ORDER GRANTING DEFENDANT'S MOTION FOR BOND; OPINION AND ORDER DENYING DEFENDANTS' MOTION TO VACATE JUDGMENT AND GRANTING PLAINTIFF'S MOTION TO RENEW JUDGMENT; OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR RECONSIDERATION OF ORDER HOLDING DEFENDANT LARRY J. WINGET IN CIVIL CONTEMPT OF COURT; OPIN

=== ORDER GRANTING DEFENDANT'S MOTION FOR BOND ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, Case Number 92-81127 v. GREGORY BROWN, Defendant. ___________________________________________/ Honorable David M. Lawson ORDER GRANTING DEFENDANT’S MOTION FOR BOND This matter is before the Court on the defendant’s motion for bond pending the redetermination on remand of his motion for reduction of sentence. In December of 2023, the Court resentenced the defendant, along with three of his co-defendants, under the First Step Act of 2018, Pub. L. No. 115-391, 132 Stat. 5194. The Court entered an amended judgment reducing the defendant’s sentence to time served. Although the government appealed the Court’s amended judgment, it did not seek to stay the decision, and the defendant was released from prison. By all accounts, he is leading a productive life. On October 14, 2025 — nearly three years after the defendant’s release — the Sixth Circuit vacated the defendant’s reduced sentence and remanded so that this Court could explain the application of the sentencing-package doctrine to the defendant’s sentence. The defendant has moved for bond for the duration of these proceedings. The government did not respond to the defendant’s motion and the time for doing so has lapsed. See E.D. Mich. LR 7.1(e)(1)(A). The relevant factors favor continuing the defendant’s release on bond while further proceedings are conducted in this Court. I. Until 2022, defendant Gregory Brown was serving a life sentence for his role in a violent drug trafficking organization, the “Best Friends” gang, which began in the mid-1980s and whose members were responsible for at least eight homicides. In 1995, he was charged in a single superseding indictment with conspiracy to distribute and to possess with intent to distribute cocaine and cocaine base (crack), in violation of 21 U.S.C. §§ 841(a)(1) and 846; intentional killing in furtherance of a continuing criminal enterprise, in violation of 21 U.S.C. § 848(e)(1)(A); and the use or carrying of a firearm in relation to a drug trafficking crime in violation of 18 U.S.C. § 924(c). ECF No. 882. A jury convicted him at trial on all counts. Consistent with the then- mandatory Sentencing Guidelines, this Court’s predecessor sentenced the defendant to a total sentence of life in prison on the drug and intentional killing charges along with a 60-month concurrent sentence on the firearm charge. ECF No. 1592. The Sixth Circuit affirmed the defendant’s sentence on appeal. United States v. Brown, 221 F.3d 1336, at *1 (6th Cir. 2000) (table). In 2019, Brown filed a motion to reduce his sentence under Section 404 of the First Step Act. Judge Cohn denied Brown’s motion, concluding that because the sentencing guideline range was calculated under the intentional killing section, U.S.S.G. § 2A1.1, he was ineligible for relief under the FSA. He moved for reconsideration of that decision, arguing in part that the so-called sentencing package doctrine allowed him to be re-sentenced on offenses not covered by the FSA. The government’s response did not address that argument, and it failed to object to it when it had other opportunities to do so. See United States v. Dale, --- F.4th ---, No. 23-1050, 2025 WL 2911058, at *4 (6th Cir. Oct. 14, 2025). -2- About the same time, Judge Cohn reached the same result as to one of Brown’s co- defendants, who appealed the decision. The Sixth Circuit concluded that the defendant in fact was eligible for a sentence reduction under the First Step Act for his drug conspiracy conviction. ECF No. 2457, PageID.19480-81. In light of the Sixth Circuit’s holding, this Court granted Brown’s motion for reconsideration. The Court held that it “ha[d] the discretion [under the First Step Act] to reduce [Brown’s] total sentence when a covered offense is involved.” United States v. Dale, 615 F. Supp. 3d 692, 701 (E.D. Mich. 2022); ECF 2541. It therefore concluded that Brown and several co-defendants were eligible for re-sentencing and ordered the Probation Department to provide an updated report. At the resentencing hearing in December of 2022, the Court reduced the Brown’s sentence to time-served, imposed a period of supervised release, and issued an amended judgment shortly thereafter. The government did not seek to stay Brown’s release from custody during the pendency of its appeal of the amended judgment. The government’s appeal was consolidated with its appeals of Brown’s three co-defendants’ amended judgments. On October 14, 2025, the Sixth Circuit vacated the Court’s resentencing decision. It affirmed that offenses that are covered by the First Step Act and those that are not covered can be reduced under the sentencing package doctrine, but it remanded the case for further proceedings consistent with its decision for this Court to explain how that doctrine would apply to Brown’s sentence. See Dale, 2025 WL 2911058, at *7, *12. The court made clear that “a district court has the discretion to reduce a sentence imposed for a non-covered offense when it is part of a sentencing package with a covered offense.” Id. at *7. And in applying the doctrine, “[t]he operative question is whether there is reason to think that, at the time of sentencing, the two -3- sentences were interdependent.” Id. at *8 (quoting United States v. Curtis, 66 F.4th 690, 694 (7th Cir. 2023 . II. In the motion presently pending before the Court, the defendant asks to remain free on bail while the Court decides the issues on remand. Separately, he has filed a motion for compassionate release. The defendant emphasizes that he is likely entitled to a reduced sentence, as the Court previously concluded, because his covered and noncovered offenses were grouped at sentencing, and he has a viable path to post-conviction relief through his compassionate release motion. The defendant also maintains that a bond would preserve the status quo, since he has resided productively in the community since his December 2022 release from custody, and it would avoid unnecessary reincarceration in the event the Court resolves his section 404 claim in his favor. III. The circumstances here do not easily fit within any of the post-conviction bail provisions of Title 18. But section 3143 is a likely candidate because the defendant now stands in the position of an individual convicted of a crime whose sentence is contested. That section sets out varying standards for individuals who have been found guilty and are “awaiting imposition or execution of sentence,” 18 U.S.C. § 3143(a)(1), (2), and individuals who have been “sentenced to a term of imprisonment, and who ha[ve] filed an appeal or a petition for a writ of certiorari,” id. § 3143(b). The former subsection directs detention for individuals like the defendant who were convicted of certain offenses, including those punishable by a possible life term, unless the Court “finds there is a substantial likelihood that a motion for acquittal or new trial will be granted” or the government recommends no term of incarceration. Id. § 3143(a)(2). The Court also must find “by clear and convincing evidence that the person is not likely to flee or pose a danger to any other -4- person or the community.” Id. § 3143(a)(2)(B). At least one court in this circuit has adopted the position that subsection (a) of section 3143 applies to defendants awaiting resentencing. See United States v. Ednie, No. 15-133, 2017 WL 6503401, at *2 (N.D. Ohio Oct. 13, 2017). However, other courts have expressed doubt that subsection (a) supplies the appropriate standard. The Seventh Circuit, for instance, explained that subsection (a) applies “to the situation where a defendant is awaiting sentencing the first time, and does not apply where the defendant is awaiting resentencing not because there was an infirmity in the original sentence but because the vacation of a concurrent sentence might lead the sentencing judge to reconsider a sentence not vacated.” United States v. Holzer, 848 F.2d 822, 824 (7th Cir. 1988). The Fifth Circuit has adopted the reasoning of the Seventh Circuit and extended it one step further, holding that subsection (b) of the statute is “a far better fit” for a defendant awaiting resentencing with no presently pending appeal. United States v. Olis, 450 F.3d 583, 587 (5th Cir. 2006); see also Edkins v. United States, No. 13-14421, 2015 WL 871587, at *16 (E.D. Mich. Feb. 27, 2015) (adopting Olin’s holding that section 3143(b) “appl[ies] to defendants . . . who are awaiting resentencing but whose convictions have been affirmed.”). Subsection (b) likewise directs detention unless the Court finds by “clear and convincing evidence that the person is not likely to flee or pose a danger to the safety of any other person or the community if released” and they have an appeal that “is not for the purpose of delay and raises a substantial question of law or fact likely to result in” reversal, a new trial, a sentence that does not include imprisonment, or a term of imprisonment less than the total time already served “plus the expected duration of the appeal process.” 18 U.S.C. § 3143(b)(1)(A), (B)(i)-(iv). The Court believes that the appropriate post-conviction bail statute to apply in the present circumstances is section 3143(b). Courts that have expressed concerns about applying subsection -5- (a) have explained that the provision embodies a slightly more lenient standard, driven by the reality that a sentence may be modest or a defendant “needs some time to get his affairs in order.” Holzer, 848 F.2d at 824. However, that justification has less force “where the defendant’s conviction has been upheld and a sentence . . . remanded solely to give the judge a chance to consider a possible” reduction since “[b]reaking a sentence in the middle does not promote any end other than reducing the effective penalty by allowing a holiday or, worse, providing an opportunity to escape.” United States v. Krilich, 178 F.3d 859, 861 (7th Cir. 1999), as amended (June 1, 1999) (per curiam) (cleaned up). This rationale is not a perfect fit for a defendant like Mr. Brown, who was convicted of an offense triggering section (a)(2)’s heightened requirements and already has been released from custody on a resentencing that later was vacated (but not reversed) by the court of appeals. For such defendants, subsection (b)’s requirements are better suited to serve the twin purposes of protecting the public and allowing the defendant the opportunity to vet fully his arguments for relief. The relevant factors prescribed by section 3143(b) weigh in favor of a bond while the proceedings on remand play out. First, there is clear evidence that convinces the Court that Brown will not flee or pose a danger to the community. Brown’s probation officer, who has been supervising him since his release three years ago, reports that Brown’s adjustment to supervision has been “fantastic,” and he has been cooperative since his release. Brown reports to the Probation Office as directed and has met with his probation officer in person several times. He maintains a stable residence and home visits have been conducted. He also has stable employment and has provided employment verification. There has been no unreported police contact, and there has been no indication of any violations. Brown has a supportive family, and he is a family man to -6- children and grandchildren. A criminal record check indicates no additional criminal activity or any warrants. Brown has a valid driver’s license and has stable transportation. Even when considering the very serious offenses for which Brown was convicted, the probation officer characterizes him as “the poster child for correctional rehabilitation” and recommends bail. Second, the proceedings on remand are not pursued for the purpose of delay, and the issues raised are substantial, as is evident from the opinion of the court of appeals remanding the case. The defendant has presented strong arguments that the re-sentencing proceedings on remand will result in a sentence substantially the same as the Court’s prior determination, both because his covered and noncovered offenses grouped at sentencing and because of the arguments in his motion for a reduction in sentence under 18 U.S.C. § 3582(c)(1)(a). The defendant will have an opportunity to demonstrate the applicability of the sentencing package doctrine, and the government will have an opportunity to fix its “failure to timely address the sentencing-package issue.” Dale, 2025 WL 2911058, at *12. The substantiality of these issues is beyond debate. Finally, there is a significant likelihood that the resentencing will result in a “reduced sentence to a term of imprisonment less than the total of the time already served.” 18 U.S.C. § 3143(b)(1)(B)(iv). If Brown prevails on remand, then it is likely that the previous, appealed sentence will be reimposed. As for now, the prospect of the defendant’s return to custody after nearly three years of successful reintegration to the community presents an exceptional circumstance militating in favor of bail. By all accounts, the defendant has demonstrated model behavior while on supervised release. Disrupting that progress with reincarceration would be manifestly unjust. -7- IV. Accordingly, it is ORDERED that the defendant’s motion for bond (ECF No. 2598) is GRANTED. The defendant must execute appropriate bond papers and abide by the standard conditions usually applied to pretrial release in this district. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: November 13, 2025 -8-

=== OPINION AND ORDER DENYING DEFENDANTS' MOTION TO VACATE JUDGMENT AND GRANTING PLAINTIFF'S MOTION TO RENEW JUDGMENT ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ALTER DOMUS, LLC, v. Plaintiff and Counter-Defendant, Case Number 08-13845 Honorable David M. Lawson LARRY J. WINGET and the LARRY J. WINGET LIVING TRUST, Defendants and Counter-Plaintiffs, ________________________________________/ OPINION AND ORDER DENYING DEFENDANTS’ MOTION TO VACATE JUDGMENT AND GRANTING PLAINTIFF’S MOTION TO RENEW JUDGMENT On June 1, 2021, the Court entered a judgment against defendants Larry J. Winget and the Larry J. Winget Living Trust in favor of plaintiff Alter Domus, LLC on its claim that Winget was unjustly enriched by Winget’s retention of certain assets from the Trust after he revoked it and subsequently rescinded the revocation. In 2015, this Court’s predecessor, the Honorable Avern Cohn, entered a judgment against the Trust after the court of appeals reversed his reformation decision. That judgment was amended by a Second Amended Judgment that was entered in 2018. The defendants now move to vacate the 2021 judgment, arguing that Alter Domus lacked standing to litigate the claims that were reduced to judgment in 2021 and to enforce that judgment. As for the 2015 judgment, the plaintiff fears that absent renewal by this Court, the judgment will expire this year due to Michigan’s statutory limitations period, unless a 2018 Second Amended Judgment established the controlling date, and Alter Domus asks the Court to renew the judgment in its favor as successor to the original judgment creditor, JPMorgan Chase. The defendants oppose that motion on the same lack-of-standing grounds. Both sides agree that the resolution of the standing issue will be dispositive of both motions. Because the standing issue is governed by the Supreme Court’s decision in Sprint Communications Co. v. L.P. v. APCC Services, Inc., 554 U.S. 269 (2008), which the defendants have not distinguished persuasively, the motion to vacate the 2021 judgment will be denied and the motion to renew the 2015 judgment will be granted. I. The background facts of this long-running dispute have been recited ad nauseum in numerous opinions filed by this Court and the court of appeals, but a further recitation is necessary to illuminate the issues in the present motions. In this litigation, the plaintiff — an administrative agent for a consortium of lenders — seeks to collect on a substantial judgment it obtained in 2015. The dispute traces its origins at least to 1999, when Venture Holdings Company, LLC, an entity controlled by defendant Larry J. Winget, sought financing to aid in the acquisition of another company. A group of lenders extended credit to Venture and designated an administrative agent to manage the loan. Venture’s acquisition plans fell through, and in an effort to avoid default, Winget, the lenders, and the administrative agent negotiated an amendment to the credit agreement in October of 2002. As part of the amendment, the parties executed a guaranty agreement by which Winget and his Trust collectively agreed that they would satisfy Venture’s obligations. The reach of that guaranty would come to be a primary issue of the first phase of this litigation. For present purposes, however, the provisions that were disputed are of less importance than its basic structure: Winget, the Trust, and the administrative agent (and not the lenders themselves) were the parties to the guaranty agreement, which was made “for the benefit of [the Agent] and the Lenders, under the Credit Agreement . . . .” Guaranty, ECF No. 1-3, PageID.19. It specified that Winget and the Trust, on Venture’s default, would “pay to the Administrative Agent for the benefit of the Lenders . . . the amount not so paid” on the credit agreement. Id. at PageID.20. In addition, the agreement stated that it “is a guaranty of payment and not of - 2 - collection.” Ibid. And the agreement mentions that the administrative agent has the right “to pursue its remedies against the Guarantor. . . .” Id. at PageID.27. The “Administrative Agent” at the time was Bank One, a national banking association, id. at PageID.19, but the parties agree that through various mergers, acquisitions, and by operation of law, JPMorgan Chase had succeeded to that role by 2008 when this case began. The Guaranty and the October 2002 amendment to the Credit Agreement both contemplate that the administrative agent might not be one of the original lenders — or even a lender at all — and could change. For instance, the Credit Agreement includes a provision governing the administrative agent’s rights “[i]n the event” it also is a Lender. ECF No. 23-2, PageID.742. Per the Credit Agreement, the administrative agent “may resign at any time,” with the resignation “effective upon the appointment of a successor Administrative Agent.” Id. at PageID.743. In 2008, JPMorgan Chase filed this lawsuit in its capacity as administrative agent to enforce the Guaranty Agreement. Compl. ¶1, ECF No. 1, PageID.1 (“These Claims are brought by the Agent against Winget and the Winget Trust for enforcement of a guaranty and two pledge agreements entered into by Winget and the Winget Trust in 2002.”). The parties’ dispute over the meaning of the agreement, particularly the extent of the Agent’s recourse against the assets of the Trust, fueled the first seven years of this litigation. Eventually, after a bench trial on that issue, Judge Cohn issued a decision reforming the Guaranty Agreement, which was reversed by the court of appeals. JPMorgan Chase Bank, N.A. v. Winget, 602 F. App’x 246 (6th Cir. 2015). In July of 2015, the Court entered an amended final judgment establishing that the defendants owed the Agent approximately $425 million dollars, which represented the unpaid principal “plus all interest, fees and costs . . . in amounts to be determined at a later date.” ECF No. 568, PageID.24047. The Agent’s recourse as to Winget personally was limited to $50 million, and he - 3 - paid this portion of the judgment, but the appellate court held that the Trust’s exposure was not similarly limited. In 2018, adopting a stipulation of the parties, Judge Cohn entered a second amended judgment, which added roughly $368 million in pre-judgment interest and adjusted the unpaid principal figure to about $410 million. See ECF No. 823. Unbeknownst to JP Morgan Chase, however, Winget in 2014 had revoked the Trust and removed all of its assets. Winget revealed the revocation in October of 2015 when he sought a declaratory judgment, filed as a separate action, that would establish that, with the revocation, Chase had no further recourse against him or the assets that were once held in the Trust. That lawsuit was assigned case number 15-13469 (E.D. Mich.). Chase filed counterclaims alleging that the revocation was a constructively fraudulent transfer under the Michigan Uniform Fraudulent Transfer Act (MUFTA) and that Winget was unjustly enriched by the revocation. Because the Court concluded that the relief sought in Chase’s counterclaims was the “functional equivalent of post-judgment proceedings” in the 2008 case, it consolidated the cases. ECF No. 686. The parties and the Court frequently have referred to the claims and counterclaims in the 2015 case number as the “Avoidance Action.” Chase then moved for judgment on the pleadings on its fraudulent transfer claim. ECF No. 699. The Court agreed with Chase and granted its motion as to liability only. ECF No. 732. Winget did not immediately appeal that ruling. Rather, he rescinded his revocation and retitled to the Trust all property that it held at the time of the revocation. After Winget reinstated the Trust, Chase requested entry of Charging Orders with respect to membership interests in certain limited liability companies (LLCs) held by the Trust. The Court issued the requested Charging Orders on August 15, 2019, and the Sixth Circuit affirmed. JPMorgan Chase Bank, N.A. v. Winget, 942 F.3d 748, 750 (6th Cir. 2019). During the interregnum, however, one of the companies formerly owned by the Trust, JVIS-USA, LLC, - 4 - distributed millions of dollars in cash and promissory notes to Winget. Two of the notes were issued by JVIS on June 29, 2017, one to a new grantor retained annuity trust (the “GRAT”) for $135 million, and one to Winget personally for $15 million. Ibid. When Winget reinstated the Trust, he did not retitle the promissory notes to the Trust but rather assigned the $135 million note to himself. However, he did retitle the LLC’s membership interests to make the Trust, again, the sole member of JVIS. Chase then moved for partial summary judgment on its unjust enrichment counterclaim in the avoidance action and sought a constructive trust over all of the distributions made during the period after Winget revoked the Trust but before he rescinded the revocation. ECF No. 926. The Court granted Chase summary judgment and ordered the imposition of a constructive trust over the distributions, including the $150 million in promissory notes. ECF No. 986. It also ordered Winget immediately to assign the promissory notes to the Agent and pay to Chase “the amounts paid on the promissory notes, including the $22.5 million payment” that JVIS had made. JPMorgan Chase Bank, N.A. v. Winget, No. 08-13845, 2021 WL 37479, at *11 (E.D. Mich. Jan. 5, 2021). On January 12, 2021, after the Court ordered the imposition of a constructive trust but before it entered judgment on Chase’s claims, Chase filed a motion to substitute Alter Domus, LLC as the plaintiff in the case. ECF No. 989. Chase’s motion recited the terms of the Credit Agreement, discussed above, dealing with successors to its role as administrative agent and stated that it had entered into an Agency Transfer Agreement (“ATA”) with Alter Domus to designate it as the successor. Id. at PageID.31907. Under the ATA, which Chase provided to the defendants before filing the motion, Chase stated that it had “assign[ed]” and Alter Domus had “assume[d] all of [Chase’s] rights, duties and obligations as non-recourse borrower under the Initial Litigation - 5 - Credit Agreement, together with the agreements, documents and instruments delivered under or in connection with the foregoing. . . .” Agency Transfer Agreement, ECF No. 1212-2, PageID.35378. Alter Domus was “vested with all the rights, powers, privileges and duties of the Administrative Agent under the Primary Credit Agreement and the Loan Documents . . . .” Id. at 35379. The ATA also stated that “all references to ‘Administrative Agent’ in any of the Primary Credit Agreement, the other Loan Documents, the Initial Litigation Credit Agreement or any other documents related thereto or delivered in connection therewith, shall mean and refer to Alter Domus.” Id. at PageID.35379-80. Chase’s motion also invoked Federal Rule of Civil Procedure 25(c). The defendants did not oppose the request, and the Court entered an order to reflect the change on January 14, 2021. ECF No. 990. On June 1, 2021, the Court entered a final judgment on the fraudulent-transfer claim and the unjust-enrichment claim in favor of Alter Domus. See ECF No. 1017. Winget placed the cash and promissory notes in escrow while he appealed the rulings. The Sixth Circuit affirmed in part. JPMorgan Chase v. Winget, No. 21-1568, 2022 WL 2389287, at *11 (6th Cir. July 1, 2022). It agreed that Winget’s revocation of the Trust constituted a fraudulent transfer executed to put the Trust’s assets beyond the reach of the Agent, and that Winget was unjustly enriched by the LLC distributions he received during the revocation period, including the promissory notes issued by JVIS. Id. at *5-9. The court found that, but for the fraudulent revocation, the Trust — not Winget — would have been the member of JVIS, and thus the Trust would have loaned JVIS cash by leaving the distributions in the company and received the promissory notes in return. Id. at *7. The court concluded that the notes belonged to the Trust and that the Agent therefore was entitled to them. Ibid. However, the court reversed a portion of - 6 - the ruling as to $79 million in cash distributions that Winget contended were used to pay the LLC’s tax obligations. Id. at *8-9. After the court of appeals issued its ruling, the Agent obtained the promissory notes and the $22.5 million from escrow, only to discover that Winget and JVIS had amended the terms of the notes on June 30, 2020. Those amendments are the subject of another lawsuit, in which the Agent has asserted claims against Winget and the Agent for payment on the notes, which now are in default, as well as claims under Michigan’s Uniform Voidable Transfer Act (MUVTA) and for unjust enrichment. See Alter Domus v. JVIS, LLC, No. 23-10458 (E.D. Mich.). JVIS filed a counterclaim in that lawsuit seeking to invalidate the notes and asserting that it has the right to recover any payments it made, including the $22.5 million payment now in the possession of the Agent. The Court granted in part Alter Domus’s motion to dismiss the counterclaim, holding that JVIS could maintain a claim to invalidate the notes but could not assert a claim to recover the $22.5 million. See Alter Domus, LLC v. Winget, No. 23-10458, 2024 WL 1287612, at *10 (E.D. Mich. March 26, 2024). That matter proceeded to a bench trial in February of 2025 and a decision is pending. At that bench trial, the defendants called Alter Domus employee Joanna Anderson, who managed Alter Domus’s role as administrative agent for the “group of lenders under [the] credit agreement.” Trial Tr. Vol. I, ECF No. 267, PageID.4065, Alter Domus v. Larry J. Winget, No. 23- 10458 (E.D. Mich.). Anderson explained that as administrative agent, Alter Domus tracks the amounts that are outstanding on the debt, maintains the “lender register,” and controls the litigation. Id. at PageID.4079. These tasks were part of Alter Domus’s “job” for which it invoiced the lenders. Id. at 4069-70. Anderson also stated her belief that Alter Domus is the “only entity that has the right to file the lawsuit,” but that it does not “have a financial stake” in the outcome - 7 - and that if there was a judgment in its favor, it would not “get the money.” Id. at PageID.4079, 4081-82. That acknowledgement provoked the defendants’ argument that Alter Domus has no standing to pursue collection of the judgment in the present case, a position they also take in the 2023 lawsuit. Alter Domus rejects that idea, and it asks the Court to renew the 2015 judgment in this case, which may expire by operation of law if the Second Amended Judgment entered in 2018 is not deemed to be the operative instrument. II. A. The defendants bring their motion to vacate the 2021 judgment under Civil Rule 60(b)(4), which authorizes the Court to “relieve a party . . . from a final judgment” if “the judgment is void.” Fed. R. Civ. P. 60(b)(4). A judgment may be considered void “in the rare instance where [it] is premised either on a certain type of jurisdictional error or on a violation of due process that deprives a party of notice or the opportunity to be heard.” United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 271 (2010). One example of a void judgment is the circumstance cited by the defendants here: where the issuing court lacked subject matter jurisdiction. See Days Inns Worldwide, Inc. v. Patel, 445 F.3d 899, 903 (6th Cir. 2006) (“The validity of a court order depends on the court having jurisdiction over the subject matter and the parties.”). However, the Sixth Circuit, and other federal courts, have held that a motion invoking the rule “will succeed only if the lack of subject matter jurisdiction was so glaring as to constitute a total want of jurisdiction or no arguable basis for jurisdiction existed.” In re G.A.D., Inc., 340 F.3d 331, 336 (6th Cir. 2003) (cleaned up); Espinosa, 559 U.S. at 271; Salem Pointe Cap., LLC v. BEP Rarity Bay, LLC, 854 F. - 8 - App’x 688, 702 (6th Cir. 2021). “The burden is on the movant to bring herself within the provisions of Rule 60(b).” In re G.A.D., 340 F.3d at 334. Moreover, a party invoking Rule 60(b)(4) must make its motion “within a reasonable time.” Fed. R. Civ. P. 60(c)(1). In this circuit, that requirement extends even to challenges that a judgment is void for want of subject matter jurisdiction. See In re Vista-Pro Auto., LLC, 109 F.4th 438, 442 (6th Cir. 2024) (citing United States v. Dailide, 316 F.3d 611 (6th Cir. 2003 . That approach, however, conflicts with the approach taken by other courts that have considered the question. Id. at 448 (McKeague, J, dissenting) (“Courts widely agree that the timeliness requirement in the text of Rule 60(c)(1) does not apply to a motion seeking vacatur of an allegedly void judgment for the simple fact that a legal nullity must necessarily be vulnerable to vacatur at any time.”). Perhaps for that reason, the Supreme Court granted the Vista-Pro Auto appellants’ petition for a writ of certiorari. See Coney Island Auto Parts Unlimited, Inc. v. Burton, No. 24-808, 2025 WL 1603597, at *1 (U.S. June 6, 2025). The Court need not dwell on the timeliness of the defendants’ motion, however, because their argument on the merits does not persuade. B. The defendants contend that the 2021 judgment on the fraudulent-transfer and the unjust- enrichment claims is void because Alter Domus had no standing to pursue them, and therefore the Court lacked subject matter jurisdiction to award it relief. It is well settled that Article III of the U.S. Constitution, which sets out the authority of the federal courts, allows those courts to adjudicate only actual “Cases” and “Controversies.” U.S. Const. Art. III, § 2. “For there to be a case or controversy under Article III, the plaintiff must have a ‘personal stake’ in the case — in other words, standing.” TransUnion LLC v. Ramirez, 594 U.S. 413, 423 (2021). Without proof of actual skin in the game, the lawsuit is no more than “a vehicle - 9 - for the vindication of the value interests of concerned bystanders.” United States v. SCRAP, 412 U.S. 669, 687 (1973). The Supreme Court has characterized the standing doctrine as “part of the basic charter promulgated by the Framers of the Constitution at Philadelphia in 1787,” and has said it promotes the separation of powers. United States v. Texas, 599 U.S. 670, 675 (2023) (quoting Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, Inc., 454 U.S. 464, 476 (1982 . To establish standing, a plaintiff must demonstrate that it has suffered an actual or imminent, concrete and particularized injury; that injury must be fairly traceable to the conduct of the defendants; and it must be likely that a favorable judicial decision would offer relief. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992). “The plaintiff ‘bears the burden of establishing standing as of the time [it] brought th[e] lawsuit and maintaining it thereafter.’” Murthy v. Missouri, 603 U.S. 43, 58 (2024) (quoting Carney v. Adams, 592 U.S. 53, 59 (2020 . The defendants emphasize Joanna Anderson’s trial testimony that Alter Donus does not “have a financial stake” in the dispute with the defendants. Trial Tr. Vol. I, ECF No. 267, PageID.4079, Alter Domus v. Larry J. Winget, No. 23-10456 (E.D. Mich.). They take this statement to mean that Alter Domus ultimately will not benefit from any judgment in its favor and argue, therefore, that Alter Domus has no “personal stake” necessary to invoke the Court’s jurisdiction under Article III. Ms. Anderson’s testimony — especially when read in isolation — is somewhat perplexing. But it bears emphasis that she did not testify that Alter Domus lacks a financial stake in the outcome of this litigation. The relevant exchange is reproduced below: Q. Ms. Anderson, could you just take a moment, please, and describe for the Court what is an administrative agent? A. So we’re a third-party administrative agent, meaning that we don’t have a financial stake. We’re acting as administrative agent under a credit agreement where there is a group of lenders where the named party that has the leads on the collateral. We track the lender register. We track any amounts that are due and - 10 - outstanding. We calculate the interest due. And then we manage the litigation, if that’s part of what's happening in the — under the credit agreement. Id. at PageID.4078-79. In context, she is explaining the role of an administrative agent, not disclaiming all interest in this litigation. The only other instance the words “financial stake” came up during her testimony was when Winget’s attorney, somewhat confusingly, inquired whether the 2023 lawsuit was a “lawyer lawsuit.” Id. at 4076. Anderson responded that Alter Domus was directed to bring the lawsuit by “lenders who have a financial stake.” Ibid. Her testimony did not disclaim any financial interest for Alter Domus, so much as state that the lenders have the ultimate financial interest. That fact was not particularly surprising or revelatory. Alter Domus, like Chase before it, would not keep for itself any funds recovered in its capacity as administrative agent. Instead, it was serving as administrative agent for the “group of lenders under [the] credit agreement,” which included invoiceable tasks like tracking the amounts outstanding on the debt, maintaining the “lender register,” and controlling the litigation. Trial Tr. Vol. I, ECF No. 267, PageID.4065, 4069- 70, 4079, Alter Domus v. Larry J. Winget, No. 23-10458 (E.D. Mich.). It was and is acting under the authority of the Credit Agreement, which provides reimbursement for certain costs and permits the Agent to assess a fee, see ECF No. 23-2, PageID.742-43, although a different financial arrangement now may govern, see ATA, ECF No. 1212-2, PageID.35378 (referring to an “Initial Litigation Credit Agreement”). Alter Domus compares its role to that of the aggregators in Sprint Communications Co. v. L.P. v. APCC Services, Inc., 554 U.S. 269 (2008). In that case, plaintiff APCC Services brought suit on behalf of hundreds of pay telephone operators against long distance carriers to collect unpaid charges that the payphone operators had assigned to it. 554 U.S. at 272. APCC aggregated the multiple small value claims assigned to it and sued to collect in a single action, remitting any - 11 - proceeds derived from judgment or settlement to the payphone operators and taking a fee for its services. Ibid. Petitioner Sprint argued that because the aggregator was suing on behalf of others and suffered no injury of its own — a fact confirmed by the reality that all proceeds derived from the litigation would be passed through to the payphone operators — APCC could not establish standing under Article III. Id. at 272-73. After conducting a thorough review of historical practice regarding suits by assignees and the Court’s precedents, the Supreme Court concluded that “[l]awsuits by assignees, including assignees for collection only” qualify for federal jurisdiction under Article III. Id. at 285. The Court rejected the view that the assignees had not suffered an injury-in-fact, reasoning that the assignment transferred the claim for payphone charges “lock, stock, and barrel.” Id. at 286. The Court also rejected the contention that the aggregator’s agreement to remit all of the proceeds to the assignors harmed its ability to demonstrate redressability. Because “a legal victory would unquestionably redress the injuries for which the aggregator[] bring[s] suit,” the aggregator’s ultimate disposition of the proceeds — “whether the aggregator[] remit[s] the litigation proceeds . . ., donate[s] them to charity, or use[s] them to build new corporate headquarters” — was irrelevant. Id. at 287. Alter Domus contends that the status of Chase as the administrative agent when it initiated this lawsuit was identical to that of the aggregator in Sprint, and that Alter Domus stepped into Chase’s shoes via the Agency Transfer Agreement (ATA), executed in December of 2020, which vested Alter Domus “with all the rights, powers, privileges and duties of the Administrative Agent under the Primary Credit Agreement and the Loan Documents. . . .” ECF No. 1212-2, PageID.35379. And because the ATA specified that “all references to ‘Administrative Agent’” in the credit agreement and Guaranty “shall mean and refer to Alter Domus,” Alter Domus became the counterparty to the Guaranty Agreement. Id. at PageID.35379-80. - 12 - The defendants contend that Alter Domus’s status is different from Chase’s because Chase was not merely the administrative agent, it also was a lender in its own right and therefore had a personal stake in the Trust’s guarantee obligation. The defendants also argue that the ATA was not sufficient to assign the lenders’ claims to Alter Domus, since it only granted Alter Domus the “rights, powers, privileges and duties of the Administrative Agent under the Primary Credit Agreement and Loan Documents” and those duties were limited to those of a “contractual representative” of the lenders. ECF No. 1215, PageID.35947 (citing ECF No. 1212-2, PageID.35364; ECF No. 23-2, PageID.740-41). They take this to mean that Alter Domus was attempting to assert the collection rights of the lenders when it secured the 2021 judgment, but the lenders kept all rights, title, and interest in the claims themselves. The defendants are wrong on both counts. First, when Chase filed this lawsuit in 2008, it acted in its capacity as the administrative agent with the purpose of enforcing the Winget and the Trust’s guaranty. It did not sue as a lender; it asserted its rights under the Guaranty Agreement because it was the counterparty on the agreement. See Guaranty Agreement, ECF No. 1-3, PageID.19 (“THIS GUARANTY . . . is made as of the 21st day of October, 2002, by Larry Winget and the Larry J. Winget Living Trust (collectively, the ‘Guarantor’) in favor of . . . [the] Administrative Agent (the ‘Administrative Agent’), for the benefit of itself and the Lenders, under the Credit Agreement referred to below.” (emphasis added . Additionally, the Guaranty was signed by the First Vice President of the bank acting “as Administrative Agent.” Id. at PageID.30. The lenders had no obvious right to enforce the Guaranty, except perhaps on a third-party beneficiary theory. Any assignment from the lenders is not of import here. The pertinent assignment is the one from Chase to Alter Domus, that is, the ATA. - 13 - Second, the defendants say that the ATA does not transfer Chase’s interests to Alter Domus sufficiently to support constitutional standing, but the language of that instrument undercuts the defendants’ position. The defendants devote considerable attention to Cortlandt Street Recovery Corp. v. Hellas Telecommunications, S.a.r.l, 790 F.3d 411 (2d Cir. 2015). In that case, the plaintiff brought claims based on its purported assignment of a debt that was in default, claiming a right to payment. 790 F.3d at 415. The district court dismissed the action for want of subject matter jurisdiction after it concluded that the plaintiff had failed to adequately establish title to its claims on the debt and therefore standing. Id. at 416. On appeal, the plaintiff contended that Sprint controlled and clearly permitted lawsuits by assignees. Neither the defendants nor the court of appeals disagreed with that point; instead, the court pointed out that the alleged assignment cited by the plaintiff only granted it a right to collect on the notes instead of complete ownership of the claims. Id. at 419 (“The language of the assignment confirms that Cortlandt was authorized to collect payment on behalf of the noteholders, but it does not so much as hint that title to the claims at issue was being transferred.”). The defendants also point to FTUTB, Inc. v. Wisconsin Surgery Ctr. LLC, No. 20-706, 2020 WL 5645690 (E.D. Wis. Sept. 22, 2020). There, the plaintiff was the “administrative agent” for a group of secured lenders of a pain management company who hoped to bring various state law claims against the company’s competitor. See 2020 WL 5645690, at *1. The defendants moved to dismiss the case on the ground that the plaintiff was not the real party in interest and for lack of proper diversity jurisdiction. Just as in Cortlandt, the court found the plaintiff’s rights somewhat unclear. Notably, the plaintiff had pleaded that it possessed “first-priority security interests in all the collateral and [was] required to take all necessary steps to preserve and protect the collateral during the period of the loan,” but it also stated “that it was the secured lenders who - 14 - were injured.” Id. at *4. To address this confusion, the court directed the plaintiff to file an amended complaint clarifying its status. However, it did not — as Winget and the Trust seem to suggest — hold that “an administrative agent for a syndicate of lenders must have title to the underlying debt to have standing.” ECF No. 1215, PageID.35499. Instead, the court merely observed that “the precise nature of the relationship between the lenders and the administrative agent [is] significant” to the inquiry of what entity properly is the real party in interest. FTUTB, Inc., 2020 WL 5645690, at *5. In fact, the court cited cases where courts had concluded that an administrative agent was the proper party based on how each loan agreement was structured. Ibid. Here, as explained above, the Guaranty identifies the Agent as the counterparty to whom the guarantors — the defendants — owe payment. It is quite clear that the guaranty agreement here places the administrative agent in the same position as the aggregator in Sprint. Although that agreement is not an assignment per se, it plainly sets out the administrative agent’s contractual right to demand and receive payment on behalf of the lenders from the guarantors, that is, the defendants here. That right led to the entry of the 2015 money judgment — unchallenged from a jurisdictional standpoint — in favor of Chase. But the defendants contend that the next level assignment — the ATA — did not give Alter Domus a stake in that judgment, and since it was the basis of the fraudulent transfer and unjust enrichment claims in the Avoidance Action that ultimately were reduced to the 2021 judgment, it cannot enforce the 2021 judgment that derived from the collection efforts on the 2015 judgment. Did the ATA transfer Chase’s interest in the 2015 judgment “lock, stock, and barrel,” à la Sprint? See 554 U.S. at 286. The language of that instrument is sufficient to effectuate such an assignment. “Assignment agreements are considered contracts, and must be interpreted as such.” Emerzian v. N. Bros Ford Inc., No. 365100, 2024 WL 1221551, at *7 (Mich. Ct. App. Mar. 21, - 15 - 2024). The ATA is worded broadly. Notably, the document makes clear that Chase “assigns” to Alter Domus all of JPMorgan’s “rights, duties and obligations as non-recourse borrower . . . together with the agreements, documents and instruments delivered under or in connection with the foregoing.” ECF No. 1212-2, PageID.35378. The 2015 judgment can be understood to be a “document” or “instrument,” and the ATA, with reasonable clarity, assigns Chase’s interest in it to Alter Domus. The defendants do not develop any compelling argument why this language is insufficient. They state that the ATA refers to “further instruments” that Chase was to “execute and deliver” to Alter Domus and speculate that Chase, perhaps, needed to convey a “portion” of its interest as a lender under the original credit agreement. ECF No. 1215, PageID.35500 (quoting ATA, ECF No. 1212-2, PageID.35379). But nothing about this text suggests that the ATA itself did not transfer Chase’s interest in the 2015 judgment. The defendants also gesture toward language in the credit agreement that the administrative agent is the “contractual representative” of the lenders and suggest this makes the situation look more like the facts in Cortlandt. But this point is a non sequitur if their concern is that the 2015 judgment was not properly assigned. That judgment was entered in favor of Chase because of its status as administrative agent, not as a lender. Alter Domus can be both the contractual representative of lenders, and, because of the Guaranty, the holder of a judgment in its own right, by which it ultimately will furnish funds to the lenders. There is no reason it needs to be a lender itself. None of this should be surprising to the defendants at this point in the litigation. Lest they forget, the 2015 judgment mentioned Chase’s status as the Administrative Agent, see Am. J., ECF No. 568, PageID.24046; it did not describe Chase as having some free-standing interest in the litigation apart from that status. - 16 - Nor are the defendants correct that the Agent’s standing to pursue its counterclaims in the Avoidance Action is dependent on the 2015 judgment, at least for its fraudulent transfer theory. Certainly, the judgment is mentioned in the Agent’s counter-complaint and undoubtedly strengthened the claims. See Counterclaims ¶ 22, ECF No. 688. However, the Agent’s fraudulent conveyance counterclaim proceeded on the theory that Winget’s revocation of the Trust in 2014 placed Trust assets beyond its reach. Id. ¶¶ 32-37. When the court of appeals affirmed the Court’s grant of judgment on the pleadings to the Agent on this claim, it explained that the Agent’s right to payment from the Trust dated to 2003, when the Venture company defaulted on the credit agreement. See Winget, 2022 WL 2389287, at *4. The court did not describe the 2015 judgment as a necessary predicate to this claim. The only plausible reason the defendants offer why Alter Domus lacks standing to enforce the 2021 judgment is that it was not assigned Chase’s 2015 Judgment, but they fail to offer a cogent explanation for why the ATA was insufficient. They have not shown that “no arguable basis for jurisdiction existed.” In re G.A.D., Inc., 340 F.3d at 336. They are not entitled to relief from the 2021 judgment under Civil Rule 60(b)(4). III. It follows that Alter Domus has the right to seek renewal of the 2015 judgment. Under Michigan law, the period of limitations on a judgment is ten years. Mich. Comp. Laws § 600.5809(3). Alter Domus suggests that it may not be necessary to pursue such relief at this time, because the 2018 Second Amendment Judgment may be the operative instrument. But there is no authority that requires a judgment creditor to wait until the last minute before seeking to renew its judgment. - 17 - Generally, federal judgments are effective when entered. Atlantic Richfield Co. v. Monarch Leasing Co., 84 F.3d 204, 208 (6th Cir. 1996). Congress never established a limitations period governing the duration of a federal judgment’s lifespan; instead, federal courts borrow the forum state’s procedures for enforcing judgments. Fed. R. Civ. P. 69(a). Michigan law states that “an action founded upon a judgment or decree rendered in a court of record of this state, or in a court of record of the United States,” must be brought within ten years. Mich. Comp. Laws § 600.5809(3). A judgment creditor may bring an action to renew a judgment, but it must do so “[w]ithin the applicable period of limitations” set forth in the statute, that is, within ten years. Ibid. A motion such as this qualifies as “an action” under this statute. Van Reken v. Darden, Neef & Heitsch, 259 Mich. App. 454, 458, 674 N.W.2d 731, 734 (2003). Assuming the judgment holder appropriately renews its judgment, Michigan law contemplates indefinite extension. Consol. Rail Corp. v. Yashinsky, 170 F.3d 591, 595 (6th Cir. 1999). The 2015 judgment specified that the defendants were liable for “$425,113,115.59, which is the unpaid principal amount owed . . ., plus all interest, fees, and costs . . . in amounts to be determined at a later date.” 2015 J., ECF No. 568, PageID.24047. That judgment was amended in 2018 to add an additional amount from a “calculation of prejudgment interest” based on a rare stipulation of the parties. ECF No. 822, PageID.27645. The amended judgment also reduced the amount of principal outstanding on the judgment from approximately $425 million to $410,148,384.04 and added prejudgment interest of $368,128,545.19. ECF No. 823, PageID.27653. The plaintiff is entitled to renewal of its judgment, Mich. Comp. Laws § 600.5809(3), but the amount of the judgment should reflect any additional amount of interest due and deduct amounts for payments and collections through the current date. The parties may submit a stipulation indicating the correct amount. - 18 - IV. The defendants have not shown that they are entitled to relief from the 2021 judgment entered in favor of Alter Domus in this action. Nor have they offered any good reason why the Court should not grant the Agent’s request to renew its 2015 judgment. Accordingly, it is ORDERED that the defendants’ motion to vacate the judgment (ECF No. 1202) is DENIED. It is further ORDERED that the Agent’s motion to renew its judgment (ECF No. 1213) is GRANTED. It is further ORDERED that the parties promptly must meet and confer to attempt to draft a stipulation on the amount presently owing on the 2015 judgment as amended and may thereafter lodge with the Court in chambers a form of judgment that reflects Alter Domus as the plaintiff in this action. Dated: September 25, 2025 s/David M. Lawson DAVID M. LAWSON United States District Judge - 19 -

=== OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR RECONSIDERATION OF ORDER HOLDING DEFENDANT LARRY J. WINGET IN CIVIL CONTEMPT OF COURT ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ALTER DOMUS, LLC, Plaintiff/Counter-Defendant, v. Case Number 08-13845 Honorable David M. Lawson LARRY J. WINGET and the LARRY J. WINGET LIVING TRUST, Defendants/Counter-Plaintiffs. ________________________________________/ OPINION AND ORDER GRANTING PLAINTIFF’S MOTION FOR RECONSIDERATION OF ORDER HOLDING DEFENDANT LARRY J. WINGET IN CIVIL CONTEMPT OF COURT On February 14, 2025, the Court entered an order finding defendant Larry J. Winget in contempt of an order that required him to turn over to plaintiff Alter Domus, the Agent for a consortium of lenders, certain payments received on promissory notes that had been impressed with a constructive trust during the collection proceedings in this case. See ECF No. 1188, also cited as Alter Domus, LLC v. Winget, 766 F. Supp. 3d 754 (E.D. Mich. 2025). The Agent had sought the turnover of $22.5 million, but the Court determined that it had established only that Winget had received $2.5 million as payment against the notes and had offered insufficient proofs at the time of payment of the other $20 million. That latter amount had been paid to one of Winget’s companies, JVIS Investments LLC, but the Agent had not produced sufficient evidence that Winget received it, credited it, or caused it to be paid to JVIS Investments. The Court also ordered Winget to “furnish to the plaintiff a declaration . . . listing all payments he received, including the dates and amounts of payments . . . .” ECF No. 1188, PageID.34743. Winget executed a declaration in compliance with the Court’s order on February 19, 2025. He represents that he had “no personal knowledge of receiving payments on the JVIS- USA, LLC Promissory Notes on June 29, 2018 or at any other time” but states that he “rel[ies] on and accept[s] as complete and accurate” the testimony of his “personal attorney and JVIS-USA, LLC Manager Timothy Bradley” given at the bench trial in the related case, Alter Domus, LLC v. Larry J. Winget, 23-10458 (E.D. Mich.), regarding the payments. See ECF No. 1192-1. The bench trial in that case was conducted on February 18 through 21, 2025. On February 28, the Agent filed the present motion under Civil Rule 60(b) and Local Rule 7.1(h) asking the Court to reconsider its ruling as it relates to the $20 million payment. Local Rule 7.1(h) allows only an invited response, E.D. Mich. 7.1(h)(3), but no such restriction is found in Civil Rule 60(b). Defendant Winget has not responded to the motion. Although both Civil Rule 60(b) and Local Rule 7.1(h) allow courts to reconsider an earlier ruling when new evidence comes to light, see Fed. R. Civ. P. 60(b)(2); E.D. Mich. LR 7.1(h)(2)(C), there are some procedural differences between the two provisions. The local rule applies to requests for reconsideration of non-final orders, see E.D. Mich. LR 7.1(h)(2), while Rule 60 applies to final orders, see Fed. R. Civ. P. 60(b). Although not all contempt orders are final orders, see United States v. Conces, 507 F.3d 1028, 1037 n.7 (6th Cir. 2007), the situation is different when the case stands in a post-judgment posture, as here, see McAlpin v. Lexington 76 Auto Truck Stop, Inc., 229 F.3d 491, 500 (6th Cir. 2000 . The rationale of considering the posture of the case when considering the finality vel non of a contempt order is “that the policy of preventing piecemeal litigation is served.” Ibid. (quoting Peabody Coal Co. v. Loc. Union Nos. 1734, 1508 and 1548, UMW, 484 F.2d 78, 82 (6th Cir. 1973 . Although the present action is a bad poster child in service of that policy, plainly the case is in its post-judgment collection phase, and Rule 60(b) provides the appropriate framework for the motion. - 2 - Rule 60(b) authorizes a court to provide a party relief “from a final judgment, order, or proceeding” for a few reasons, including as relevant here, where a party offers “newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b)” or “any other reason that justifies relief.” Fed. R. Civ. P. 60(b)(2), (6). The Agent says that testimony by Timothy Bradley fills the gap that prevented it from proving that Winget violated the turnover order as to the $20 million payment. The Agent highlights several portions of Bradley’s testimony as evidence that Winget did violate the turnover order. For instance, Bradley explained that the 2018 payment from JVIS-USA was allocated “100 percent [] to Mr. Winget.” Trial Tr. Vol. I, ECF No. 267, PageID.4108. He also clarified why JVIS USA issued the payment to JVIS Investments, LLC, rather than Winget personally by name: Q. . . . [T]ell us, what is JVIS Investments, LLC? A. It’s a company that’s owned 100 percent by Mr. Winget that, generally, any transactions related to certain payments or funds, that it would be sort of a central cash management company that would take in funds and then utilize them for other purposes. Q. Why was that $20,000,000 paid to JVIS Investments, LLC? A. For a payment like that, Mr. Winget didn’t really have a bank account that items would go into. So as a solely owned company, a disregarded entity for tax purposes, that’s the company that we utilized for that purpose. Id. at PageID.4111. Bradley added that JVIS Investments frequently was used to receive funds “owed to” Winget. Id. at PageID.4113. He also stated that the $20 million payment originally was booked as a distribution from JVIS, but on the advice of Mr. Winget’s accountants it was re- classified as a loan repayment. Id. at PageID.4114. The Agent is entitled to the relief it seeks in its motion. In its previous order, the Court declined to order Winget to pay $20 million to the Agent because the turnover order imposed a - 3 - constructive trust only on “payments made to Winget on account of the promissory notes,” but there was insufficient evidence to conclude Winget had received the $20 million, credited it, or caused it to be paid to JVIS Investments, LLC. ECF No. 1188, PageID.34735. Bradley’s trial testimony bridges the evidentiary gap. Bradley’s testimony, which was adopted by Winget in his declaration, ECF No. 1192-1, establishes that Winget received the $20 million payment. Bradley’s testimony clarified that Winget owns JVIS investments, LLC and treated it like a “bank account” or “central cash management company” for funds “owed to him.” Trial Tr., Vol. I, ECF No. 267, PageID.4111, 4113. He also confirmed that JVIS Investments, LLC, in fact, received the $20 million and that Winget and JVIS-USA alike treated it as a payment on the notes. Id. at PageID.4111, 4114. The Agent also has established that evidence of Winget’s violation could not with “reasonable diligence” have been discovered before the Court’s prior decision. See Fed. R. Civ. P. 60(b)(2). The Court observed previously that the existence of additional payments was “far from obvious” based on the documents in the Agent’s possession at the time. ECF No. 1188, PageID.34740. The Agent also took action to obtain documents pertaining to the $20 million payment while the contempt motion was pending. See ECF No. 1163. When Magistrate Judge Grand granted the Agent’s motion to compel and ordered Winget to “conduct a good faith search for and produce any and all non-privileged documents related to the 2018 Additional Payment of $20,000,000 that have not already been produced,” ECF No. 1173, Winget ultimately had little to show. According to the Agent, he produced one document that makes no mention of JVIS Investments and does not furnish anything in the level of detail provided by Bradley at trial. With the evidence received during trial of the related case, the Agent has proven “by clear and convincing evidence” that defendant Winget violated the Court’s prior order by failing to turn - 4 - over the $20 million payment JVIS-USA made on the subject promissory notes. Glover v. Johnson, 934 F.2d 703, 707 (6th Cir. 1991). That order was “definite and specific” and required the defendant “to perform or refrain from performing a particular act or acts.” Rolex Watch U.S.A., Inc. v. Crowley, 74 F.3d 716, 720 (6th Cir. 1996) (quoting NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 591 (6th Cir. 1987 . Accordingly, it is ORDERED that the plaintiff’s motion for partial relief from and reconsideration of the order holding defendant Larry J. Winget in civil contempt of Court (ECF No. 1192) is GRANTED. It is further ORDERED AND ADJUDGED that Larry J. Winget is in CIVIL CONTEMPT of the order of this Court to turn over “the amounts paid on the promissory notes.” It is further ORDERED that Larry J. Winget may purge his contempt by paying over to the plaintiff the $20 million payment received from JVIS-USA and directed to JVIS Investments, LLC on the promissory note(s) on or before October 21, 2025. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: September 23, 2025 - 5 -

=== OPINION AND ORDER DENYING IN PART DEFENDANT’S MOTION TO COMPEL ARBITRATION ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION KENNETH JAMES WILKINSON, v. Plaintiff, GENERAL MOTORS, LLC, ________________________________________/ Defendant. Case Number 24-11007 Honorable David M. Lawson OPINION AND ORDER DENYING IN PART DEFENDANT’S MOTION TO COMPEL ARBITRATION Kenneth Wilkinson is one of the several plaintiffs in this case who alleges that a vehicle he purchased that was manufactured by defendant General Motors was sold with a defective automatic transmission. The sales contract he signed with his dealer contained a provision that disputes arising from the transaction would be resolved by arbitration. By its terms, the arbitration clause applies to “dispute[s] between Purchaser and Dealer or any officer, employee or affiliate of Dealer.” Defendant General Motors argues in a motion to compel arbitration that this language is broad enough to cover the present action brought against it as the manufacturer, even though GM was not a signatory to the agreement. But under the contract’s plain terms, the manufacturer is neither a “Purchaser,” a “Dealer,” nor an “affiliate.” GM therefore has no basis to enforce the arbitration clause for its own benefit. The motion to compel arbitration as to plaintiff Wilkinson will be denied. I. The facts of the case are familiar by now to the parties and were discussed at length in the Court’s prior opinions on the defendant’s pleading challenges to the amended class action complaint in the companion case, Francis v. Gen. Motors, LLC, 504 F. Supp. 3d 659, 667 (E.D. Mich. 2020), the motions challenging the expert witnesses, Won v. Gen. Motors, LLC, No. 19- 11044, 2022 WL 3010886, at *1 (E.D. Mich. July 28, 2022), and the motion to dismiss in the present matter, Ulrich v. Gen. Motors, LLC, No. 24-11007, 2025 WL 629460, 116 UCC Rep. Serv. 2d 332 (E.D. Mich. Feb. 25, 2025). The plaintiffs allege that the automatic transmissions in their vehicles will “slip, buck, kick, jerk and harshly engage.” They say that, when the transmission causes the vehicle to perform erratically, such as with sudden or delayed acceleration, the vehicles may be unsafe to drive. All of the car and truck models implicated by this suit were made by defendant General Motors. The plaintiffs filed suit on behalf of putative classes, including the owners of thousands of vehicles that, they claim, have defective transmissions, which GM has refused to fix or replace under its express warranty. The plaintiffs’ claims are based on fraud, unjust enrichment, and breach of warranty theories. In April 2019, plaintiff Kenneth Wilkinson bought a used 2018 Chevrolet Colorado from Kendall Chevrolet in Eugene, Oregon. He executed a written Purchase Agreement for the sale. The agreement defined certain terms and conditions and incorporated an arbitration clause. See Purchase Agreement, ECF No. 17-3, PageID.433. In the Definitions section, the agreement states: “As used in this Vehicle Purchase Agreement (Agreement) (a) ‘Dealer’ means the dealer designated on the face of this Agreement. (b) ‘Purchaser’ means the party or parties who execute this Agreement as Purchaser. (c) ‘Manufacturer’ means the company that manufactured the Vehicle or any part thereof.” Ibid. On the first page of the agreement, the Purchaser is identified as “Kenneth Wilkinson,” and the Dealer is identified as “Kendall Chevrolet LLC.” The agreement incorporates “additional terms and conditions” which include, in Paragraph 10 of an addendum, a provision for “Mandatory Arbitration.” That provision states: Any claim, controversy, or dispute between Purchaser and Dealer or any officer, employee or affiliate of Dealer, arising out of or relating to this Agreement, the sale - 2 - of or financing for, or the condition of the Vehicle . . . shall be resolved by arbitration in accordance with the then effective commercial arbitration rules of the Arbitration Service of Portland, Inc. Purchase Agreement, Additional Terms and Conditions ¶ 10, ECF No. 17-3, PageID.433. The agreement also conspicuously disclaims the issuance of any express or implied warranty by the Dealer covering the vehicle, stating: DEALER HAS NOT MADE ANY WARRANTY WITH RESPECT TO THIS VEHICLE OR RELATED GOODS OR SERVICES, unless Dealer delivers to Purchaser a separate written warranty. THERE ARE NO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER IMPLIED WARRANTIES WITH RESPECT TO THE VEHICLE, GOODS OR SERVICES, unless Dealer delivers to Purchaser a separate written warranty or Purchaser has at the time of sale or within 90 days after the time of sale entered into a written service contract in connection with the sale of the Vehicle. Id. at PageID.431. It is undisputed that no other separate written warranty or service agreement was issued by the dealer in connection with Wilkinson’s vehicle. The parties agree that the dispute is governed by Oregon law, and for reasons discussed below, the Court agrees. General Motors believes that it is entitled to enforce the arbitration clause because Oregon courts construe such clauses broadly, the clause by its terms covers any dispute “arising out of” the agreement and relating to “the condition of the vehicle,” and the clause refers to disputes with any “affiliate” of the dealer, which GM says includes it as a manufacturer. Failing that, GM says that it may invoke the doctrine of equitable estoppel to avail itself of the purchase contract’s terms, including the right to compel arbitration. Plaintiff Wilkinson also points to the plain terms of the arbitration clause, which, he says, undermine GM’s arguments, as many courts applying Oregon law have found. Likewise, he points to cases that reject the equitable estoppel argument. The parties argued their motion last December, along with another plaintiff, Ryan Volmert, who also signed a dealer agreement with a differently-worded arbitration clause. Volmert’s - 3 - contract had an arbitration clause that included a provision that referred questions of arbitrability to the arbitrator. Although Volmert contended that his arbitration clause would not include a non- signatory manufacturer like GM, he conceded that this question must be decided by the arbitrator. The Court stayed his case and referred it to arbitration. The motion as to plaintiff Wilkinson has remained under advisement until now. II. The parties agree with the basic rules governing the enforceability of arbitration clauses. When such a clause is found in a contract, it is generally “‘valid, irrevocable, and enforceable.’” New Heights Farm I, LLC v. Great Am. Ins. Co., 119 F.4th 455, 461 (6th Cir. 2024) (quoting 9 U.S.C. § 2). Because the applicability of an arbitration provision is “‘fundamental[ly] . . . a matter of contract,’” ibid. (quoting Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67 (2010 , conventional contract interpretation law governs the question “whether their agreement covers a particular controversy,’” ibid. (quoting Rent-A-Center, 51 U.S. at 68-69 (cleaned up). Basic to the law of contract formation are parties who come to a meeting of the minds and agree to be bound by their mutual promises. Homestyle Direct, LLC v. DHS, 354 Or. 253, 262, 311 P.3d 487 (2013). Focusing on agreements to arbitrate, which fall under the umbra of the Federal Arbitration Act, 9 U.S.C. § 1, et seq., the Supreme Court emphasizes that “arbitration is strictly a matter of consent.’” Coinbase, Inc. v. Suski, 602 U.S. 143, 148 (2024) (quoting Lamps Plus, Inc. v. Varela, 587 U.S. 176, 184 (2019); Granite Rock Co. v. Teamsters, 561 U.S. 287, 299 (2010 (cleaned up). “Arbitration is ‘a way to resolve those disputes — but only those disputes — that the parties have agreed to submit to arbitration.’” Coinbase, 602 U.S. at 148 (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995 . “Consent is essential under the FAA because arbitrators wield only the authority they are given. That is, they derive their ‘powers - 4 - from the parties’ agreement to forgo the legal process and submit their disputes to private dispute resolution.’” Lamps Plus, Inc. v. Varela, 587 U.S. 176, 184 (2019) (quoting Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 682 (2010 . “Consequently, the first question in any arbitration dispute must be: What have these parties agreed to?” Coinbase, 602 U.S. at 148. The contract language will determine who is bound by the promise to arbitrate. “It is axiomatic that, ‘[t]ypically, only parties to a contract are bound to its terms.’” Firexo, Inc. v. Firexo Grp. Ltd., 99 F.4th 304, 311-12 (6th Cir. 2024) (citing E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 294 (2002) (“It goes without saying that a contract cannot bind a nonparty.” . “But there are certainly exceptions, such as in agency, for third-party beneficiaries, or via equitable estoppel.” Ibid. (citing Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009) (“[T]raditional principles of state law allow a contract to be enforced by or against nonparties to the contract through assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel.” . These questions are all matters of contract interpretation, and there is a question of which body of law should control. The Sixth Circuit has recognized that there is a circuit split on whether federal or state common law should be applied when construing contract terms governing arbitration. See Firexo, 99 F.4th at 323. But in Firexo, the court settled on the “stronger position [holding] that there is no federal common law of contract interpretation for arbitration clauses; [and] courts must use the Erie choice-of-law analysis — and the law dictated thereby — to determine whether an arbitration clause applies to a non-signatory.” Id. at 326 (citing AtriCure, Inc. v. Meng, 12 F.4th 516, 520-25 (6th Cir. 2021 . “Under the Erie approach to contract interpretation, a federal court sitting in diversity begins with a conflict-of-laws analysis using the - 5 - law of the State in which it sits . . . to determine the governing law, and then interprets the contract provision under that law.” Id. at 327. Following Firexo’s guidance, the parties agree that Oregon law governs the construction of the arbitration clause in Wilkinson’s dealer purchase agreement. “Oregon courts follow a three- step inquiry for interpreting a contract.” Jurj v. Albers for Andersen, No. 21-00088, 2024 WL 4187138, at *8 (D. Or. Sept. 13, 2024) (citing Yogman v. Parrott, 325 Or. 358, 361, 937 P.2d 1019, 1021 (1997 . That analysis begins — and often ends — with the first step, in which “the court must determine whether the disputed provision is ambiguous, which is a question of law.” Ibid. (“First, the court examines the text of the disputed provision, in the context of the document as a whole. If the provision is clear, the analysis ends.”) (citing Ross Dress for Less, Inc. v. Makarios- Oregon, LLC, 210 F. Supp. 3d 1259, 1263 (D. Or. 2016 . “A provision is ambiguous ‘if two or more plausible interpretations of that term withstand scrutiny, i.e., continue[] to be reasonable, after the interpretations are examined in the light of, among other things, the particular context in which that term is used in the contract and the broader context of the contract as a whole.’” Ibid. (quoting Hoffman Const. Co. of Alaska v. Fred S. James & Co. of Oregon, 313 Or. 464, 470, 836 P.2d 703, 706 (1992 . “The court must, if possible, construe the contract in a way that gives effect to all of its provisions, and is ‘not to insert what has been omitted, or to omit what has been inserted.’” Ibid. (quoting Ross Dress for Less, 210 F. Supp. 3d at 1263). “If the provision is clear and unambiguous, the court applies the contractual term to the facts.” Ibid. Consistently with the foundational principles of Oregon’s law of contracts, “in Oregon, the Court determines whether unnamed third-part[ies] . . . can invoke an arbitration clause.” Big Wuf Enters., LLC, v. Go Farm Hemp, LLC, No. 20-01634, 2021 WL 12319108, at *2 (D. Or. July 12, 2021) (citing Livingston v. Metro. Pediatrics, LLC, 234 Or. App. 137, 149, 227 P.3d 796, 804 - 6 - (2010 ; see also Eugene Water & Elec. Bd. v. MWH Americas, Inc., 293 Or. App. 41, 57-58, 426 P.3d 142, 151 (2018) (“Defendants point out that the arbitration provision states that it applies to ‘any’ dispute under the contract, which they contend extends to disputes . . . involving nonparties. . . . But, . . . the provision also states that it applies to any dispute between the parties. The question remains: Who are ‘the parties’?”). To start, the parties agree as a threshold matter that Wilkinson’s agreement does not contain a delegation provision, so the question of arbitrability is for the Court and not an arbitrator to decide. Harrison v. Gen. Motors LLC, 651 F. Supp. 3d 878, 889 (E.D. Mich. 2023). Next, looking to the arbitration agreement, the language is not ambiguous. It is clear and specific and states plainly that the parties agreed to submit to arbitration “[a]ny claim, controversy, or dispute between Purchaser and Dealer or any officer, employee or affiliate of Dealer, arising out of or relating to this Agreement, the sale of or financing for, or the condition of the Vehicle.” Purchase Agreement, Terms and Conditions ¶ 10, ECF No. 17-3, PageID.433 (emphasis added). The contract defines the terms Purchaser and Dealer, and neither of those definitions can be read to include the defendant, which is identified separately as the Manufacturer of the vehicle. The contract makes no mention of submitting any dispute between Purchaser and Manufacturer to arbitration, and the agreement does not incorporate either by reference or otherwise the defendant’s separate express Limited Warranty on which the plaintiff has sued. Moreover, the purchase agreement explicitly disclaims the issuance of any warranty, express or implied, by Dealer to Purchaser, further demonstrating that the parties did not contemplate an agreement to arbitrate claims arising from a separate warranty issued by the non-party Manufacturer. There is no other reasonable construction of the arbitration provision in the context of the entire agreement other - 7 - than that the parties intended to arbitrate only disputes that might arise between the parties to the contract itself, not including disputes involving non-signatories. The defendant contends that it is covered by the undefined term “affiliate” used in the arbitration clause, even though the definitions in the contract explicitly identify the “Manufacturer” of the vehicle distinctly from the “Dealer.” The agreement does not define the term “affiliate.” That term is understood to mean: “A person or organization that is affiliated with a larger body; a member. Also: an associate of another person or organization; a fellow member of a larger body.” Oxford Eng. Dict. (Rev. ed. 2012). No doubt that General Motors’ upper management — not to mention its members and stockholders — would be surprised to learn that the international automaker was a junior member of Kendall Chevrolet in Eugene, Oregon. The term “affiliate” cannot be conscripted into the service GM envisions. And the defendant has not pointed to any traces elsewhere in the Dealer Agreement showing the parties’ intent to include a distinctly nominated stranger to the contract under the general category of “affiliates” of the Dealer. GM says that the plaintiff has alleged that the defendant is an “affiliate” of the Dealer, but the complaint says no such thing, pleading merely that the defendant acts on its own and in concert with unspecified “affiliates” to design, make, and market the class vehicles. Compl. ¶ 28, ECF No. 1, PageID.14 (“General Motors LLC, itself and through its affiliates, designs, manufactures, markets, distributes, services, repairs, sells, and leases passenger vehicles, including the Class Vehicles, nationwide and in Michigan.”). That language might support an inference that the Dealer is an affiliate of the Manufacturer, but urging the opposite conclusion only attempts to fly that arrow backwards. The argument cannot take flight. Moreover, the defendant’s reading of the agreement as including it under the generalized rubric of “affiliates” would render superfluous the language in the definitions distinctly nominating - 8 - the defendant as the Manufacturer of the vehicle. If the parties intended to include disputes against a Manufacturer within the scope of their arbitration agreement, then they certainly could have said so in their contract, but they did not. The defendant would have the Court read into the contract an additional definition provision stating “‘Affiliates’ means entities . . . including Manufacturer”, or an insertion to the arbitration clause enlarging its scope to cover disputes between “between Purchaser and Dealer or any officer, employee or affiliate of Dealer, including Manufacturer.” Either construction is a bridge too far under Oregon law, which is emphatic on this topic, having enshrined by statute the venerable axiom that “[i]n the construction of an instrument, the office of the judge is simply to ascertain and declare what is, in terms or in substance, contained therein, not to insert what has been omitted.” Or. Stat. § 42.230 (emphasis added). The plain terms of the writing do not suggest any intent by the parties to include the defendant in the undefined category of “affiliates,” and the defendant has not presented any evidence that it has any “affiliate” relationship with the dealer that was within the contemplation of the parties when the purchase agreement was executed. Confronting language equally specific and indistinguishable, Oregon courts readily have concluded that a third-party defendant is not entitled to compel arbitration under a contract to which it was not a party. Eugene Water & Elec. Bd. v. MWH Americas, Inc., 293 Or. App. 41, 58- 59, 426 P.3d 142, 151-52 (2018). In that case, a subcontractor attempted to invoke an arbitration clause that “applie[d] to claims between ‘Owner’ and ‘Contractor,’ terms that [were] specifically defined in the contract.” Id. at 58, 426 P.3d at 151. Rejecting that effort, the court found that “[t]he arbitration provision’s use of the definite article, the parties, suggests a reference back to those parties previously named, the ‘Owner’ and ‘Contractor,’ who, as noted, are also described as the parties to the contract. Based on the plain text of the contract . . ., we conclude that the - 9 - reference to ‘the parties’ in the arbitration provision is a reference to the parties to the contract previously named in the first sentence of the paragraph, the ‘Owner’ and the ‘Contractor.’” Ibid., 426 P.3d at 151-52. Oregon courts also consistently have rejected attempts to inject supposed “ambiguity” into the plain terms of contracts, or to compel arbitration on broader principles, where the language of an agreement is clear and specific as to the scope of arbitrable disputes. DeLashmutt v. Parker Grp. Invs., LLC, 276 Or. App. 42, 47-48, 366 P.3d 769, 772-73 (2016). The DeLashmutt court held that an arbitration provision that bound “the Borrower and the Lender” could not be expanded to include disputes involving individuals who had signed a related investment agreement, rejecting the argument that the plain construction “exalts form over substance, and inconvenience over efficiency, for no discernible reason that would benefit either side or the enterprise.” Id. at 47, 366 P.3d at 772. The court reasoned that “the presumption in favor of arbitration identified in [its prior] cases does not supplant the ordinary rules of contract interpretation. Rather, it applies only where an arbitration agreement is ambiguous and extrinsic evidence does not resolve the ambiguity. Here, an application of the ordinary rules of contract interpretation leads to the conclusion that the arbitration provision is unambiguous and, by its terms, applies only to disputes between [the contract signatories], and not to disputes involving other parties.” Id. at 48, 366 P.3d at 772. Applying similar principles and the law of other jurisdictions, federal courts have reached the same conclusion, finding that the plain language of the agreement controls. Ngo v. BMW of N. Am., LLC, 23 F.4th 942, 948 (9th Cir. 2022) (holding that “[t]he arbitration clause’s enforcement provisions [in a similarly worded dealer agreement] are limited to the dealership, the assignee, and [the customer]. . . . [and] the fact that the purchase agreement provides that it ‘does not affect any - 10 - warranties covering the vehicle that the vehicle manufacturer may provide,’ is a potent indication that the parties knew how to deal with claims against the manufacturer. Although the arbitration clause may have extended to claims regarding the purchase of the vehicle, it does not follow that additional parties can enforce the arbitration clause.”). The circumstances in those cases, as in the present case, are distinguishable from cases relied on by GM where less cabined terms were found to permit the possibility of third-party invocation of an arbitration clause, when a reference to disputes “arising out of or relating to” the agreement was not accompanied by any language limiting the scope to controversies “between the parties” to the contract. E.g., Livingston v. Metro. Pediatrics, LLC, 234 Or. App. 137, 150, 227 P.3d 796, 805 (2010). Oregon courts also consistently have rejected attempts by non-parties to invoke arbitration clauses on the ground of equitable estoppel. “To establish an affirmative defense of equitable estoppel or estoppel by conduct [under Oregon law], the defendant must show: (1) a false representation, (2) made with knowledge of the facts, and (3) the other party must have been ignorant of the truth; (4) it must have been made with the intention that it should be acted upon by the other party; and (5) the other party must have been induced to act upon it.” Goergen v. Black Rock Coffee Bar, LLC, No. 22-1258, 2023 WL 1777980, at *9 (D. Or. Feb. 6, 2023) (citing Ross Dress For Less, Inc. v. Makarios-Oregon, LLC, 180 F. Supp. 3d 745, 778 (D. Or. 2016), aff’d, No. 21-35106, 2022 WL 2643376 (9th Cir. July 8, 2022 . GM has not identified any false representation by plaintiff Wilkinson or any way in which it, as a stranger to the contract, conceivably could have been induced to act on such a representation. Where a defendant has failed to make out the elements for estoppel, Oregon courts have rejected attempts by a contractual non- party to invoke that equitable principle to compel arbitration, and federal courts have followed suit - 11 - applying the law of various jurisdictions. Goergen v. Black Rock Coffee Bar, LLC, No. 22-1258, 2023 WL 1777980, at *10 (D. Or. Feb. 6, 2023) (“Black Rock additionally argues that equitable estoppel applies to the Trust because it ‘knowingly exploited’ the arbitration agreement. Black Rock does not cite any Oregon state case applying this type of equitable estoppel.”); id. at *2 (“[T]he Court concludes that Plaintiffs, who are nonsignatories to the contracts between Black Rock and the BR Entities, are not bound by the arbitration agreement in those contracts and there is no valid contract between Plaintiffs and Black Rock requiring arbitration.”); see also Ngo, 23 F.4th at 949 (“BMW is mistaken that, under the Song-Beverley and the Magnuson-Moss Warranty Acts, Ngo’s claims are inextricably intertwined with terms of the purchase agreement. To be sure, Ngo must show that she owned a BMW, but ownership does not entail an intention to enforce any obligations of the purchase agreement on BMW. BMW was not a party to the agreement and its obligations to Ngo arose independently of her agreement with the dealership.”); Harrison v. Gen. Motors LLC, 651 F. Supp. 3d 878, 889-92 (E.D. Mich. 2023) (rejecting application of estoppel to enforce arbitration clauses under Ohio, Tennessee, and Florida law). By contrast, in those rare cases where a third party has been allowed to avail itself of an arbitration clause, it was because the plaintiff had sued both the manufacturer and the retail vendor of an allegedly defective product. E.g., Ngo, 23 F.4th at 950 (“It makes a critical difference that the Felisildas, unlike Ngo, sued the dealership in addition to the manufacturer. In Felisilda, it was the dealership — a signatory to the purchase agreement — that moved to compel arbitration rather than the non-signatory manufacturer. Furthermore, the Felisildas dismissed the dealership only after the court granted the motion to compel arbitration. Accordingly, Felisilda does not address the situation we are confronted with here, where the non-signatory manufacturer attempted to compel arbitration on its own. We therefore decline to affirm on the ground of equitable - 12 - estoppel.”) (distinguishing Felisilda v. FCA US LLC, 53 Cal. App. 5th 486, 266 Cal. Rptr. 3d 640 (2020 . In this case, the plaintiff has not sued the dealer, nor has he pleaded any claim in his complaint for breach of the purchase agreement that incorporated the arbitration clause. Instead, he seeks to recover for a breach of the entirely separate express Limited Warranty issued by the defendant, not the dealer. III. The language of the Dealer Agreement is unambiguous and plainly answers the inquiry whether plaintiff Wilkinson and the dealer that sold him his vehicle contemplated arbitration of disputes involving non-parties to the sale contract, including the manufacturer. They did not. Plaintiff Wilkinson did not agree to arbitrate any claims he may have against the manufacturer of the vehicle he purchased with the allegedly defective transmission. Accordingly, it is ORDERED that the defendant’s motion to compel plaintiff Wilkinson to submit his claims to arbitration (ECF No. 17) is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: June 13, 2025 - 13 -

=== OPINION AND ORDER DENYING MOTIONS TO DISMISS BY DEFENDANTS KENNETH KING AND CATHY GREER-FORTE, AND GRANTING IN PART AND DENYING IN PART UNIVERSAL PROTECTION SERVICES’S MOTION TO DISMISS ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ELG, a minor child by next friend, LATOREYA TILL, v. Plaintiffs, KENNETH KING, UNIVERSAL PROTECTION SERVICES, JOHN DOE COURT OFFICER, and JANE DOE COURT OFFICER, ________________________________________/ Defendants. Case Number 24-12195 Honorable David M. Lawson OPINION AND ORDER DENYING MOTIONS TO DISMISS BY DEFENDANTS KENNETH KING AND CATHY GREER-FORTE, AND GRANTING IN PART AND DENYING IN PART UNIVERSAL PROTECTION SERVICES’S MOTION TO DISMISS When fifteen-year-old ELG traveled to a Detroit courtroom last summer for a civics- oriented summer camp field trip, she had no idea that she would be arrested, detained, and subject to a mock trial like a common criminal for the transgression of dozing off between sessions of court while 36th District Court Judge Kenneth King lectured about his former legal practice. ELG was placed in handcuffs, forced to wear a prison jumpsuit, and held in a court detention cell for several hours. She then was made to appear as a mock “defendant” in a “trial” where her peers on the fieldtrip “decided” her fate. All of this allegedly was streamed on the court’s YouTube channel for the world to see. ELG, through her mother and next friend, understandably brought suit against Judge King, two court officers, and the company that employed one of the officers. The amended complaint alleges a variety of constitutional violations and state law torts. Judge King has filed a motion to dismiss arguing that absolute judicial immunity protects him from this lawsuit, contending that he had a right to use his discretion to maintain courtroom decorum. Court officer Cathy Greer-Forte also moves to dismiss claiming quasi-judicial immunity, and her employer, defendant Universal Protection Services, seeks dismissal arguing the plaintiff’s claims against it must fail if its employee receives immunity. The doctrine of absolute judicial immunity is quite broad — “sweeping” in the words of the Supreme Court. Forrester v. White, 484 U.S. 219, 225 (1988). It may be overcome, however, when the judicial officer’s action can be characterized as “nonjudicial,” or when the judge acts in the absence of all jurisdiction. The plaintiff has pleaded facts from which it could be inferred plausibly that Judge King’s actions toward the minor plaintiff occurred when court was not in session and he was performing a nonjudicial role, using the City’s courtroom as a lecture forum. Discovery may establish otherwise, but at this stage of the case it is not clear that absolute judicial immunity will shield Judge King or his court officer from liability. The motions to dismiss by Judge King and court officer Greer-Forte will be denied. The plaintiff’s federal claim against defendant Universal Protection Services is based on vicarious liability and therefore is not viable. That claim will be dismissed. I. The plaintiff’s claims grow out of events that occurred during a field trip to the 36th District Court in Detroit. The following facts are taken from the amended complaint, which are accepted as true for the purpose of these motions. Donovan v. FirstCredit, Inc., 983 F.3d 246, 252 (6th Cir. 2020) (citing Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012 . Plaintiff ELG, a minor, is represented in this action by her mother, Latoreya Till. On August 13, 2024, ELG visited the 36th District Court as part of a summer vocational program organized by a local nonprofit agency. Am. Compl. ¶¶ 16-20. When the group arrived at the court, they were seated in the gallery of District Judge Kenneth King’s courtroom to watch the day’s proceedings. Id. at ¶¶ 25-27. After Judge King handled a homicide proceeding, he recessed court - 2 - and left the bench to speak with the youths about careers in the law. Id. at ¶ 29. One of the students spoke up to say he was interested in becoming a judge, so Judge King gave him his judicial robe and had him sit at the bench. Id. ¶ 30. Judge King then proceeded to lecture the students about his experiences as a practicing attorney. Ibid. The lecture was broadcast publicly on the court’s YouTube livestream platform. Id. ¶ 31. As Judge King lectured, ELG fell asleep briefly. Id. ¶ 32. Judge King noticed and “berated” her, comparing her to a juvenile delinquent. Id. ¶ 33. ELG apologized and Judge King moved on for a time, but ELG soon dozed off again. Id. ¶ 34. Judge King told ELG to go to the restroom and get a drink of water. Id. ¶¶ 35-36. It was during this time, the plaintiff alleges, that Judge King formed a plan to use “Scared Straight” tactics on her. Id. ¶ 37. When ELG returned to the courtroom, court officer Keith Taylor “derided” her for “disrespecting” Judge King. Id. ¶¶ 38-39. He directed her to the side of the bench and ordered her to stand still while a real defendant was escorted into the courtroom from a detention cell. Id. ¶ 40. Taylor then placed ELG into the detention cell and locked her inside while Judge King brought court back into session to hear another case. Id. ¶ 41. Ten minutes later, court officer Cathy R. Greer-Forte, who is employed by defendant Universal Protection Services, opened the cell where ELG was waiting and instructed her to put on a jail jumpsuit over her clothing. ELG remained in her cell for “hours” while Judge King heard cases in the courtroom. Id. ¶ 44. After the day’s proceedings had ended, Greer-Forte brought ELG back into the courtroom where she became “the defendant” in a “mock trial” led by Judge King. Id. ¶ 44. Although the “proceedings” continued to be streamed on YouTube, there was no official case number or court record. Id. ¶¶ 45-46. During the “trial,” Judge King made ELG disclose her name and age. He commandeered a real private attorney serve as her “counsel.” Id. ¶¶ 48-49. He also threatened to - 3 - send ELG to “juvey” and relayed stories about poor conditions at the Wayne County juvenile detention center. Id. ¶ 50. At the conclusion of the “trial,” Judge King asked ELG’s peers to serve as a mock jury and decide whether she should go to the juvenile detention facility. Id. ¶ 51. The amended complaint does not explain how the events concluded, but there is no indication that ELG ever was “convicted” or “sentenced.” However, the plaintiff alleges that Judge King spoke with the media about the event and stated that it was his version of a “Scared Straight” program and that ELG was disrespectful and required his “mentorship.” Id. ¶¶ 52-53. The plaintiff also avers that Judge King “acknowledged” that he lacked jurisdiction to hold her in contempt. Id. ¶ 53. ELG, through her mother, brought suit on August 21, 2024. The amended complaint pleads eight claims: malicious prosecution and unlawful arrest in violation of the Fourth Amendment via 42 U.S.C. § 1983 (Counts I and II); and intentional infliction of emotional distress (Count III), invasion of privacy (Count IV), and false arrest and imprisonment (Count V) under Michigan common law. Counts I through V are pleaded only against Judge King. The plaintiff also alleges unlawful seizure in violation of the Fourth Amendment via section 1983 (Count VI) and false arrest under state law (Count VII) against defendants Taylor and Greer-Forte. The plaintiff also includes a count styled as “vicarious liability” against Universal Protection Services, Ms. Greer- Forte’s employer (Count VIII). Judge King, Greer-Forte, and Universal Protection Services filed motions to dismiss the case on immunity grounds. The motions are directed at the original complaint, but the parties agree that that they will be considered as addressing the later-filed amended complaint. The Court heard oral argument on February 19, 2025. At the time, defendant Keith Taylor had not been served and had not appeared in the case. - 4 - II. Defendants King and Greer-Forte argue that the plaintiff has not made allegations in the complaint sufficient to state a claim for relief because all the claims are barred by immunity doctrines. The issues raised are narrow and require an examination of the contours of judicial and quasi-judicial immunity defenses. Defendant Universal Protection Services maintains that if Greer-Forte is entitled to immunity, the plaintiff’s claims against it must also be dismissed. The defendants invoke Federal Rule of Civil Procedure 12(b)(6). To survive such a motion, the plaintiff “must plead ‘enough factual matter’ that, when taken as true, ‘state[s] a claim to relief that is plausible on its face.’ Plausibility requires showing more than the ‘sheer possibility’ of relief but less than a ‘probab[le]’ entitlement to relief.” Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007), Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009 . When deciding a motion under Rule 12(b)(6), the Court looks only to the pleadings, Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008), the documents attached to them, Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 335 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c , documents referenced in the pleadings that are “integral to the claims,” id. at 335-36, documents that are not mentioned specifically but which govern the plaintiff’s rights and are necessarily incorporated by reference, Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir. 1997), abrogated on other grounds by Swierkiewicz v. Sorema, N.A., 534 U.S. 506 (2002), and matters of public record, Northville Downs v. Granholm, 622 F.3d 579, 586 (6th Cir. 2010). However, before a court considers documents “integral to the claims” and that are referenced in the complaint, “it must also be clear that there exist no material disputed issues of fact regarding the relevance of the documents.” Diei v. Boyd, 116 F.4th 637, 644 (6th Cir. 2024) (quoting - 5 - Ouwinga v. Benistar 419 Plan Servs., Inc., 694 F.3d 783, 797 (6th Cir. 2012 . If those extra- complaint materials are to be considered, the Court must convert the motion to a motion for summary judgment under Rule 56 and allow all parties to present evidence, which usually means that an opportunity to conduct discovery should be given. Id. at 643 (citing Fed. R. Civ. P. 12(d . A. Let’s start with Judge King’s motion. He invokes the doctrine of absolute judicial immunity as the basis for the dismissal of ELG’s case against him. He insists that the facts pleaded by the plaintiff fail to demonstrate that he was acting outside his judicial role or in the complete absence of jurisdiction such that absolute judicial immunity would not apply. Instead, he says that the complaint describes conduct suggesting that he was acting as a judge would act during contempt proceedings and that he is protected by immunity regardless of whether he acted in error, with malice, or was beyond the scope of his authority. Michigan law, he says, grants judges the authority to maintain order in their courtrooms, and he points out that the students were observing court proceedings during their field trip. A couple procedural points deserve mentioning. First, because the immunity Judge King seeks is “absolute,” he bears the burden “of showing that public policy requires an exemption of that scope.’” Flying Dog Brewery, LLLP v. Michigan Liquor Control Comm’n, 597 F. App’x 342, 348 (6th Cir. 2015) (quoting Butz v. Economou, 438 U.S. 478, 506, (1978) (emphasis added ; see also Bright v. Gallia Cnty., Ohio, 753 F.3d 639, 648 (6th Cir. 2014). Second, despite that allocation of the burden of persuasion, addressing the question in the context of a motion to dismiss is allowed. Under Rule 12(b)(6), the Court is called upon to determine if the “complaint . . . contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, , 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 - 6 - U.S. 544, 570 (2007 . A “claim is facially plausible when a plaintiff ‘pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’” Matthew N. Fulton, DDS, P.C. v. Enclarity, Inc., 907 F.3d 948, 951-52 (6th Cir. 2018) (quoting Iqbal, 556 U.S. at 678). If the facts pleaded by the plaintiff and accepted as true fail to establish that immunity is inapplicable, then the matter is a pure question of law and there is no harm to the plaintiff in deciding it early in the litigation. See Barnes v. Winchell, 105 F.3d 1111, 1123 (6th Cir. 1997); Brookings v. Clunk, 389 F.3d 614, 617 (6th Cir. 2004). Finally, absolute judicial immunity shields judges who are sued either in their individual capacity or their official capacity. See Dixon v. Clem, 492 F.3d 665, 674 (6th Cir. 2007). As mentioned earlier, the immunity afforded in this country to judges acting as such is “sweeping.” Forrester v. White, , 225 (1988). It is immunity in an absolute sense, that is, “immunity from suit, not just from [the] ultimate assessment of damages.” Mireles v. Waco, 502 U.S. 9, 11 (1991) (per curiam). More than a century ago, the Supreme Court endorsed “a general principle of the highest importance to the proper administration of justice that a judicial officer, in exercising the authority vested in him, shall be free to act upon his own convictions, without apprehension of personal consequences to himself.” Bradley v. Fisher, 80 U.S. (13 Wall.) 335, 347 (1871). The Supreme Court has explained that “[t]his immunity applies even when the judge is accused of acting maliciously and corruptly.” Pierson v. Ray, 386 U.S. 547, 554 (1967). The rationale for this immunity, the Court explained, is “for the benefit of the public, whose interest it is that the judges should be at liberty to exercise their functions with independence and without fear of consequences.’” Ibid. (citing Scott v. Stansfield, 3 L.R. Ex. 220, 223 (1868 . Nevertheless, judicial immunity may be overcome (1) when a judge takes nonjudicial action or (2) when a judge acts in complete absence of all jurisdiction. Mireles, 502 U.S. at 11- - 7 - 12. To determine whether a particular act is non-judicial, a court must consider (i) “whether the act in question is a function that is normally performed by a judge,” and (ii) “whether the parties dealt with the judge in his or her judicial capacity.” Brookings, 389 F.3d at 617-18 (internal quotation marks omitted). “Whether an action is judicial depends on the nature and function of the act, not the act itself.” Dixon, 492 F.3d at 674. As for the second category of circumstances where immunity does not apply, “[a]cts done ‘in the clear absence of all jurisdiction’ for which no immunity is afforded, should be distinguished from those actions in ‘excess of jurisdiction’ which fall within the ambit of immunity protection.” Id. at 623 (quoting Barnes, 105 F.3d at 1122). “[A] judge acts in the clear absence of all jurisdiction ‘only when the matter upon which he acts is clearly outside the subject matter of the court over which he presides.’” Id. at 623 (quoting Johnson v. Turner, 125 F.3d 324, 334 (6th Cir. 1997 . “Judicial immunity, though absolute and firm, is something to be applied carefully and should not be extended further than its justification warrants.” Morgan v. Bd. of Pro. Resp. of the Sup. Ct. of Tenn., 63 F.4th 510, 521 (6th Cir. 2023). 1. The plaintiff maintains that her complaint clearly demonstrates that Judge King is not entitled to immunity because he acted in the complete absence of jurisdiction by orchestrating his “Scared Straight” program. That argument misses the mark. True, the line between cases where a judge acts in excess of jurisdiction and is protected by immunity and cases where a judge acts in the complete absence of jurisdiction “is not self-revealing.” Norfleet v. Renner, 924 F.3d 317, 319 (6th Cir. 2019). However, the cases provide exemplary guidance. For instance, “a judge with general criminal jurisdiction [who] ruled that an act amounted to a crime when it did not, [] would merely act in excess of jurisdiction.” Ibid. The opposite result would follow if a probate judge assumed authority over a criminal case. Ibid. - 8 - Judge King maintains that he enjoyed the authority — the jurisdiction — to enforce courtroom decorum and hold in contempt those who disrupt the administration of court proceedings or impugn the respect due to the court. If that is what he was doing, he is on firm ground. In Michigan, district court judges are vested with the same authority to punish for contempt as the circuit courts. See Mich. Comp. Laws § 600.8317. It therefore is difficult to see how a judge acting to enforce even a misguided sense of decorum in his own courtroom acts in the complete absence of jurisdiction. Michigan’s contempt statute authorizes judges to punish, among other things, “[d]isorderly, contemptuous, or insolent behavior, committed during its sitting, in its immediate view and presence, and directly tending to interrupt its proceedings or impair the respect due to its authority” and “[a]ny breach of the peace, noise, or disturbance directly tending to interrupt its proceedings.” Mich. Comp. Laws § 600.1701. The plaintiff argues that the contempt statute constrains Judge King’s jurisdiction to conduct contempt proceedings only when the court was “sitting,” but this argument, if anything, suggests that he acted in excess of his jurisdiction by conducting the “mock trial” when court was not formally “sitting,” which is not sufficient to overcome an immunity defense. ELG faces a formidable chore to establish that Judge King acted in the “clear absence of jurisdiction,” if what he was doing was maintaining courtroom decorum. The cases confer wide latitude to judges in the immunity context. A relevant benchmark was laid down by the Supreme Court in Stump v. Sparkman, 435 U.S. 349, 362 (1978). There, the Court held that a judge on an Indiana trial court did not act in the complete absence of all jurisdiction when he approved a petition for a young woman to be sterilized despite the fact that no state statute authorized him to approve that procedure. 435 U.S. at 357-59. Significant to the Court’s decision was the fact that the trial court was one of general jurisdiction. Id. at 359. Adding further color to the inquiry, in - 9 - Brookings v. Clunk, the Sixth Circuit held that a state probate judge did not act in the absence of all jurisdiction when he filed a criminal complaint against a party whom he later discovered had allegedly sought a fraudulent marriage license from him. This was despite the fact that the Judge did not discover the offending act until nearly seven years after the fact. 389 F.3d at 616, 623. Measured against these cases, Judge King’s attempt to maintain an orderly courtroom — even if procedurally irregular and substantively deficient — would not be in the clear absence of his jurisdiction, if in fact that was the nature of his actions. Cf. Stump, 435 U.S. at 359 (“A judge is absolutely immune from liability for his judicial acts even if his exercise of authority is flawed by the commission of grave procedural errors.”). 2. The lingering question that governs this motion is whether the amended complaint includes facts to establish that Judge King was not performing a judicial act when he acted abusively toward ELG. When applying absolute immunity, the Court must discern whether the challenged acts are “normally performed by a judge” and look to the “expectations of the parties”—that is, “whether they dealt with the judge in his judicial capacity.” Stump, 435 U.S. at 362. Some examples of non-judicial acts are obvious: Physical assaults and sexual harassment are not judicial in nature. See Archie v. Lanier, 95 F.3d 438, 441 (6th Cir. 1996). Nor is speaking with the media about a litigant. See Barrett v. Harrington, 130 F.3d 246, 261 (6th Cir. 1997). Other examples are slightly less obvious: A judge is not entitled to absolute immunity from ordinary employment suits brought by court employees. See Forrester, 484 U.S. at 229-30 (holding that the defendant judge acted in an administrative rather than a judicial capacity when he demoted and discharged an employee). Nor is a judge absolutely immune from promulgating rules and administrative orders. Morrison v. Lipscomb, 877 F.2d 463, 465 (6th Cir. 1989). - 10 - On the other side of the line are actions that are examples of or relate “to those general functions that are normally performed by a judicial officer.” Cooper v. Parrish, 203 F.3d 937, 945 (6th Cir. 2000). The core of the judicial role is “resolving disputes between parties who have invoked the jurisdiction of a court”; the acts that comprise a judge’s decisional process therefore are “paradigmatic judicial acts.” Brookings, 389 F.3d at 618. This would include presiding over hearings and issuing warrants, DePiero v. City of Macedonia, 180 F.3d 770, 784 (6th Cir. 1999), taking pleas and pronouncing sentences, King v. McCree, 573 F. App’x 430, 439 (6th Cir. 2014), and setting dates for hearings and collecting attorney’s fees, Mann v. Conlin, 22 F.3d 100, 104 (6th Cir. 1994). It also is clear that a judge acts in his judicial capacity when he exercises control of his courtroom. Cameron v. Seitz, 38 F.3d 264, 271 (6th Cir. 1994). Judges even act in their judicial role when they initiate, rather than merely adjudicate, criminal complaints, when the criminal action is initiated to “preserve the integrity of the judicial system.” Brookings, 389 F.3d at 622. The Sixth Circuit has expounded on the breadth of that concept in three cases with similar captions: Barnes, Barrett, and Brookings. Barnes involved a former couple who filed criminal complaints against one partner’s estranged ex-wife for stalking. 105 F.3d at 1113. The pair came before a state court judge who modified the factual allegations in the complaints and thereafter assisted the former couple in finalizing them. Ibid. After the charges against the estranged partner were dismissed, she brought suit against the judge, alleging that he violated her “right to be free of arrest and prosecution and to due process of law.” Id. at 1114. The Sixth Circuit determined that the state judge was entitled to immunity. Even though the judge’s actions were “prosecutorial in nature,” the court explained that there was no evidence that the “criminal prosecutions [were] based on the judge’s private interests, completely separate from cases brought to court independently by the parties.” Id. at 1118. - 11 - The court went a step further in Barrett v. Harrington, 130 F.3d 246, 249 (6th Cir. 1997). In that case, a judge wrote letters to prosecutors on court letterhead requesting an investigation of a disgruntled litigant. The litigant’s conduct made the judge fear for her safety, but it also was the case that the litigant had discovered evidence that the judge dismissed her husband’s parking tickets. Ibid. Again concluding that the judge was entitled to immunity for writing to the prosecutors, the court emphasized that the judge was attempting “to protect the integrity of the judicial decision-making process” and observed that “[j]ust as a judge’s citation for contempt against a party who obstructs justice is a judicial act taken to preserve integrity of the judicial system, so too is the instigation of criminal proceedings against a disgruntled litigant whose conduct may amount to obstruction.” Id. at 259. Based on the leeway afforded by Barnes and Barrett, the Sixth Circuit in Brookings held that a judge was entitled to immunity for swearing out a criminal complaint against a litigant who he believed had committed fraud on the court nearly seven years prior. Brookings, 389 F.3d at 621-22. In sum, the Sixth Circuit has afforded judges a wide scope to, in effect, police their notions of judicial integrity. Measured against these guideposts, the allegations in the plaintiff’s amended complaint present a close case. Her pleading paints a picture of a judge who felt disrespected while he was lecturing students, albeit within the walls of his courtroom, and wished to teach the plaintiff a lesson misusing the machinery of his court. Ultimately the inquiry hinges on the “function” of the acts Judge King allegedly took, not the acts themselves. Mireles, 502 U.S. at 13. One might conclude that Judge King was performing the function of a judge when he reconvened his court to discipline ELG. However, the amended complaint includes facts that permit a different conclusion: that Judge King was retaliating against an adolescent who had the temerity to doze during his recounting of his career, using his courtroom - 12 - as a prop for his own devices. Focusing on the acts specific to Judge King, ELG alleges that he 1) publicly berated and humiliated her for nodding off during his lecture, 2) “developed a plan for the amusement of his followers and fan base to cast [her], unwittingly, in what he later described as his own episode of ‘Scared Straight,’” 3) made her disclose her name and other personal information, 4) made her participate in a “mock trial,” 5) threatened to send her to a juvenile detention center, and 6) told the press that ELG “had a bad attitude, was disrespectful[,] and required his mentorship.” Am. Compl. ¶¶ 33, 37. 49, 50, 51, 53. She alleges that Judge King instituted fake proceedings when court was not in session, which was beyond his power to do. She also argues that from a functional perspective, Judge King acted as a teacher or lecturer and not a judge and that he did not intend to engage ELG in his official capacity but as a participant in a “Scared Straight” program broadcast to the public over the internet. She maintains that she encountered Judge King as a sort of teacher, not as a judge. She avers that her offending act — nodding off in the gallery — occurred after Judge King had left the bench, given his judicial robe to one of her peers, and was discussing his legal practice. Id. ¶¶ 28-32. Moreover, it was while Judge King was lecturing the students that he allegedly “berated” ELG and executed his “Scared Straight” tactics. Id. ¶¶ 33, 37. She argues that Judge King would not be entitled to immunity had he taken the same acts while teaching law students or serving as a keynote speaker at a public event. Those allegations are sufficient to distance Judge King’s actions from the judicial functions that the immunity doctrine insulate from liability. Compare Rockett as next friend of K.R. v. Eighmy, 71 F.4th 665 (8th Cir. 2023). There, a Missouri judge presiding over a custody dispute was frustrated by the unwillingness of the children involved to go with one of the parents. Hearing the children’s protests in the lobby, he proceeded to take them to jail and ordered them to remove - 13 - their clothing before entering separate cells. Rockett, 71 F.4th at 668. He came to release them about an hour later after they agreed to his terms. Ibid. The Eighth Circuit held that the judge was not entitled to judicial immunity for these acts, indicating that Missouri law did not permit him to punish the children for behavior that did not occur in the courtroom. Id. at 671-72. The Eighth Circuit cited the Missouri statutory scheme as part of its discussion of whether the judge’s acts were judicial in nature. Ibid. Also critical to the court’s decision was the fact the judge personally imposed the punishment on the children. Id. at 672. Rockett does not provide an exact template for the actions alleged in the complaint, but it does demonstrate that the judicial function is not broad enough to confer immunity upon the unusual type of discipline described in the amended complaint. The judicial function, as traditionally understood, does not include teaching, much less disciplining students who appear before a judge in a didactic relationship. And the fact that Judge King allegedly commented to the media that ELG required his “mentorship” suggests that he understood his actions to be non-judicial in nature. Discovery may shed additional light on the events. It may be that the facts will show that Judge King’s conduct related to the actual function of the court that day. Despite the objectionability of the method, it is not the “how” that matters for purposes of defining the judicial function but the “what.” The Sixth Circuit has recognized “preserv[ing] the integrity of the judicial system,” undoubtedly is a judicial function. Barrett, 130 F.3d at 259. And the case law teaches that “even if the particular act is not a function normally performed by a judge, it may constitute a judicial act if it relates to a general function normally performed by a judge.” Brookings, 389 F.3d at 621. But the allegations in the amended complaint also permit the inference that Judge King was not defending the judicial branch or preserving courtroom decorum, but instead was striking out at a fifteen-year-old who insulted his lecturing prowess by dozing during his delivery. - 14 - At this stage of the case, this Court cannot conclude that the amended complaint fails to state a viable claim, even under the specter of absolute judicial immunity. B. Court officer Cathy Greer-Forte also seeks the protection of immunity — quasi-judicial immunity — as derivative of Judge King’s absolute immunity. It is well-settled that such immunity “extends to those persons performing tasks so integral or intertwined with the judicial process that these persons are considered an arm of the judicial officer who is immune.” Bush v. Rauch, 38 F.3d 842, 847 (6th Cir. 1994). “One who acts as the judge’s designee, and who carries out a function for which the judge is immune, is . . . protected.” Johnson v. Turner, 125 F.3d 324, 333 (6th Cir. 1997). Because Judge King is not entitled to absolute immunity at this stage of the case, Ms. Greer-Forte’s derivative arguments fail. The plaintiff also contends that Ms. Greer-Forte is not entitled to immunity because she was not employed by the court but by Universal Protection Services, a private company. For that proposition, she relies on Rodriguez v. Providence Community Corrections, Inc., 191 F. Supp. 3d 758, 767 (M.D. Tenn. 2016). There, the court denied quasi-judicial immunity to private company that administered a county’s probation system, reasoning in large part that private actors do not always share the public interest. Rodriguez, 191 F. Supp. 3d at 768 (“The perverse policy incentives attendant to immunizing private for-profit ventures is alone enough to deny the application of quasi-judicial immunity.”). The court also explained that the complaint did not include any allegations regarding the company’s practices that could be considered judicial functions. Ibid. This Court previously has suggested, however, that private court security officers would be entitled to quasi-judicial immunity “when they follow an explicit directive from the court itself.” - 15 - Fareed v. G4S Secure Sols. (USA) Inc., 942 F. Supp. 2d 738, 746 (E.D. Mich. 2013). In that case, court security officers at the same 36th District Court attempted to invoke immunity against the plaintiff’s allegations that the officers forced him to remove his kufi, a type of Islamic head- covering. Id. at 740. We determined that the officers were not entitled to immunity because there was no record that any judge explicitly commanded the officers to force the plaintiff to remove his kufi. Id. at 747. Here, the allegations specific to Ms. Greer-Forte are that she opened the detention cell where ELG was waiting, handcuffed her, directed her to put on a jail jumpsuit over her clothing, and brought her back into the courtroom. Am. Compl. ¶¶ 42-44. There is no indication in the pleadings that any of these actions was taken at the direct request of Judge King. Whether Judge King actually ordered Ms. Greer-Forte to direct the plaintiff to don the prison jumpsuit or use handcuffs for transporting her back to the courtroom, for instance, is left unspecified. It is true that the plaintiff’s claims against Ms. Greer-Forte — for violations of her Fourth Amendment rights and state law false arrest — proceed on the general theory that all of the acts ultimately flowed from Judge King’s plan. See id. ¶ 37 (“[Judge King] developed a plan for the amusement of his followers and fan base to cast Ms. ELG, unwittingly, in what he later described as his own episode of ‘Scared Straight.’”). If Judge King is entitled to immunity for his orders, Ms. Greer- Forte also might be entitled to immunity for implementing them. Cooper v. Parrish, 203 F.3d 937, 948 (6th Cir. 2000) (“[A]n official is entitled to absolute quasi-judicial immunity when that official acts pursuant to a valid court order because the act of ‘enforcing or executing a court order is intrinsically associated with a judicial proceeding.’” (quoting Bush v. Rauch, 38 F.3d 842, 847 (6th Cir. 1994 . But the complaint does not reveal the precise contours of Judge King’s orders, and this Court previously has explained that there is a “distinction between cases where a - 16 - courtroom deputy or police officer is carrying out a judge’s orders, and those where the specific conduct alleged (e.g., use of excessive force), was not taken at the judge’s direction.” Fareed, 942 F. Supp. 2d at 746 (citing Ingram v. Township of Deptford, 858 F. Supp. 2d 386, 391 (D.N.J. 2012 . It is certainly possible that Judge King did not direct that ELG be placed in handcuffs, order her to wear a prison jumpsuit, or be detained in a court holding cell. Further discovery is necessary to resolve whether Ms. Greer-Forte also is entitled to immunity. And if Judge King is not entitled to judicial immunity, Ms. Greer-Forte must be accountable for her own actions even if she acted at the behest of Judge King. She does not cite a case holding that a court officer may be relieved of her constitutional obligations merely because she followed an order of a supervising, unimmune judicial officer. “‘[S]ince World War II, the ‘just following orders’ defense has not occupied a respected position in our jurisprudence, and [government actors] in such cases may be held liable under § 1983 if there is a reason why any of them should question the validity of that order.’” Kennedy v. City of Cincinnati, 595 F.3d 327, 337 (6th Cir. 2010) (quoting O’Rourke v. Hayes, 378 F.3d 1201, 1210 n.5 (11th Cir. 2004 ; Grossman v. City of Portland, 33 F.3d 1200, 1209 (9th Cir. 1994) (explaining that section 1983 defendants are not “immune for the results of their official conduct simply because they were enforcing policies or orders promulgated by those with superior authority”); Brent v. Ashley, 247 F.3d 1294, 1305 (11th Cir. 2001) (“following orders does not immunize government agents from civil rights liability”). The amended complaint pleads a viable claim against defendant Greer-Forte. C. Finally, Universal Protection Services, Ms. Greer-Forte’s employer, asserts that the plaintiff’s claim against it must fail if her claims against Ms. Greer-Forte are barred by quasi- - 17 - judicial immunity. The plaintiff agrees with that proposition, ECF No. 16, PageID.134, but this question merits further discussion, especially since the case against Ms. Greer-Forte will proceed. The plaintiff pleaded “vicarious liability” as a separate count against Universal (Count VIII). But vicarious liability is not an independent cause of action; it is a theory of liability. See Webster v. AutoZone Dev. LLC, No. 23-13033, 2024 WL 4245402, at *7 (E.D. Mich. Sept. 19, 2024) (“Vicarious liability is not an independent claim in Michigan but is instead a theory of liability for otherwise substantiated tort claims.”); AeroFund Fin., Inc. v. Sexton Landscape, Inc., No. 16-13730, 2018 WL 6809185, at *4 (E.D. Mich. Sept. 29, 2018). It is clear enough, however, that the plaintiff’s intent is to hold Universal liable on Counts VI and VII, her claims against Ms. Greer-Forte. That theory may be viable for the state law false arrest claim stated in Count VII of the amended complaint, but for the federal claim under the Fourth Amendment in Count VI (via Count VIII), section 1983 does not countenance liability premised on a respondeat superior theory for public or private employers. See Savoie v. Martin, 673 F.3d 488, 494 (6th Cir. 2012) (citing Street v. Corrections Corp. of Am., 102 F.3d 810, 814 (6th Cir. 1996 . The complaint includes no allegations that Universal itself caused the plaintiff’s harm, nor that Ms. Greer-Forte acted pursuant to any custom or policy it promulgated. Monell v. Dep’t of Soc. Servs., 436 U.S. 658, 694 (1978). Therefore, regardless of the immunity questions, there is no basis to hold her employer liable on the federal claim. III. The amended complaint contains facts which, if believed, avoids the defenses of absolute judicial immunity and quasi-judicial immunity at this stage of the case. The amended complaint - 18 - does not state a viable claim for a violation of federal law under 42 U.S.C. § 1983 against defendant Universal Protection Services. Accordingly, it is ORDERED that the motions to dismiss by defendants Kenneth King and Cathy Greer-Forte (ECF Nos. 11, 17) are DENIED. It is further ORDERED the motion to dismiss by defendant Universal Protection Services (ECF No. 11) is GRANTED IN PART. Counts VI and part of Count VIII are DISMISSED as to that defendant, only. The motion is DENIED in all other respects. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 22, 2025 - 19 -

=== OPINION AND ORDER ON DEFENDANTS’ MOTION FOR INDICATIVE RULING ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION J. ALEX HALDERMAN, v. Plaintiff, HERRING NETWORKS, INC., CHARLES HERRING, ROBERT HERRING, SR., and CHANEL RION, _________________________________________/ Defendants. Case Number 24-51057 Honorable David M. Lawson OPINION AND ORDER ON DEFENDANTS’ MOTION FOR INDICATIVE RULING The defendants in this case, who have been sued for defamation in a case pending in the United States District Court for the District of Columbia, sought to take the deposition of J. Alex Halderman, an election security expert who has investigated and written about the safety and security of voting machines. Dr. Halderman, a Michigan resident who has not been retained as an expert witness by any party or otherwise named as a witness in the underlying litigation, moved to quash the deposition subpoena. The Court granted the motion because the defendants did not overcome Civil Rule 45(d)(3)(B)(ii)’s proscription against compelling by subpoena the testimony of an unretained, uncompensated, and unwilling expert witness. The defendants appealed. The appeal is still pending, but the defendants want the Court to reconsider its decision. They call attention to information that they characterize as “newly discovered,” consisting mainly of certain draft reports presumably authored by Dr. Halderman. Those drafts, read in context, are unremarkable and do not furnish a basis to conclude that the Court made a mistake when it quashed the subpoena. Because the defendants merely seek to rehash arguments made and rejected in the earlier ruling, the Court would not reconsider its earlier decision. I. The facts of the case were discussed in detail in the Court’s previous opinion and need not be repeated here. See Halderman v. Herring Networks, 348 F.R.D. 305, 307-09 (E.D. Mich. 2025). The Court ultimately granted Dr. Halderman’s motion to quash the subpoena on January 24, 2025, reasoning that the defendants sought his testimony on his opinions as an unretained expert, and they had not adequately explained why failing to permit a deposition of Dr. Halderman would cause them undue hardship. Id. at 313 (“[T]he defendants apparently want Dr. Halderman to repeat under oath an opinion that a number of votes in Antrim County were ‘flipped’ because of a software defect, that the incorrect vote tally there was not due to human error, and that the Dominion systems in use in Georgia had security flaws. These statements are not facts. They plainly are opinions. Dr. Halderman has stated that he reached these opinions after research and investigation that he was hired to perform. These were not previously formed, historical opinions. (Moreover, Halderman also opines that he never had discovered any evidence that those vulnerabilities were exploited to affect the outcome of any past election.) Halderman decl., ECF No. 1-2, ¶ 10.). These factors favor quashing the subpoena.”) (citing Kaufman v. Edelstein, 539 F.2d 811, 822 (2d Cir. 1976 . The defendants subsequently appealed that decision, ECF No. 29, but approximately two weeks later they filed a motion for an indicative ruling in this Court, ECF No. 32. The defendants say that they obtained several new pieces of evidence from the Michigan Department of State approximately six days after the Court issued its decision quashing the subpoena. The records primarily concern Dr. Halderman’s preparation of his report concerning the Antrim County vote tabulation issues and consist of a draft of his report dated March 23, 2021, ECF No. 32-2, and two Outlook calendar invites for conference calls on March 24, 2021 and March - 2 - 26, 2021 between Dr. Halderman and employees of the Michigan Attorney General and Secretary of State (the entities that retained him to produce his expert report in the case in state court), ECF Nos. 32-3. The defendants believe that certain changes between the draft and final report, along with the timing of the conference calls, might lead to the conclusion that Dr. Halderman altered his conclusions to minimize the role played by Dominion’s software in causing the incident. They point to four specific changes, although they say there are others of significance; a table summarizing these is reproduced below. March 23 Draft Report March 26 Final Report Although human error was the root cause of the Antrim County incident, the design of the Dominion software was a contributing factor. I conclude that the incident in Antrim resulted from a series of operator errors, which were compounded by inadequate procedures and insufficiently defensive software engineering. The explanations provided by the county and the Department of State are correct that the inaccurate results were a consequence of human errors. However, as I will explain, the problems were more complex than initially understood. The human errors were also compounded by gaps in election procedures and their adherence and by the design of the election software. Following the November 3, 2020, general election, Antrim County, Michigan published inaccurate election results, attracting national attention Sentence removed. Sentence removed. unofficial results were The explanations provided by the county and the Department of State are correct that the a inaccurate consequence of human errors. However, as I will explain, but the problems were somewhat more complex complicated initially understood. The human errors that initiated the incident were also compounded by gaps in election procedures and their adherence and by the design of the. The election software also could have done more to help election staff avoid making mistakes that could lead to erroneous results. than On the night of the November 3, 2020, general election, Antrim County, Michigan published attracting inaccurate national attention unofficial results, - 3 - ECF No. 32, PageID.1883-84. In their reply brief, the defendants cite an additional example from the recommendations section of Dr. Halderman’s report: 11. 12. Dominion should modify enhance D-Suite to verify that the election definition on any a memory card being loaded matches the election definition is compatible with the one used by the EMS. ECF No. 38, PageID.2180. Although the defendants suggest that these edits might lead one to conclude that Dr. Halderman intentionally sought to minimize Dominion’s role, when read in context, the examples cited by the defendants on that point are not compelling. For instance, the defendants make much of the fact that the final report no longer states that Dominion’s software was a “contributing factor” to the miscount. It is true that Dr. Halderman’s final report omits a sentence stating that the software was a “contributing factor,” but the defendants neglect the surrounding paragraph, which reads “There is no credible evidence that the Dominion system was deliberately designed to induce errors, but there were missed opportunities for the software to do more to election staff [sic] avoid making mistakes . . .” Redlined Report, ECF No. 32-4, PageID.2088 (emphasis added). The report recommends that the software be changed to flag that election worker errors would cause problems. Likewise, the second alteration cited by the defendants is hardly the smoking gun they make it out to be. That sentence was part of draft report’s abstract. That it was removed is unsurprising as the final report contains no abstract at all. ECF No. 21-7. And in the eventual peer-reviewed copy of the analysis published in the Proceedings of the 31st USENIX Security Symposium, where Dr. Halderman did include an abstract, it expressly stated that the incident was at least partially attributable to “insufficiently defensive software design.” ECF No. 21-8, PageID.1671. The defendants also point to a transcript of Dr. Halderman’s comments at a League of Women Voters event on April 12, 2021, two weeks after he issued his final report, as further - 4 - evidence that he may have more complex views of Dominion’s responsibility for the Antrim County mis-tabulation. During the event, Halderman described the cause of the Antrim County incident. He explained that Dominion’s election system works by assigning every potential ballot option a sequential number. In Antrim County, workers “went in and corrected one of the[] races,” which added a new choice “that pushed down by one spot all the later sequence numbers of the different . . . places you could make a mark.” ECF No. 32-6, PageID.2109. This change ultimately led votes to get assigned to the wrong candidates in certain precincts. Ibid. He described this encoding mechanism as a “quirk of the Dominion system.” Ibid. It is not clear whether these comments are “new evidence.” The transcript was not presented in the parties’ original briefing on the motion to quash, and the defendants do not state that it was unavailable to them previously. In any event, the defendants ask the Court to indicate that it would revisit its prior ruling in light of newly discovered evidence, which they say suggests that Dr. Halderman possesses factual information relevant to their substantial truth defense in the underlying defamation action — information that plainly “results from the expert’s study that was not requested by a party.” Fed. R. Civ. P. 45(d)(3)(B). II. Following the Court’s earlier ruling, the defendants filed a notice of appeal. A notice of appeal generally transfers jurisdiction of a case from the district court to the circuit court. Lewis v. Alexander, 987 F.2d 392, 394 (6th Cir. 1993) (“As a general rule, the district court loses jurisdiction over an action once a party files a notice of appeal, and jurisdiction transfers to the appellate court.”) (citing Cochran v. Birkel, 651 F.2d 1219, 1221 (6th Cir. 1981 . However, Federal Rule of Civil Procedure 62.1 permits a district court to state that it would reconsider its judgment if the case were remanded for that purpose. That rule states that, upon a timely motion, - 5 - the Court may “state either that it would grant the motion if the court of appeals remands for that purpose or that the motion raises a substantial issue.” Fed. R. Civ. P. 62.1(a)(3). Otherwise, the court may either defer ruling on the motion or deny it. Ibid. A. Before addressing any of those options, there is a procedural issue that the plaintiff has raised. In their motion for an indicative ruling, the defendants ask this Court to indicate whether it would grant relief under Civil Rule 59(e), which allows a court to amend or alter a judgment if there is “(1) a clear error of law; (2) newly discovered evidence; (3) an intervening change in controlling law; or (4) a need to prevent manifest injustice.” Intera Corp. v. Henderson, 428 F.3d 605, 620 (6th Cir. 2005) (citing GenCorp, Inc. v. Am. Int'l Underwriters, 178 F.3d 804, 834 (6th Cir. 1999 . The plaintiff argues that before a court can indicate under Rule 62.1 whether it would afford relief if the case were remanded for that purpose, the party seeking such an indication first must file a separate motion actually seeking that relief. Although formalistic, there is some support for that argument. For instance, Rule 62.1 refers to “a timely motion . . . made for relief,” although it does not require that the motion for relief be separate from the motion for an indicative ruling. Dr. Halderman cites Lopez Dominguez v. Gulf Coast Marine & Associates, 607 F.3d 1066 (5th Cir. 2010), and United States v. Ocampo, No. 06-20172-01, 2013 WL 686922, at * 1 (E.D. Mich. Feb. 26, 2013), but those cases do not compel the result he seeks. In Lopez Dominguez, the plaintiffs appealed a trial court’s decision dismissing the case but later sought remand so that they could file a Rule 60(b) motion to vacate the court’s judgment. 607 F.3d at 1073. The defendants opposed the request on the ground that the court of appeals could not remand for the district court to consider a motion that had not yet been filed. Ibid. Explaining that the plaintiff’s request was unusual, the Fifth Circuit stated that - 6 - although “an effective notice of appeal strips district courts of jurisdiction to grant a . . . motion [for reconsideration], it does not prevent litigants from filing them in the district court while an appeal is pending.” Id. at 1073-74. That proposition is sound as a matter of procedure and perhaps supports the idea that the defendants could have filed a motion for relief after they filed their notice of appeal, but it does not support Dr. Halderman’s argument that the reconsideration motion must have been filed separately from the Rule 62.1 motion. Ocampo cannot be interpreted to fill that logical gap. In that case, the district court denied a habeas petitioner’s motion that invoked Rule 62.1 where the movant had not filed a motion for relief under Rule 59 but stated that his motion was “forthcoming.” Ocampo, 2013 WL 686922, at *1. Unlike that case, the defendants’ motion here included all their substantive arguments for reconsideration. It is true that some district courts appear to have adopted the position that there must be a separate, predicate motion for relief. E.g., Medgraph, Inc. v. Medtronic, Inc., 310 F.R.D. 208, 210 (W.D.N.Y. 2015) (“[P]rocedurally there is no basis for an independent, free-standing Rule 62.1 motion”); see also Rowe v. Gary, Williams, Parenti, Watson & Gary, P.L.L.C., 2017 WL 10398767, at *2 (N.D. Ga. July 14, 2017) (“Rule 62.1 is intended to be used in conjunction with a separate motion seeking relief, such as a Rule 60(b) motion to vacate a judgment that is pending on appeal.”). But the majority approach “accept[s] a ‘freestanding’ Rule 62.1(a) motion if the moving party sufficiently states the merits of its substantive argument in its briefs.” Index Newspapers LLC v. City of Portland, No. 20-1035, 2022 WL 72124, at *2 (D. Or. Jan. 7, 2022) (collecting cases); see also McKnight v. Uber Techs., Inc., No. 14-05615, 2022 WL 19975447, at *2 (N.D. Cal. Sept. 13, 2022). The majority approach is more sensible where, as here, the Rule 62.1 motion includes all the arguments in support of the underlying relief — here, reconsideration of the appealed ruling - 7 - — and the motion is timely under the rule that provides the basis for the underlying relief — here, Rule 59(e). Moreover, that approach avoids unreasonably elevating form over substance and is consistent with the maxim that the Rules of Civil Procedure are to be interpreted to “secure the just, speedy, and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1. B. In support of their request for an indicative ruling, the defendants point to certain differences between Dr. Halderman’s draft report and his final report, as well as information about two meetings between Dr. Halderman and state officials, as evidence that he potentially altered his conclusions about the cause of the Antrim County incident. They ask to be able to explore these topics with Dr. Halderman in a deposition. What’s left unexplained is why this evidence, even if new, affects the merits of the Court’s original decision. Even if it were true that Dr. Halderman somehow altered his conclusions at the state officials’ or Dominion’s request (although there is no evidence that Dominion participated in his meetings with state officials), this would not change the Court’s conclusion that the defendants have not shown a need for his uncompensated expert opinion testimony, and that information about why he changed his opinion — if he did at all — would only be useful as impeachment evidence. Instead, the defendants ask the Court to re-decide whether to permit Dr. Halderman’s deposition based on arguments that already were litigated. The defendants clearly argued in their initial briefing that Halderman was a fact witness, not an expert, based on his work investigating the Antrim County incident for the state. See ECF No. 21, PageID.1558-59. The Court explicitly rejected that theory in its original opinion: Dr. Halderman’s information aligns more closely with the Schaefer and Glaxosmithkline cases. He was not involved in the actual transactions in Antrim County or Georgia — either the system implementation or the voting counting. He came along in Antrim County as the dust was settling as a hired investigator. In - 8 - Georgia, he was asked to perform a security assessment months before the election even occurred. The defendants have offered no reason why they couldn’t hire their own expert to evaluate the data available in either of these fora. In fact, the defendants have not even attempted to demonstrate “a substantial need” for Halderman’s testimony “that cannot be otherwise met without undue hardship.” Fed. R. Civ. P. 45(d)(3)(C)(i). But the defendants apparently want Dr. Halderman to repeat under oath an opinion that a number of votes in Antrim County were “flipped” because of a software defect, that the incorrect vote tally there was not due to human error, and that the Dominion systems in use in Georgia had security flaws. These statements are not facts. They plainly are opinions. Dr. Halderman has stated that he reached these opinions after research and investigation that he was hired to perform. These were not previously formed, historical opinions. (Moreover, Halderman also opines that he never had discovered any evidence that those vulnerabilities were exploited to affect the outcome of any past election. Halderman decl., ECF No. 1-2, ¶ 10.). These factors favor quashing the subpoena. See Kaufman, 539 F.2d at 822. Halderman v. Herring Networks, Inc., 348 F.R.D. 303, 313 (E.D. Mich. 2025) (citing In re Schaefer, 331 F.R.D. 603 (W.D. Pa. 2019); Glaxosmithkline Consumer Healthcare, L.P. v. Merix Pharm. Corp., No. 05-36, 2007 WL 1051759 (D. Utah Apr. 2, 2007 . The defendants offer no explanation for how Dr. Halderman has any factual knowledge that is relevant for purposes other than impeachment or that is otherwise distinct from his expert work that is pertinent to any issue in the underlying case, as is further discussed below. Stale arguments dressed up with “new evidence” are not a permissible basis to grant reconsideration under Rule 59(e). To support the merits of their contention that the defendants seek to inquire of Dr. Halderman about factual issues, the defendants rely mainly on two Michigan state cases, Klabunde v. Stanley, 384 Mich. 276, 282, 181 N.W.2d 918, 921 (1970), and Doering v. Koppelberger, No. 343196, 2019 WL 4732725 (Mich. App. Sept. 26, 2019). Neither of those cases — which are factually distinguishable — has any bearing on Federal Rule of Civil Procedure 45(d)(3)(B)(ii), which was a fundament of the Court’s original decision. That rule authorizes a court to quash a subpoena that “[r]equires disclosing an unretained expert’s opinion or information that does not - 9 - describe specific occurrences in dispute and results from the expert’s study that was not requested by a party.” Fed. R. Civ. P. 45(d)(3)(B)(ii) (emphasis added). As the Court explained previously, Dr. Halderman’s opinions about the causes of the Antrim County incident plainly are expert in nature. The defendants maintain that that is not dispositive because his report is “replete with facts concerning his investigative work” in the Antrim County incident. ECF No. 32, PageID.1902. In its prior opinion, the Court explained that courts interpreting Rule 45 have drawn a distinction between “(1) the factual record compiled by the expert and (2) the opinion and analysis performed by the expert.” Halderman, 2025 WL 296600, at *7 (quoting Daggett v. Scott, No. 15-00065, 2015 WL 3407314, at *2 (D. Colo. May 26, 2015 . The defendants insist that what they seek from Dr. Halderman are his factual observations about the Dominion voting software that was used in Antrim County. But the example questions that they have put forth, see ECF No. 32, PageID.1902-04, plainly seek information about Dr. Halderman’s expert opinion as to the causes of the mis-tabulation of the election results in Antrim County. As the Court explained in its original opinion, these sorts of inquiries may yield useful “impeachment material if he were to be called as a witness by the plaintiff and testify that the Antrim County incident was caused by human, rather than software error.” Halderman, 348 F.R.D. at 312. But there is no suggestion that Dr. Halderman has been retained by any party such that impeachment would be necessary. See ibid. It is apparent that the defendants seek Dr. Halderman’s testimony because they see in his Antrim County report — and potentially in his statements made before and after the report was released — opinions that might buttress their substantial truth defense to Dominion’s defamation claims. Because he has not been retained as an expert in the underlying litigation, the defendants - 10 - are not automatically entitled to a deposition to probe these opinions further. Nor does the information presented in their motion alter the conclusion that the defendants failed to demonstrate a “substantial need” for the testimony “that cannot be otherwise met without undue hardship.” Fed. R. Civ. P. 45(d)(3)(C)(i). To illustrate that point, it may be useful to examine the so-called Kaufman factors in greater detail. See Rule 45 Adv. Comm. Notes (quoting Kaufman 539 F.2d at 822). 1. Is Dr. Halderman being called for his opinion testimony or for his knowledge of facts relevant to the case? The defendants insist that they seek Dr. Halderman’s deposition to explore his knowledge of facts relevant to the defamation lawsuit. For the reasons explained above, that plainly is not the case. This factor weighs against the defendants. 2. Is he being asked to form a new opinion or merely express a previously formed opinion? The second Kaufman factor assesses whether Dr. Halderman would be required to form a new opinion for purpose of responding to the subpoena or merely would be repeating an existing one. This factor weighs in favor the defendants, who are interested in Dr. Halderman’s past work analyzing the causes of the vote tabulation incident in Antrim County in 2020. It appears that Dr. Halderman completed all of his work on this incident by 2022. Nevertheless, “the fact that [his] testimony will primarily concern previously formed opinions is not sufficient, on its own, to demonstrate a substantial need for [his] subpoenaed testimony.” In re Schaefer, 331 F.R.D. 603, 612 (W.D. Pa. 2019). 3 & 4. Is Dr. Halderman a “unique” witness and is it unlikely that a comparable witness willingly will testify? This question addresses the third and fourth Kaufman factors. The defendants contend that Dr. Halderman’s expertise and knowledge pertaining to the Antrim County incident make him a unique witness and that they are unlikely to find another willing - 11 - witness. In their present motion, the defendants emphasize that the primary purpose of his testimony would be to buttress its substantial truth defense based on at least one alleged defamatory statement that votes in Antrim County were “digitally somehow glitching towards Biden.” ECF No. 32, PageID.1897 (citing Compl. ¶ 305(b . And they assert that without his deposition, they likely would be unable to use his report in the underlying litigation to demonstrate that Dominion’s software “glitched” unless it were admitted via the residual hearsay exception in Rule 807. This defense likely is of somewhat limited utility given that this statement is only one of many allegedly defamatory statements regarding Dominion made by the defendants according to the complaint in the underlying case. See generally Compl. ¶ 305(a)-(y) (listing statements). And it likely is a weak defense on the merits. Dr. Halderman did not conclude in his report that Dominion’s machines “glitched.” He attributed the mis-tabulation to “human errors” that were “compounded by gaps in election procedures and their adherence.” ECF No. 21-7, PageID.1617. As for the election software, he commented that it “could have done more to help election staff avoid making mistakes that could lead to erroneous results.” Ibid. The new information, at best, suggests that Dr. Halderman saw the software as a contributing factor to the incident, but when read in its entirety, it is clear that his prior draft faulted the software for not flagging the election workers’ own errors, not “glitching.” This does not necessarily defeat the defendants’ quest for his testimony about the incident if he truly has unique information or a unique perspective. On that score, they emphasize that Dr. Halderman was the only individual who had “direct forensic access” to Antrim County’s election management system, including the voting machines and the flash drives that programmed the ballot scanners. For his part, Dr. Halderman disputes that he was the only individual with such access, pointing out that the plaintiff in the Bailey v. Antrim County case in Michigan state court - 12 - had his own experts who accessed the same data and produced their own reports. The record is not clear on who had access to what and when; it is only obvious that Dr. Halderman prepared the investigation of the Antrim County incident at the behest of the state and in the immediate aftermath of the incident. But that only makes him “unique” in the sense that he was involved early and was engaged by a government entity. Presumably, the defendants — through discovery in the underlying case — can obtain the source code in use by Antrim County at the time of the incident and hand it over to a retained expert for evaluation. They do not represent that these materials are unavailable or explain why the materials Dr. Halderman examined are somehow irreplicable. If their contention is that Dominion’s software is flawed, they should be able to have a retained expert examine it. Software is not like a crime scene where access at particular time points matters a great deal. Dr. Halderman did not watch the software and election system function in real time; he likely drew inferences about the causes of the incident after the fact based on data that presumably still exist. That is what expert witnesses do. In his motion to quash the subpoena, Dr. Halderman cited a letter co-signed by 59 election security specialists. ECF No. 1, PageID.25. That there are a substantial number of practitioners in this area suggests that his expertise and skills are hardly unique. Nor have the defendants established that they would be unable to find another witness capable of opining on these issues. These factors therefore weigh against the defendants. 5. Degree to which Halderman has been oppressed by having to repeatedly testify. This factor does not weigh decisively in favor of either party. Although Halderman’s original motion suggested there was cause to believe that he might be harassed by participating in a deposition, he does not maintain that he has been forced to testify repeatedly on this subject. Once again, as the Court previously determined, the factors weigh in favor of the conclusion the Court reached in its prior opinion: that the defendants are not entitled to Dr. - 13 - Halderman’s uncompensated expert testimony. The defendants have not articulated a cogent basis for revisiting that holding. III. The defendants have not shown that the Court’s previous decision quashing the deposition subpoena amounted to a clear error of law, or that there is any newly discovered evidence of consequence, or an intervening change in controlling law, or that there is a need to prevent manifest injustice. Accordingly, it is ORDERED that the defendants’ motion for an indicative ruling (ECF No. 32) is GRANTED. If the court of appeals were to remand the case, this Court would not grant a motion to alter or amend the previous judgment. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 19, 2025 - 14 -

=== OPINION AND ORDER ADOPTING IN PART REPORT AND RECOMMENDATION, SUSTAINING IN PART AND OVERRULING IN PART PLAINTIFF’S OBJECTIONS, GRANTING DEFENDANT McCLELLAN’S MOTION FOR SUMMARY JUDGMENT, VACATING ORDER OF REFERENCE, AND SETTING STATUS CONFERENCE ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION DEON GLENN, v. Plaintiff, Case Number 22-10883 Honorable David M. Lawson Magistrate Judge Elizabeth A. Stafford JODI McCLELLAN and TERI MASSEY, _________________________________________/ Defendants. OPINION AND ORDER ADOPTING IN PART REPORT AND RECOMMENDATION, SUSTAINING IN PART AND OVERRULING IN PART PLAINTIFF’S OBJECTIONS, GRANTING DEFENDANT McCLELLAN’S MOTION FOR SUMMARY JUDGMENT, VACATING ORDER OF REFERENCE, AND SETTING STATUS CONFERENCE Plaintiff Deon Glenn, a Michigan prisoner, filed a complaint without the assistance of an attorney against two medical employees of the Michigan Department of Corrections alleging that they failed to attend to his serious medical needs while he was confined at the Thumb Correctional Facility in Lapeer, Michigan. Glenn alleges that the defendants refused to provide him with appropriate medical care when he was in extreme pain and physical distress, suffering from what turned out to be acute appendicitis. The case was referred to Magistrate Judge Elizabeth A. Stafford to conduct all pretrial proceedings. Thereafter, defendant Jodi McClellan filed a motion for summary judgment. Magistrate Judge Stafford filed a report on August 2, 2024 recommending that the motion be granted. The plaintiff, having since obtained counsel, filed timely objections to the report and recommendation, and the motion is before the Court for fresh review. I. A. On September 12, 2021, at approximately 2:30 p.m., Glenn reported to a correctional officer that he was experiencing severe abdominal pain. Deon Glenn dep., ECF No. 39-3, PageID.273, 280. The correctional officer contacted nurse Jodi McClellan, who advised the officer to tell Glenn to report back if his pain worsened. Id. at PageID.273. Later that afternoon, Glenn reported to the officer that his pain had gotten worse. Ibid. Glenn testified that the officer told him that he called McClellan, but she said that he still did not meet the criteria for treatment. Ibid. McClellan does not recall these conversations. Jodie McClellan dep., ECF No. 39-4, PageID.285. Eventually, Glenn was taken to the prison’s clinic a little after 5:00 p.m. where he saw McClellan. Id. at PageID.288. He told McClellan that he was experiencing pain in the left lower quadrant region of his abdomen and reported that his pain was at a “10 out of 10.” Id. at PageID.285; Medical Records, ECF No. 39-5, PageID.296. On examination, McClellan found that Glenn’s blood pressure was 220 over 110. Concerned that this figure was inaccurate, she ran the test again, producing another elevated but lower reading of 179 over 89. McClellan dep., ECF No. 39-4, PageID.285; Glenn dep., ECF No. 39-3, PageID.273. McClellan testified that the combination of these factors caused her to believe that Glenn was in urgent need of medical attention. McClellan dep., ECF No. 39-4, PageID.285. However, she also testified that her examination included a physical inspection of Glenn’s abdomen and palpitation of his left lower quadrant to test for increased pain, which is curious since the appendix generally is located in the right lower quadrant of the abdomen, although Glenn did complain of pain on his left side. In any event, her palpitation of the left side did not produce pain. Id. at PageID.289. And Glenn’s temperature, pulse, and blood oxygen level all appeared normal to her as well. Ibid. She found that these factors were not consistent with a diagnosis of appendicitis. Id. at PageID.287. Pursuant to the prison’s policy, McClellan called nurse practitioner defendant Terri Massey, the on-call medical provider, to discuss Glenn’s case. Id. at PageID.285. Massey directed her to perform a urinalysis to check for a urinary tract infection and to give Glenn an over-the-counter pain - 2 - medication. Ibid. McClellan did not inform Massey of her belief that Glenn needed serious medical attention. Ibid. McClellan returned to the clinic lobby where she found Glenn laying on the floor. Glenn told her that his stomach pain was so severe that he could not get up, a fact that would have “give[n] [her] pause that he was in need of medical care.” Id. at PageID.286. Glenn says that he was “fading in and out of consciousness.” Glenn dep., ECF No. 39-3, PageID.274. Glenn’s medical records state that he refused the over-the-counter medication. Medical Records, ECF No. 39-5, at PageID.290. McClellan called Massey a second time to inform her of Glenn’s condition, but Massey told her to send him back to his cell. Ibid. McClellan did not argue with this direction and instructed the officers to take Glenn to the housing unit with the instruction to contact the health unit if his symptoms worsened. McClellan dep., ECF No. 39-4, PageID.286, 291. Glenn testified that he had to be escorted back to his cell in a wheelchair. Glenn dep., ECF No. 39-3, PageID.274. McClellan says that her shift ended between 6:00 and 6:30 p.m. and that she did not see Glenn again that evening. McClellan dep., ECF No. 39-4, PageID.286. She also testified that she lacked the authority to send a patient to the hospital herself unless he was unconscious and a medical provider was unavailable. Id. at PageID.292. At approximately 7:30 p.m., Glenn reported to correctional officers that his pain had again worsened. A housing unit officer called health care, but the health unit refused to see him, so the officer sent him to the control center for observation. Prison Logbook, ECF No. 38-3, PageID.220. In the control center, Glenn’s pain became so severe that he could not sit up; he began vomiting and experienced chest pains and dizziness. Glenn dep., ECF No. 39-3, PageID.275-76. Around 9:00 p.m., he was seen by Nurse Belinda Haubenstricker, who observed that Glenn was laying on his side, vomiting, “had tears in his eyes when being assessed and was not able to speak in full - 3 - sentence responses.” Medical Records, ECF No. 38-2, PageID.191-92. Haubenstricker called Massey to report these findings. Massey finally advised that Glenn should be taken to the hospital. Terri Massey dep., ECF No. 39-6, PageID.303-04. At the hospital, Glenn was diagnosed with acute appendicitis and ultimately transferred to McLaren Hospital in Lansing for surgery. Hospital Records, ECF No. 39-7, PageID.308. B. On April 19, 2022, Glenn, initially proceeding without the assistance of counsel, filed this action against McClellan and Massey under 42 U.S.C. § 1983, alleging a violation of his Eighth Amendment rights. He contended that the defendants were deliberately indifferent to his medical needs because they saw his physical condition exhibiting intractable pain and failed or refused to provide appropriate medical care. Defendant McClellan moved for summary judgment seeking qualified immunity on Glenn’s claim. On August 2, 2024, Magistrate Judge Stafford issued a report recommending that the Court grant that motion. It is well known that the State’s jailors have “an ‘obligation to provide medical care for those whom it is punishing by incarceration.’” Rhinehart v. Scutt, 894 F.3d 721, 737 (6th Cir. 2018) (quoting Estelle v. Gamble, 429 U.S. 97, 103 (1976 . “[T]he treatment a prisoner receives in prison and the conditions under which he is confined are subject to scrutiny under the Eighth Amendment.” Helling v. McKinney, 509 U.S. 25, 31 (1993). To establish a claim under the Eighth Amendment for deliberate indifference, Glenn must offer evidence showing that he suffered a serious medical condition that would have been apparent to someone in the position of the defendants (the objective component) and that the defendants actually perceived that condition and intentionally disregarded the risk to Glenn (the subjective - 4 - component). Johnson v. Karnes, 398 F.3d 868, 874 (6th Cir. 2005). In her report, the magistrate judge determined that Glenn failed to offer evidence on either of these components. She suggested that because Glenn received some treatment, he needed to demonstrate, using medical evidence, that the treatment was inadequate. She emphasized that Glenn failed to offer any expert reports or medical evidence demonstrating that the care he received was grossly inadequate. Based on the record, she found that Glenn’s condition was not life-threatening when McClellan examined him and that he had not submitted evidence establishing that McClellan had declined to see him again after he was returned to the housing unit. Judge Stafford also held that Glenn could not satisfy the subjective component of his claim and could not show that McClellan was culpable. She emphasized McClellan’s testimony that she did not believe Glenn’s condition was emergent and that he did not have certain symptoms consistent with appendicitis, such as a fever, vomiting, nausea, or rebound tenderness. Judge Stafford also credited McClellan’s testimony indicating that she generally lacked the authority to send patients to the hospital without a medical provider’s approval. Finally, Judge Stafford explained that even if McClellan committed a constitutional violation, she was entitled to qualified immunity because there was “no clearly established law that [a nurse’s] decision to defer to the judgment of their supervising medical providers who had diagnostic and treatment authority consciously exposed [the inmate] to an excessive risk of serious harm.” See Est. of Majors v. Gerlach, 821 F. App’x 533, 536 (6th Cir. 2020) (cleaned up). Through counsel, Glenn filed timely objections to the report and recommendation. II. When a party files timely objections to a report and recommendation, the court must “make a de novo determination of those portions of the report or specified proposed findings or - 5 - recommendations to which objection is made.” 28 U.S.C. § 636(b)(1); see also Fed. R. Civ. P. 72(b)(2), (3) (requiring court review of “any part of the magistrate judge’s disposition that has been properly objected to”) (emphasis added); United States v. Raddatz, 447 U.S. 667 (1980); United States v. Walters, 638 F.2d 947 (6th Cir. 1981). This fresh review requires the court to re-examine all of the relevant evidence previously reviewed by the magistrate judge in order to determine whether the recommendation should be accepted, rejected, or modified in whole or in part. 28 U.S.C. § 636(b)(1). But this review is not plenary. “The filing of objections provides the district court with the opportunity to consider the specific contentions of the parties and to correct any errors immediately,” Walters, 638 F.2d at 950, enabling the court “to focus attention on those issues — factual and legal — that are at the heart of the parties’ dispute,” Thomas v. Arn, 474 U.S. 140, 147 (1985). As a result, “[o]nly those specific objections to the magistrate’s report made to the district court will be preserved for appellate review; making some objections but failing to raise others will not preserve all the objections a party may have.” McClanahan v. Comm’r of Soc. Sec., 474 F.3d 830, 837 (6th Cir. 2006) (quoting Smith v. Detroit Fed’n of Tchrs. Loc. 231, 829 F.2d 1370, 1373 (6th Cir. 1987 . A. First, Glenn takes issue with the magistrate judge’s conclusion as to both the objective and subjective portions of his claim. He argues that she misstated the law on the objective component of his claim by framing the inquiry as whether “McClellan’s acts or omissions deprived him of the minimal civilized measure of life’s necessities and posed a substantial risk of harm.” ECF No. 42, PageID.343. He maintains that the correct standard requires evaluating whether he has demonstrated a medical need so obvious that a lay person would easily recognize the need for a - 6 - doctor’s attention, which the record demonstrates here. He further argues that a fact dispute remains on the subjective component of his claim, pointing to McClellan’s testimony that seeing his condition gave her pause about whether he needed serious medical attention, her admission that he was in need of urgent medical care when he lay on the floor of the clinic lobby, and the fact that she observed that he could not walk back to the housing unit. 1. To establish the objective component of a deliberate indifference claim under the Eighth Amendment, a plaintiff must show the existence of a “sufficiently serious” medical need. Dominguez v. Corr. Med. Servs., 555 F.3d 543, 550 (6th Cir. 2009) (citing Farmer v. Brennan, 511 U.S. 825, 834 (1994 . However, “Farmer requires only that ‘the inmate show that he is incarcerated under conditions posing a substantial risk of serious harm[,]’ so as to avoid ‘the unnecessary and wanton infliction of pain.’” Blackmore v. Kalamazoo Cnty., 390 F.3d 890, 896 (6th Cir. 2004) (quoting Farmer, 511 U.S. at 834). A serious medical need may be demonstrated by a physician’s diagnosis mandating treatment or a condition that “is so obvious that even a lay person would easily recognize the necessity for a doctor’s attention.” Id. at 897 (citations omitted). Glenn’s objection to the magistrate judge’s articulation of the applicable law generally describing the objective component is unpersuasive. The quote from Farmer used by the magistrate judge is a correct statement of the law insofar as it describes the objective element of a general deliberate indifference claim. See, e.g., Crawford v. Tilley, 15 F.4th 752, 761 (6th Cir. 2021). However, this statement of law has been refined in the context of inadequate medical care claims. Phillips v. Tangilag, 14 F.4th 524, 534 (6th Cir. 2021) (“To prove this objectively serious harm in the health context, prisoners must first establish that they have serious medical needs. They can do so, for example, by showing that a doctor has diagnosed a condition as requiring - 7 - treatment or that the prisoner has an obvious problem that any layperson would agree necessitates care. A serious medical need alone can satisfy this objective element if doctors effectively provide no care for it.”) (citations omitted). The magistrate judge’s failure to use Glenn’s preferred articulation of the standard is not the main source of his disagreement with her analysis. Rather, the core of his objection is with her determination that his claim follows the line of cases where some medical care was provided. The Sixth Circuit has said that for an inmate establishing the objective component where ongoing medical care has been rendered, the “care qualifies as ‘cruel and unusual’ only if it is ‘so grossly incompetent’ or so grossly ‘inadequate’ as to ‘shock the conscience’ or ‘be intolerable to fundamental fairness.’” Phillips, 14 F.4th at 535 (quoting Rhinehart v. Scutt, 894 F.3d 721, 737 (6th Cir. 2018 . The magistrate judge acknowledged that appendicitis was a serious medical need but held that Glenn had received treatment for it and therefore needed to offer medical evidence to demonstrate that he had received grossly inadequate care. ECF No. 41, PageID.320-21. But she failed to account for the well-established caveat that “[w]hen the need for treatment is obvious, medical care which is so cursory as to amount to no treatment at all may amount to deliberate indifference.” Terrance v. Northville Reg’l Psychiatric Hosp., 286 F.3d 834, 843-44 (6th Cir. 2002) (quoting Mandel v. Doe, 888 F.2d 783, 789 (11th Cir. 1989 . Glenn, albeit somewhat indirectly, argues that the magistrate judge improperly applied this added burden to his claim because McClellan provided him no care after she observed him lying on the floor of the clinic. He also argues that additional medical evidence is not required to satisfy the objective component when cursory medical treatment, in response to an obvious need, amounts to no treatment at all. An inmate’s obligation to provide medical evidence to prove the objective - 8 - element is relaxed where “a prisoner receives such ‘cursory’ treatment that it effectively amounts to no care.” Phillips, 14 F.4th at 538 (citing Rhinehart, 894 F.3d at 737). Glenn has a point. The magistrate judge’s analysis conflates two distinct portions of Glenn’s narrative, ultimately missing the significant lapse in care in his case. All acknowledge that McClellan examined Glenn, palpated his abdomen, checked his vital signs, and then returned him to the lobby of the health unit while she consulted with Massey. McClellan dep., ECF No. 39-4, PageID.289-90; Glenn dep., ECF No. 39-3, PageID.274. Viewing that evidence in the light most favorable to Glenn, as the Court must, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251- 52 (1986), it is easy to say that Glenn was examined but not treated during his first encounter with McClellan. Moreover, the situation changed once McClellan concluded her call with Massey and returned to the lobby to find Glenn lying on the ground. McClellan dep., ECF No. 39-4, PageID.290. Glenn testified that he was “fading in and out of consciousness” and that he could not stand up to walk back to his cell. Glenn dep., ECF No. 39-3, PageID.274. McClellan reported in her notes that Glenn was covering his eyes and stating that he could not get up because his stomach hurt too badly. Medical Records, ECF No. 38-2, PageID.196. To the extent that these accounts diverge, Glenn’s must be accepted at the summary judgment stage of the case. Ibid. And if true that he had lost consciousness, this development marks a significant turn and is distinct from his original presentation, which focused solely on his pain. However, the record reflects that McClellan’s only response to finding Glenn on the floor of her clinic, reportedly fading in and out of consciousness, was to call Massey a second time and follow her recommendation to send Glenn back to his cell with instructions to notify medical staff if his condition worsened. Ibid. The record does not conclusively establish whether she stepped into the lobby again to evaluate Glenn after she ended her second call to Massey. And although - 9 - Glenn’s medical records indicate he “refused” over-the-counter pain medication, Medical Records, ECF No. 38-2, PageID.196, it is unclear how he could have done so if he lacked consciousness or what good these medications would have done for him. To the extent these actions amount to “treatment,” discharging a patient under the circumstances, even under the direction of a supervising medical provider, represents care that is so cursory that it amounts to no treatment at all. Phillips, 14 F.4th at 538. The magistrate judge credited certain evidence suggesting that Glenn’s condition was not life threatening, such as the fact that one of his blood pressure readings was 179/89; but this reading was taken during McClellan’s initial examination before she emerged from the clinic and found Glenn on the ground. Glenn dep., ECF No. 39-3, PageID.273. And although not as high as the initial reading, it was an elevated blood pressure. There is no evidence that she took his blood pressure again. Glenn’s loss of consciousness presented an obvious need for medical treatment, and the record, viewed in the light most favorable to Glenn, suggests that McClellan offered little, if any, real treatment in response to this need. Glenn did not need medical evidence to establish the objective component of his claim. Rhinehart, 894 F.3d at 737. And a loss of consciousness clearly is a serious medical need because it is “so obvious that even a layperson would easily recognize the necessity for a doctor’s attention.” Blackmore, 390 F.3d at 899. Nor is the fact that Glenn later received treatment determinative because the requirement to submit verifying medical evidence in claims where treatment has been delayed “does not apply to medical care claims where facts show an obvious need for medical care that laymen would readily discern as requiring prompt medical attention by competent health care providers.” Id. at 898. Glenn has presented sufficient evidence to create a fact dispute on the objective component of his claim. - 10 - 2. Glenn also contests the magistrate judge’s determination that he failed to create a fact question on the subjective part of his claim. On this element, the plaintiff must offer evidence that “would show that the official being sued subjectively perceived facts from which to infer substantial risk to the prisoner, that [s]he did in fact draw the inference, and that [s]he then disregarded that risk.” Comstock v. McCrary, 273 F.3d 693, 703(6th Cir. 2001). Deliberate indifference requires “more than negligence or the misdiagnosis of an ailment.” Id. at 703 (citations omitted). Courts must “distinguish between cases where the complaint alleges a complete denial of medical care and those cases where the claim is that a prisoner received inadequate medical treatment.” Alspaugh v. McConnell, 643 F.3d 162, 169 (6th Cir. 2011) (quoting Westlake v. Lucas, 537 F.2d 857, 860 n.5 (6th Cir. 1976 . In her report, the magistrate judge again credited McClellan’s testimony that she did not think Glenn’s condition was emergent, her findings that Glenn did not meet certain criteria indicative of appendicitis, and her testimony that she lacked the authority to send a patient to the hospital unless he was unconscious and a medical provider was unavailable. She held that the evidence showed, at most, that McClellan failed to diagnose Glenn accurately, not that she was deliberately indifferent to his medical needs. Glenn argues that the evidence actually supports an inference that McClellan understood the severity of his condition and asserts that there are fact disputes about whether McClellan refused to see him again, which could establish her disregard of his risky predicament. The Court agrees with the plaintiff. Contrary to the magistrate judge’s conclusion, Glenn has offered sufficient evidence to establish a question of fact on whether McClellan was culpable for failing to ensure he received constitutionally adequate treatment. - 11 - Again, the problem with the magistrate judge’s report is its focus on the initial aspect of Glenn’s encounter with the defendant. It primarily centers on McClellan’s initial examination of Glenn and her later decision not to furnish much treatment dictated by Massey. But Glenn alleges more than mere dissatisfaction with McClellan’s decision to give him common pain relief and send him on his way. The magistrate judge’s analysis does not give sufficient recognition to the fact — apparently undisputed — that moments later McClellan found Glenn laying on the floor of the clinic lobby. McClellan dep., ECF No. 39-4, PageID.290. And the magistrate judge’s report also does not weigh Glenn’s testimony that he was “fading in and out of consciousness” on the floor of the lobby and ultimately had to be returned to his cell in a wheelchair. Glenn dep., ECF No. 39- 3, PageID.274. Importantly, McClellan testified that seeing Glenn on the floor “would have given [her] pause that he was in need of medical care.” McClellan dep., ECF No. 39-4, PageID.286. She called Massey back again, but Massey advised her to send Glenn back his cell with instructions to notify the medical staff if his condition worsened further. Id. at PageID.290-91; Medical Records, ECF No. 39-5, PageID.298. She did not argue with Massey, yet she was the one in personal contact with the plaintiff in distress. These facts are sufficient to support a finding that McClellan “(1) was aware of facts from which the inference could be drawn that a substantial risk of serious harm existed, (2) drew the inference, and (3) disregarded the excessive risk to inmate safety by failing to act,” Buetenmiller v. Macomb Cnty. Jail, 53 F.4th 939, 944 (6th Cir. 2022) (citing Farmer, 511 U.S. at 837), that is, that she consciously disregarded the risk to Glenn’s health by refusing further treatment and returning him to his cell. A jury can find conscious disregard when presented with evidence of an inmate in severe pain, unconscious and lying on the floor, and unable to return to his cell under his own power. Glenn is entitled to prove the subjective component in “the usual ways, including inference from circumstantial evidence.” Farmer, 511 - 12 - U.S. at 842. “[A] factfinder may conclude that a prison official knew of a substantial risk from the very fact that the risk was obvious.” Terrance, 286 F.3d at 843 (quoting Farmer, 511 U.S. at 842). The magistrate judge justified her conclusion in part by comparing the case to Winkler v. Madison County, 893 F.3d 877 (6th Cir. 2018). There, an inmate in a county jail reported to a nurse that he was experiencing various symptoms that he attributed to heroin withdrawal. Id. at 886. She relayed this information to a supervising nurse practitioner, and they developed a treatment plan focused on the inmate’s high blood pressure and withdrawal symptoms and sent him back to his cell. Id. at 886-87. Over the following days, the inmate’s condition deteriorated, and he was taken to be seen by the on-call nurse, where he collapsed. Id. at 889. The inmate later was determined to have died from a perforated duodenal ulcer. Ibid. The Sixth Circuit affirmed the trial court’s conclusion that the inmate’s estate had not created a fact dispute on the subjective component of a claim against the nurse because she provided treatment consistent with the inmate’s symptoms at the time (that is, before he collapsed) and believed he was being treated according to the supervising nurse practitioner’s orders over the weekend. Id. at 894-95. The parallels drawn by the magistrate judge between Winkler’s nurse and the facts in the present record break down when one considers the events after McClellan’s initial examination. After McClellan later encountered Glenn on the floor, she did not gather further information about his condition or render any treatment; she merely relayed information to Massey, who repeated her direction that Glenn be returned to his cell. In contrast, the nurse in Winkler developed a treatment plan for the inmate’s withdrawal symptoms that she fully anticipated would offer him relief over the weekend. Winkler, 893 F.3d at 895. McClellan points out that she “performed her duties as a nurse in collecting information about Glenn and providing that information to a medical - 13 - professional qualified to evaluate [him].” ECF No. 43, PageID.399. That may be true, but she does not cite a case holding that a nurse may be relieved of her constitutional obligations merely because she followed an order of a supervising medical provider, particularly one who was not present to observe the patient’s condition. “‘[S]ince World War II, the ‘just following orders’ defense has not occupied a respected position in our jurisprudence, and [government actors] in such cases may be held liable under § 1983 if there is a reason why any of them should question the validity of that order.’” Kennedy v. City of Cincinnati, 595 F.3d 327, 337 (6th Cir. 2010) (quoting O’Rourke v. Hayes, 378 F.3d 1201, 1210 n.5 (11th Cir. 2004 ; Grossman v. City of Portland, 33 F. 3d 1200, 1209 (9th Cir. 1994) (explaining that section 1983 defendants are not “immune for the results of their official conduct simply because they were enforcing policies or orders promulgated by those with superior authority”); Brent v. Ashley, 247 F.3d 1294, 1305 (11th Cir. 2001) (“following orders does not immunize government agents from civil rights liability”). Glenn submitted sufficient evidence to defeat summary judgment on the subjective component of his claim. His first objection to the report and recommendation will be sustained. B. Glenn next objects to the magistrate judge’s conclusion that qualified immunity shields McClellan from liability, arguing that he had a constitutional right to medical care and that this right was clearly established. The parties do not dispute the articulation of the governing law. The doctrine of qualified immunity insulates state actors from liability so long “as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982). Once the qualified immunity defense is raised, Glenn “must show that (1) the defendant violated a constitutional right and (2) - 14 - that right was clearly established.” McDonald v. Flake, 814 F.3d 804, 812 (6th Cir. 2016) (citing Quigley v. Tuong Vinh Thai, 707 F.3d 675, 680 (6th Cir. 2013 . In her report, the magistrate judge found that the non-precedential decision of Estate of Majors v. Gerlach, 821 F. App’x 533 (6th Cir. 2020), was controlling because of its discussion on whether clearly established law requires a nurse to second-guess the judgment of a medical provider. That case is not a perfect fit. It involved a claim against an inmate’s medical team for failing to treat his multiple sclerosis (MS) despite being informed of the diagnosis. Majors, 821 F. App’x at 535. Majors’s MS diagnosis had been confirmed by prison authorities in Minnesota, where an established plan of treatment had been in place. Although those prison records were available to MDOC medical personnel, they refused to continue the medication injections that appeared to be effective. Majors suffered from a long-term, chronic medical condition and his treatment was in the hands of two physician’s assistants, who were making the medical decisions. The court held that the physician’s assistants were not entitled to qualified immunity, but the nurse defendants were immune because, although the “nurses may have been aware of [Majors’s] diagnosis and treatment history, there is no evidence that they could have meaningfully influenced his course of treatment.” Majors, 821 F. App’x at 547. The Majors court relied on Winkler, where a nurse “‘gathered information about [the plaintiff’s] condition, provided it to a medical professional qualified to evaluate him, and followed the directions of that medical professional,’” and where “the nurse believed that the prisoner’s condition would be adequately treated by following those orders.” Ibid. (quoting Winkler, 839 F.3d at 894-95). In this case, there was no chronic condition that was the subject of continuing, supervised treatment. Glenn presented with an acute condition, one that McClellan herself perceived as - 15 - serious enough to “give [her] pause to think that he was in need of medical care.” McClellan dep., ECF No. 39-4, PageID.286. No other medical provider had seen or evaluated him. Nonetheless, application of this defense requires a close look at the interplay of the facts of the case and the contours of the constitutional right asserted by Glenn. “[B]ecause ‘immunity protects all but the plainly incompetent or those who knowingly violate the law,’ [the] court must not ‘define clearly established law at a high level of generality.’” Tlapanco v. Elges, 969 F.3d 638, 649 (6th Cir. 2020) (quoting Kisela v. Hughes, 584 U.S. 100, 104 (2018 . “A right is ‘clearly established’ if ‘[t]he contours of the right [are] sufficiently clear that a reasonable official would understand that what he is doing violates that right.’” Baynes v. Cleland, 799 F.3d 600, 610 (6th Cir. 2015) (quoting Anderson v. Creighton, 483 U.S. 635, 640 (1987 . Even when there is no case defining a constitutional right that directly mirrors the fact pattern confronted by the defendant, “‘an official can be on notice that [her] conduct violates established law even in novel factual situations.’” Cahoo v. SAS Analytics Inc., 912 F.3d 887, 898 (6th Cir. 2019) (quoting Littlejohn v. Myers, 684 F. App’x 563, 569 (6th Cir. 2017 . The touchstone of the “clearly established” inquiry is “fair warning.” Baynes, 799 F.3d at 612-13 (quoting Hope v. Pelzer, 536 U.S. 730, 741 (2002 . “If the law did not put the officer on notice that [her] conduct would be clearly unlawful, summary judgment based on qualified immunity is appropriate.” Saucier v. Katz, 533 U.S. 194, 202 (2001). When the qualified immunity defense is raised in a motion for summary judgment, courts must weave the summary judgment standard into each step of the qualified immunity analysis. Scott v. Harris, 550 U.S. 372, 378 (2007). Glenn is obliged to demonstrate with evidence in the record both that the challenged conduct violated a constitutional right and that the right was clearly established at the time. McDonald v. Flake, 814 F.3d 804, 812 (6th Cir. 2016) (citing Quigley, - 16 - 707 F.3d at 680). “If the plaintiff fails to establish either element, the defendant is immune from suit.” T.S. v. Doe, 742 F.3d 632, 635 (6th Cir. 2014). But under the summary judgment standard, the Court must view the facts in the light most favorable to the plaintiff, Saucier, 533 U.S. at 201; “[i]n qualified immunity cases, this usually means adopting . . . the plaintiff’s version of the facts,” Scott, 550 U.S. at 378. The record developed in this case shows that after her first call with defendant Massey, McClellan returned to find Glenn on the floor of the lobby writhing in such severe pain in his stomach that he could not stand or walk on his own. Glenn was fading in and out of consciousness. McClellan testified that she lacked the authority to send a patient to the hospital herself unless he was unconscious and a medical provider was unavailable. Id. at PageID.292. But when McClellan called Massey a second time, she did not inform her of her belief that Glenn needed serious medical attention, and she did not argue with the instruction to send Glenn back to his cell, despite the fact that he could not ambulate under his own power. It is apparent from the record that McClellan “could have meaningfully influenced [Glenn’s] course of treatment” by sending him to the hospital. Majors, 821 F. App’x at 547. But that would have required her to overrule the decision of her superior, who told her to send the plaintiff back to his cell. The magistrate judge correctly observed that the plaintiff cited no case clearly establishing an obligation by a nurse to take such action. Glenn’s condition plainly called for some immediate medical care, but the decision not to provide it was Massey’s. Perhaps McClellan could be faulted for not sharing her concern with Massey or failing to convey an accurate picture of Glenn’s condition. But again, the plaintiff has not shown that the right to a fulsome description of his condition by the nurse on the ground to the remote medical - 17 - decisionmaker was clearly established in Eighth Amendment jurisprudence. For that reason, Glenn has not overcome McClellan’s assertion of qualified immunity. The plaintiff’s second objection to the report and recommendation will be overruled. III. The magistrate judge did not conclude correctly that the evidence failed to support a deliberate indifference claim under the Eighth Amendment. However, the plaintiff failed to offer evidence that created a fact question sufficient to defeat the defense of qualified immunity, as the magistrate judge suggested. Accordingly, it is ORDERED that the magistrate judge’s report and recommendation issued (ECF No. 41) is REJECTED IN PART AND ADOPTED IN PART, and the plaintiff’s objections (ECF No. 42) are SUSTAINED IN PART AND OVERRULED IN PART. It is further ORDERED that defendant McClellan’s motion for summary judgment (ECF No. 38) is GRANTED for the reasons stated in this opinion and order. It is further ORDERED that the complaint against defendant Jodi McClellan, only, is DISMISSED WITH PREJUDICE. It is further ORDERED that the order of reference in this case is WITHDRAWN, and counsel for the remaining parties shall appear for a status conference on October 3, 2024 at 3:30 p.m. to discuss a further case management schedule. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: September 17, 2024 - 18 -

=== OPINION AND ORDER GRANTING PETITION FOR WRIT OF HABEAS CORPUS ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION GREGORY TUCKER, Petitioner, Case Number 21-11494 Honorable David M. Lawson v. RANDEE REWERTS, _________________________________/ Respondent, OPINION AND ORDER GRANTING PETITION FOR WRIT OF HABEAS CORPUS Michigan prisoner Gregory Tucker was convicted by a jury of burglarizing a business in Ferndale, Michigan. Tucker represented himself at trial with the help of standby counsel. The only evidence that connected him to the crime was a soda bottle left at the scene, which contained trace DNA evidence belonging to him. The bottle unquestionably was placed at the scene during the window of time when the burglary occurred. But there was no other evidence presented in the case that suggested when the trace evidence was deposited on the item or that positively identified the person who left the bottle at the scene that tied Tucker to the crime. The state appellate court held that the evidence was sufficient to support the conviction. However, the prevailing jurisprudence applying Supreme Court precedent — Jackson v. Virginia, 443 U.S. 318 (1979), and the cases that follow it — holds that trace evidence found on a moveable object at a crime scene, absent any other circumstantial proof about when the trace was deposited, is not sufficient by itself to establish guilt beyond a reasonable doubt. Because the state court’s application of Jackson was unreasonable, the Court will grant the petition and issue a writ of habeas corpus. I. The facts of the case are simply stated. Talya Ashford rented space on the second floor of a commercial building in Ferndale, Michigan where she operated a beauty and makeup studio. On September 16, 2016, she closed up shop, locked the door, and left for the day at around 4:00 p.m. She returned the next morning at 5:00 a.m. to find that her suite had been broken into, the space ransacked, and much of her inventory stolen. The stolen property, she said, included about $10,000 of beauty supplies, a television, computer, and a clock off the wall. Of significance here, Ashford said that she saw a Coke bottle and cigarette lighter on the counter. She was certain that those items were not in her shop when she left the previous afternoon. The police responded to her call and took the bottle into evidence. DNA testing suggested traces from two individuals: a “minor donor” and a “major donor.” The minor donor could not be identified, but the forensic expert testified that the DNA deposited by the major donor was Tucker to a near 100% certainty. The responding police officer testified that there were other break-ins at other office suites in the same building around the same time. And the detective who took the bottle into custody said that burglaries at that location were a common occurrence. The detective also said that he examined the scene for fingerprints and was not able to find any. Based on this evidence, the jury convicted Tucker of breaking and entering with intent to commit larceny. See Mich. Comp. Laws § 750.110. He was sentenced as an habitual offender to nine to fifteen years in prison. His conviction and sentence were affirmed on appeal. People v. Tucker, No. 343351, 2019 WL 4126755 (Mich. Ct. App. Aug. 29, 2019), lv. den. 505 Mich. 1016, 940 N.W.2d 94 (2020) (Mem.). Tucker then filed a petition for a writ of habeas corpus without the assistance of a lawyer under 28 U.S.C. § 2254. - 2 - Tucker presents the following grounds in support of his petition: I. The petitioner was convicted without sufficient evidence to prove beyond a reasonable doubt. II. The petitioner’s rights to due process were violated when the trial court empaneled an anonymous jury without justification. III. The petitioner was sentenced disproportionately to an upward sentence without reason. Pet. at 6, 7, 9, ECF 1, PageID.6, 7, 9. The petition also raised an issue of undisclosed evidence under Brady v. Maryland, 373 U.S. 83 (1963), but Tucker withdrew that claim because it had not been exhausted in state court. ECF No. 11. The warden filed a response that tracks the Michigan Court of Appeals opinion holding that the evidence was sufficient because the prosecution is not required to offer evidence that negates all innocent inferences that might flow from circumstantial evidence. See Tucker, 2019 WL 4126755, at *1. The warden cites authority for the proposition that “[p]hysical evidence such as fingerprints alone, when found under circumstances that they could only have been made during commission of the crime, are sufficient proof of identity.” ECF No. 13, PageID.669 (citing People v. Himmelein, 117 Mich. App. 365, 374-75, 442 N.W. 2d 667, 672 (1989 . II. Certain provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the standard of review federal courts must apply when considering an application for a writ of habeas corpus raising constitutional claims, including claims of ineffective assistance of counsel. See Wiggins v. Smith, 539 U.S. 510, 520 (2003). The AEDPA provides a “highly deferential standard for evaluating state-court rulings[.]” Cullen v. Pinholster, 563 U.S. 170, 181 (2011) - 3 - (quoting Woodford v. Visciotti, 537 U.S. 19, 24 (2002) (per curiam . That means federal courts give the state court “the benefit of the doubt,” ibid., applying that “statutorily prescribed deference,” Michael v. Butts, 59 F.4th 219, 225 (6th Cir. 2023) (citing 28 U.S.C. § 2254(d); English v. Berghuis, 900 F.3d 804, 811 (6th Cir. 2018 . A federal court may grant relief only if the state court’s adjudication “resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States,” or if the adjudication “resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding.” 28 U.S.C. § 2254(d)(1)-(2). “Clearly established Federal law for purposes of § 2254(d)(1) includes only the holdings, as opposed to the dicta, of [the Supreme] Court’s decisions.” White v. Woodall, 572 U.S. 415, 419 (2014) (quotation marks and citations omitted). “As a condition for obtaining habeas corpus from a federal court, a state prisoner must show that the state court’s ruling on the claim being presented in federal court was so lacking in justification that there was an error well understood and comprehended in existing law beyond any possibility for fairminded disagreement.” Harrington v. Richter, 562 U.S. 86, 103 (2011). The distinction between mere error and an objectively unreasonable application of Supreme Court precedent creates a substantially higher threshold for obtaining relief than de novo review. Mere error by the state court will not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520- 21 (quoting Williams v. Taylor, 529 U.S. 362, 409 (2000) (quotation marks omitted . Tucker argues that the evidence adduced at trial was not sufficient to prove that he was the perpetrator of the burglary. The Michigan Court of Appeals rejected that argument. It cited the controlling law — Jackson v. Virginia, 443 U.S. 318 (1979) — and determined that there was - 4 - enough evidence to convict. Tucker, 2019 WL 4126755, at *1-2. The court focused on Tucker’s argument that the evidence is insufficient if the inferences that can be drawn from circumstantial evidence are equally consistent with guilt and innocence. Id. at *2. Tucker had cited a Fifth Circuit case to support that proposition, but the case had been abrogated by a later en banc decision. Ibid. (citing United States v. Reveles, 190 F.3d 678, 686 (5th Cir. 1999), abrogated by United States v. Vargas-Ocampo, 747 F.3d 299, 301-02 (5th Cir. 2014) (en banc . The court of appeals then discussed each of the petitioner’s alternate theories of innocence, found them wanting, and held that the prosecution in any event was not required to offer evidence to negate them. Ibid. Tucker argues that this decision misapplied federal law established by the Supreme Court. The governing law is clearly established. It is universally accepted that “the Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged.” In re Winship, 397 U.S. 358, 364 (1970). Jackson refines that general rule when the sufficiency of the evidence to support a criminal conviction is questioned. Courts must ask “whether the record evidence could reasonably support a finding of guilt beyond a reasonable doubt.” 443 U.S. at 318. That rubric “must be applied with explicit reference to the substantive elements of the criminal offense as defined by state law,” id. at 324 n.16. A federal court reviewing a state court conviction under the habeas corpus statute that is “faced with a record of historical facts that supports conflicting inferences must presume — even if it does not affirmatively appear in the record — that the trier of fact resolved any such conflicts in favor of the prosecution, and must defer to that resolution.” Cavazos v. Smith, 565 U.S. 1, 7 (2011). Michigan law’s articulation of the elements of the breaking and entering crime in this case have not been called into question. But, as with any crime, the prosecution also must prove beyond - 5 - a reasonable doubt that the defendant committed the charged offense. People v. Oliphant, 399 Mich. 472, 489, 250 N.W.2d 443, 449 (1976); People v. Yost, 278 Mich. App. 341, 356, 749 N.W.2d 753, 767 (2008). Direct or circumstantial evidence and reasonable inferences arising from that evidence may constitute satisfactory proof of the elements of an offense, People v. Nowack, 462 Mich. 392, 399-400, 614 N.W.2d 78, 81 (2000); People v. Jolly, 442 Mich. 458, 466, 502 N.W.2d 177, 180 (1993), including the identity of the perpetrator, Dell v. Straub, 194 F. Supp. 2d 629, 647 (E.D. Mich. 2002). Did the Michigan courts unreasonably apply Jackson to the record facts in this case? “Under the ‘unreasonable application’ clause, a federal habeas court may grant the writ if the state court identifies the correct governing principle from this Court’s decisions but unreasonably applies that principle to the facts of the prisoner’s case.” Williams v. Taylor, , 413 (2000). The term “‘unreasonable’” is “a common term in the legal world and, accordingly, federal judges are familiar with its meaning.” Id. at 410. State courts, however, are entitled to a generous dose of deference by federal habeas courts. The Supreme Court has explained that that application of the “unreasonable application” rubric depends on the specificity of the specific federal rule. Yarborough v. Alvarado, 541 U.S. 652, 663-64 (2004). When the rule announces a general standard, application can involve “a substantial element of judgment.” Ibid. “The more general the rule, the more leeway courts have in reaching outcomes in case-by-case determinations.” Ibid. (citing Wright v. West, 505 U.S. 277, 308-09 (Kennedy, J., concurring in judgment). With respect to the Jackson rule, on direct appeal, review of a sufficiency of the evidence challenge must focus on whether “after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond - 6 - a reasonable doubt.” Jackson, 443 U.S. at 319. On habeas review, that standard must be applied through the framework of 28 U.S.C. § 2254(d). Martin v. Mitchell, 280 F.3d 594, 617 (6th Cir. 2002). The Sixth Circuit reads those cases as creating a gauntlet for state prisoners asserting a sufficiency-of-evidence challenge under the AEDPA: they must penetrate “two layers of deference to groups who might view facts differently” than a reviewing court on habeas review — the factfinder at trial and the state court on appellate review. Brown v. Konteh, 567 F.3d 191, 205 (6th Cir. 2009); see also Tucker v. Palmer, 541 F.3d 652, 656 (6th Cir. 2008). The evidence of Tucker’s participation in the burglary in this case consists of the Coke bottle found on the premises, which contained trace evidence of his DNA, along with testimony by the store owner that the bottle was not present when the premises were locked up at closing on the evening prior. Viewing that evidence in the light most favorable to the prosecution, it is easy to conclude that the bottle was left in the salon sometime during the thirteen-hour window between the time Talya Ashford closed up shop on September 16, 2016 and when she returned the following morning at 5:00 a.m. Ashford testified that she and her landlord were the sole possessors of the keys to the salon. And she testified with certainty that the bottle was not there when she left the previous afternoon. There were other explanations for how the bottle may have ended up on the counter, and the court of appeals discussed (and rejected) them in its opinion on direct appeal. But that court correctly concluded that the prosecution was not obliged to offer evidence to negate the innocent inferences. United States v. Algee, 599 F.3d 506, 512 (6th Cir. 2010) (“Circumstantial evidence alone is sufficient to sustain a conviction and such evidence need not remove every reasonable hypothesis except that of guilt.”). The conclusion that the bottle was left in the salon by the burglar did not unreasonably apply Jackson. - 7 - But the presence of Tucker’s DNA on the bottle did not lead ineluctably to the conclusion that he was present at the crime scene — i.e., that it was Tucker who left the bottle at the scene. There also was no evidence offered at trial about when his DNA was or could have been deposited on the bottle. And that gap in the proofs is fatal to the state’s case. Generally, the case law applying Jackson tracks the rule that trace evidence uniquely corresponding to the defendant may suffice to prove identity where additional circumstantial evidence demonstrates that the trace only could have been left by the defendant at the scene during the commission of the crime in question. See, e.g., Soto v. Ryan, 760 F.3d 947, 979-80 (9th Cir. 2014) (holding that evidence of “the placement and location of Petitioner’s fingerprints were consistent with them being left during the commission of the crime.”); Schell v. Witek, 218 F.3d 1017, 1023 (9th Cir. 2000) (holding that the location of the defendant’s fingerprint at the burglary scene — “the fingerprint was obtained from the interior of one of the two lower panes of a louvered window removed during the burglary” — would allow “any jury reasonably [to] have inferred that Schell left his fingerprint on the inside of the screen-protected window during the commission of the burglary”). However, where a trace is located on an “easily movable object,” particularly where there is testimony that the trace could have persisted on the object for a lengthy period, or indefinitely, then in the absence of other evidence about when the trace was deposited, proof merely that the object was recovered at the scene does not support a reasonable inference that the trace was deposited during the commission of the crime. Examples of this application of Jackson include Travillion v. Superintendent Rockview SCI, 982 F.3d 896 (3d Cir. 2020), involving a habeas challenge to a robbery prosecution. The evidence showed that the robber followed an employee into a store when she arrived in the morning to open up. He was carrying a manilla envelope, which ultimately was found to bear his - 8 - fingerprints. There was no other evidence of the perpetrator’s identity. The Third Circuit determined that the state courts’ finding that the evidence was sufficient unreasonably applied Jackson. “Evidence that Travillion’s fingerprints were found on the easily movable Manila folder and a paper inside the folder carried into the store by the robber and a witness’s description of the robber that does not match Travillion but doesn’t necessarily exclude him is not sufficient evidence for a rational trier of fact to place Travillion at the scene of the crime at the time the crime was committed beyond a reasonable doubt.” Id. at 903-04. The court reasoned, “[i]n addition to the absence of evidence regarding when Travillion’s fingerprints on the easily movable folder and paper were impressed, there was a lack of sufficient additional incriminating evidence, circumstantial or otherwise, so as to allow a rational juror to find guilt beyond a reasonable doubt. Although there is evidence that Travillion touched the folder at some indefinite time with his left hand, and there is evidence that the robber carried the folder at the time of the crime in his left hand, there is not sufficiently incriminating evidence that Travillion was the perpetrator holding the folder at the time of the crime.” Id. at 904-05. In United States v. Strayhorn, 743 F.3d 917 (4th Cir. 2014), the defendant was convicted of Hobbs Act robbery. Two men entered a store and incapacitated the proprietor by binding his legs with zip ties and duct tape. The defendant’s fingerprint was found on the duct tape. On direct appeal, the court applied Jackson to determine that the evidence of guilt was insufficient to prove the defendant’s participation in the robbery, although other evidence supported his conspiracy conviction. The court stated: “It is undisputed that the fingerprint evidence against Janson Strayhorn as to Counts One and Two consists of one partial fingerprint on the duct tape used in the P & S Coins robbery. The duct tape is, without question, an easily movable object. And the government’s expert conceded that he had no way to determine when Janson Strayhorn’s - 9 - fingerprint was imprinted on the tape and that the fingerprint could have been impressed even a year earlier. The probative value of the fingerprint evidence here is thus highly questionable. . . . In sum, a fingerprint on an easily movable object with no evidence of when it was imprinted is sufficient to support a conviction only when it is accompanied by additional incriminating evidence which would allow a rational juror to find guilt beyond a reasonable doubt.” Id. at 923- 24 (cleaned up). In United States v. Bonner, 648 F.3d 209 (4th Cir. 2011), another Hobbs Act robbery case, a fast food store was robbed by two Black males wearing panty hose to obscure their faces. The store employee gave inconclusive descriptions of the robbers, except to say that one of them was wearing a Yankees baseball cap. The police located a Yankees cap in the dumpster behind the store, and DNA testing revealed a match to the defendant. The trial court granted a post-trial motion for judgment of acquittal, and the court of appeals, applying circuit precedent based on the Jackson rule, affirmed. The court reasoned, “[s]trikingly, despite claims otherwise, no credible physical evidence indicates that Bonner was wearing the Yankees hat on the night of the robbery. The government disagrees and argues that because Bonner’s DNA was ‘predominant,’ it was reasonable for the jury to infer that he was wearing the hat on the night of the robbery. However, the DNA expert testified that he could not conclude who last wore the hat based on the DNA despite the government’s emphasis on the word ‘predominant.’ Any assumption that Bonner was the last wearer is an impermissible inference by the jury.” Id. at 214. And in Mikes v. Borg, 947 F.2d 353 (9th Cir. 1991), a pre-AEDPA case, the court of appeals held on habeas review that the evidence of the petitioner’s participation in a murder was insufficient to support the conviction. In that case, the proprietor of a fixit shop was found dead in his store. His pockets had been turned out, and he was lying near a disassembled turnstile. The - 10 - record revealed that the victim had purchased the turnstile at a going-out-of-business sale at a hardware store. The petitioner’s fingerprints were found on one of the chrome posts of the turnstile. There was no other evidence connecting him to the murder scene. To find guilt beyond a reasonable doubt, the court held, “the record must demonstrate that he in fact touched the posts at the time the crime was committed and not at some earlier point.” Id. at 359. Stating that the petitioner had no obligation to explain “how or when” his fingerprints were deposited on the posts, the court held that “on the basis of the record before us, a reasonable factfinder could not conclude beyond a reasonable doubt that Mikes’ fingerprints were placed on the turnstile posts at the time of the commission of the crime.” Ibid. These cases illustrate the flaws in the state court’s analysis. The Coke bottle certainly was a moveable object. And there is no evidence of when Tucker’s DNA was or could have been deposited on the bottle. To the contrary, the DNA expert witness did not even comment on that proposition; she did not indicate how long the trace evidence would persist on the object, and she did not furnish any information from which a rational jury could conclude that the trace evidence was deposited anytime near the break-in. The characteristics of the bottle itself do not support a reasonable inference that the DNA trace evidence must have been deposited during the course of the burglary. Unlike the surfaces in Soto and Schell, the bottle was not a fixed part of the premises that only could have been touched by a perpetrator who had gained access to the interior. The bottle also had no inherent characteristics that could support a reasonable inference that it must have been touched by the perpetrator during the commission of the crime. For example, it was not a tool like a pry bar that might have been used to gain entry, from which it reasonably could be inferred that the object was handled manually during a breaking and entry, resulting in the deposition of the perpetrator’s biological traces. To the contrary, the only evidence in the record - 11 - showed that Tucker had contact with the bottle in an unknown place and at an unknown time, and that subsequently the bottle was brought to the store premises by a person or persons unknown. Any inference that the petitioner must have deposited his DNA on the bottle during the course of the burglary was pure speculation unsupported by any positive proof in the record. Moreover, there was no eyewitness testimony linking the petitioner to the break-in. There was no surveillance videotape of the break-in. The petitioner’s fingerprints were not recovered from the store. There was no evidence otherwise linking the petitioner to Ms. Ashford’s business. There was no testimony that the petitioner attempted to sell or pawn any items that were stolen during the break-in. No evidence of motive or opportunity on the petitioner’s part was presented. Although the evidence established that the petitioner’s DNA was recovered from the Coke bottle, there was also evidence that another donor left his or her DNA on the bottle. Without impermissibly stacking inferences, there is insufficient evidence in this record that Tucker broke into Ms. Ashford’s salon. See Kelly v. Roberts, 998 F. 2d 802, 808-09 (10th Cir. 1993) (applying Jackson to invalidate a conviction for insufficient evidence). “[A]lthough a jury may infer facts from other facts that are established by inference, each link in the chain of inferences must be sufficiently strong to avoid a lapse into speculation.” Piaskowski v. Bett, 256 F. 3d 687, 693 (7th Cir. 2001). In this case, the chain of inferences that the prosecution attempted to forge fails for the reasons discussed above. And, although the state is not required to rebut possible innocent explanations for the trace evidence, the record does suggest other possibilities. For instance, another person’s DNA was recovered from the bottle, suggesting that this person could be the actual perpetrator of the crime. A customer could have left the Coke bottle at the business. The record evidence therefore did not rule out such alternative theories as wholly implausible or improbable. Although Ms. Ashford - 12 - testified that the Coke bottle and cigarette lighter found at her business did not belong to her, she admitted that clients or friends and children of clients sometimes brought such items with them into her business. Ms. Ashford was insistent that the Coke bottle had not been in her store prior to the burglary, but the detective in this case testified that burglary victims are often distraught, and he admitted that Ms. Ashford may have been mistaken concerning the timeline of events. Thus, it is also possible that one of Ms. Ashford’s clients left the Coke bottle at her business, but in her distress following the break-in she may have not remembered seeing the Coke bottle prior to the break-in. Also, contrary to the Michigan Court of Appeals’ finding, there was testimony from a police sergeant that he had been informed by another tenant who was renting another office in the building from Ms. Ashford that the previous tenants could have had keys to the building, establishing the possibility that another person could have broken into Ms. Ashford’s business. None of this, however, is necessary to the conclusion that the positive evidence of the perpetrator’s identity in this case falls short of that necessary for proof beyond a reasonable doubt. “Although circumstantial evidence alone can support a conviction, there are times that it amounts to only a reasonable speculation and not to sufficient evidence.” Newman v. Metrish, 543 F.3d 793, 796 (6th Cir. 2008). In this case, the “meager circumstantial evidence” is simply too thin to convict Tucker of this crime, particularly since much of it is “conjecture camouflaged as evidence.” Piaskowski, 256 F. 3d at 693. Although the evidence may have led to a reasonable speculation that Tucker may have broken into the store, without stacking inferences there is insufficient evidence to prove beyond a reasonable doubt that he was the perpetrator. Because the state failed to meet its burden of proof, the appropriate remedy is to issue a writ of habeas corpus outright, rather than granting of the writ conditioned on the state retrying the petitioner. See Brown v. Palmer, 358 F. Supp. 2d 648, 656 (E.D. Mich. 2005). - 13 - III. It appears that petitioner Tucker is in the state’s custody serving a sentence on another conviction. See People v. Tucker, No. 340425, 2019 WL 286540 (Mich. Ct. App. Jan. 22, 2019). The decision in this case does not affect the state’s authority to confine him on that conviction. However, the evidence in this case is insufficient to support the breaking and entering conviction that is the subject of this petition, and the state courts’ determination otherwise was an unreasonable application of Jackson v. Virginia. Accordingly, it is ORDERED that the petition for a writ of habeas corpus is GRANTED. It is further ORDERED that the petitioner’s convictions for breaking and entering with intent to commit larceny and being an habitual offender are VACATED. It is further ORDERED that the respondent shall release the petitioner from custody on the present conviction. Dated: August 1, 2024 s/David M. Lawson DAVID M. LAWSON United States District Judge - 14 -

=== OPINION AND ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION LAURA BENY, v. Plaintiff, Case Number 22-12021 Honorable David M. Lawson UNIVERSITY OF MICHIGAN BOARD OF REGENTS, and MARK M. WEST, Defendants. ______________________________________________/ OPINION AND ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Plaintiff Laura Beny is a tenured professor at the University of Michigan law school, where she is at present a member of the faculty. In a second amended complaint, Beny accuses the defendants of discriminating and retaliating against her on the basis of her race (Black) and sex (female) in violation of state and federal law. She also alleges a violation of the Equal Pay Act. Discovery has closed, and the defendants have moved for summary judgment. They acknowledge that they have imposed employment-related discipline upon Beny, but they argue, among other things, that Beny’s own blatantly unprofessional conduct is the only reason for their actions. Because Beny has not produced evidence that the defendants’ actions were a pretext for unlawful discrimination or retaliation, she is not able to demonstrate that a fact issue remains for trial on any of her claims. The motion for summary judgment will be granted, and the case will be dismissed with prejudice. I. Facts and Proceedings Beny has been a faculty member of the University of Michigan law school since 2003, where she teaches law and economics. She holds a law degree and an economics doctorate from Harvard University, has published research in numerous prestigious publications, and, in 2019, was named the Earl Warren DeLano Professor of Law. Beny was the second Black female tenure- track professor hired at the Law School and at times since has been one of only two Black tenured professors on the faculty. A. Background Allegations Beny’s apparent dissatisfaction with the Law School’s diversity and outreach practices, which she would characterize as anemic, likely led to incidents in 2018, which in turn led to the imposition of employment-related sanctions. However, she traces her grievances with former law school dean defendant Mark West to a series of email exchanges starting in 2008, which can be viewed as immature, awkward, and unprofessional, but likely not harassing. In that year, the same year Beny was granted tenure, defendant West became the Associate Dean of the Law School. Beny alleges that during his time as associate dean, West made several statements to her by email that she found to be inappropriate. The information about these emails has evolved somewhat since Beny filed her complaint, and only some of the emails ultimately have become part of the record. The first instance occurred on May 22, 2008, when West emailed her after a social gathering to remark that it was nice seeing her there. ECF No. 96-21, PageID.2720. Beny responded that she was “honored” by West’s presence and noted that the party “totally fell apart” after he left such that her brother almost had to “save the situation with some Air Force strategic tactics.” Ibid. West responded, “Oh be quiet. I really have missed you and our stupid emails. I wasn’t sure how to break the silent impasse. It will be good to have you back. I liked meeting your brother, too. I almost broke his neck just to prove that I could do it, but I held back.” Ibid. In early 2010, West told Beny in an email that he was going to put a picture of her infant daughter on his desk and tell everyone the child was his. Mark West dep., ECF No. 109-5, - 2 - PageID.4127. In late 2010, West emailed her to report that the Law School’s communications office was “all over [his] ass” to cajole her to sit for a photo shoot due to her “beauty”; he signed the email, “Your humble minion, Mark XOXOXO.” ECF No. 96-19, PageID.2718. Beny responded, “If I am fucking beautiful, then why does everyone fuck with me! Anyway, I’m getting a picture in early Jan b/c that threat is scary!:-*” Ibid. West replied, “Cool. Just get with lisa ASAP so she’ll stop bothering me. And watch your fucking language!!” Ibid. Beny’s complaint also included information about two other emails. She stated that West emailed her in 2009 to remark that he saw her downtown and asked why she made her male companion walk two feet behind her. That email is not reproduced in the record. Similarly, the plaintiff also alleged that West emailed her to ask why she seemed startled to see him after another off-campus encounter; when she said she did not recognize him in “street clothes,” he responded that “some people can’t get used to how awesome I look in different settings.” Am. Compl., ECF No. 34, ¶ 37, PageID.477. That email also has not been made a part of the record. Around January 23, 2022, West formally apologized to the plaintiff in writing for sending one of the 2010 emails. Mark West dep., ECF No. 109-5, PageID.4180; ECF No. 109-4, PageID.4095-96. B. First Discipline-Provoking Incident In approximately 2018, Beny’s time at the University began to be marked by contention. In April of that year, University students organized an international academic conference, but Beny had heard that organizers did not invite presenters in a manner that would ensure diversity. Beny dep., ECF No. 109-3, PageID.4003. When the students did not respond to an email Beny sent them expressing her concerns about the selection process, she decided to speak out at the conference. Although she was not invited to speak, she attended the conference. Id. at PageID.4001. After West concluded his opening remarks, she asked if he would take questions. - 3 - Id. at PageID.4001. When he declined, she approached the podium and began to speak in front of the attendees, identifying herself as a tenured professor, prominent scholar, taxpayer, and American citizen. Id. at PageID.4001-02. She stated that the law school had tried to sabotage one of her courses and noted that the conference organizers were perpetuating inequities. Ibid. When a woman got up and walked towards the front of the room, appearing as if she was on a phone call, Beny accused her of calling the police and urged her to go ahead. Id. at PageID.4002. When one of the students stood up and asked her to stop speaking, she asked him what country he was from. Ibid. A few minutes later, she concluded her remarks and the conference continued. Several days later, defendant West called Beny into a meeting with himself and the Law School’s Chief Operating Officer, Michele Frasier Wing, to ask her what occurred at the student conference. To Beny’s surprise, the meeting was disciplinary in nature, which she did not learn until West and Wing called her into a second meeting that May and provided her with a disciplinary letter. The letter characterized Beny’s conduct during the conference as “unprofessional,” “inappropriate for any member of the faculty,” and “unacceptable.” Notification of Disciplinary Action, ECF No. 96-4, PageID.2664. The disciplinary letter did not include any consequences but stated that the incident would be taken into account if Beny’s conduct was inappropriate in the future. Ibid. Beny believes that the letter perpetuated racial and sexist tropes of “the angry black woman.” Laura Beny dep., ECF No. 109-3, PageID.4004. On February 7, 2019, over half a year later, Beny sent West and Wing a memo detailing her disagreements with the disciplinary letter and her belief that her actions were protected speech under University policy. Emails, ECF No. 109-7, PageID.4193. - 4 - C. Second Discipline-Provoking Incident In October 2018, Beny had a disagreement with defendant West’s administrative assistant, Robyn Grimes, outside West’s office. The nature of this disagreement is disputed, but Beny told the assistant that she felt like she was disrespecting her and did not treat her as an equal member of the community. She concedes that she may have asked the assistant whether she had a soul. The assistant ended the conversation by returning to her office. After Beny emailed the assistant the next morning to apologize, West emailed Beny and told her not to go to his office suite to speak to the assistant. Second Notification of Disciplinary Action, ECF No. 96-6, PageID.2668. On November 6, 2018, West called Beny into a meeting with himself and Wing to discuss the incident with Grimes. Laura Beny dep., ECF No. 109-3, PageID.4007. Beny refused to provide him any details about the incident. Id. at PageID.4008. Three months later, West scheduled a follow-up meeting with Beny and Wing. Id. at PageID.4008-09. Beny responded by asking why she needed to keep meeting with him when students have informed her of instances of “blatant racism” in the law school. Id. at PageID.4009. West assured her that he also cared about addressing inequities and urged her to direct specific allegations to himself or to the University’s equity office. Ibid. On February 7, 2019, West provided Beny with a memorandum informing her that her eligibility to take a sabbatical would be delayed by a year as a sanction for the October 2018 incident with his assistant and that she could be subject to further sanctions if she engaged in similar conduct in the future. Mark West dep., ECF No. 109-5, PageID.4185; Second Notification of Disciplinary Action, ECF No. 96-6, PageID.2668-70. On September 1, 2019, Beny pleaded no contest to a charge of driving under the influence. Laura Beny dep., ECF No. 109-3, PageID.4049. On September 4, she reached out to West and Associate Dean Gil Seinfeld to inform them that she would be seeking medical leave for the fall - 5 - semester because she had been experiencing a health crisis. Both wished her well. Id. at PageID.4048. She ultimately spent approximately two weeks in jail on the charge in November of 2019. Beny researched University policies and determined that she did not have to report her arrest and conviction to University officials because it was a misdemeanor. Id. at PageID.4049. She returned to her teaching duties the next semester, id. at PageID.4050, and the Law School took no action against her as a result of that incident. D. Third Discipline-Provoking Incidents During the Fall of 2021, Beny registered several informal complaints with law school administrators. In one instance, she reported to administrators that she felt singled out by an email from Associate Dean for Academic Programming Kristina Daugirdas asking her to keep her mask on in class as part of the COVID protocol. She also complained to Daugirdas after she suggested that Beny bring her daughter, who had to quarantine due to a COVID-19 outbreak at school, to campus instead of teaching virtually. That semester, Beny also filed a complaint with the University Equity Civil Rights and Title IX (ECRT) office, citing discrimination because she was not asked to teach in one of the law school’s summer programs. Laura Beny dep., ECF No. 109- 3, PageID.4012-13. She says that the complaint also included allegations against West and Professor Adam Pritchard that went beyond the summer program. Id. at PageID.3992-93. As she reviewed her files in preparation for her interview with the equity office, she re-encountered the old emails from West. Id. at PageID.4013-4014. She also reviewed a March 2021 apology letter made by West to the Michigan Law School community apologizing for using images of Asian women that trade in racial and sexual stereotypes on some of his book covers. Id. at PageID.3988- 89. - 6 - In late December or early January 2022, Beny began to forward the emails from West to the Law School’s faculty email list, encouraging the other faculty members to “comment publicly.” Id. at PageID.4031; Third Notice of Disciplinary Action, ECF No. 96-17, PageID.2708. She did not forward her replies to West’s messages. Laura Beny dep., ECF No. 109-3, PageID.4017. On January 28, 2022, she forwarded one of the emails to administrator Wing asking her to look into potential Title IX issues. Id. at PageID.4014. Wing directed her to the ECRT office. Ibid. Beny says that she informed West around February 7, 2022 that she included him in her ECRT complaint. Id. at PageID.3993. On February 8, 2022, she emailed Wing with the same information, although her email also accused Wing of “harming me and my family.” Id. at PageID.3993, 4015; Emails, ECF No. 113, PageID.4434. On January 31, 2022, Dean of Students Kimberly D’Haene forwarded Daugirdas an anonymous student complaint about Beny’s Enterprise Organization course. The complaint generally raised concerns regarding Beny’s preparedness and tardiness to class. Emails, ECF No. 96-9, PageID.2677. Daugirdas forwarded the email to Wing the same day she received it. Id. at PageID.2676. On February 9, 2022, Daugirdas emailed Beny to set up a meeting with her and Wing to discuss the complaint. Emails, ECF No. 96-10, PageID.2682. Beny responded that she was not comfortable meeting while her ECRT complaint was pending against the administration. Ibid. Daugirdas informed Beny that the meeting was not optional and detailed the contents of the student complaint. Id. at 2681-82. Beny and Daugirdas exchanged several additional emails about whether a meeting to discuss the complaint was appropriate, but Beny again emphasized that she would not meet with administrators without counsel due to her pending civil rights complaints. Id. at PageID.2680. She also wrote, “[I]f you continue to push me, I will have to go very public with some of the conduct of the members of this admin toward me that has had an extremely negative - 7 - impact on the environment here. It will be very embarrassing for this law school, to say the least.” Ibid. Beny filed another ECRT complaint on February 13, 2022, naming West, Daugirdas, and Wing as persons involved. Laura Beny dep., ECF No. 109-3, PageID.4017. On February 14, 2022, Beny addressed the anonymous student complaint with her class. Discussing the complaint for about ten minutes, Beny told the students that she welcomed constructive criticism but asked them not to spread “malicious lies.” Id. at PageID.4034. She was particularly concerned by an allegation that she had called for assignments to be due on January 17, which could not be true, she maintained, because that was Martin Luther King, Jr. Day, and there was no class. Ibid. After concluding her remarks, she returned to the course’s subject matter. She thought that the session, which was recorded on Zoom, ended well. Id. at PageID.4075. On February 15, Daugirdas received a follow-up to the anonymous student complaint, which took issue with how Beny had handled the initial complaint in class and raised additional concerns about the course. Emails, ECF No. 96-12, PageID.2691. Daugirdas emailed Beny, stating that administrators would conduct a midterm evaluation in her course and directing her to teach on time and in person and to refrain from any acts that could be considered retaliatory. Emails, ECF No. 113, PageID.4517-18. At that point, Beny emailed her students, stating, Dear Students: I am unable to teach at this law school anymore while subjected to arbitrary abuse and retaliation. I love each of you for what you bring to the world. Just know that you are valued for who you are. I have not resigned but the administration has taken over my teaching and pedagogical decisions, I love each of you for what you bring to the world. Thanks. Thanks. Emails, ECF No. 96-13, PageID.2693. - 8 - When Daugirdas learned of Beny’s email to the students, she contacted Beny to confirm. Emails, ECF No. 96-14, PageID.2694. Copying several additional administrators, Beny responded that she “decided not to continue teaching under your continued racism and retaliation” and requested that Daugirdas refrain from contacting her directly. Ibid. She also sent a separate email to Daugirdas, West, and Wing complaining about Daugirdas’s concerns about her course and stating that “evil is often sloppy.” Emails, ECF No. 113, PageID.4518. On February 19, she informed a student that she could no longer serve on his dissertation committee. Emails, ECF No. 96-16, PageID.2697. A meeting between administrators and Beny ultimately occurred on February 25, after she had retained an attorney. Laura Beny dep., ECF No. 109-3, PageID.4040. West, Daugirdas, and Sascha Matish, a university HR employee, attended the Zoom session, which was meant to discuss the student-complaint incident. Ibid. West testified at deposition that he had not read the student complaint before the meeting and was unaware of how Beny had addressed it in class. ECF No. 109-5, PageID.4155. During the month of February, Beny continued to send emails to the law school email list and to individual faculty and staff. Third Notice of Disciplinary Action, ECF No. 96-17, PageID.2708. The emails and communications are numerous, and Beny does not contest making them. ECF No. 109-3, PageID.4040. They include:  An email to all faculty members asking if any had “swallow[ed] this level of abuse and perform[ed] at the highest levels of performance for decades?” ECF No. 96-17, PageID.2708.  An email to all faculty members accusing them of silence. Ibid.  An email to all faculty members that included a rhetorical “Email I Never Received.” Ibid.  In response to an email announcing new faculty hires, an email to all faculty members, remarking, “What is brilliant about hiring qualified candidates? What stands out as especially brilliant? Who is brilliant at this time?” Id. at PageID.2709. - 9 -  An email to Daugirdas, Wing, Vice Provost Robert Sellers, and Senior Investigator Tanya Castrogiovanni accusing administrators of an “incompetent” investigation into her complaints. Id. at PageID.2710.  An email to the same individuals inquiring how “the dean and associate dean [got] so far as they did when they were not great teachers?” Ibid.  An email to Daugirdas and Wing with an attached article about bullying. Id. at PageID.2711.  An email to Daugirdas and Wing stating, “So. You are evil. And this is where I go public. Good luck to you. Let’s see how you do.” Ibid.  Several emails to West, calling him, among other things, “a diehard racist and sexist liar,” noting that his “own teaching record isn’t great but [he] got to be dean,” and accusing him of retaliation because she “outed [your] inappropriate comments and behaviors towards me as my supervisor.” Id. at PageID.2712.  An email to Professor Vic Khanna, the replacement instructor for her course, stating that he would be “dragged into my lawyers [sic] investigation and EEOC complaint” if he did not give her access to her course materials. Id. at PageID.2713; Laura Beny dep., ECF No. 109-3, PageID.4041.  A phone call to a staff member requesting access to the Enterprise Organizations course website because she “doesn’t want to find herself on the wrong side of these issues.” ECF No. 96-17, PageID.2713.  Several emails to Professor Nick Bagley, who is married to Daugirdas, accusing both of racism and “attacks against me.” Id. at PageID.2713-14. Some of these emails provoked a response from Professor Barbara McQuade, who testified at her deposition that she contacted West to suggest that he request a threat assessment after seeing several of Beny’s emails. Barbara McQuade dep., ECF No. 114, PageID.4531. The email that prompted the concern was Beny’s February 23, 2022 communication to the faculty asking, “how many of you had to swallow this level and abuse and perform at the highest levels of performance for decades?” Id. at PageID.4533. The next day, Beny emailed the faculty again, stating “Yes, I didn’t think that anyone else did and your silence confirms that. I think it’s a wonderful privilege - 10 - to be able to focus on your work, teaching and research, without constant abuse and retaliation. Congratulations to you.” Ibid. McQuade, one of the recipients, testified that she found the email “chilling because it appear[ed] to be directed . . . to all of us.” Ibid. She did not know of Beny’s prior complaints against officials at the law school, had never met Beny in person, and was unaware of her race. Id. at PageID.4535-36, 4548. She acknowledged that while the email could be read as an expression of hurt, she viewed it differently; its use of “retaliation” and “congratulations to you” caused her concern. McQuade then called West and encouraged him to contact the University’s Department of Public Safety instead of remaining “stoic,” which she explained was a natural reaction in these situations. Id. at PageID.4532. In context, McQuade’s response could be characterized as an overreaction. However, University police records indicate that West otherwise was motivated to request a threat assessment after he received an email from Professor Alicia Davis, a Black female member of the faculty, stating that Beny had phoned her and asked, “what evil, Satanic motive drives you” and later texted her, “God will deal with you.” Police Report, ECF No. 111, PageID.4233; Mark West dep., ECF No. 109-5, PageID.4133. Davis reported that phone call in an email to West on February 24, 2022. ECF No. 96-25, PageID.2728. She characterized the phone call as “incredibly disturbing.” She wrote that Beny sounded “very distraught” and said that she had “f**ked her up and dragged her down at every opportunity.” Ibid. Beny also asked Davis “what evil, Satanic motive drives you?” Ibid. Davis told Beny that she intended to end the call and did not want to have similar conversations going forward, but Beny hung up before she could finish speaking. Ibid. Beny then texted Davis “God will deal with you.” Ibid. Davis reported to West that she did not feel safe and asked what actions the administration would take. Ibid. During her deposition, - 11 - Beny admitted making those statements but denied that they were intended as threats. She maintains that she and Davis were discussing what she was going through at the law school. Laura Beny dep., ECF No. 109-3, PageID.4071. She admits, however, that she accused Davis of “undermining [her] on every opportunity that she got.” Ibid. This was not the first time that administrators had sought a threat assessment concerning Beny. In April 2018, before the incident at the student scholarship conference, police records indicate that University Vice President Tim Lynch contacted the school’s public safety department to request a threat assessment of Beny. ECF No. 109-2, PageID.3964. Kevin Crowley, the responding officer, contacted West to discuss Beny. Id. at PageID.3965. West reportedly stated that Beny “displays delusions of grandeur where she will talk about herself in the third person” and believes “everyone is out to get her.” Ibid. West reportedly added that there is “growing concern from staff that if Laura does something happens [sic] in the future they would look back and ask if there would be signs.” Ibid. In his interview with the responding investigator, West recalled that during a fundraiser auction for public service students, Beny engaged in “some kind of a protest,” bidding the price for an event at a restaurant with him to $3,700, and then taking the podium in front of approximately 300 students and “admonish[ing] the crowd for some reason.” ECF No. 109-2, PageID.3964; Mark West dep., ECF No. 109-5, PageID.4140. She then gave the “Wakanda” salute (an apparent reference to the Kingdom of Wakanda, a fictional country appearing in American comic books published by Marvel Comics and featured in the Black Panther movies) and exited the building. Mark West dep., ECF No. 109-5, PageID.4140. During his deposition, West estimated that this event took place in 2015, ibid., but the contemporaneous University police records indicate that West expressed his concerns about this conduct in March of 2018, ECF No. 109-2, PageID.3964. On April 20, 2018, West updated his report to the - 12 - investigator after Beny’s disruption of the student conference. Id. at 3968. The report was closed after Crowley reported that he stood by in an adjacent room while West met with Beny to discuss the incident at the conference. Id. at PageID.3968. On March 31, 2022, West issued Beny a Third Notice of Disciplinary Action. ECF No. 96-17, PageID.2702. As a sanction, Beny’s pay was frozen through June 30, 2027, and she was made ineligible for summer funding, several other funding sources, and sabbaticals. Id. at PageID.2715. The letter also explained that Beny’s salary would not return to that of her cohort and requested that she prepare a “detailed plan” for returning to her responsibilities as a faculty member. Id. at PageID.2715-16. As justification, the notice principally cited Beny’s “abandonment” of her class and “retaliation” against the students, but also cited her for  Failing to attend and evaluate assigned courses as a member of the Academic Standards and Practice Committee. ECF No. 96-17, PageID.2705-06.  Being the only tenured faculty member not on leave to fail to attend any faculty meetings or job talks during the academic year. Id. at PageID.2706.  Retaliating against students who made an anonymous complaint in her course by “[taking] bits and pieces of the complaint and ridicul[ing] it.” Id. at PageID.2706-07.  Using the faculty email list to send numerous emails about her grievances. Id. at PageID.2707-08.  Making threatening and harassing statements to various faculty and staff, discussed above. Id. at PageID.2713. The notice also stated: We recognize that you claim that your refusal to perform the responsibilities of your position, including not only the actions detailed above but also your failure to produce any original scholarship for several years, is the result of discrimination. The University and the Law School take all claims of discrimination and harassment seriously. The process for reviewing those claims, both internally and externally, has been invoked. These claims, however, do not excuse you from properly performing your job, which includes treating others with civility and respect. Nor do these claims insulate you from the consequences of failing to properly perform your job. - 13 - Id. at PageID.2715. On February 26 or 27, 2022, Beny filed an online claim for medical leave citing a work- related psychological injury. Laura Beny dep., ECF No. 109-3, PageID.4052; Emails, ECF No. 114, PageID.4524. Although she believed she was applying for leave under the Family Medical Leave Act, she actually had filled out paperwork for a workers’ compensation claim. Laura Beny dep., ECF No. 109-3, PageID.4053; ECF No. 114, PageID.4524. The form email confirming receipt of Beny’s report indicated that her supervisor was copied on the email, but it does not include any specific information about the nature of Beny’s claim, and no supervisor appears on the email’s list of recipients. Emails, ECF No. 114, PageID.4524. On April 8, 2022, she clarified with the University’s Work Connections office that she had intended to apply for FMLA leave. Laura Beny dep., ECF No. 109-3, PageID.4053. Her leave was approved on April 15, 2022 for the period between February 15, 2022 and May 15, 2022. Emails, ECF No. 114, PageID.4520-21. West believes he was made aware of the University’s approval of Beny’s leave around that date. Mark West dep., ECF No. 109-5, PageID.4118. E. Subsequent Events Beny filed a charge with the Equal Employment Opportunity Commission (EEOC) dated May 13, 2022, alleging discrimination and retaliation on the basis of race, gender, and disability. She received a right-to-sue letter from the EEOC on May 31, 2022. She reports that her doctor cleared her to return to work on May 16, 2022, but the defendants refused to let her teach a courseload until the Winter 2024 semester. West stated that he was apprehensive about adding her to the course schedule sooner because he was concerned that she would “abandon” her students again. Mark West dep., ECF No. 109-5, PageID.4125. On September 19, 2022, West told Beny via email that he was concerned about aspects of her classroom management, including tardiness - 14 - and absenteeism that preceded her 2022 departure from the classroom and directed her to attend five professional development seminars and provide a personal reflection about the contents. Laura Beny dep., ECF No. 109-3, PageID.4056. Beny did not complete this task until May of 2023. Ibid. On January 19, 2023, she submitted a follow-up EEOC complaint alleging that the additional requirements for a return to the classroom amounted to retaliation for her initial EEOC complaint. EEOC Compl., ECF No. 65-1. The parties informed the Court at oral argument that Beny returned to teaching a two-credit course in the 2024 winter term. F. Proceedings After receiving a right-to-sue letter, the plaintiff filed her complaint in this case on August 26, 2022. It since has been amended twice, after early motion practice dispensed with some of the theories of liability. See Beny v. Univ. of Michigan Bd. of Regents, No. 22-12021, 2023 WL 4409107 (E.D. Mich. July 7, 2023). The present operative pleading is the second amended complaint, which pleads claims under Title VII of the Civil Rights Act of 1968 and Michigan’s Elliott-Larsen Civil Rights Act (ELCRA) for sex and race discrimination (Counts I and II), retaliation in violation of the same statutes (Counts III and IV), and an Equal Pay Act claim against the University of Michigan (Count V). The Title VII claims are pleaded against the University of Michigan only, and the ELCRA claims are pleaded against defendant Mark West only. After the close of discovery, the defendants moved for summary judgment on all of the plaintiff’s claims. II. Discussion Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). When reviewing the motion record, “[t]he court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine ‘whether the evidence - 15 - presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.’” Alexander v. CareSource, 576 F.3d 551, 5558 (6th Cir. 2009) (quoting Anderson v. Liberty Lobby, Inc., , 251-52 (1986 . “The court need consider only the cited materials, but it may consider other materials in the record.” Fed. R. Civ. P. 56(c)(3). The party bringing the summary judgment motion must inform the court of the basis for its motion and identify portions of the record that demonstrate that no material facts are genuinely in dispute. Alexander, 576 F.3d at 558 (citing Mt. Lebanon Pers. Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002 . “Once that occurs, the party opposing the motion then may not ‘rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact’ but must make an affirmative showing with proper evidence in order to defeat the motion.” Ibid. (quoting Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989 . A. Discrimination Claims The defendants contend that Beny’s discrimination claims are not viable because most of the alleged adverse employment actions occurred outside the time frame covered by the statute of limitations. They do concede that the Third Notice of Disciplinary Action is not time-barred, but, pivoting, they argue that Beny cannot show discrimination based on that action because she cannot show any comparable white or male peer treated more favorably than she in similar circumstances. The defendants also maintain that they have established non-discriminatory reasons for disciplining her, which are not pretextual based on the undisputed facts. Beny responds that fact issues preclude summary judgment on several elements of her discrimination claims. She states that the defendants’ decision not to select her to teach in one of their summer programs and the March 2022 discipline constitute adverse employment actions. - 16 - She argues that she was treated differently from Professor Mathias Reimann, who is a white male alleged to have engaged in abusive conduct towards staff. She also maintains that the defendants’ rationale for her discipline was pretextual because the allegation that she abandoned her class is without factual basis since she was on a medical leave, no other professors have been disciplined by West, and no other professors have received a “threat assessment.” Discrimination and retaliation claims brought under Title VII and ELCRA are evaluated under the same standards. Rogers v. Henry Ford Health Sys., 897 F.3d 763, 771 (6th Cir. 2018); Radtke v. Everett, 442 Mich. 368, 381-82, 501 N.W.2d 155, 161-62 (1993) (holding that the ELCRA hostile work environment and retaliation analysis mirrors the analysis under Title VII for analogous claims); White v. Dep’t of Transp., 334 Mich. App. 98, 116, 964 N.W.2d 88, 97 (2020) (citing Rasheed v. Chrysler Corp., 445 Mich. 109, 123 n.20, 517 N.W.2d 19, 27 n.20 (1994 . Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., makes it “an unlawful employment practice for an employer . . . to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race . . . [or] sex . . . .” 42 U.S.C. § 2000e–2(a)(1). To prove race or sex discrimination under Title VII, the plaintiff must offer evidence that the defendant took adverse action against her and that race or sex was a motivating factor. Ondricko v. MGM Grand Detroit, LLC, 689 F.3d 642, 649 (6th Cir. 2012). These elements may be established by direct or circumstantial evidence. Johnson v. Kroger Co., 319 F.3d 858, 864-65 (6th Cir. 2003). In the absence of direct evidence of discrimination, as in this case, Title VII claims are subject to the familiar burden-shifting framework set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), as modified in Texas Department of Community Affairs v. Burdine, 450 U.S. 248 (1981). Under this framework, “the plaintiff must first submit evidence from which a - 17 - reasonable jury could conclude that he or she established a prima facie case of discrimination.” Blair v. Henry Filters, Inc., 505 F.3d 517, 524 (6th Cir. 2007), abrogated on other grounds by Gross v. FBL Fin. Servs., 557 U.S. 167 (2009). For a Title VII discrimination claim, a prima facie case consists of proof that (1) the plaintiff is a member of a protected group, (2) she suffered an adverse employment action, (3) she was qualified for the position, and (4) she was treated differently than similarly-situated employees that were not part of the protected group. Peeples v. City of Detroit, 891 F.3d 622, 634 (6th Cir. 2018). Once the plaintiff offers evidence sufficient to form a prima facie case, “[t]he defendant must then offer admissible evidence of a legitimate, nondiscriminatory reason for its action.” Blair, 505 F.3d at 524. If the defendant offers a legitimate motive, then “the plaintiff must identify evidence from which a reasonable jury could conclude that the proffered reason is actually a pretext for unlawful discrimination.” Ibid. The plaintiff may establish pretext by showing that the employer’s stated reason either (1) has no basis in fact, (2) was not the actual reason for the action, or (3) is insufficient to explain the employer’s action. White v. Baxter Healthcare Corp., 533 F.3d 381, 393 (6th Cir. 2008). 1. Prima Facie Case Although some of Beny’s complaints fall outside the period of limitations, she has alleged certain adverse actions, mentioned earlier, on a timely basis. She also has shown that she is a member of protected group and that she is qualified for the work and pay that was denied her. The thrust of the dispute over Beny’s prima facie case is directed at the fourth element’s requirement that the plaintiff identify similarly-situated employees who were treated better than she. For that, Beny points to Professor Matthew Reimann. Reimann is a white male who also is a tenured faculty member at the Law School. Beny has furnished evidence that he: allegedly mistreated his former administrative assistant, Linda Wielfaert, by, among other things pounding her desk, referring to - 18 - himself as her “master,” urging her to avoid gaining weight during her recovery from an injury, and calling another assistant an “idiot,” Linda Wielfaert dep., ECF No. 109, PageID.3865-71; allegedly using a rude tone in conversations with Rashida Douglas, the law school’s registrar, Kristina Daugirdas dep., ECF No. 111, PageID.4300; allegedly engaging in a “heated” discussion with Daugirdas when she met with him about his interactions with Douglas, id. at PageID.4300- 01; and allegedly telling two staff members who were working at a law school event, “It must be nice to get paid to sit and do nothing,” Emails, ECF No. 111, PageID.4256. Reimann was not similarly disciplined even though officials were aware of his conduct. Mark West dep., ECF No. 109-5, PageID.4153 (stating that he was aware that there was “some conflict” between Reimann and the administrative assistant but that the conflict “really [did not] rise to [his] level.”). The defendants’ response, if any, was limited until relatively recently. In a September 28, 2023 email, West stated that administrators should look to the human resources personnel for guidance and “draft something” for Reimann’s file based on the incidents. Emails, ECF No. 111, PageID.4256. Reimann was directed to apologize to the two staff members working the event who were insulted by his comment. Id. at PageID.4257-58. Beny also cites as comparators Professors Don Herzog, Carl Schneider, and Karima Bennoune. During the Fall 2022 semester, a student alleged that Herzog “asked how much money people would accept to experience racism,” slammed the door in his face, and refused to answer his questions. Emails, ECF No. 114, PageID.4572. The University’s equity office reported to West that they would “conduct an educational session” with Herzog. Ibid. The allegations regarding Schneider concern a claim that a grade he assigned a student in his Art Law course was the result of racial bias. Id. at PageID.4579-82. Administrators investigated the complaint, and Schneider agreed to amend the grade. Id. at PageID.4582. The complaint about Bennoune also - 19 - involved a student who believed her grade resulted from race, sex, and gender stereotyping. Id. at PageID.4587-89. In cases involving allegations of inconsistent levels of discipline, the Sixth Circuit has identified three factors to gauge similarity: the plaintiff and comparator (1) must share the same supervisor; (2) be subject to the same standards; and (3) have engaged in the same conduct “without such differentiating or mitigating circumstances that would distinguish their conduct or the employer’s treatment of them for it.” Ercegovich v. Goodyear Tire & Rubber Co., 154 F.3d 344, 352 (6th Cir. 1998). The circumstances of the two employees need not be identical, but they must be similar in “all of the relevant aspects.” Ibid. The underlying conduct need not be identical, but more severe sanctions imposed for more egregious conduct will defeat an inference of discrimination. Jackson v. VHS Detroit Receiving Hosp., Inc., 814 F.3d 769, 777 (6th Cir. 2016). Professor Reimann easily satisfies the requirements of an out-of-class comparator who was treated less severely than the plaintiff. His alleged conduct, composed mainly of haughty and egotistical behavior and harsh and disrespectful treatment of other University employees, is similarly severe to Beny’s. Allegations of abusive practices are serious matters in any workplace. Reimann was not similarly disciplined even though officials were aware of at least some of his conduct. Mark West dep., ECF No.109-5, PageID.4153 (acknowledging that he was aware that there was “some conflict” between Reimann and the administrative assistant but that the conflict “really [did not] rise to [his] level”). The defendants’ response, if any, was disproportionally anemic until relatively recently. In a September 28, 2023 email, West merely gave advice to consult with human resources and suggested that a note be placed Reimann’s file. Emails, ECF No. 111, PageID.4256. Later, Reimann was told to apologize to the two staff members who were insulted by his derogatory remark. Id. at PageID.4257-58. - 20 - The defendants argue that Beny’s conduct is distinct because her discipline was based on her abandonment of her course mid-semester and “retaliation” against students. But Beny’s FMLA leave was backdated by the University to February 15, 2022, the date she informed her class that she could no longer teach. Drawing all inferences in the plaintiff’s favor leads to the conclusion that Beny did not “abandon” her course but instead withdrew due to medical circumstances. That conduct, discussed in more detail below, likely was not a violation of any rules. And abusive conduct towards staff members is not so distinct from “retaliatory” conduct towards students. That incident to the side, the greater number of Beny’s misconduct incidents seems to have centered on her abuse of the faculty email list-serv and communications towards other staff and faculty members that was perceived as threatening. See, e.g., Third Notice of Discipline, ECF No. 96-17, PageID.2713 (“You phoned a faculty member to ask ‘what evil, Satanic motive drives you’ and texted ‘God will deal with you.’”). The defendants have failed to distinguish that conduct in severity from Reimann’s own conduct, which also persisted over time and involved harsh words to multiple recipients. The defendants insist that Beny’s conduct is distinguishable because her March 2022 discipline was her third formal discipline, but she disputes the factual basis and the appropriateness of the University’s response to each disciplinary event. And to credit such an argument would be to compound past misconduct by a comparator that may have gone unsanctioned for several years. See ECF No. 111, PageID.4252 (complaint about Reimann dated October 8, 2021). Schneider’s, Herzog’s, and Bennoune’s alleged misconduct must be viewed differently. Those events are not similar to Beny’s misbehavior. Schneider and Bennoune’s misconduct involved a single allegation each of racial or gender discrimination in grading, and the allegations against Herzog concern a charge of racial discrimination in the classroom setting. These incidents, - 21 - although deserving of institutional attention, do not match the type or number of allegations regarding Beny’s conducts in any relevant aspect. Nevertheless, because Beny has established that Reimann is a proper comparator who was treated more favorably, she has demonstrated a fact question as to this element of her prima facie case. 2. Defendants’ Non-discriminatory Response and Pretext The defendants justify the discipline imposed upon Beny by citing her abandonment of her classroom responsibilities and “problematic behavior” toward students and colleagues. Employee misconduct is a legitimate basis for an adverse employment action, and the Sixth Circuit has held that threatening statements constitute legitimate reasons for discipline or termination. Smith v. Leggett Wire Co., 220 F.3d 752, 759 (6th Cir. 2000). Beny maintains that these reasons are pretextual. To win that argument on summary judgment she need only provide evidence “that would allow a jury to find that her employer’s stated reason ‘is unworthy of credence.’” Ames v. Ohio Dep’t of Youth Servs., 87 F.4th 822, 826 (6th Cir. 2023) (quoting Reeves v. Sanderson Plumbing Prod., Inc., 530 U.S. 133, 147 (2000 . Here, however, she comes up short. Starting with her class abandonment, Beny insists that this charge has no evidentiary support because she received FMLA leave, made retroactive to the date she ceased teaching her course. The defendants respond that the post-hoc leave designation does not suggest Beny’s discipline lacked a factual basis and does not excuse her conduct. And they point out that Beny did not seek FMLA leave until after the discipline was announced. The relevant administrators testified repeatedly that they only learned of Beny’s receipt of FMLA approved leave when it was authorized on April 15, 2022, more than two weeks after they had disciplined her. Kristina - 22 - Daugirdas dep., ECF No. 111, PageID.4310; Mark West dep., ECF No. 109-5, PageID.4118; Laura Beny dep., ECF No. 109-3, PageID.4052 (indicating that she received formal approval for her FMLA leave on April 15, 2022). Moreover, none of Beny’s many emails to administrators in February suggested that she was seeking a medical leave, and her emails to the course and her doctoral advisee similarly do not indicate a medical justification for leaving. During oral argument and in their brief, the defendants cited Halpern v. Wake Forest University Health Sciences, 669 F.3d 454 (4th Cir. 2012), for the proposition that “the law does not require [the defendants] to ignore misconduct that has occurred because [the plaintiff] subsequently asserts it was a result of a disability.” Id. at 465. Halpern, an ADA and Rehabilitation Act case involving a student, is not entirely on point but does evoke important considerations that bolster the defendants’ argument against pretext. In Halpern, a former medical student who had exhibited unprofessional behavior on multiple occasions alleged that his dismissal from the medical school violated the Rehabilitation Act and Americans with Disabilities Act because the school failed to provide reasonable accommodations for his mental health disabilities. Id. at 459-60. The district court granted summary judgment in favor for Wake Forest on the ground that Halpern was not “otherwise qualified” as a medical student because demonstrating professionalism was a fundamental tenet of the program. Ibid. The court also held that Halpern’s proposed accommodation — which involved obtaining therapeutic treatment, participating in a distressed physicians program, and continuing as a student on strict probation — was unreasonable “because of the uncertainty of the duration and the prospects for success of such behavior modification efforts.” Id. at 460. The Fourth Circuit affirmed, holding that Halpern failed to demonstrate the existence of a reasonable accommodation that would have permitted him to satisfy the school’s professionalism requirement. Rejecting - 23 - Halpern’s proposed accommodations, the court reasoned in part that the request itself was untimely because it came long after his unprofessional acts. Id. at 465. By the time Halpern had requested a remediation plan, “he had already engaged in numerous unprofessional acts that warranted his dismissal, including acting abusively towards staff, multiple unexcused absences, repeated failure to meet deadlines, and tardiness.” Ibid. His request therefore was not for an accommodation “but for ‘a second chance to better control [his] treatable medical condition.’” Ibid. (quoting Hill v. Kan. City Area Transp. Auth., 181 F.3d 891, 894 (8th Cir. 1999 . The court continued: A school, if informed that a student has a disability with behavioral manifestations, may be obligated to make accommodations to help the student avoid engaging in misconduct. But, the law does not require the school to ignore misconduct that has occurred because the student subsequently asserts it was the result of a disability. Halpern’s argument that he was owed an opportunity to continue at the Medical School and correct his misbehavior is, therefore, without merit. Ibid. The defendants here quote the second sentence of this passage. Halpern, however, is not on all fours with this case. The University actually did approve Beny’s FMLA leave request, with an effective date that matched the date she “abandoned” her course. Far from ignoring the alleged abandonment, the University appears to have validated Beny’s decision to cease teaching by granting the retroactive FMLA leave. That tends to undermine the defendants’ continued reliance on Beny’s purported abandonment of her class to support of their prospective discipline. However, the honest belief rule fortifies the defendants’ no-pretext argument. “When an employer reasonably and honestly relies on particularized facts in making an employment decision, it is entitled to summary judgment on pretext even if its conclusion is later shown to be ‘mistaken, foolish, trivial, or baseless.’” Chen v. Dow Chemical Co., 580 F.3d 394, 401 (6th Cir. 2009) (quoting Clay v. United Parcel Serv., Inc., 501 F.3d 695, 713-15 (6th Cir. 2007 . An - 24 - employer’s belief in the nondiscriminatory reason for its action is “honest” when “‘the employer made a reasonably informed and considered decision before taking’ the complained-of action.” Michael v. Caterpillar Fin. Servs. Corp., 496 F.3d 584, 598-99 (6th Cir. 2007) (quoting Smith v. Chrysler Corp., 155 F.3d 799, 807 (6th Cir. 1998 . The employer must identify “particularized facts upon which it reasonably relied.” Tingle v. Arbors at Hilliard, 692 F.3d 523, 531 (6th Cir. 2012). The employer’s investigation need not be “optimal,” and it does not have to show that “it left no stone unturned.” Smith, 155 F.3d at 807. The Sixth Circuit has explained that when facing summary judgment, “the ‘plaintiff must produce sufficient evidence from which the jury could reasonably reject [the defendants’] explanation and infer that the defendants . . . did not honestly believe in the proffered nondiscriminatory reason for its adverse employment action.’” Tingle, 692 F.3d at 531 (quoting Braithwaite v. Timken Co., 258 F.3d 488, 493-94 (6th Cir. 2001 . An unadorned argument that “the employer’s proffered reason has no basis in fact is insufficient to call an employer’s honest belief into question, and fails to create a genuine issue of material fact.” Ibid. (quoting Seeger v. Cincinnati Bell Tel. Co., 681 F.3d 274, 285 (6th Cir. 2012 . Here, the defendants’ honest belief in their reasons for disciplining Beny finds ample support in the record. During oral argument, defense counsel agreed with the Court that their proffered legitimate reasons for Beny’s discipline were her “abandonment” of the classroom, retaliation against students who raised concerns about her course, and her troubling communications with other faculty and staff members. These reasons were supported by an adequate investigation. West, Daugirdas, Wing, and Sascha Matish, a university HR employee, met with Beny and her attorney on February 25, 2022 to discuss her decision to leave the classroom. Laura Beny dep., ECF No. 109-3, PageID.4040; Emails, ECF No. 96-10, PageID.2681 - 25 - (discussing topics of meeting). At the time of the meeting, Beny had not requested any form of medical leave, and the record does not suggest that she indicated during the meeting any desire to take leave. Instead, Beny first formally sought leave two days later on February 27, when she filed an online claim form with the University’s Work Connections office, citing work-related psychological injury. Laura Beny dep., ECF No. 109-3, PageID.4052; Emails, ECF No. 114, PageID.4524. Although Beny believed she was applying for leave under the Family Medical Leave Act, she actually had completed paperwork for a workers’ compensation claim. Laura Beny dep., ECF No. 109-3, at PageID.4053; ECF No. 114, PageID.4524. And there is little indication that anyone in the Law School became aware of her request for leave. The form email confirming receipt of Beny’s report indicated that her supervisor was copied on the email, but it does not include any specific information about the nature of Beny’s claim, and no supervisor appears on the email’s list of recipients. Emails, ECF No. 114, PageID.4524. On April 8, 2022, she clarified with the Work Connections office that she had intended to apply for FMLA leave. Id. at PageID.4521-22. Her leave was approved a week later on April 15, 2022, covering the period between February 15, 2022 and May 15, 2022. Id. at PageID.4520-21. West and Daugirdas both testified that they were not made aware of the FMLA decision until then, nearly two weeks after they had issued Beny her third disciplinary letter. Mark West dep., ECF No. 109-5, PageID.4118; Kristina Daugirdas dep., ECF No. ECF No. 111, PageID.4310. There is, therefore, little, if any, record evidence suggesting that the relevant administrators were aware of Beny’s intention to take medical leave during their investigation into her conduct. Rather, the administrators appear to have conducted a thorough review of Beny’s actions, as outlined in the 15-page March 31, 2022 disciplinary letter, and even spoke with Beny herself. Furthermore, a large portion of the conduct at issue was directed at the defendants personally, - 26 - obviating some of the need for an extensive investigation. See Tingle, 692 F.3d at 532 (finding sufficient an investigation that included a manager’s personal knowledge of the events in question). Beny’s argument regarding the retroactive nature of her leave is insufficient to suggest that the defendants “did not ‘honestly believe’ in the proffered nondiscriminatory reason[s]” for her discipline. Braithwaite, 258 F.3d at 493-94. At most, it raises questions about the “abandonment” justification because the medical leave excused her workplace attendance. But even then, at the time of the investigation and decision, West and other administrators were unaware of Beny’s request for leave. Moreover, administrators cited more than her decision to decline teaching her Enterprise Organizations course as justification for her March 2022 discipline. Those additional instances of misconduct are cataloged above and include non-attendance at required meetings, retaliating against students who filed complaints about her class conduct, and making multiple threatening and harassing statements to various faculty and staff. See ECF No. 96-17, PageID.2706-15. Beny attempts to rebut some of these grounds, arguing in particular that her discussion of the anonymous complaint with students was not retaliatory. But Title VII claims are “not a vehicle for litigating the accuracy of the employer’s grounds for [discipline].” Tingle, 692 F.3d at 530. And her argument does nothing to undermine the defendants’ honest belief in these other cited reasons for the discipline. The fact that these incidents occurred during a period later determined to be a medical leave is irrelevant. The FMLA does not operate to erase conduct that has occurred because the law “simply does not force an employer to retain an employee on FMLA leave when the employer would not have retained the employee had the employee not been on FMLA leave.” Throneberry v. McGehee Desha Cnty. Hosp., 403 F.3d 972, 977 (8th Cir. 2005). And it is well- - 27 - understood that employees may be disciplined for misconduct attributed to a disability. See Yarberry v. Gregg Appliances, Inc., 625 F. App’x 729, 739-40 (6th Cir. 2015) (“E.E.O.C. 2008 Guidance and Sixth Circuit case law suggest that where there has been employee misconduct — including nonviolent disruptive misconduct — the employer may terminate the employee for that behavior, even if it is related to his disability.”); see also Hrdlicka v. Gen. Motors LLC, No. 20- 11015, 2022 WL 989339, at *18 (E.D. Mich. Mar. 31, 2022), aff’d, 59 F.4th 791 (6th Cir. 2023), and aff’d, 63 F.4th 555 (6th Cir. 2023) (collecting cases). The retroactive nature of Beny’s leave may excuse her from workplace responsibilities during the months of her illness, but it does not excuse her from acts of misconduct that occurred during that period, and it does not undermine the defendants’ administrator’s honest belief in the need to issue disciplinary measures. Beny disputes the defendants’ conclusions regarding her alleged retaliation against her students and the concerning communications with faculty and staff members, but “arguing about the accuracy of the employer’s assessment is a distraction because the question is not whether the employer’s reasons for a decision are right but whether the employer’s description of its reasons is honest.” Smith v. Chrysler Corp., 155 F.3d 799, 806 (6th Cir. 1998) (citation and internal quotation marks omitted). Moreover, “a case alleging unlawful [discrimination] is not a vehicle for litigating the accuracy of the employer’s grounds for [discipline].” Tingle, 692 F.3d at 530. The defendants conducted a thorough investigation into Beny’s handling of her course and her numerous inappropriate communications to faculty and staff members, resulting in a discipline letter that cited three grounds. The defendants’ later decision to grant Beny retroactive FMLA leave does not shield her from discipline for misconduct that occurred, and it is insufficient to call into question the defendants’ honest belief in their explanation of the disciplinary action. - 28 - Beny also takes issue with a statement in the discipline letter that “[t]he concern that you might have access to weapons is a frequent topic of conversation among faculty members,” Third Notice of Discipline, ECF No. 96-17, PageID.2714, and refocuses her argument on establishing that the defendants’ decision to conduct a threat assessment of her was unreasonable. She also accuses defendant West of falsely testifying that he did not initiate the 2022 threat assessment when the report lists him as the complainant. Perhaps these arguments are attempts to undermine the defendants’ honest belief. However, these arguments are insufficient to show that the administration’s disciplinary actions lacked a factual basis. West’s deposition testimony about the threat assessment did not contradict the police report. West stated that he was confident that he “was involved in the conversation and the decision” to conduct a threat assessment but that he did not “have a specific recollection of . . . me personally asking for the threat assessment to be done.” Mark West dep., ECF No. 109-5, PageID.4131. Even if there were reason to disbelieve West, the threat assessment itself is not a cited reason for the discipline. And, in any event, the threat assessment itself actually is some evidence favoring the defendants’ honest belief about the gravity of the situation. After all, West testified that he was motivated to request it after he received an email from Professor Alicia Davis, another Black woman faculty member who was the recipient of Beny’s “God will deal with you” communications, which indicated that she did not feel safe. Mark West dep., ECF No. 109-5, PageID.4133; ECF No. 111, PageID.4268. The record reflects that Davis emailed West and Daugirdas on February 24, before West had requested the threat assessment, stating that she felt threatened by Beny’s phone call and asking what actions the administration would take. Emails, ECF No. 96-25, PageID.2728. West also was encouraged to request a threat assessment by Professor Barbara McQuade after she reviewed Beny’s emails to - 29 - the faculty. Barbara McQuade dep., ECF No. 114, PageID.4531-32. Despite Beny’s protests, there is ample evidence that administrators honestly believed a threat assessment was necessary. Instead, Beny’s arguments obscure the reality that she has provided no rebuttal to several bases for the discipline, including the charge that she failed to attend faculty and committee meetings. In fact, she admitted during her deposition that she sent the troubling emails and text messages listed in the disciplinary letter. ECF No. 109-3, PageID.4040-41. She maintains that her statement to one faculty member that “God will deal with you” was not a threat, but she admitted that she accused the faculty member of “undermining [her] on every opportunity that she got” and it certainly was interpreted as a threatening communication by Davis. Id. at 4071. She is hard-pressed to argue that the University’s discipline had no factual basis or that “the employer’s allegations never happened.” Pelcha v. MW Bancorp, Inc., 988 F.3d 318, 326 (6th Cir. 2021). Beny has not developed any other grounds for finding pretext in the defendants’ proffered nondiscriminatory reasons for imposing the discipline that they meted out. Given the scale of Beny’s undisputed disruptive and unprofessional behaviors, and the defendants’ proportionate responses, no reasonable jury could find that any adverse action was motivated by illegal discrimination on the basis of race or sex. The defendants are entitled to a judgment as a matter of law on the discrimination claims. B. Retaliation Claims The defendants argue that the retaliation claims must be dismissed because the evidence conclusively shows that Beny cannot make out a prima facie case of retaliation. The defendants reason that Beny’s serial complaints of discrimination did not amount to reasonable opposition to an unlawful employment practice and therefore cannot constitute protected activity. They also say that the complaints were substantively unreasonable and inappropriately made. Alternatively, the - 30 - defendants contend that Beny’s own misconduct, mainly her “abandonment” of her spring 2022 course, was the but-for cause of her March 2022 discipline and furnished a legitimate reason for that action. They also point out that Beny has suffered few, if any, adverse consequences despite her history of complaints, which demonstrates that the defendants retain employees who make complaints and do not retaliate against them. Beny counters that fact issues exist on all the elements of her retaliation claims. Adverse action can be found, she says, in the decision not to select her to teach in one of their summer programs and in the March 2022 discipline. She maintains that 1) it is undisputed that the defendants knew of her prior race and gender-based complaints, 2) her pay freeze amounted to an adverse employment action, and 3) there is a causal connection between her complaints and the adverse employment action because of the two events occurred close in time and no other professors ever received discipline. She argues that the defendants’ explanations for the adverse action were pretextual, again, because she did not abandon her class but was on a medical leave. Title VII prohibits an employer from retaliating against an employee who has opposed an “unlawful employment practice.” 42 U.S.C. § 2000e–3(a). Retaliation similarly is prohibited by ELCRA. Rogers, 897 F.3d at 771; Radtke, 442 Mich. at 381-82, 501 N.W.2d at 161-62. To establish a prima facie case of retaliation under Title VII, the plaintiff must demonstrate that: “(1) [s]he engaged in activity protected by Title VII; (2) h[er] exercise of such protected activity was known by the defendant; (3) thereafter, the defendant took an action that was ‘materially adverse’ to the plaintiff; and (4) a causal connection existed between the protected activity and the materially adverse action.” Laster v. City of Kalamazoo, 746 F.3d 714, 730 (6th Cir. 2014) (quoting Jones v. Johanns, 264 F. App’x 463, 466 (6th Cir. 2007 . The plaintiff’s burden of establishing a materially adverse employment action is “less onerous in the retaliation context than - 31 - in the anti-discrimination context,” because a lower standard for material adversity applies. Id. at 731 (quoting Michael v. Caterpillar Fin. Servs. Corp., 496 F.3d 584, 594 (6th Cir. 2007 . For retaliation to be actionable, a plaintiff “must show that a reasonable employee would have found the challenged action materially adverse, which in this context means it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, 67-68 (2006) (quotations omitted). And the plaintiff must allege at least some facts that support the inference of a causal connection between the adverse action and the protected conduct. Laster, 746 F.3d at 730-31. After establishing a prima facie case, “the burden of production of evidence shifts to the employer to ‘articulate some legitimate, nondiscriminatory reason’ for its actions.” Hunter v. Sec’y of U.S. Army, 565 F.3d 986, 996 (6th Cir. 2009) (quoting Canitia v. Yellow Freight Sys., 903 F.2d 1064, 1066 (6th Cir. 1990 . “The plaintiff, who bears the burden of persuasion throughout the entire process, then must demonstrate ‘that the proffered reason was not the true reason for the employment decision.’” Canitia, 903 F.2d at 1066 (quoting Tex. Dep’t of Cmty. Affairs v. Burdine, 450 U.S. 248, 256 (1981 . Although the second amended complaint does not explicitly say so, it could be read to advance two separate theories. The first is that the defendants retaliated against Beny by issuing the March 31, 2022 discipline letter. The second is that the defendants retaliated against her again by refusing to permit her to return to her full duties, including teaching students, after she filed her May 2022 charge with the EEOC. The success of the first theory largely depends on the pretext arguments laid out more fully in the discussion of Beny’s discrimination claim, above. The second theory is not well-briefed, has had little factual development, will not defeat summary judgment, and need not be discussed further. - 32 - 1. Protected Activity The defendants maintain that Beny’s “serial and vague” reports of discrimination do not qualify as protected activity. They make an extended argument on this point, but it misses the obvious: regardless of whether all of her complaints across her time at the University were protected — she certainly made many complaints — Beny’s decision to initiate an action with the University’s ECRT office in November of 2021 clearly was protected activity. Protected activities include filing an EEOC charge and opposing discriminatory practices by making complaints to management. See 42 U.S.C. § 2000e-3(a); EEOC v. New Breed Logistics, 783 F.3d 1057, 1067 (6th Cir. 2015). Courts in this circuit consistently find that a complaint to a university internal office handling equity issues constitutes protected activity under Title VII. See, e.g., Arthur v. Michigan State Univ., No. 1:19-cv-484, 2022 WL 1616947, at *4-5 (W.D. Mich. May 23, 2022); Blessing v. Ohio Univ., No. 2:09-0762, 2011 WL 6076327, at *18-19 (S.D. Ohio Dec. 6, 2011). This Court held as much when adjudicating the motion to dismiss, see Beny, 2023 WL 4409107, at *10, and the defendants furnish no reason for the Court to revisit this conclusion now. The defendants argue that Beny’s complaint to the ECRT did not amount to a complaint about an unlawful employment practice because it focused on the operation of the MACL summer program. That does not matter either, because Beny has introduced evidence that her 2022 complaint covered a broad range of conduct by University officials, even though the complaint was initiated because of her belief that she was excluded from the summer program. In her interviews with ECRT, Beny raised the email exchanges with West. Laura Beny dep., ECF No. 109-3, PageID.3993. And a transcript of her December 2022 interview with the office includes discussion of her dissatisfaction with the prior disciplinary actions initiated against her. Transcript, ECF No. 113, PageID.4406-08, 4412. And the defendants do not address the fact that Beny made - 33 - a ECRT report on February 13, 2022, involving allegations about the defendants’ interference with her Enterprise Organizations course. Laura Beny dep., ECF No. 109-3, PageID.4017. And she made a complaint with the EEOC in May 2022, and received a right to sue letter shortly thereafter. Id. at PageID.3999. These were not “vague charge[s] of discrimination.” Yazdian v. ConMed Endoscopic Techs., Inc., 793 F.3d 634, 645 (6th Cir. 2015). Nevertheless, the defendants maintain that her complaints were either substantively unreasonable or inappropriately made, and they attempt to undermine their factual bases. But these arguments raise fact questions. And to the extent that, as a matter of law, some of Beny’s conduct, such as her numerous emails to the faculty email list, could be so inappropriate or substantively unreasonable that they are not protected activity, see Johnson v. Univ. of Cincinnati, 215 F.3d 561, 580 (6th Cir. 2000), the defendants cannot argue that Beny’s filing of an ECRT complaint was inappropriate. The plaintiff has introduced sufficient evidence at this stage for a jury to conclude that she engaged in protected activity. 2. Defendants’ Knowledge Direct evidence of knowledge by the decision-maker of the protected activity is not required. “[A] plaintiff may survive summary judgment by producing circumstantial evidence to establish this element of her claim.” Mulhall v. Ashcroft, 287 F.3d 543, 552-53 (6th Cir. 2002). The defendants do not appear to contest knowledge of the plaintiff’s protected activity. Nor could they. The March 2022 Notice of Disciplinary action explicitly recognizes Beny’s view that she had been discriminated against. ECF No. 96-17, PageID.2715; see also Laura Beny dep., ECF No. 109-3, PageID.3991 (“Between January and February of 2022, I informed Kristina Daugirdas, Michele Frasier Wing, and Mark West that I was filing — I was opening Civil Rights complaints again on the basis of race and gender.”). There is evidence in the record from which a jury could find the defendants knew of Beny’s ECRT complaint. - 34 - 3. Adverse Action The defendants also agree that Beny sufficiently established that her disciplinary action constituted an adverse action. In addition, a refusal to permit Beny to return to teaching may constitute adverse action. In the retaliation context, a plaintiff may demonstrate adverse action if “a reasonable employee would have found the challenged action materially adverse, which in this context means it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” White, 548 U.S. at 68 (cleaned up). The reassignment of duties can be “materially adverse.” Id. at 71. A jury plausibly could find that the defendants’ decision to delay Beny’s return to the classroom — in the context of academia — is an adverse action. 4. Causal Connection To establish a causal connection, a plaintiff must produce evidence sufficient to support an inference that an employer took an adverse action because of the plaintiff’s protected activity. Bledsoe v. Tennessee Valley Auth. Bd. of Dirs., 42 F.4th 568, 588 (6th Cir. 2022). This element “requires proof of so-called ‘but-for’ causation, meaning that the plaintiff must furnish evidence that ‘the unlawful retaliation would not have occurred in the absence of the alleged wrongful action or actions of the employer.’” Mys v. Michigan Dep’t of State Police, 886 F.3d 591, 600 (6th Cir. 2018) (quoting Univ. of Tex. Sw. Med. Ctr. v. Nassar, 570 U.S. 338, 360 (2013 . The Sixth Circuit has recognized that a plaintiff may be able to survive summary judgment based on a showing of temporal proximity between the adverse action and the protected activity alone. Bledsoe, 42 F.4th at 588 (citing Mickey v. Zeidler Tool & Die Co., 516 F.3d 516, 525 (6th Cir. 2008 . The defendants contend that Beny’s conduct after her complaints were made was the intervening cause of her discipline. Relying on Mittman v. City of Toledo, 156 F.3d 1231 (6th Cir. 1998) (table), the defendants also argue that Beny’s temporal proximity evidence is insufficient to establish causation because she has had a long history of filing employment related charges - 35 - without consequence. In response, Beny reiterates that the timing between her November 2021 and February 2022 ECRT complaints was critically proximate to her March 2022 discipline and argues again that the defendants have not taken action against white and male comparators. The evidence regarding Beny’s comparators, discussed above, and the temporal proximity between her ECRT complaints and discipline does go some way to creating fact questions on her retaliation claim, but it does not address fully the defendants’ arguments. In Mittman, the court of appeals discussed a plaintiff who, by his counsel’s own admission, had been a “contentious” employee during his tenure for the numerous grievances he had filed. 156 F.3d at *1. He complained that he had been retaliated against for his more recent complaints. Id. at *2. The court of appeals ultimately affirmed the district court’s determination that he failed to establish a causal nexus, in part because “temporal proximity alone will not support an inference in the face of compelling evidence that the employer supported engaging in protected activity.” Id. at *4 (internal quotations omitted). The court of appeals viewed as significant Mittman’s employer’s long tolerance of his numerous employment related claims. Ibid. Although Mittman is an unpublished case, the court drew its holding from Moon v. Transport Drives, Inc., 836 F.2d 226, 229 (6th Cir. 1987), which does have precedential authority. The defendants here urge a similar approach, pointing out that Beny also has a long history of complaints that they have tolerated. They point to West’s testimony that he welcomed Beny’s attempts to raise issues of discrimination at the law school. Mark West dep., ECF No. 109-5, PageID.4187 (“I am grateful that she raised the issues. I think we have points of agreement on diversity, equity, inclusion issues in the law school . . . .”). But this statement, standing alone, is insufficient to be considered “compelling evidence” of the University’s willingness for employees to engage in protected activity. Moreover, Beny’s 2021 and 2022 complaints appear to have taken a more direct aim at West and other Law - 36 - School administrators than her past complaints, perhaps creating an additional motive for retaliation. However, the defendants’ intervening cause argument merits closer scrutiny. This is because “an intervening legitimate reason” for discipline “dispels an inference of retaliation based on temporal proximity.” Wasek v. Arrow Energy Servs., 682 F.3d 463, 472 (6th Cir. 2012). This argument derives some initial support from the scope of the misconduct cited in the Third Notice of Discipline, some of which Beny admits. But two problems stand out. First, drawing all reasonable inferences in Beny’s favor, the timing of the discipline creates some grounds for suspicion. On February 8, 2022, Beny engaged in an email exchange with Wing complaining that she had “rubber stamped” West’s prior disciplinary actions against her and “never once disputed his false claims” about her. ECF No. 113, PageID.4434. Wing responded that she “never witnessed any false claims” and “certainly would have reported” had she observed any. Ibid. The next day, Daugirdas, copying Wing, emailed Beny to set up a meeting regarding the anonymous student complaint in her Enterprise Organizations course. ECF No. 96-10, PageID.2682. When Beny demurred about meeting, Daugirdas emphasized that the student concerns were “urgen[t].” Id. at PageID.2681. However, Wing and Daugirdas had been aware of the student complaint since January 31. ECF No. 96-9, PageID.2676. A reasonable jury could view with suspicion this timing and interpret it as evidence of retaliatory motive by University officials. To be clear, the student complaint is not the cited reason for Beny’s discipline, but Beny’s response to it is, including her alleged “retaliation” against the students. Second, unlike many of the other cases accepting intervening cause arguments, Beny has provided at least some additional circumstantial evidence that supports a finding of causation. Wielfaert, Beny’s academic assistant, testified that she was directed by her supervisor to report “anything out of the ordinary” during the Fall of 2021. Linda - 37 - Wielfaert dep., ECF No. 109, PageID.3862-63. And in the 2018 threat assessment, defendant West is quoted as saying that Beny “will go right to the line of inappropriate behavior but never goes over it which keeps her from getting reported to Human Resources (HR).” ECF No. 109-2, PageID.3965. That evidence supports an inference that administrators were looking for an opportunity to discipline her. Beny makes much of the defendants’ decision to discipline her while she was on medical leave, but the discipline was at least partially attributable to conduct that occurred before the February 15 approved beginning of the leave and she has pleaded no FMLA claims. Beny has produced sufficient evidence to create a jury question on the issue of causation. 5. Pretext Beny’s retaliation claims once again falter at the pretext stage though. The pretext analysis on a Title VII (and ECLRA) retaliation claim mirrors that on a Title VII discrimination claim. Michael, 496 F.3d at 593. The defendants justify their March 2022 disciplinary action on Beny’s decision to refuse to teach her course and her many emails to faculty and staff members. ECF No. 96, PageID.2504. The plaintiff’s response is anemic and offers little more than her pretext arguments for her discrimination claim, which are unpersuasive. She emphasizes again that the discipline could be viewed as pretextual because it cited principally her decision to “abandon” her course when she was, in fact, on a medical leave. These arguments cannot carry the day. A case could be made, based on several factors cited in the causation section above, that University officials kept a close eye on Beny’s conduct. But any extra attention should not have been surprising in the context of Beny’s past discipline. And a reasonable jury could not disregard the defendants’ explanation for disciplining Beny following their meeting — during which there is no evidence she asserted a need for medical (or any other kind of) leave — and her continued threatening, disruptive, and unprofessional communications to faculty and staff. Because Beny - 38 - has failed to meet her burden of showing the defendants’ explanation was pretextual, the defendants are entitled to summary judgment on Beny’s retaliation claims. C. Equal Pay Act Claim The defendants contend that Beny’s Equal Pay Act claim is meritless because she did not perform the same work as her proposed comparator after she refused to teach her course, and there is no evidence that Beny’s sex played a role in any differential pay. Beny responds that she now makes approximately $50,000 per year less than her identified comparator, and she states that the defendants have not met their burden of showing that the pay gap was caused by a factor besides her sex when the disciplinary action causing the pay gap was based on discrimination and retaliation. The Equal Pay Act prohibits employers from paying an employee at a rate less than that paid to an employee of the opposite sex for performing equal work. 29 U.S.C. § 206(d)(1). Under the Act, pay differentials are allowed when based on “(i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex . . . .” Ibid. To establish a prima facie case of wage discrimination under the EPA, the plaintiff must show that an employer pays different wages to employees of opposite sexes “for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.” Corning Glass Works v. Brennan, 417 U.S. 188, 195 (1974) (quoting 29 U.S.C. § 206(d)(1 . A plaintiff can establish a violation of the Act if she shows that the defendant paid her less compensation — however measured — than male counterparts for the same work. No showing of discriminatory intent is required. Schleicher v. Preferred Sols., Inc., 831 F.3d 746, 752 (6th Cir. 2016). - 39 - After the plaintiff establishes a prima facie case, “the defendant must ‘prove’ that the wage differential is justified under one of the four affirmative defenses set forth under section 206(d)(1) listed above. Buntin v. Breathitt Cnty. Bd. of Educ., 134 F.3d 796, 799 (6th Cir. 1998). Defendants bear the burden of production and persuasion on these affirmative defenses. Schleicher, 831 F.3d at 753. The fourth exception, the catch-all, relied upon by the defendants here, “permits a ‘factor other than sex’ to be an affirmative defense only if, ‘at a minimum, [it] was adopted for a legitimate business reason.’” Briggs v. Univ. of Cincinnati, 11 F.4th 498, 508 (6th Cir. 2021) (quoting Beck- Wilson v. Principi, 441 F.3d 353, 365 (6th Cir. 2006 . If a defendant meets its burden of showing an affirmative defense, the plaintiff, at the third stage, “must produce evidence creating a triable issue of fact as to whether the defendant’s proffered explanation was pretextual.” Briggs, 11 F.4th at 508. The parties dispute whether the plaintiff has performed the same work as her proposed comparator and whether the defendants’ have met their burden of showing that any disparity was motivated by a factor other than sex. The plaintiff proposes as a comparator Professor John Pottow, a member of her faculty cohort whose pay should have moved in “lock-step” with her own. The defendants concede that Beny now has a disparity in pay with Pottow, ECF No. 96, PageID.2511, but they argue that Beny did not perform the same work as he because she “abandoned” her course, and they note that the disparity resulted as a consequence of Beny’s discipline and therefore is legitimate. The former argument is belied by the defendants’ own decision to retroactively grant the plaintiff a medical leave to the date they say she effectively ceased performing the same work as her comparator. But the latter argument, which goes to pretext, favors the defendants. - 40 - The Sixth Circuit has explained that defendants are entitled to summary judgment “only if the record shows that [they] established the [‘factor other than sex’] defense so clearly that no rational jury could have found to the contrary.” Briggs, 11 F.4th at 508 (quoting Schleicher, 831 F.3d at 753). Such is the case here. An employer’s decision to freeze an employee’s pay for disciplinary reasons is a legitimate explanation for a pay differential. See Allender v. Univ. of Portland, 689 F. Supp. 2d 1279, 1287 (D. Or. 2010). The plaintiff does not argue otherwise. For the reasons explained above, Beny has failed to establish that the defendants’ reasons for disciplining her were pretext for a sex or race-based motives. The defendants therefore were entitled to pay her differently. They are entitled to a judgment as a matter of law on this claim. III. Conclusion The undisputed facts in this record show that the defendants took disciplinary action against the plaintiff because of her disruptive and unprofessional conduct, and not because of her race or sex or because she engaged in protected activity. They delayed her pay increases based on a factor other than sex. The defendants are entitled to a judgment as a matter of law on all of Beny’s remaining claims. The parties also filed motions challenging each other’s expert witnesses. Because the case will not proceed to trial, the Court will not address those motions, and they will be dismissed as moot. Accordingly, it is ORDERED that the defendants’ motion to for summary judgment (ECF No. 96) is GRANTED. It is further ORDERED that the case is DISMISSED WITH PREJUDICE. - 41 - It is further ORDERED that the motions to exclude the parties’ respective expert witnesses (ECF Nos. 97, 98) are DISMISSED as moot. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 17, 2024 - 42 -

=== OPINION AND ORDER DENYING DEFENDANT’S MOTION TO DISMISS, GRANTING PLAINTIFF’S MOTION FOR JUDGMENT ON THE PLEADINGS, AND REMANDING CASE TO THE DEPARTMENT OF LABOR ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION WILLIAM LEHMAN, v. Plaintiff, U.S. DEPARTMENT OF LABOR and JULIE A. SU, ________________________________________/ Defendants. Case Number 23-11585 Honorable David M. Lawson OPINION AND ORDER DENYING DEFENDANT’S MOTION TO DISMISS, GRANTING PLAINTIFF’S MOTION FOR JUDGMENT ON THE PLEADINGS, AND REMANDING CASE TO THE DEPARTMENT OF LABOR Following a consent decree entered in the United States government’s case against the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW), the union membership approved a referendum calling for the direct election of certain union officers, which the Court approved on January 31, 2022. The consent decree also called for the appointment of a Monitor who was charged with several duties. See United States v. UAW, Case No. 20-13293 (E.D. Mich.) (ECF No. 10). Among them was monitoring the election of union officers. The election was held, and the results ultimately were certified on June 16, 2023. Plaintiff William Lehman, a union member and unsuccessful candidate for the office of International President, lodged several protests with the Monitor both before and after the election, some formally and others as email messages. Post election, the Monitor observed that 30 of Lehman’s 34 protests were untimely, but he addressed and rejected each of them on their merits. Lehman took his grievances to the Department of Labor (DOL), which likewise rejected them. However, the DOL only addressed four of the protests on the merits; it rejected the rest of them on the basis of untimeliness, despite the Monitor’s merits determinations. Lehman then filed the present lawsuit with this Court asking that the DOL’s decision be vacated, and the case remanded for a more fulsome review of the protests. The plaintiff filed a motion for judgment on the pleadings, and the DOL moved to dismiss. The Court heard oral argument in open court on December 19, 2023. The government has not demonstrated that the Secretary of Labor’s reasoning was sound when it failed to address the merits of the 30 protests and deemed them untimely, and the dismissal of those protests was arbitrary and capricious. The government’s motion to dismiss will be denied, the plaintiff’s motion for judgment on the pleadings will be granted in part, and the matter will be remanded to the DOL for production of supplemental reasons for its actions. I. This is not the first time William Lehman has sought relief from this Court to address perceived Union election faults and shortcomings. In November 2022, while nationwide union elections were underway, he filed a complaint and motion for preliminary injunction where he expressed concern that the Union officials had failed to provide effective notice of the election to its members, that the membership lists and outreach to members were seriously flawed, that as a result the union’s members largely were unaware of the election or their right to vote and had no ballot access, and that the turnout was woefully low. See Lehman v. UAW, No. 22-12790 (E.D. Mich.). The Court denied the motion for preliminary injunction and dismissed the case, holding that Lehman’s lawsuit implicated Title IV of the Labor-Management Reporting and Disclosure Act (LMRDA), and therefore the Court did not have subject matter jurisdiction to adjudicate the claims. Under Title IV, Lehman was required to present his election protests to the Union and then to the Secretary of Labor. Id., 2022 WL 17184564, at *1 (E.D. Mich. Nov. 23, 2022). In the government’s lawsuit against the UAW, the Court had granted the government’s motion to appoint Neil M. Barofsky as the Monitor under the consent decree. Among his duties - 2 - was to “ensure that the election of the members of the [International Executive Board (IEB)] of the UAW shall follow the requirements of the UAW Constitution, and all applicable state and federal laws, and this decree.” Consent Decree ¶ 45, ECF No. 10, PageID.126. On May 11, 2022, the Monitor exercised his authority under the consent decree by publishing official Election Rules to govern the then-upcoming 2022 election of international officers for the Union. Official Rules for the 2022 International Officer Election of the UAW (May 11, 2022), https://perma.cc/9LCN- XNGS. The Rules set forth separate procedures for handling “pre-election” and “post-election” protests by UAW members concerning the conduct of a union officer election. Protests “concerning conduct occurring on or before November 28, 2022 (‘pre-election protests’),” other than protests relating to the nomination of a candidate for international office, “must be filed within ten (10) calendar days of the day when the protestor becomes aware or reasonably should have become aware of the action protested or such protests shall be waived as to internal adjudication (which in the 2022 Election [was] overseen by the Monitor).” Election Rules § 9-2(b). The Rules further specify that “[a] protest must be filed in writing and sent by email to the Monitor,” and “shall contain a clear and concise statement of the grounds for the protest and the complainant’s name, address, phone number, and Local Union affiliation.” Election Rules § 9-2(e). “Within a reasonable amount of time after receipt of a protest, the Monitor shall either: (1) determine the merits of the protest and, if found meritorious, determine the appropriate remedy; or (2) defer making a determination until after the election and thereby treat the matter as a post-election protest pursuant to Section 9-3 below, as if such protest was filed on election day.” Election Rules § 9-2(f). “The Monitor will notify the following individuals or entities of the decision in writing: the complainant, the Union officials or members involved, any Candidate adversely affected, and any person or entity who is the subject of the decision or - 3 - remedy.” Ibid. “In the Monitor’s discretion, the Monitor may excuse a missed deadline and choose to adjudicate a pre-election protest that does not abide by the foregoing filing deadlines.” Election Rules § 9-2(i). “Protests concerning conduct occurring on or after November 29, 2022 (‘post-election protests’) shall be filed with the Monitor . . . [and] must be filed by the later of: (1) fifteen (15) calendar days of the unofficial announcement of the applicable 2022 Election results; or (2) five (5) business days of the date when the protestor becomes aware or reasonably should have become aware of the action protested.” Election Rules § 9-3(a). The same as a pre-election protest, any post-election protest “must be filed in writing and sent by email to the Monitor,” and “shall contain a clear and concise statement of the grounds for the protest and the complainant’s name, address, phone number and Local Union affiliation.” Election Rules § 9-3(c). “Post-election protests shall be considered and remedied only if the alleged violation may have affected the outcome of the 2022 Election, except that any timely protest alleging improper threats, coercion, intimidation, or acts of violence or retaliation for exercising any right protected by these Rules may be considered and remedied without regard to whether the alleged violation affected the outcome of the 2022 Election.” Election Rules § 9-3(b). Post-election protests are subjected to the same procedural requirements for decision within a reasonable time and notice of a written decision as noted above for pre-election protests, except for the Monitor’s option to defer a ruling until after the election, which obviously would be inapplicable. See Election Rules §§ 9-3(e), (f). Even before he filed his first lawsuit, Lehman had contacted the Monitor by email at least 18 times between July 12 and November 12, 2022 to complain about election irregularities, including dissemination of election information and ballot access. Am. Compl. ¶ 41(e), ECF No. 13, PageID.230-32. The November 9, 2022 email summarized most of Lehman’s complaints. The - 4 - Monitor acknowledged Lehman’s correspondence and stated that he was formulating a “more comprehensive response.” But the Monitor never responded to the complaint before the election, and no such “comprehensive response” ever was produced until much later, long after the election was concluded. Because the Monitor did not address any of these complaints before the election was concluded, Lehman file a “formal” protest letter with the Monitor on December 19, 2022, detailing 34 protests. Am. Compl. Ex. A, ECF No. 13-2. The Monitor issued a response on March 19, 2023. The Monitor denied all 34 grievances, which the Monitor enumerated, as stated in Lehman’s December 19, 2022 post-election protest filing. As to timeliness, the Monitor wrote as follows: As a threshold matter, the Rules for the 2022 International Officer Election (the “Election Rules”) required that protests concerning conduct occurring prior to November 28, 2022, be filed within ten (10) calendar days of the day when the protestor became aware, or reasonably should have become aware, of the action protested. With the exception of the claims numbered 14, 32, and 30 — namely, that Mr. Lehman’s personal ballot was “never counted,” that the Union’s “secret ballot guarantees” were violated, and that his supporters were intimidated at a specific Union rally — Mr. Lehman’s post-election Protest is untimely on its face. All the other claims concern conduct alleged to have occurred before November 28, 2022, more than ten days before Mr. Lehman’s Protest was filed on December 19. Thus, the portions of Mr. Lehman’s Protest that are based on these events are therefore denied as untimely. Notwithstanding that they are untimely, the Monitor has also addressed their substance, and in each case, the Monitor has also found them to be without merit for the reasons discussed below. Monitor’s Decision dated Mar. 19, 2023, ECF No. 13-3, PageID.394 (emphasis added). Despite concluding that most of the claims were untimely, the Monitor proceeded to set forth 20 pages of detailed analysis addressing each stated grievance in turn, concluding that several of the claims were either contradicted by undisputed evidence or contrary to the law, and that Lehman had failed to produce any evidence to substantiate the rest. Id. at PageID.394-416. - 5 - On March 29, 2023, Lehman filed a complaint with the Department of Labor seeking review of the Monitor’s decision rejecting his election protest. The complaint was denied in a summary ruling in June 2023, and a statement of reasons for the denial eventually was produced on August 8, 2023. The Secretary rejected four of the election grievances on the merits, and those claims are not in dispute here. As to the remaining 30 grievances, the Secretary’s reasoning sidestepped entirely the substance of the claims and affirmed on the sole alternative ground that all 30 complaints of “pre-election” misconduct were untimely under the Election Rules, and that Lehman therefore had not exhausted his remedies with the Union before presenting his complaint to the Secretary. The Secretary’s reasoning is set forth in full below: In his decision, the Monitor addressed 34 of the allegations in your post-election protest and determined that only four of them were timely filed under Section 9- 3(a) of the Election Rules insofar as they concerned conduct that occurred on or after November 29, 2022. The Monitor noted that the remaining 30 allegations concerned conduct that occurred before November 28, 2022, and accordingly, were required to be raised as preelection protests under the Election Rules. He concluded that these 30 allegations were untimely under Section 9-3(a) because more than 10 days had elapsed from when you were or reasonably should have been aware of the conduct protested in your December 19, 2022 post-election protest. In support of his determination that you were aware of or reasonably should have been aware of the specific issues that were protested in your December 19 complaint, the Monitor relied upon numerous email communications that you sent to the Monitor throughout the election period as well as allegations that you raised in your November 17, 2022 lawsuit filed in federal district court. In your complaint to the Department, you assert that the Monitor erred in finding that 30 of the allegations in your post-election protest were untimely. In your complaint, you do not distinguish between the Election Rules governing “pre- election” and “postelection” protests but assert that communications with the Monitor in which you claim to have “protested all the deficiencies in the election” should have been treated as “protests” by the Monitor. The Election Rules at subsection 9-2, address pre-election protests and provide that “[a] protest must be filed in writing and sent by email to the Monitor. The protest shall contain a clear and concise statement of the grounds for the protest and the complainant’s name, address, phone number, and Local Union affiliation. The complainant bears the burden of presenting evidence of the alleged improper conduct.” See Election Rules, 9-2(e) and 9-3(c). Based on his interpretation of the Election Rules, the Monitor explained that the post-election protest you filed on December 19, 2022, was the only protest that you filed. - 6 - A review of your post-election protest discloses that it contains the word “protest” in the subject line and its first sentence makes clear that it is an election protest, as it states, “[w]ith this letter, I am formally protesting the 2022 UAW International Officer Election results in their entirety.” In contrast, none of the email communications that you sent the Monitor during the course of the election contained the words “complaint” or “protest,” nor do any of these emails refer to Section 9 of the Election Rules, which governed pre-election protests. The Department reviewed these email communications and determined that while they reveal your awareness of specific issues, the content of these emails was clearly distinguishable from your December 19, 2022 post-election protest. As the Monitor explained during the Department’s investigation, the Monitor viewed the statements made in your numerous emails throughout the election period as general grievances or attempts to pass along information to the Monitor about the conduct of the election. Further, it is notable that the Monitor did not adjudicate any of the issues raised in your email communications as would be required if such communications were formal pre-election protests. At no point during these communications did you clarify to the Monitor that you were attempting to file formal pre-election protests under the Election Rules. Statement of Reasons (SOR) dated Aug. 8, 2023, ECF No. 13-6, PageID.662-64. Lehman filed his complaint in this case on July 3, 2023. In his initial pleading, the plaintiff challenged the Secretary’s failure up to that point to produce a statement of reasons for denying his complaint seeking review of the Monitor’s rejection of his election protest. The Secretary subsequently produced a statement of reasons, which was incorporated into the plaintiff’s amended complaint, filed on September 5, 2023. In his amended complaint, the plaintiff alleged that the Secretary’s decision was irrational or arbitrary and capricious in its endorsement of the Monitor’s conclusion that 30 out of the 34 grounds stated in his election protest were not timely presented according to the UAW election rules. After the government filed a motion to dismiss, the Court held a status conference during which the parties agreed that a disposition of the entire case on the pleadings would be proper, and the Court advised them that it would consider the government’s motion as a motion for judgment on the pleadings. The plaintiff filed his cross-motion for judgment on the pleadings, and the parties agree that no further discovery is needed since the entire administrative record comprising the SOR was attached to the amended complaint. - 7 - II. A pleading challenge via Federal Rule of Civil Procedure 12(c), which usually is filed after the defendant has answered and the pleadings are closed, invokes the same standards that govern motions to dismiss filed under Rule 12(b)(6). See Fed. R. Civ. P. 12(c); Vickers v. Fairfield Med. Ctr., 453 F.3d 757, 761 (6th Cir. 2006); Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 511-12 (6th Cir. 2001). When evaluating a motion under Federal Rule of Civil Procedure 12(b)(6), the Court is called upon to determine if the “complaint . . . contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, , 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, , 547 (2007 . A “claim is facially plausible when a plaintiff ‘pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’” Matthew N. Fulton, DDS, P.C. v. Enclarity, Inc., 907 F.3d 948, 951-52 (6th Cir. 2018) (quoting Iqbal, 556 U.S. at 678). When reviewing the motion, the Court “must construe the complaint in the light most favorable to the plaintiff and accept all [factual] allegations as true.” Donovan v. FirstCredit, Inc., 983 F.3d 246, 252 (6th Cir. 2020) (quoting Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012 . When deciding a motion under Rule 12(b)(6), the Court looks only to the pleadings, Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008), the documents attached to them, Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 335 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c , documents referenced in the pleadings that are “integral to the claims,” id. at 335-36, documents that are not mentioned specifically but which govern the plaintiff’s rights and are necessarily incorporated by reference, Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir. 1997), abrogated on other grounds by Swierkiewicz v. Sorema, N.A., (2002), and matters of public record, Northville Downs v. Granholm, 622 F.3d 579, 586 (6th Cir. 2010). - 8 - As an initial matter, the parties agree that there is no dispute over the Secretary’s disposition of four grounds for challenge which were found to be timely. In those grounds, Lehman complained that (1) his own vote was not counted, (2) ballot secrecy was compromised, (3) his request to extend the vote tally deadline was denied by the Monitor and the Union, and (4) threats were made to certain volunteers working with Lehman’s campaign. The Monitor and the Secretary both concluded that those grievances either were contradicted or unsupported by the available evidence, that Lehman had not shown that any provisions of the LMRDA had been violated by the Union’s handling of ballots, and that Lehman’s vote was in fact tallied. Lehman does not petition the Court for further review on any of those challenges. The Secretary’s argument on the other challenges emphasizes the narrow scope of review afforded district courts under Title IV of the LMRDA, and she insists that record indisputably shows that Lehman’s 30 remaining protests were untimely. She gives no credit to the several pre- election complaints as protests, and she views Lehman’s December 19, 2022 protest letter as the only legitimate formal protest under the Election Rules. Because that letter was submitted more than ten days after the election closed on November 28, 2022, she concludes that it was untimely. Her alternative argument references Lehman’s several pre-election communications to the Monitor, the last one dated November 11, 2022, and she contends that because there was no formal response by the Monitor, Lehman’s complaint to the DOL had to be filed within four months, that is, by March 11, 2023, a date he missed by two weeks. Lehman counters that his pre-election emails to the Monitor, particularly the November 9, 2022 email, should be regarded as protests because they contained all the elements required by the Election Rules. The Monitor’s failure to respond before the election concluded, he says, prompted his December 19, 2022 letter, which he characterizes as a timely post-election complaint in which - 9 - he reasserted all of the grounds stated in his pre-election complaints submitted via email, and which also added other claims of election irregularities. Lehman asserts that when the Monitor finally issued a decision on March 19, 2023 in which he addressed and rejected all of Lehman’s grievances — including those covered in Lehman’s pre-election email complaints, Lehman timely submitted a complaint for review by the Secretary of Labor on March 29, 2023, which was well within the 30-day window for administrative appeal following the Monitor’s decision. Lehman argues that the Secretary’s formalistic application of the Election Rules, by which she refuses to view many of the pre-election communications with the Monitor as protests, is arbitrary and capricious. He points out that the Monitor never adjudicated any of his pre-election protests before the election transpired, but the Monitor eventually did issue a “more comprehensive response” to all of the grievances presented — both before and after the election — when he issued a decision on Lehman’s December 19, 2022 post-election protest and addressed the merits of all of Lehman’s grievances. That is consistent with the Election Rules, which allow the Monitor to defer a ruling on a pre-election protest until after an election has concluded, and then to adjudicate it as a post- election protest deemed to have been filed on election day. The LMRDA incorporates two distinct remedial avenues for union members to present grievances about the conduct of union elections. First, Title I guarantees union members “equal rights . . . to nominate candidates, [and] to vote in elections or referendums of the labor organizations.” 29 U.S.C. § 411(a)(1). If a union member believes that right to have been violated, he or she “may bring a civil action in a district court of the United States for such relief (including injunctions) as may be appropriate.” 29 U.S.C. § 412. Second, Title IV addresses the timing and manner in which local, national and international union elections of officers are to be conducted. 29 U.S.C. § 481 et seq.; see also Am. Fed’n of Musicians v. Wittstein, 379 U.S. 171, 181 (1964) - 10 - (“Title IV contains elaborate statutory safeguards for the election of union officers.”); Harrington v. Chao, 280 F.3d 50, 53 (1st Cir. 2002) (“Title IV of the LMRDA . . . establishes minimum standards for the election of union officers.” (citation omitted . To enforce rights granted under Title IV, the union member must file a complaint with the Secretary of Labor (after completing certain procedural requirements). 29 U.S.C. § 482(a). That is the only enforcement route under that title; district court litigation is not an option. 29 U.S.C. § 483 (“The remedy provided by this subchapter for challenging an election already conducted shall be exclusive.”); Local No. 82, Furniture & Piano Moving Drivers v. Crowley, 467 U.S. 526, 540 (1984) (Title IV “‘sets up an exclusive method for protecting Title IV rights,’ and Congress ‘decided not to permit individuals to block or delay union elections by filing federal-court suits for violations of Title IV.’”) (quoting Calhoon v. Harvey, 379 U.S. 134, 140 (1964 . The parties agree that Title IV governs Lehman’s complaint in this case. It is well established that federal courts play a limited role when it comes to reviewing the Secretary of Labor’s decisions on complaints lodged under Title IV. Crowley, 467 U.S. at 550 n.22. That is because the Secretary has exclusive authority to challenge and, if successful, to supervise union elections. Crowley, 467 U.S. at 550 n.22 (citing Dunlop v. Bachowski, 421 U.S. 560, 568-71 (1975), overruling Dunlop in part on other grounds). In Dunlop, the Court observed that its prior decisions “construing the LMRDA identif[ied] the congressional objectives and thus put the scope of permissible judicial review in perspective.” The Court determined that when Congress passed the LMRDA, it had “decided to utilize the special knowledge and discretion of the Secretary of Labor in order best to serve the public interest [and] decided not to permit individuals to block or delay union elections by filing federal-court suits.” Dunlop, 421 U.S. at 568-69 (quoting Calhoon, 379 U.S. at 140). “Congress’ concern was - 11 - to settle as quickly as practicable the cloud on the incumbents’ titles to office, and in deliberately giving exclusive enforcement authority to the Secretary emphatically asserted a vital public interest in assuring free and democratic union elections that transcends the narrower interest of the complaining union member.” Id. at 569 (cleaned up). “‘Congress made suit by the Secretary the exclusive post-election remedy for two principal reasons: (1) to protect unions from frivolous litigation and unnecessary judicial interference with their elections, and (2) to centralize in a single proceeding such litigation as might be warranted.’” Ibid. (quoting Trbovich v. Mine Workers, 404 U.S. 528, 532 (1972 . “Congress intended to prevent members from pressing claims not thought meritorious by the Secretary, and from litigating in forums or at times different from those chosen by the Secretary[;] [t]he statute gives the individual union members certain rights against their union, and ‘the Secretary of Labor in effect becomes the union member’s lawyer’ for purposes of enforcing those rights.’” Id. at 569-70 (quoting Trbovich, 404 U.S. at 538-39). Discussing the reviewing court’s role under Title IV, Dunlop held that a “reviewing court is not authorized to substitute its judgment for the decision of the Secretary not to bring suit,” but it also emphasized that to enable the review that is allowed, “the Secretary must provide the court and the complaining witness with copies of a statement of reasons supporting [her] determination.” Dunlop, 421 U.S. at 571. Explaining, the Dunlop Court held that the Secretary’s decision must be detailed enough “to enable a reviewing Court to determine with some measure of confidence whether or not the discretion, which still remains in the Secretary, has been exercised in a manner that is neither arbitrary nor capricious. It is necessary for [her] to delineate and make explicit the basis upon which discretionary action is taken, particularly in a case such as this where the decision taken consists of a failure to act after the finding of union election irregularities.” Ibid. (cleaned up). - 12 - When a court concludes that the Secretary’s statement of reasons is adequate, that is, not arbitrary or capricious, the court’s job is finished. But if those reasons do not measure up, the case must be remanded to the Secretary “to supplement [her] statement.” Id. at 574. The Secretary’s decision to overlook the Monitor’s 20-page reasoned adjudication of Lehman’s numerous election grievances and uphold the rejection of his claims solely on the alternative ground that 30 out of 34 of the claims were untimely was irrational and grounded in an arbitrary and capricious construction of the Election Rules that is not supported by their plain text or the prevailing case law. The government insists that the Court may look no further than the Statement of Reasons itself when evaluating whether the reasons stated are sound. That is not quite correct. Dunlop held only that consideration of materials beyond the SOR “may not extend to cognizance or trial of a complaining member’s challenges to the factual bases for the Secretary’s conclusion either that no violations occurred or that they did not affect the outcome of the election.” Dunlop, 421 U.S. at 573. The plaintiff’s petition for judicial review in this case does not require the Court to engage in any such mini-inquisition of any finding that no violations occurred or that any such violations did not affect the outcome of the election. Instead, the interpretive question presented turns solely on whether as a matter of law and an exercise in textual interpretation the Secretary endorsed a reading of the Election Rules that was reasonable and rationally relied on that reading to conclude that the election grievances were untimely. The government has cited no authority prohibiting the Court from considering the substance of materials that were themselves considered by the Secretary in making the timeliness determination. Nevertheless, the SOR facially discloses the critical fault in its reasoning, which is inherently illogical and textually unsupported. - 13 - First, the Secretary stated that the Monitor’s decision concluded that Lehman’s December 19, 2022 protest “was the only protest” that he presented. In fact, the Monitor expressed no such conclusion explicitly anywhere in his decision. The fact that the Secretary relied on a conclusion that is nowhere found in the Monitor’s reasoning is belied by the Secretary’s later statement that, “[a]s the Monitor explained during the Department’s investigation, the Monitor viewed the statements made in your numerous emails throughout the election period as general grievances or attempts to pass along information to the Monitor about the conduct of the election.” Statement of Reasons, ECF No. 13-6, PageID.664. The “conclusion” that the Monitor found none of the pre- election protests to be properly regarded as “protests” appears to be based on post-hoc justification of the Monitor’s decision not to adjudicate any such protests in a timely manner before the election, since it is undisputed that no substantial response to Lehman’s pre-election complaints ever was produced before the election was completed. At any rate, the Monitor nowhere expressed in his written decision any finding that the December 19, 2022 protest “was the only protest.” Second, the Secretary represents that Lehman’s November 2022 emails to the Monitor were reviewed comprehensively during the Secretary’s investigation, and that none of those emails qualified as “protests” because none included certain indicia such as use of the term “complaint” or “protest” or citations of the Election Rules. That reasoning is unsupported by the plain text of the Election Rules, which specify only that “[a] protest must be filed in writing and sent by email to the Monitor,” and “shall contain a clear and concise statement of the grounds for the protest and the complainant’s name, address, phone number, and Local Union affiliation.” Election Rules § 9-2(e). The Secretary set forth no grounds for a conclusion that Lehman’s pre-election email protests did not satisfy those criteria. The Secretary attempts to “distinguish” Lehman’s November 2022 emails from his December 19, 2022 “formal protest” based on the usage of significant terms - 14 - in the phrasing of the later submission. But that is another example of post-hoc reasoning through which the Secretary merely attempts to engraft into the rules formal requirements that appear nowhere in their text. Again, such reasoning appears nowhere in the Monitor’s decision, which undertook no such formalistic textual analysis. The cases on point teach that such pedantry in the application of the exhaustion requirement is particularly inappropriate where it concerns election grievances. “The requirement of [LMRDA] § 402(a) that a union member first seek redress of alleged election violations within the union before enlisting the aid of the Secretary, was [] designed to harmonize the need to eliminate election abuses with a desire to avoid unnecessary governmental intervention.” Hodgson v. Loc. Union 6799, United Steelworkers of Am., AFL-CIO, 403 U.S. 333, 339 (1971). “Plainly Congress intended to foster a situation in which the unions themselves could remedy as many election violations as possible without the Government’s ever becoming involved.” Ibid. However, “any interpretation of the exhaustion requirement must reflect the needs of rank and file union members — those people the requirement is designed ultimately to serve.” Id. at 340. The Court was well aware that “union members may use broad or imprecise language in framing their internal union protests and that members will often lack the necessary information to be aware of the existence or scope of many election violations.” Id. at 340. The Court determined that the Secretary and the unions must make allowances for such imprecision, because “[u]nion democracy is far too important to permit these deficiencies to foreclose relief from election violations; and in determining whether the exhaustion requirement of § 402(a) has been satisfied, courts should impose a heavy burden on the union to show that it could not in any way discern that a member was complaining of the violation in question.” Id. at 340-41. “For much the same reasons, members should not be held to procedural niceties while seeking redress within their union, and - 15 - exhaustion is not required when internal union remedies are unnecessarily complex or otherwise operate to confuse or inhibit union protestors.” Id. at 341 n.6. The government has not even attempted to articulate any reasonable basis for a conclusion that the Monitor “could not in any way discern” what Lehman was complaining about when he submitted his pre-election complaints about low turnout and the possible misconduct by the Union (and the Monitor) that might account for it. Moreover, the Monitor’s thorough discussion and analysis of each one of Lehman’s 30 enumerated grievances on the merits belies the implication that such complaints were not presented to the Monitor in a plain and complete fashion. Under the circumstances, the Secretary’s reliance on a pedantic construction of formal protest requirements that are stated nowhere in the Election Rules is irrational as a matter of law. Moreover, the Secretary’s statement acknowledged the fact that “the Monitor did not adjudicate any of the issues raised in [Lehman’s] email communications as would be required if such communications were formal pre-election protests.” Statement of Reasons, ECF No. 13-6, PageID.664. That circular reasoning is nothing more than an apparent attempt to impute the Monitor’s failures to the plaintiff — concluding that because the protests were not “adjudicated,” they must not have been protests at all. In addition to the inherent contradiction, that conclusion entirely overlooks the provision of the Election Rules that expressly permits the Monitor to defer adjudication of a pre-election protest until after the election is completed. In this instance, the undisputed record clearly indicates that (1) the Monitor never issued a written decision before the election, (2) in the preliminary response to Lehman’s November 2022 complaints, the Monitor represented that a “more comprehensive response would be forthcoming,” (3) no such “comprehensive response” ever was produced before the election, or soon afterwards, and (4) the Monitor did produce a “more comprehensive response” when, on March 19, 2023, he issued a 20- - 16 - page written decision addressing in detail — and on the merits — each of Lehman’s grievances concerning the election, including all of the complaints that he raised before the election, and others which he added in the more formalized statement (or restatement) of grievances submitted on December 19, 2022. The government’s argument on timeliness, which is its sole defense, falls apart as soon as the unsupported premises of the Secretary’s reasoning are rejected, since (1) there has been no showing made that any of Lehman’s pre-election grievances were not submitted within 10 days of when he learned about the factual grounds for them, (2) the Monitor’s final decision rejecting all of those grievances was not issued until well after the election, on March 19, 2023, and (3) Lehman’s complaint to the Secretary was submitted on March 29, 2023, well within the 30-day window for appealing the decision for further administrative review. III. The government has failed to demonstrate that the Secretary’s reasoning was sound, and the dismissal of 30 out of 34 of the grievances stated by William Lehman in his March 29, 2023 complaint to the Secretary was arbitrary and capricious. Accordingly, it is ORDERED that the defendants’ motion to dismiss, construed as a motion for judgment on the leadings, (ECF No. 16) is DENIED. It is further ORDERED that the plaintiff’s motion for judgment on the pleadings (ECF No. 22) is GRANTED IN PART. It is further ORDERED that the matter is REMANDED the case to the Secretary of Labor for further proceedings, which, at a minimum, must consist of the production of a supplemental statement of reasons. - 17 - The Court does not retain jurisdiction. Dated: June 25, 2024 s/David M. Lawson DAVID M. LAWSON United States District Judge - 18 -

=== OPINION AND ORDER SUSTAINING DEFENDANT’S OBJECTIONS TO MAGISTRATE JUDGE’S DISCOVERY ORDER, VACATING ORDER, AND GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR PROTECTIVE ORDER ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION IN RE: CHRYSLER PACIFICA FIRE RECALL PRODUCTS LIABILITY LITIGATION MDL No. 3040 _____________________________________/ Case Number 22-3040 Honorable David M. Lawson Magistrate Judge Elizabeth S. Stafford OPINION AND ORDER SUSTAINING DEFENDANT’S OBJECTIONS TO MAGISTRATE JUDGE’S DISCOVERY ORDER, VACATING ORDER, AND GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR PROTECTIVE ORDER The plaintiffs in this multidistrict litigation allege that defendant FCA US LLC manufactured and sold them Chrysler Pacifica Plug-in Hybrid minivans that are defective because they have been known to combust spontaneously. In their 1,450-paragraph, 430-page (including attached exhibits), 81-count consolidated master complaint (CMC), they have identified 69 plaintiffs from 31 states, at least 50 of whom are still actively involved in the litigation. Discovery has been underway since the Court entered a case management order, and the defendant has sought to take the depositions of all of the named plaintiffs, noticing the depositions for locations in Michigan. The plaintiffs then moved for a protective order requiring that the depositions be taken remotely via videoconferencing so that the plaintiffs would be spared the inconvenience of traveling to Michigan to sit for a deposition. The Court referred the motion to the assigned magistrate judge for determination. The magistrate judge entered an order on April 8, 2024 granting the motion, and the defendant filed a timely objection to the order. The Court heard oral argument on the objection in open court on June 13, 2024. The magistrate judge’s order is clearly erroneous, and the plaintiffs have not stated adequate grounds for the blanket protective order they seek. However, they are entitled to relief in specific instances, outlined below. The defendant’s objection will be sustained, the magistrate judge’s order will be vacated, and the plaintiffs’ motion for a protective order will be granted in part and denied in part. I. Each of the plaintiffs in this case have alleged that they purchased a Pacifica plug-in hybrid minivan, which, they believe, is defective because of its tendency to combust after a thermal runaway of its battery mechanism. The CMC consolidates the claims of the several plaintiffs from eleven separate lawsuits, some of which were filed directly in this district and the rest of which were filed elsewhere and transferred here by the Panel on Multidistrict Litigation. Of the non- direct-filed actions, six were filed in various federal districts in California and one in the Eastern District of Pennsylvania. According to the motion papers, counsel for the parties engaged in talks to schedule the depositions of all the named plaintiffs, to be conducted over several weeks. Plaintiffs’ counsel insisted that the depositions be taken remotely. The defendant took the position that the depositions should take place in person and occur in this district. Plaintiffs’ counsel pointed out that several of the plaintiffs expressed concern over traveling due to general claims of inconvenience. Some, however, cited leftover anxiety over health issues related to infectious diseases, mainly COVID, that they might encounter with air travel and attending a deposition in a closed space. And a few of the named plaintiffs offered specific personal and family reasons that travel to Michigan would cause a hardship. Defense counsel mostly was unmoved by the pleas of personal inconvenience. For the individuals who cited health concerns, defense counsel said he would acquiesce in a remote deposition if the particular plaintiff signed some sort of pledge to stay away from this district - 2 - during trial if the environmental circumstances stayed the same. That response prompted the present motion for a protective order. The plaintiffs based their motion on Federal Rule of Civil Procedure 26(c)(1), which authorizes the Court to issue remedial orders that limit or regulate discovery upon a showing of good cause. The Court referred the motion to the assigned magistrate judge for decision under 28 U.S.C. § 636(b)(1). After a hearing, the magistrate judge determined that the plaintiffs had not made the requisite good cause showing for relief under Rule 26(c). Instead, the magistrate judge issued a sua sponte ruling under the purported authority of Rule 26(b)(2)(C), which provides that the court “must limit the frequency or extent of discovery otherwise allowed by these rules . . . if it determines that . . . the discovery sought . . . can be obtained from some other source that is more convenient, less burdensome, or less expensive.” The magistrate judge ordered that the plaintiffs’ depositions be conducted remotely. To address the plaintiffs’ concerns about the expense and burden of traveling to attend depositions in Michigan, and the defendant’s objection that remote depositions would interfere with its counsel’s ability to gauge the demeanor and context of the deponents’ responses, the magistrate judge set certain conditions on conducting the depositions, including camera placement proximate to the deponents’ faces, and segregation of any plaintiffs’ counsel present in a separate room. The defendant filed a timely objection to the order. II. Under 28 U.S.C. § 636(b)(1), a magistrate judge has the authority “to hear and determine any pretrial matter pending before the court,” with the exception of certain dispositive motions. 28 U.S.C. § 636(b)(1)(A). A party aggrieved by a magistrate judge’s order may file objections to it within two weeks. Fed. R. Civ. P. 72(a). The filing of objections, however, does not stay the - 3 - force of the magistrate judge’s order, which “remains in full force and effect.” E.D. Mich. LR 72.2. Upon receiving objections, the Court reviews an order by a magistrate judge on a nondispositive matter to determine whether the decision is “clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A); see also Fed. R. Civ. P. 72(a) (stating that upon receipt of timely objections, “[t]he district judge in the case must consider timely objections and modify or set aside any part of the order that is clearly erroneous or contrary to law”); United States v. Curtis, 237 F.3d 598, 603 (6th Cir. 2001). A decision is “clearly erroneous” when, “although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed,” United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948), or where the magistrate judge improperly applies the law or employs an erroneous legal standard, Beck v. Haik, 377 F.3d 624, 636 (6th Cir. 2004). Where there are two plausible views, a decision cannot be “clearly erroneous.” Anderson v. City of Bessemer, 470 U.S. 564, 573 (1985). The defendant argues that the discovery order is unsound because the plaintiffs failed to make a showing of good cause (as the magistrate found), which is necessary to trigger remedial court action, and the alternate ground offered by the magistrate judge on her own to regulate the discovery is not authorized by Rule 26(b)(2)(C) under the present circumstances. Disagreeing, the plaintiffs contend that Rule 26(b)(2)(C) is sound authority under which a court may place constraints on the taking of depositions, and, contrary to the magistrate judge’s finding, they believe that they have established good cause for their request to have depositions taken remotely by submitting an exhibit listing, for 40 plaintiffs, the specific hardships that they would suffer including lost work, travel expenses, and potential exposure to increased risks of infection from the COVID-19 disease. - 4 - To start, the governing rule for the request the plaintiffs have made is Rule 26(c), which deals with the issuance of protective orders. The magistrate judge’s reliance on Rule 26(b)(2)(C), which falls under the general rubric of the scope of discovery, is clearly erroneous. The plaintiffs assert that other district courts have relied on Rule 26(b)(2)(C) to grant motions to require the taking of depositions by remote means, per the allowance in Rule 30(b)(4). Such reasoning is difficult to square with the plain text of a rule that provides for orders limiting the “frequency” or “extent” of discovery if the same information reasonably may be obtained from “other sources” that are more convenient or less expensive to produce. See Fed. R. Civ. P. 26(b)(2)(C) (“On motion or on its own, the court must limit the frequency or extent of discovery otherwise allowed by these rules or by local rule if it determines that . . . the discovery sought . . . can be obtained from some other source that is more convenient, less burdensome, or less expensive.”). The order in this instance had no bearing on either the “frequency” or “extent” of any discovery, since it did not prohibit the taking of any depositions, nor did it limit the number or duration of any depositions to be taken. Moreover, the rule plainly contemplates a limitation on taking discovery by certain means when the same information sought may be obtained from some “other source” at greater convenience or lesser expense. But no finding was made that the testimony sought from the plaintiffs could be obtained from any “other source,” or that information from any such source could be produced more conveniently or cheaply. Instead, the order plainly “specif[ied] terms, including time and place or the allocation of expenses, for the disclosure or discovery” to be taken, by directing all plaintiff depositions to be conducted by Zoom video conferencing. See Fed. R. Civ. P. 26(c)(1)(B). That relief falls squarely within the ambit of a protective order under Rule 26(c), not an order limiting the “extent” or “frequency” of discovery under Rule 26(b)(2)(C). - 5 - Moreover, granting what amounts to a protective order on the grounds of convenience or expense, a lesser burden, would render Rule 26(c)’s good cause requirement a dead letter. Confounding the scope of discovery (Rule 26(b with protection against abusive discovery practices (Rule 26(c , as did the magistrate judge’s order, is clear error. Turning back to the plaintiffs’ motion brought ostensibly under Rule 26(c), courts have broad discretion to regulate the means by which discovery may be had “to protect a party or entity from ‘annoyance, embarrassment, oppression, or undue burden or expense.’” In re Ohio Execution Protocol Litig., 845 F.3d 231, 236 (6th Cir. 2016) (quoting Fed. R. Civ. P. 26(c)(1 . “To sustain a protective order under Rule 26(c), the moving party must show ‘good cause’ for protection from one (or more) harms identified in Rule 26(c)(1)(A) ‘with a particular and specific demonstration of fact, as distinguished from stereotyped and conclusory statements.’” Ibid. (quoting Serrano v. Cintas Corp., 699 F.3d 884, 901 (6th Cir. 2012 . “The enumerated harms available to support a protective order are ‘annoyance, embarrassment, oppression, or undue burden or expense.’” Ibid. (quoting Fed. R. Civ. P. 26(c)(1 . “Good cause exists if ‘specific prejudice or harm will result’ from the absence of a protective order.” Ibid. (quoting Father M. v. Various Tort Claimants (In re Roman Catholic Archbishop), 661 F.3d 417, 424 (9th Cir. 2011 . The defendant argues that the magistrate judge should not have granted any type of relief to the plaintiffs because she found that the plaintiffs had not established “good cause” to warrant the requested discovery limitations. Taking a narrow view of the discovery order, the defendant is correct. The magistrate judge explicitly recognized the “good cause” requirement that must be satisfied before a protective order may be issued, see Order, ECF No. 116, PageID.4685, she found that the plaintiffs’ reliance on COVID risk did not support a finding of good cause, because “the - 6 - United States declared the pandemic over in 2023,” ibid., and she expressly declined to find that the plaintiffs had established sufficient hardship to justify protective relief, id. at 4686. The plaintiffs contend that they established “good cause” by presenting an exhibit identifying the harms that numerous plaintiffs would suffer if required to attend depositions in- person in the Eastern District of Michigan. See Letter dated Jan. 16, 2024, ECF No. 83-2, PageID.4291. With some notable exceptions, the plaintiffs’ account of their “hardships” consists almost entirely of generalized assertions that they would suffer inconvenience, expense, or incur unpaid time off from work, and that traveling to Michigan for one to three days to attend a deposition would interfere with routine obligations of their work and family lives. As the magistrate judge aptly observed, none of the inconveniences described amount to a sufficiently specific showing of tangible harm so as to establish good cause for a protective order. “[T]he general rule [is] that the proper location of a plaintiff’s deposition . . . is in the forum where the litigation is pending.” Scooter Store, Inc. v. Spinlife.com, LLC, No. 10-18, 2011 WL 2118765, at *2-3 (S.D. Ohio May 25, 2011) (quotation omitted). And in the absence of a proper showing, the plaintiffs have not demonstrated good cause to depart from the general rule that the forum of suit is an appropriate place for the taking of a party’s deposition. There are sound reasons for enforcing the general rule concerning the location of a plaintiff’s deposition. As a formal matter, the party noticing the deposition designates the time and place of the deposition. Fed. R. Civ. P. 30(b)(1). “Pursuant to Federal Rule of Civil Procedure 30(b)(1), the party noticing the deposition initially selects the deposition’s location.” Madej v. Maiden, No. 16-658, 2017 WL 3446489, at *6 (S.D. Ohio Aug. 11, 2017) (citing Fed. R. Civ. P. 30(b)(1); 8A Wright & Miller, Federal Practice & Procedure § 2112 at 73 (2d ed. 1994) (“[T]he examining party may set the place for deposition of another party wherever he or she wishes, - 7 - subject to the power of the court to grant a protective order under Rule 26(c)(2) designating a different place.” . As a practical matter, “[t]he basis for requiring plaintiff to come to the forum for the taking of his or her deposition in most cases is that plaintiff has selected the forum.” 8A Wright & Miller, Federal Practice & Procedure § 2112 (3d ed. 2010). So it is here. Many of the plaintiffs who have proposed to act as class representatives elected to file their suits within this district, meaning that the expense and burden of personal participation was foreseeable at the outset of their suits. As potential class representatives, an allowance is made under Rule 23 for individual compensation to be paid to the named plaintiffs to offset the burden and expense incurred by representation of absent class members, in the event that the case proceeds on a class basis, and if they secure a recovery for the benefit of the class. See In re FCA US LLC Monostable Elec. Gearshift Litig., No. 16-MD-02744, 2017 WL 4216193, at *4 (E.D. Mich. Sept. 22, 2017). It is true that under Rule 30(b)(4), the parties may stipulate or the Court may order that a deposition may be taken remotely. But that authority has no bearing on the question whether good cause for issuance of a protective order has been shown. “[W]hether the plaintiffs’ proposal is reasonable is immaterial to the question whether they have elaborated a sufficiently serious and specific hardship to warrant protective relief from the Court compelling a departure from the general rule that the forum of the litigation is an entirely appropriate location for the taking of party depositions.” Ibid. As the plaintiffs point out, some district courts have issued orders requiring the taking of depositions by remote means, for instance, where a deponent’s serious medical condition makes attendance at an in-person deposition unreasonably risky. E.g., Rogers v. Bedford, No. 22-1737, 2023 WL 6143545, at *2 (D. Md. Sept. 20, 2023) (“Remote depositions have become a standard - 8 - tool in litigation since the onset of the COVID-19 pandemic and are sufficiently effective. Particularly given that Mr. Smith appears to have serious health issues, it is appropriate to conduct the deposition remotely via video conference technology.”); see also Mayfield v. City of Madison, No. 17-514, 2020 WL 13252053, at *2 (S.D. Miss. Dec. 9, 2020) (“[T]he Court finds good cause to order that the depositions of [non-parties] Clark and Barbour be taken by remote means. The Court also finds good cause to order that the court reporter(s) for the Clark and Barbour depositions appear remotely from a separate location than the deponent.”). However, the defendant aptly raises concerns that remote depositions, despite being a more widely used tool in the post-pandemic era, pose unique disadvantages that examining counsel may struggle to overcome in order to achieve an effective examination. Federal courts have recognized such concerns as legitimate. E.g., Radiant Glob. Logistics, Inc. v. BTX Air Express of Detroit, LLC, No. 18-12783, 2020 WL 1933818, at *4 (E.D. Mich. Apr. 22, 2020) (Whalen, J.) (“[The defendants’] facile suggestion that the depositions could be held by video conference is unavailing. Where it is posited that the previously deposed corporate officers have given perjured testimony, and that the new depositions will delve into documentary evidence, it would approach legal malpractice for Radiant’s counsel to conduct those depositions remotely.”). In any event, the fact that depositions by remote means may be an economical and appropriate tool in some instances, at least where the parties agree on the means, or where extraordinary circumstances such as the medical infirmity of a deponent make an in-person examination unreasonably risky, does not mean that good cause has been shown to compel the taking of depositions by remote means across the board for all plaintiffs, based merely on the routine inconvenience and expense that is incident to participation in litigation by any party who chooses to file suit in a forum distant from their residence. - 9 - The magistrate judge here concluded that a blanket claim of inconvenience over travel to this district did not amount to good cause for protection from the discovery demanded by the defendant. The Court agrees, as far as that finding goes. But the record does justify a protective order in two categorical instances. First, for the plaintiffs who filed their cases in their home districts, the general rule that sites the deposition “in the forum where the litigation is pending,” Scooter Store, 2011 WL 2118765, at *2-3, suggests that their depositions should be taken in their home districts. Their cases were transferred by no actions of their own, and the expense of traveling to a remote district where their case was transferred involuntarily likely was not anticipated at the time of filing. Those plaintiffs have shown good cause that their depositions should be taken in their respective home districts. Second, despite the magistrate judge’s contrary finding, certain plaintiffs have demonstrated personal hardship to satisfy the good cause requirement for relief under Rule 26(c)(2). The following plaintiffs have shown that “specific . . . harm will result,” In re Ohio Execution Protocol Litig., 845 F.3d at 236, from having to endure a trip to this district for their depositions: • Diahann Messeguer: She has chronic pain that makes traveling difficult. She also is a part-time caretaker of her 78-year-old diabetic mother where she is the sole person responsible for her insulin pump. • James Quattropani: He is the sole caretaker for his 95-year-old mother who recently was discharged from the hospital. • Salyi Vu: She is currently recovering from a car accident and her treatment has caused her severe motion sickness and nausea. She receives physical therapy twice a week for her ankle, and she cares for her son who recently broke his ankle, requiring her to transport him to doctor appointments and physical therapy appointments. • Michael Natale: His wife is disabled, and he cares for his two children who are both on the autism spectrum. - 10 - • Kent Schumann: He and his wife care for six teenagers at home (five children and one exchange student), and his wife is recovering from both brain surgery and a broken ankle. These hardships certainly should not deprive the defendant of in-person depositions that it insists is necessary to prepare its case. But these individuals have qualified for a protective order that “specif[ies] the terms, including the time and place,” of the deposition. Fed. R. Civ. P. 26(c)(1)(B). III. The magistrate judge correctly found that most of the plaintiffs failed to show good cause for issuance of a protective order under Rule 26(c)(1). Issuance of a protective order under Rule 26(b)(2)(C) was clearly erroneous. The failure to find good cause under Rule 26(c)(1) for certain individual plaintiffs also was clear error. Accordingly, it is ORDERED that the defendant’s objection to the magistrate judge’s discovery order (ECF No. 121) is SUSTAINED IN PART. It is further ORDERED that the magistrate judge’s discovery order (ECF No. 116) is VACATED. It is further ORDERED that plaintiffs’ motion for a protective order (ECF No. 83) is GRANTED IN PART AND DENIED IN PART. The depositions of the plaintiffs who filed their cases in the transferor districts shall be taken in person in their home districts, and the depositions of plaintiffs Diahann Messeguer, James Quattropani, Salyi Vu, Michael Natale, and Kent Schumann shall be taken in person in the districts in which they reside. By stipulation, the parties may agree to take these depositions remotely. See Fed. R. Civ. P. 30(b)(4). The motion is DENIED in all other respects. Dated: June 18, 2024 s/David M. Lawson DAVID M. LAWSON United States District Judge - 11 -

=== ORDER DENYING REDUCTION OF SENTENCE ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. ALVIN COATES, _____________________________________/ Defendant. Case Number 16-20414 Honorable David M. Lawson ORDER DENYING REDUCTION OF SENTENCE Defendant Alvin Coates was sentenced by the Honorable Avern Cohn to 87 months in prison after Coates pleaded guilty to a twelfth superseding information charging him with conspiracy to possess and distribute heroin, crack cocaine, and fentanyl. The probation department identified the sentence in this case as eligible for consideration of a reduction under 18 U.S.C. § 3582(c)(2) and Amendment 821 to the United States Sentencing Guidelines. The probation department found that Coates’s sentencing guideline range would be reduced by the retroactive application of USSG § 4C1.1(a), which calls for a two-point reduction of the offense level for offenders having no criminal history points. The government objects, arguing that Coates is categorically ineligible for a reduction under that section because his offense resulted in death or serious bodily injury. For reasons discussed below, the Court agrees that Coates is not eligible for relief and will decline the request to reduce the sentence. I. Coates participated in a drug trafficking organization as a paid delivery driver (referred to by the parties as a “runner”) in a drug conspiracy to sell and deliver heroin, crack cocaine, and fentanyl. He had been charged with that conspiracy in an eighth superseding indictment, which included a penalty enhancement provision that alleged that his conduct caused death or serious injury. But with the plea agreement, the government chose not to pursue those allegations against him. On March 27, 2018, Coates pleaded guilty to a twelfth superseding information charging conspiracy to distribute and to possess with intent to distribute multiple controlled substances. Coates’s criminal history produced no criminal history points, and Judge Cohn determined that the applicable offense level was 27, yielding a sentencing guideline range of 70 to 87 months. After protracted arguments with the government over the terms of the plea agreement, Judge Cohn sentenced Coates to 87 months in prison. Following the recent sentencing guideline amendments, which would reduce the offense level to 25 if applicable, the probation department calculated the applicable sentencing range as 57 to 71 months. The probation department notified the Court of the possibility of a sentence reduction, and the government objected. Coates, through counsel, filed a response. II. As a general rule, “a federal court ‘may not modify a term of imprisonment once it has been imposed.’” United States v. Alam, 960 F.3d 831, 832 (6th Cir. 2020) (quoting 18 U.S.C. § 3582(c . But that rule comes with a few exceptions, one of which arises when a defendant was sentenced to prison “based on a sentencing [guideline] range that has subsequently been lowered by the Sentencing Commission.” 18 U.S.C. § 3582(c)(2). When that occurs, the Court may order a reduction of the prison sentence “if such a reduction is consistent with applicable policy statements issued by the Sentencing Commission.” Ibid. The Sentencing Commission’s policy statement on this subject is found at USSG § 1B1.10, and it references the statute’s authorization of sentence reductions based on retroactive changes to the Sentencing Guideline Manual. Last year, the United States Sentencing Commission promulgated Amendment 821, which changed the sentencing guidelines’ scoring of offense levels for zero-point offenders, that is, - 2 - defendants whose criminal history yields no criminal history points. The amendment was made retroactive. Part B of Amendment 821, which now appears in the guidelines at section 4C1.1(a), instructs that an offense level for zero-point offenders should be reduced by two levels if certain other requirements are met. One requirement is that “the offense did not result in death or serious bodily injury.” USSG § 4C1.1(a)(4). Although the government failed to include allegations of death or serious injury resulting from Coates’s conduct when if filed the twelfth superseding information, to which Coates pleaded guilty, it now argues that Coates should be held responsible for those consequences. It points to similar allegations in earlier charging documents (the eighth superseding indictment), and it states that a codefendant was convicted at trial of those penalty-enhanced charges. It calls the Court’s attention to proofs in that trial consisting of testimony of a person who said she consumed drugs supplied by Coates and who suffered a near-fatal overdose. Of course, Coates did not participate in that trial, and he did not have any opportunity to cross-examine any of the witnesses. That evidence cannot be used against him here, as it would implicate substantial due process concerns. See Lankford v. Idaho, 500 U.S. 110, 126-27 (1991). And it is unlikely that Congress intended that district courts conduct a series of minitrials to determine if retroactive applications of guideline amendments are applicable. The better approach is to take guidance from the line of cases that prescribe the methodology for determining if prior convictions constitute predicate offenses under the Armed Career Criminal Act or the sentencing guideline enhancement for armed career criminals. Under that approach, courts “consider neither ‘the particular facts underlying the prior convictions’ nor ‘the label a State assigns to [the] crime[s].’” Shular v. United States, 589 U.S. 154, 157 (2020) (quoting Mathis v. United States, 579 U.S. 509-10 (2016 ; United States v. Cervenak, 99 F.4th - 3 - 852, 856 (6th Cir. 2024). Instead, courts limit their consideration to a list of official documents that have come to be known as “Shepard documents,” and consist of “the terms of the charging document, the terms of a plea agreement or transcript of colloquy between judge and defendant in which the factual basis for the plea was confirmed by the defendant, or to some comparable judicial record of this information.” Shepard v. United States, 544 U.S. 13, 26 (2005). The analogy to determinations under USSG § 4C1.1(c) is not perfect, inasmuch as the categorical approach exercise is designed to determine offense elements, not the consequences of criminal conduct. But the procedures share practical benefits for judicial and administrative efficiency. The point of the categorical approach (or the modified categorical approach) is to avoid delving into the historical facts of a case to determine if past conduct triggers sentencing enhancements. It serves a “‘practical’ purpose[]: It promotes judicial and administrative efficiency by precluding the relitigation of past convictions in minitrials conducted long after the fact.” Moncrieffe v. Holder, 569 U.S. 184, 200-01 (2013) (citing Chambers v. United States, 555 U.S. 122, 125 (2009 . Here, the government abandoned the formal charge that Coates caused death or serious injury when he delivered potentially lethal drugs. However, among the Shepard documents in this case is the plea agreement, in which Coates admitted that one of the drug customers that received heroin or fentanyl from him on March 17 and 31, 2016 suffered an overdose. ECF No. 425, PageID.2095. Application note M to guideline section 1B1.1 defines “serious bodily injury” as an “injury involving extreme physical pain or the protracted impairment of a function of a bodily member, organ, or mental faculty; or requiring medical intervention such as surgery, hospitalization, or physical rehabilitation.” A drug overdose by its nature is life-threatening and incapacitating for a period of time, easily fitting within the definition quoted above. - 4 - It is apparent, then, that Coates’s offense, which included the distribution of heroin and fentanyl to a person who, by Coates’s own admission, suffered an overdose, resulted in serious bodily injury. Therefore, he is ineligible for relief under USSG § 4C1.1(a)(4). III. Because defendant Coates does not qualify for an adjustment to his sentencing guideline range under USSG § 4C1.1(a), or any other guideline amendment made retroactive by the Sentencing Commission, his sentence cannot be reduced. Accordingly, it is ORDERED that the defendant’s request to reduce his sentence (ECF Nos. 901, 912) is DENIED. Dated: June 11, 2024 s/David M. Lawson DAVID M. LAWSON United States District Judge - 5 -

=== OPINION AND ORDER GRANTING IN PART AND DENYING IN PART GOVERNMENT’S REQUEST FOR A CONTINUING WRIT OF GARNISHMENT ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 23-51467 Honorable David M. Lawson UNITED STATES OF AMERICA, v. Plaintiff, DONALD STANLEY LAVIGNE, Defendant, and STATE OF MICHIGAN DEPARTMENT OF TREASURY, ________________________________________/ Garnishee OPINION AND ORDER GRANTING IN PART AND DENYING IN PART GOVERNMENT’S REQUEST FOR A CONTINUING WRIT OF GARNISHMENT Defendant Donald Stanley Lavigne was convicted on all ten counts of an indictment charging him with, among other things, filing false income tax returns. He was sentenced to a prison term to be followed by supervised release for two years, a special assessment of $1,000 ($100 per count), and restitution payable to the Internal Revenue Service of $80,732.11. See United States v. Lavigne, No. 21-20355 (E.D. Mich.), ECF No. 236. The government has requested a writ of continuing garnishment to collect the monetary penalties set forth in the judgment. Lavigne countered with a request for a hearing, including in his request a demand that the Court quash the garnishment writ and vacate the restitution order. He raises several objections relating to assets that are exempt from execution, ambiguities in the judgment and commitment, the absence of a payment schedule, and the timing of collection of the monetary penalties. Most of Lavigne’s objections are meritless. However, one of them — relating to the timing of the restitution payments — was not addressed by the government’s response, and upon examination requires a substantial modification of the writ of garnishment. Because the tax crimes on which Lavigne was convicted are not offenses identified in the Mandatory Victim’s Restitution Act as authorizing a restitution order, ordering immediate restitution is not allowed. The Court may order restitution payment as a condition of supervised release, which it did here. But collection of that restitution must wait until Lavigne is under supervision. The government may collect immediately only the special assessment of $1,000, and its garnishment request must be modified accordingly. I. Lavigne was convicted at a bench trial of seven counts of filing false tax returns in violation of 26 U.S.C. § 7206(1), two counts of making false statements in a bankruptcy proceeding in violation of 18 U.S.C. § 152(3), and one count of lying to a government official in violation of 18 U.S.C. § 1001(a)(3). He was sentenced on July 18, 2023 to 36 months in prison followed by two years of supervised release. He was ordered to pay a special assessment totaling $1,000. As a special condition of his supervised release, Lavigne was required to pay restitution to the Internal Revenue Service of $80,732.11. Lavigne, No. 21-20355, Judgment, ECF No. 236, PageID.2279. The Court calculated the restitution amount as the tax loss, interest, and penalties for tax years 2013 through 2018 as established by the government at the sentencing hearing. Lavigne, No. 21-20355, Sent’g Hr’g Tr., ECF No. 237, PageID.2303. As a special condition of supervision, the Court ordered Lavigne to file amended tax returns for each of the affected tax years, pay the tax obligation owed, and establish a monthly payment plan. Id. at PageID.2304; Judgment at 5, ECF No. 236, PageID.2278. In the Schedule of Payments section of the judgment, the Court ordered the $1,000 special assessment to be paid as a lump sum due immediately. Id., Judgment at 7, ECF No. 236, PageID.2280. The Court checked boxes on the judgment form that stated “[p]ayment [is] to begin - 2 - immediately” and that “[p]ayment during the term of supervised release will commence within 30 days (e.g., 30 or 60 days) after release from the imprisonment. The court will set the payment plan based on an assessment of the defendant’s ability to pay at that time.” Ibid. Finally, the judgment states that “[u]nless the court has expressly ordered otherwise, if this judgment imposes imprisonment, payment of criminal monetary penalties is due during imprisonment.” Ibid. Lavigne has appealed his conviction and sentence, and his appeal remains pending. The government opened the present miscellaneous file with an application for a continuing writ of garnishment to collect the restitution amount stated in the criminal judgment. The Clerk issued the writ directed to the Michigan Department of Treasury on October 6, 2023, and it was served on the defendant on October 18, 2023. On November 9, 2023, Lavigne, who is serving his sentence at FPC Loretto in Loretto, Pennsylvania, filed a motion to appoint counsel and to extend time to request a hearing opposing the government’s application for writ of continuing garnishment. The Court granted that motion in part, extending Lavigne’s response date but denying his request for counsel. Lavigne then filed a request for a hearing, claiming every exemption available under 18 U.S.C. § 3613, although he specified that he only claimed them “if they apply and the law allows.” ECF No. 7, PageID.36. Lavigne also raised several additional issues with the garnishment. The government filed a response, and Lavigne filed a reply. II. The government may enforce the monetary payment provisions of a criminal judgment against a criminal defendant — that is, it may collect court-ordered fines and restitution payments — “in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law.” 18 U.S.C. §§ 3613(a), (f); In re Robinson, 764 F.3d 554, 559, 560 n.1 - 3 - (6th Cir. 2014). Section 3613(a) in turn references 26 U.S.C. § 6334, which contains a long list of property categories that are exempt from levy. The exempt properties include things like wearing apparel, tools of trade, unemployment benefits, pensions, child support, and a portion of wages. A. The civil procedures that the federal government utilizes to collect judgments are set forth in the Federal Debt Collection Procedures Act (“FDCPA”), 28 U.S.C. §§ 3001, et seq. 28 U.S.C. § 3001(a)(1). Under the FDCPA, upon application by the government, the Court is authorized to “issue a writ of garnishment against property (including nonexempt disposable earnings) in which the debtor has a substantial nonexempt interest and which is in the possession, custody, or control of a person other than the debtor, in order to satisfy the judgment against the debtor.” Id. § 3205(a). The government then must serve the writ on the garnishee and the debtor. Id. § 3205(c)(3). The garnishee must file an answer with the court and serve a copy of its answer on the debtor and the government. Id. § 3205(c)(4). Either party may then file objections to the garnishee’s answer and request a hearing “[w]ithin 20 days after receipt of the answer.” Id. § 3205(c)(5). The Court will hold a hearing on the objections, but the hearing is limited to the validity of a claim of exemption and the government’s compliance with statutory requirements. 28 U.S.C. § 3202(d). A judgment debtor who contests a writ of garnishment bears the burden of showing he is entitled to an exemption. United States v. Sawaf, 74 F.3d 119, 122 (6th Cir. 1996). A hearing is not necessary, however, “where the objection is plainly without merit, or where the objection was simply a matter of statutory interpretation.” United States v. Miller, 588 F. Supp. 2d 789, 797 (W.D. Mich. 2008) (collecting cases). None of the exemptions cited pro forma by Lavigne applies here; the government’s writ is directed to money owed the defendant by the Michigan treasury, like state income tax refunds. - 4 - Courts repeatedly have held that state income tax refunds are not exempt from garnishment. See, e.g., United States v. Budd, No. 21-50759, 2021 WL 5541936, at *1-2 (E.D. Mich. Aug. 31, 2021); United States v. Miller, No. 08-11499, 2019 WL 2205918, at *1 (E.D. Mich. Feb. 28, 2019), report and recommendation adopted, 2019 WL 1748426 (E.D. Mich. Apr. 19, 2019) (“Because Defendant has not shown that his Michigan income tax refunds are exempt from garnishment, his objections must be denied.”); United States v. Price, No. 17-51116; 2017 WL 4803706, at *2 (E.D. Mich. Oct. 25, 2017); United States v. Bravata, No. 14-50375, 2015 WL 4967044, at *2 (E.D. Mich. Aug. 19, 2015); United States v. Henderson, No. 13-15146, 2014 WL 4209936, at *1 (E.D. Mich. Aug. 26, 2014) (“While SSI funds would be exempt, his tax refund, based on taxes withheld as the result of employment, is not.”). Lavigne’s objection plainly is without merit. Miller, 588 F. Supp. 2d at 797. No hearing is required. B. Lavigne insists that the Court did not have the authority to order restitution to the government in this case. That argument constitutes a collateral attack on the judgement, which presently is on appeal. This Court cannot “alter[] the sentence” while the court of appeals has jurisdiction of the case. United States v. Carman, 933 F.3d 614, 617 (6th Cir. 2019). Lavigne’s argument should be directed to the appellate court. It is true that federal courts have no inherent authority to order restitution to crime victims; they may do so, however, when Congress has authorized them to do so. United States v. Evers, 669 F.3d 645, 655 (6th Cir.2012). The Victim Witness Protection Act, 18 U.S.C. § 3663, and the Mandatory Victim Restitution Act, 18 U.S.C. § 3663A, are two such authorizing statutes, but neither authorizes restitution as an independent part of the sentence for tax offenses under Title 26. United States v. Blanchard, 618 F.3d 562, 577 (6th Cir. 2010); United States v. Butler, 297 - 5 - F.3d 505, 518 (6th Cir. 2002). Nevertheless, “the law gives courts wide discretion in ordering restitution as a condition of supervised release.” United States v. Kilpatrick, 798 F.3d 365, 391 (6th Cir. 2015) (citing United States v. Batson, 608 F.3d 630, 635 (9th Cir. 2010) (“[T]he Supervised Release Statute [18 U.S.C. § 3583(d) ], together with the Probation Statute [18 U.S.C. § 3563], unambiguously authorizes federal courts to order restitution as a condition of supervised release for any criminal offense, including one under Title 26, for which supervised release is properly imposed.” . That authority extends to ordering as a supervised release condition that the defendant pay restitution to the government when it has suffered a tax loss. United States v. Lawrence, 557 F. App’x 520, 531 (6th Cir. 2014) (recognizing that “if a defendant has been convicted of a tax crime under Title 26, and a court finds that the government has suffered a loss, the court may order the defendant to make restitution as a special condition of supervised release”) (citations omitted). The Court unquestionably was empowered to order Lavigne to pay restitution to the IRS as a condition of supervision. He believes the restitution order is premature, however, because after he undertakes to complete his faulty tax returns properly, the amount of his tax obligations could change. The problem with that argument is that it confounds the loss amount (and the corresponding restitution amount) determined by the Court at sentencing with the defendant’s actual civil tax liability. The two are not necessarily the same. Klein v. Comm’r of Internal Revenue, 149 T.C. 341, 359-60 (2017). As the Tax Court in Klein explained, The restitution ordered in a criminal tax case is designed to compensate the IRS for the loss caused by the defendant’s wrongdoing. But that award does not purport to reflect the defendant’s actual civil tax liability. Generally, the IRS will later commence an examination to determine what the taxpayer’s civil tax liability is. That liability may be higher or (as petitioners contend here) lower than the tax loss that formed the basis for the restitution award. - 6 - Id. at 359. The restitution figure in a criminal case is calculated using the evidence presented at the sentencing hearing bearing on the calculation of tax loss. Id. at 360. When the IRS later assesses the defendant’s actual liability, the defendant is free to claim deductions not considered in the tax loss calculation. Ibid. If Lavigne takes issue with the amount of restitution in light of the evidence presented in the criminal case, he should seek to air that issue in his direct appeal. C. Lavigne’s argument about the timing of the collection of restitution raises another issue, perhaps by accident. Restitution was ordered in this case as a special condition of supervised release. Lavigne is still serving the custodial part portion of his sentence and has not been released on supervision yet. Courts cannot require a defendant to make immediate payment on a restitution judgment when it is imposed as a term of supervised release. United States v. Westbrooks, 858 F.3d 317, 328 (5th Cir. 2017), vacated on other grounds by Westbrooks v. United States, 584 U.S. 901 (2018); United States v. Hassebrock, 663 F.3d 906, 924 (7th Cir. 2011) (“Because a district court can only impose restitution as a condition of supervised release, a defendant cannot be required to pay restitution until his period of supervised release begins.”). If a court cannot order a defendant to pay restitution until their period of supervised release, it follows that the government cannot commence collection efforts on that part of the judgement’s monetary penalties. The government does not address this issue in its brief, and it is not clear upon what authority it seeks to base its collection efforts. See United States v. Roush, 452 F. Supp. 2d 676, 681 (N.D. Tex. 2006) (“Because restitution payments are not presently due under the judgment, there is nothing for the government to enforce by garnishment.) Once the defendant is on supervision, then the Court can address Lavigne’s arguments about establishing a payment plan. Lavigne believes that the Court failed to establish such a plan - 7 - with his personal financial circumstances in mind. He is incorrect. His judgment reflects a consideration of his financial circumstances. See Lavigne, No. 21-20355, Judgment at 7, ECF No. 236, PageID.53 (“Having assessed the defendant’s ability to pay, payment of the total criminal monetary penalties is due as follows . . . .”). And the Court did impose a payment schedule. The $1,000 special assessment was due immediately, while the balance of his restitution will be set as part of a later payment plan upon his release from custody. That scheme complies with the requirements of the MVRA. See United States v. Hack, 999 F.3d 980, 982 (6th Cir. 2021) (holding that a post-release payment schedule that would be finalized later based on the defendant’s financial circumstances and recommendation of the probation department satisfies the terms of section 3664(f)(2) of the MVRA). D. Next, Lavigne argues that his judgment is ambiguous in two respects, which he believes require the writ of garnishment to be quashed and the judgment of restitution vacated. First, he notes that one of his conditions of supervised release requires that he file amended tax returns. He believes that these returns may change the amount he owes to the IRS, so the judgment is impermissibly ambiguous as to the amount of restitution owed. Second, he maintains that his judgment is ambiguous because the word restitution is not used in the Schedule of Payments section of his judgment. He believes this means that the Court did not indicate when his restitution would be due. Neither of these arguments has merit, but if Lavigne intends to attack the judgment, he should do so on direct appeal. E. Finally, Lavigne contends that issuance of a garnishment writ denies his due process. That argument is not clearly developed. If he is challenging the Court’s decision to award restitution in - 8 - the first instance, again, he must raise that issue in his direct appeal. If he is challenging the procedures in this garnishment action, his argument is meritless. The Due Process Clause guarantees a person certain procedures before the government may deprive that person of life, liberty, or property. The fundament of that requirement is notice and the opportunity to be heard. Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 313 (1950). Lavigne has had both. He obviously had notice of the government’s writ, otherwise he could not have presented his written objections. And the Court is now able to determine whether the legal or factual disputes arising from his objections warrant a live hearing (which they don’t). Cf. United States v. Bankas, 717 F. App’x 637, 638 (7th Cir. 2018) (mem.) (holding that defendant’s due process rights were not violated by district court’s denial of hearing when objections to garnishment were not based on grounds identified by section 3202(d . III. The government may not enforce the restitution order in the criminal judgment until defendant Lavigne has been released from prison and begins his term of supervised release. The government may enforce the monetary penalty part of the criminal judgment that requires the payment of a $1,000 special assessment. Accordingly, it is ORDERED that the defendant’s objections to the writ of garnishment are SUSTAINED IN PART AND OVERRULED IN PART, and his request for a further hearing (ECF No. 7) is DENIED. - 9 - It is further ORDERED that the government must amend its request for a writ of garnishment to confine its collection effort to the $1,000 special assessment part of the monetary penalties in the criminal judgment. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 20, 2024 - 10 -

=== OPINION AND ORDER GRANTING IN PART GOVERNMENT’S MOTION FOR INTERLOCUTORY SALE OF VESSEL SUBJECT TO FORFEITURE AND SETTING SALE CONDITIONS ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. SAMER YOUSSEF, ________________________________________/ Defendant. Case Number 23-20431 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART GOVERNMENT’S MOTION FOR INTERLOCUTORY SALE OF VESSEL SUBJECT TO FORFEITURE AND SETTING SALE CONDITIONS The indictment in this case charging defendant Samer Youssef with health care fraud and money laundering also contains forfeiture allegations. One item the government seized as alleged proceeds derived from the criminal activity is a yacht, which currently is in United States Marshals Service custody. The government filed a motion (styled as an “application”) for interlocutory sale of the vessel. Youssef did not object to the sale in principle, but he disagreed with the government’s proposed sale procedures, which vests significant discretion in the Marshals Service. He argued that the vessel should be sold through a broker, a method which, he believed, would fetch a higher price. The Court held a hearing on the government’s motion on March 28, 2024, at the conclusion of which the Court allowed Youssef to have access to the vessel, to obtain an appraisal by an expert of his choosing, and to propose a disposition plan. On May 1, 2024, Youssef pleaded guilty to one count of health care fraud (18 U.S.C. § 1349) and one count of money laundering (18 U.S.C. § 1357). During the plea hearing, the Court inquired about the status of the government’s application for an order of interlocutory sale of Youssef’s vessel. Youssef’s attorney stated that the defendant no longer intended to seek an appraisal of the vessel and had no objection to an interlocutory sale, provided that the Court set a reserve price. The government opposed the defendant’s request, and the Court asked for supplemental briefs, which have been filed. Youssef does not contest the Court’s authority to order a sale of the vessel at this stage of the case, but he argues that the Court should set a reserve price of approximately $373,000, which represents the value of the vessel as determined by the government’s appraiser. He argues that this value would ensure that the government’s proposed auction would proceed in a “commercially feasible” means, conforming with 21 U.S.C. § 853(h)’s command. He also asks — presumably in the alternative — that the government be required to seek Court approval of a sale at a price below the appraised value to prevent a “fire sale” of the vessel. The government argues that Youssef’s failure to acquiesce to its proposed sales terms amounts to a breach of his plea agreement, which requires that he cooperate with the government’s efforts with dispose of forfeitable property. That argument does not reflect an honest construction of the plea agreement. In that agreement, Youssef agreed to cooperate with the government’s efforts “to identify, locate, seize, and forfeit” the property that could be subject to forfeiture. ECF No. 68, PageID.268-69. It does not require him to roll over on any government proposal to liquidate personal property at any price. And the plea agreement also suggests that the forfeited property could be used to offset Youssef’s substantial restitution obligation, id. at PageID.270-71, so it would behoove him and the government alike to maximize the proceeds from the sale of the vessel. The government also balks at Youssef’s suggestion of setting the reserve price at the appraised value, arguing that it would not foster a competitive auction because a bidder could only pay market price or more. The government does acknowledge, though, that the standard procedure of its yacht broker, National Liquidators, is to set a reserve price at 75 percent of a vessel’s “value.” - 2 - If a reserve price is not achieved, the vessel would be relisted and eventually would be re-appraised if it still has not sold. The Court’s authority to order the interlocutory sale of property subject to criminal forfeiture is derived, among other sources, from 21 U.S.C. § 853(e), which permits a court to “enter a restraining order or injunction, require the execution of a satisfactory performance bond, or take any other action to preserve the availability” of property subject to forfeiture. 21 U.S.C. § 853(e)(1) (emphasis added). This authority is triggered upon the filing of an indictment charging a violation for which criminal forfeiture may be ordered, as here, and alleging that the property with respect to which the order is sought would, in the event the defendant is convicted, be subject to forfeiture. Id. § 853(e)(1)(A); see also United States v. King, No. 10-122, 2010 WL 4739791, at *1 (S.D.N.Y. Nov. 12, 2010). “Courts have interpreted the statute’s grant of authority . . . as a flexible grant including the authority to order the interlocutory sale of property when necessary to preserve the property’s equity or value.” United States v. Johnston, No. 13-5181, 2013 WL 5775250, at *5 (E.D. Ky. Sept. 26, 2013), report and recommendation adopted sub nom. United States v. Woodland Dream, No. 13-279, 2013 WL 5775298 (E.D. Ky. Oct. 24, 2013). In addition, the Federal Rules of Criminal Procedure’s forfeiture provisions also provide authority for the court to conduct interlocutory sales. United States v. Guzman, No. 08-00023, 2013 WL 12228400, at *2 (M.D. Tenn. Oct. 7, 2013) (applying both section 853 and the forfeiture provisions of the Federal Rules); see also King, 2010 WL 4739791, at *1 (same). Rule 32.2(b)(7) states that a district court, “at any time before entry of a final forfeiture order,” may order an interlocutory sale of alleged forfeitable property “in accordance with Supplemental Rule G(7) of the Federal Rules of Civil Procedure.” Fed. R. Crim. P. 32.2(b)(7) (emphasis added). Of particular relevance here, interlocutory sales are permitted when “the expense of keeping the property is - 3 - excessive or is disproportionate to its fair market value.” Fed. R. Civ. P. Supp. G(7)(b)(1)(B). The government has stated, and the defendant does not dispute, that the vessel is in drydock storage incurring monthly storage expenses; and modest repairs ($3,650 to address dock rash on the hull, an acid wash to remove hard water stains, and routine service on all three motors) likely would be required to make the vessel seaworthy and more attractive to a buyer. The Court has “considerable discretion” to order a sale of property subject to forfeiture and to prescribe its terms. United States v. Approximately 81,454 Cans of Baby Formula, 560 F.3d 638, 641 (7th Cir. 2009). Such sales generally are “governed by 28 U.S.C. §§ 2001, 2002, and 2004, unless all parties, with the court’s approval, agree to the sale, aspects of the sale, or different procedures.” Fed. R. Civ. P. Supp. G(7)(b)(iii). Section 2004 requires that any personal property sold by order of a court be conducted in accordance with the provisions of section 2001, “unless the court orders otherwise.” 28 U.S.C. § 2004; Glander Int’l Bunkering Inc. v. M/V TERESA, 586 F. Supp. 3d 189, 198 (E.D.N.Y. 2022). Section 2001, in general, requires a public sale “upon such terms and conditions as the court directs.” 28 U.S.C. § 2001(a). However, the court may order a private sale, after a hearing, “if it finds that the best interests of the estate will be conserved thereby.” Id. § 2001(b). Courts ordering interlocutory sales frequently include a reserve (or minimum) price as part of the sale conditions. See, e.g., United States v. $510,910.00 in United States Currency, No. 18- 1683, 2020 WL 3840502, at *2 (S.D. Ill. July 8, 2020). The question then becomes what reserve price is appropriate. Youssef prefers that the reserve price be set at approximately $373,000, which is close to the appraised value of the vessel. The government objects, noting that absent Court intervention, the yacht broker’s default practice is to set a reserve price at 75 percent of a vessel’s “value.” That “value,” however, is subject to some dispute. Youssef took the position initially - 4 - that the yacht was worth $550,000. But he has not backed up that assertion with an appraisal of his own, despite being given the opportunity to do so. A reserve price of 75% of the only actual appraisal available is a reasonable approach to the sale, tempered, however, by the requirement that the government must seek and obtain Court approval before finalizing any sale, before which the defendant would be allowed to object to the sale price. Several factors suggest that setting the reserve at 75 percent of the vessel’s appraised value would be appropriate. First, that figure comports with the practice of the government’s yacht broker, which presumably has experience with and an interest in maximizing sales proceeds. Second, this figure likely will permit the sale to reach a conclusion expeditiously. Although it is possible that this could result in a sale that undershoots the vessel’s fair market value somewhat, there are costs to further delaying the sale that could diminish the net yield. The vessel continues to accumulate storage fees, which reduce the amount that ultimately will be recovered. The vessel also may depreciate in value over time; the government’s appraisal was made in August 2023. Third, this reserve price is consistent with the practice of other courts that have ordered interlocutory sales. See, e.g., United States v. $510,910.00 in United States Currency, 2020 WL 3840502, at *2 (setting reserve price of recreational vehicle at “75 percent of the retail value”); United States v. One 2005 Lagoon 440 Sailing Catamaran Named Bohemian Rhapsody, No. 13- 9262, 2017 WL 10573808, at *4 (C.D. Cal. Sept. 22, 2017) (setting lowest acceptable bid on a vessel at 66 percent of the National Automobile Dealers Association (“NADA”) list price at the time of sale); United States v. One 2014 Rolls Royce Phantom Auto., 461 F. Supp. 3d 1, 2-3 (D.D.C. 2018) (setting reserve price at government’s estimate of fair market value where claimant contended the value was approximately $10,000 to $20,000 higher). - 5 - The government’s appraiser and selling agent, National Liquidators, estimated the vessel’s NADA value at $373,950 and “NL Consensus Value” as $370,000. ECF No. 55, PageID.190. Presumably, the latter is National Liquidator’s own estimate of the vessel’s worth, although the government does not specify why it differs from the NADA value. (National Liquidators did find that the vessel required approximately $3,650 in maintenance, but this figure does not explain completely the discrepancy.) In any event, taking 75 percent of the NADA appraisal yields $280,462.50 — a figure substantially below either appraisal, but likely sufficient to promote a robust auction. That reserve price is reasonable under all circumstances at present. Accordingly, it is ORDERED that the government’s motion for an interlocutory sale of seized property, to-wit: a 2022 40-foot Schaefer 400 Sport vessel, bearing hull number SHF40119H122 and Florida Title No. 146978808 (the “Vessel”), (ECF No. 55) is GRANTED IN PART. It is further ORDERED that the government may proceed with its efforts to sell the Vessel on the following terms: a) The Vessel will be sold in the most commercially feasible manner as determined by the government’s appraiser and selling agent, National Liquidators, under the supervision of the United States Marshal Service (USMS) for the Middle District of Florida under the terms of this Order; b) The USMS and its delegate, National Liquidators, may reject any offers to purchase the Vessel for any reason, where it determines that the offer is being made by, on behalf of, or in conjunction with a person or entity involved in the criminal activity alleged in these criminal proceedings as the basis for forfeiture; c) The selling agent may not entertain any offer that is less than $280,462.50; d) Before any sale is finalized, the government must seek and obtain permission from the Court by filing an appropriate motion. The defendant may oppose the motion by filing an appropriate response within 14 days after the motion is filed. Final sale will be subject to Court approval; - 6 - e) After the sale of the Vessel is finalized, the net sale proceeds shall be remitted to the custody and control of the USMS or its delegate and shall be deposited into the Department of Justice Seized Asset Deposit Fund, an interest bearing account; f) The net proceeds from the sale of the Vessel will include all money realized from the sale of the property, less all reasonable costs incurred by the USMS or its delegate in connection with the storage, maintenance, repair, marketing, and sale of the Vessel; g) The net proceeds realized from the sale of the Vessel shall constitute “substitute res” for the Vessel in this case and subject to any preliminary and final order of forfeiture entered in the case; and h) An accounting of the proceeds attributable to the Vessel shall be maintained by the USMS or its delegate and furnished to the Court. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 17, 2024 - 7 -

=== OPINION AND ORDER DENYING MOTION TO REDUCE SENTENCE ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. MARCUS GILBERT, _________________________________________/ Defendant. Case Number 16-20414 Honorable David M. Lawson OPINION AND ORDER DENYING MOTION TO REDUCE SENTENCE Marcus Gilbert was sentenced to 103 months in prison by the Honorable Avern Cohn on September 18, 2018 for his involvement in a drug trafficking conspiracy. He now seeks a reduction of his prison sentence under 18 U.S.C. § 3582(c)(2) and Amendment 821 to the United States Sentencing Guidelines. He argues that the amendment will eliminate “status points” from his criminal history score, and that will result in a lower criminal history category than the one Judge Cohn applied, and a consequent reduction in his sentencing guideline range. The government disagrees that the elimination of the status points will reduce Gilbert’s criminal history category or his sentencing guideline range and argues therefore that Gilbert is not eligible for a reduction. The Court agrees that Gilbert is not eligible for relief under the statute and will deny the motion to reduce the sentence. I. Gilbert pleaded guilty to conspiracy to possess and distribute 100 or more grams of heroin and 28 or more grams cocaine base in violation of 21 U.S.C. §§ 841(b)(1)(B) and 846 under a plea agreement with the government. The plea agreement, drafted in accordance with Federal Rule of Criminal Procedure 11(c)(1)(C), anticipated a sentencing guideline range of 87 to 108 months, and the parties agreed that a specific sentence of 103 months imprisonment was appropriate. See ECF No. 412. In the presentence report, the probation department calculated Gilbert’s net offense level as 27, which the parties did not (and do not here) dispute. In the worksheets attached to the plea agreement, the parties listed convictions for receiving stolen property and possession of a controlled substance totaling four criminal history points, plus two points (the “status points”) because Gilbert was under a criminal justice sentence when he committed the offence of conviction. His six criminal history points placed him in criminal history category III. That yielded a sentencing guideline range of 87 to 108 months. ECF 412-1, PageID.2051-52. However, the probation department scored an additional criminal conviction for receiving stolen property that Gilbert earned as a juvenile. That additional criminal history point elevated Gilbert’s criminal history category to VI and increased his sentencing guidelines range to 100 to 125 months. At the sentencing hearing held on August 30, 2018, Judge Cohn stated that he thought the probation department’s calculation overstated the defendant’s criminal history; that the “proper criminal history is” category III; and that the applicable sentencing range was 87 to 108 months. ECF No. 545, PageID.2589. The government agreed with the sentencing guideline calculation. Id. at PageID.2590. (“[W]e believe that the Court has accurately determined the guideline range in this case.”). Judge Cohn then called out a provision of the plea agreement, which he read as mandating a 103-month sentence, if the Court accepted the agreement. And Judge Cohn read his statements in the record as having “impliedly” accepted the agreement. Id. at PageID.2589. He believed that he should not have accepted the plea agreement without first seeing the presentence report, and he thought that the provision mandating a specific sentence was an “illegal” plea agreement provision. - 2 - He stated then that he “reserve[d] the right to sentence [Gilbert] between 87 and 108 months.” Ibid. The government’s lawyer apparently took that comment to mean that the Court was rejecting the plea agreement, and he engaged the Court in a protracted argument during which he made several oral motions. He moved to withdraw from the plea agreement for the government, to set the case for trial, to adjourn the sentencing hearing, to find that the defendant breached the plea agreement, and to file briefs. Id. at PageID.2592-2600. His argument did not illuminate anything useful, and Judge Cohn denied all of the government’s motions save the motion to adjourn the hearing. The sentencing hearing resumed on September 18, 2018. On that occasion, Judge Cohn stated that “[u]nder the guidelines your Offense Level is 27, your Criminal History Category is IV. The sentencing range is 100 to 125 months.” ECF No. 597, PageID.3168. The government’s lawyer apparently retreated from his position that Judge Cohn had rejected the plea agreement; instead, he took the position that it was not his “view that the Court is bound to accept agreements if it believes that those agreements were accepted in error. The Government believes that the Court retains the power today to reject plea agreements if it believes that those plea agreements should be rejected.” Id. at PageID.3172. Judge Cohn did not reject the plea agreement, observing that if he did, the defendant might be exposed to other charges that included a substantial mandatory minimum sentence. He then proceeded to sentence Gilbert to 103 months in prison, plus a term of supervised release. Id. at PageID.3173. The statement of reasons attached to the judgment and commitment listed a criminal history of III and a sentencing guideline range of 87 to 108 months. However the sentencing guideline range was calculated in this case, there is no question that the defendant’s criminal history score included two “status points.” And the parties agree that - 3 - if Gilbert were sentenced today, those status points would not be included in the calculation of his criminal history score. Gilbert argues that omitting those status points would make a difference because Judge Cohn excluded consideration of Gilbert’s juvenile adjudication, which would bring his total score to three points and a corresponding criminal history of II. The sentencing guideline range then would be 78 to 97 months. The government responds that Judge Cohn did not formally depart from the criminal history score or rule on an objection; instead, he simply referenced that the criminal history was overstated as a justification for varying from the probation department’s guideline scoring, which did not conform with the plea agreement. II. Last year, the United States Sentencing Commission promulgated Amendment 821, which changed the sentencing guidelines’ criminal history scoring for offenses committed while under a criminal justice sentence. Part A of Amendment 821, which now appears in the guidelines at section 4A1.1(e), limits the criminal history impact of “status points,” decreasing them by 1 point for individuals with 7 or more criminal history points and eliminating status points for those with 6 or fewer criminal history points. See U.S.S.G. § 4A1.1(e). The Amendment, which was given retroactive effect, provided that any order reducing a term of imprisonment based on retroactive application of Amendment 821 must have an effective date of February 1, 2024, or later. See § 1B1.10(e)(2) (Nov. 1, 2023). When a defendant was sentenced to prison “based on a sentencing range that has subsequently been lowered by the Sentencing Commission,” the defendant may move, and the Court may order, a reduction of the prison sentence “if such a reduction is consistent with applicable policy statements issued by the Sentencing Commission.” 18 U.S.C. § 3582(c)(2). The Sentencing Commission’s policy statement on this subject is found at U.S.S.G. § 1B1.10, and it - 4 - references the statute’s authorization of sentence reductions based on retroactive changes to the Sentencing Guideline Manual. It also states: “A reduction in the defendant’s term of imprisonment is not consistent with this policy statement and therefore is not authorized under 18 U.S.C. § 3582(c)(2) if . . . [a]n amendment listed in subsection (d) does not have the effect of lowering the defendant’s applicable guideline range.” U.S.S.G. § 1B1.10(2)(B). Adjudicating a motion under section 3582(c)(2) requires application of a two-step approach. First, the Court must consider whether the defendant is eligible for relief under the amendment, and then it must consider whether such a reduction is warranted based on the factors set forth in 18 U.S.C. § 3553(a). Dillon v. United States, 560 U.S. 817, 826 (2010) (citing § 3582(c)(2 . The defendant has the burden of establishing eligibility. United States v. Petaway, No. 16-3592, 2017 WL 6003432, at *1 (6th Cir. May 22, 2017) (“To be eligible for a reduction, a defendant must show that his sentence was based on a sentencing range that was subsequently lowered by the Sentencing Commission and that the reduction would be consistent with the Commission’s applicable policy statements.”) (citing United States v. McClain, 691 F.3d 774, 777 (6th Cir. 2012 . One requirement for eligibility is that the defendant’s sentence must have been based on a sentencing guideline range that an amendment subsequently reduced. It appears that Gilbert’s sentence was based on an agreement to peg the sentence at 103 months, which would have been required if Judge Cohn had accepted the plea agreement under Rule 11(c)(1)(C). Under that rule, the parties may “agree that a specific sentence or sentencing range is the appropriate disposition of the case, or that a particular provision of the Sentencing Guidelines, or policy statement, or sentencing factor does or does not apply.” Fed. R. Crim. P. 11(c)(1)(C). And “such a recommendation or request binds the court once the court accepts the plea agreement.” Ibid. A - 5 - fair reading of the record indicates that Judge Cohn believed that he had accepted the plea agreement and was bound therefore to sentence the defendant accordingly. It could be argued, then, that the sentence was based on the plea agreement, not on a sentencing guideline range that later was amended downward. However, the discussions in the record at the first sentencing hearing suggest that the 103- month agreed sentence was the product of the parties’ estimate of the applicable sentencing guideline range that was adjusted by other considerations, such as giving Gilbert credit for time spent detained before trial that otherwise would not be credited to him by the Bureau of Prisons. ECF No. 545, PageID.2597-98. The sentencing guideline range, therefore, was part of the framework for the negotiated plea agreement, and therefore the sentence was “based on” the sentencing guideline range. Hughes v. United States, 584 U.S. 675, 685 (2018) (holding that “a sentence imposed pursuant to a Type-C agreement is ‘based on’ the defendant’s Guidelines range so long as that range was part of the framework the district court relied on in imposing the sentence or accepting the agreement”). Another requirement for eligibility is that the “guidelines amendment must have the effect of lowering the defendant’s applicable guideline range.” United States v. Cook, 870 F.3d 464, 467 (6th Cir. 2017) (quoting United States v. Hameed, 614 F.3d 259, 269 (6th Cir. 2010); U.S.S.G. § 1B1.10(a)(2)(B (cleaned up). That determination calls for a comparison of the original applicable guideline range with the new range that results from applying the retroactive amendments. U.S.S.G. § 1B1.10(b)(2)(B). When calculating the new range, “the court shall substitute only the [new retroactive] amendments . . . for the corresponding guideline provisions that were applied when the defendant was sentenced and shall leave all other guideline application decisions unaffected.” Ibid. - 6 - The parties disagree on how this instruction is to be applied. Gilbert believes that the starting point is the guideline range Judge Cohn calculated after he departed or varied downward because he found that Gilbert’s criminal history was overstated. But that interpretation collides with Sixth Circuit precedent. In United States v. Pembrook, the court held that “the term ‘applicable guideline range’ in U.S.S.G. § 1B1.10 refers to a defendant’s pre-departure guideline range.” 609 F.3d 381, 384 (6th Cir. 2010). Referencing subsection (b)(2)(B), the court stated that “[t]his provision specifically refers to the defendant’s applicable guideline range as the guideline range that applied before the sentencing court decided to depart or vary downward.” Id. at 384- 85. The probation department determined that Gilbert’s sentencing guideline range was 100 to 125 months after it scored the juvenile adjudication, which brought the total criminal history points to seven and the criminal history category to IV. That was Gilbert’s “applicable guideline range.” Judge Cohn varied (or departed) downward by not including the juvenile adjudication in the criminal history score, reducing it to six points and category III and the corresponding sentencing guideline range to 87 to 108 months. The defendant does not argue that the juvenile adjudication was scored improperly. It wasn’t. See U.S.S.G. § 4A1.2(d). Eliminating the status points from the criminal history score still leaves Gilbert with four points, which puts him in Category III and yields the same sentencing guideline range that Judge Cohn found applicable: 81 to 108 months. Because Amendment 821 did not “have the effect of lowering the defendant’s applicable guideline range,” Gilbert is not eligible for relief from his prison sentence under 18 U.S.C. § 3582(c)(2). III. The defendant is not eligible for a reduction of his sentence under 18 U.S.C. § 3582(c)(2). - 7 - Accordingly, it is ORDERED that the defendant’s motion for a sentence reduction under Sentencing Guideline Amendment 821 (ECF No. 915) is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 15, 2024 - 8 -

=== OPINION AND ORDER GRANTING IN PART PLAINTIFF’S MOTION FOR ATTORNEY’S FEES AND EXPENSES ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION HRT ENTERPRISES, Plaintiff, v. CITY OF DETROIT, _____________________________________/ Defendant. Case Number 12-13710 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART PLAINTIFF’S MOTION FOR ATTORNEY’S FEES AND EXPENSES After a jury returned a verdict of almost $2 million in favor of plaintiff HRT Enterprises in this inverse condemnation case, the plaintiff filed a motion for attorney’s fees and costs under 42 U.S.C. § 1988. The parties are familiar with the facts of the case, which have been set forth in several of the Court’s previous opinions discussing this litigation that has endured for over a decade. The Court heard oral argument on the attorney’s fee motion on June 28, 2023, during which it expressed skepticism over the bases of some of the plaintiff’s fee requests, particularly its insistence that it may recover fees incurred in separate litigation. The Court understood, however, that the plaintiff is entitled to a substantial attorney’s fee as the prevailing party in this case. The defendant acknowledges as much, but it takes issue with the plaintiff’s proposed fee calculation on several grounds. After the Court heard oral argument, the Court directed the parties to meet and confer to attempt to resolve their differences over the hours spent and hourly rates claimed by plaintiff’s counsel and the allocation of hours incurred in this litigation as opposed to other cases. On August 21, 2023, the parties filed supplemental briefs stating their respective positions. On the same date, the plaintiff also filed a motion to “update” the motion for attorney fees seeking to add in hours billed from March through August 2023. And on September 11, 2023, the plaintiff submitted a supplemental exhibit consisting of spreadsheets summarizing the components of its fee request. The plaintiff now seeks an award of attorney’s fees totaling $1,503,113.88 and expenses of $55,010.22. The defendant, as mentioned, does not quarrel with an award of fees under section 1988, but it believes that the amount should be less than half that claimed. For the reasons discussed below, the defendant is closer to target. I. The amended judgment in this case awards the plaintiff $2,125,907.43, consisting of a verdict for just compensation of $1,976,820 and prejudgment interest of $149,087.43. The verdict was rendered after a retrial, which followed an order granting a new trial when the plaintiff declined to accept a remittitur ordered by this Court’s predecessor, Judge Avern Cohn, after an initial trial and jury verdict. The litigation has been pending a long time and was complicated in part by an intervening municipal bankruptcy. The dispute focuses on the City of Detroit’s regulatory taking of the plaintiff’s industrial property situated at 11111 and 11181 French Road, Detroit, Michigan adjacent to the Coleman A. Young International Airport. The City’s plans for the airport, and their effect on the viability of HRT’s property for commercial use, have spawned multiple lawsuits in state court and this Court. Each of HRT’s two tenants filed a lawsuit alleging inverse condemnation of their leasehold interests. Merkur Steel filed a taking suit against the City in the Wayne County, Michigan circuit court in September 1999. That suit resulted in a jury verdict in favor of Merkur Steel finding that the City’s acquisition efforts amounted to a de facto taking of Merkur Steel’s leasehold interest in the property. The Michigan Court of Appeals affirmed that determination and the $6.8 million compensation award. See Merkur Steel Supply Inc. v. City of Detroit, 261 Mich. App. 116, 680 N.W.2d 485 (2004). -2- Merkur Steel’s sub-tenant Steel Associates, Inc. filed a separate action in the Wayne County circuit court against the City also alleging a de facto taking of its leasehold interest. In 2003, a jury found in favor of Steel Associates and awarded $4 million in compensation. The court of appeals affirmed in a 2005 decision. See Steel Assocs., Inc. v. City of Detroit, No. 254025, 2005 WL 2656648 (Mich. Ct. App. Oct. 18, 2005). Subsequently in 2005, Merkur Steel, Steel Associates, and HRT collectively filed suit in the Wayne County circuit court against the City for inverse condemnation. The parties alleged “that the filing of the airport layout plan and the threat of potential condemnation of the property affected its property so adversely as to amount to [a] taking without just compensation.” HRT Enters. v. City of Detroit, No. 268285, 2007 WL 2118867, at *1 (Mich. Ct. App. July 24, 2007). HRT proceeded to trial on its own, and in 2005 a jury returned a no-cause-of-action verdict in favor of the City. Ibid. The state court of appeals affirmed, stating that there was “competent evidence to support a finding that the city’s actions were not a substantial cause of the decline of HRT’s property and that the [C]ity did not abuse its legitimate powers in affirmative actions directly aimed at HRT’s property.” Id. at *7. The Michigan Supreme Court denied leave to appeal. HRT Enters. v. City of Detroit, 480 Mich. 1134, 745 N.W.2d 786 (2008) (mem.). Next, HRT sued the City for inverse condemnation in this court in 2008 based on additional events that occurred since the 2005 trial. HRT Enters. v. City of Detroit, No. 08-14460 (E.D. Mich. 2008). Judge Cohn dismissed that case without prejudice, finding that because HRT did not seek compensation through state procedures based on the new facts, the case was unripe for federal review under Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172, 195-97 (1985), overruled by Knick v. Township of Scott, Pennsylvania, --- U.S. ---, 139 S. Ct. 2162 (2019). -3- Undaunted, HRT returned to state court in 2009 and again sued the City for inverse condemnation. The trial court dismissed that case based on res judicata, and the Michigan Court of Appeals affirmed. HRT Enters. v. City of Detroit, No. 304057, 2012 WL 3055221 (Mich. Ct. App. July 26, 2012) (per curiam). HRT did not seek leave to appeal to the Michigan Supreme Court. HRT then filed the present lawsuit in 2012, alleging inverse condemnation based on events that occurred since the 2005 jury verdict in state court. The City filed a motion to dismiss or alternatively for summary judgment, pressing a res judicata argument based on the 2005 state court verdict in its favor and the dismissal of the 2009 state court case on the same grounds. Judge Cohn denied that motion, concluding that additional events that had occurred since 2005 would permit a new jury to find a taking of the property. After additional motion practice, during which Judge Cohn found in favor of HRT on liability, the case proceeded to trial on the issues of damages and the date of taking. On April 24, 2019, the jury returned a verdict establishing the date of the taking as January 1, 2009 and the fair market value of the property on that date as $4.25 million. However, on October 30, 2019, Judge Cohn granted a remittitur of the verdict and reduced the judgment to $2 million after he found that the testimony presented at trial was not adequate to prove a higher valuation. The plaintiff filed a notice of its rejection of the remittitur on November 25, 2019. On the following day, Judge Cohn issued an order setting aside the verdict and granting a new trial “on the issue of damages.” After the case was reassigned to the undersigned, a second trial was held in August of 2022, which concluded with a verdict determining just compensation for the value of “land and buildings” taken in the amount of $1,976,820, and $0 for the value of “fixtures” associated with -4- the property. The parties filed an additional round of motions, including the present motion for attorney’s fees. II. The plaintiff argues that as the prevailing party it is entitled under 42 U.S.C. § 1988 to recover attorney fees and “expenses” including “expert witness fees.” The plaintiff contends that in addition to legal fees incurred during this lawsuit, it also is entitled to recover under section 1988 fees incurred in a laundry list of other separate lawsuits including (1) presentation of claims in the City of Detroit municipal bankruptcy, (2) a separate state court lawsuit against the City and an ensuing appeal (which the plaintiff lost), (3) separate litigation in state court over disputed charges for sewage runoff fees that the City assessed against the property, and (4) defense of an unspecified number of unidentified proceedings related to “blight tickets” issued by the City against the property. The defendant responds that (1) the hourly rates quoted are based on a contemporary survey of typical billing rates in Michigan from 2020, but it is more appropriate to adjust the rates to correspond to dates the services were rendered over the decade this case has been pending based on both a 2014 State Bar rate survey and the most recent publication of rates, (2) the requests for fees incurred in separate lawsuits are foreclosed by Sixth Circuit precedent, (3) the billing records ostensibly attributed to the present litigation are comingled with numerous entries for legal work performed on other lawsuits and proceedings, and therefore the lodestar calculation should be discounted heavily, (4) none of the claimed “fees” or “expenses” including “expert witness fees” are recoverable as “costs” under 28 U.S.C. § 1920, and (5) costs of $1,254 already have been taxed, and no further award of costs is allowed. -5- Typically, the reasonableness of an attorney’s fee request is measured by the lodestar method. Ne. Ohio Coal. for the Homeless v. Husted, 831 F.3d 686, 702 (6th Cir. 2016). That method calls for multiplying “the number of hours reasonably expended on the litigation . . . by a reasonable hourly rate.” Ibid. (quoting Hensley v. Eckerhart, 461 U.S. 424, 433 (1983 . “The party seeking attorney’s fees bears the burden of proof on the number of hours expended and the rates claimed.” Granzeier v. Middleton, 173 F.3d 568, 577 (6th Cir. 1999). If “documentation of hours is inadequate, the district court may reduce the award accordingly.” Hensley, 461 U.S. at 433 (1983). Additionally, the Court must “exclude . . . hours that were not reasonably expended.” Id. at 434. A reasonable rate for the purpose of the lodestar calculation is “the rate that lawyers of comparable skill and experience can reasonably expect to command within the venue of the court of record.” Husted, 831 F.3d at 715 (citing Geier v. Sundquist, 372 F.3d 784, 791 (6th Cir. 2004 . Sources of information include “a party’s submissions, awards in analogous cases, state bar association guidelines, and its own knowledge and experience in handling similar fee requests.” Id. at 716 (quoting Van Horn v. Nationwide Prop. & Cas. Ins., 436 F. App’x 496, 499 (6th Cir. 2011 . When a prevailing party provides sufficiently reliable and “particularized” billing records, “conclusory allegations that the award was excessive and that . . . counsel employed poor billing judgment . . . do not suffice to establish that there was error.” Imwalle v. Reliance Med. Prod., 515 F.3d 531, 553 (6th Cir. 2008) (quoting Perotti v. Seiter, 935 F.2d 761, 764 (6th Cir. 1991 ; see also Fox v. Vice, 563 U.S. 826, 838 (2011) (“[T]rial courts need not, and indeed should not, become green-eyeshade accountants. The essential goal in shifting fees . . . is to do rough justice, not to achieve auditing perfection.”). However, the invoices furnished must be “of sufficient detail and probative value to enable the court to determine with a high degree of certainty that such hours -6- were actually and reasonably expended in the prosecution of the litigation.” Imwalle, 515 F.3d at 553; see also Hensley, 461 U.S. at 433, 437 n.12. The number of hours reasonably expended on a matter may include such things as time spent drafting pleadings, meeting with clients, and preparing the case for trial. See Hensley, 461 U.S. at 34 (noting that the hours should be of the type billed to one’s client). However, the court may reduce the number of hours claimed where the documentation is inadequate or the time was not “reasonably expended.” Mehney-Egan v. Mendoza, 130 F. Supp. 2d 884, 886 (E.D. Mich. 2001). “Hours are not reasonably expended if they are excessive, redundant, or otherwise unnecessary. ‘A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee.’” Ibid. (quoting Mich. R. Pro. Conduct (MRPC) 1.5). There is a “strong presumption” that the lodestar represents the “reasonable” fee. City of Burlington v. Dague, 505 U.S. 557, 562 (1992) (holding that lodestar figure has “become the guiding light of our fee-shifting jurisprudence”). The party advocating a departure from the lodestar amount bears the burden of establishing that the adjustment is “necessary to the determination of a reasonable fee.” Ibid. (quoting Blum v. Stenson, 465 U.S. 886, 898 (1984) In determining whether to adjust the lodestar amount, courts may consider several factors, discussed below. Hensley, 461 U.S. at 430 n.3 (citing Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974 . The defendant does not dispute that the plaintiff may receive a significant attorney fee under the present posture of the case. However, review of the billing records submitted provokes grave doubts about the propriety of the extremely large fee sought in this case. It is apparent that the plaintiff has presented an inflated accounting that includes numerous hours of attorney’s fees -7- expended in several entirely separate matters, for which they have no legal grounds for seeking an award of fees in this case. In particular, the plaintiff claims entitlement to fees for work done on at least five separate suits including: proceedings in the City of Detroit’s municipal bankruptcy, In re City of Detroit, No. 13-53846 (Bankr. E.D. Mich.) (150 hours); prior state court litigation between HRT’s tenants, Wayne County case number 09-016475 (233 hours) and Michigan Court of Appeals case number 304057 (103.7 hours); a suit by HRT against the City Treasurer and the Detroit Water and Sewer Department involving disputed charges for sewage runoff assessed against the property, Wayne County case number 2017-015659 (89.3 hours); and an unspecified number of unidentified municipal proceedings concerning “blight tickets” issued by the City against the property, for which no separate accounting was presented. In addition to segregated billings for those separate litigations, it also is apparent that the records presented by the plaintiff nominally allocating billable hours to the present litigation include numerous entries for legal work performed on the several separate matters, which were comingled with hours that appear to have been legitimately allocated to this case. Addressing a similar issue, the Sixth Circuit clearly stated that “fees under § 1988 are not recoverable for work performed in a completely separate case, even if, as here, that case involves the same defendant, and even if the defendant agrees to use the materials from the separate case in the present action.” Binta B. ex rel. S.A. v. Gordon, 710 F.3d 608, 631 (6th Cir. 2013). HRT never mentioned that case in its initial motion. In its supplemental filing, it attempts unconvincingly to distinguish it and points the Court instead to Webb v. Board of Education of Dyer County, 471 U.S. 234 (1985). In Webb, the Supreme Court indicated that a court could award fees under section 1988 when the work performed was “useful and of a type ordinarily necessary to advance the civil -8- rights litigation.” Id. at 243. But, as the Sixth Circuit pointed out, the Webb Court “upheld the denial of fees for work performed in separate proceedings.” Binta B., 710 F.3d at 629. In Webb, a former school teacher challenged his firing before the local school board and in a lawsuit filed in court. He won his lawsuit by obtaining a consent decree, and his lawyer sought attorney’s fees for the work before the school board. He maintained that the work he preformed before the school board “was analogous to discovery, investigation, and research that are part of any litigated proceeding,” and therefore was “reasonably expended” as part of the court action. Webb, 471 U.S. at 240, 242. The Supreme Court was unconvinced and rejected that argument. Id. at 243. Citing this holding, the Binta panel concluded that the plain language of 42 U.S.C. § 1988 bars recovery of attorney fees expended in any proceeding separate from the litigation before the district court in which attorney fees are sought. Binta B, 710 F.3d at 630-31. It is readily apparent from a review of the plaintiff’s billing records that fees incurred in the several separate lawsuits are comingled pervasively throughout the ledger of hours purportedly incurred “in this case.” Most conspicuously, a vast swath of the main tract of the ledger appears to comprise fees incurred almost entirely in the course of appearances and litigation by plaintiff’s counsel presenting claims and contesting issues raised during the City of Detroit’s bankruptcy proceedings. Thirteen entire pages of the billing records appear to be packed with appearances and filings in the bankruptcy case. See Billing Records, ECF No. 454-1, PageID.12147-12160. Those entries span more than a year, from an entry on July 18, 2013 annotated as “Reviewing City of Detroit bankruptcy petition” through an entry on December 22, 2014 that indicates work on a motion to reopen this case. During that entire period this case was stayed and administratively closed, see Order Staying and Administratively Closing Case, ECF No. 42, and no appearances -9- were recorded, nor were any papers filed by any party, until the December 2014 filing of the motion to reopen after the bankruptcy stay was lifted. In its supplemental brief, the plaintiff continues to insist that it can recover in this case the attorney’s fees incurred in the bankruptcy proceedings. It reasons that its work in the bankruptcy matter was necessary to its success in this case because otherwise Detroit’s bankruptcy would have wiped out the obligation to pay for the taking of the plaintiff’s property. But even if that were true, as the defendant points out — and as the plaintiff concedes — there is no legal authority for fee shifting under the Bankruptcy Code. In re Cole, No. 15-00168, 2023 WL 356016, at *3 (Bankr. M.D. Fla. Jan. 6, 2023) (“[T]here is no right to prevailing party attorneys’ fees on a claim objecting to discharge under 11 U.S.C § 727(a).”); see also In re Wyatt, 609 B.R. 530, 533 (Bankr. D. Idaho 2019) (“‘No general right to attorney fees exists under the Bankruptcy Code.’ Heritage Ford v. Baroff (In re Baroff), 105 F.3d 439, 441 (9th Cir. 1997). Nor does any provision in § 727 provide for prevailing party attorneys’ fees in causes of action under § 727(a).”). Allowing recovery of those fees here would amount to an unauthorized exception to the American Rule, which states that in the usual case, each side must pay their own attorney’s fees “unless there is express statutory authorization to the contrary.” Hensley, 461 U.S. at 429 (citing Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240 (1975 . After a comprehensive search of federal decisions, the Court has not located any case in which a prevailing party in a civil case was allowed to import its attorney’s fees incurred in a related bankruptcy proceeding under the authority of 42 U.S.C. § 1988 or otherwise. The plaintiff has not cited any case holding that such a fee award is proper. The plaintiff’s demand for substantial legal fees incurred in connection with the separate bankruptcy proceedings — during a period when this litigation was closed and the proceedings were stayed by order of the Court — cannot be honored. -10- The examples cited above are not the only instances of improperly comingled billing. Other entries indicate that within the ledger ostensibly devoted to legal work on this case the plaintiff recorded billings relating to the separate state court litigation in HRT Enterprises v. Detroit Water and Sewer Department, No. 2017-015659 (Wayne Cty. Cir. Ct.), where the plaintiff sued DWSD and the City over disputed charges for sewer runoff assessed against the property. For example, a December 20, 2013 entry indicates that 0.1 hours were billed for “Review[ing] Opinion from Judge Rhodes lifting the stay in rate case against DWSD,” PageID.12149; an October 1, 2015 entry indicates that 0.5 hours were billed with the annotation: “Review recent developments in Detroit bankruptcy. Telephone from Lyle at DWSD re outstanding bills. Review DWSD billing information. E-mails with Andy Chamberlain. Telephone with Andy Milia,” PageID.12167; and numerous entries from January 22 through February 17, 2017 logged more than 10 hours spent reviewing documents and drafting motions and briefs relating to “suspend[ing] property tax and utility payments,” PageID.12176. Those questionable entries covering lengthy and widely separated spans before and after the stay of this case due to the bankruptcy litigation suggest that the corruption of the accounting is pervasive throughout and not confined to any discernible discrete period. It is undisputed that the plaintiff is entitled to a substantial fee recovery, but only for the work performed on this case. In light of the pervasive inclusion of illegitimate billings throughout its legal ledger, it is impossible to determine with reasonable certainty that it is entitled to any amount approaching the nearly $1.8 million in attorney’s fees that it seeks. It is therefore necessary for the Court to make some attempt, before computing the lodestar fee, to determine from the available information an appropriate discount against the gross total of hours billed and a suitable average hourly rate. -11- In its supplemental brief, the plaintiff concedes that 201 hours are related to separate litigation. It agreed to drop 75 hours of entries from its claim, cutting the total number of claimed hours from 3,075 to an even 3,000 hours. And it concedes that the parties agreed on 201 hours that were related to the separate bankruptcy proceeding, although it persists in its claim that all of those hours should be compensable in this case, despite case law to the contrary. But the plaintiff also seeks compensation for another 169 hours logged at various rates during six months of this year from March through August 2023. Also, it insists that approximately 658 hours of billings by attorney Neil Strefling are compensable despite the fact that they were accompanied by no descriptions at all, because, according to the plaintiff, the entries all “correlate” either with docket entries in the case or more descriptive entries logged by lead counsel Mark Demorest. And the defendant points to additional entries, which, along with the Strefling hours, total 1,111 hours that are questionable because they feature either vague descriptions that make it impossible to determine which litigation they were related to, or because they include no description at all of the work performed. Because of the poor descriptions and the inclusion of billed time that does not relate to this case, it follows that the plaintiff is not entitled to the recover all the attorney’s fees it claims. Under the circumstances, the Court is left with two options: (1) disallow the fee award entirely or (2) discount the number of billable hours to reduce the lodestar in rough proportion to the observable incidence of disallowable fees. See Vanderhoef v. Dixon, No. 16-508, 2020 WL 6864543, at *14 (E.D. Tenn. May 4, 2020), R&R adopted, 2020 WL 4673464 (E.D. Tenn. Aug. 12, 2020) (“Where the documentation of hours is inadequate, the district court may reduce the award accordingly. Here, the Court is unable to evaluate the reasonableness of the specific time expended in preparing Plaintiff’s reply. Plaintiff did not submit either billing records or an -12- affidavit to establish as a factual matter his request for fees associated with the preparation of the Reply.” (citing Hensley, 461 U.S. at 433 ; see also Bio-Med. Applications of Kentucky, Inc. v. Coal Exclusive Co., No. 08-80, 2011 WL 3568249, at *8 (E.D. Ky. Aug. 15, 2011) (“One option is to simply reduce the award. District courts may make across-the-board percentage cuts either in the number of hours claimed or in the final lodestar figure. Another option in egregious situations is to disallow the award altogether.”) (collecting cases discounting hours billed or gross lodestar by figures ranging from 10% to 40%) (citations omitted). Taking the plaintiff’s total claim of 3,169 hours and subtracting the 1,111 hours logged in disputed, poorly described billing entries, 2,058 hours remain. Based on that observable proportion of questionable billing entries to the total claimed, it is appropriate to impose a .67 multiplier, taking a 33% discount against the gross number of compensable hours to account for the pervasive corruption of the billing records, which the plaintiff has been intransigent in refusing either to clarify or concede. Hensley, 461 U.S. at 433; Mehney-Egan, 130 F. Supp. 2d at 886. That works out to a top line total of 2,091 hours for a decade of billable labor. The plaintiff has supplemented its fee motion with a request for compensation for the work performed on post- verdict matters. The total amount requested is for 168.6 hours of time divided among three attorneys. That time is documented properly and plainly is attributable to this current case. The hourly component of the lodestar will be 2,259.6 hours. The second component of the lodestar calculation is determination of a reasonable hourly rate. The plaintiff has suggested hourly rates ranging from $225 to $450 per hour for the dozen attorneys who billed time claimed over the decade of litigation. However, the approval of specific rates for individual counsel is problematic because, for the reasons stated above, it is impossible to determine reliably the number of hours that reasonably and legitimately were expended by each -13- lawyer who worked on the case. Under these circumstances, the use of an average hourly rate is more appropriate due to the deficiencies in the accounting that make it impossible to reach any measure of certainty in partitioning the allowable fees among the several lawyers employed. For similar reasons, there is no sound basis for addressing the nuances among the proposed hourly rates based on experience and competence of counsel. It is undisputed that several of the lawyers involved have decades of experience in practice. However, the highly questionable nature of the fee request in gross weighs heavily against the assignment of any premium rate for the labor performed on a wholesale basis. The State Bar of Michigan’s published Economics of Law Practice for 2020 reports a range of median hourly rates from $250 for associates to $350 for partners in law firms across all areas of practice. 2020 Economics of Law Practice, State Bar of Michigan, https://www.michbar. org/file/pmrc/articles/0000155.pdf. The mid-point of that range is $300 per hour. That overall market average supplies a reasonable basis for the calculation of the lodestar. Multiplying total hours of 2,259.6 hours for a decade of billable labor by the reasonable market rate of $300 per hour yields a lodestar benchmark of $677,880. The Court also must consider the factors outlined in Hensley to determine if any further adjustment of the fee is required. Those factors are: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. Hensley, 461 U.S. at -14- 430 n.3. The assessment of those factors is difficult in this case because the plaintiff made no effort to address them in its briefing. Instead, it devoted almost its entire presentation to its questionable effort to sustain its claim for fees that plainly are not recoverable under the statute and controlling case law. The discount suggested above is calculated to offset the unsound basis of the fee claim, and there are no circumstances apparent from the record that compel further reduction of the fee. However, the plaintiff’s presentation also supplies no good reasons to award any premium over the lodestar amount. In the absence of any good grounds for a deviation, the lodestar is presumed to be reasonable. City of Burlington, 505 U.S. at 562. The plaintiff also asks the Court to award compensation for costs incurred in the litigation. Those consist of $40,906.25 in expert witness fees, $2,099.16 in miscellaneous expenses, and an additional $1,700 for expenses incurred in litigating post-verdict motions. The defendant does not take issue with any particular line item, but it argues that none of the claimed fees or expenses, including expert witness fees, are recoverable as costs under 28 U.S.C. § 1920, and costs of $1,254 already have been taxed, and no further award of costs is allowed. It is true that “[p]revailing parties are entitled to receive costs under Federal Rule of Civil Procedure 54(d),” but “a court may only tax costs as authorized by statute.” EEOC v. W&O, Inc., 213 F.3d 600, 620 (11th Cir. 2000) (citing Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 445 (1987), superseded by statute on other grounds, 42 U.S.C. § 1988(c) (1991 . “[S]ince 28 U.S.C. § 1920 lists which expenses a court ‘may’ tax as costs, that section only authorizes taxation of certain items.” Crawford, 482 U.S. at 441. However, the Court has the statutory authority under section 1988 to include in an award of attorney fees expenses incurred in the representation that are “incidental and necessary.” Waldo v. Consumers Energy Co., 726 F.3d 802, 827 (6th Cir. 2013) (quoting Sigley v. Kuhn, 205 F.3d -15- 1341, 2000 WL 145187, at *9 (6th Cir. 2000 . Recoverable expenses include those typically charged to a fee-paying client, such as photocopying, paralegal expenses, and travel and telephone costs. Ibid. Expert witness fees also may be taxed. 42 U.S.C. § 1988(c). The plaintiff may recover the fees charged by expert witness Andrew Reed, who testified at both trials. The miscellaneous expenses of $2,099.16 will not be allowed because they consist of fees paid in other lawsuits and the plaintiff has not attempted to segregate them. However, the additional expenses of $1,700 are allowable because they plainly relate to the present case, and they consist of those expenses described by the court in Waldo. None of the expenses claimed duplicate the costs taxed by the Clerk under 28 U.S.C. § 1920 and Rule 54(d). III. To summarize, the plaintiff may recover from the defendant attorney’s fees in the amount of $677,880 and litigation expenses of $42,606.25, for a total of $720,486.25. Accordingly, it is ORDERED that the plaintiff’s motion for attorney’s fees and expenses (ECF No. 454) and the motion to update the attorney’s fee motion (ECF No. 483) are GRANTED IN PART. It is further ORDERED that the plaintiff shall recover from the defendant attorney’s fees and costs in the amount of $720,486.25. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: January 16, 2024 -16-

=== OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR SUMMARY JUDGMENT ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION BROAD-OCEAN TECHNOLOGIES, LLC, Plaintiff, Case Number 21-11297 Honorable David M. Lawson v. BO LEI, ________________________________________/ Defendant. OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR SUMMARY JUDGMENT Plaintiff Broad-Ocean Technologies, an automotive supplier that specializes in designing and manufacturing electric drive motors, filed this lawsuit accusing defendant Bo Lei, a software engineer and former employee, of stealing trade secrets when he left his employment with the plaintiff and engaging in extraordinary and sophisticated measures to cover up the theft. Broad- Ocean brings claims based on federal and Michigan trade secrets law; breach of the employment contract, which included a number of confidentiality provisions; and breach of fiduciary duty. Lei moves for summary judgment, alleging, among other things, that Broad-Ocean has not identified its trade secrets with sufficient particularity to move forward on its claims. The Court disagrees. Although Broad-Ocean’s description of its intellectual property is sketchy, there is enough information in the record for it to withstand summary judgment on that argument. However, the evidence does not show that Lei had a fiduciary relationship with his employer, and the claim of breach of fiduciary duty is unsupported and will be dismissed. I. Broad-Ocean is headquartered in Novi, Michigan. It serves customers across North America, designing and developing advanced electric motors, inverters, motor controllers, powertrain systems, and supervisory controllers. It alleges that it invests significant time, effort, and money developing and acquiring intellectual property, including complex mechanical designs, computer-aided design (CAD) models, electrical schematics, simulations, printed circuit board fabrication data, and other data. It says that it has committed millions of dollars in investments to develop next-generation fuel cell technology to replace internal combustion engines. Defendant Bo Lei began working at Broad-Ocean around October 3, 2016. As a Senior Software and Control Engineer, he was responsible for developing control software for Fuel Cell Control Units and Belt Starter Generators, and he was granted access to Broad-Ocean’s intellectual property, trade secrets, and other confidential information. Broad-Ocean requires its personnel to execute an Employee Confidentiality and Assignment of Intellectual Property Agreement. Id. at ¶ 15, PageID.4. The Confidentiality Agreement expressly prohibits personnel from disclosing any intellectual property, trade secrets, or other confidential information, including but not limited to experimental research work; technical and business methodologies, processes, and tools; machinery; formulae; drawings; business development plans; software development plans; source and object codes; suppliers; customers; technology; contractors; know-how; products; business data; subcontractors; trade secrets and inventions (whether or not subject to a pending patent application), and other forms of intellectual property or proprietary information. licensees; licensors; Confidentiality Agreement, ¶ 1(a), ECF No. 1-2, PageID.37. Employees agree to maintain the confidentiality of all such information during and after the termination of their employment, and to “immediately return” to Broad-Ocean all materials in their possession or control. Id. at ¶¶ 2, 11, PageID.39-40. When defendant Bo Lei signed a copy of the Confidentiality Agreement on October 3, 2016, he acknowledged that it restricted his right to “disclose or use” Broad-Ocean’s confidential information subsequent to his employment. Id. at PageID.42. The Confidentiality - 2 - Agreement contains a choice-of-law provision stating that it will be governed by and construed according to the laws of the State of Michigan. Id. at ¶ 14(b), PageID.41. In addition to signing Broad-Ocean’s Confidentiality Agreement, Lei signed a Non- Compete Agreement that prohibited him from accepting a position with a direct competitor for one year after leaving Broad-Ocean. He also signed an offer letter that conditioned his employment on his acceptance of all confidentiality obligations. Broad-Ocean also invests significant resources in protecting its intellectual property in order to maintain an advantage over its competitors. One way is by storing its information and trade secrets on a private, confidential system hosted on a private internal server. Only authorized personnel may access the server, using login credentials provided by Broad-Ocean’s information technology department. The credentials are tailored to individual users, so that different personnel are permitted to access only those portions of the server based on their respective job duties. Broad-Ocean records each employee’s file downloads, manipulations, and deletions in real time. After an employee separates from Broad-Ocean, the company reviews his or her file activity to ensure that the secrecy and confidentiality of all material is maintained. On January 26, 2021, Lei told Broad-Ocean’s president, Terry Zhang, that he had received employment offers from other companies and was unsure whether he would accept them. Lei expressed the same uncertainty when he and Zhang spoke again on March 21, 2021. Zhang reminded Lei that, although he was permitted to seek outside opportunities, he could not accept a position with a direct competitor for one year and could not take any intellectual property with him or use it anywhere else. Lei confirmed that he would not do so. On April 2, 2021, Lei tendered his resignation letter to Broad-Ocean. Zhang immediately called Lei to confirm his decision and reiterated his confidentiality obligations, and Lei again - 3 - confirmed that he understood. Finally, Zhang met with Lei on April 15, 2021, his second-to-last day of employment, to review Lei’s Non-Compete and Confidentiality Agreements one last time. During that meeting, Zhang presented Lei with a letter confirming their discussion. Lei signed the letter, acknowledging his conversations with Zhang and his obligation to maintain the confidentiality of Broad-Ocean’s trade secret and other information, and verifying that he was not in possession or control of any confidential information. After Lei separated from Broad-Ocean, the company conducted its routine review of his company-issued laptop and server activity. The review revealed that Lei accessed a significant amount of Broad-Ocean intellectual property on April 2 and 3, 2021, the day of and day after his resignation; transferred the information to various external spaces; and then attempted to wipe the evidence from his hard drive. Most notably, on April 2, 2021, at 10:51 a.m., Lei created a folder named “taxinfo” on his hard drive. He then spent 25 minutes renaming and copying documents and files into the folder, including numerous documents related to the Fuel Cell Control Unit. Then, at 11:07 a.m., Lei uploaded the “taxinfo” folder to his personal, cloud-based Google Drive, and deleted the “taxinfo” folder from his hard drive. The record contains a spreadsheet, filed under seal, that lists the files Lei uploaded into the “taxinfo” folder. See Taxiinfo Spreadsheet, Ex. C, ECF No. 4-2, PageID.163 (sealed). The spreadsheet contains source file and pathway information, most of which include the notations “XXL,” “1040,” and “BOT_FCU.” The names and contents of the files otherwise are unclear. Broad-Ocean retained a third-party forensic analysis expert, Spectrum Computer Forensics & Risk Management, to assess Lei’s information technology equipment. Spectrum’s founder and managing member, J. Stott Matthews, imaged Lei’s computer hard drive on April 22, 2021. His examination revealed that, from March 29 to April 3, 2021, Lei downloaded more than 610 files - 4 - from Broad-Ocean’s corporate server, totaling more than 1.8 GB of data. It confirmed that Lei moved confidential files into the “taxinfo” folder, compressed the folder, then moved the folder into his personal Google Drive. And it further revealed that Lei had undertaken significant efforts to erase data from his hard drive to inhibit any future analysis, including installing the anti- forensics application 360Safe on his laptop on April 2, 2021. Matthews surmised that Lei used the application to attempt to wipe the artifacts created by his transfer of proprietary data from Broad-Ocean’s server. Lei used the command line — not Windows file explorer — to delete 360Safe from his laptop, likely in an effort to evade detection of such activity. Id. at ¶ 11, PageID.54; see also Deletions Spreadsheet, Ex. F, ECF No. 4-4, PageID.189 (sealed) (containing a list of source files apparently connected to 360Safe). Matthews also noted that Lei used a Toshiba USB-storage device on March 2, 2021 and routinely sent information to his personal Gmail account. However, because Lei used the 360Safe application, Matthews could not identify what data Lei transferred to the USB drive. Of the hundreds of files Lei apparently downloaded from Broad-Ocean’s server, Broad- Ocean says that most were 3D computer-aided design files of fuel cell systems, which typically are used by system or mechanical engineers, not software engineers like Lei. It produced a spreadsheet of 821 source files it says Lei downloaded, some of which contain part names and some of which are identified only by a series of letters and numbers. See Downloads Spreadsheet, Ex. 3, ECF No. 4-3, PageID.175 (sealed). Lei denies that the files he downloaded are trade secrets. He says that he used his Google Drive with Broad-Ocean’s knowledge and consent, deleted all of Broad-Ocean’s files from his possession before leaving its employment, and did not access or download any of Broad-Ocean’s information after leaving its employment. - 5 - Broad-Ocean filed its complaint in June 2021 and asked for a preliminary injunction, which the Court granted. As ordered in that injunction, Lei provided his personal laptop to Broad-Ocean for a forensic examination. Spectrum analyzed the laptop and found evidence that, on April 2, 2021, Lei downloaded the “taxinfo” folder form his Google Drive to his laptop, then permanently deleted his activity. The preliminary injunction also ordered Lei to provide his new work laptop to his counsel, and for his counsel to make the laptop available to Spectrum. At the time, Lei was employed by Hyzon Motors. After some dispute, Broad-Ocean ultimately engaged Spectrum to conduct a forensic examination of Lei’s Hyzon laptop. J. Stott Matthews examined the computer and found almost no artifacts of any recent files, indicating that Lei had wiped information from the laptop before turning it over. Nevertheless, Matthews found artifacts indicating that the laptop at some point contained at least two files referencing Broad-Ocean documents by name, and another referencing Broad-Ocean by “hash value.” Because the files had been removed from the laptop, however, Matthews was not able to verify their names or content. Matthews also determined that on June 14 and 15, 2022 — immediately before Lei surrendered the computer to Hyzon — “shadow copies” of 4.3 GB of data were created then deleted on Lei’s laptop. Matthews concluded that someone had engaged in uncommonly sophisticated anti-forensic activities to obstruct his review. Broad-Ocean served its responses to Lei’s first set of interrogatories on November 5, 2021. After interposing an objection to a question asking it specifically to identify each trade secret it claims Lei misappropriated, Broad-Ocean responded by pointing to Exhibits C and E to the Complaint, filed under seal, which contain the names of hundreds of files of Broad-Ocean’s intellectual property and trade secrets — primarily CAD part files (3D design files) of fuel cell systems — that Broad-Ocean has specifically alleged Defendant misappropriated. - 6 - Discovery Resp., ECF No. 40-3, ¶ 15, PageID.530-31. Broad-Ocean’s complaint pleads claims that Lei (1) violated the Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836; (2) violated the Michigan Uniform Trade Secrets Act, Mich. Comp. Laws § 444.1901, and the common-law duty of non-disclosure; (3) breached the Confidentiality Agreement; (4) breached his fiduciary duty to Broad-Ocean; (5) converted Broad-Ocean’s property; and (6) violated the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. However, Broad- Ocean later stipulated to dismiss its Computer Fraud and Abuse Act and conversion claims (Counts 5 and 6). Lei’s summary judgment motion attacks the remaining counts of the complaint. II. Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A trial is required when “there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Anderson v. Liberty Lobby, Inc., , 250 (1986). The party bringing the motion first must explain why the record is so settled that no genuine issues of material fact exist by “identify[ing] those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.’” Pittman v. Experian Info. Sols., Inc., 901 F.3d 619, 627-28 (6th Cir. 2018) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986 . To rebut that showing, “[t]he nonmoving party ‘must set forth specific facts showing that there is a genuine issue for trial.’” Id. at 628 (quoting Anderson v. Liberty Lobby, Inc., , 250 (1986 . The opposing party must base that rebuttal on specific facts in affidavits, - 7 - depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. Notably, however, “[t]he court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine ‘whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.’” Alexander v. CareSource, 576 F.3d 551, 557-58 (6th Cir. 2009) (quoting Anderson, 477 U.S. at 251-52). A. 1. Lei argues first that Broad-Ocean’s trade secret claims should be summarily dismissed because Broad-Ocean has failed to identify with particularity what trade secrets he allegedly misappropriated. Broad-Ocean brings claims for trade secret misappropriation under both the federal Defend Secrets Act, 18 U.S.C. § 1836 et seq., and the Michigan Uniform Trade Secrets Act, Mich. Comp. Laws § 445.1901 et seq. Courts have analyzed these claims together because the elements are substantially similar. See, e.g., RGIS, LLC v. Gerdes, 817 F. App’x 158, 162 (6th Cir. 2020) (assuming without deciding that “the federal law follows the same standards as the state law”); InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653, 657 (9th Cir. 2020) (concluding that it is “appropriate” to consider federal and state trade secrets claims together); Compulife Software Inc. v. Newman, 959 F.3d 1288, 1311 n.13 (11th Cir. 2020) (same) Under both laws, the first element the plaintiff must establish “is that the information at issue actually constitutes a ‘trade secret.’” Mike’s Train House, Inc. v. Lionel, L.L.C., 472 F.3d 398, 410–11 (6th Cir. 2006) (citing Stromback v. New Line Cinema, 384 F.3d 283, 302 (6th Cir. 2004) (the other two elements being that the defendant acquired the trade secret in confidence, and - 8 - the defendant’s unauthorized use of it). A “trade secret” is information, “including a formula, pattern, compilation, program, device, method, technique, or process,” that (i) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. (ii) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Mich. Comp. Laws § 445.1902(d); Mike’s Train House, 472 F.3d at 410. In determining whether information constitutes a trade secret, courts consider several factors. But before a court can apply those factors, the plaintiff must identify what it is that it believes is the trade secret. Caudill Seed & Warehouse Co. v. Jarrow Formulas, Inc., 53 F.4th 368, 380-81 (6th Cir. 2022) (stating that “a trade-secrets plaintiff must ‘defin[e] the information for which protection is sought with sufficient definiteness to permit a court to apply the criteria for protection’”) (quoting Restatement (Third) of Unfair Competition § 39 cmt. d (Am. L. Inst. 1995 . Broad-Ocean has not made that task very easy for the Court. Although it insists that Lei downloaded files that contain computer-aided designs of fuel cell systems, it has presented very little evidence in support of that assertion. It points to (1) its pleaded allegation in its verified complaint that “nearly all” of the more than 600 files Lei downloaded to his hard drive before leaving were 3D computer-aided design files of fuel cell systems, (2) its answers to interrogatories stating the same, and (3) two spreadsheets, filed under seal, that contain source file and path information for said files. See Compl., ¶ 43, ECF No. 1, PageID.11; Discovery Resp., ¶ 15, ECF No. 40-3, PageID. 530-31; Taxiinfo Spreadsheet, Ex. C, ECF No. 4-2, PageID.163 (sealed); Downloads Spreadsheet, Ex. 3, ECF No. 4-3, PageID.175 (sealed). However, it has not further elucidated the contents of the files listed in the sealed spreadsheets — many dozens of which are - 9 - identified only by unintelligible combinations of letters or numbers — or explained why these design files inherently are secret. Broad-Ocean’s reluctance to be specific is understandable: “the more precise the claim, the more a party does to tip off a business rival to where the real secrets lie and where the rival’s own development efforts should be focused.” IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581, 583 (7th Cir. 2002) (applying the Wisconsin Uniform Trade Secrets Act). Nevertheless, it is inadequate for Broad-Ocean merely to “cite and incorporate by reference hundreds of documents that purportedly reference or reflect the trade secret information,” InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653, 658 (9th Cir. 2020), or “just identify a kind of technology and then invite the court to hunt through the details in search of items meeting the statutory definition” of a trade secret, IDX, 285 F.3d at 584; see also TLS Mgmt. & Mktg. Servs., LLC v. Rodriguez-Toledo, 966 F.3d 46, 54 (1st Cir. 2020) (“Because TLS failed to identify the process with specificity, let alone establish what aspects were not readily ascertainable, no reasonable fact finder could determine that TLS proved its claim by merely asserting that the process . . . qualified as a trade secret.”); Composite Marine Propellers, Inc. v. Van Der Woude, 962 F.2d 1263, 1266 (7th Cir. 1992) (“It is not enough to point to broad areas of technology and assert that something there must have been secret and misappropriated.”). “The plaintiff must show concrete secrets,” ibid., “at a level of depth beyond merely listing technical concepts,” Caudill Seed, 53 F.4th at 380. Broad-Ocean points to a number of items in the record that it believes satisfy its obligation to describe its intellectual property in a way that allows it to be deemed a trade secret. First, it states that the documents that Lei renamed and uploaded to the “taxinfo” folder were “files containing Broad-Ocean’s intellectual property — primarily documents and files related to the Fuel Cell Control Unit.” Compl., ¶ 36, ECF No. 1, PageID.10. Second, it alleges that “nearly all” - 10 - of the 687 files Lei downloaded from its server between March 29 and April 3, 2021, “were CAD part files (3D Design files) of fuel cell systems.” Id. at ¶¶ 42-43, PageID.11. Broad-Ocean makes three additional factual allegations relevant to the acquired files. It says that it has invested millions of dollars and countless hours developing fuel cell technology, which “represents the next generation in the automotive industries’ shift from internal combustion engines to fuel cell driven powertrains.” Id. at ¶ 37, PageID.10. It explains that CAD files typically are used by system or mechanical engineers. Id. at ¶ 44, PageID.11. And it states that it wished to file the source file information for the acquired files under seal “due to the confidential nature of the information therein.” Id. at ¶ 42. The other factual allegations Broad-Ocean made in its verified complaint pertain to all of its trade secrets. Broad-Ocean states that, “for example,” its intellectual property, trade secrets, and technical and proprietary information includes, without limitation, design data for the hardware, software, and control aspects of Broad-Ocean’s motors and inverters including, but not limited to, Fuel Cell Control Units (“FCU”) and Belt Starter Generators (“BGS”). This information is comprised of complex mechanical designs, computer-aided design (CAD) models, electrical schematics, simulations, software and control algorithms, printed circuit board (PCB) fabrication data, and other data and information relating to the design and development of cutting edge electric motors, inverters, and related products. Id. at ¶ 9, PageID.3. It alleges that all of this “above-described information is considered confidential, proprietary, and trade secret information” and has “given Broad-Ocean an opportunity to obtain an advantage over competitors who did not know or use that information.” Id. at ¶ 10, PageID.3-4. And it states that it has “invested significant time, effort, and money acquiring and developing intellectual property, trade secrets, and technical and propriety information.” Id. at ¶ 8. Again, Broad-Ocean also describes the technological measures its takes to maintain the secrecy and confidentiality of all of its trade secrets. Id. at ¶¶ 14-25, PageID.4-7. - 11 - One problem with Broad-Ocean’s approach is that it runs afoul of the specificity obligation endorsed by the Sixth Circuit. “If a plaintiff ‘effectively assert[s] that all information in or about its [product] is a trade secret,’ then it brings a case ‘both too vague and too inclusive,’ and does not allow a jury to ‘separate the trade secrets from the other information that goes into any’ product in the field.” Caudill Seed, 53 F.4th at 381 (quoting IDX Sys. Corp., 285 F.3d at 583-84). Merely asserting that items are “trade secrets” does not make them so. Utilase, Inc. v. Williamson, 188 F.3d 510, 1999 WL 717969, at *7 (6th Cir. 1999) (table). Broad-Ocean cites the Sixth Circuit’s decision in Mike’s Train House for the proposition that courts “routinely find[] that engineering design files are protected trade secrets.” Resp., ECF No. 42, PageID.595-96. However, what the court of appeals actually held in Mike’s Train House is that, “[w]hen material such as design drawings or manuals are trade secrets based on a unique combination of both protected and unprotected material, a plaintiff should not be obligated to identify which components of the protected material is secret.” 472 F.3d at 411. And in Caudill, the court of appeals clarified that a combination-trade-secret plaintiff must describe with sufficient specificity why the compilation of protected and unprotected material at issue is unique. 53 F.4th at 381. Thus, the court of appeals found that the model train design drawings at issue in Mike’s Train House properly were considered trade secrets because the plaintiff described the specific “kinds of secret information” contained in the drawings that could not “be determined by simply measuring the parts on a manufactured engine or looking at a picture” — including tolerances, data and reference points, clearances, pivot points, spring tensions, and specific alloys. 472 F.3d at 411. It similarly found the research and development processes at issue in Caudill to be trade secrets based on testimony and documents illustrating that the plaintiff relied on a combination of - 12 - proprietary testing, datasets, and laboratory discoveries to develop seed derivatives. 53 F.4th at 381. Here, Broad-Ocean offers no testimony or documents relevant to determining what information in the computer-aided design files is secret, or what combination of non-secret information is unique. Instead, it broadly alleges that all of the downloaded files contain confidential computer-aided design, electrical schematics, simulations, software, control algorithms, and printed circuit board fabrication data, among other things. It says that all such information gives it a competitive advantage and details the efforts it takes to protect said files. There are good reasons for rejecting Broad-Ocean’s circular argument that its computer- aided design files are secret because they contain computer-aided design models. For one, the Sixth Circuit made clear in Caudill that a combination-trade-secret plaintiff cannot merely assert “that all information in or about its [product] is a trade secret,” or “merely offer lists of broad technical concepts . . . identifying categories” of “highly complex technical information.” 53 F.4th at 381. That, in effect, is what Broad-Ocean is doing here. For another, every circuit court to consider similar trade secret claims has required plaintiffs to explain with greater specificity why their technology is secret in order to survive summary judgment. In Integrated Cash Management Services, Inc. v. Digital Transactions, Inc., 920 F.2d 171, 174 (2d Cir. 1990), for example, the Second Circuit found a generic software system to be a trade secret, but it did so based on evidence and “extensive expert testimony” detailing the unique way the programs interact and establishing that technical aspects of the software were not in the public domain. The plaintiff also offered expert testimony that the software product’s architecture could not readily be duplicated without secret information. Likewise, in Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655, 662-64 (4th Cir. 1993), the Fourth Circuit found that - 13 - tunnel system software was a trade secret, but it was able to point to information offered by the plaintiff that explained how it used a certain computer language to write the software system and compile its source code, and how it uses said code to offer specific client services that generate specific revenues. And in IDX Systems Corp., the Seventh Circuit specifically rejected a plaintiff’s argument that “all information in or about its software is a trade secret.” 285 F.3d at 583. Broad- Ocean correctly notes, however, that the Seventh Circuit also required the IDX plaintiff to “separate the trade secrets from the other information that goes into any software package,” id. at 854 — something, again, that combination-trade-secret plaintiffs need not do in this circuit, Mike’s Train House, 472 F.3d at 411. Broad-Ocean pleaded that the files Lei acquired contained computer-aided design models of next-generation fuel-cell technology. It stated that its competitors do not have access to that technology, which it has spent millions of dollars to develop, and detailed its efforts to protect the acquired files. These verified pleadings, while relatively bare, put Lei on notice of what trade secrets Broad-Ocean is alleging he misappropriated. They also distinguish the case from Mike’s Train House: Broad-Ocean does not acknowledge or even suggest that its computer-aided design models contain any unprotected material. Instead, it appears to argue that the models entirely are novel, and Lei does not present any argument or evidence to the contrary. Nor is there indication that the contents of the files widely were known within Broad-Ocean’s industry or otherwise. Viewing its argument in that context, Broad-Ocean’s reliance on Mike’s Train House and other combination-trade-secret jurisprudence does not advance its case. Nonetheless, determining whether a plaintiff sufficiently particularized its trade secrets requires a modicum of common sense. Broad-Ocean contends that Lei misappropriated a specific list of design files. It is reasonable to conclude that computer-aided design models of fuel-cell - 14 - technology components inherently are more secret than the business processes and strategies, categories of information, or “low technology commodity products” considered by other courts. See, e.g. AMP Inc. v. Fleischhacker, 823 F.2d 1199, 1203 (7th Cir. 1987) (low-technology products); TLS Mgmt. & Mktg. Servs., LLC v. Rodriguez-Toledo, 966 F.3d 46, 56 (1st Cir. 2020) (business strategy); Magna Donnelly Corp., 662 F. Supp. 2d 855, 859 (E.D. Mich. 2009) (categories of information). It also is appropriate to distinguish this case from those where plaintiffs alleged that defendants misappropriated the ends, but not the means, of their business. In IDX, for example, the plaintiff sued a competitor for developing a similar software package and contended that it must have misappropriated its methods and processes to do so. See IDX, 285 F.3d at 583. That resulted in a dispute regarding whether the competitor instead could have used non-secret information to develop its software. Id. at 583-84; see also Caudill, 53 F.4th at 376-77 (contesting the secrecy of process and knowledge used to manufacture raw materials). In contrast, Broad-Ocean here contends that, based on forensic evidence, Lei misappropriated specific files — the means — in what appears to have been an unsuccessful effort to mimic its end-product fuel- cell technology. There is no dispute that the files came from Broad-Ocean. The concreteness of Broad-Ocean’s allegations distinguishes its case from those cited by the parties. See InteliClear, 978 F.3d at 658 (distinguishing “‘[l]ong lists of general areas of information containing unidentified trade secrets’” from the “concrete identification” necessary for a defendant to “prepare a rebuttal”) (quoting IDX Sys. Corp. v. Epic Sys. Corp., 165 F. Supp. 2d 812, 819 (W.D. Wis. 2001 . It also creates questions of fact for trial. It also is appropriate to take account of Lei’s extraordinary efforts to conceal his acquisition of the files. He used his superior technical knowledge and sophisticated means to copy and transfer the files, conceal their identity, and then cover his tracks. It is reasonable to infer at this stage of - 15 - the case that Lei knew what he was taking from his former employer, and that its value was derived from unique properties that were not known outside Broad-Ocean’s business. Those efforts mirror Broad-Ocean’s own extraordinary measures it implemented to “guard [the] secrecy of [its] information,” which also provides insight into the “value of [the] information to” Broad-Ocean and likely its competitors in the fuel cell technological industry. See Magna Donnelly, 662 F. Supp. 2d at 859 (quoting Wysong Corp. v. M.I. Industries, 412 F. Supp. 2d 612, 626 (E.D. Mich. 2005 . Broad-Ocean alleges that it has invested “millions of dollars” to develop this fuel cell technology, a fact that is unrebutted on this record. And it has averred that its CAD models, electrical schematics, circuit board fabrication data, and software and control algorithms are unique and not available to competitors — facts that also are unrebutted at this stage of the case. The plaintiff, therefore, has put forth facts that allow it to avoid summary judgment on the defendant’s specificity argument. 2. Fact questions remain as to whether Lei knowingly “acquired” the files “by improper means.” Mich. Comp. Laws § 445.1902(b)(i). Broad-Ocean has presented evidence suggesting that Lei downloaded certain design files from its server and then uploaded them to his personal Google Drive in order to retain possession of the files after terminating his employment. See Taxiinfo Spreadsheet, Ex. C, ECF No. 4-2, PageID.163; Downloads Spreadsheet, Ex. 3, ECF No. 4-3, PageID.175; Matthews Decl., ¶¶ 7-13, ECF No. 1-5, PageID.52-55; Spectrum Ref., ECF No. 42-2, PageID.607. Because Lei knew that he was barred from retaining any files, see Confidentiality Agreement, ¶ 11, ECF No. 1-2, PageID.40, he must also have known that downloading and saving files from the server was improper. That is sufficient to create a question of fact as to whether Lei misappropriated trade secrets. Contrary to Lei’s argument, Broad-Ocean - 16 - need not establish that Lei also disclosed or used the files in order to survive summary judgment on its misappropriation claims. “[W]hile unauthorized use of a trade secret is an element of a common law claim for misappropriation, MUTSA only requires that a plaintiff show that the secret was disclosed or acquired.” Erlich Prot. Sys., Inc. v. Flint, No. 345323, 2019 WL 5851938, at *4 (Mich. Ct. App. Nov. 7, 2019) (citations omitted); see also Ajuba Int’l, L.L.C. v. Saharia, 871 F. Supp. 2d 671, 691 (E.D. Mich. 2012) (“[A] plaintiff need not plead that the defendant ‘used’ the trade secret or benefitted from it in any way.” (quoting Dow Corning Corp. v. RSI Silicon Prod., LLC, No. 10-11226, 2010 WL 4723428, at *5 (E.D. Mich. Nov. 15, 2010 . Broad-Ocean has demonstrated that genuine issues of material fact remain as to whether Lei misappropriated the files that the plaintiff alleges contain the trade secrets discussed above. Lei is not entitled to summary judgment on the plaintiff’s federal and state trade secret misappropriation claims. B. Lei argues that, because Broad-Ocean has not established the damages it suffered as a result of his breach of his Confidentiality Agreement, he is entitled to summary judgment on Broad- Ocean’s claim for breach of contract. Under Michigan law, damages indeed are an element of a breach of contract action, and Broad-Ocean has the burden of proving its damages with reasonable certainty. See, e.g., Alan Custom Homes, Inc. v. Krol, 256 Mich. App. 505, 512, 667 N.W.2d 379, 383 (2003). That does not mean, however, that Broad-Ocean must establish its damages with reasonable certainty at the summary judgment stage of the case. “Damages cannot be speculative, but this only means that the fact of damages, not their amount, cannot be uncertain.” Pfahler v. Nat’l Latex Prod. Co., 517 F.3d 816, 837 (6th Cir. 2007) (emphasis in original) (citing Kemmerer v. ICI Americas Inc., 70 - 17 - F.3d 281, 289–91 (3d Cir. 1995 . It therefore is sufficient at this stage in the proceedings for Broad-Ocean to demonstrate that material questions of fact remain as to the extent to which it suffered damages as a result of Lei’s breach of his Confidentiality Agreement. See ibid. Broad- Ocean has made that showing: Taking the facts in the light most favorable to Broad-Ocean, it has raised a question of fact as to whether Lei brought some of its files to its competitor, Hyzon. The forensic examinations of Lei’s computers suggested that Lei may have uploaded at least some Broad-Ocean files to his Hyzon computer in violation of the agreement. And even if the information had not caused the plaintiff a specific pecuniary loss, “the law infers some damages — at least nominal damage — from the breach of a contract.” See 4041-49 W. Maple Condo. Ass’n v. Countrywide Home Loans, Inc., 282 Mich. App. 452, 459-60, 768 N.W.2d 88, 92 (2009) (citing Vandenberg v. Slagh, 150 Mich. 225, 229, 114 N.W. 72 (1907 . “[N]ominal damages are generally sufficient to sustain a cause of action.” Ibid. (citing Health Call of Detroit v. Atrium Home & Health Care Services, Inc., 268 Mich. App. 83, 107, 706 N.W.2d 843 (2005 . Summary judgment is not warranted on Broad-Ocean’s breach of contract claim. C. Lei also argues that he is entitled to summary judgment on Count 4 of the complaint because Broad-Ocean has not offered sufficient evidence to sustain a breach-of-fiduciary-duty claim. To establish a claim for breach of fiduciary duty under Michigan law, a plaintiff must prove “(1) the existence of a fiduciary duty, (2) a breach of that duty, and (3) damages caused by the breach of duty.” Highfield Beach at Lake Michigan v. Sanderson, 331 Mich. App. 636, 666, 954 N.W.2d 231, 247 (2020) (citations omitted). A fiduciary relationship “arises from the reposing of faith, confidence, and trust and the reliance of one on the judgment and advice of another.” Teadt - 18 - v. Lutheran Church Missouri Synod, 237 Mich. App. 567, 580-581, 603 N.W.2d 816, 823 (1999). “A person in a fiduciary relation to another is under a duty to act for the benefit of the other with regard to matters within the scope of the relation.” Ibid. (citing Melynchenko v. Clay, 152 Mich. App. 193, 197, 393 N.W.2d 589 (1986 . A breach of fiduciary duty arises when a person holding a position of influence and confidence “abuses the influence and betrays the confidence.” Highfield Beach, 331 Mich. App. at 666 n.13, 954 N.W.2d at 247 (citing Teadt, 237 Mich. App. at 581, 603 N.W.2d at 823). Broad-Ocean insists that Lei owed it a fiduciary duty as its employee because it entrusted him with confidential information pursuant to the Confidentiality Agreement. But unless circumstances indicate otherwise, the employer-employee relationship alone generally does not give rise to fiduciary duties. See, e.g., Delphi Auto. PLC v. Absmeier, 167 F. Supp. 3d 868, 884 (E.D. Mich. 2016); Wysong, 412 F. Supp. 2d at 623-24 (citing Bradley v. Gleason Works, 175 Mich. App. 459, 463, 438 N.W.2d 330, 332 (1989 . And Broad-Ocean cites no authority in support of the proposition that every employee who signs a confidentiality agreement becomes a fiduciary of his employer. That is because fiduciary relationships arise from influence — that is, by the exchange of confidence for superiority, judgment, or advice. See, e.g., Fassihi v. Sommers, Schwartz, Silver, Schwartz & Tyler, P.C., 107 Mich. App. 509, 515, 309 N.W.2d 645, 648 (1981) (“A fiduciary relationship arises when one reposes faith, confidence, and trust in another’s judgment and advice.”); Smith v. Saginaw Sav. & Loan Ass’n, 94 Mich. App. 263, 274, 288 N.W.2d 613, 618 (1979) (“Relief is granted when such position of influence has been acquired and abused.”); In re Wood’s Est., 374 Mich. 278, 283, 132 N.W.2d 35, 39 (1965) (“[A] fiduciary relation exists as a fact” where “there is confidence reposed on one side, and the resulting superiority and influence on the other.”). Under Michigan law, mid-level employees generally do - 19 - not owe fiduciary duties to their employers unless their employer places them in a position where they are responsible for strategic plans or operations, or where they are serving as their employer’s agent. See, e.g., Petroleum Enhancer, LLC v. Woodward, 690 F.3d 757, 766 (6th Cir. 2012) (finding corporate director a fiduciary); Hayes-Albion v. Kuberski, 421 Mich. 170, 187, 364 N.W.2d 609, 617 (1984) (finding chief engineer a fiduciary); Echelon Homes, L.L.C. v. Carter Lumber Co., 261 Mich. App. 424, 446, 683 N.W.2d 171, 184 (2004), rev’d in part on other grounds, 472 Mich. 192, 694 N.W.2d 544 (2005) (finding bookkeeper a fiduciary); Chem-Trend Inc. v. McCarthy, 780 F. Supp. 458, 460 (E.D. Mich. 1991) (finding employee acting as agent a fiduciary). Although Lei was a senior software engineer at Broad-Ocean, there is no evidence that he served as a high-level executive or was placed in a position of influence at the company. Nor has Broad-Ocean set forth any specific facts showing that there is a genuine question whether Lei acted as its agent. That alone means that Lei is entitled to summary judgment on Broad-Ocean’s fiduciary duty claim. Lei also is entitled to summary judgment for another reason: Broad-Ocean’s fiduciary duty claim is “based solely upon the misappropriation of a trade secret.” Wysong Corp., 412 F. Supp. 2d at 623 (quoting Bliss Clearing Niagara, Inc. v. Midwest Brake Bond Co., 270 F. Supp. 2d 943, 946 (W.D. Mich. 2003 . MUSTA, however, “displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.” Magna Donnelly, 662 F. Supp. 2d at 858 (quoting Mich. Comp. Laws § 445.1908(1 ; see also CMI Int’l, Inc. v. Intermet Int’l Corp., 251 Mich. App. 125, 131-32, 649 N.W.2d 808, 812-13 (2002). Although as a general matter “[a] claim for breach of fiduciary duty . . . is really the opposite of a misappropriation claim,” Wysong, 412 F. Supp. 2d at 623-24, a plaintiff nevertheless cannot - 20 - recover for both a MUSTA and a fiduciary duty claim if the two claims are supported by identical underlying facts, see, e.g., CMI Int’l, 251 Mich. App. at 131-32, 649 N.W.2d at 812-13 (finding fiduciary duty claim displaced by MUSTA); Radiant Glob. Logistics, Inc. v. Furstenau, 368 F. Supp. 3d 1112, 1134 (E.D. Mich. 2019) (same). There is no question that Broad-Ocean’s fiduciary duty claim rests on the same underlying facts as its trade secret misappropriation claims. Broad-Ocean pleads that Lei owed it “a fiduciary duty not to misappropriate Confidential Information or trade secrets,” and breached that duty by intentionally taking said secrets. Compl., ¶¶ 102-03, ECF No. 1, PageID.23. It makes no other factual allegations in support of its fiduciary duty claim. The claim must be dismissed both because there is no evidence of a fiduciary relationship and because it is preempted by MUSTA. III. Fact questions preclude summary judgment on the plaintiff’s claims for misappropriation of trade secrets under federal and state law and its claim for breach of contract. The defendant is entitled to summary judgment on the claim for breach of fiduciary duty. Accordingly, it is ORDERED that the defendant’s motion for summary judgment (ECF No. 40) is GRANTED IN PART AND DENIED IN PART. Count 4 of the complaint alleging a claim for breach of fiduciary duty is DISMISSED WITH PREJUDICE. The motion is DENIED in all other respects. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: January 9, 2023 - 21 -

=== OPINION AND ORDER GRANTING PLAINTIFF’S MOTION SUMMARY JUDGMENT ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION 7-ELEVEN, INC., Plaintiff, v. CJ-GRAND, LLC and ROBERT TAYLOR, Defendants. / Case Number 19-12624 Honorable David M. Lawson OPINION AND ORDER GRANTING PLAINTIFF’S MOTION SUMMARY JUDGMENT Plaintiff 7-Eleven, Inc., the franchisor of the nationally familiar “7-Eleven” branded convenience stores, filed this action under the Declaratory Judgment Act alleging that one of its franchisees breached the franchise agreement and asking for a determination that the agreement is valid and the defendants’ conduct constitutes grounds for its immediate termination. Now that discovery has closed, 7-Eleven moves for summary judgment. The defendants have not identified any facts in the record that call into question the validity of the franchise agreement, nor have they pointed to anything in the record that casts doubt on the plaintiff’s evidence that their conduct amounted to a material breach of the agreement justifying termination. Because there is no material fact dispute, and the termination provisions of the franchise agreement are not unconscionable, 7-Eleven is entitled to a judgment as a matter of law, and its motion will be granted. I. On December 2, 2013, defendant Robert Taylor, as principal of his entity CJ Grand, LLC, executed a franchise agreement and several associated agreements and addendums to obtain a franchise to operate the 7-Eleven store on East Jefferson Avenue in Detroit. The agreements included a personal guaranty of performance that was executed by Taylor. The store property was leased by the plaintiff and sub-leased to the defendants. The sub-lease term naturally would expire in 2023. The plaintiff also supplied $100,000 worth of fixtures and equipment to furnish the store, such as coolers, shelves, a safe, and a cash register, all of which also were leased to the defendants. Under the franchise agreement, the defendants assumed a variety of obligations and promised, among other things, that they would: (1) operate the store according to the requirements of the “7-Eleven System,” and in a manner that would “enhance the 7-Eleven image,” (2) carry, use, and offer for sale only products that are consistent with the type, quantity, quality, and variety allowed under the franchise agreement, (3) comply with all of 7-Eleven’s standards and specifications for maintaining inventory, including proprietary products, (4) maintain the store premises and equipment in a clean, attractive, orderly, safe, and sanitary condition and in good repair and operating condition, (5) meet with 7-Eleven representatives once a week at the store during reasonable business hours, and (6) operate the store, including the food service facility, at all times in compliance with 7-Eleven’s food service standards and in compliance with all applicable laws and regulations. The defendants further agreed that the plaintiff’s representatives had the right to inspect the store to determine if it was compliant with franchise requirements, and that the defendants reasonably would assist inspectors for that purpose. They also agreed to provide the plaintiff’s representatives access to the store, equipment, inventory, supplies, receipts, cash logs and other financial records during any time when the store is in normal operation. They also agreed that none of the equipment would be disabled without prior written permission from the plaintiff. And they agreed to submit cash reports daily or at other times as specified by the plaintiff. Finally, in Section 26(b) of the agreement the defendants agreed that the franchise could be terminated, - 2 - immediately and without any opportunity to cure, if after the defendants received three separate notices of breaches of the agreement, a fourth notice of breach was delivered within two years after delivery of the first breach notice, regardless whether any of the breaches were cured. Between April 2018 and April 2019, the plaintiff conveyed to the defendants six notices that they had breached various provisions of the franchise agreement. On April 3, 2018, the defendants were notified that they had failed to submit timely cash reports for March 1, 2018 through March 28, 2018. On the same date, they also were notified that the video recording system in the store had been offline for nearly five months (since December 17, 2017), denying 7-Eleven reasonable access to observe the premises during operational hours. A technician who came to service the equipment discovered that the video system, which apparently worked well on the premises, had been unplugged from the network. On August 9, 2018, the defendants were notified that they had denied the plaintiff remote access to the store premises because the video recorder had been offline again for over two months. And again, a technician discovered that the system was unplugged from the network. On the same date, the defendants were notified that they had failed to maintain the store by allowing unclean and out-of-stock conditions that were observed during a May 22, 2018 inspection. On January 28, 2019, and again on April 17, 2019, the defendants were notified that they had failed to maintain a minimum net worth of at least $15,000 in their franchise account. Defendant Taylor met with 7-Eleven senior managers in July 2019 and promised to fix the problems that had been brought to his attention. However, the problems persisted, and on September 4, 2019, the defendants were notified of four more breaches based on further failures to submit timely cash reports, allowing the video recorder to go offline again, denying the - 3 - plaintiff’s representative access to the back room of the store, and failing to meet with the plaintiff’s representative at the store to discuss the ongoing problems. The complaint pleads a single count for declaratory relief, requesting a determination that (1) section 26(b) of the franchise agreement is valid and enforceable, where it permits termination after notice of four incidents of material breach, as defined by the agreement, whether or not any of the breaches were cured, and (2) the 10 incidents of material breaches that are described in the complaint comprise “good cause” for termination of the franchise agreement under section 27 of Michigan’s Franchise Investment Law, Mich. Comp. Laws § 445.1527. The plaintiff filed its complaint for declaratory relief on September 6, 2019. The defendants initially failed to respond after being served with process, and their defaults were entered. However, the Court later granted the defendants’ motion to set aside the defaults and issued a scheduling order. Discovery has closed, and the plaintiff timely filed its motion for summary judgment. II. The Federal Declaratory Judgment Act, 28 U.S.C. § 2201, authorizes courts to adjudicate controversies between parties before a conflict blossoms into a larger and more costly claim. This statute permits suit when a controversy, although real and immediate, has not ripened to the point where one of the parties could invoke a coercive remedy, that is, a suit for damages or an injunction. See 12 James Wm. Moore et al., Moore’s Federal Practice § 57.03[2] (3d ed.1999) (stating that the Act enables “parties to adjudicate disputes before either suffers great damage”). The Act also confers “unique and substantial discretion” for the Court not to exercise jurisdiction. Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). A court may decline to hear a declaratory judgment action even where jurisdiction exists. See Brillhart v. Excess Ins. Co. of - 4 - Am., 316 U.S. 491, 494 (1942). The general inquiry is whether “the judgment will serve a useful purpose in clarifying and settling the legal relationships in issue and whether it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.” Aetna Cas. & Sur. Co. v. Sunshine Corp., 74 F.3d 685, 687 (6th Cir.1996) (internal quotes omitted). This case is an appropriate one for declaratory relief. A decision here would settle the controversy between a franchisor and its franchisee over the rights and duties under the franchise agreement and state law, and it would serve a useful purpose by clarifying the legal relationship between the parties. The plaintiff contends it is entitled to summary judgment on its complaint. Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). When reviewing the motion record, “[t]he court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine ‘whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.’” Alexander v. CareSource, 576 F.3d 551, 557-58 (6th Cir. 2009) (quoting Anderson v. Liberty Lobby, Inc., , 251-52 (1986 . When the moving party also bears the ultimate burden of persuasion, the movant's affidavits and other evidence not only must show the absence of a material fact issue, they also must carry that burden. Vance v. Latimer, 648 F. Supp. 2d 914, 919 (E.D. Mich. 2009); see also Resolution Trust Corp. v. Gill, 960 F.2d 336, 340 (3d Cir. 1992); Stat–Tech Liquidating Trust v. Fenster, 981 F. Supp. 1325, 1335 (D. Colo. 1997) (stating that where “the crucial issue is one on which the movant will bear the ultimate burden of proof at trial, summary judgment can be entered only if the movant submits evidentiary materials to establish all of the elements of the - 5 - claim or defense”). The plaintiff therefore “must sustain that burden as well as demonstrate the absence of a genuine dispute. Thus, it must satisfy both the initial burden of production on the summary judgment motion — by showing that no genuine dispute exists as to any material fact—and the ultimate burden of persuasion on the claim — by showing that it would be entitled to a directed verdict at trial.” William W. Schwarzer, et al., The Analysis and Decision of Summary Judgment Motions, 139 F.R.D. 441, 477-78 (1992) (footnotes omitted). Because this is a diversity action, the Court must follow Michigan substantive law, as prescribed by the state’s highest court. Erie R.R. v. Tompkins, 304 U.S. 64 (1938). If the Michigan Supreme Court has not addressed a determinative point of law, this Court “must predict how it would resolve the issue from ‘all relevant data.’” Kingsley Associates, Inc. v. Moll PlastiCrafters, Inc., 65 F.3d 498, 507 (6th Cir. 1995) (citing Bailey v. V & O Press Co., Inc., 770 F.2d 601, 604 (6th Cir. 1985 . “Relevant data include decisions of the state appellate courts, and those decisions should not be disregarded unless we are presented with persuasive data that the Michigan Supreme Court would decide otherwise.” Ibid. (citing FL Aerospace v. Aetna Casualty and Surety Co., 897 F.2d 214, 218-19 (6th Cir. 1990 . The plaintiff alleges that the defendants breached the franchise agreement in ways that allow the plaintiff to cancel it before it expires by its own terms. To state a claim for breach of contract under Michigan law, a plaintiff first must establish the elements of a valid contract. Pawlak v. Redox Corp., 182 Mich. App. 758, 765, 453 N.W.2d 304, 307 (1990). The elements of a valid contract in Michigan are “‘(1) parties competent to contract, (2) a proper subject matter, (3) a legal consideration, (4) mutuality of agreement, and (5) mutuality of obligation.’” Hergenreder v. Bickford Senior Living Grp., LLC, 656 F.3d 411, 417 (6th Cir. 2011) (quoting Hess v. Cannon Twp., 265 Mich. App. 582, 696 N.W.2d 742, 748 (2005 . Once a - 6 - valid contract has been established, the plaintiff then must prove (1) the terms of the contract, (2) breach of those terms by the defendant, and (3) injury to the plaintiff resulting from the breach. In re Brown, 342 F.3d 620, 628 (6th Cir. 2003); see also May v. CitiMortgage, Inc., 648 F. App’x 567, 571 (6th Cir. 2016). The defendants agree that a valid contract exists with the plaintiff. And they do not quarrel with the allegations that they failed to perform their obligations under the agreement as recounted in the several notices of breach. However, this contract is a franchise agreement, which is subject to additional regulations. Michigan’s Franchise Investment Law (MFIL) “prohibits any provision in a franchise agreement that ‘permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause.’” Lakeside Surfaces, Inc. v. Cambria Co., LLC, No. 18-110, 2020 WL 1227047, at *9 (W.D. Mich. Mar. 13, 2020) (quoting Mich. Comp. Laws § 445.1527(c . The defendants contend that their non-performance did not amount to “good cause” to terminate the agreement. And they say that because they were able to cure their several breaches, section 26(b) of the agreement, which allows 7-Eleven to terminate the relationship upon the fourth breach within two years despite cure by the franchisee, is unconscionable. A. The Michigan statute does not define “good cause” explicitly, but it does state that it “shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.” Mich. Comp. Laws § 445.1527(c). The defendants seize upon the “cure” language, arguing that they have made right all the faults for which they were cited in the ten breach notices. - 7 - Certainly, a franchise agreement that allows termination for a single breach that remains uncured for 30 days after notice would fall within the statute’s safe harbor. But that does not mean other provisions also could not satisfy the good-cause requirement. In both an ordinary grammatical sense, and in customary legislative use, “[t]he word ‘includes’ is usually a term of enlargement, and not of limitation.” Samantar v. Yousuf, 560 U.S. 305, 317 n.10 (2010) (quotations and citations omitted); see also United States v. Clear, 112 F. App’x 429, 431 (6th Cir. 2004) (interpreting Sentencing Guideline commentary construing the term “sophisticated means” as “incud[ing]” certain conduct as “illustrative, not exclusive.”). And it has been observed that “the MFIL has been drafted broadly compared to a number of other state statutes which proscribe specific situations which constitute ‘good cause.’” Two Men & a Truck/Int’l Inc. v. Two Men & a Truck/Kalamazoo, Inc., 949 F. Supp. 500, 505 (W.D. Mich. 1996). It is safe to say that 7-Eleven’s “four strikes” provision satisfies the statute’s good-cause requirement. It plainly is intended to address the problem of serial breachers. And the defendants’ conduct in this case fits that mold. Within a two-year period, they committed “material breaches,” as defined by section 26(a) of the franchise agreement, and cured them, only to fall out of compliance again — and again. Those “material breaches” included the following: failing properly to maintain the store premises, 26(a)(1)(d); “discontinuing using” 7-Eleven-issued video recording equipment without prior written permission from 7-Eleven, 26(a)(d)(e); failing to comply with inventory requirements and foodservice standards established by 7-Eleven, 26(a)(2)(e), (f); failing to maintain the required minimum net worth, 26(a)(4)(a); and failing to record or submit cash reports and other financial records as directed by the plaintiff, 26(a)(4)(b). The problem with the video monitoring system is a case in point. That system was offline for weeks at a time because it was not plugged into the network. When a technician remedied the - 8 - problem — thereby “curing” the breach — the defendants allowed it to be unplugged again, leaving it offline for another extended period. The franchise agreement allows termination if there are four breaches within two years. Here there were ten. The defendants argue that the breaches were not “material,” although the agreement defines them as such. The lone case they cite to support that argument is Walker & Co. v. Harrison, 347 Mich. 630, 81 N.W.2d 352 (1957). But that decision does not warrant a contrary result because the holding of the case defines factors that are considered to assess whether an alleged failure of performance was sufficiently “material” as a matter of law to justify wholesale repudiation of a lease contract by the aggrieved party. That case has no bearing on the question whether a party to a contract may exercise an expressly provided right of immediate termination upon conditions precedent that explicitly are defined by the contract terms. The record establishes as a matter of law that the defendants’ failure of performance was sufficient to trigger the termination provision in section 26(b) of the franchise agreement. B. The defendants also ague that section 26(b) is unconscionable. In their brief, they posit that 7-Eleven routinely treats its franchisees with a heavy hand, and it has served these breach notices as a pretext to allow it to terminate a high-revenue franchise so it can market it at a substantial profit to another taker. Those are serious allegations indeed. But the defendants have not backed them up with any evidence in the record. “Michigan law requires a party to demonstrate both procedural and substantive unconscionability” to establish that a contract term is invalid. Whirlpool Corp. v. Grigoleit Co., 713 F.3d 316, 321 (6th Cir. 2013). “‘Procedural unconscionability is determined by evaluating - 9 - the bargaining power of the parties, their relative economic strength, and their alternative sources of supply.’” Ibid. (citing Gianni Sport Ltd. v. Gantos, Inc., 151 Mich. App. 598, 601, 391 N.W.2d 760, 761-62 (1986 . “[T]he most important factors in determining procedural unconscionability are (1) whether the relatively weaker party had an alternative source with which it could contract, and (2) whether the contract term in question was in fact negotiable.” Id. at 322. The only evidence the defendants cite to support of their claim of procedural unconscionability is the following exchange from defendant Robert Taylor’s deposition: Q. If there were any terms in this agreement that you were uncomfortable with, you could have just not signed it, right? A. That’s always an option, but I didn’t think that would have been the wisest option to take at the time. Q. Why? A. Because I wanted to do business with 7-Eleven and it was this way or no way at that point in time. Robert Taylor dep., ECF No. 38-1, PageID.1358 (emphasis added). The defendants contend that the evidence shows that Taylor was faced with a take-it-or-leave-it proposition. Instead, it Taylor candidly admitted that he could have rejected the contract and walked away if he were unhappy with any of the terms. No evidence at all has been presented to establish the unavailability of other sources of potential franchises for convenience stores. And Taylor testified that he was looking at franchises in other areas as well. He chose this one, apparently, because he “wanted to do business with 7-Eleven.” It is unlikely that 7-Eleven would have altered the terms of its standard franchise agreement. But Taylor retained the ultimate bargaining option: he could have walked away and pursued another franchise opportunity. “‘Whether a contractual provision is substantively unreasonable or unconscionable depends on the commercial setting, purpose and effect of the provision.’” Pichey v. Ameritech - 10 - Interactive Media Servs., Inc., 421 F. Supp. 2d 1038, 1049 (W.D. Mich. 2006) (quoting Michigan Ass’n of Psychotherapy Clinics v. Blue Cross & Blue Shield of Michigan, 101 Mich. App. 559, 575, 301 N.W.2d 33, 41 (1981), set aside in part on other grounds, 411 Mich. 869, 306 N.W.2d 101). “‘Reasonableness is the primary consideration.’” Ibid. (quoting St. Paul Fire & Marine Ins. Co. v. Guardian Alarm Co. of Michigan, 115 Mich. App. 278, 284, 320 N.W.2d 244, 247 (1982 . “[A] contract provision is not invariably substantively unconscionable simply because it is foolish for one party and very advantageous to the other. Instead, a term is substantively unreasonable where the inequity of the term is so extreme as to shock the conscience.” Clark v. DaimlerChrysler Corp., 268 Mich. App. 138, 144, 706 N.W.2d 471, 475 (2005). Is 7-Eleven’s four-strikes termination provision unreasonable? Certainly not as applied in this case. As noted above, the provision reasonably addresses the violation-cure-violation cycle that is evident here. The franchisor no doubt enjoyed superior power when deciding whether to close the deal or to pull the plug. But “merely because the parties have different options or bargaining power, unequal or wholly out of proportion to each other, does not mean that the agreement of one of the parties to a term of a contract will not be enforced against him; if the term is substantively reasonable it will be enforced.” Allen v. Michigan Bell Tel. Co., 18 Mich. App. 632, 638, 171 N.W.2d 689, 692 (1969). “If a termination clause appears reasonable to [the] Court, disparity in bargaining power between the parties will not make the clause unenforceable.” Gianni Sport Ltd. v. Gantos, Inc., 151 Mich. App. 598, 601, 391 N.W.2d 760, 76 (1986). And it should be remembered that the defendants had another option available to them within the franchise relationship: compliance. Instead, they found themselves in material breach ten times within two years, which subjects them to the consequences laid out in section 26(b) of the agreement. There is nothing unreasonable about the clause in question here. - 11 - III. The undisputed evidence in the record establishes that the defendants engaged in at least four material breaches of the franchise agreement over a two-year period, those breaches are sufficient to trigger the termination provision in section 26(b) of the franchise agreement, section 26(b) is valid and enforceable, and the incidents of material breaches that are described in the complaint comprise “good cause” for termination of the franchise agreement under section 27 of Michigan’s Franchise Investment Law, Mich. Comp. Laws § 445.1527. Accordingly, it is ORDERED that the plaintiff’s motion for summary judgment (ECF No. 36) is GRANTED. Separate judgment will enter. s/David M. Lawson DAVID M. LAWSON United States District Judge Date: February 8, 2021 - 12 -

=== OPINION AND ORDER DENYING DEFENDANT'S MOTION TO DISMISS ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION IN RE: FCA US LLC MONOSTABLE ELECTRONIC GEARSHIFT LITIGATION MDL No. 2744 _____________________________________/ DEDRA MANEOTIS, Case Number 16-md-02744 Honorable David M. Lawson Magistrate Judge David R. Grand Plaintiff, Case Number 17-10351 v. FCA US, LLC, _____________________________________/ Defendant. OPINION AND ORDER DENYING DEFENDANT’S MOTION TO DISMISS Plaintiff Dedra Maneotis was injured when her 2014 Jeep Grand Cherokee rolled over her leg after she exited the vehicle, thinking she had successfully put the vehicle in “Park.” She sued the car manufacturer, Fiat Chrysler Automobiles US, LLC (FCA), alleging that various product defects led to her injuries. FCA filed a motion to dismiss the complaint, which raises two issues: whether Colorado’s two-year statute of limitations for product liability actions governs over the more general three-year statute that applies to personal injury actions involving operation of a motor vehicle; and, if the two-year statute applies, whether equitable tolling or fraudulent concealment jurisprudence renders the complaint timely filed. Because the plaintiff brought this action against a product manufacturer to recover for personal injuries caused by a product defect, the two-year statute of limitations governs, despite other statutory provisions that also could apply. But the plaintiff has pleaded facts in her complaint that support a plausible claim for equitable tolling and fraudulent concealment; therefore, the case cannot be dismissed as time-barred at the pleading stage. The defendant’s motion to dismiss will be denied. I. Maneotis’s initial complaint, filed in the District of Colorado, was transferred to this Court by the Joint Panel on Multidistrict Litigation and consolidated with the MDL proceedings. The plaintiffs in this consolidated action previously filed a consolidated master complaint for personal injury actions, which included the claims brought by Maneotis, a citizen of Colorado. However, in order to sharpen the pleadings for the purpose of the present motion, Maneotis filed her own individual first amended complaint, which contains only her claims. The facts discussed below are drawn from that pleading, and are the focus of the defendant’s motion to dismiss. “On December 20, 2013, Dedra Maneotis pulled up a hill into her driveway and put her 2014 Grand Cherokee in Park.” Am. Compl. ¶ 55 (Pg ID 5383). “As she opened the door and stepped one foot out, the car started to roll backward.” Id. ¶ 56. “With her left leg out, she tried to hop along with her left foot while holding on to the door and the steering wheel.” Id. ¶ 57. However, as she tried to keep up with the car, “the car door clipped a half-height decorative wall and bent backward, causing Dedra to lose her grip on the door handle,” and “[s]he struggled to stay upright as the car gained speed down the hill.” Id. ¶ 58. Maneotis soon “grew tired and had to let go of her hold on the vehicle,” and, as a result, “[s]he fell, and her leg got wrapped up in the front driver-side wheel.” Id. ¶ 59. The Jeep then rolled up onto the half-height decorative wall and over [her] leg, . . . rolled over, and then spun out on [her] leg, causing [her serious] injuries.” Ibid. -2- Maneotis reported the accident to the police immediately. “Officer Ryan M. Fritz responded and reported that ‘due to the electronic shifting system in this vehicle . . . [it] was not in “Park” like [Maneotis] thought it was.’” Ibid. Maneotis was hospitalized for her injuries and undergoes continuing treatment and therapy. The complaint highlights that Ms. Maneotis was in an unusual position compared with the typical plaintiffs in this multidistrict litigation, because her family owns a Dodge Jeep Ram dealership in Craig, Colorado, known as Victory Motors. The day after the accident, her Jeep was brought to the dealership’s service department, and, following the defendant’s protocol, the service manager and a mechanic on hand called Chrysler’s Service Technical Assistance Resource (“STAR”) team and reported the rollaway incident. Am. Compl. ¶ 18. The STAR team told the service manager that they “had not heard of this issue.” Ibid. The Victory Motors service team and Chrysler’s STAR team then ran extensive diagnostics on the Jeep: The STAR team gave the service manager and mechanic specific protocols and procedures to test the various systems in Dedra’s Jeep Grand Cherokee. None of the protocols and procedures identified an issue or defect and everything checked out to STAR’s satisfaction. STAR informed the service manager and mechanic that the rollaway was the result of driver error, and did not mention anything about their knowledge of rollaways or [other] consumer complaints. Id. ¶ 21. In May or June 2014, Tony Maneotis, the plaintiffs’ son and co-owner of Victory Motors, “attended an annual fleet meeting where FCA dealers met with FCA’s sales representatives, fleet representatives, and service representatives to learn about the new vehicles in the upcoming model year.” Id. ¶ 22. “Tony told FCA’s employees about his mother’s rollaway and asked if they knew about any issues with Dedra’s Jeep Grand Cherokee.” But FCA’s representatives professed ignorance of any rollaway incidents or shifter defect, and they asked Maneotis’s son if the STAR team had been consulted about testing the Jeep. In May or June 2015, Tony attended another fleet -3- meeting where he “learned that the model year 2016 Jeep Grand Cherokees would come equipped with a different shifter than the ZF Shifter.” Id. ¶ 23. He again “raised the issue of his mother’s rollaway directly with FCA’s employees,” and, “FCA’s employees said that they were not aware of a safety issue or defect but that the shifter change was being made to improve safety.” Ibid. Maneotis alleges that FCA did not inform its dealers that there was a safety defect with the monostable gearshift design until a year later at the 2016 fleet meeting. Id. ¶ 24. The amended complaint alleges that “[t]he ZF Shifter design is dangerously defective because there is not any tactile or position feedback to the operator as to whether the car has actually been placed into the safe-to-exit ‘park’ gear, nor a safety override that automatically puts the car in ‘park’ or applies the parking brake if the driver gets out of the car.” Am. Compl. ¶ 2. It also alleges that “[t]he defect is programmed into the defective ZF Shifter’s software,” and that because “the ordinary user has no ability to access the ZF Shifter’s source code, no ordinary user could possibly identify the presence of a defect. Nor was there any reason to suspect that the software was defective, especially when such concerns were rejected by ZF’s business partner, FCA.” Id. ¶ 68. The plaintiff further alleges that Chrysler was aware of the defect before December 2013. Am. Compl. ¶ 43. In her amended complaint, Maneotis pleaded claims for negligence (Count I), negligence per se (Count II), and strict product liability (Count III), under various Colorado product liability statutes and common law. The defendant filed its motion to dismiss Maneotis’s amended complaint on January 2, 2018, arguing that the plaintiff’s claims are governed by the two-year limitations period under section 13-80-106 of the Colorado Code, and not the three-year period for claims “arising from use or operation of a motor vehicle” under section 13-80-101. FCA contends -4- that Maneotis’s claim accrued on the date of the accident because she “formed a belief” on that date that the rollaway accident was caused by a failure of the shifter in her car, as demonstrated by the statement attributed to her from the contemporaneous police report that she quoted in her amended complaint. And FCA insists that equitable tolling cannot apply because the facts alleged in the amended complaint do not plausibly establish that the defendant had any “knowledge” of the purported defect before the accident, or that it had any duty to disclose whatever it did know about the shifter’s design. Maneotis argues that the three-year statute of limitations applies. But even if the two-year statute governs, she contends that her claim did not accrue more than two years before she filed her complaint because she could not have discovered that FCA’s wrongful conduct was the cause of her injuries within that time, and she believes that her filing deadline was equitably tolled because FCA fraudulently concealed the defect in the Jeep’s transmission. II. FCA brought its motion under Federal Rule of Civil Procedure 12(b)(6). Under that rule, the Court, looking only to the complaint, its attachments, matters of public record, and documents necessarily incorporated by reference that are integral to the claims, and accepting the pleaded facts as true, must determine if the plaintiff has stated a viable claim entitling her to relief. See Crosby v. Twitter, Inc., 303 F. Supp. 3d 564, 571 (E.D. Mich. 2018) (citing cases). To survive the motion, the plaintiff “must plead ‘enough factual matter’ that, when taken as true, ‘state[s] a claim to relief that is plausible on its face.’ Bell Atl. Corp. v. Twombly, , 556, 570 (2007). “Plausibility requires showing more than the ‘sheer possibility’ of relief but less than a ‘probab[le]’ -5- entitlement to relief. Ashcroft v. Iqbal, [ , 678] (2009).” Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010). In its motion, FCA does not challenge the sufficiency of the pleaded cause of action. Instead, it contends that it is entitled to dismissal based on its statute of limitations affirmative defense. A plaintiff is not obliged to plead around an affirmative defense to state a claim. Cataldo v. U.S. Steel Corp., 676 F.3d 542, 547 (6th Cir. 2012) (citing Fed. R. Civ. P. 8(a), (c . Therefore, a motion under Rule 12 “is generally an inappropriate vehicle for dismissing a claim based upon the statute of limitations.” Ibid. However, “sometimes the allegations in the complaint affirmatively show that the claim is time-barred,” and “[w]hen that is the case . . . dismissing the claim under Rule 12(b)(6) is appropriate.” Ibid. “Whether a statute of limitations bars a particular claim is a question of fact, but the issue may be decided as a matter of law if undisputed facts demonstrate that the plaintiff had the requisite information as of a particular date,” so that the court can decide when the claim accrued. Oaster v. Robertson, 173 F. Supp. 3d 1150, 1169 (D. Colo. 2016) (quotations omitted). A. Colorado has two statutory provisions that arguably could apply to cases involving injuries caused by the operation of motor vehicles. One statute establishes a three-year period within which to file a lawsuit for “[a]ll tort actions for bodily injury or property damage arising out of the use or operation of a motor vehicle.” Colo. Rev. Stat. 13-80-101(n)(I). However, Colorado imposes by statute a universal two-year limitations period that governs all actions seeking recovery for personal injuries resulting from a defective product, “[n]otwithstanding any other statutory provisions to the contrary.” Colo. Rev. Stat. § 13-80-106(1). -6- The plaintiff contends that because a motor vehicle was involved, the three-year statute ought to apply. There is not much authority to be found that reconciles the two competing statutes in like circumstances, but that, perhaps, is because the answer is too obvious to warrant an extended discussion. See Sepulveda v. Ford Motor Co., No. 15-00572, 2015 WL 3947113, at *3 (D. Colo. June 26, 2015) (applying the two-year limitations period, without any mention of section 13-80- 101(n), and dismissing as untimely plaintiff’s claims for crash injuries allegedly caused by a defective airbag). The main thrust of Maneotis’s amended complaint is that she was injured by a defective product manufactured by FCA. Section 13-80-106(1) “establish[es] a two-year statute of limitations for all tort, strict liability and product liability actions, regardless of the substantive theory on which the product liability action is based.” Schmidt v. DJO, LLC, No. 09-02683, 2010 WL 3239249, at *4 (D. Colo. Aug. 12, 2010). But where the three-year statute also (arguably) could apply, how should the two statutes be reconciled? The task of statutory interpretation begins “with the plain meaning of the statutory language.” King v. Zamiara, 788 F.3d 207, 212 (6th Cir. 2015) (citing Walker v. Bain, 257 F.3d 660, 666 (6th Cir. 2001 . “[I]f [the] language [of the statute] is clear and unambiguous, the Court will usually proceed no further.” United States v. Bailey, 228 F.3d 637, 638 (6th Cir. 2000) (citing Barker v. Chesapeake & Ohio R.R., 959 F.2d 1361, 1366 (6th Cir. 1992 ; see also Michigan Flyer LLC v. Wayne Cty. Airport Auth., 860 F.3d 425, 428 (6th Cir. 2017) (noting that any exercise in statutory construction “must begin with the plain language of the statute because the ‘language of the statute is the starting point for interpretation, and it should also be the ending point if the plain meaning of that language is clear.’” (quoting United States v. Choice, 201 F.3d 837, 840 (6th Cir. 2000 . Where words used in a statute are not explicitly defined, the Court assumes, absent any -7- indications to the contrary, that those terms are used according to their ordinary meaning. Mohamad v. Palestinian Authority, 566 U.S. 449, 454 (2012) (“Because the [Terror Victim Protection Act] does not define the term ‘individual,’ we look first to the word’s ordinary meaning.”); FCC v. AT & T Inc., 562 U.S. 397, 397 (2011) (“When a statute does not define a term, the Court typically ‘give[s] the phrase its ordinary meaning.’” (quoting Johnson v. United States, 559 U.S. 133, 138 (2010 . The plain terms of the competing statutes in this case establish that the plaintiff’s claims are governed by the two-year limitations period for product liability actions under section 13-80- 106(1), and nothing in their plain language suggests otherwise. Several factors point ineluctably to this conclusion. First, it is undisputed that the claims pleaded in the complaint comprise facts and causes of action that fit squarely within the ambit of an action “brought against a manufacturer or seller of a product, regardless of the substantive legal theory or theories upon which the action is brought, for or on account of personal injury, death, or property damage caused by or resulting from the manufacture, construction, design, formula, installation, preparation, assembly, testing, packaging, labeling, or sale of any product, or the failure to warn or protect against a danger or hazard in the use, misuse, or unintended use of any product.” Colo. Rev. Stat. § 13-80-106(1). Therefore, the action is within those expressly governed by the two-year limitations period. Second, the three-year statute must take a back seat, as the same provision expressly states that the two-year period governs any such action “[n]otwithstanding any other statutory provisions to the contrary.” Ibid. The plaintiff’s argument --- that section 13-80-101(n)(I) ought to apply because it specifically mentions personal injury tort actions that “aris[e] out of the use or operation -8- of a motor vehicle” --- collides directly with section 13-80-106(1)’s “notwithstanding” language. The parties’ semantic debates over the nuances of the exclusionary clause in section 13-80-101(n) and the meaning of “notwithstanding” do not alter this conclusion. Both statutes use straightforward terms that are unambiguous; the debate thus begins and ends with those terms. Merriam Webster’s dictionary defines “notwithstanding” as a synonym for “despite,” meaning “in spite of.” See https://www.merriam-webster.com/dictionary/notwithstanding. Despite any apparent language suggesting otherwise in any other statute, the Colorado legislature made its will plain when it enacted section 13-80-106(1), which commands that “all actions” comprising claims for personal injuries due to a defective product must be brought within two years. “All actions” means all actions, without regard to any other enactment that may suggest otherwise. Whaley v. Henry Ford Health Sys., 172 F. Supp. 3d 994, 1000-01 (E.D. Mich. 2016) (“There is no more comprehensive term than ‘all.’” (citing Sander v. Alexander Richardson Inv., 334 F.3d 712, 716 (8th Cir. 2003 ; County of Oakland v. Federal Housing Finance Agency, 716 F.3d 935, 940 (6th Cir.2013) (observing that “a straightforward reading of the statute leads to the unremarkable conclusion that when Congress said ‘all taxation,’ it meant all taxation” ; see also In re Hydro Action, Inc., 266 B.R. 638, 645 (Bankr. E.D. Tex. 2001) (“Notwithstanding the proclivities of a recent Chief Executive to the contrary, the meanings of these three comprehensive words are not subject to serious dispute. ‘All’ means all. ‘Every’ means every. ‘Any’ means any.”). Reading section 13-80-101(n)(I)’s three-year limitation period as trumping the two-year statute that applies to product liability actions plainly would be “contrary” to the terms of section 13-80-106(1). The plaintiff’s argument therefore is foreclosed by the broad, preclusive terms of the product liability limitations statute. -9- Finally, the plaintiff’s argument that a three-year limitations period should apply is contrary to the plain language of the statute on which she relies, because that section applies specifically to “tort actions for bodily injury or property damage arising out of the use or operation of a motor vehicle.” Colo. Rev. Stat. § 13-80-101(n)(I). Maneotis contends that her claims are governed by Colorado’s general tort liability statute, Colo. Rev. Stat. 13-80-101(n), which identifies “civil actions, regardless of the theory upon which suit is brought, or against whom suit is brought, [which must] be commenced within three years after the cause of action accrues, and not thereafter”; that catalog includes “[a]ll tort actions for bodily injury or property damage arising out of the use or operation of a motor vehicle including [all actions under the former Colorado Auto Accident Reparations Act (‘CAARA’ or ‘No-Fault Act’), since repealed].” Colo. Rev. Stat. § 13-80-101(n)(I). The same subsection (n) also states that “[t]he provisions of this paragraph (n) do not apply to any action for strict liability, absolute liability, or failure to instruct or warn governed by the provisions of section 13-80-102(1)(b) or section 13-80-106.” Id. § 13-80- 101(n)(II). If this case were an action brought against Maneotis for injuries or damage to property resulting from her “use” or “operation” of her Jeep, then the matter might be open to some debate, but it is not. None of the allegations of the amended complaint suggest that any wrongful conduct by the defendant in negligently designing or failing to warn about the dangers of its gear shift design involved any “use” or “operation” of the Jeep by the defendant or any of its employees or agents. Thus, this case is not, in the first instance, within the category of actions covered by section 13-80-101(n)(I). Regardless of the scope of any exceptional clause to that statute, its plain terms do not comprise any claims arising from defective design or manufacture of a motor vehicle that do not involve any allegedly tortious “use” or “operation.” -10- B. Section 13-80-106(1) states that a person bringing a products liability action must file her complaint “within two years after the claim for relief arises.” The defendant contends that Maneotis’s claim accrued on the day of the accident. But accrual of a claim under this statute “is subject to the discovery rule, meaning that the cause of action accrues on the date both the injury and its cause are known or should have been known by the exercise of ‘reasonable diligence.’” Schmidt, No. 09-02683, 2010 WL 3239249, at *4 (quoting Colo. Rev. Stat. § 13-80-108(1 ; see also Murry v. GuideOne Specialty Mutual Insurance Co., 194 P.3d 489, 491 (Colo. App. 2008) (stating that “[a] cause of action accrues on the date when ‘the injury, loss, damage, or conduct giving rise to the cause of action is discovered or should have been discovered by the exercise of reasonable diligence’”). “The point of accrual is usually a question of fact, but if the undisputed facts clearly show when a plaintiff discovered or should have discovered the damage or conduct, the issue may be decided as a matter of law.” Murry, 194 P.3d at 491. In her amended complaint, the plaintiff has stated facts that raise a question on when she had enough information to have discovered that she had a claim for injuries against FCA. Most prominent in this record is a substantial question of fact — the most basic unresolved question of fact in this entire litigation — about whether the monostable gear shift mechanism used by the defendant has one or more design or manufacturing defects, and, if so, what precisely is the nature, cause, and effect of any defect or defects. Whether a reasonable person could have been expected to discover any such defect at a particular time through use of the vehicle depends inherently on what the defect is, and how it is incorporated into or expressed through operation of the gear shift. -11- The defendant contends that the “only defects” alleged in the amended complaint are that the shifter (1) gives insufficient tactile feedback, and (2) lacks an “auto park” feature. But that overlooks other allegations, including in paragraph 64, where the plaintiff also alleges that “[a]s a result of the defective ZF Shifter installed in Dedra’s Grand Cherokee, and its failure to keep the vehicle in park, Dedra will require a lifetime of physical and mental assistance and medical treatment.” Am. Compl. ¶ 64 (Pg ID 5384) (emphasis added). If the gear shift only is defective in terms of design, features, and behavior immediately apparent to an ordinary user, such as its “monostable” movement and lack of tactile feedback, then perhaps a reasonable driver would be expected to notice those faults in its design right away, or at the least after a moderate period of ordinary use of her car. If, however, the gear shift design has more subtle problems, such as the Court previously has found that the plaintiffs alleged in the economic loss complaint, and, as alleged here, where it “fails to keep the vehicle in park,” even though the driver properly completed a shift to that gear, then a reasonable person probably could not be expected to know about that sort of defect until, quite by surprise, it resulted in a possibly disastrous unexpected movement of her car. Even then, the driver who had a rollaway incident reasonably may have no more than a suspicion that a lurking defect caused her car to fail to stay in the selected gear, at least, without conducting a thorough technical investigation of the gear shift’s inner workings — an inquiry that would not plausibly be within the capabilities of a reasonable ordinary driver. As the Colorado appellate courts have explained, “the statute of limitations begins to run when the claimant has knowledge of facts which would put a reasonable person on notice of the nature and extent of an injury and that the injury was caused by the wrongful conduct of another.” Salazar v. American Sterilizer Co., 5 P.3d 357, 363, (Colo. App. 2000). “However, suspicion of -12- a possible connection does not necessarily put a reasonable person on notice of the nature, extent, and cause of an injury.” Ibid. “The focus is on plaintiff’s knowledge of facts rather than the discovery of applicable legal theories.” Ibid. Maneotis’s amended complaint plausibly could be read to indicate that she deduced, at the time of her accident, that her car had either of those sorts of defects. Her comment to a police officer on the scene that “due to the electronic shifting system in this vehicle . . . [it] was not in ‘Park’ like [Maneotis] thought it was,” Am. Compl. ¶ 60, could be read as indicating that Maneotis believed either (1) that, although she properly used the gear shift to put the car in “park,” it was, unexpectedly, no longer in “park” when she got out; or (2) that, although she thought she had put the car in “park,” due to the operation of the gear shift, she actually had not, and, hence, due to “user error,” as the defendant contends, the car rolled away unexpectedly when she got out. If the only true defect in the gear shift is lack of tactile feedback contributing to “user error,” then maybe Maneotis knew all that a reasonable person needed to know on the date of the accident to conclude that she had a cause of action against the defendant for injuries due to its confusing design. However, even with such a readily apparent defect, questions of fact remain on the record now before the Court. The defendant conceded at oral argument that the most that can be inferred from the allegations of the complaint is that Maneotis operated the car “at least once,” on the date of the accident. The defendant’s attorney also represented when asked that Maneotis did not own the car, and that it is unknown how many times she drove it before the accident. Thus, there is at least a lingering question about whether, having driven the car only once, a reasonable person in Maneotis’s position, particularly after she suffered traumatic injuries due to the accident, -13- could be expected to retain a sufficient impression of how the gear shift operated to comprehend even an obvious defect in its superficial function or features. Moreover, if the gear shift in fact has a defect that caused it to “fail to keep the car in park” even though it properly was put in “Park” by the driver, then Maneotis could not reasonably have been expected to divine what inner workings of the mechanism would lead to that action, or even that such action was possible, since the amended complaint here alleges that the defective performance was obfuscated within a software program embedded in the gear shift. The fact that Maneotis may have suspected that there was some connection between the shifter and the roll away accident is not enough, standing alone, for the Court to conclude as a matter of law that the plaintiff must have known, as soon as the accident occurred, all she needed to know to pursue litigation. Salazar, 5 P.3d at 363. Here there is room for debate about what facts Maneotis “knew,” and what conclusions she reached or should have reached after the accident, particularly since a reasonable person might have abandoned any lingering suspicion about a lurking defect, after the defendant’s STAR team, following thorough diagnostic testing of the car at the dealership, proclaimed that there was no problem, that the team had no knowledge of other similar incidents, and that the sole cause of the accident was “user error.” At this stage of the case, based on nothing more than the facts pleaded, without a developed record on all the salient points, this question at least remains: Would a reasonable driver in Maneotis’s position have deduced on the day of the accident that the rollaway was due to poor design of the shifter, or would she have assumed that it was due to poor use of that design by her? That is a question of fact that is not amenable to disposition as a matter of law, particularly since it involves the application of a rule of reason, where the facts could support an outcome either way. -14- Therefore, the Court cannot conclude from the amended complaint that Maneotis’s claim accrued more than two years before she filed her lawsuit. C. The plaintiff also alleges that FCA concealed the defect in the transmission and therefore the statute of limitations ought to be equitably tolled. “[T]he related doctrines of equitable estoppel and fraudulent concealment may bar a defendant from enforcing a statute of limitation when its own deception prevented a reasonably diligent plaintiff from bringing a timely claim.” Sebelius v. Auburn Regional Medical Center, 568 U.S. 145, 164 (2013). Under Colorado law, the statute of limitations “may be tolled if the plaintiffs can prove that the defendant fraudulently concealed material elements giving rise to their claims.” Patterson v. BP America Production Co., 2015 COA 28, ¶ 38, 360 P.3d 211, 220 (Colo. Ct. App. 2015). “To establish fraudulent concealment, the plaintiffs must demonstrate that they were ignorant of the defendant’s concealment, that they relied on the concealment to their detriment, and that they were unable, by reasonable diligence, to discover facts necessary to determine the existence of a claim for relief.” Ibid. “[B]ecause tolling is an equitable remedy, its application involves an examination of the facts and circumstances of individual cases to determine when equity requires such a remedy.” Morrison v. Goff, 91 P.3d 1050, 1057 (Colo. 2004). It is apparent from the pleadings that there are several live questions of fact as to whether equitable tolling should be applied to foreclose the defendant’s reliance on its limitations defense. Based on the facts asserted in the amended complaint, there is at least a colorable basis for the application of equitable tolling premised on fraudulent concealment of the defect by the defendant, and the defense therefore is not amenable to disposition by a judgment on the pleadings, without -15- the benefit of discovery and a full consideration of the defense based on a complete factual record. As the Court held in a prior opinion in this case, the allegations of the complaint here, which are materially indistinguishable from those that the Court reviewed in the economic loss complaint, amply make out the pertinent elements of a freestanding fraudulent concealment claim, which are materially congruent with those needed to sustain a claim for equitable tolling based on fraudulent concealment. See In re FCA US LLC Monostable Electronic Gearshift Litigation, 280 F. Supp. 3d 975, 1003 (E.D. Mich. 2017) (noting that “[t]he plaintiffs here allege that the defendant failed to disclose to them anything about the risks posed by the dangerous and unreliable shifter design; that it knew about the problems with that design as a result of its own testing and design analysis, and customer complaints received from early in the market life of the product; that it should have disclosed the defect at or before the respective dates on which they bought their cars; and that, instead, the defendant concealed its knowledge of the defect until it finally declared a recall of the vehicles on April 22, 2016 and sent a letter to affected owners and lessees in June 2016”). On similar facts, federal courts applying Colorado law readily have found questions of fact about whether tolling should apply to claims of concealed defects. See Schmidt, 2010 WL 3239249. Moreover, the plaintiff has alleged sufficient facts to suggest that she could prevail on her claim for equitable tolling of the limitations period, based on repeated, allegedly untrue statements by the defendant’s representatives, including its STAR team, that (1) there was no defect in the Jeep or its gear shift; and (2) that Chrysler and its representatives had no knowledge of rollaway incidents or safety problems with the shifter design. Even if the plaintiff had some suspicion that a gear shift defect could have been the cause of the accident, she still could prevail if a fact finder decides that she reasonably relied on the false representations by the defendant and accepted, at -16- her peril, its proffered explanation of “user error,” which caused her to forego further attempts to secure her rights by litigation, despite her extraordinarily diligent attempts — particularly compared with those that an average consumer could indulge — to investigate the defect. Guy v. Mercantile Bank Mortgage Co., 711 F. App’x 250, 254 (6th Cir. 2017) (noting that the Fifth Circuit has held that “equitable tolling was appropriate where an employer cited the need for a workforce reduction when he fired an older employee, which was plausible in light of an industry-wide recession and which caused the employee not to bring an age-discrimination suit within the statute of limitations, when in fact the employer had replaced the employee with a younger person at a lower salary” (citing Rhodes v. Guiberson Oil Tools Division, 927 F.2d 876 (5th Cir. 1991 . On congruent facts, Colorado courts have applied equitable tolling to foreclose a limitations defense, despite admissions that a plaintiff may have had some information that wrongful conduct by the defendant was a cause of her harm, where the defendant’s tortious silence or active misrepresentation on the matter caused the plaintiff to relax her diligence and abandon or not pursue any further inquiry about her rights. See Patterson, 360 P.3d at 221. The plaintiff here did as much as she reasonably could have been expected to do under the circumstances to investigate whether a suspected design defect caused her accident — much more in fact than an average consumer reasonably could have, given her unique position. And the purportedly defective behavior concealed in software code incorporated into the shifter’s hidden inner workings certainly was not the sort of evidence that was so superficially apparent that the plaintiff must be, as a matter of law, faulted for lack of diligence for failing to discover it. That is particularly true when the defendant allegedly stifled further inquiry by its STAR team’s denials of a defect or even of knowledge of other roll-away incidents. -17- III. The amended complaint does not affirmatively show that the plaintiff’s claim is time barred. The defendant is not entitled to a dismissal of the claim based on its affirmative defense at this stage of the case. Accordingly, it is ORDERED that the defendant’s motion to dismiss [dkt. #193] is DENIED. Date: September 12, 2018 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first-class U.S. mail on September 12, 2018. s/Susan K. Pinkowski SUSAN K. PINKOWSKI -18-

=== OPINION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT BY DEFENDANT MICHIGAN DEPARTMENT OF TRANSPORTATION, GRANTING IN PART AND DENYING IN PART MOTION FOR SUMMARY JUDGMENT BY DEFENDANT WASHTENAW COUNTY ROAD COMMISSION, DENYING MOTION FOR RECONSIDERATION BY DEFENDANT MICHIGAN DEPARTMENT OF TRANSPORTATION, DENYING MOTION FOR SUMMARY JUDGMENT BY DEFENDANT CITY OF CHELSEA, AND ORDERING STATUS CONFERENCE ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 16-11546 Honorable David M. Lawson SHAUNA M. MOTE, DEBORAH CLARK, CARLOS GRAY-LION, BRENDA BARANIAK, KAREN STREET, MERLYN STREET, LEE BENTON, by his next friends RONALD M. BENTON and MARION BENTON, J.N., a minor, by his next friends DANIEL and MARY JANE NELSON, ANN ARBOR CENTER FOR INDEPENDENT LIVING, INC., and JENNIFER KUNDAK, v. Plaintiffs, CITY OF CHELSEA, CHELSEA DOWNTOWN DEVELOPMENT AUTHORITY, MICHIGAN DEPARTMENT OF TRANSPORTATION, and WASHTENAW COUNTY ROAD COMMISSION, Defendants, and CITY OF CHELSEA, v. Third-party plaintiff, WASHTENAW COUNTY ROAD COMMISSION, ___________________________________________/ Third-party defendant. OPINION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT BY DEFENDANT MICHIGAN DEPARTMENT OF TRANSPORTATION, GRANTING IN PART AND DENYING IN PART MOTION FOR SUMMARY JUDGMENT BY DEFENDANT WASHTENAW COUNTY ROAD COMMISSION, DENYING MOTION FOR RECONSIDERATION BY DEFENDANT MICHIGAN DEPARTMENT OF TRANSPORTATION, DENYING MOTION FOR SUMMARY JUDGMENT BY DEFENDANT CITY OF CHELSEA, AND ORDERING STATUS CONFERENCE This case is before the Court again on the second round of dispositive motions in this municipal sidewalk accessibility dispute brought under the Americans With Disabilities Act (ADA), the Rehabilitation Act, and their state-law counterpart. The Court previously denied motions to dismiss filed by defendants Washtenaw County Road Commission (WCRC) and Michigan Department of Transportation (MDOT). Mote v. City of Chelsea, 252 F. Supp. 3d 642 (E.D. Mich. 2017). The plaintiffs since have filed a second amended complaint, and discovery has closed. Defendants WCRC and MDOT now have filed motions for summary judgment, presenting many of the same legal arguments raised and rejected earlier. Each defendant has raised additional arguments, however, some of which merit dismissal of part of the plaintiffs’ claims. The Court will grant in part and deny in part the defendants’ motions for summary judgment. I. The plaintiffs are individual disabled persons, who live, work, or frequently travel to and within the City of Chelsea, Michigan, and who each require the use of a wheelchair, braces, cane, or other assistive devices in order to get around, along with the Ann Arbor Center for Independent Living (AACIL), which is an association that represents disabled persons such as the plaintiffs throughout southeastern Michigan, including in Chelsea. Together, and on behalf of persons similarly situated, the plaintiffs complain that the public streets and sidewalks in the City of Chelsea are less than fully accessible, at least in part because of construction and renovation work done on public sidewalks and streets by the City of Chelsea, the WCRC, and MDOT, which either removed, omitted, or improperly constructed accessibility features. The plaintiffs also initially complained about accessible public parking, but they have not developed those claims and appear to have abandoned them. -2- The parties have furnished drawings and diagrams of some of the intersections. Their “Ramp Location Index” identifies each intersection’s potential ramp location with ordinal numbers “1” through “8,” beginning with the northwest corner of an intersection — ramp “1” is the south-facing location — then proceeding clockwise until the southwest corner, with “8” being the north-facing location. (In the case of a “T” intersection, at least two of the ordinal locations would be inapplicable.). Those designation will be used here. The following fact summary is taken from the parties’ affidavits, declarations, and authenticated documents. We begin with the circumstances of the individual and institutional plaintiffs. A. Individual Plaintiffs 1. Shauna Mote In 2005, plaintiff Shauna Mote was in a car accident, and her injuries resulted in the amputation of both her legs. She now uses an adapted van with hand controls for transportation, which has a side fold-out ramp that she uses to exit the vehicle. Before her accident, she never used the sidewalks or curb ramps along US-12, but in 2015 a new friend suggested to her that a good way to meet people was to participate in the fairs and parades held in town. In August 2016 Mote attempted to travel the pedestrian route along US-12 for the first time, in order to meet with her friend for the “Old 12 Childrens Fair Parade.” She also attempted to attend the “Chelsea Summer Fair Children’s Parade” on an unspecified date in 2016. While traveling the sidewalk route along US-12, Mote observed several ramps with excessive running slopes, one of which was so steep that it caused the front wheels of her wheelchair to come up off the ground at the top. She also found it hard to navigate the ramps across US-12; at one location an excessive cross-slope on the ramp almost caused her to roll into traffic, and at another crossing police had to stop traffic to allow Mote and her friend to try to cross the street. However, upon crossing the street Mote and her friend were -3- “confronted with a very steep curb ramp that was also covered with mud, weeds, and gravel several inches deep,” and as “a result we had to avoid that curb ramp entirely and use a different ramp, which forced us to travel along Old 12, with our police escort.” On other occasions, Mote has found many of the curb ramps to be flooded with water and mud, requiring her husband to push her wheelchair with great difficulty; Mote averred that she would not have been able to make the passage in her wheelchair without his aid. As a result of these and other problems with the US-12 curb ramps, Mote has not been able to access the Lake Pierce Boardwalk either alone or with the assistance of friends. Mote did not identify the specific intersections with the offending ramps. As to M-52, Mote attested only that there are no accessible or handicapped-placarded parking spaces anywhere in the street parking along M-52; the normal spaces marked out on that street do not have enough width to allow deployment of her van’s ramp; and, as a result, she has had to forego attending music festivals in town, or is forced to “park far away, and risk [her] health and safety using the very inaccessible and unsafe curb ramps, street crossings and sidewalks along SR-52 (Main Street).” 2. Deborah Clark Plaintiff Deborah Clark has a wheelchair-modified van and a motorized wheelchair that she uses to get around. She first met friends who lived in Chelsea and visited there in 2014. Before August 2014, she never had occasion to visit the City or use any of the sidewalks there. In August 2014 Clark attended the Chelsea Summer Fair Parade, which ran along US-12, and, after parking in an accessible space by the shopping mall, she used six curb ramps installed by defendant WCRC to reach a spot where she could view the parade. The excessive slope on some of those ramps -4- caused her wheelchair to tip, and gaps where some ramps met the sidewalk caused her wheels to get stuck, resulting in Clark having difficulty controlling her chair and her service dog. In 2015 Clark decided not to attend the parade, to avoid facing the same difficult trek. In 2015 or 2016, Clark learned that a new pedestrian crossing was installed across US-12 leading to the Lake Pierce Boardwalk. However, when it rains Clark has observed that the entire cross-walks and ramps are submerged and filled with pooled water and mud, which causes her wheelchair tires to lose traction, leaving her unable to traverse the ramps. As a result, Clark was not able to access the boardwalk despite the new crossing. In 2016, Clark tried to attend one of the Thursday Night Sights and Sounds events in downtown Chelsea with her friend, fellow plaintiff Brenda Baraniak. The event features musical acts on ten stages arranged along M-52 (Main Street). Clark attested that “[v]irtually every transition from each crosswalk to and from each curb ramp had an abrupt change in level, (large lips) that risked tipping our wheelchairs”; almost “every painted crosswalk had one or more divots, potholes, rips or other defects in the road surface that were tipping hazards”; and a “few times we had to go outside of the painted crosswalk, to find the least risky place to transition from the street onto or off of a curb ramp.” Clark stated that “[a]t one location, we abandoned the crosswalks and curb ramps entirely,” and instead “both traveled in heavy vehicular traffic and used a commercial driveway apron to leave the street and enter onto the sidewalk, and later to leave the sidewalk and enter the traffic.” As a result, Clark and Baraniak were able to get close to only two of the performing stages, were unable to reach two others, and ended up giving up and going home without enjoying most of the festival. As with Ms. Mote, Clark did not identify the specific intersections with the offending ramps. -5- 3. Brenda Baraniak Plaintiff Brenda Baraniak is paralyzed from the waist down and uses a wheelchair that she pushes by her own power. She has a device that lifts the wheelchair and stores it on top of her car when she travels, and her car is modified to use hand controls. Baraniak stated that she had not visited Chelsea or used any of the pedestrian crossings there before August 2014. However, sometime after July 2014, Baraniak believed her granddaughter had reached an age where she could enjoy the parades in Chelsea and decided to attend the Chelsea Community Fair and its associated parade along US-12. Baraniak described nearly verbatim the same difficulties encountered by plaintiff Clark during her visit to the US-12 parade route. She also described similar difficulties and a lack of access to the Lake Pierce Boardwalk via the new pedestrian crosswalk across US-12, and she related the same difficulties encountered while attempting unsuccessfully to attend the downtown music fair with Clark. 4. Karen and Merlyn Street Plaintiff Karen Street lives in Chelsea, is a survivor of polio, and has trouble walking. In 2014 she had an orthotic brace made for her ankle to assist her, but she still has trouble ambulating. She can walk for short distances, but she uses a motorized scooter to get around most of the time, and as her condition has worsened in recent years she has relied on her scooter more and more. Before August 2015, she never had any reason to use the curb ramps or sidewalks along US-12. But in January 2017 a friend of hers moved into a retirement home across US-12 from the Lake Pierce Boardwalk, and Street attested that she wants to visit the boardwalk with her friend, but has been unable due to the same flooding and debris accumulation at the US-12 crossing which was described by other plaintiffs. Street also stated that in 2015 she attended one of the Thursday evening music -6- festivals along M-52 in Chelsea, and while trying to negotiate a particularly dangerous transition from a curb ramp her scooter tipped over into traffic along the street. Since that time Street and her husband have taken the dangerous — but in her view less risky — alternative of passing along the street among parked cars and passing traffic, rather than risk tipping over again on that particular curb ramp. However, even by that risky avenue Street was unable to reach most of the stages during the festival, due to the number of curb ramps that she found dangerously impassable. Street attested that almost every transition from ramp to street or sidewalk along M-52 has large lips that cause her scooter almost to tip over, and she often is forced to go outside the painted crosswalks to find a place to safely enter or exit the ramp. Even when walking short distances, Street stated that she often has to turn sideways in order to safely traverse the ramps, due to the steep slopes and poor transitions, which increases her risk of falling. Plaintiff Merlyn Street submitted a declaration generally corroborating his wife’s account of her difficulties traversing the US-12 and M-52 curb ramps and sidewalks, which he also has had the same problems with as an elderly survivor of polio. Neither identified specific problematic intersections along US-12 or M-52 5. Lee Benton Plaintiff Lee Benton attested that he moved to Ann Arbor in 2014, and in 2015 and 2016 he rode the WAVE bus from Ann Arbor to Chelsea, where his parents live. He has cerebral palsy, cannot use his legs, has limited use of his arms, and uses a powered wheelchair. He described problems similar to those encountered by Mote, Clark, Baraniak, and the Streets while traveling from his bus stop to the Chelsea summer fair and parade, and while attempting to access the -7- Thursday night summer music festivals; but he did not point out the specific intersections where the ramps were problematic. 6. Joanne Ladio Joanne Ladio attested that she is the full-time caregiver for plaintiff Carlos Gray-Lion, and that the two have lived together in Chelsea since 1999. She attested to difficulties pushing Carlos’s wheelchair on the pedestrian routes along US-12 and M-52, stating that she had similar difficulties as other plaintiffs with the US-12 crossing to the Lake Pierce Boardwalk. She also attested that in 2014, 2015, and 2016 she and Carlos only have been able to attend the one stage nearest to their home during the summer music festivals, due to the many (unspecified) impassable curb ramps along M-52. 7. Other Individual Plaintiffs Plaintiffs Jennifer Kundak, who has difficulty walking, and J.N. (by his next friend), a minor who has spina bifida and uses a wheelchair and forearm crutches to ambulate, submitted similar declarations describing their difficulties traversing the same curb ramps discussed by the plaintiffs mentioned above. 8. Plaintiff Ann Arbor Center for Independent Living (AACIL) Carolyn Grawi, director and CEO of plaintiff AACIL, submitted a declaration in which she attested that she is blind, cannot drive, and walks using a cane. AACIL provides services to disabled individuals that include information, peer mentoring, training in individual living skills, advocacy, and assistance with community transitions. Grawi was contacted in late 2015 or early 2016 by plaintiffs Mote, Clark, and Baraniak. She drove to Chelsea to meet with the plaintiffs, where she observed for the first time that many of the businesses along main street had inaccessible entrances, -8- and that much of the street parking in the City was inaccessible. Grawi referred the plaintiffs to their counsel of record for advice about their legal rights, and she “spent hours inspecting sidewalk, curb ramp and crosswalk barriers to access throughout Chelsea, which is in AACIL’s service area.” Several weeks later, Grawi was driven to Chelsea to meet with City officials about the accessibility barriers she had encountered; evidently unsatisfied with the City’s response, the AACIL board of directors later voted to file suit against the City under the ADA. While this lawsuit has been pending, Grawi has had to spend time answering discovery inquiries and attending a deposition, and her involvement in the case has diverted her from work that had to be covered by other employees. Grawi attested that “[d]ue to funding cuts, and layoffs, AACIL is stretched very thin,” and “[a]ny time spent on the Chelsea matters is a drain, in people, resources and time that I and other employees would otherwise spend on other AACIL work.” Grawi also attested that her organization’s ability to negotiate with commercial businesses in Chelsea to persuade them to make their premises accessible is hampered because of the time and resources diverted to dealing with accessibility defects in the public way, and because Grawi must be “accompanied and assisted by a non-disabled person even to reach the establishments.” B. The Chelsea Thoroughfares 1. State Road 52 (M-52) In 2003 defendant MDOT resurfaced the part of State Road 52 (M-52, a.k.a. “Main Street”) that runs through the City of Chelsea. MDOT’s representative also testified that the agency periodically “refreshes” painted pavement markings along the M-52 corridor, on an approximately five-year cycle, and that the agency also periodically “salvages” or “replaces” street signs along the road. -9- Beyond those preliminary and apparently undisputed facts, it was difficult to discern any coherent information that could be pertinent to the applicable construction standards from the record submitted by the plaintiffs relating to M-52. The plaintiffs attached to their response to MDOT’s motion a vast catalog of inscrutable diagrams and photographs, which perhaps are meant to depict the dimensions and condition of numerous curb ramps at locations along M-52. However, unlike the description of conditions along US-12, the defects purportedly identified at those locations were not summarized in any affidavit by the plaintiffs’ inspectors, and no deposition or other affidavit testimony was included to explain them. The plaintiffs also do not cogently summarize or identify the specific defects of those M-52 curb ramps with respect to particular regulations anywhere in their briefing. After reviewing all of those exhibits, without the benefit of any testimonial guidance from the plaintiffs’ inspectors or any explanatory briefing to illuminate the significance of the depictions, the Court could say that there appear to be some locations depicted in the exhibits that are in some degree of disrepair, but cannot draw any conclusions about what a factfinder could ascertain relating to any specific defects at those locations that contravene an applicable regulation. The Court discussed that difficulty with the plaintiff’s attorney at oral argument, and invited supplemental briefs that might cure the problem. However, the plaintiffs’ brief fails to address the lack of information required by Federal Rule of Civil Procedure 56(c), regarding the supposed defects along the M-52 (Main Street) corridor. Contrary to the Court’s direction, the plaintiffs refused to actually enumerate the defects at each of the sidewalk ramps, and instead cited only “one example” of purported defects, referencing the same inscrutable engineering sketches previously -10- submitted. The plaintiffs’ only explanation for their failure to produce an inventory of defects is that it would take a lot of pages to make such a list, so they apparently believed they should not try. 2. Old U.S. 12 (US-12) In 2007, WCRC carried out the “Old U.S. 12 Resurfacing Project,” which was referred to in project documents as being undertaken “in cooperation with the Michigan Department of Transportation.” The log stated that the “improvements covered by [it would be] constructed in accordance with the Michigan Department of Transportation 2003 standard specifications for construction,” and it included drawings and specifications for, among other things, “sidewalk ramp details,” “concrete sidewalks,” and “concrete curb[s].” The project log stated that “all sidewalk ramps” within the work zone would be “replaced and/or relocated with ADA compliant ramps.” An accompanying letter from WCRC officials stated that the County required a permit to be issued by the City for work to be performed within the City limits, before it could “submit a final engineering package to the Michigan Department of Transportation Local Agency Section.” That letter noted that the work would include “reconstruction of the sidewalk drops to become compliant with ADA requirements” at the intersections with Lane Street, Arthur Street, and Old Manchester Road. Subsequently, the WCRC entered into a contract with MDOT to procure financing for the project from MDOT. On October 19, 2016, Derik Bollinger and Ray Schmidt, two superintendents of the City of Chelsea Public Works Department, inspected several of the intersections along US-12 that were included within the 2007 resurfacing project. Bollinger and Schmidt stated in their affidavits that they observed that at the Wilkinson, Arthur, and Lane street “T” intersections, there were only two curb ramps placed at crossings of US-12, meaning that the ramps designated as “1” and “8” -11- according to the plaintiff’s diagram were omitted (i.e., one ramp at the northwest corner of each intersection and one corresponding ramp at the southwest corner). They also observed that at the “+” or “plus” intersection with Taylor street, there also were only two ramps crossing Taylor, with ramps “4” and “5” omitted from that intersection. At Wilkinson Street, at ramps “4” and “5” crossing US-12, the superintendents observed “evidence of ponding water, such as staining and debris covering part of the detectable warnings and collected at the transition of each curb ramp to Old U.S. 12.” At that location ramp “4” also “had a running slope of 10%.” Similarly, at Lane Street they also observed evidence of ponding water, at ramps “2,” “3,” “4,” and “5,” and they noted that ramp “4” had a running slope of 9%. At Arthur Street, they noted evidence of ponding water at ramps “2,” “3,” and “4,” and ramp “2” had a running slope of 10.4%. At ramps “4” and “5” they also observed a “3/4 to 1 inch abrupt change in level at the transition from the curb ramp to the street — an ‘asphalt reverse lip.’” At Taylor Street, they observed that curb ramps “1,” “2,” and “8” had evidence of ponding water, and ramps “6” and “7” (across Taylor Street) had “missing expansion joints leaving a gap in the surfaces approximately 1.5 inches wide and more than 1 inch deep for the entire widths of the ramps.” They also noted a “hole in the asphalt approximately 1.5 inches deep and 7 inches wide” in the road surface crosswalk between ramps 6 and 7, and they recorded that ramps 2 and 7 had 1/2 inch “asphalt reverse lips.” Mark McCulloch of the WCRC confirmed at his deposition that the work during the 2007 project included removing two of the four curb ramps that previously had existed at Arthur and Lane Streets. McCulloch testified that the ramp locations were removed because there were some ramps in place on one side of the street with no “receiving” ramp on the other side, and because it was -12- determined that reducing the number of “conflict points” between cars and pedestrians along US-12 would improve safety. C. Procedural History The plaintiffs filed their putative class-action complaint seeking declaratory and injunctive relief against the local and state government defendants on April 28, 2016, followed by an amended complaint to correct procedural defects on August 4, 2016, and a second amended complaint on May 22, 2017. The amended complaint alleges violations of ADA Title II (Count I) and the Rehabilitation Act of 1973 (Count II) against the City of Chelsea, the City’s Downtown Development Authority, and MDOT. The complaint also raises a congruent claim against the City of Chelsea only under Michigan’s Persons With Disabilities Civil Rights Act (PWDCRA). With leave granted, the City of Chelsea filed a third-party complaint against the WCRC, which the City contends has exclusive control over and responsibility for certain roadways within its city limits. Defendant MDOT filed an answer to the original complaint and a motion for judgment on the pleadings; WCRC responded in similar fashion to the third-party complaint. The plaintiffs later entered into a consent decree with the City of Chelsea, and they filed their second amended complaint naming WCRC as a principal defendant. After discovery closed, defendants WCRC and MDOT filed their summary judgment motions. II. Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Under Rule 56, the party bringing the summary judgment motion has the initial burden of informing -13- the court of the basis for its motion and identifying portions of the record that demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Pers. Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). If the party opposing the motion contends facts are in dispute, she may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). Nor may she “simply show that there is some ‘metaphysical doubt as to the material facts.’” Highland Capital, Inc. v. Franklin Nat’l Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986 (internal quotation marks omitted). Instead, the opposing party must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson v. Liberty Lobby, Inc., , 252 (1986). Those facts must be “established by evidence that will be admissible at trial.” Alexander v. CareSource, 576 F.3d 551, 558 (6th Cir. 2009) (citing Fed. R. Civ. P. 56(e)(2 If the non-moving party, after sufficient opportunity for discovery, is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp. v. Catrett, , 322-23 (1986). “Thus, the mere existence of a scintilla of evidence in support of the [opposing party]’s position will be insufficient; there must be evidence on which the jury could reasonably find for the [opposing party].” 350 F.3d at 546 (quoting 477 U.S. at 252) (quotations omitted). -14- A. ADA, Rehabilitation Act, and State Law 1. The ADA and its Regulations Title II of the ADA prohibits the exclusion of a “qualified individual with a disability” from “participation in” or enjoying the “benefits of the services, programs, or activities of a public entity.” 42 U.S.C. § 12132. It also prohibits “discrimination by any such entity.” Ibid. “‘Public entity’ includes ‘any state or local government’ and ‘any department, agency, special purpose district, or other instrumentality of a State or States or local government.’” Ability Center of Greater Toledo v. City of Sandusky, 385 F.3d 901, 904 (6th Cir. 2004) (quoting 42 U.S.C. § 12131(1)(A) & (B . Through section 204 of the ADA, Congress granted to the Attorney General the “authority to promulgate regulations to implement its provisions.” Ibid. (citing 42 U.S.C. § 12134). One of those regulations, 28 C.F.R. § 35.151, governs construction and alteration of public facilities commenced after January 26, 1992. When the alteration “could affect the usability of the facility,” the alterations must be designed and constructed “in such manner that the altered portion of the facility is readily accessible and usable by individuals with disabilities.’” Ibid. (quoting 28 C.F.R. § 35.151(b . The regulations define the term “facility” to include “all or any portion of buildings, structures, sites, complexes, equipment, rolling stock or other conveyances, roads, walks, passageways, parking lots, or other real or personal property, including the site where the building, property, structure, or equipment is located.” 28 C.F.R. § 35.104. As the Court explained in its previous opinion in this case, “‘To be “readily accessible,” any part of a newly constructed or altered facility must be constructed in conformance with the Americans with Disabilities Act Accessibility Guidelines for Buildings and Facilities (ADAAG), 28 C.F.R. Pt. 36, App. A, or with the Uniform Federal Accessibility Standards (UFAS), 41 C.F.R. Pt. 101-19.6, App. A.’” Mote, 252 F. Supp. 3d at 649 (citing Daubert v. Lindsay Unified Sch. Dist., -15- 760 F.3d 982, 986 (9th Cir. 2014); 28 C.F.R. § 35.151(c)(1)-(3 . The ADAAG is a set of regulations that set out, in comprehensive detail, the design specifics for structures and facilities to make them “readily accessible” to disabled persons. The regulations also require a public entity to “maintain in operable working condition those features of facilities and equipment that are required to be readily accessible to and usable by persons with disabilities by the Act or this part.” 28 C.F.R. § 35.133. With respect to curb ramps, section 35.151(i) expressly requires that “(1) Newly constructed or altered streets, roads, and highways must contain curb ramps or other sloped areas at any intersection having curbs or other barriers to entry from a street level pedestrian walkway,” and “(2) Newly constructed or altered street level pedestrian walkways must contain curb ramps or other sloped areas at intersections to streets, roads, or highways.” 28 C.F.R. § 35.151(i). The DOJ has interpreted this regulation to require that “[w]hen streets, roads, or highways are newly built or altered, they must have ramps or sloped areas wherever there are curbs or other barriers to entry from a sidewalk or path. Likewise, when new sidewalks or paths are built or are altered, they must contain curb ramps or sloped areas wherever they intersect with streets, roads, or highways.” U.S. DOJ, ADA Title II Technical Assistance Manual II-6.6000 (https://www.ada.gov/taman2.html). The ADAAG sets forth detailed specifications for the location and construction of curb ramps in Section 4.7 of the Guidelines (1991 version). As an initial matter, the Guidelines define the term “accessible route” as “[a] continuous unobstructed path connecting all accessible elements and spaces of a building or facility.” ADAAG 3.4. “Exterior accessible routes may include parking access aisles, curb ramps, crosswalks at vehicular ways, walks, ramps, and lifts.” Ibid. The phrase “curb ramp” refers to “[a] short ramp cutting through a curb or built up to it.” Ibid. “If an accessible -16- route has changes in level greater than 1/2 in (13 mm), then a curb ramp . . . shall be provided that complies with [ADAAG 4.7].” ADAAG 4.3.8. “Curb ramps complying with [ADAAG 4.7] shall be provided wherever an accessible route crosses a curb.” ADAAG 4.7.1. “Slopes of curb ramps shall comply with [ADAAG 4.8.2].” ADAAG 4.7.2. Section 4.8.2 specifies that “[t]he least possible slope shall be used for any ramp,” “[t]he maximum slope of a ramp in new construction shall be 1:12,” and “[t]he maximum rise for any run shall be 30 [inches].” ADAAG 4.8.2. “Transitions from ramps to walks, gutters, or streets shall be flush and free of abrupt changes,” and “[m]aximum slopes of adjoining gutters, road surface immediately adjacent to the curb ramp, or accessible route shall not exceed 1:20.” Ibid. “The minimum width of a curb ramp shall be 36 [inches], exclusive of flared sides.” ADAAG 4.7.3. “Surfaces of curb ramps shall comply with [section] 4.5.” ADAAG 4.7.4. Section 4.5 covers “ground and floor surfaces” generally and states, among other things, that (1) “[g]round and floor surfaces along accessible routes and in accessible rooms and spaces including floors, walks, ramps, stairs, and curb ramps, shall be stable, firm, [and] slip-resistant”; (2) changes in level less than 1/4” may be “vertical and without treatment”; and (3) changes between 1/4 and 1/2” must be beveled and with a slope no greater than 1:2. ADAAG 4.5.1-4.5.2. Curb ramps must “be located or protected to prevent their obstruction by parked vehicles,” and ramps “at marked crossings shall be wholly contained within the markings, excluding any flared sides.” ADAAG 4.7.8-4.7.9. “Outdoor ramps and their approaches shall be designed so that water will not accumulate on walking surfaces.” ADAAG 4.8.8. -17- 2. The Rehabilitation Act Section 504 of the Rehabilitation Act parallels the command of the ADA concerning accessibility to public facilities for persons with disabilities, but it applies only to “any program or activity receiving Federal financial assistance.’” Babcock v. Michigan, 812 F.3d 531, 540 (6th Cir. 2016) (quoting 29 U.S.C. § 794(a . “[T]he remedies, procedures, and rights available under Title II of the ADA parallel those available under [The Rehabilitation Act].” Ability Center, 385 F.3d at 905 & n.7 (citing 29 U.S.C. 794a(a)(2); Barnes v. Gorman, 536 U.S. 181, 189 n.3 (2002); Johnson v. City of Saline, 151 F.3d 564, 573 (6th Cir. 1998 . Thus, the Sixth Circuit has explained that its “analysis of Rehabilitation Act claims ‘roughly parallels’ ADA claims because the statutes contain similar language and are ‘quite similar in purpose and scope.’” Babcock, 812 F.3d at 540 (quoting McPherson v. Michigan High School Athletic Association, Inc., 119 F.3d 453, 459-60 (6th Cir. 1997 . The regulations enacted under the Rehabilitation Act apply “to each recipient of Federal financial assistance from the Department of Transportation and to each program or activity that receives such assistance,” and require that “all [] entities subject to section 504 shall design, construct, or alter buildings, or other fixed facilities, in conformance with appendices B and D of 36 C.F.R. part 1191, as modified by appendix A to part 37 of this title.” 49 C.F.R. § 27.3. “The Rehabilitation Act has a set of standards nearly identical to the ADAAG called the Uniform Federal Accessibility Standards (‘UFAS’). 41 C.F.R. pt. 101-19.6, app. A.” Greer v. Richardson Indep. Sch. Dist., 472 F. App’x 287, 291 n.2 (5th Cir. 2012). -18- 3. State Law The state law counterpart to these two federal statutory mandates is the Michigan Persons With Disabilities Civil Rights Act (PWDCRA), Mich. Comp. Laws § 37.1101, et seq. That enactment “‘substantially mirrors the ADA, and resolution of a plaintiff’s ADA claim will generally, though not always, resolve the plaintiff’s PWDCRA claim.’” Donald v. Sybra, Inc., 667 F.3d 757, 764 (6th Cir. 2012) (quoting Cotter v. Ajilon Servs., Inc., 287 F.3d 593, 597 (6th Cir. 2002 . B. MDOT’s Summary Judgment Motion MDOT’s legal position has evolved with each of the briefs it filed on its motion for summary judgment. In its final reply brief, filed after the Court issued its opinion on MDOT’s and WCRC’s Rule 12 motions, the MDOT argued that: (1) it is responsible for building and maintaining state roads such as M-52, but it is not responsible for any work done on Old U.S. 12, a county road, even if it served as a “funding conduit” for work done under the County’s authority; (2) MDOT is not responsible for constructing or maintaining sidewalks, even if they run along a state road, because municipalities are responsible for building and maintaining sidewalks within their borders, (citing Mich. Comp. Laws § 103.1; 1963 Mich. Const. art. VII, § 29); (3) in any event, the plaintiffs have not identified any “sidewalk” that is defective that MDOT took upon itself to repair, and their evidence relates only to “curb ramps”; (4) the plaintiffs have not identified any intersection along M-52 that does not feature fully ADAAG-compliant curb ramps; and (5) the ADA does not require accessible on street parking to be located in any particular place, and under state law motorists are allowed to park along any public street where not otherwise prohibited, so the failure to construct accessible on-street parking in any particular spot does not violate any cognizable provision of the ADAAG. -19- In a supplemental brief, filed with the Court’s permission, MDOT also raised a new argument that the State of Michigan’s Eleventh Amendment sovereign immunity bars all of the plaintiffs’ claims under ADA Title II, because (1) the failure to build curb ramps in full conformance with the ADAAG guidelines does not violate any fundamental constitutional guarantee secured by the Fourteenth Amendment, and (2) the Title II mandate for strict ADAAG compliance in all new construction is not otherwise valid because it was not a “congruent” and “proportional” response to any Congressional findings of widespread discrimination against the disabled by the states that informed Congress’s passage of the ADA. MDOT’s sovereign immunity arguments have little impact on the ultimate disposition of this case, for a couple of reasons. First, although (subject to three exceptions, noted below) the Eleventh Amendment bars suits in federal court “in which [a] State or one of its agencies or departments is named as the defendant,” Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 100 (1984), even if the defendant prevails on its position that the Eleventh Amendment bars the ADA claims lodged against MDOT itself, the plaintiffs would be able to salvage their claims by the simple expedient of amending the complaint to drop the state agency and name its present highest official as a defendant instead. “[T]he Eleventh Amendment does not preclude a suit against [state official defendants named in their official capacities] for prospective injunctive relief.” McCormick v. Miami University, 693 F.3d 654, 662 (6th Cir. 2012) (citing McKay v. Thompson, 226 F.3d 752, 757 (6th Cir. 2000) (“The district court correctly determined that the Eleventh Amendment permits prospective injunctive relief, but not damage awards, for suits against individuals in their official capacities under 42 U.S.C. § 1983.” ; see also Ex parte Young, 209 U.S. 123, 159 (1908). -20- Second, it is undisputed that the defendants received and used federal funds to construct all of the sidewalks and curb ramps in question, and, as a result, they were subjected to materially identical accessibility mandates under the Rehabilitation Act, which are coextensive with those imposed by the ADA. Neither defendant has raised any coherent argument to explain how it is not bound to abide by the Rehabilitation Act mandates, and MDOT concedes in a footnote that its entire elaborately briefed Eleventh Amendment argument is inapplicable to the Rehabilitation Act, and that it is not immune to claims brought under that authority. Def. MDOT’s Supp. Brief [dkt. #75] at 10 n.1 (“MDOT recognizes that it is not immune to Plaintiffs’ Rehabilitation Act claims.”). As the federal courts have long recognized, “Title II of the ADA was expressly modeled after § 504 of the Rehabilitation Act of 1973 [and] essentially extends coverage to state and local government entities that do not receive federal funds.” Pierce v. County of Orange, 526 F.3d 1190, 1217 (9th Cir. 2008). The courts “have therefore observed that ‘[t]here is no significant difference in analysis of the rights and obligations created by the ADA and the Rehabilitation Act.’” Ibid. (quoting Zukle v. Regents of Univ. of California, 166 F.3d 1041, 1045 n. 11 (9th Cir. 1999 . The regulations enacted under the authority of the Rehabilitation Act apply “to each recipient of Federal financial assistance from the Department of Transportation and to each program or activity that receives such assistance,” and require that “all . . . entities subject to section 504 shall design, construct, or alter buildings, or other fixed facilities, in conformance with appendices B and D of 36 C.F.R. part 1191, as modified by appendix A to part 37 of this title.” 49 C.F.R. § 27.3. “The Rehabilitation Act has a set of standards nearly identical to the ADAAG called the Uniform Federal Accessibility Standards (‘UFAS’). 41 C.F.R. pt. 101-19.6, app. A.” Greer, 472 F. App’x at 291. -21- In yet another supplemental brief, MDOT attempts to advance the argument that the Rehabilitation Act’s regulations are invalid ab initio because they never were submitted to the proper congressional authority for approval. That argument was not raised in any previous briefs that MDOT filed, and was mentioned in passing for the first time at oral argument. After that hearing, the Court allowed the parties to submit supplemental briefs, primarily to permit the plaintiffs to address their failure to support their arguments with specific references to the record. Although the Court allowed additional briefing to address items discussed at oral argument that were not addressed in earlier briefs, MDOT mistook that allowance as an invitation to submit what amounted to another summary judgment motion based on a new theory that contradicted a position it took in an earlier brief. The Court struck its latest brief for that reason; because the latest argument was not raised on a timely basis, it is deemed waived. See, e.g., Piazza v. Aponte Roque, 909 F.2d 35, 37 (1st Cir. 1990) (noting arguments raised for the first time at oral argument are deemed waived); Sodexo Mgmt., Inc. v. Detroit Pub. Sch., 200 F. Supp. 3d 679, 694 (E.D. Mich. 2016) (holding that arguments “raised for the first time in a reply brief renders this argument waived”) (citing McPherson v. Kelsey, 125 F.3d 989, 995-96 (6th Cir. 1997 . MDOT has filed a motion to reconsider the order striking its last brief, but it has not identified a basis to overturn the Court’s ruling. See E.D. Mich. LR 7.1(b)(2) (“A party must obtain leave of court to file more than one motion for summary judgment.”). Third, MDOT’s sovereign immunity does not excuse it from potential ADA violations. There are three exceptions to Eleventh Amendment immunity: (1) when the state has waived its immunity by consenting to the lawsuit; (2) when Congress has abrogated the state’s sovereign immunity; and (3) when the plaintiff seeks only prospective injunctive relief against a state official -22- from violating federal law. Boler v. Earley, 865 F.3d 391, 410 (6th Cir. 2017) (citing cases). The second exception applies to the present alignment of the parties in this case. “Congress may abrogate the states’ Eleventh Amendment sovereign immunity pursuant to the enforcement provisions of § 5 of the Fourteenth Amendment when Congress both ‘unequivocally intends to do so and acts pursuant to a valid grant of constitutional authority.’” Babcock, 812 F.3d at 534 (6th Cir. 2016) (quoting Board of Trustees of Univ. of Ala. v. Garrett, 531 U.S. 356, 363 (2001 (quotation marks and alterations omitted). “In other words, the ADA only applies to the states to the extent that the statute is enacted pursuant to a valid grant of Congress’s authority.” Ibid. As to the first element of the Garrett analysis, it is beyond dispute that “Congress has expressed an unequivocal desire to abrogate Eleventh Amendment immunity for violations of the ADA.” Ibid. (citing 42 U.S.C. § 12202 (“A State shall not be immune under the eleventh amendment to the Constitution of the United States from an action in [a] Federal or State court of competent jurisdiction for a violation of this chapter.” . However, “the Supreme Court has held that Congress’s attempted abrogation is only valid in limited circumstances, depending upon the nature of the ADA claim.” Ibid. To determine if a case fits one of those circumstances of Title II ADA claims, “the Supreme Court has set forth a three-part test: [D]etermine . . . on a claim-by-claim basis, (1) which aspects of the State’s alleged conduct violated Title II; (2) to what extent such misconduct also violated the Fourteenth Amendment; and (3) insofar as such misconduct violated Title II but did not violate the Fourteenth Amendment, whether Congress’s purported abrogation of sovereign immunity as to that class of conduct is nevertheless valid.” Ibid. (quoting United States v. Georgia, 546 U.S. 151, 159 (2006 . As to the first element of the Georgia analysis, the Supreme Court has explained that courts must identify with some particularity the plaintiffs’ rights that allegedly were invaded, which they -23- contend should be vindicated by enforcement of the ADA. That is so because, “[w]hile § 5 authorizes Congress to enact reasonably prophylactic remedial legislation, the appropriateness of the remedy depends on the gravity of the harm it seeks to prevent.” Tennessee v. Lane, 541 U.S. 509, 523-24 (2004). And as the Court observed, “difficult and intractable problems often require powerful remedies,” but “strong measures appropriate to address one harm may be an unwarranted response to another, lesser one.” Ibid. (quotations omitted). In this case, the plaintiffs testified that, as a result of the accessibility defects in the defendants’ sidewalks and curb ramps, they have been denied equal access to the City’s pedestrian thruways in order to get to public facilities and events, because they are unable to travel along the same paths taken by other pedestrians who are not disabled. Depriving a disabled individual of the ability to traverse the public spaces used by his or her fellow citizens certainly amounts to a severe burden on his or her participation in public life — perhaps among the most severe impairments that can be imposed. Title II was intended to “enforce a variety of . . . basic constitutional guarantees,” Lane, 541 U.S. at 522, but the guarantee of the ability freely to travel in the public way is among the most fundamental of those. All of the other promises of equal access under the ADA “would be meaningless if people who use wheelchairs were not afforded the opportunity to travel on and between the streets.’” Ability Center, 385 F.3d at 911-12 (6th Cir. 2004) (quoting H.R.Rep. No. 101-485, pt. 2, at 84 (1990), reprinted in 1990 U.S.C.C.A.N. 303, 367 (emphasis added . As to the second element, the plaintiffs have not submitted sufficient evidence to establish that the alleged accessibility defects resulted in any invasion of their rights under the Fourteenth Amendment. They mount undeveloped arguments that they were deprived of their rights to engage in “commerce” and that their inability to travel around the City could impair their First Amendment -24- right of free association. But their testimony does not suggest plausibly any instances in which those fundamental constitutional rights were injured. Therefore, the Court must determine whether “Congress’[s] chosen remedy for the pattern of exclusion and discrimination” that it observed was met with a legislative mandate that “was congruent and proportional to its object of enforcing the right of access . . . .” Lane, 541 U.S. at 531. The defendant contends that Congress did not identify any pattern of exclusion from public facilities when it enacted the ADA, but the Lane Court squarely held otherwise. “Congress enacted Title II against a backdrop of pervasive unequal treatment in the administration of state services and programs, including systematic deprivations of fundamental rights.” Lane, 541 U.S. at 524. “This pattern of disability discrimination persisted despite several federal and state legislative efforts to address it.” Id. at 526. And “[t]he conclusion that Congress drew from [the] evidence is set forth in the text of the ADA itself: ‘[D]iscrimination against individuals with disabilities persists in such critical areas as . . . education, transportation, communication, recreation, institutionalization, health services, voting, and access to public services.’” Id. at 529 (quoting 42 U.S.C. § 12101(a)(3 . “This finding, together with the extensive record of disability discrimination that underlies it, makes clear beyond peradventure that inadequate provision of public services and access to public facilities was an appropriate subject for prophylactic legislation.” Ibid. Moreover, as the district court noted in Mason v. City of Huntsville, Ala., No. 10-02794, 2012 WL 4815518 (N.D. Ala. Oct. 10, 2012), Congress was particularly concerned with the isolation from public life that resulted from accessibility barriers in the public way: In the House Report published in conjunction with the 1990 enactment of the ADA, Congressional inquiries and testimony showed that, before the ADA, “it [was] clear that an overwhelming majority of individuals with disabilities lead isolated lives.” H.R. Rep. 101-485, pt. 2, at 34 (alteration supplied). The report stated that -25- “[d]iscrimination also includes harms resulting from the construction of transportation, architectural, and communication barriers.” Id. at 33 (emphasis supplied). The report labeled transportation as “the linchpin which enables people with disabilities to be integrated and mainstreamed into society,” and recognized that “accessible transportation . . . promotes the self-reliance and self-sufficiency of people with disabilities. People who cannot get to work or to the voting place cannot exercise their rights and obligations as citizens.” Id. at 37. Mason, 2012 WL 4815518, at *10 (emphasis added and in original). The remaining question, therefore, is “whether Title II is an appropriate response to this history and pattern of unequal treatment,” and in particular whether the mandate of strict compliance with the ADAAG specifications in the case of new constructions or alterations after 1992 was a congruent and proportional response to an identified pattern of denial of equal access by the disabled to avenues of travel in the public way. Here, as the Lane court observed, “[t]he remedy Congress chose is [] a limited one,” where it mandated only that “the States [] take reasonable measures to remove architectural and other barriers to accessibility.” 42 U.S.C. § 12131(2). Moreover, the states are allowed the flexibility to work around obstacles “in the case of older facilities, for which structural change is likely to be more difficult,” where “a public entity may comply with Title II by adopting a variety of less costly measures, including relocating services to alternative, accessible sites and assigning aides to assist persons with disabilities in accessing services.” Id. at 532 (citing 28 C.F.R. § 35.150(b)(1 . But “[i]n the case of facilities built or altered after 1992,” where the cost of incorporating new accommodations likely will be nominal, “the regulations require compliance with specific architectural accessibility standards.” Ibid. (citing 28 C.F.R. § 35.151); Venus v. Seville Food, LLC, No. 14-2476, 2017 WL 2364192, at *12 (D.N.J. May 31, 2017) (“‘Because it costs far less to incorporate accessible design into the planning and construction of new buildings and of alterations as compared to retrofitting existing structures, a higher standard of “readily -26- accessible to and usable by” persons with disabilities has been adopted in the ADA for new construction and alterations.’” (quoting H.R.Rep. No. 101–485(III) at 60, reprinted at 1990 U.S.C.C.A.N. 445, 483 . The ADA’s flexible imperative, requiring the greatest extent of accommodations only in cases where the cost of compliance would be the least, was an eminently “congruent” and “proportional” response to the historical pattern of isolation of the disabled from public life that Congress found had resulted from architectural obstacles that economically can be eliminated with proper attention to design details in new construction. Mason, 2012 WL 4815518, at *11 (“Considering the clear and persistent history of discrimination against persons with disabilities and the Congressional recognition of the importance of accessible streets, sidewalks, and parking areas, this court finds that Title II is a congruent and proportional and, therefore, constitutional exercise of Section 5 enforcement power as applied to equal access to publically-maintained sidewalks, curb ramps, and parking areas.”). Congress’s abrogation of the states’ sovereign immunity in Title II of the ADA was a valid exercise of its remedial power under setcion 5 of the Fourteenth Amendment. MDOT’s Eleventh Amendment defense here fails. But the plaintiffs are not home free with that determination. Far from it. Their brief responding to MDOT’s summary judgment motion does not identify issues of fact for trial under the prescriptions of Rule 56 on any specific sidewalk or curb ramp feature along M-52. Their brief consists mostly of large segments of language copied from the Court’s previous opinion in this case, which were included in the plaintiffs’ papers nearly verbatim, with no attribution. The plaintiffs also included exhibits denominated as “fact sets,” which comprise nothing more than argumentative -27- summaries of certain affidavits and other exhibits depicting the conditions in the defendant’s right of way. However, their briefing did not include anywhere an explanation of how any specific defects identified in the curb ramps constructed by MDOT violated provisions of the ADAAG. They have failed to put forth any coherent evidentiary presentation to identify what specific defects they believe exist, at which specific curb ramps along M-52 that they contend are defective. Certainly the testimony of the individual plaintiffs suggests that some of the curb ramps on Main Street have dangerous defects that made them difficult to navigate and obstructed the plaintiffs’ ability fully to access and enjoy public events (such as the Thursday evening music festivals). However, none of that testimony identifies with any specificity what ADAAG-violating aspects of the design or construction of any particular curb ramps led to those difficulties that the plaintiffs encountered. Moreover, there is no evidence in the record tending to suggest that MDOT constructed or altered any of those ramps after 1992, or identifying which ramps the agency constructed or altered that now have cognizable defects. In their briefing the plaintiffs rely solely on general citations to a prolix, undifferentiated mass of inscrutable technical diagrams and scrawlings, which they contend illustrate numerous instances of ADAAG violations. That is insufficient. The mere reference to those technical drawings, inviting the court to cull through them in search of a fact question, “falls well short of ‘direct[ing] the court’s attention to those specific portions of the record upon which [the plaintiff sought] to rely to create a genuine issue of material fact.” Bormuth v. Cty. of Jackson, 870 F.3d 494, 500 (6th Cir. 2017) (citing Chicago Title Ins. Corp. v. Magnuson, 487 F.3d 985, 995 (6th Cir. 2007 . This Court is not charged with the responsibility of constructing the plaintiffs’ arguments for them, from unannotated documents presented to the Court en masse. The court of appeals “never -28- required such advocacy by a district court . . . .” Ibid. (citing Guarino v. Brookfield Twp. Trustees, 980 F.2d 399, 410 (6th Cir. 1992) (holding that a district court is not obligated to “comb the record from the partisan perspective of an advocate for the non-moving party” . The plaintiffs have utterly failed to point out for the Court which portions of those exhibits correlate to what specific ADAAG violations that they allege. They have not met their burden under Rule 56. Fed. R. Civ. P 56(c)(1) (“A party asserting that a fact cannot be or is genuinely disputed must support the assertion by: (A) citing . . . particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or (B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.”) (emphasis added). Calling that defect to the plaintiffs’ attention at oral argument, the Court invited plaintiffs’ counsel to address the problem in a supplemental brief. To tame the impenetrable record they submitted, the Court suggested that the plaintiffs identify those specific curb ramps along M-52 that they contend are defective, stating (1) the exact location of each allegedly defective ramp; (2) the defects identified in each ramp, with pinpoint citations of exhibits in the record evidencing those defects, and citations of the specific ADAAG provision that the plaintiffs contend was violated by each defect; and (3) any evidence in the record tending to show that each of the ramps complained of was built or modified by defendant MDOT, and when the construction or alteration of the ramp occurred. -29- The plaintiffs have not capitalized on that opportunity. Contrary to the Court’s direction, the plaintiffs refused actually to enumerate the defects at each of the sidewalk ramps, and instead cited only “one example” of purported defects, referencing the same inscrutable engineering sketches previously submitted. The plaintiffs’ only explanation for their failure to produce an inventory of defects is that it would take a lot of pages to make such a list, so they did not do it. There also are two other major problems with the mass of materials submitted in support of the plaintiffs’ response, which were not addressed at all in the plaintiffs’ supplement. One is that the documents they submitted are unauthenticated by any accompanying affidavit testimony by anyone who was involved in producing them, at least with respect to M-52. Nor were they accompanied by any comprehensible summary of defects correlating the discrete measurements with identifiable ADA Guideline transgressions. Such affidavits or declarations are necessary to show that the documents would be admissible at trial. See Alexander, 576 F.3d at 558 (noting that “the party opposing summary judgment must show that she can make good on the promise of the pleadings by laying out enough evidence that will be admissible at trial to demonstrate that a genuine issue on a material fact exists, and that a trial is necessary”) (emphasis added). A second problem is that the plaintiffs’ documents probably would not be admissible even if they were authenticated and properly summarized so that the Court could understand them. They obviously represent information collected by parties to this litigation, for the purpose of supporting their positions, which are materially adverse to defendant MDOT. Those documents likely amount to inadmissible hearsay statements, not subject to any apparent exception. See Fed. R. Evid. 801(c). Although they might be fodder for properly documented and disclosed expert opinion testimony about the sidewalk conditions via Rule 702, no such testimony has been submitted in opposition to -30- the summary judgment motion, and the documents themselves likely would not be admissible. Therefore, they do not suffice to oppose MDOT’s summary judgment motion. See Alpert v. United States, 481 F.3d 404, 409 (6th Cir.2007) (noting that “‘evidence submitted in opposition to a motion for summary judgment must be admissible’”) (quoting United States Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185, 1189 (6th Cir. 1997 . The plaintiffs’ claims against MDOT concerning the M-52 corridor must be dismissed because the plaintiffs have failed to submit adequate, prospectively admissible information to establish the existence of any defects in the sidewalks along that route, which violate any of the regulations enacted under the ADA or the Rehabilitation Act. The record does not establish a material fact question for trial. Therefore, MDOT’s motion for summary judgment will be granted. C. WCRC’s Motion for Summary Judgment In its motion for summary judgment, including an amended reply brief filed after the plaintiffs filed their response, defendant WCRC argues that: (1) the Sixth Circuit’s decision in Babcock v. Michigan inevitably points to the conclusion that sidewalks are not “services” within the meaning of the ADA and therefore not subject to its regulations; (2) even if the Court finds that sidewalks are a “service,” any such “service” must be viewed in its entirety, “the entire system of sidewalks would be the service, and the plaintiffs would have to show that they were denied meaningful access to that system; (3) none of the plaintiffs testified at their depositions about any place they were unable to get to via the pedestrian routes along Old US-12; (4) the DOJ regulations unlawfully “impose obligations on public entities that are not imposed by Title II,” where they require “that facilities be ‘to the maximum extent feasible . . . constructed [or altered] in such manner that the facility is readily accessible to and usable by individuals with disabilities,’” (quoting -31- 28 C.F.R. 35.150(a ; (5) as to the placement of new curb ramps that do not already exist, the road commission must be allowed discretion to decide what locations are safe for pedestrians to cross, and the agency should not be required to place crosswalks (and therefore curb ramps) at unsafe or impractical locations; and (6) all of the alleged deficits in the existing ramps based on their present condition are issues of “maintenance,” not “construction”; maintenance is the obligation of the local municipality under state law. WCRC also asserts that the plaintiffs’ accessibility claims are untimely under the applicable three-year statute of limitations. Finally, WCRC argues that plaintiff AACIL lacks organizational standing to participate in this lawsuit because its executive director could not identify at her deposition any financial harm suffered by the organization as a result of the alleged discrimination, and she admitted that the organization does not have “members” as such on whose behalf the AACIL could pursue the claims raised in this case. 1. Sidewalks are “Facilities” Under the ADA Defendant WCRC argues with great vigor about the purported distinction between “services”and “facilities,” contending that sidewalks are not “services,” and therefore are beyond the reach of Title II of the ADA. However, the distinction is of little consequence, since sidewalks certainly are “facilities” under the plain language of the ADA, and it is beyond dispute that the ADAAG guidelines promulgated under the ADA that govern the construction of public facilities built or altered after 1992 therefore apply to them. The term “facility” is defined under the applicable ADA regulations to include “all or any portion of buildings, structures, sites, complexes, equipment, rolling stock or other conveyances, roads, walks, passageways, parking lots, or other real or personal property, including the site where -32- the building, property, structure, or equipment is located.” 28 C.F.R. § 35.104. The defendant’s roadway, the sidewalks adjoining it which the defendant built or altered, and the curb ramps connecting them all plainly qualify as “facilities” under that definition. And the ADA regulations also plainly require that any “alterations of facilities commenced after January 26, 1992, ‘by, on behalf of, or for the use of a public entity in a manner that affects or could affect the usability of the facility or part of the facility shall, to the maximum extent feasible, be altered in such manner that the altered portion of the facility is readily accessible and usable by individuals with disabilities.’” Ability Center, 385 F.3d at 904 (quoting 28 C.F.R. § 35.151(b . As noted above, ready accessibility requires new construction or alterations to be ADAAG-compliant. Mote, 252 F. Supp. 3d at 649 (citing Daubert, 760 F.3d at 986; 28 C.F.R. § 35.151(c)(1)-(3 . Moreover, it has been accepted by federal courts for more than two decades that ADA Title II imposes an affirmative mandate on public entities to ensure that facilities newly constructed or altered after 1992 comply with the ADAAG specifications. Lane, 541 U.S. at 532 (“In the case of facilities built or altered after 1992, the regulations require compliance with specific architectural accessibility standards”) (citing 28 C.F.R. § 35.151 (2003); Ability Center, 385 F.3d at 913 (“In conclusion, § 202 of Title II does not merely prohibit intentional discrimination. It also imposes on public entities the requirement that they provide qualified disabled individuals with meaningful access to public services, which in certain instances necessitates that public entities take affirmative steps to remove architectural barriers to such access in the process of altering existing facilities. 28 C.F.R. § 35.151 is a regulation adopted by the Attorney General at Title II’s express direction that effectuates this aim.”); Barden v. City of Sacramento, 292 F.3d 1073, 1076 (9th Cir. 2002) (“In keeping with our precedent, maintaining public sidewalks is a normal function of a city and without -33- a doubt something that the [City] ‘does.’ Maintaining their accessibility for individuals with disabilities therefore falls within the scope of Title II.” (quotations and citations omitted ; Johnson, 151 F.3d at 570 (“Congress gave the Attorney General the task of developing regulations to implement Title II. Because of this express delegation, these regulations are entitled to ‘controlling weight, unless they are arbitrary, capricious, or manifestly contrary to the statute.’” (quoting Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-44 (1984 . Finally, as noted above, the UFAS guidelines promulgated under the Rehabilitation Act also impose materially identical architectural requirements for all construction carried out with federal funding by any state or local entity, and it is undisputed here that all of the sidewalks and curb ramps targeted in this case were built with federal funds. 2. Sidewalks are “Services” Under the ADA Even if the sidewalks at issue were not “facilities” subject to the ADA, the program of building and maintaining sidewalks certainly is a “service” provided by the defendant by any coherent interpretation of that term. No decision of the Supreme Court or any other federal court that was cited by the parties has held otherwise. And in the Fifth Circuit’s decision in Frame v. City of Arlington, 657 F.3d 215 (5th Cir. 2011), the court of appeals squarely confronted the question and held that sidewalks do count as “services” for the purposes of ADA Title II. WCRC’s contrary argument is based on a strained reading of Babcock v. Michigan. But the court of appeals in that case avoided the question whether “sidewalks” are “services,” when it considered whether other features of an existing public building such as “handrails” could be construed to be services subject to Title II. Babcock, 812 F.3d at 539 n.5 (noting that handrails are not “design features” that “satisfy a ‘general demand’ for ‘safe transportation’ in the same way that -34- a sidewalk does, “ and acknowledging that it was “hard-pressed to conclude that [handrails] qualify as ‘services,’ like sidewalks under the [Frame] majority’s approach”); see also id. at 543 (“While the majority relies substantially on the reasoning of the Frame dissent, the majority in this case carefully notes ways in which the case of sidewalks may be different from the building designs before us. Ante, at 538 n.5. Our decision today thus does not necessarily control a future case involving sidewalks.”) (Rogers, J., concurring). Moreover, this Court explicitly rejected WCRC’s position on this issue on the previous opinion on the Rule 12 motions: Any sensible reading of ADA Title II compels the conclusion that maintaining public pedestrian thoroughfares for citizens to get around a city — and access the many public services and businesses located within — is the archetypal example of the most fundamental of public services. Inaccessible sidewalks are, in fact, the single most readily conceivable example of a basic obstacle to accessibility that comes to mind when considering the purpose that animates the ADA, which is to eliminate obstacles to the full enjoyment of public life by disabled citizens. See PGA Tour, Inc. v. Martin, 532 U.S. 661, 675 (2001) (“To effectuate its sweeping purpose, the ADA forbids discrimination against disabled individuals in major areas of public life . . . .”). It is simply common sense: If disabled pedestrians cannot access the sidewalks, then they can hardly access anything else that a city has to offer. Mote, 252 F. Supp. 3d at 654. 3. Denial of “Services” As noted below, there is evidence in the record identifying the specific ADAAG-violating defects at several specific sidewalk intersections along Old US-12. The plaintiffs also have alleged adequately that they were denied “meaningful access” to the service provided — or supposed to be provided — by the defendant’s construction of those sidewalks, because they have pointed to specific instances when they were prevented from accessing public events such as the City’s summer parade, or denied access to a public venue such as the Lake Pierce Boardwalk, due to the defects in -35- the curb ramps along US-12. Two of the plaintiffs even identified one instance where they were forced at great risk to traverse their intended route along US-12 by traveling along the roadway in their wheelchairs, at considerable risk due to the passing traffic, and with a “police escort,” because they could not safely navigate the curb ramps along their route. That presentation certainly suffices to suggest that the plaintiffs have been denied “meaningful access” to the service offered by a properly constructed roadside pedestrian walkway. 4. Specific Defects Although the plaintiffs’ factual presentation in response to WCRC’s summary judgment motion is not much more elucidating than its response to MDOT’s motion, the plaintiffs did attach affidavits from Derik Bollinger and Ray Schmidt, two superintendents of the City of Chelsea Public Works Department, who inspected several of the intersections along US-12. They reported their observations of those intersections and some measurements of their features. By applying what appeared to be the pertinent portions of the ADAAG to those observations, the Court was able to reach its own conclusions on those points. The plaintiffs have identified at least three defects in the curb ramps at several of the intersections between sidewalks and the roadway on US-12, and those defects sufficiently suggest that the curb ramps in question are not compliant with relevant provisions of the ADAAG. Among other things, the plaintiffs’ inspectors stated their observations, based on an October 2016 inspection of several intersections, that several of the ramps within the scope of the work done in 2007 featured defects such as (1) running slopes exceeding the 1 in 12 or 8.33% maximum allowed by the ADAAG specifications, ADAAG 4.8.2 (“The maximum slope of a ramp in new construction shall be 1:12.”); (2) transitions or “lips” at the transition from the ramp to the sidewalk exceeding the -36- maximum allowable untreated vertical deviation of 1/2 inch, see ADAAG 4.3.8; 4.5.1-4.5.2; and (3) propensity for the ramps to allow water to accumulate, resulting in obstructive accumulations of dirt, debris, mud, and grass, see ADAAG 4.8.8 (“Outdoor ramps and their approaches shall be designed so that water will not accumulate on walking surfaces.”). The defendant contends that there is “no evidence” that the curb ramps in question were not fully ADA-compliant as built. But of course that position necessarily disregards the evidence that they are not compliant now, and, in the absence of any evidence to the contrary, a factfinder fairly could infer that the curb ramps are too steeply sloped, obstructed by dangerous asphalt protrusions, and prone to accumulate water because they were designed and constructed to be so. And the defendant has not offered any evidence conclusively to rebut that inference. The Plaintiffs have met their obligation under Rule 56 to establish a material fact issue for trial. 5. Eliminated Curb Ramps The plaintiffs also complain of one defect in particular at several intersections, which does not comprise a violation of any ADAAG standard on point: the alleged “omission” of one pair of ramps at some intersections. The plaintiffs contend that the “omission” of a ramp to transition from one of the two sidewalks along a side street that intersects with US-12 is non-ADAAG-compliant. But they have not pointed to any ADAAG specification purporting to control the number or orientation of ramps at an intersection. Instead, the pertinent regulations merely require that (1) “[n]ewly constructed or altered streets, roads, and highways must contain curb ramps or other sloped areas at any intersection having curbs or other barriers to entry from a street level pedestrian walkway,” and (2) “[n]ewly constructed or altered street level pedestrian walkways must contain -37- curb ramps or other sloped areas at intersections to streets, roads, or highways.” 28 C.F.R. § 35.151(i) (emphasis added). In this case, it is apparent that the configuration of the intersections in question does, in fact, include ramps at each spot where a sidewalk “intersects” a roadway. In those locations where ramps were omitted, the sidewalk in question terminates early, into the side of a perpendicular sidewalk running along US-12, and does not extend to the roadway. The plaintiffs have not pointed to any authority in the ADAAG or elsewhere mandating that the defendant construct sidewalks so that they intersect with a roadway at any particular point. Instead, all that the regulations require is that where a sidewalk does intersect with a road, a ramp must be installed. In this case that obligation appears to be fulfilled at all of the locations in question. 6. Construction vs. Maintenance The defendant contends that, even if the sidewalks that it built were defective according to the ADDAG, it is not liable for their present condition because the issues identified are caused by lack of “maintenance” rather than as a consequence of improper “design” or “construction.” But the defendant has not offered any evidence to substantiate its position that the sidewalks properly were designed and constructed in the first instance. Instead, it merely posits, without any supporting evidence, that its efforts during the 2007 reconstruction project were ADA-compliant, and it invites the Court to conclude that the defects that now exist must be due to lack of maintenance of the curbs and sidewalks, which it contends is exclusively the responsibility of the City after the construction was completed. The defendant points out that state law assigns to the City the responsibility of maintaining sidewalks within its borders. Mich. Comp. Laws Ann. § 691.1402a(1) (“A municipal -38- corporation in which a sidewalk is installed adjacent to a municipal, county, or state highway shall maintain the sidewalk in reasonable repair.”). However, that statute does not answer in the first instance the question whether the offending curb ramps are defective because they were defectively designed and constructed, or inadequately “maintained.” And the present record is insufficient for the Court to decide the issue as a matter of law. As between the City and the County, the decision which is liable, and to what extent, for the identified defects will have to await the development of an adequate record on those points at a trial before the Court. WCRC is not entitled to a judgment as a matter of law on that point. 7. Statute of Limitations Accepting the defendant’s premise that the applicable statute of limitations for the ADA claims here is three years, it is apparent from the record that the plaintiffs claims all are timely because all of them specifically alleged that they first encountered the accessibility defects described in the complaint within three years before this action was filed. “Federal law . . . governs when the limitations period begins to run, that is, when a claim accrues.” Helm v. Eells, 642 F. App’x 558, 561 (6th Cir. 2016) (citing Johnson v. Memphis Light Gas & Water Div., 777 F.3d 838, 843 (6th Cir. 2015 . “Under federal law, a claim accrues ‘when the plaintiff knows or has reason to know of the injury which is the basis of his action.’” Ibid. “A plaintiff has ‘reason to know’ of an injury if he or she ‘should have discovered it through the exercise of reasonable diligence.’” Ibid. “This is an objective inquiry, which looks ‘to what event should have alerted the typical lay person to protect his or her rights.’” Ibid. -39- Nothing in the record suggests that any of the plaintiffs knew or had reason to know of any curb ramp defects in the sidewalks along US-12 or M-52 more than three years before this civil action was commenced. 8. AACIL’s Standing Standing is required in order to confer subject matter jurisdiction upon federal courts under Article III of the Constitution. It is “the threshold question in every federal case.” Warth v. Seldin, 422 U.S. 490, 498 (1975). The Supreme Court has stated that the standing requirement “limits federal court jurisdiction to actual controversies so that the judicial process is not transformed into ‘a vehicle for the vindication of the value interests of concerned bystanders.’” Coal Operators & Assocs., Inc. v. Babbitt, 291 F.3d 912, 915-16 (6th Cir. 2002) (quoting Valley Forge Christian College v. Ams. United for Separation of Church & State, Inc., , 473 (1982 . One of the three components necessary to establish standing to sue under Article III is the demonstration of an injury in fact. Lujan v. Defenders of Wildlife, , 560 (1992) (stating that a plaintiff also must show that the injury is “traceable” to the defendant’s conduct, and the injury likely will be “redressed by a favorable judicial decision”). “To establish injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’” Spokeo, Inc. v. Robins, --- U.S. ---, 136 S. Ct. 1540, 1548 (2016) (quoting Lujan, 504 U.S. at 560). “For an injury to be ‘particularized,’ it ‘must affect the plaintiff in a personal and individual way.’” Ibid. “A ‘concrete’ injury must be ‘de facto’; that is, it must actually exist.” Ibid. An organization may have “associational standing” to sue on behalf of its members, “which exists if an association’s members have standing; if the interests at stake are relevant to the -40- organization’s purpose; and if the claims and relief do not require the participation of individual members.” Barry v. Lyon, 834 F.3d 706, 716 (6th Cir. 2016) (citing Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 181 (2000 . However, “[i]n addition to suing on behalf of its members, an entity may sue ‘on its own behalf because it has suffered a palpable injury as a result of the defendants’ actions.’” Northeastern Ohio Coalition for the Homeless v. Husted, 837 F.3d 612, 624 (6th Cir. 2002) (quoting MX Group, Inc. v. City of Covington, 293 F.3d 326, 332-33 (6th Cir. 2002 . The record before the Court adequately establishes that AACIL has standing to proceed on its own behalf in this litigation, regardless of whether it has “associational standing” to proceed on behalf of any of its individual disabled clients. The testimony of its CEO establishes that the organization has suffered by having to divert its resources toward attempts to secure ADA compliance by the defendants, and that diversion of resources has impacted its capacity to provide the range of other services that it offers to disabled persons, including education, counseling, and advocacy. On similar facts, the Supreme Court has found that an advocacy organization for the homeless had standing to proceed against the defendants in a discrimination action, where its complaint alleged that the organization had been “frustrated by defendants’ racial steering practices in its efforts to assist equal access to housing through counseling and other referral services,” and that the organization “had to devote significant resources to identify and counteract the defendants’ racially discriminatory steering practices.” Havens Realty Corp. v. Coleman, 455 U.S. 363, 379 (1982) (quotation marks and alterations omitted). As the Court explained: If, as broadly alleged, petitioners’ steering practices have perceptibly impaired HOME’s ability to provide counseling and referral services for low-and moderate-income homeseekers, there can be no question that the organization has suffered injury in fact. Such concrete and demonstrable injury to the organization’s -41- activities — with the consequent drain on the organization’s resources — constitutes far more than simply a setback to the organization’s abstract social interests. We therefore conclude . . . that in view of HOME’s allegations of injury it was improper for the District Court to dismiss for lack of standing the claims of the organization in its own right. Havens Realty, 455 U.S. at 379 (citing Sierra Club v. Morton, 405 U.S. 727, 739 (1972 . AACIL’s executive director testified to circumstances that rendered the injury adequately particularized, where she explained that AACIL’s resources have been diverted from its usual mission as a result of its participation in pre-litigation advocacy relating to the precise accessibility defects alleged by the individual plaintiffs in this case, and that the burden only has increased due to the defendants’ resistance in the course of this litigation. And contrary to the defendants’ contention, there is no threshold of “significance” of the injury to the organization that must be exceeded to render the harm sufficiently concrete under Article III. The Supreme Court has held that even unquantifiable and intangible harms may qualify as injuries in fact, and, as in the Court held in Havens, the impairment of the organizations operations needs only to be “perceptible” to suffice. Havens, 455 U.S. at 379; see also Spokeo, 136 S. Ct. at 1549; D. City of Chelsea’s Summary Judgment Motion The City of Chelsea has moved for summary judgment on its third-party complaint against WCRC, alleging that it is entitled as a matter of law to a declaration that WCRC is liable for the condition of any sidewalks or curb cuts within the US-12 right of way. However, as noted above, the state of Michigan imposes an affirmative duty by statute on the City to maintain sidewalks within its boundaries. See Mich. Comp. Laws Ann. § 691.1402a(1). The ADA regulations also impose an express requirement on a responsible public entity to “maintain in operable working condition those features of facilities and equipment that are required to be readily accessible to and usable by -42- persons with disabilities by the Act or this part.” 28 C.F.R. § 35.133(a) (emphasis added). As between the City and the County, the present evidentiary record is insufficient to allow the Court to hold as a matter of law that the City has no liability for maintenance of the sidewalks in question, if, in fact, some of the present accessibility defects are due to deterioration of ADA-compliant construction over time, coupled with a lack of maintenance, instead of defective construction or design. Moreover, the City cannot escape liability for the condition of the sidewalks and curb ramps merely because it was the County and not the City that carried out the original work, because the ADA regulations impose obligations on a public entity to ensure that accessibility features are incorporated and that the ADAAG specifications are complied with any time that a public facility is altered or newly constructed, after 1992, “‘by, on behalf of, or for the use of a public entity in a manner that affects or could affect the usability of the facility or part of the facility’” Ability Center, 385 F.3d at 904 (quoting 28 C.F.R. § 35.151(b (emphasis added). The “project log” and the letter regarding the permit process that were submitted by defendant WCRC plainly suggest that the City was involved at the very least in issuing required permits to allow the project to proceed, and it is a fair inference from the record that the sidewalks and curb ramps were constructed either “on behalf of” or “for the use of” the City, despite the funding of the project with state and federal funds and the handling of the work by the County authority. And the City has not pointed to any authority suggesting that it cannot be held jointly liable with the County for any resulting ADA defects in the sidewalks and curb ramps under those circumstances. -43- III. Although the sovereign immunity defenses asserted by defendant MDOT lack merit, the plaintiffs have not offered evidence to satisfy their burden under Federal Rule of Civil Procedure 56(c) of demonstrating a material fact issue for trial. Their claims against MDOT, therefore, fail as a matter of law. MDOT has not offered good reason for the Court to reconsider its order striking its latest brief; its motion for reconsideration will be denied. Although the plaintiffs have met their Rule 56(c) burden on most of their claims against defendant WCRC, they have not demonstrated an entitlement to relief for their claim that certain curb ramps along Old U.S. 12 were eliminated during reconstruction. That claim will be dismissed. Fact disputes preclude summary judgment for the City of Chelsea on its third-party complaint against WCRC. Accordingly, it is ORDERED that defendant Washtenaw County Road Commission’s motion for summary judgment [dkt. #48] is GRANTED IN PART AND DENIED IN PART. The plaintiffs’ claims based on the alleged elimination of a pair of curb ramps at some intersections is DISMISSED WITH PREJUDICE. The motion is DENIED in all other respects. It is further ORDERED that defendant Michigan Department of Transportation’s motion for summary judgment [dkt. #50] is GRANTED. The plaintiffs claims against defendant MDOT are DISMISSED WITH PREJUDICE. It is further ORDERED that defendant Michigan Department of Transportation’s motion for reconsideration [dkt. #94] is DENIED. It is further ORDERED that the City of Chelsea’s motion for summary judgment [dkt. #49] is DENIED. -44- It is further ORDERED that the parties shall appear before the Court for a status conference to discuss further case management deadlines on Wednesday, January 17, 2018 at 10:00 a.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: January 2, 2018 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 2, 2018. s/Susan Pinkowski SUSAN PINKOWSKI -45-

=== OPINION AND ORDER GRANTING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION IN RE: FCA US LLC MONOSTABLE ELECTRONIC GEARSHIFT LITIGATION MDL No. 2744 _____________________________________/ Case Number 16-md-02744 Honorable David M. Lawson Magistrate Judge David R. Grand OPINION AND ORDER GRANTING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION After this multidistrict litigation was initiated on October 5, 2016, the Judicial Panel on Multidistrict Litigation (JPML) transferred to this Court for pretrial proceedings six civil actions pending in various districts. One of them originated in Central District of California. The case was brought in the name of 24 plaintiffs. At the time the complaint was filed, three of them resided in that district, but 20 others had no apparent connection to California. Defendant FCA US LLC (commonly referred to as Fiat Chrysler Automotive, Chrysler, or FCA) has moved under Federal Rule of Civil Procedure 12(b)(2) to dismiss the first amended consolidated master class action complaint (FACMC) as to those 20 plaintiffs for want of personal jurisdiction. After hearing oral argument on the motion on April 12, 2017, the Court agrees that those plaintiffs have not furnished a basis for personal jurisdiction over the defendant in California; therefore, the motion will be granted. I. This case deals with claims that defendant FCA manufactured vehicles that were defective because they were equipped with “monostable electronic gearshifts,” which, allegedly, do not shift into “Park” properly, and rollaway incidents can and have resulted as a consequence. After the JPML transferred several putative class action complaints to the undersigned, the Court ordered the plaintiffs to file a consolidated master complaint. One of the transferred cases has come to be known as the Andollo v. FCA US matter. That case was filed as a putative class action in the Central District of California. Three plaintiffs in that case (David Goldsmith, Michael Vincent Nathan, Jr., and Pascual Pietri) alleged that they are domiciled in California and bought their cars there. (One other California plaintiff, Deryl Wall, filed a Rule 41 notice of voluntary dismissal of his claims against the defendant on October 17, 2016). In this motion, however, the defendant challenges the exercise of personal jurisdiction over it by the California district court (and, by extension, this Court), as to the claims of 20 other plaintiffs named in the Andollo complaint, who alleged that they reside and bought their vehicles in various states other than California. Those plaintiffs are: Jeffrey Guy, Casey E. Perkins, Justine Andollo, Ken McDonald, Lindsey Wells, Scott Michael Youngstrom Jr., Todd Machtley, Melvin Scott, Eliam M. Marrero Bernal, Clare Colrick, Jacob Gunnells, Danielle and Joby Hackett, Todd Fisher, John and Mary Metzger, Robert F. Hyatt IV, Cameron Phelps, Karen Stedman, and Cameron Webster. Chrysler argues that it is not subject to general personal jurisdiction in the State of California, because it is incorporated in Delaware and headquartered in Michigan. The defendant contends that the 20 plaintiffs have not alleged any facts sufficient to show that the exercise of specific personal jurisdiction by a California district court would be proper; those 20 plaintiffs allege that they live and bought their cars in other states, and no pleaded facts suggest that their dealings with the defendant have any apparent connection to the forum. The defendant argues that it also does not have sufficient minimum contacts with California — or, indeed, any pertinent contacts at all — with respect to the claims of the 20 non-resident plaintiffs. It matters not, says Chrysler, that it is headquartered in this district, because in the context of an MDL litigation, if the transferor court -2- could not validly exercise personal jurisdiction over the claims before the transfer, then this Court cannot do so after a transfer, regardless whether those plaintiffs could have elected to file their claims here in the first instance. The plaintiffs do not contend that Chrysler would be subject to general personal jurisdiction in California. But they do insist that general personal jurisdiction over the defendant is valid in this district, so this Court may adjudicate the claims of all of the plaintiffs in the Andollo case, especially since all the claims were consolidated in the FACMC. In the main, however, the plaintiffs place most of their reliance on the doctrine of “pendent personal jurisdiction,” which the Ninth Circuit has applied to permit the exercise of personal jurisdiction over claims that “arise out of a common nucleus of operative facts with a claim in the same suit over which the court does have personal jurisdiction.” II. The parties agree on the general legal principles. When personal jurisdiction is challenged in a motion filed under Federal Rule of Civil Procedure 12(b)(2), the plaintiff bears the burden of establishing the Court’s authority to proceed against the defendant. Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991) (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936); Am. Greetings Corp. v. Cohn, 839 F.2d 1164, 1168 (6th Cir. 1988); Weller v. Cromwell Oil Co., 504 F.2d 927, 929 (6th Cir. 1974 . When the motion is supported by properly documented factual assertions, the plaintiff “may not stand on his pleadings but must, by affidavit or otherwise, set forth specific facts showing that the court has [personal] jurisdiction.” Ibid. There is no factual dispute raised by the motion. The plaintiff need only present a prima facie case for personal -3- jurisdiction, and the Court views the submissions in the light most favorable to the plaintiff. Id. at 1458-59. General jurisdiction over a foreign business entity — that is, the power of a court to adjudicate any claims against it, regardless of their origin — exists when that entity “‘essentially [is] at home in the forum State.’” Daimler AG v. Bauman, 134 S. Ct. 746, 751 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011 . “At home,” “[w]ith respect to a corporation, [and by extension, a limited liability company,] [means] the place of incorporation and principal place of business.” Id. at 760. Those are the “‘paradig[m] . . . bases for general jurisdiction.’” Ibid. (quoting A General Look at General Jurisdiction, 66 Texas L. Rev. 721, 735 (1988 . The plaintiffs observe, correctly, that Chrysler’s principal place of business is in the Eastern District of Michigan. And because this MDL has been centralized in this Court in this district, the plaintiffs insist that this Court has general jurisdiction over the defendant for all claims, including those of the 20 challenged plaintiffs in the Andollo case. That position, however, ignores the fact that, whether or not jurisdiction could be obtained over the defendant by a federal district court in Michigan to hear the claims of all these plaintiffs from various states, the pertinent inquiry, in the context of an MDL proceeding, is whether the claims properly could be entertained by the transferor court in the first instance. In re Chinese Manufactured Drywall Prod. Liab. Litig., 742 F.3d 576, 583 (5th Cir. 2014) (“The . . . relevant question is whether [the defendant] established minimum contacts with [the transferor forum], rather than the MDL court, necessary to give rise to personal jurisdiction.”) (citing Charles Alan Wright, 4 Federal Practice & Procedure Civil § 1067.3 (3d ed.) (“It also seems clear that the minimum contacts requirement does not apply to a plaintiff’s contacts with the transferee forum in a case -4- transferred pursuant to the multidistrict litigation (MDL) statute.” . As this Court explained earlier in this case, the authority of a transferee court to exercise case management and adjudicatory authority over a case under 28 U.S.C. § 1407 derives from the power initially enjoyed by the transferor court. See Op. & Order Granting Mot. to Strike [dkt. #81] at 4-5; see also Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 28 (1998). It is well accepted that “[t]he transferee judge inherits the entire pretrial jurisdiction that the transferor court could have exercised had the case not been transferred.” 15 Fed. Prac. & Proc. Juris. § 3866 (4th ed.) (citing In re Korean Air Lines Co., Ltd., 642 F.3d 685, 699 (9th Cir. 2011 . “There are limits, however, to what the transferee court can do,” and because “the consolidated cases retain their individual status, MDL should not be managed in a way that fails to recognize that the cases will be returned to their transferor courts.” Ibid. Once again, in arguing that the claims of the non- California plaintiffs should be permitted to proceed, now that their case has been (temporarily) transferred here, the plaintiffs disregard the elementary principle that the power of this Court to act with respect to their claims derives from the power of the California court so to act. If that court had no authority over those claims, then this Court cannot inherit power where there was none to be inherited — or at least none that could be exercised consistently with the limiting principles of the Due Process Clause. The plaintiffs contend that allowing the claims of these 20 persons to proceed is proper because the consolidated master complaint “superseded” the previous pleadings in the underlying case. But that pleading does not supersede any of the previous civil actions, that were transferred to this Court, which each “retain their separate identities” throughout the MDL process, Gelboim v. Bank of America Corp., --- U.S. ---, 135 S. Ct. 897, 904 (2015). And the Court has an express -5- duty under the MDL statute “to remand any such action to the original district ‘at or before the conclusion of such pretrial proceedings,’” Lexecon, 523 U.S. at 28 (quoting 28 U.S.C. § 1407(a . Regardless of what legal effect the consolidated complaint has on the litigation, “the filing of a consolidated complaint in a multidistrict case [does not merge] the plaintiffs’ actions permanently,” and the impact of that pleading is “limited to the duration of the pretrial proceedings.” In re Refrigerant Compressors Antitrust Litigation, 731 F.3d 586, 592 (6th Cir. 2013) (emphasis added). “[W]hen the pretrial phase ends and cases not yet terminated return to their originating courts for trial, the plaintiffs’ actions resume their separate identities.” Ibid. Personal jurisdiction, therefore, must be assessed under the rules that apply in the transferror court. If a California court would have jurisdiction over a defendant, so would a federal district court sitting in that state. Daimler, 134 S. Ct. at 753 (explaining that “[f]ederal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons”); Williams v. Yamaha Motor Co., 851 F.3d 1015, 1020 (9th Cir. 2017) (“Federal courts apply state law to determine the bounds of their jurisdiction over a party.”) (citing Fed. R. Civ. P. 4(k)(1)(A . “California’s long-arm statute permits the exercise of jurisdiction to the full extent that such exercise comports with due process.” Ibid. (citing Cal. Code Civ. P. § 410.10). But, “[t]he Due Process Clause of the Fourteenth Amendment constrains a State’s authority to bind a nonresident defendant to a judgment of its courts.” Walden v. Fiore, --- U.S. ---, 134 S. Ct. 1115, 1121 (2014). The plaintiffs do not contend that the defendant is subject to general personal jurisdiction in California. “‘Specific’ or ‘case-linked’ jurisdiction depends on an affiliation between the forum and the underlying controversy (i.e., an ‘activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation’).” Walden, 134 S. Ct. at 1122 n.6 (quoting Goodyear, -6- 564 U.S. at 919). “When a plaintiff relies on specific jurisdiction, he must establish that jurisdiction is proper for ‘each claim asserted against a defendant.’” Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (citing Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1174, 1180 (9th Cir. 2004 . The plaintiffs make no effort to validate the exercise of specific personal jurisdiction by the California district court over the claims of the non-California plaintiffs. The plaintiffs’ alternative argument is that a California court — and therefore this Court — may exercise personal jurisdiction over the claims of the non-California plaintiffs under the doctrine of “pendent personal jurisdiction.” The theory is that the claims of unrelated plaintiffs from different states could be heard by a California district court because they have some common factual basis, even though none of the dealings between the remote plaintiffs and the defendant have any articulable connection to the California forum. That position is unsupported by the case law and flatly contrary to the recent controlling decisions of the Supreme Court on point (principally the Court’s holding in Walden). And the plaintiffs have offered nothing to sustain their burden of showing that a California district court properly could, within the confines of the Due Process Clause, exercise such boundless power to adjudicate claims that have no conceivable intersection with its territorial jurisdiction. All of the circuit court decisions cited by the plaintiffs, and all of those relied upon by the Ninth Circuit when it endorsed the concept of pendent personal jurisdiction, are readily distinguishable from the circumstances of this case. In all of those decisions, the courts of appeals construed the concept of “pendent personal jurisdiction” as being congruent to, and going hand-in- hand with, the related doctrine of pendent or supplemental subject-matter jurisdiction, which concerns the authority of a federal court to hear claims between the same parties, in a single -7- proceeding, where the case involves claims under both federal and state law that are premised on the same underlying facts. This concept of supplemental subject-matter jurisdiction, or the power to hear factually intertwined state-law claims as part and parcel of a case where the same parties already are before the Court on related federal claims, was articulated by the Supreme Court in United Mine Workers of America v. Gibbs, 383 U.S. 715, 725 (1966) (“The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal or state character, a plaintiff’s claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole.”). The courts of appeals that accept the notion of “pendent personal jurisdiction” have treated it as being a corollary to the concept of supplemental or pendent subject-matter jurisdiction. It comes into play when specific jurisdiction over one of a plaintiff’s claims against a defendant may exist, but not as to another claim by that plaintiff against that defendant. The limiting principle, however, is that the court already has personal jurisdiction over a defendant with respect to certain claims brought by the same plaintiff in that case. Those courts reasoned that because the defendant was summoned properly before the court, due process was not offended by exercising personal jurisdiction over the defendant for the purpose of hearing additional, factually intertwined claims brought in the same case, by the same plaintiffs, without regard to whether personal jurisdiction separately could be obtained over those other claims alone. E.g., CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1076 (9th Cir. 2011) (“We conclude that a California court may exercise specific personal jurisdiction over AcademyOne with respect to the misappropriation claim. Under the doctrine of pendent personal jurisdiction, the court may also exercise jurisdiction over the -8- balance of CollegeSource’s claims, which ‘arise out of a common nucleus of operative facts’ with the misappropriation claim.”); CE Distribution, LLC v. New Sensor Corp., 380 F.3d 1107, 1113 (9th Cir. 2004) (“[The plaintiff’s] claims for tortious interference with contract and for breach of contract arise from a common nucleus of fact. Thus, the intentional interference claim may serve as the basis for the exercise of pendent personal jurisdiction over the breach of contract claim.”); Action Embroidery, 368 F.3d at 1180 (“Having established personal jurisdiction over Wolcott for Action and Vanguard’s antitrust claims, we must determine whether the court also has personal jurisdiction over Wolcott with respect to their California state-law claims.”); Robinson Eng’g Co. Pension Plan & Trust v. George, 223 F.3d 445, 449 (7th Cir. 2000) (“[W]e conclude that service in Canada was authorized at least for the claims under the Securities Act and the Securities Exchange Act. What of the other claims? The RICO claim arises out of the same nucleus of operative fact as the securities claims; it was therefore proper for the federal court to assert personal jurisdiction over George for it as well, under the idea of pendent personal jurisdiction.”); ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 629 (4th Cir. 1997) (“In this case, the parties agree that the federal court has subject matter jurisdiction over the ESAB Group’s claims and is thus competent to adjudicate them. They also agree that the factual nucleus for the state claims and the RICO claim is the same. Since the court has personal jurisdiction over the defendants under service of process authorized by the Federal Rule of Civil Procedure 4(k)(1)(D) and by the RICO statute, we can find no constitutional bar to requiring the defendants to defend the entire constitutional case, which includes both federal and state claims arising from the same nucleus of facts, so long as the federal claim is not wholly immaterial or insubstantial.”); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1057 (2d Cir. 1993) (“We need not reach the question whether personal jurisdiction as to the -9- state law claims was otherwise available because the district court had personal jurisdiction over the defendants under [ERISA’s Multiemployer Pension Plan Amendments Act] and the state law claims derive from a common nucleus of operative facts with the federal claims.”); Oetiker v. Jurid Werke, GmbH, 556 F.2d 1, 4 (D.C. Cir. 1977) (“Section 293 [of Title 35 of the United States Code] enabled plaintiff to obtain personal jurisdiction over the foreign defendant with respect to his claims of patent invalidity and noninfringement. In our view, this enabled plaintiff to obtain personal jurisdiction over the defendant with respect to any of his claims that arose out of the same core of operative facts as those claims which clearly fell within the scope of [section 293].”) (citing Gibbs, 383 U.S. at 725); Robinson v. Penn Cent. Co., 484 F.2d 553, 555 (3d Cir. 1973) (“Secondary authorities which have considered the issue have suggested that the better view is that pendent state law claims may be included when in personam jurisdiction is based upon extraterritorial service authorized by a federal statute.”). By contrast, in cases where the only claim that plausibly could support personal jurisdiction was dismissed, the conclusion has been that the propriety of exercising personal jurisdiction vanished along with that claim, where no other claims remained in the case for which sufficient minimum contacts could be established. E.g., United States v. Botefuhr, 309 F.3d 1263, 1274 (10th Cir. 2002) (“This conclusion . . . ignores the fact that once the § 3713 count disappeared, there was no claim before the district court for which it could be said [that the defendants] had ‘minimum contacts’ with Oklahoma.”) In support of their pendent personal jurisdiction argument, the plaintiffs cite the decision of only one California district court that has gone so far as they desire: Allen v. Similasan Corp., No. 12-376, 2013 WL 2120825 (S.D. Cal. May 14, 2013). But that decision did not engage in any -10- minimum contacts analysis with respect to the out-of-forum plaintiff or discuss the impact of the Due Process Clause. “For a State to exercise jurisdiction consistent with due process, the defendant’s suit-related conduct must create a substantial connection with the forum State.” Walden, 134 S. Ct. at 1121. In a single paragraph, with no substantial analysis, and with no examination of the controlling decisions on point, the court in that case simply concluded that “pendent personal jurisdiction” could apply because the claims involved the same product, regardless of the fact that the Florida plaintiff’s claims had no asserted relationship to the forum: Plaintiff Allen . . . alleges that she purchased Defendant’s products in Florida, and has not otherwise alleged a connection between her transactions and [California]. Nonetheless, in the interest of judicial economy, the Court elects to exercise its discretion and retain jurisdiction over Plaintiff Allen’s claims as per the pendent personal jurisdiction doctrine. Allen’s claims arise out of the same common nucleus of operative fact as Rideout’s claims, for which the Court does have jurisdiction over the defendant. There is no prejudice to Similasan in hearing both cases together. Allen, 2013 WL 2120825, at *3. Allen preceded the Supreme Court’s rulings in both Daimler and Walden. But it cannot be reconciled with those precedents. And the plaintiffs have not pointed to any court of appeals decision in any circuit that has extended the concept of pendent personal jurisdiction with such sweeping effect that can be squared with the constraints of the Due Process Clause. Finally, the plaintiffs contend that it would be needlessly inefficient if they are forced to litigate the claims of the 20 non-California plaintiffs in separate forums around the nation, when they all share apparent common factual and legal issues, and all are brought against the same defendant, who ultimately will be called upon to defend against the claims of the three California plaintiffs in their home forum anyway. However, as the plaintiffs themselves point out, there is a federal court where the claims of all those plaintiffs indisputably could be lodged and litigated, and where they -11- would have no problem establishing personal jurisdiction (of the general form) over the defendant, regardless of where in the country — or the world — they may reside or happen to have bought their cars. That, of course, is here. If the 20 non-California plaintiffs want to re-file their claims here and rejoin this MDL, they no doubt know how to do so. III. The non-California plaintiffs in the transferred case of Andollo v. FCA USA have not established personal jurisdiction over the defendant, FCA US LLC. Accordingly, it is ORDERED that the defendant’s motion (and corrected motion) to dismiss based on Federal Rule of Civil Procedure 12(b)(2) [dkt. #37, 95] is GRANTED. It is further ORDERED that the amended complaint in the transferred case of Andollo v. FCA USA and the first amended consolidated master class action complaint in this MDL proceeding is DISMISSED WITHOUT PREJUDICE as to Jeffrey Guy, Casey E. Perkins, Justine Andollo, Ken McDonald, Lindsey Wells, Scott Michael Youngstrom Jr., Todd Machtley, Melvin Scott, Eliam M. Marrero Bernal, Clare Colrick, Jacob Gunnells, Danielle and Joby Hackett, Todd Fisher, John and Mary Metzger, Robert F. Hyatt IV, Cameron Phelps, Karen Stedman, and Cameron Webster, ONLY. Dated: April 19, 2017 s/David M. Lawson DAVID M. LAWSON United States District Judge -12- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on April 19, 2017. s/Susan Pinkowski SUSAN PINKOWSKI -13-

=== OPINION AND ORDER GRANTING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION STEFANO SPIGNO, Plaintiff, v. PRECISION PIPELINE, LLC, and ALAN GANSCH, _____________________________/ Defendants. ANN E. BLAAUW Plaintiff, v. PRECISION PIPELINE, LLC and ALAN GANSCH, _____________________________/ Defendants. Case Number 14-10076 Honorable David M. Lawson (Consolidated cases) Case Number 14-11440 OPINION AND ORDER GRANTING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT The plaintiffs in these consolidated cases each were injured in a common motor vehicle accident involving the defendants. They each filed complaints under Michigan’s no-fault insurance law for third-party damages against the defendants, alleging that defendant Alan Gansch was negligent, and that he was acting as defendant Precision Pipeline’s employee at the time. The plaintiffs’ theory of liability against Precision Pipeline originally was based on the doctrine of respondeat superior. After discovery proceeded, the plaintiffs both filed motions to amend their respective complaints to add a second theory of liability: that Precision Pipeline was the owner of the truck Gansch was driving, and therefore it is liable under Michigan’s owner’s liability statute, Michigan Compiled Laws § 257.401(1). The defendants filed responses in opposition arguing that the amendment would be futile because the claim would fail as a matter of law. The Court scheduled the motions for oral argument. However, the Court has reviewed the motion papers and finds that they adequately set forth the relevant facts and law, and oral argument will not aid in the disposition of the motion. Therefore, it is ORDERED that the motion be decided on the papers submitted. See E.D. Mich. LR 7.1(f)(2). The hearing previously scheduled for November 6, 2014 is CANCELLED. The Court finds that an amended complaint would state a viable claim under section 257.401(1), and the amendment otherwise would be allowable under Federal Rule of Civil Procedure 15. Therefore, the Court will grant the motions. I. The accident occurred on December 14, 2012. At the time, Gansch was driving a large Peterbilt semi-truck eastbound on Highland Road near Eager Road in Oceola Township, Michigan. Plaintiff Stefano Spigno was driving in the same direction in front of Gansch’s truck. Gansch rear- ended Spigno’s car, causing him to spin out and cross the center line into the path of an oncoming westbound car driven by plaintiff Ann E. Blaauw. Spigno and Blaauw suffered serious injuries in the resulting collision, and both subsequently sued Gansch and Precision for negligence. Each of the plaintiffs alleged in their original complaints that defendant Precision Pipeline was liable for the injuries caused by Gansch’s driving because he was at the time of the accident an employee of Precision acting within the scope of his employment. Now the plaintiffs contend that they have learned facts that suggest Precision Pipeline may qualify as an owner of the truck under Michigan Compiled Laws § 257.37(a), because (1) Precision Pipeline had rented or had exclusive -2- use of the truck for a period of more than 30 days at the time of the accident; and (2) Gansch was operating the truck with the express or implied consent of Precision Pipeline. Plaintiff Spigno filed his complaint against defendants Precision Pipeline and Alan Gansch on January 8, 2014. Plaintiff Blaauw filed her complaint against the defendants on April 8, 2014, after the Court denied her motion to intervene in Spigno. The Court ordered the matters consolidated for discovery and pretrial proceedings and ordered that the scheduling order entered in Spigno would apply to both cases. Under the scheduling order entered by the Court, discovery closed on October 15, 2014. The plaintiffs filed their motions to amend before then. II. Motions to amend before trial are governed by Federal Rule of Civil Procedure 15(a). Rule 15(a)(2) requires a party seeking to amend its pleadings at this stage of the proceedings to obtain leave of court. Although Rule 15(a)(2) provides that “[t]he court should freely give leave when justice so requires,” leave may be denied on the basis of undue delay, bad faith by the moving party, repeated failure to cure defects by previously-allowed amendments, futility of the proposed new claim, or undue prejudice to the opposite party. Foman v. Davis, 371 U.S. 178, 182 (1962); Duggins v. Steak ‘N Shake, Inc., 195 F.3d 828, 834 (6th Cir. 1999); Fisher v. Roberts, 125 F.3d 974, 977 (6th Cir. 1997). The defendants oppose the motion on futility grounds. If the district court concludes that the pleading as amended could not withstand a motion to dismiss, then the court may deny the motion to amend as futile and save the parties and the court the expense of having to confront a claim doomed to failure from its outset. Head v. Jellico Housing Auth., 870 F.2d 1117, 1123 (6th Cir. 1989); Martin v. Associated Truck Lines, Inc., 801 F.2d 246, 248 (6th Cir. 1986); Neighborhood Dev. Corp. v. Advisory Council on Historic Pres., 632 F.2d 21, -3- 23 (6th Cir. 1980). “[A] civil complaint only survives a motion to dismiss if it ‘contain[s] sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face.’” Courie v. Alcoa Wheel & Forged Prods., 577 F.3d 625, 629 (6th Cir. 2009) (quoting Ashcroft v. Iqbal, , 678 (2009 . The plaintiffs brought their claims under Michigan law, and the parties have invoked this Court’s diversity jurisdiction. Michigan substantive law supplies the rules for decision. Erie R.R. v. Tompkins, , 78 (1938) (holding that in diversity cases brought under state law, a federal court must apply the substantive law of the forum state’s highest court). If the state’s highest court has not decided an issue, then “the federal court must ascertain the state law from ‘all relevant data,’” Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995) (quoting Bailey v. V. & O Press Co., 770 F.2d 601, 604 (6th Cir. 1985 , which can include “the state’s intermediate appellate court decisions, as well as the state supreme court’s relevant dicta,” Ososki v. St. Paul Surplus Lines, 156 F. Supp. 2d 669, 674 (E.D. Mich. 2001) (internal quotation marks and citation omitted). Under Michigan law, “[t]he owner of a motor vehicle is liable for an injury caused by the negligent operation of the motor vehicle . . . [that was] being driven with his or her express or implied consent or knowledge.” Mich. Comp. Laws § 257.401(1) (emphasis added). The definition of “owner” includes “[a]ny person, firm, association, or corporation renting a motor vehicle or having the exclusive use thereof, under a lease or otherwise, for a period that is greater than 30 days.” Mich. Comp. Laws § 257.37(a). The dispute in these motions focuses on whether the proposed amended complaint can allege facts that qualify Precision Pipeline as an “owner” of Gansch’s truck when the accident occurred. -4- At his deposition on August 20, 2014, Gansch testified, and as the plaintiffs presumably will allege in their amended complaints, that (1) the truck was titled in Gansch’s name; (2) while working for Precision he was paid separately for his own hourly wages and for “rig pay” based on the number of hours of use of the truck during his work day; (3) he was “on call” with Precision and could be called out to do work (and to use his truck) at any hour of the day or night during the time he was working for Precision in Michigan; (4) during that period, he did not use the truck to do work for anyone other than Precision; (5) the truck had a “not for hire” sign posted on it; (6) Precision paid for fuel, parts, and supplies such as grease and oil needed to maintain the truck, and allowed Gansch to work on the truck during his usual working hours at the job site; and (7) the only reason that he did not submit a bill to Precision for repairs to the truck after the accident was that his insurance paid for the repairs. The plaintiffs argue that Precision Pipeline hired Gansch and his truck, of which it had exclusive use, for the required time to make Precision an “owner” under the statute. The defendants disagree. They contend that the plaintiffs cannot establish that Precision either “rented” or had “exclusive control” of the truck for the required 30-day period under the statute. According to the defendant, the record shows that (1) the truck was titled in Gansch’s name; (2) before he started his work for Precision in Michigan, Gansch used the truck to tow a trailer from Pennsylvania to Michigan that served as his temporary residence while working here; and (3) after the accident Gansch paid for and performed the repairs on the truck himself, and Precision never paid for any of the work or parts used to repair the accident damage. Precision further contends that Gansch drove the truck to and from his temporary home each day and was free to use it however he liked when he was not working. The defendant contends that because the “rental period” lasted — -5- if at all — only during Gansch’s working hours and did not continue during his off hours, the plaintiffs cannot show “continuous” exclusive use for any 30-day period. All that, however, is beside the point. In assessing the alleged futility of a proposed amendment, the focus is on whether the allegations in the amended complaint could withstand a motion to dismiss, not the whether the plaintiff will be able to support the allegations with proofs. Head, 870 F.2d at 1123 (quoting Martin, 801 F.2d at 248). That reality confines the inquiry to the proposed pleading. Wysocki v. Int’l Bus. Mach. Corp., 607 F.3d 1102, 1104 (6th Cir. 2010) (holding that assessment of the facial sufficiency of the complaint ordinarily must be undertaken without resort to matters outside the pleadings); Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008) (reiterating that consideration of a motion to dismiss under Rule 12(b)(6) is confined to the pleadings). Precision’s arguments would be well taken in a brief in support of a motion for summary judgment on the plaintiffs’ “owner’s liability” claims. But the question at this stage of the case is simply whether, assuming that the plaintiffs could prove the allegations that they have set forth as to “ownership,” the amended complaints would state valid claims for owner liability under the relevant Michigan statutes. The Michigan Court of Appeals has explained that “the word ‘owner’ is not meant to restrict liability to a person or entity whose title is good against all others, and under the [motor vehicle] code there may be several owners.” Ringewold v. Bos, 200 Mich. App. 131, 135, 503 N.W.2d 716, 719 (1993) (citing Messer v. Averill, 28 Mich. App. 62, 65, n.2, 183 N.W.2d 802, 804 n.2 (1970 . “[A] person need not hold legal title to an automobile in order to be an ‘owner’ of it under the code.” Ibid. “The general rule of law from Ringewold and its predecessors . . . is that the definition of -6- ‘owner’ in [Mich. Comp. Laws §] 257.37(a) is not restricted to those who have actually exercised exclusive control over the vehicle for a thirty-day period; rather, an ‘owner’ may be any person who has a ‘right to exclusive use’ of the vehicle for a period exceeding thirty days, regardless of whether the person has, in fact, controlled the vehicle for that period.” Schwarze v. Dilworth, No. 257467, 2006 WL 2085311, at *11 (Mich. Ct. App. July 27, 2006); Sec. Ins. Co. of Hartford v. Daniels, 70 Mich. App. 100, 106, 245 N.W.2d 418, 422 (1976) (“We read ‘exclusive use’ as meaning ‘right to exclusive use.’ We do not think it is relevant that the [defendants] chose never to use the vehicle.”); Ketola v. Frost, 375 Mich. 266, 279, 134 N.W.2d 183, 190 (1965) (“The . . . lessee’s ‘exclusive use’ of the unit was . . . no less ‘exclusive’ than if the proviso [allowing the lessor to use a truck when the lessee did not require the use of it] had been left out of the lease, the lessee having the ‘exclusive’ right to say when if at all it did not ‘require’ such unit.”). The inquiry whether a defendant qualifies as an “owner” under the owner liability statute generally is a question that depends on the facts and circumstances such as who held title to the vehicle, and who had possession and the right to exclusive use of it during the relevant time period. See People v. Jackway, No. 313703, 2014 WL 1510120, at *2 (Mich. Ct. App. Apr. 15, 2014) (“Cornette’s actions of purchasing the truck, installing a new motor in it, keeping it on his property for six months, deciding to sell it after the crime, and then receiving the proceeds of its sale, permitted the jury to reasonably infer that he exclusively used the truck for more than 30 days.”); In re Young, 468 B.R. 818, 823 (Bankr. E.D. Mich. 2012) (“[T]he certificate of title is not dispositive [and] one may be an owner of a vehicle notwithstanding the fact that such individual is not shown as the owner on the certificate of title.”) (citing Twichel v. MIC General Insurance Corp., 469 Mich. 524, 676 N.W.2d 616 (2004 ; Dilworth, 2006 WL 2085311, at *9-11 (collecting cases). -7- Under Michigan law the terms “owner” and “exclusive use” have been construed broadly, considering the particular facts and circumstances in each case. It is not at all evident on the facts suggested by the parties that the defendant will be entitled to judgment as a matter of law on this question, if and when it moves for that relief. But even if the defendants might prevail on a motion under Rule 56, it is enough to say here that the proposed amendment adding a liability theory based on the owner’s liability statute would survive a motion under Rule 12(b)(6). The defendants’ futility argument, therefore, must be rejected. III. The defendants have opposed the motion to amend the complaints based on futility of the amendment. They have not offered any other reason for rejecting the amendment. Because the proposed amendment is not futile, leave will be granted under Rule 15(a)(2). Accordingly, it is ORDERED that the plantiffs’ motions to amend the complaints [14- 10076, dkt. #34; 14-11440 dkt. #27] are GRANTED. It is further ORDERED that the plaintiffs may file amended complaints on or before November 14, 2014 adding counts under Michigan’s owner’s liability statute, Michigan Compiled Laws § 257.401(1). Dated: November 7, 2014 s/David M. Lawson DAVID M. LAWSON United States District Judge -8- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on November 7, 2014. s/Susan Pinkowski SUSAN PINKOWSKI -9-

=== S.A. RESTAURANTS, INC. v. ANDREW J. DELONEY ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION S.A. RESTAURANTS, INC., Plaintiff, v. ANDREW J. DELONEY, individually and in his official capacity as Chairman of the MICHIGAN LIQUOR CONTROL COMMISSION, Case No. 11-13985 Honorable David M. Lawson ________________________________________________/ Defendant. OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS AND PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT, DECLARING STATE STATUTE UNCONSTITUTIONAL ON ITS FACE, ENJOINING ENFORCEMENT, AND DISMISSING REMAINDER OF COMPLAINT The plaintiff, S.A. Restaurants, Inc., operated an “adult cabaret” on Eight Mile Road in Detroit, Michigan that featured topless dancing entertainment. For a number of years, its attempt to transfer its Topless Activity Permit to a prospective purchaser were frustrated, it says, because of the delay in the approval process that was countenanced by the Michigan liquor control statutes and corresponding regulations. After the transfer finally occurred, the plaintiff filed the present lawsuit against the current Michigan Liquor Control Commissioner in his official and individual capacities, arguing that the statute is unconstitutional as applied and on its face, and seeking declaratory and injunctive relief and damages. Thereafter, the defendant filed a motion to dismiss and the plaintiff filed a motion for partial summary judgment. The Court heard oral argument on November 26, 2012 and now concludes that the plaintiff’s claim for damages cannot survive, nor can its as-applied challenge to the statute. However, the plaintiff has standing to assert a facial challenge to the statute, which the Court finds is a prior restraint on expressive activity and lacks the procedural safeguards that the First Amendment requires. Therefore, the Court will grant in part and deny in part the defendant’s motion to dismiss and the plaintiff’s motion for partial summary judgment, declare the statute unconstitutional with respect to the permit transfer process, and enjoin its enforcement. I. The following facts are taken from the complaint. The plaintiff, S.A. Restaurants, Inc., operated “an adult cabaret” offering “live, non-obscene clothed and semi-nude (‘topless’) dance entertainment” at 20771 W. Eight Mile Road, Detroit, Michigan. Compl. at ¶ 4. The defendant, Andrew J. Deloney, is the current chairman of the Michigan Liquor Control Commission (MLCC), the state agency charged with issuing topless activity permits. According to public records, Deloney was appointed chairman of the MLCC on June 10, 2011 and assumed his duties on July 5, 2011. Michigan law governs the issuance and transfer of licenses to sell alcoholic beverages at bars and restaurants. When those establishments also offer live entertainment, additional permits must be authorized by the MLCC. The plaintiff is challenging the constitutionality of Michigan Compiled Laws § 436.1916, which governs the issuance and transfer of ownership of Entertainment and Topless Activity Permits. An Entertainment Permit is required to present any performance for public viewing; both an Entertainment Permit and a Topless Activity Permit are required to present exotic dancing. The plaintiff had been attempting to transfer its Class C Liquor License with Sunday Sales and Entertainment and Topless Activity Permits to ABCDE Operating, LLC, doing business as the Penthouse Club, since January 31, 2007. Under Michigan law, the MLCC will not issue permits -2- without the approval of “the local legislative body of the jurisdiction within which the premises are located.” Mich. Comp. Laws § 436.1916(10)(b). The MLCC apparently applied this requirement to transfer requests as well, since on March 7, 2007, the MLCC sent a Local Approval Notice to the City of Detroit. On February 6, 2008, the City of Detroit issued a temporary occupancy permit to the Penthouse Club for the Eight Mile Road location and the MLCC approved a management agreement allowing the Penthouse Club to do business under the plaintiff’s license and permits. However, the application for the transfer of those permits was not acted upon between March 2, 2007 and September 2010. The plaintiff argues that the delay has caused damages in an amount exceeding $1,000,000 because under the management agreement the plaintiff has had to pay ABCDE Operating, LLC, ten percent of the revenue of the Penthouse Club, and that revenue for the relevant period has exceeding $10,000,000. The defendant’s response to the plaintiff’s motion for summary judgment presents a somewhat different account of the transfer process. According to the defendant, in February 2007, the plaintiff ceased operation of its business and placed its license and permits into escrow. The MLCC received a request from ABCDE seeking the transfer of the license and permits on February 1, 2007. However, the MLCC was unable to process the request until December 28, 2007 because the plaintiff had not provided the necessary documents. On January 25, 2008, the MLCC’s Lansing division received a report from the Enforcement Division recommending approval of ABCDE’s request, but indicating that ABCDE needed to provide a lease agreement and verification of loan proceeds and to submit to inspection prior to approval. According to the plaintiff, ABCDE filed a complaint against the City of Detroit on November 24, 2008, alleging that a moratorium imposed by the City of Detroit on the consideration -3- of MLCC applications was unconstitutional. In response to this suit, the City of Detroit rewrote its procedures with respect to MLCC applications so as to place them in compliance with the applicable law. The plaintiff states that the new policies went into effect on June 23, 2009. According to the defendant, the policies were not adopted until August 25, 2009. In any event, on September 5, 2009, ABCDE submitted a petition to the City of Detroit seeking approval for the issuance of a topless activity permit, which the City of Detroit addressed but declined to approve or deny on November 20, 2009. On December 22, 2009, ABCDE filed a lawsuit in federal court against the City of Detroit seeking to compel approval of the topless activity permit. See Case No. 09-14969. Judge George Steeh of this Court entered an order deeming ABCDE’s transfer petition approved on January 21, 2010. In response to that order, the MLCC sent ABCDE a letter advising ABCDE that approval could not be considered because there were four code violations pending against the plaintiff that had allegedly occurred on January 28, 2010. The City of Detroit issued a complaint against the plaintiff on April 9, 2010 for additional violations; the complaint was resolved after a hearing on June 7, 2010. On February 16, 2010, ABCDE filed another lawsuit in this district, this time against Nida Samona, the then-MLCC commissioner. See Case No. 10-10646. The complaint is similar to the complaint currently before this Court, with the exception of the requested money damages and the defendant. ABCDE sought unspecified compensatory damages and a preliminary and permanent injunction. The case apparently was resolved; a stipulated dismissal with prejudice was entered in that case on July 28, 2010. -4- Nonetheless, the MLCC denied the plaintiff’s transfer request on June 23, 2010. According to the defendant, the denial was based on negative prior operating history of the members of ABCDE, the lack of a 10% down payment of the purchase price, and negative prior operating history of the lender. The plaintiff states that after that denial, two of the three members of ABCDE withdrew from the company. ABCDE appealed to the MLCC Administrative Commissioners, and after the submission of additional documentation by ABCDE, the MLCC approved the transfer on June 30, 2011. The plaintiff transferred the license and permits to ABCDE on September 9, 2011. Plaintiff S.A. Restaurants filed the present complaint in this case under 42 U.S.C. § 1983 on September 13, 2011 against the present MLCC chairman, Andrew Delony, in his individual and official capacities. It requests a declaratory judgment that Michigan Compiled Laws § 436.1916 is unconstitutional on its face and as applied and violates the First Amendment. The plaintiff also seeks damages in the amount of $500,000 from the defendant in his individual capacity, plus costs and attorney’s fees. The defendant has filed a motion to dismiss, contending that the plaintiff’s suit is barred by the Eleventh Amendment and the doctrine of res judicata, and the challenged statute is constitutional. The plaintiff countered with a motion for partial summary judgment, contending it is entitled to a judgment as a matter of law declaring the statute unconstitutional on its face. II. “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief if all the facts and allegations in the complaint are taken as true.” Rippy ex rel. Rippy v. Hattaway, 270 F.3d 416, 419 (6th Cir. 2001) (citing Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993 . Under Rule 12(b)(6), the complaint is viewed in the light most favorable to plaintiffs, the allegations in the complaint are accepted as true, and all reasonable inferences are -5- drawn in favor of plaintiffs. Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008). As the Sixth Circuit explained, [t]o survive a motion to dismiss, [a plaintiff] must plead “enough factual matter” that, when taken as true, “state[s] a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, , 556, 570 (2007). Plausibility requires showing more than the “sheer possibility” of relief but less than a “probab[le]” entitlement to relief. Ashcroft v. Iqbal, [ , 678] (2009). Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010). A. Eleventh Amendment The defendant argues that the plaintiff’s claims against him in his official capacity must be dismissed because they are barred by the Eleventh Amendment, and the claims against him in his individual capacity must be dismissed because the complaint does not allege facts that could subject him to personal liability. The plaintiff responds that it is requesting declaratory relief, and that suits against state officials seeking such relief are permissible under the Eleventh Amendment. The plaintiff also argues that the allegations in the complaint against the defendant in his individual capacity are sufficient to survive a motion to dismiss. The Eleventh Amendment provides that “[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another state, or by Citizens or subjects of any foreign State.” U.S. Const. Amend. XI. In general, the Eleventh Amendment immunizes state officials from suit in federal court. Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 101 (1984). However, state sovereign immunity as recognized by the Eleventh Amendment does not extend to suits against state officials seeking to enjoin violations of federal law. Ex parte Young, , 159-160 (1908). A plaintiff can “avoid[] this sovereign immunity bar by suing for injunctive or declaratory relief, -6- rather than monetary relief.” Johnson v. Unknown Dellatifa, 357 F.3d 539, 545 n.1 (6th Cir. 2004) (citing Will v. Michigan Dep’t of State Police, 491 U.S. 58, 71 n.10 (1989 . To determine whether a claim for such relief avoids sovereign immunity, “a court need only conduct ‘a straightforward inquiry into whether [the] complaint alleges an ongoing violation of federal law and seeks relief properly characterized as prospective.’” Dubuc v. Michigan Bd. of Law Examiners, 342 F.3d 610, 616 (6th Cir. 2003) (quoting Verizon Maryland, Inc. v. Public Service Comm’n of Maryland, 535 U.S. 635, 645 (2002 . The complaint in this case plainly states that the plaintiff is suing the defendant in his official capacity for declaratory and injunctive relief. Therefore, the plaintiff’s complaint against the defendant in his official capacity survives an Eleventh Amendment challenge, but only as to those forms of relief. The Eleventh Amendment bars suits for money damages against state officers sued in their official capacities. Johnson, 337 F.3d at 545. The plaintiff’s claim against defendant Deloney for money damages is barred by the Eleventh Amendment. However, state defendants may be sued under section 1983 in their individual capacities for money damages. Rodgers v. Banks, 344 F.3d 587, 594 (6th Cir. 2003). The plaintiff’s complaint states that the defendant is being sued in his individual capacity for money damages. The Eleventh Amendment is no obstacle to that claim. B. Individual capacity claim for damages The defendant also argues that the plaintiff’s money damages claim must be dismissed because the complaint does not allege sufficient facts to establish the defendant’s personal liability. The Court agrees. The Supreme Court has explained that “[p]ersonal-capacity suits seek to impose personal liability upon a government official for actions he takes under color of state law.” Kentucky -7- v. Graham, 473 U.S. 159, 165 (1985). In order to establish personal liability in an action under 42 U.S.C. § 1983, a plaintiff must be able to demonstrate that “the official, acting under color of state law, caused the deprivation of a federal right.” Id. at 166. In order to support a claim against the defendant in his personal capacity, therefore, the plaintiff must allege some action by defendant Deloney that deprived the plaintiff of a federal right. That mission is impossible. The plaintiff seeks relief for damages that allegedly occurred between February 6, 2008 and September 13, 2011. However, Andrew Deloney was not appointed to the MLCC until June 10, 2011, and did not begin his duties until July 5 of that year. The transfer application was approved on June 30, 2011, before Mr. Deloney was on the job. The plaintiff, therefore, cannot state a plausible claim for money damages based on events that occurred before the defendant took his seat on the MLCC, because the defendant cannot possibly have taken any action under the color of state law prior to that time. Although the transfer was approved on June 30, it was not effectuated until September 13, 2011. The defendant insisted at oral argument that the delay was solely due to the plaintiff. The record does not contain any information to confirm that contention. Nonetheless, the Court believes that the plaintiff has not pleaded sufficient facts to state a claim for money damages against the defendant that is plausible on its face. The only facts that the plaintiff has alleged with respect to the defendant’s conduct are that he is the chairman of the MLCC, he has acted under the color of state law in performing his duties as chairman, he has “caused the deprivation of Plaintiffs’ [sic] First Amendment rights while acting under color of state law by enforcing” Michigan Compiled Laws § 436.1916, the defendant has enforced section 436.1916 “as the official policy of MLCC,” and that the plaintiff has incurred damages as a result of the defendant’s violations of the -8- Constitution because it has paid a percentage of its sales to ABCDE Operating under a management agreement approved by the MLCC. Compl. at ¶¶ 6-10, 42, 43. The only factual allegations that can be described as more than a “formulaic recitation of the elements” of a section 1983 claim are the plaintiff’s allegations that the defendant has enforced section 436.1916 and that the plaintiff has been forced to pay a percentage of its gross sales under its management agreement with ABCDE. But the bare allegation that the defendant has enforced the state statute as a general proposition, without any specific allegation of actions that this defendant has taken with respect to this plaintiff, is insufficient to establish a plausible claim of entitlement to relief. The Court finds, therefore, that the claims against the defendant in his individual capacity must be dismissed. In a related argument, the defendant contends that the City of Detroit must be joined as a necessary party, and if it is not, the case must be dismissed under Federal Rule of Civil Procedure 19(a). The defendant reasons that joinder of the City is necessary either because the Court cannot accord complete relief among the existing parties in the City’s absence or because the failure to join the City leaves the defendant open to a substantial risk of incurring double, multiple, or inconsistent obligations because of the City’s interest. The suggestion that the Court cannot entertain a facial challenge to the constitutionality of the state statute without the City of Detroit participating is unpersuasive, and the dismissal of the damages claim renders the balance of the argument moot. C. Res Judicata Because the plaintiff’s transferee, ABCDE Operating, LLC, brought an earlier action against the MLCC chairwoman concerning this same transfer that was dismissed with prejudice, the -9- defendant believes that the doctrine of claim preclusion, also known as res judicata, bars the present action. The Court disagrees. It is true that “when a court of competent jurisdiction enters a final judgment on the merits in an action, the parties and their privies are barred from relitigating in a subsequent action matters that were actually raised or might have been raised in the prior action.” Nathan v. Rowan, 651 F.2d 1223, 1226 (6th Cir. 1981). And a dismissal “with prejudice” can constitute an adjudication on the merits. Michigan Surgery Inv., LLC v. Arman, 627 F.3d 572, 575 (6th Cir. 2010) (stating that “a dismissal with prejudice operates as a rejection of the plaintiff’s claims on the merits and res judicata precludes further litigation” (quoting United States v. One Tract of Real Property, 95 F.3d 422, 425-26 (6th Cir. 1996 . However, “[c]laim preclusion only arises . . . in the presence of the following four elements: (1) where the prior decision was a final decision on the merits; (2) where the present action is between the same parties or their privies as those to the prior action; (3) where the claim in a present action should have been litigated in the prior action; and (4) where an identity exists between the prior and present actions.” Mitchell v. Chapman, 343 F.3d 811, 819 (6th Cir. 2003). The defendant can not demonstrate all four elements in this case. The defendant’s claim preclusion argument fails because he has not demonstrated that the two actions were between the same parties or their privies. There is no question that the plaintiffs in the two cases are different; therefore, the question is whether the plaintiff was in privity with ABCDE Operating, LLC. “In the context of claim preclusion ‘privity . . . means a successor in interest to the party, one who controlled the earlier action, or one whose interests were adequately represented.’” Mitchell, 343 F.3d at 823 (quoting Sanders Confectionary Prods., Inc. v. Heller, 973 F.2d 474, 481 (6th Cir. 1992 . The Supreme Court has outlined six exceptions to the general rule -10- barring non-party preclusion: where a person “agrees to be bound by the determination of issues in an action between others,” where there is a “pre-existing substantive legal relationship[] between the person to be bound and a party to the judgment,” where a person was “adequately represented by someone with the same interests who was a party,” where the nonparty “assumed control over the litigation in which [the] judgment was rendered,” where “a person who did not participate in a litigation later brings suit as the designated representative of a person who was a party to the prior adjudication,” and where provided by a special statutory scheme. Taylor v. Sturgell, 553 U.S. 880, 893-95 (2008) (internal citations and alterations omitted). The only exception addressed by the defendant is the designated representative or agent exception. However, the defendant does not provide any argument in support of his contention that the plaintiff is a proxy for ABCDE beyond an assertion that the plaintiff “clearly has no substantial interest in the alleged controversy and appears to be merely a nominal plaintiff trying advance [sic] the interests of” ABCDE Operating. Def.’s Mot. to Dismiss at 5. The plaintiff has asserted a claim for $500,000 in damages, measured by what it supposedly paid ABCDE. It is difficult to classify that as anything other than a “substantial interest” in the controversy. And since the money flowed away from the plaintiff to toward ABCDE, their interests inter se arguably were at odds. The defendant has provided no evidence other than supposition to support his claim that the plaintiff has been appointed by ABCDE or is acting as that company’s representative. Nor is there any evidence that would suggest that any other exception applies. The defendant’s claim preclusion argument fails. III. In its motion for partial summary judgment, the plaintiff argues that it is entitled to a judgment as a matter of law declaring that Michigan Compiled Laws § 436.1916 is an -11- unconstitutional prior restraint that violates the First Amendment, both on its face and as applied to it, because the statute does not (1) impose time limits for actions on permits, (2) mandate that the status quo be maintained during judicial review of an adverse decision, (3) guarantee accelerated judicial review of an adverse decision, or (4) contain nondiscretionary criteria to inform the decision to grant, deny, or transfer the permit. Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A trial is required only when “there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Anderson v. Liberty Lobby, Inc., , 250 (1986). The parties have not seriously contested the basic facts of the case as to the impact of the statute on the permit transfers. Where the material facts are mostly settled, as here, and the question before the court is purely a legal one, the summary judgment procedure is well suited for resolution of the case. See Cincom Sys., Inc. v. Novelis Corp., 581 F.3d 431, 435 (6th Cir. 2009). The defendant resists the plaintiff’s summary judgment motion, contending that the statute has adequate procedural safeguards and is constitutional. More importantly, however, the defendant argues that the plaintiff does not have standing to assert a constitutional challenge to the statute. A. Standing Because the permits have been transferred, and the plaintiff’s damages claims have no merit, the plaintiff’s standing is properly questioned. Standing is required in order to confer subject matter jurisdiction upon federal courts under Article III of the Constitution. It is “the threshold question in every federal case.” Warth v. Seldin, , 498 (1975). The Supreme Court has stated that the standing requirement “limits federal court jurisdiction to actual controversies so that the -12- judicial process is not transformed into ‘a vehicle for the vindication of the value interests of concerned bystanders.’” Coal Operators & Assocs., Inc. v. Babbitt, 291 F.3d 912, 915-16 (6th Cir. 2002) (quoting Valley Forge Christian College v. Ams. United for Separation of Church & State, Inc., , 473 (1982 . There are three constitutional requirements for standing. See Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 771 (2000); City of Cleveland v. Ohio, 508 F.3d 827, 835 (6th Cir. 2007). “To establish Article III standing, a litigant must show (1) an injury in fact; (2) a causal connection between the injury and the conduct complained of; and (3) that the injury will likely be redressed by a favorable decision.” Barnes v. City of Cincinnati, 401 F.3d 729, 739 (6th Cir. 2005) (citing Lujan v. Defenders of Wildlife, , 560-61 (1992 . The injury must be “actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560 (internal quotations and citations omitted). “[A] plaintiff is not entitled to injunctive or declaratory relief ‘[a]bsent a sufficient likelihood that he will again be wronged in a similar way,’ City of Los Angeles v. Lyons, 461 U.S. 95, 111 (1983), unless the plaintiff is subject to ‘continuing, present adverse effects,’ O’Shea v. Littleton, 414 U.S. 488, 496 (1974).” Schultz v. United States, 529 F.3d 343, 349 (6th Cir. 2008); see also Fieger v. Ferry, 471 F.3d 637, 643 (6th Cir. 2006) (“In the context of a declaratory judgment action, allegations of past injury alone are not sufficient to confer standing. The plaintiff must allege and/or ‘demonstrate actual present harm or a significant possibility of future harm.’” (quoting Peoples Rights Org., Inc. v. City of Columbus, 152 F.3d 522, 527 (6th Cir. 1998 . -13- Causation is “a fairly traceable connection between the plaintiff’s injury and the complained- of conduct of the defendant.” Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 103 (1998). The Sixth Circuit has stated that “[r]edressability . . . requires that prospective relief will remove the harm, and the plaintiff must show that he personally would benefit in a tangible way from the court’s intervention.” American Civil Liberties Union v. National Sec. Agency, 493 F.3d 644, 670 (6th Cir. 2007) (internal quotations and citations omitted). “Relief that does not remedy the injury suffered cannot bootstrap a plaintiff into federal court; that is the very essence of the redressability requirement.” Ibid. (quotation omitted). In addition to the constitutional requirements, a plaintiff must also satisfy three prudential standing requirements. See City of Cleveland, 508 F.3d at 835. First, a plaintiff must “assert his own legal rights and interests, and cannot rest his claim for relief on the legal rights or interests of third parties.” Warth, 422 U.S. at 499 (citations omitted). Second, a plaintiff’s claim must be more than a “generalized grievance” that is pervasively shared by a large class of citizens. Coal Operators, 291 F.3d at 916 (citing Valley Forge, 454 U.S. at 474-75). “Third, in statutory cases, the plaintiff’s claim must fall within the ‘zone of interests’ regulated by the statute in question.” Ibid. “These additional restrictions enforce the principle that, ‘as a prudential matter, the plaintiff must be a proper proponent, and the action a proper vehicle, to vindicate the rights asserted.’” Ibid. (quoting Pestrak v. Ohio Elections Comm’n, 926 F.2d 573, 576 (6th Cir. 1991 . To determine whether the plaintiff has standing to mount its challenges to the statute in question here, the Court must determine whether the challenged provisions of the statute have caused an injury-in-fact to the plaintiff that would be redressed by a favorable decision by this -14- Court. The defendant argues that the plaintiff cannot bring an as-applied challenge to the statute, because it never applied for a topless activity permit, it does not allege that it intends to request another topless activity permit, it was not required to enter into a management agreement, it cannot establish a causal link between the management fees and the application of the statute, and it cannot demonstrate that a favorable decision from this Court would redress its harm. The Court agrees that the plaintiff does not have standing to argue that the statute is unconstitutional as applied. Although the plaintiff has alleged a concrete harm — that it was unable to transfer its license and permits between January 31, 2007 and June 30, 2011 — see H.D.V.- Greektown, LLC v. City of Detroit, 568 F.3d 609, 617 (6th Cir. 2009) (finding that plaintiffs were harmed when a city council failed to act on and ultimately denied an application to transfer a liquor license and topless activity permit), neither injunctive nor declaratory relief will help at this point. Prospective relief against the defendant in his official capacity cannot redress the plaintiff’s injury. The plaintiff has not alleged that it intends to apply for another Topless Activity Permit, and it has none to transfer presently. A declaration that the statute is unconstitutional as applied to the plaintiff or an injunction barring the defendant from applying the statute to the plaintiff would confer no practical benefit upon the plaintiff. The defendant’s argument that the plaintiff has no standing to muster a facial attack on the statute is a different matter. The defendant believes that the plaintiff lacks standing because the plaintiff cannot assert a third party’s First Amendment rights when the challenge is based on a lack of procedural safeguards, and the plaintiff has not attacked the statute on vagueness or overbreadth grounds. The defendant is incorrect. -15- The plaintiff contends that the requirement of a Topless Activity Permit is a prior restraint on expressive activity that is protected by the First Amendment. Prudential standing rules are somewhat relaxed in the First Amendment context. See Lac Vieux Desert Band of Lake Superior Chippewa Indians v. Michigan Gaming Control Bd., 172 F.3d 397, 407 (6th Cir. 1999). Normally, a party bringing a lawsuit must show an actual or threatened injury resulting from the alleged illegal action and may only assert a violation of its own rights. Virginia v. American Booksellers Assoc., Inc., 484 U.S. 383, 392 (1988). However, the freedom of expression and the unfettered exchange of ideas is considered the lifeblood which sustains a democracy. Roth v. United States, 354 U.S. 476, 484 (1957) (stating that “[t]he protection given speech and press was fashioned to assure unfettered interchange of ideas for the bringing about of political and social changes desired by the people”). Therefore, where a law regulates speech based on content, R.A.V. v. City of St. Paul, 505 U.S. 377, 381 (1992), contains a prior restraint of protected speech, City of Lakewood v. Plain Dealer Publ’g Co., 486 U.S. 750, 757 (1988); FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 223 (1990), chills the right of expression of third parties, American Booksellers, 484 U.S. at 392, or restricts the expression of others not before the court, Members of the City Council for the City of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789, 798 (1984), third parties may wage a facial challenge to the offending law based on First Amendment rights. American Booksellers, 484 U.S. at 392-93. The Sixth Circuit has explained that unfettered censorship itself constitutes an injury-in- fact, stating that when a licensing statute allegedly vests unbridled discretion in a government official over whether to permit or deny expressive activity, one who is subjected to the law may challenge it facially without the necessity of applying for, and being denied, a license. Such a licensing requirement constitutes a prior restraint and may result in censorship. Thus, the prior restraint of a licensing provision coupled with unbridled discretion itself amounts to an actual injury. -16- H.D.V.-Greektown, LLC v. City of Detroit, 568 F.3d 609, 617 (6th Cir. 2009) (quoting Prime Media, Inc. v. City of Brentwood, 485 F.3d 343, 351 (6th Cir. 2007 . The relaxed standing rules are not limited to First Amendment challenges based only on vagueness and overbreadth grounds. The plaintiff alleges in its complaint that Michigan Compiled Laws § 436.1916 is an unconstitutional prior restraint because it does not (1) impose time limits for actions on permits, (2) mandate that the status quo be maintained during judicial review of an adverse decision, (3) guarantee accelerated judicial review of an adverse decision, or (4) contain nondiscretionary criteria to inform the decision to grant or deny the permit. The plaintiff’s allegation that the statute does not contain nondiscretionary criteria for granting or denying the permit is, essentially, an allegation that a government official has “unbridled discretion . . . over whether to permit or deny expressive activity.” H.D.V. Greektown, LLC, 568 F.3d at 617. In such a situation, the licensing requirement combined with the unbridled discretion of the official constitutes an “actual injury,” and the plaintiff has standing to mount a facial challenge to that aspect of the statute. Similarly, the Supreme Court has held that the failure to place limitations on the time within which a censorship board decisionmaker must make a determination of obscenity is a species of unbridled discretion. Thus, where a scheme creates a risk of delay such that every application of the statute creates an impermissible risk of suppression of ideas, we have permitted parties to bring facial challenges. FW/PBS, Inc., 493 U.S. at 223-24 (internal quotations and citations omitted). Therefore, the plaintiff may bring a facial challenge to the statute on the grounds stated. B. Constitutionality of the statute The challenged statute, Michigan Compiled Laws § 436.1916(10), reads as follows: Before the issuance of any permit under this section, the on-premises licensee shall obtain the approval of all of the following: -17- (a) The commission. (b) Except in cities with a population of 1,000,000 or more, the local legislative body of the jurisdiction within which the premises are located. (c) The chief law enforcement officer of the jurisdiction within which the premises are located or the entity contractually designated to enforce the law in that jurisdiction. Mich. Comp. Laws § 436.1916(10). Although the statute by its terms addresses “the issuance of . . . permit[s],” the MLCC apparently believes the statute governs applications to transfer permits as well. Licensing schemes like the one described by the statute in this case have been held to constitute a prior restraint on protected expression. Richland Bookmart, Inc. v. Knox County, Tenn., 555 F.3d 512, 532 (6th Cir. 2009). To overcome the presumption of invalidity, a scheme for licensing sexually oriented businesses must incorporate two procedural safeguards. See Deja Vu of Nashville [Inc. v. Metropolitan Government of Nashville], 274 F.3d [377,] 400-01 [(6th Cir. 2001)]; Nightclubs, Inc. [v. City of Paducah], 202 F.3d [884,] 890 [(6th Cir. 2000)]. First, the decision whether to issue a license must be made within a specified — and brief — time period, and the status quo must be maintained during that period and during the course of any judicial review. See Deja Vu of Nashville, 274 F.3d at 400- 01. Second, there must be an assurance that a judicial decision, if sought by the applicant, can be obtained seasonably. See City of Littleton v. Z.J. Gifts D-4, L.L.C., 541 U.S. 774 (2004); Deja Vu of Nashville, 274 F.3d at 400-01. Bronco’s Entm’t v. Charter Twp. of Van Buren, 421 F.3d 440, 444 (6th Cir. 2005). “[P]rompt judicial review and preservation of the status quo are the only constitutionally indispensable safeguards.” Odle v. Decatur County, Tenn., 421 F.3d 386, 390 (6th Cir. 2005). “Where . . . the regulation simply conditions the operation of adult business on compliance with neutral and nondiscretionary criteria . . . and does not seek to censor content, an adult business is not entitled to an unusually speedy judicial decision.” City of Littleton, 541 U.S. at 784; see also Bronco’s Entm’t, 421 F.3d at 444. “However, ‘[i]f a licensing scheme involves the application of subjective -18- standards, rules requiring a speedy juridical decision may be necessary.’” 729, Inc. v. Kenton County Fiscal Court, 515 F.3d 485, 495 (6th Cir. 2008) (quoting Bronco’s Entm’t, 421 F.3d at 444). 1. Time Limits The plaintiff argues that section 436.1916(10) is unconstitutional because neither it, nor any other provision of the Michigan Liquor Code, nor any administrative rule imposes time limits within which a permit application must be acted upon. The defendant argues that Michigan Compiled Laws § 436.1525(3) establishes a time limit of 90 days within which the MLCC must approve or deny a licensing request, and that it is the practice of the Commission to apply that limit to permit applications as well. The plaintiff responds that the time limit does not apply on its face to permit transfer applications, and that even if it is construed to apply to permit transfer applications, the time limit may be tolled by a number of other conditions, such as local approval. The plaintiff contends that the statute should dictate that any application not acted upon within a specific period of time will be deemed granted. Michigan Compiled Laws § 436.1525(3) states that “the commission shall issue an initial or renewal license not later than 90 days after the applicant files a completed application.” That period is tolled in two situations: when the Commission has sent a notice of a deficiency in the application and has not yet received the requested information, and when the Commission is waiting for third parties to complete designated tasks, such as completion of construction or renovation of the licensed premises; mandated inspections by the commission or by any state, local, or federal agency; approval by the legislative body of a local unit of government; criminal history or criminal record checks; financial or court record checks; or other actions mandated by this act or rule or as otherwise mandated by law or local ordinance. -19- Mich. Comp. Laws §§ 436.1525(3)(a), (b). The defendant concedes that the 90-day time limit does not apply specifically to permit applications. However, the defendant also states that the Commission voluntarily applies the requirements of section 1525, including the time limits, when it processes permit applications. The defendant’s argument faces three major problems. First, although the defendant argues that the Commission applies the times limits in section 1525 to topless activity permit applications, the decision to do so is discretionary and not mandated by anything in the licensing scheme itself. Therefore, there is no guarantee that the policy will be followed consistently by the Commission, especially as its membership changes. In a facial challenge, a court must analyze a statute “as written” and “cannot depend on individuals enforcing [the statute] to do so in a manner that cures it of constitutional infirmities.” Redner v. Dean, 29 F.3d 1495, 1501 (11th Cir. 1994). The Sixth Circuit has noted that the statute does not contain time limits for the approval and issuance of a topless activity permit and has stated that in different factual circumstances “the absence of standards and time limits might warrant a judicial determination that the statute is an unconstitutional prior restraint.” Bronco’s Entertainment, 421 F.3d at 450. Second, the ninety-day period is on the longer end of periods that have been found to satisfy the requirement for prompt licensing decisions. See Big Dipper Entertainment, L.L.C. v. City of Warren, 641 F.3d 715, 720 (6th Cir. 2011) (24-day period for acting on application satisfies the requirement); Bronco’s Entertainment, 421 F.3d at 448 (holding that a 44-day period for acting on a licensing application was sufficiently brief); Doctor John’s, Inc. v. City of Roy, 465 F.3d 1150, 1162 (10th Cir. 2006) (approving of a licensing scheme that mandated approval or denial within 40 days); Café Erotica of Florida, Inc. v. St. Johns County, 360 F.3d 1274, 1383 (11th Cir. 2004) -20- (finding 30-day limit acceptable); but see Wolff v. City of Monticello, 803 F. Supp. 1568, 1574 (D. Minn. 1992) (finding a 90-day limit acceptable). Although a 90-day limit is not entirely unacceptable, when the longer time limit combines with the numerous ways in which that limit might be tolled, the time period no longer can be characterized as “brief,” as required by the Constitution. Third, the Supreme Court has found that a similar licensing scheme failed to satisfy the Constitution. In FW/PBS Inc. v. City of Dallas, the Court held that a licensing scheme that imposed a thirty-day time limit for issuing decisions on applications but also mandated that licenses could not issue until the premises had been inspected failed to provide an effective limitation on the time in which a decision could be made because the ordinance did not place any time limits on when the city would inspect the business. 493 U.S. at 227. Similarly, section 436.1916(10)(b) and (c) require approval of the local jurisdiction where the business is located and its chief law enforcement official before the issuance of a permit. Section 436.1525(3)(b) tolls the ninety-day time limit while approval by the local jurisdiction is pending but does not contain a corresponding limitation on the time for local action. That problem manifested itself in this very case. The City of Detroit had to be sued in order to move it to act, and even then the court ultimately “deemed” the transfer approved by the local governmental unit. The time for all of that cannot be considered “brief” by any measure. That problem was systemic and derives from the language of the statute itself. The defendant offers no counter to any of these arguments. Because the language of the statute does not provide a time limit in which a transfer application must be decided upon and because the statue presents the possibility of indefinite delay prior to decision-making, the Court must find the statute is unconstitutional on that basis. -21- 2. Status Quo The Supreme Court has also required that the status quo be maintained during the pendency of an application and judicial review. Freedman v. Maryland, 380 U.S. 51, 59 (1965). The plaintiff argues that the statute and administrative rules do not mandate that the status quo be maintained. The defendant argues that there is no requirement that the statute explicitly state that the status quo be maintained, as long as the practical effect of the statute is that the status quo is maintained. There are only two categories of businesses that can apply for a topless activity permit. First, businesses that have liquor licenses may apply for a topless activity permit. Those defendants would be permitted to continue to serve alcohol but would not be permitted to present nude dancing. Second, businesses seeking both a liquor license and a topless activity permit would not operate while the application is pending. The status quo requirement does not mandate that an applicant be permitted to operate pending judicial review. As the defendant notes, “[t]he status quo for a business seeking a permit to begin operating a sexually oriented business . . . is non-operation.” East Brooks Books, Inc. v. City of Memphis, 48 F.3d 220, 225 (6th Cir. 1995). The Sixth Circuit has held that the status quo requirement, in the case of a permit denial, “does not require more” than permitting sexually oriented businesses already in operation when the statute takes effect to continue operating while their applications are pending. Ibid. The plaintiff’s challenge on this point fails. 3. Objective and Nondiscretionary Criteria The plaintiff also argues that the statute and rules governing the issuance or transfer of a Topless Activity Permit do not contain explicit and objective criteria. The plaintiff maintains, correctly, that section 436.1916(10) contains no criteria at all. It also contends that a corresponding regulation, Michigan Administrative Rule (AR) 436.1105(2) and (3), is not applicable to transfer -22- applications, contains criteria that are wholly subjective, and confers unbridled discretion on the government. The defendant argues that section 436.1916(10) does not seek to censor topless activity, and the Commission’s criteria for considering a permit are neutral and nondiscretionary because they only require a review of the general qualifications of the applicant. Michigan AR 436.1105(2) states: The commission shall consider all of the following factors in determining whether an applicant may be issued a license or permit: (a) The applicant’s management experience in the alcoholic liquor business. (b) The applicant’s general management experience. (c) The applicant’s general business reputation. (d) The opinions of the local residents, local legislative body, or local law enforcement agency with regard to the proposed business. (e) The applicant’s moral character. (f) The order in which the competing initial application forms are submitted to the commission . . . . (g) Past convictions of the applicant for any of the following: (i) A felony. (ii) A crime involving the excessive use of alcoholic liquor. (iii) A crime involving any of the following: (a) Gambling. (b) Prostitution. (c) Weapons. (d) Violence. (e) Tax evasion. (g) Fraudulent activity. (h) Controlled substances. (iv) A misdemeanor of such a nature that it may impair the ability of the applicant to operate a licensed business in a safe and competent manner. (v) Sentencing for any of the offenses specified in this subrule after a plea of nolo contendere. (h) The applicant’s excessive use of alcoholic liquor. (i) The effects that the issuance of a license would have on the economic development of the area. (j) The effects that the issuance of a license would have on the health, welfare, and safety of the general public. Subsection (3) of that regulation states: -23- An application for a new license, an application for any transfer of interest in an existing license, or an application for a transfer of location of an existing license shall be denied if the commission is notified, in writing, that the application does not meet all appropriate state and local building, plumbing, zoning, fire, sanitation, and health laws and ordinances as certified to the commission by the appropriate law enforcement officials. The commission may accept a temporary or permanent certificate of occupancy for public accommodation issued by the appropriate officials as evidence of compliance with this subrule. Mich. Admin. R. 436.1105(3). Some of the factors in these rules plainly are objective and nondiscretionary. But even the specific provisions requiring consideration of past convictions for designated crimes state that the Commission must “consider” the applicant’s prior criminal record; it does not state that having those convictions is disqualifying. Moreover, the other factors listed in the Rule are discretionary and cannot be described plausibly as objective. The “opinions of the local residents, local legislative body, or local law enforcement agency” call for a subjective assessment. The applicant’s “moral character” and “general business reputation” are not factors that are susceptible to objective measurement. Nor does the Rule describe an objective measure by which an applicant’s alcohol consumption could be determined to be “excessive.” In addition, the Rule describes those items as “factors to be considered” rather than as nondiscretionary qualifications or disqualifications. There is nothing in the Rule preventing the Commission from exercising its discretion to consider additional factors or to weigh the various factors differently in different cases. The defendant compares this case to City of Littleton v. Z.J. Gifts D-4, LLC, 541 U.S. 774 (2004), in which the Supreme Court held that a regulation applicable to an adult business prescribed neutral and nondiscretionary criteria and did not seek to censor content. But comparing that case to the present one only demonstrates the shortcomings of Michigan’s statutory scheme. In City of Littleton, the ordinance stated that a license “shall” be denied if the applicant was underage, -24- provided false information, had an adult business license suspended or revoked in the previous year, operated an adult business determined to be a public nuisance in the previous year, was a corporation not authorized to do business in the state, had not obtained a sales tax license, or had been convicted of certain crimes in the past five years. City of Littleton, 541 U.S. at 783. All those criteria are nondiscretionary (“shall” be denied), and are plainly objective. The factors in the Michigan rule more closely resemble those that the Sixth Circuit has found to be nonobjective. In Bronco’s Entertainment, the court found that an ordinance that required a judgment as to whether an applicant “has demonstrated an inability to operate or manage a sexually oriented business in a peaceful and law-abiding manner” and an “assessment of the applicant’s ‘fitness’ by the chief of police” were discretionary and therefore not objective. Bronco’s Entertainment, 421 F.3d at 449; see also East Brook Books, 48 F.3d at 227 (finding that a nearly identical provision vested “unbridled discretion” in the hands of the chief of police). Similarly, here, the factors vest nearly unbridled discretion in the Commission to determine the applicant’s moral character, business acumen, and reputation in the community. The Michigan licensing scheme does not “appl[y] reasonably objective, nondiscretionary criteria”; instead, it contains “subjective standards” that are not permitted by the First Amendment when a government imposes a prior restraint. City of Littleton, 541 U.S. at 782. 4. Accelerated Judicial Review The plaintiff argues that accelerated judicial review is required when a licensing scheme fails to impose time limits and fails to incorporate reasonably nondiscretionary, objective criteria to licensing decisions. The defendant agrees that provisions for accelerated judicial review are necessary in the absence of objective, nondiscretionary criteria. The Sixth Circuit has repeatedly -25- held that “‘[i]f a licensing scheme involves the application of subjective standards, rules requiring a speedy judicial decision may be necessary.’” 729, Inc., 515 F.3d at 495 (quoting Bronco’s Entm’t, 421 F.3d at 444). Because the licensing scheme in this case employs subjective standards, it “requires special rules that guarantee an ‘unusually speedy judicial decision.’” Bronco’s Entertainment, 421 F.3d at 449 (quoting City of Littleton, 541 U.S. at 784). There are no special rules in the MLCC permit- issuing scheme. The defendant does not even attempt to argue that such rules exist, instead pointing to the general right to appeal an administrative decision contained in the Michigan Revised Judicature Act and ask for accelerated review. See Mich. Comp. L. § 600.631; Mich Ct. R. 7.105(L). Moreover, in the absence of the requisite procedural safeguards, specifically a reasonable limit on the time within which a licensor must decided whether to issue a license, see FW/PBS, Inc., 493 U.S. at 230 (citing Bantam Books, Inc. v. Sullivan, 372 U.S. 58, 66 (1963 , “the licensing scheme must place the burden of instituting judicial proceedings and proving that expression is unprotected on the licensor rather than the exhibitor.” Deja Vu of Nashville, 274 F.3d at 400-01 (citing Freedman, 380 U.S. at 57). Because the licensing scheme does not apply reasonably objective nondiscretionary criteria and does not incorporate special rules guaranteeing an unusually speedy judicial decision, the permitting scheme is unconstitutional on that ground as well. IV. The Court concludes that all of the plaintiff’s claims against the defendant in his individual capacity must be dismissed, and the plaintiff does not have standing to assert that the statute governing the issuance and transfers of permits is unconstitutional as applied. However, the plaintiff has standing to argue that Michigan Compiled Laws § 436.1916(10) is unconstitutional in its face. -26- The Court finds that the statute is unconstitutional because it does not impose reasonable time limits for actions on permits, guarantee accelerated judicial review of an adverse decision, and contain nondiscretionary criteria to inform the decision to grant, deny, or transfer the permit. Accordingly, it is ORDERED that the defendant’s motion to dismiss [dkt. #6] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the plaintiff’s motion for partial summary judgment [dkt. #12] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that Michigan Compiled Laws § 436.1916(10) is declared to violate the First Amendment and therefore is repugnant to the Constitution. It is further ORDERED that the defendant and all those in active concert and participation with him who receive actual notice of this order are RESTRAINED AND ENJOINED from enforcing Michigan Compiled Laws § 436.1916(10). It is further ORDERED that the remaining portions of the plaintiff’s complaint are DISMISSED WITH PREJUDICE. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: December 4, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 4, 2012. s/Shawntel Jackson SHAWNTEL JACKSON -27-

=== PATRICIA A. KIENZLE v. GENERAL MOTORS, LLC. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION PATRICIA A. KIENZLE, v. Plaintiff, GENERAL MOTORS, LLC, ______________________________________/ Defendant. Case Number 11-11930 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT This matter is before the Court on the defendant’s motion for summary judgment. Plaintiff Patricia Kienzle alleges in a complaint filed in this Court that from July 2009 to January 2010, defendant General Motors LLC (GM) paid Kienzle less money for doing the same work as male supervisors and the male engineers that she managed. In an amended complaint, she also alleges that male supervisors she worked with harassed her, that managers and company human resources representative ignored her complaints of harassment, and that managers retaliated against her when she complained. Kienzle bases her complaints of discrimination and retaliation on Title VII of the Civil Rights Act of 1964, Michigan’s counterpart legislation, and the Equal Pay Act. The Court heard oral argument on the defendant’s motion on October 25, 2012 and now concludes that the plaintiff has offered sufficient evidence on her Equal Pay Act and disparate treatment claims to survive summary judgment, but she has failed to do so on her retaliation claims. Therefore, the Court will grant in part and deny in part the defendant’s motion for summary judgment. I. Kienzle is a current employee of GM. She began working in a salaried full-time position for the former General Motors Corporation (now known as Motors Liquidation Company) at its Ypsilanti, Michigan facility in 1983. Kienzle worked in a variety of positions throughout her tenure with GM, receiving numerous promotions that gradually elevated her from a level three position to level eight. GM apparently uses a flexible salary structure to denote job responsibilities and related pay ranges. Salaried employees are assigned a level of responsibility, ranging from level two through level nine. Kienzle has been classified by GM as a salaried exempt employee since 1985. Kienzle transferred in 2008 to the Pontiac, Michigan facility when GM decided to close its plant in Ypsilanti. Since July 2010, Kienzle has worked in the Customer Care department. Before July 2010, Kienzle worked as an Engineering Group Manager in the Powertrain division, supervising a small team of engineers who ran transmission dynamometer cells to support engineering development work. The team kept the cells running twenty-four hours a day, seven days a week, to provide data for development engineers on how well their transmission designs worked. The plaintiff’s claims are fact-intensive, which requires the Court to discuss the record in detail. A. Hour/pay disparity claim As noted above, Kienzle alleges that when she worked in the Powertrain division from July 2009 to January 2010, GM paid her less money for doing the same work as male counterparts. She asserts that as a “flex-time” employee, she had a salary based on a 32-hour work week and was not allowed to receive overtime pay for any extra hours that she worked. But despite the nominal cap on her work hours, Kienzle’s managers at GM expected her to work 40 or more hours per week, -2- which she often did, and they delayed for seven months her requests to be upgraded to full-time status to reflect her actual workload. In contrast, she says, the male engineers who worked for Kienzle, and several male supervisors, were all full-time employees and eligible for overtime pay on any extra hours that they worked. In 1997, Kienzle chose to begin working a flexible service schedule pursuant to GM’s Flexible Service policy, and she remained a flexible service employee until 2010. GM’s Flexible Service program is a part-time work option for salaried employees. Flexible Service employees are not eligible for overtime, may not work more than forty hours per week, and are “not . . . permitted to work on Saturday or Sunday, unless these days are part of their regular workweek schedule.” Def.’s Mot. for Summ. J., Ex. A, Kienzle dep., Ex. 2, GM Flexible Service and Special Flexible Service Administrative Guidelines at 4. From 1997 to 2009, Kienzle shared the responsibilities of her position with Colleen Diemer, another flexible service employee, each working 24 hours per week. GM’s Flexible Service policy provides that “[t]here may be times when employees in Flexible Service . . . employment categories exceed their regular workweek schedule in order to accommodate either leadership or the employee.” Ibid. GM’s Flexible Service policy specifically provides that “[l]eadership is under no obligation to place flexible service employees into regular full-time positions.” Id. at 3. When Kienzle worked at GM’s Ypsilanti facility, she was working as an engineering group manager (EGM) in the transmission validation group of GM’s Powertrain organization. The validation group is generally responsible for providing engineering support for the testing of transmission products in dynamometer cells within a laboratory setting and testing conducted on vehicle proving grounds. In an effort to consolidate its engineering activities within Powertrain, GM -3- relocated the five product areas that make up the organization — including the transmission engineering group in which plaintiff worked — to its Pontiac facility. General Motors Corporation underwent a company-wide restructuring in 2008 and 2009 as a result of management decisions that eventually forced the company into bankruptcy. General Motors Corporation took that opportunity to eliminate thousands of salaried positions from its U.S. workforce, affecting nearly every organization within GM, including Powertrain. As a result of the restructuring, the validation manager position shared by plaintiff and Diemer in Powertrain transmission engineering division was reduced from an eighth-level position to a seventh-level position effective May 1, 2009. Kienzle previously reported to the Executive Director of Transmission, Jeff Baran, but because of the consolidation within that group, she began reporting to Dave Stark, who assumed the managerial responsibilities of the transmission group’s validation and road-to-lab-to-math activities. As a result, Kienzle and Diemer supervised more people and took on the responsibilities formerly held by Mark Farone and Bob Conn. Other eighth-level managerial positions under Baran’s supervision within the transmission group were similarly adjusted downward in May 2009. The only other position that also included responsibility for managing validation activities was held by Mark Farone. Farone was a validation supervisor in Milford prior to the reorganization, but his position was eliminated and his supervisory duties passed to Kienzle and Diemer. The Pontiac and Milford validation groups were combined into one group, with Kienzle and Diemer sharing responsibility for managing it. Prior to the reorganization, Farone was an eighth level full-time employee. He was reduced to level seven. Bob Conn’s position as manager of dynamometer hardware was also reduced from eight to seven. -4- The only eighth level manager that remained after the reorganization was Michael Partridge. Partridge was brought into the Powertrain organization, reporting to Dave Stark just as Kienzle did. Partridge and Kienzle both managed teams of engineers. When Partridge left the validation group, Dan Wehrein came in to replace him. Wehrein was a full-time seventh level employee. Angela Willis testified that Partridge’s job was equivalent to Kienzle’s: “The Engineering Group Manager RLM (Road to Lab to Math) position would have been an equivalent position to Pat’s Validation Manager (then General Supervisor) position for the entire time that those positions existed. Pat’s effort, skill, and responsibility as Validation Supervisor were the same as the EGM RLM.” Pl.’s Resp. to Mot. for Summ. J., Ex. 6, Willis aff. ¶¶ 18-19. Before Kienzle’s position was reduced to level seven and burdened with additional responsibilities, Kienzle was given the option to return to full time, but she declined. Instead, she and Diemer chose to increase their flexible service schedules from 24 hours to 32 hours per week. Effective May 16, 2009, Kienzle’s annual base salary was increased by more than 30 percent to $100,608 as a result of the increase in hours. Approximately two months later in July 2009, Kienzle talked to Stark about returning to full time status, but he had not checked with the human resources department to see if that was an actual option. Following the restructuring, Kienzle and Diemer chose to end their job sharing arrangement and divided the transmission validation responsibilities between the two of them, with Diemer taking on a greater portion of the new responsibilities recently shifted to the position. As a result, Kienzle had fewer engineers reporting directly to her than before. Kienzle says she managed a group of seven engineers. The engineers who reported to her in 2009 were male and worked in full-time exempt positions. Kienzle described her supervisory -5- position as different from the job of her direct reports in that she had more responsibility to the organization by representing her team in meetings and handling the planning and business functions for the group, whereas the engineers were assigned to a specific product team and provided technical engineering oversight for validation tests. The men who reported to Kienzle following the May 2009 restructuring all held engineering degrees, but Kienzle did not. GM apparently does not require that a person hold an engineering degree in order to be classified as an engineer. At one point Kienzle herself worked as an assistant staff engineer. After the reorganization, Kienzle’s supervisor job was a seventh level position, the same as those of the engineers that she managed. Bruce VanVliet and Paul Trybula, two members of Kienzle’s team, testified that Kienzle covered the job duties of her engineers when they were out, and that she had all of the skills and knowledge needed to do so. VanVliet stated: “Pat operated at a level higher than the engineers which she supervised in her technical knowledge and skills. She would have been able to step in and do the job of the Validation Engineers in their absence or when back-filling for them. When a Validation Engineer was absent, Pat easily assumed the responsibilities and duties. In fact she excelled in them.” Pl.’s Resp. to Mot. for Summ. J., Ex. 8, VanVliet aff. ¶ 13. Trybula agreed: “When Pat covered for me she easily filled in with the same skill, effort, and responsibility that I had. This happened every time I went on vacation. Pat was able to cover for me with the direction and information I left for her. When Pat was called by the lab technicians with questions regarding my cells and pallets, she had the same tasks as I and the other engineers and was able to complete them without difficulty.” Pl.’s Resp. to Mot. for Summ. J. Ex. 7, Trybula aff. ¶¶ 9-10. -6- In June 2009, General Motors Corporation filed for Chapter 11 bankruptcy protection. As part of the bankruptcy reorganization, certain assets were sold to General Motors Company, the entity now known and reorganized as General Motors LLC. Under that arrangement, Kienzle remained employed by General Motors Corporation until July 10, 2009, at which time she became an employee of defendant General Motors LLC. In August 2009, the transmission validation group began an effort to provide twenty-four/seven engineering support for some of the laboratory work. That initiative required the validation group to develop procedures to troubleshoot problems with the transmissions when dynamometer cells stopped running during off-shifts. One of the procedures used to support the laboratory’s twenty-four/seven operation was a call tree, which directed the laboratory to contact certain validation engineers when issues arose on evenings or weekends. Kienzle was placed on one of the early versions of the call tree, although GM asserts that she lacked the technical skills to make a product decision and would only be contacted as a courtesy if an engineer failed to respond or in the rare circumstance that an issue needed to be escalated to a supervisor. However, Kienzle asserts that she responded to calls from the lab “with the same skill, attention and ability as her engineers did,” Pl.’s Resp. to Mot. for Summ. J. at 2 (citing Resp., Ex. 6, Willis aff. ¶ 13) and that she was required to answer calls and return messages on evenings and weekends. As the validation group continued to develop processes for providing twenty-four/seven engineering support, a technical specialist eventually was placed on second shift to address any significant disruption in the testing and product development activities with the laboratory. In late August 2009, Kienzle and the engineers whom she supervised were asked to work a weekend to assist with the launch of the 24/7 initiative. Kienzle did not receive overtime pay for -7- the weekend. Unlike Kienzle, the engineers she supervised were full-time employees and were eligible and approved for overtime for the special project. GM asserts that although the engineers were occasionally approved for overtime related to their roles for the twenty-four/seven plan, such approved overtime was minimal. Apart from the overtime associated with the pilot project in August 2009, only 12 hours of total overtime was approved in Kienzle’s group from September 2009 until she became full time in January 2010. Kienzle admits there might have been instances in which the validation engineers worked unpaid overtime in supporting the twenty-four/seven efforts, and Stark testified to as much. Because Kienzle was not eligible for overtime as a flexible service employee, her manager allowed her to take off one day in exchange for her time worked on Saturday. Stark acknowledged that he knew Kienzle was working more than her 32 scheduled flex service hours per week, but he never told her not to work those extra hours nor did anything to re- allocate the work to change the number of hours that she was working. In August 2009, Kienzle sent an email to the Human Resources department about changes in the laboratory that were going to require more hours to be worked, and she asked if it was possible for a flexible service employee to get paid for overtime. Kienzle was advised that pursuant to GM policy, flexible service employees are not eligible for overtime. Although many GM salaried employees in exempt positions frequently work more than their regularly scheduled hours each week and are not paid for what is known as “casual” overtime, full-time exempt employees can be compensated for overtime in limited situations subject to management approval. Mike Coutts became Kienzle’s manager in October 2009, and around that time she asked Coutts if she could convert to full-time status. Coutts understood that Baran was aware already that Kienzle wanted to work full time. On October 7, 2009, Kienzle sent Coutts an email asking to be -8- made a full-time employee as soon as possible. Coutts forwarded the email to Baran. Baran testified that he became aware in October 2009 that Kienzle wanted to be made full time, but because of “headcount” issues, that was not possible. Fonda Dietz, a human resourses representative for Transmission Engineering, testified that the defendant’s headcount is determined each month on an actual basis versus the target for the end of the year (which would have been December 31, 2009), and each department worked toward that number during the year. Dietz said that throughout the year, the numbers do not usually match, and they are always fluid for a variety of reasons. Dietz explained that no issue arose if a department was over the target during the year, as long as it had a plan to reach the target by the end of the year. After consulting with HR and other management, Coutts and HR advised Kienzle that a full time position was not a viable option at that time because of staffing and headcount limitations resulting from budgetary constraints. Kienzle also informed Coutts that she had been working numerous hours beyond her 32-hour workweek, and in January 2010, he instructed her to go home after working 32 hours, although she believed Coutts said that in frustration. Coutts testified that he did not respond to Kienzle’s emails requesting conversion to full-time employment, but took plaintiff into a conference room after the emails she sent on October 7 and November 5 and told her to go home and that he would finish the work she could not do. He did not tell her who would take over her work when she left, that she would be taken off the call tree when she left, or how her work would get finished when she left. However, Kienzle admits that Coutts did not threaten to discipline her if she chose to go home after working 32 hours. -9- In December 2009, Andrea Hidalgo was hired into the validation group and placed under Kienzle’s supervision before Kienzle received her full-time designation, which occurred in January 2010. In addition to a salary increase reflecting Kienzle’s change to full-time status, GM awarded her a $7,300 bonus in February 2010. B. Sex harassment and retaliation complaints Kienzle alleges that Steve Nash and Bill Lychuck, two employees she interfaced with in the lab on a daily basis, discriminated against her because she is a woman. She bases her claim on the following evidence. In August 2009, Kienzle presented Stark with a list of issues relating to work tasks she believed the laboratory was not addressing in a timely fashion, as well as instances in which Bill Lychuck, a manager in the laboratory, was supposedly disrespectful of her and her group. The laboratory at the Powertrain division supports product development and engineering within the different groups that make up that division, including the transmission and engine groups. Kienzle expressed her belief that laboratory management treated the transmission validation team as a “nuisance” and favored the engine group over the transmission group. Kienzle and Stark also discussed an instance in which Kienzle was speaking with Lychuck about the laboratory’s priorities, and Lychuck stated that “these conversations kill me.” Pl.’s Resp. to Mot. for Summ. J., Ex. 5, Stark dep. at 66-67. In another conversation, Kienzle testified that Lychuck degraded her for being a female supervisor of the transmission organization. Stark arranged a meeting with Kienzle and Baran to discuss her concerns. Kienzle repeated the items she had relayed to Stark and also reported that she had been told that Steve Nash, another laboratory manager, stated to Stark that “I got rid of my problem, now you get rid of yours,” which -10- she believed to be a threat toward her job. Pl.’s Resp. to Mot. for Summ. J., Ex. 1, Kienzle dep. at 142, 146-48, 159. Stark explained that the comment was not about getting rid of Kienzle, but rather it was made by Nash during a conversation with Stark in which he was expressing frustration that she was giving work assignments directly to his staff in the laboratory without first going through him. Kienzle described Nash as argumentative toward her initiatives, and said that she heard he told another supervisor “We’re going to show her.” Id. at 143-44. Kienzle also reported that Nash instructed her to tape her list of priorities to the wall, but believes he did not instruct the supervisors in the engine group to do the same. Kienzle said that Nash told her that the transmission team was his biggest problem in keeping the cells running, and told another supervisor that “Those two won’t be going to the prom any time soon,” in reference to Kienzle and Lychuck. Id. at 155. Kienzle believed that laboratory managers were critical of her and her group, and stated that Lychuck said “Shame on you,” and referred to her as “narrow-minded” when discussing how she delegated work to her team. Id. at 157, 261. Kienzle also asserted that Lychuck had set up a meeting with her, and then later told her that he did not have time to meet with her. Following her meeting with Baran and Stark, Kienzle also reported her concerns to Fonda Dietz in the human resources department. Dietz and Baran discussed Kienzle’s complaints and concluded that they stemmed from business-related issues that could best be resolved by working to improve communications between the two groups. Baran and Stark then met with the director of the laboratory organization, Roger Dugay, and Lychuck to address Kienzle’s concerns. During this meeting, Baran and Stark agreed to work on a plan with Lychuck to improve communication and work output between Kienzle’s group and the lab. -11- When Coutts became Kienzle’s manager, she expressed to him that the laboratory folks were not listening to her and that other groups were getting more support than the transmission team received. Other employees on the transmission team also complained to Coutts about prioritization of work in the laboratory, with specific complaints that the engine group was benefitting from more resources than the transmission team. Coutts talked to Nash, Lychuck, and other managers in the laboratory about some of the issues raised by transmission employees, including Kienzle, and Coutts believed that Kienzle and others within the transmission team were making demands of a lesser priority than demands made by other product groups, particularly the engine group. Kienzle concedes that she never asserted that her difficulties with laboratory personnel were related to her gender. It appears that management and human resources personnel believed that Kienzle’s issues involved business-related difficulties in coordinating work between two groups that were significantly impacted by the restructuring of the Powertrain organization. Additionally, the engine group was newer to the Pontiac site and was facing more obstacles in getting its product cells running; thus, resources were being pulled from the transmission group and allocated to the engine group, causing discontent among the transmission staff. In January 2010, Kienzle informed Baran and Coutts that she wished to find a new position with GM because she did not feel she was getting the support she needed in her current position. Employees are required to notify their supervisor before they can apply for an internal position within GM. During that conversation, Kienzle told Baran about her excessive work hours and how there had been no resolution to the harassment she told him about in August 2009. Kienzle set up a meeting with Baran’s superior, Jim Lanzon in April 2010, to discuss her difference in pay. Kienzle met with Lanzon and told him about hours she had worked over her flex -12- service schedule, and Lanzon asked her to go back and put together a list of the hours she had worked. Lanzon suggested that Kienzle meet with Andrea Ebbitt, Director of the human resources department for Global Manufacturing Engineering, about her harassment complaint. During the ensuing meeting with Ebbitt, Kienzle detailed both the many hours she worked over her flex service pay and the harassment she had endured. Ebbitt never followed up with Kienzle after that meeting or confirmed that anyone in the human resources department had done so. Kienzle believes Baran should have done more to help her find a new job. However, Baran notified Kienzle of at least two potential internal opportunities, and she chose not to apply for either position. Baran also placed a call to another GM manager to explore potential opportunities for Kienzle and to personally recommend her, something he says he has never done for any other employee. Kienzle applied for and accepted a lateral position in the Transmission Service & Remanufacturing Engineering group at Pontiac in July 2010. She remained a seventh level employee and her pay was not affected by the transfer. After Kienzle transferred, her former validation supervisor position was posted internally and candidates were required to apply and interview. Jason Solomon, one of the engineers who formerly reported to Kienzle, was selected for the position. Although Kienzle had already been reclassified to full-time at the time she transferred, her flexible service reduced salary was actually higher than Mr. Solomon’s full-time salary even after he was promoted to her former position. C. Procedural history Kienzle filed a complaint with the EEOC on August 3, 2010, and thereafter filed her complaint against GM in this Court on May 2, 2011, alleging a violation of the Equal Pay Act. The -13- EEOC issued a right-to-sue letter on June 23, 2011, and the plaintiff filed an amended complaint on August 11, 2011 alleging a violation of the Equal Pay Act, (count I); sex discrimination under Title VII of the Civil Rights Act of 1964 (count II); retaliation under Title VII (also labeled as count II); sex discrimination under Michigan’s Elliott-Larsen Civil Rights Act (count III); and retaliation under Michigan’s Elliott-Larsen Civil Rights Act (count IV). Discovery closed on March 16, 2012. The defendant filed its motion for summary judgment attacking all counts of the amended complaint. II. Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). As the Sixth Circuit has explained: Both claimants and parties defending against a claim may move for summary judgment “with or without supporting affidavits.” Fed.R.Civ.P. 56(a), (b). Such a motion presumes the absence of a genuine issue of material fact for trial. The court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). Alexander v. CareSource, 576 F.3d 551, 557-58 (6th Cir. 2009). “The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record that demonstrate the absence of a genuine dispute over material facts.” 576 F.3d at 558. (citing Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002 . “Once that occurs, the party opposing the motion then may not ‘rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact’ but must make an affirmative showing with proper evidence in -14- order to defeat the motion.” Ibid. (quoting Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989 . “[T]he party opposing the summary judgment motion must do more than simply show that there is some ‘metaphysical doubt as to the material facts.’ ” Highland Capital, Inc. v. Franklin Nat’l Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 586 (1986 (internal quotation marks omitted). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” 477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp. v. Catrett, , 322- 23 (1986). “Thus, the mere existence of a scintilla of evidence in support of the [opposing party]’s position will be insufficient; there must be evidence on which the jury could reasonably find for the [opposing party].” 350 F.3d at 546 (quoting 477 U.S. at 252) (internal quotation marks omitted). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics & Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting 477 U.S. at 248). In a defensive motion for summary judgment, the party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th -15- Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). A. Equal Pay Act claim GM argues that Kienzle cannot make out a prima facie case under the Equal Pay Act, 29 U.S.C. § 206(d)(1), because the plain language of the statute applies only to differences in the hourly rate of pay, not the number of hours worked. For that proposition, GM relies on Lauper v. Central Parking System, 708 F.2d 725 (6th Cir. 1982) (Table), an unpublished decision. Lauper, however, is off point because it — like the other noncontrolling cases GM cites — concerns only the denial of the opportunity to take overtime work, not the failure to pay regular or overtime wages for hours actually worked in excess of an employee’s regular schedule, or in excess of the statutory 40-hour- per-week limit. Nonetheless, GM believes that because Kienzle does not challenge the hourly rate of her pay, she cannot satisfy the first element of a claim under the Equal Pay Act. The Court disagrees. The Equal Pay Act prohibits employers from paying an employee at a rate less than that paid to an employee of the opposite sex for performing equal work. 29 U.S.C. § 206(d)(1). The statute reads: No employer having employees subject to any provisions of this section shall discriminate, within any establishment in which such employees are employed, between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex . . . . -16- Ibid. In order to establish a prima facie case of wage discrimination under the EPA, the plaintiff must show that an employer pays different wages to employees of opposite sexes “for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.” Corning Glass Works v. Brennan, 417 U.S. 188, 195 (1974) (quoting 29 U.S.C. § 206(d)(1 . The regulations that relate to the EPA make clear that the statutory term “rate” in the statute refers to any relevant base against which a wage is paid, whether by the hour, day, month, annually, or by piece work or some other measure: The term wage “rate,” as used in the EPA, refers to the standard or measure by which an employee’s wage is determined and is considered to encompass all rates of wages whether calculated on a time, commission, piece, job incentive, profit sharing, bonus, or other basis. The term includes the rate at which overtime compensation or other special remuneration is paid as well as the rate at which straight time compensation for ordinary work is paid. It further includes the rate at which a draw, advance, or guarantee is paid against a commission settlement. 29 C.F.R. 1620.12(a). The statutory term “wages” means all forms of payment or compensation, including holiday, vacation, or overtime pay, as well as any other benefits or payments not included under other statutes as part of regular wages: Under the EPA, the term “wages” generally includes all payments made to [or on behalf of] an employee as remuneration for employment. The term includes all forms of compensation irrespective of the time of payment, whether paid periodically or deferred until a later date, and whether called wages, salary, profit sharing, expense account, monthly minimum, bonus, uniform cleaning allowance, hotel accommodations, use of company car, gasoline allowance, or some other name. Fringe benefits are deemed to be remuneration for employment. . . . Thus, vacation and holiday pay, and premium payments for work on Saturdays, Sundays, holidays, regular days of rest or other days or hours in excess or outside of the employee’s regular days or hours of work are deemed remuneration for employment and therefore wage payments that must be considered in applying the EPA, even though not a part of the employee’s “regular rate.” -17- 29 C.F.R. 1620.10. The plaintiff can establish a violation of the Act if she establishes that the defendant paid her less compensation — however measured — than male counterparts for the same work. Contrary to GM’s argument, the “plain language” of the EPA nowhere suggests that its reach ends at a strict comparison of hourly rates of pay. The regulations issued under the statute make clear that the term “wage” used in the statute includes all forms of pay and compensation, given in whatever form or fashion, and that the term “rate” means any relevant scale on which wages are paid. In fact the “plain language” of 29 U.S.C. § 206(d)(1) does not include the words “hour,” “hourly” or any similar chronological term. GM also argues that even if Kienzle could make out a claim of unequal rates of pay, her Equal Pay Act claims still must fail because she cannot show that she and the validation engineers who reported to her did equal work. GM reasons that because Kienzle did not have an engineering degree or the skill and knowledge to do engineering work, she cannot show that she did the same work as the engineers whom she supervised. However, “[j]obs need not be identical in order to be considered ‘equal work’ under the EPA.” Beck-Wilson v. Principi, 441 F.3d 353, 359 (6th Cir. 2006). “Whether a job is substantially equal for purposes of the EPA is determined on a case-by-case basis and ‘resolved by an overall comparison of the work, not its individual segments.’” Id. at 359-60. When comparing jobs for the purpose of an EPA claim, the focus is on actual job requirements and duties, rather than job classifications or titles. Id. at 362. “Because the comparison at the prima facie stage is of the jobs and not the employees, only the skills and qualifications actually needed to perform the jobs are considered.” Id. at 363. “Factors like -18- education and experience are considered as a defense to an employer’s liability rather than as part of a plaintiff’s prima facie case.” Ibid. The Court believes that a jury reasonably could conclude that GM paid Kienzle less than her male peers. As GM points out, Kienzle offers nothing to show in dollar terms the wages paid to the male validation engineers who worked for her, or to anyone else other than herself and her successor in the supervisor job. And in the case of her successor, the undisputed facts show that he started at a lower nominal salary as a full-time employee compared with the salary Kienzle had in the same job while paid on a part-time basis. However, GM does not dispute that Kienzle’s salary was discounted based on her part-time status; indeed GM points out that when Kienzle was upgraded from 24 hours per week to 32 hours per week she received a proportional 33% raise. If GM paid Kienzle less because she was classified as part-time than it would have had she been full-time, that suffices to show a pay disparity, even if her net salary in dollar terms was higher than some other employees paid on a full-time basis. Buntin v. Breathitt County Board of Education, 134 F.3d 796 (6th Cir. 1998), illustrates the point. In that case, the court found that the plaintiff had established a prima facie case under the EPA where she showed that a school district imposed a lower annual pro rata salary cap on her compared with the cap applied to her male predecessor. District administrators had their salaries scaled or capped based on the number of “extended service days” per year that varied according to how each position was rated. The plaintiff was hired with a 220-day cap, but her predecessor had been subject to a 240-day cap, and received a 10% bonus as well. The court did not discuss the dollar figures that the salary formula produced, but treated the lower pro rata cap as evidence in itself of a pay gap. That holding is consistent with the broad language of the regulations that define -19- “wage” and “rate,” which dictate that an employer must pay equal wages with regard to any relevant “rate” or basis that applies. Kienzle has presented evidence showing the “level” and the part-time or full-time classification of her male peers. Before the “releveling” in the Powertrain division, Mark Farone was a full-time eighth level supervisor in Milford (doing the same job there that Kienzle and Diemer job-shared as eighth level supervisors in Pontiac). Michael Partridge was a full-time eighth level manager in the validation group after the reorganization, in contrast with Kienzle’s part-time seventh level position. Like Kienzle, Partidge also managed a small team of engineers. Partridge’s successor, Wehrein, was a full-time seventh level manager. Finally, the engineers who worked for Kienzle were all full-time, seventh level engineers, while Kienzle was only a part-time seventh level supervisor. Assuming that “level” at least partly dictates the range of salary paid to employees at GM, Kienzle has shown that as a seventh level manager subjected to a part-time salary discount, she was paid less than male peers in seventh level jobs who were compensated on a full-time basis. GM objects that Kienzle cannot compare her salary to full-time peers because she was not similarly situated with them based on her flexible service status. But that is no answer; it merely restates the charge: GM paid Kienzle less because it subjected her to a part-time salary proration while demanding that she work full-time hours. The case law is thin on the issue whether a nominally “part-time” employee can compare her compensation to “full-time” peers in order to show a disparity under the EPA. GM cites only a handful of noncontrolling, unpublished, and unhelpful cases. Kienzle cites none. However, following the principle in Buntin, the Court believes that a jury may decide whether GM in fact paid Kienzle less than her male peers by imposing the “salary discount” that went along with the flexible service classification, while still requiring Kienzle to -20- work full-time hours. At least one district court has done just that. “[W]here . . . the plaintiff is required to work three quarters of the hours worked by the putative comparator and in fact on occasion works more, and where the plaintiff’s actual tasks, duties, and responsibilities are essentially similar to those of the putative comparator, then the issue becomes one of fact for the jury to resolve.” Lovell v. BBNT Solutions, LLC, 295 F. Supp. 2d 611, 619 (E.D. Va. 2003). GM’s argument that Kienzle proves she was not similarly situated by showing that she had more responsibility than the engineers who reported to her contradicts the Sixth Circuit’s express holding in Beck-Wilson. The defendant cannot distinguish two jobs for the purposes of the EPA by showing that a lower paid job requires higher skill and responsibility. “While ‘differences in skill, effort, or responsibility . . . might be sufficient to justify a finding that two jobs are not equal . . . if the greater skill, effort, or responsibility has been required of the higher paid sex, [such differences] do not justify such a finding where the greater skill, effort, or responsibility is required of the lower paid sex.’ ” Beck-Wilson, 441 F.3d at 360 (quoting 29 C.F.R. § 1620.14(a . As the Sixth Circuit explained, it defies reason and logic to suggest that an employer may defend a case of wage discrimination under the EPA by proving that a woman works more but is paid less than her male peers. A jury reasonably could conclude that GM paid Kienzle less because of her sex, if the part- time classification does not in itself justify the pay gap, and if the jury rejects GM’s argument that the need to control headcount justified the gap. Proof of discriminatory intent is not required to establish a prima facie case under the Equal Pay Act. Beck-Wilson, 441 F.3d at 360. If the plaintiff establishes a prima facie case, then the defendant must prove that the wage differential is justified under one of the four affirmative defenses set forth under section 206(d)(1) of the Equal Pay Act: -21- (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; or (4) any other factor other than sex. Buntin, 134 F.3d at 799 (citing Corning Glass Works, 417 U.S. at 196). Because those are affirmative defenses, the defendant must do more than simply suggest a nondiscriminatory reason for the differential, and the defendant, not the plaintiff, must carry the burden of persuasion. Beck-Wilson, 441 F.3d at 360. GM bears the burden of proving one of the four affirmative defenses under the law, and it offers only one — the need to control headcount in the Powertrain division due to the dire economic circumstances of the company during and after the 2009 bankruptcy. GM does not even suggest that seniority, merit, or any form of quota accounts for the pay gap. The Equal Pay Act’s exception that a factor other than sex can be an affirmative defense “does not include literally any other factor, but a factor that, at a minimum, was adopted for a legitimate business reason.” EEOC v. J.C. Penney Co., 843 F.2d 249, 253 (6th Cir. 1988) (quotation omitted). “[T]he burden of proving that a factor other than sex is the basis for a wage differential is a heavy one.” Brennan v. Owensboro-Daviess County Hospital, 523 F.2d 1013, 1031 (6th Cir. 1975). “[U]nless the factor of sex provides no part of the basis for the wage differential, the requirements [for the defense] are not met.” Ibid. (quotation omitted). The EPA plaintiff need not provide evidence of “pretext” to rebut the employer’s stated justification, and the employer moving for summary judgment must show that there is no genuine issue as to whether the difference in pay is due to a factor other than sex. Beck-Wilson, 441 F.3d at 365. Kienzle’s flexible time classification does not justify the disparity. According to the plaintiff, that classification is the means of imposing the disparity, not an excuse for the imposition. A fact question remains on the issue whether GM’s delay in converting Kienzle to full-time status -22- following her several requests was justified by economic pressures. GM points out that it offered to convert Kienzle to full-time in May 2009, during the “releveling” process that converted her position from eighth to seventh level. A jury reasonably could conclude that if GM was willing to convert Kienzle to full-time status in May, it has not shown why it could not do so just as well in July or August, when Kienzle changed her mind and asked to be upgraded when she realized that she was called on to do full-time work anyway. If Powertrain was under “intense scrutiny” to meet headcount figures in July and August, when the company had cleared the process of bankruptcy, then it is unclear why that scrutiny was any less earlier in May. GM also disputes that an employee was hired into Kienzle’s group prior to her conversion, but Coutts testified that Andrea Hidalgo was hired into the validation group and placed under Kienzle’s management while Kienzle was still in a part-time status. The jury must decide which side to believe on that point. Finally, Kienzle points out that GM elected to pay overtime to her engineers during the 24/7 launch weekend, even though company policy did not require overtime approval for full-time exempt salaried employees who worked extra hours. When viewing the evidence in the light most favorable to the plaintiff, the Court must conclude that the plaintiff’s case withstands summary judgment on the Equal Pay Act count. B. Title VII & Elliott-Larsen disparate treatment claims Title VII makes it unlawful for an employer “to . . . discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” 42 U.S.C. § 2000e-2(a)(1). The Michigan Elliott-Larsen Civil Rights Act forbids like conduct. -23- Claims of gender discrimination under Title VII and the Michigan counterpart can be analyzed together because Michigan courts frequently “turn to federal precedent for guidance in reaching [their] decision” to determine whether a claim has been established in discrimination cases. Radtke v. Everett, 442 Mich. 368, 382, 501 N.W.2d 155, 162 (1993) (quoting Sumner v. Goodyear Co., 427 Mich. 505, 525, 398 N.W.2d 368 (1986 . For analytical purposes, Michigan’s Elliott-Larsen Act resembles federal law, and the same evidentiary burdens prevail as in Title VII cases. See In re Rodriguez, 487 F.3d 1001, 1008 n.2 (6th Cir. 2007); Humenny v. Genex Corp., 390 F.3d 901, 906 (6th Cir. 2004); Lytle v. Malady, 458 Mich. 153, 172-73, 579 N.W.2d 906, 914 (1998). “The ultimate question in every employment discrimination case involving a claim of disparate treatment is whether the plaintiff was the victim of intentional discrimination.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 153 (2000). To withstand summary judgment on her disparate treatment claim, the plaintiffs must either “present direct evidence of discrimination or introduce circumstantial evidence that would allow an inference of discriminatory treatment.” Johnson v. Kroger Co., 319 F.3d 858, 864-65 (6th Cir. 2003). The plaintiff does not contend that she has direct evidence that her pay disparity was due to her gender. In the absence of direct evidence, the plaintiff might prevail if she can establish an inferential case of discrimination under “the burden-shifting framework first set forth in McDonnell Douglas v. Green, 411 U.S. 792, 802-05 (1973).” Blair v. Henry Filters, Inc., 505 F.3d 517, 524 (6th Cir. 2007) (citing Rowan v. Lockheed Martin Energy Sys., Inc., 360 F.3d 544, 547 (6th Cir. 2004); Town v. Mich. Bell Tel. Co., 455 Mich. 688, 695, 568 N.W.2d 64, 67-68 (1997 . That construct requires the plaintiff to present a prima facie case, whereupon the defendant must offer a legitimate reason for its actions. If the defendant does so, the plaintiff cannot proceed unless she -24- offers some evidence that the defendant's proffered justification is a pretext for unlawful discrimination. See Kline v. Tennessee Valley Auth., 128 F.3d 337, 342 (6th Cir.1997). A plaintiff may establish a prima facie case of discrimination “by showing that: ‘(1) she is a member of a protected group, (2) she was subject to an adverse employment decision, (3) she was qualified for the position, and (4) she was . . . treated differently than similarly situated non-protected employees.’” Russell v. Univ. of Toledo, 537 F.3d 596, 604 (6th Cir. 2008) (internal citations omitted). Deprivation of increased compensation qualifies as an adverse employment action. White v. Baxter Healthcare Corp., 533 F.3d 381, 403 (6th Cir. 2008). GM argues that Kienzle cannot establish a prima facie case of discrimination because she has failed to show that any male employee, similar to her in all relevant aspects, received more favorable treatment. GM asserts that Kienzle has not shown that any male employee was upgraded to full-time hours as a result of working consistently more hours than their flex-time schedule, or that any male employee received extra pay or overtime for hours worked beyond their flex-time schedule. Although Kienzle alleges she received less favorable treatment than engineers working for her, GM contends that she cannot show they were equally situated, because they were full-time employees and she was not. The record shows that no flex-time employees were eligible for overtime, and that full-time employees were. Kienzle also admits that she performed different work as a supervisor than the male engineers whom she supervised. However, for the reasons discussed earlier, the Court finds that the plaintiff has shown that she was treated differently than other seventh level managers, including Partidge and Wehrein, who were permitted full-time status while the plaintiff was not. Viewing the evidence most favorably to her, a jury could conclude that the plaintiff, a woman, was required to work the same hours as her -25- similarly-situated male counterparts from July 2009 to January 2010, but she made less money because of her part-time status, which surely is adverse employment action. See White, 533 F.3d at 402. Those male counterparts held positions that were similar to the plaintiff’s in all relevant respects. Ercegovich v. Goodyear Tire & Rubber Co., 154 F.3d 344, 352 (6th Cir. 1998). The plaintiff has made out a prima facie case. GM next argues that Kienzle cannot refute the reasons GM has advanced to justify denying overtime pay to Kienzle and refusing to advance her from flex-time to full-time. GM says it set Kienzle’s work schedule and hours based on budget limits and headcount needs, and the denial of overtime was based on established company policy. GM asserts that Kienzle refused a change from flex-time to full-time when it was offered just prior to the May 2009 restructuring, and when Kienzle made a later request to return to full-time status, it was granted in less than four months. Kienzle admits that she was not told to work any hours beyond her flex-time schedule and was not disciplined for working fewer hours than full-time employees. It appears that the period of contention for the plaintiff’s gender-pay discrimination claim is the six months or so between her request to migrate to full-time status and the company’s acceding to that request. During that time, Kienzle says she worked as much as her full-time male counterparts, and the evidence tends to support her. She may establish that GM’s stated reasons for the delay in status change is a “made up” reason intended to conceal intentional discrimination by showing that the employer’s stated reason either (1) has no basis in fact, (2) was not the actual reason for the action, or (3) is insufficient to explain the employer’s action. Tingle v. Arbors at Hilliard, 692 F.3d 523, 530 (6th Cir. 2012). The evidence undermining GM’s stated reasons — -26- budget limits and headcount needs — is discussed above. The Court finds that a jury could believe that those reasons had no basis in fact and therefore were pretextual. The Court cannot conclude, therefore, that the defendant is entitled to judgment as a matter of law on the plaintiff’s disparate treatment claims under Title VII and the Elliott-Larsen Civil Rights Act. C. Retaliation claims The plaintiff has not pleaded a claim for a hostile work environment in her amended complaint. However, she has alleged that the defendant retaliated against her when she complained about hostile treatment from her co-workers, and disparate treatment in the form of unequal pay. Title VII prohibits an employer from retaliating against an employee who has “opposed any practice made an unlawful employment practice by this subchapter, or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing” under the Act. 42 U.S.C. § 2000e-3(a). In order to make out a prima facie case of retaliation, the plaintiff must show that (1) she engaged in protected activity; (2) the defendant knew she exercised her rights; (3) the defendant took adverse employment action against the plaintiff; and (4) there was a causal connection between the plaintiff’s protected activity and the adverse employment action. Wasek v. Arrow Energy Services, Inc., 682 F.3d 463, 468-69 (6th Cir. 2012) (citing Morris v. Oldham Cnty. Fiscal Court, 201 F.3d 784, 792 (6th Cir. 2000 . At the outset, it perhaps bears noting that the plaintiff has not shown that she was subjected to a hostile work environment at GM. She cites six incidents in which she alleges that Lychuk and Nash harassed and degraded her: (1) while Kienzle was trying to provide feedback on questions Lychuk had asked, he stood over her in an intimidating way and said, “these conversations just kill -27- me”; (2) Nash told Kienzle that if she wanted to have work done for her group, she needed to write her requests down and tape them to the wall, but male managers were not told to do the same, even for simple requests like paper towel holders; (3) Lychuk yelled at and degraded her for being a female supervisor, and called into doubt her skills and abilities; (4) Nash told Kienzle to reformat and resubmit the same list of priorities three times, just to see it different ways each time; (5) work and information was withheld from Kienzle because of the way others saw Nash and Lychuk treat her; and (6) when Kienzle asked an employee of Nash’s group a question, the employee went to Stark and berated her for giving his group “all kinds of work.” Pl.’s Resp. to Mot. for Summ. J. at 14. Lychuk’s and Nash’s rude behavior would not have created a hostile work environment that violated Title VII or Michigan law unless they treated the plaintiff poorly because of her sex. Kalich v. AT&T Mobility, LLC, 679 F.3d 464, 470 (6th Cir. 2012) (citing Vickers v. Fairfield Med. Ctr., 453 F.3d 757, 765 (6th Cir. 2006 . It is plain that the plaintiff did not like how she was treated by Nash and Lychuk, and although the incidents describe rude conduct and perhaps demonstrated the poor interpersonal skills of the engineers GM hired, none of them, except possibly the third, are related to sex. Moreover, the six incidents cited by the plaintiff did not show that Nash’s and Lychuk’s bad behavior was pervasive. Title VII prohibits workplace conditions “permeated with discriminatory intimidation, ridicule, and insult that is sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment.” Harris v. Forklift Sys., Inc., 510 U.S. 17, 21 (1993) (internal quotations omitted). The plaintiff must establish that harassment was “ongoing,” “commonplace,” and “continuing.” See Hawkins v. Anheuser–Busch, Inc., 517 F.3d 321, -28- 333–34 (6th Cir. 2008). But “conduct that is not severe or pervasive enough to create an objectively hostile or abusive work environment — an environment that a reasonable person would find hostile or abusive — is beyond Title VII’s purview.” Harris, 510 U.S. at 21. An objective observer would not so characterize the plaintiff’s working conditions. But that is beside the point. If the plaintiff complained about a hostile work environment due to her sex, and GM retaliated against her for doing so, the company violated Title VII. Under Title VII, there are two types of protected activity: (1) participation in a proceeding with the Equal Employment Opportunity Commission and (2) opposition to an apparent Title VII violation. Booker v. Brown & Williamson Tobacco Co., 879 F.2d 1304, 1313 (6th Cir. 1989). Complaining about allegedly unlawful conduct to company management is classic opposition activity. Wasek, 682 F.3d at 469. The plaintiff contends that she falls under the second category of protected activity. The Court disagrees. The plaintiff admits that she never told any of her supervisors or GM’s human resources representatives that she was being mistreated because of her sex. And because there was no objective indication of that, GM cannot be charged with that knowledge. Absent that knowledge, the plaintiff cannot show that any adverse action visited upon her by GM was based on her opposition to a Title VII violation. There is another problem with Kienzle’s retaliation claim: she has not offered evidence establishing adverse action by GM. To determine what qualifies as an adverse action in employment-related retaliation claims, the Sixth Circuit applies the Title VII retaliation standard announced in Burlington Northern & Santa Fe Railway Company v. White, 548 U.S. 53 (2006). See Jordan v. City of Cleveland, 464 F.3d 584, 594 (6th Cir. 2006). The test employs an objective component. “[A] plaintiff must show that a reasonable employee would have found the challenged -29- action materially adverse, which . . . means it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” Burlington, 548 U.S. at 68 (internal quotation marks omitted). Kienzle has not offered enough evidence for a jury reasonably to conclude that GM subjected her to any adverse employment action in response to her complaints. The closest she comes is alleging that Baran asked Kienzle if she wanted to find another job within GM. Although Kienzle asserts that “she knew it would only get worse,” that amounts to nothing more than her own speculation; it does not suffice to show that GM took action against her. The one unflattering performance review that Coutts admits writing does not amount to an adverse action, because Kienzle does not demonstrate that any consequences flowed from the review. Her transfer to the Customer Care department was by her own account voluntary, and she admits that she retained her existing salary and moved into a position at the same level she left. Although Kienzle asserts that her career is over, because she lacks future opportunities for promotion, she has not established that GM forced her to take the transfer to her new job, or that the conditions in her engineering job were so awful that a reasonable person would have felt compelled to transfer. The defendant is entitled to judgment as a matter of law on the plaintiff’s retaliation claims. III. The Court finds that the plaintiff has offered sufficient evidence on her Equal Pay Act and disparate treatment claims to warrant jury determination. Not so with her retaliation claims. Accordingly, it is ORDERED that the defendant’s motion for summary judgment [dkt. #19] is GRANTED IN PART AND DENIED IN PART. -30- It is further ORDERED that the plaintiff’s claims of retaliation under Title VII of the Civil Rights Act of 1964 and Michigan’s Elliott-Larsen Civil Rights Act in the amended complaint are DISMISSED WITH PREJUDICE. The motion is DENIED in all other respects. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: October 29, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 29, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -31-

=== United States of America v. Anthony Johnson ===

AO245B [Rev. 12/03] Judgment in a Criminal Case Sheet 1 Judgment-Page 1 of 5 United States District Court Eastern District of Michigan United States of America V. Anthony Johnson Case Number: 10CR20163-1 USM Number: 44721-039 AMENDED JUDGMENT IN A CRIMINAL CASE (For Offenses Committed On or After November 1, 1987) Date of Original Judgment: May 11, 2011 (or date of Last Amended Judgment) Richard M. Lustig Defendant's Attorney Reason for Amendment: Correction of Sentence Clerical Mistake (Fed.R.Crim.P.36). Correction of date of imposition of sentence. Pleaded guilty to count(s) 3, 6. Count(s) 1, 4 are dismissed on the motion of the United States after a plea of not guilty. Title & Section 18 U.S.C. §922(a)(1)(A) 18 U.S.C. § 2 Nature of Offense Dealing in firearms without a license. Aiding and Abetting Offense Ended March 5, 2009 March 5, 2009 Count 3, 6 3, 6 The defendant is sentenced as provided in pages 2 through 5 of this judgment. This sentence is imposed pursuant of the Sentencing Reform Act of 1984 IT IS FURTHER ORDERED that the defendant must notify the United States attorney for this district within 30 days of any change of name, residence, or mailing address until all fines, restitution, costs, and special assessments imposed by this judgment are fully paid. If ordered to pay restitution, the defendant must notify the court and United States attorney of material changes in economic circumstances. March 11, 2011 Date of Imposition of Judgment s/David M Lawson _________________________________________ United States District Judge October 18, 2012 Date Signed AO245B [Rev. 12/03] Judgment in a Criminal Case Sheet 2 - Imprisonment DEFENDANT: Anthony Johnson CASE NUMBER: 10CR20163-1 Judgment-Page 2 of 5 IMPRISONMENT The defendant is hereby committed to the custody of the United States Bureau of Prisons to be imprisoned for a total term of: 60 months on Count 3, and on Count 6 to a term of 27 months, which is to be served consecutive to Count 3. The court makes the following recommendations to the Bureau of Prisons: that the defendant be designated to an institution with a Comprehensive Drug Treatment Program. The defendant is remanded to the custody of the United States Marshal. I have executed this judgment as follows: RETURN Defendant delivered on _______________________________ to _______________________________________ a __________________________________________, with a certified copy of this judgment. _________________________________________ United States Marshal _________________________________________ Deputy United States Marshal AO245B [Rev. 12/03] Judgment in a Criminal Case Sheet 3- Supervised Release DEFENDANT: Anthony Johnson CASE NUMBER: 10CR20163-1 Judgment-Page 3 of 5 SUPERVISED RELEASE Upon release from imprisonment, the defendant shall be on supervised release for a term of: 2 years. The defendant must report to the probation office in the district to which the defendant is released within 72 hours of release from the custody of the Bureau of Prisons. The defendant shall not commit another federal, state or local crime. If the defendant is convicted of a felony offense, DNA collection is required by Public Law 108-405. The defendant shall not unlawfully possess a controlled substance. The defendant shall refrain from any unlawful use of a controlled substance. The defendant shall submit to one drug test within 15 days of release from imprisonment and at least two periodic drug tests thereafter, as determined by the court. Revocation of supervised release is mandatory for possession of a controlled substance. If this judgment imposes a fine or restitution, it is a condition of supervised release that the defendant pay in accordance with the Schedule of Payments sheet of this judgment. The defendant must comply with the standard conditions that have been adopted by this court as well as with any additional conditions on the attached page. STANDARD CONDITIONS OF SUPERVISION 1) the defendant shall not leave the judicial district without the permission of the court or probation officer; 2) the defendant shall report ot the probation officer and shall submit a truthful and complete written report within the first five days of each month; 3) the defendant shall answer truthfully all inquiries by the probation officer and follow the instructions of the probation officer; 4) the defendant shall support his or her dependents and meet other family responsibilities; 5) the defendant shall work regularly at a lawful occupation, unless excused by the probation officer for schooling, training, or other acceptable reasons; 6) the defendant shall notify the probation officer at least ten days prior to any change in residence or employment; 7) the defendant shall refrain from excessive use of alcohol and shall not purchase, possess, use, distribute, or administer any controlled substance or any paraphernalia related to any controlled substances, except as prescribed by a physician; 8) the defendant shall not frequent places where controlled substances are illegally sold, used, distributed, or administered; 9) the defendant shall not associate with any persons engaged in criminal activity and shall not associate with any person convicted of a felony, unless granted permission to do so by the probation officer; 10) the defendant shall permit a probation officer to visit him or her at any time at home or elsewhere and shall permit confiscation of any contraband observed in plain view of the probation officer; 11) the defendant shall notify the probation officer within seventy-two hours of being arrested or questioned by a law enforcement officer; 12) the defendant shall not enter into any agreement to act as an informer or a special agent of a law enforcement agency without the permission of the court; 13) as directed by the probation officer, the defendant shall notify third parties of risks that may be occasioned by the defendant's criminal record or personal history or characteristics and shall permit the probation officer to make such notifications and to confirm the defendant's compliance with such notification requirement; and 14) the defendant shall not possess a firearm, ammunition, destructive device, or any other dangerous weapon. Revocation of supervised release is mandatory for possession of a firearm. AO245B [Rev. 12/03] Judgment in a Criminal Case Sheet 3C - Supervised Release DEFENDANT: Anthony Johnson CASE NUMBER: 10CR20163-1 Judgment-Page 4 of 5 SPECIAL CONDITIONS OF SUPERVISION The defendant shall participate in a program approved by the Probation Department for substance abuse which program may include testing to determine if the defendant has reverted to the use of drugs or alcohol. AO245B [Rev. 12/03] Judgment in a Criminal Case Sheet 5 - Criminal Monetary Penalties DEFENDANT: Anthony Johnson CASE NUMBER: 10CR20163-1 Judgment-Page 5 of 5 CRIMINAL MONETARY PENALTIES TOTALS: Assessment $ 200.00 Fine $ 0.00 Restitution $ 0.00 If the defendant makes a partial payment, each payee shall receive an approximately proportioned payment, unless specified otherwise in the priority order or percentage payment column below. However, pursuant to 18 U.S.C. § 3664(i), all nonfederal victims must be paid before the United States is paid. Name of Payee TOTALS: Total Loss* Restitution Ordered Priority or Percentage $ 0.00 $ 0.00 * Findings for the total amount of losses are required under Chapters 109A, 110, 110A, and 113A of Title 18 for offenses committed on or after September 13, 1994, but before April 23, 1996.

=== MT. CLEMENS AUTO CENTER INC. v. HYUNDAI MOTOR AMERICA ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION MT. CLEMENS AUTO CENTER INC., v. Plaintiff, HYUNDAI MOTOR AMERICA, Defendant. _____________________________________________/ Case Number 12-11282 Honorable David M. Lawson OPINION AND ORDER GRANTING DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS Plaintiff Mt. Clemens Auto Center, Inc. operated a dealership in Jackson, Michigan selling automobiles manufactured by the Korean car company, Hyundai Motors. Mt. Clemens obtained its inventory of new vehicles under a franchise agreement (dealer agreement) with defendant Hyundai Motor America (Hyundai). When Mt. Clemens lost its floor plan credit source, Hyundai terminated the franchise agreement for violation of a provision requiring the dealer to maintain a source for financing the purchase of inventory. Both the agreement and Michigan law provide protection to auto dealers against unreasonable actions of manufacturers, including termination of dealership agreements. Mt. Clemens filed a complaint, which it amended once, alleging that the defendant breached the dealer agreement and violated Michigan law when it would not allow the plaintiff to transfer the dealer agreement to another entity that was able to satisfy the floor plan credit source requirements. The defendant has filed a motion for judgment on the pleadings, which is presently before the Court. The Court heard oral argument on October 3, 2012, and now finds that, when taken as true, the allegations in the amended complaint do not demonstrate that the defendant breached the dealer agreement or violated Michigan law governing automobile manufacturers and their relationships with their dealers. Therefore, the Court will grant the defendant’s motion and dismiss the complaint. I. On December 25, 2009, Mt. Clemens and Hyundai entered a dealer sales and service agreement, which established Mt. Clemens as an authorized dealer of Hyundai cars in Jackson, Michigan. Under the dealer agreement, Mt. Clemens agreed “to obtain, maintain and increase as [Hyundai] may require, adequate flooring and lines of credit from any reputable financial institution or other credit source.” Answer, Ex. A, Dealer Agreement ¶ 13(B). On April 14, 2011, Hyundai learned that JP Morgan Chase had placed Mt. Clemens’s wholesale financing arrangements “on hold.” On August 4, 2011, Hyundai sent Mt. Clemens a notice of termination stating that “the Agreement shall be terminated within 90 days of your receipt of this letter, which we calculate to be no later than November 7, 2011.” Compl., Ex. 1, Notice of Termination Letter at 2. Mt. Clemens sued Hyundai in Jackson County, Michigan circuit court for an injunction to prevent Hyundai from terminating the agreement. Hyundai removed the case to this Court, but the case was remanded on jurisdictional grounds. On November 4, 2011, the Jackson County court ordered a temporary injunction prohibiting the termination of the agreement. About three months later, on January 24, 2012, Mt. Clemens sent Hyundai a letter with a proposed purchase agreement under which Wolverine Hyundai, LLC agreed to buy “the Hyundai Franchise” from Mt. Clemens. The letter stated that “Wolverine Hyundai will be initially capitalized at Seven Hundred and Fifty Thousand ($750,000) Dollars (unencumbered) and have a One Million Five Hundred Thousand ($1,500,000) Dollars wholesale line of credit (floor plan) solely for new Hyundai vehicles.” Compl., Ex. 5, Letter dated Jan. 24, 2012 at 1. Wolverine Hyundai was a yet-to-be formed limited liability -2- company with members consisting of Mt. Clemens’s sole owner, Tibor Gyarmati, and a new partner, Keyur Nagrik. On February 1, 2012, Mt. Clemens and Hyundai agreed to dismiss their lawsuit, and the Jackson County court entered a stipulated order dismissing the action with prejudice that day. Also that same day, Hyundai sent Mt. Clemens a letter declining to approve the sale to Wolverine Hyundai, reasoning that the dealer agreement had been terminated already. Hyundai explained in its letter: As you are aware, the termination of Hyundai of Jackson became effective February 1, 2012. As a result, Mt. Clemens Auto Center, Inc. no longer holds any asset for which Hyundai Motor America’s consent to transfer is required. Therefore, the enclosed document, proposing a change of ownership structure at your former dealership, is not relevant to Hyundai Motor America and is being returned to your attention. Compl., Ex. 7, Letter dated February 1, 2012. In response to further inquiry by Mt. Clemens’s attorney, Hyundai’s attorney sent a letter on February 7, 2012 reiterating that Hyundai would not rescind the termination, and that the submission of the proposed asset transfer had no effect on the termination process or its effective date. Following that exchange of letters, Mt. Clemens filed another lawsuit in Jackson County seeking damages for breach of contract and an order requiring Hyundai to rescind its termination of the franchise. Hyundai removed the second action to this Court on March 21, 2012, this time successfully. Hyundai answered the complaint on March 22, 2012 and filed its motion for judgment on the pleadings, which is pending presently. -3- II. A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) applies the same standards that govern motions to dismiss under Rule 12(b)(6). See Fed. R. Civ. P. 12(c); Vickers v. Fairfield Med. Ctr., 453 F.3d 757, 761 (6th Cir. 2006); Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 511-12 (6th Cir. 2001). Rule 12(b)(6) authorizes dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When deciding a motion under that Rule, “[t]he court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief.” Cline v. Rogers, 87 F.3d 176, 179 (6th Cir. 1996). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Columbia Nat’l Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Ibid. “To survive a motion to dismiss, [a plaintiff] must plead ‘enough factual matter’ that, when taken as true, ‘state[s] a claim to relief that is plausible on its face.’ Bell Atl. Corp. v. Twombly, , 556, 570 (2007). Plausibility requires showing more than the ‘sheer possibility’ of relief but less than a ‘probab[le]’ entitlement to relief. Ashcroft v. Iqbal, (2009).” Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010). In count I of its amended complaint, Mt. Clemens alleges that Hyundai breached the provision of the dealer agreement that prohibits Hyundai from unreasonably withholding consent to the transfer of the dealership. Mt. Clemens also cites sections of Michigan law, Mich. Comp. Laws § 445.1574(1)(k) & (m), that prohibit manufacturers from unreasonably withholding consent to the transfer of a dealership to a qualified buyer. Count III of the amended complaint parrots the -4- allegations in count I and asserts a cause of action based on the Michigan law. (Counts II and IV of the amended complaint ask for various forms of relief — an injunction and declaratory judgment, respectively — and do not assert other independent causes of action.). The basis of the plaintiff’s claims is that its earlier floor plan financing lapse amounted to a failure of sales performance, which, under Michigan law, justified terminating the dealer agreement only if after 180 days the failure had not been cured. Mt. Clemens believes that the prospect of transferring the dealership to a new entity that had the financial wherewithal to finance the floor plan cured the performance failure, and it did so within 180 days to boot. Since the new entity to be formed is a qualified buyer, Mt. Clemens reasons, Hyundai is required to approve the transfer. Hyundai sees thing quite differently. It argues that its stated reason for terminating the franchise — the failure of Mt. Clemens’s floor plan financing — was an outright breach of the dealer agreement, not a mere failure to perform. As such, the dealer was entitled to 60 days notice under the dealer agreement and 90 days under Michigan law before termination, but it was not entitled to an opportunity to cure. And although the state court injunction may have held off the termination (which was to have occurred otherwise on November 7, 2011), the termination became effective when the lawsuit was dismissed on February 1, 2012. Hyundai reasons that at that point, Mt. Clemens had no dealership interest to transfer, so Hyundai had nothing to approve or disapprove. And even if an interest remained in viable form on that date, Hyundai had 60 days under state law to consider a proposed transfer before it had to respond (citing Mich. Comp. Laws § 445.1574(1)(l , and the proposal was submitted only six days prior to the termination. Therefore, Hyundai insists, it did not violate any contractual or statutory duty to deal in good faith. Hyundai -5- also points out that in any event, Mt. Clemens did nothing to remedy the breach on its own part, and that proposing a third party to take over those obligations does not count as a cure. Under Michigan, law a manufacturer may terminate an auto dealer’s franchise agreement only for cause, and the dealer is entitled to advance notice of termination and, in some cases, an opportunity to cure, depending on the cause for termination. A manufacturer may terminate a franchise agreement if the dealer fails to meet sales performance requirements, but only if (1) the dealer was afforded a reasonable opportunity to exert good faith efforts to carry out the dealer agreement, and (2) the failure continued for more than 180 days after the manufacturer gave written notice of the problem. Mich. Comp. Laws § 445.1567(3). Otherwise, a manufacturer may terminate a dealer franchise if (1) the dealer failed to comply with a provision of the dealer agreement, (2) the provision is reasonable and of material significance to the relationship between the manufacturer and dealer, and (3) the manufacturer first acquired actual or constructive knowledge of the failure not more than two years before the date of its notice to the dealer. Mich. Comp. Laws § 445.1567(2). The dealer agreement in this case contains its own termination provisions. Paragraph 16(B)(2) lists 21 specific breaches for which Hyundai may terminate the agreement and states: If [Hyundai] learns of any of the following events and determines, in its sole discretion, that the matter may require termination of this Agreement, [Hyundai] will so advise [the dealer] in writing. If [the dealer] does not correct the condition or explain the matter to [Hyundai’s] satisfaction within thirty (30) days of such notice, then [Hyundai] will have the right to terminate this Agreement upon sixty (60) days notice. Answer, Ex. A, Dealer Agreement at 17, ¶ 16(B)(2). The termination clause in Paragraph 16(B)(2) allows for no right to cure after a notice of termination, and provides no further procedure for termination, but expressly states that if Hyundai is not satisfied with the dealer’s action within 30 -6- days of the first notice of a breach, then Hyundai “will have the right to terminate this agreement” on 60 days notice. Termination for failure to meet sales performance requirements is governed by a separate provision in Paragraph 16(B)(3), entitled “Termination for Failure of Performance,” which states that if Hyundai determines, after an evaluation, that the dealer is not meeting sales performance requirements, then Hyundai will (1) “review promptly with [the dealer] the nature and extent of [the failure]”; (2) notify the dealer in writing and allow 180 days to improve performance; and (3) if the dealer fails or refuses to improve performance, or has not made “substantial progress” on improving by the end of 180 days, then Hyundai may terminate the agreement on 60 days notice. Answer, Ex. A, Dealer Agreement at 19, ¶ 16(B)(3). Under both the dealer agreement and the statute, a critical question here is whether the failure of the plaintiff to maintain its floor plan financing amounts to a failure to perform in sales or service on one hand, or a breach of a non-sales-performance provision of the dealer agreement on the other. The rules of contract construction and statutory interpretation point ineluctably to the latter. In construing the meaning of a statute, the court must seek the intent of the legislature and refer first to the statute’s plain language. Chrysler Corp. v. C.I.R., 436 F.3d 644, 654 (6th Cir. 2006); Herman v. Fabri–Centers of Amer., Inc., 308 F.3d 580, 585 (6th Cir. 2002). Similarly, when construing a contract or one of its provisions, the intentions of the parties govern. First Nat. Bank of Ypsilanti v. Redford Chevrolet Co., 270 Mich. 116, 121, 258 N.W. 221, 223 (1935). To ascertain the parties’ intentions, the Court looks first to the language in the written agreement. Haywood v. Fowler, 190 Mich. App. 253, 258, 475 N.W.2d 458, 461 (1991) (“Where the language of a contract is clear and unambiguous, the intent of the parties will be ascertained according to its plain sense -7- and meaning.”); see also Wilkie v. Auto-Owners Ins. Co., 469 Mich. 41, 61, 664 N.W.2d 776, 787 (2003) (“Well-settled principles of contract interpretation require one to first look to a contract’s plain language. If the plain language is clear, there can be only one reasonable interpretation of its meaning and, therefore, only one meaning the parties could reasonabl[y] expect to apply. If the language is ambiguous, longstanding principles of contract law require that the ambiguous provision be construed against the drafter.” (citation omitted . “Contractual language is construed according to its plain and ordinary meaning, and technical or constrained constructions are to be avoided.” Dillon v. DeNooyer Chevrolet Geo, 217 Mich. App. 163, 166, 550 N.W.2d 846, 848 (1996). The same holds true for statutory construction. First American Nat’l Bank-Eastern v. FDIC, 782 F.2d 633, 636 (6th Cir. 1986) (“The rule that where the statute contains no ambiguity, it must be taken literally and given effect according to its language is a sound one not to be put aside to avoid hardships that may sometimes result from giving effect to the legislative purpose.” (quoting Helvering v. New York Trust Co., 292 U.S. 455, 464 (1934) (internal citations and quotation marks omitted . The plain language of the dealer agreement supports the conclusion that failure to maintain financing was an independent breach of an express, material term of the agreement, not a failure to meet sales performance requirements. There are several reasons why this is so. First, the termination provisions of the agreement set forth separate and contrasting treatment for breaches of the capital standard provision and breaches of the sales performance provisions. Among the 21 specific grounds listed in Paragraph 16(B)(2) for which Hyundai may terminate the dealer agreement is “[f]ailure of [the dealer] to establish or maintain required net working capital or adequate wholesale credit.” Answer, Ex. A, Dealer Agreement at 18, ¶16(B)(2)(k). As mentioned -8- above, termination for failure to meet sales performance requirements is governed by a separate provision in the agreement, in which there is no reference to inventory financing. Second, the provisions in the agreement relating to sales performance are wholly separate and distinct from those that set forth capital requirements. Paragraph 10 governs the obligations of the dealer relating to “Sale of Hyundai Products.” Paragraph 10(A)(1) requires that the dealer purchase Hyundai vehicles in adequate quantities to fulfill its obligations. Paragraph 10(B)(1) requires that the dealer use its “best efforts” to market and sell Hyundai vehicles in its primary market. Paragraphs 10(C)(1) and 10(D)(1) require that the dealer organize and maintain an adequate and trained sales force, and require its salespeople to participate in sales training provided by Hyundai. And Paragraph 10(E) sets forth the criteria for “Evaluation of Dealer’s Sales Performance.” Mt. Clemens presents nothing in its pleadings to suggest that Hyundai alleged any violation of those specific sales performance clauses. Third, the provisions in Paragraph 10(E) regarding evaluation of sales performance set forth a detailed process and criteria for evaluating the dealer’s sales performance, which do not apply in any way to the capital standards requirements. Paragraph 10(E) requires that Hyundai (1) evaluate sales performance at least annually, (2) review evaluations with the dealer, to allow the dealer to take “prompt action” to improve performance, and (3) provide copies of evaluations on request. That paragraph also sets forth the factors that Hyundai may consider in evaluating sales performance, including (1) comparison of the dealer’s sales to sales in the local market, region, or nation, (2) the trend of the dealer’s performance over a reasonable period of time, and (3) “[s]ignificant local conditions” that could affect the dealer’s sales performance. -9- In contrast, Paragraph 13 sets forth the “Capital Standards” and requires that the dealer maintain adequate working capital and lines of credit. That section of the agreement does not set forth any factors for evaluating the dealer’s credit lines, does not require Hyundai to report its evaluation of the dealer’s credit at any time, and provides no period for remedial action by the dealer to correct a credit shortfall. Paragraph 13 merely states that the dealer must maintain capital and financing “as [Hyundai] may require.” The plaintiff argues that floor plan financing was essential to sales performance, and the failure to maintain financing to purchase adequate inventory can be viewed as a sales performance failure. That may be true, but a reading of the dealer agreement leads to the unavoidable conclusion that the parties treated the sales performance requirements separate from the financing requirements. If financing went away, poor sales performance might well follow; but it is a stretch to say that one amounts to the other. The contract language makes the two distinct. And there is no support for the argument that losing its floor plan financing constituted a “failure by the new motor vehicle dealer to comply with a provision of the dealer agreement relat[ing] to the performance of the new motor vehicle dealer in sales or service.” Mich. Comp. Laws § 445.1567(3). In some ways, all the requirements of the dealer agreement — maintaining adequate capitalization and physical facilities, complying with state and local law, keeping proper books and records, maintaining licenses — “relate[] to” sales performance. But “the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.” Discount Tobacco, 674 F.3d at 549 (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132-33 (2000 (internal quotation marks omitted). Accepting the plaintiff’s argument that any -10- dealer obligation that somehow could “relate to” sales triggers the 180-notice-and-cure provision in the statute would distort the meaning of the overall legislation. The Court is satisfied that the floor plan financing provision is a general contract obligation and not one that relates or amounts to a sales or performance requirement. Therefore, the governing contractual and statutory sections are those that apply to general breaches. As it turns out, the termination of the dealer agreement was not effective until February 1, 2012, when the Jackson County court entered its stipulated order to dismiss the prior action with prejudice. The original notice of termination stated that it was effective November 7, 2011, but the order of the Jackson County court prevented that termination from becoming effective until January 31, 2012 (180 days after the notice of termination). Mt. Clemens has not pleaded any facts to show that Hyundai changed, withdrew, or extended the notice of termination in any way, nor has it claimed that any order of the Jackson County court delayed the date of termination beyond January 31, 2012. Mt. Clemens attempts to parlay the 180-day period between initial notice and termination as an admission by Hyundai that the cause for termination was poor sales performance. However, no such admission can be derived or inferred from the duration of the state court’s preliminary injunction, and there is no statement by Hyundai on the present record that would justify such an inference. And the extension of the notice period that resulted from the state court’s injunction did not create any new obligation on Hyundai’s part to entertain a dealership sale. If Hyundai had any obligation to consider the proposed transfer, that obligation did not require it to respond or take any action prior to the termination of the agreement on February 1, 2012. Both the dealer agreement and Michigan law require that Hyundai not “unreasonably withhold consent” to a proposed change of -11- ownership. Mich. Comp. Laws § 445.1574(1)(k); Compl., Ex. 6, Dealer Agreement ¶ 5. But the agreement is silent as to how long Hyundai has to consider a proposed transfer, and the Michigan statute allows a manufacturer 60 days to respond in writing to a proposal, after which a failure to respond is deemed to be consent. Mich. Comp. Laws § 445.1574(1)(l). Hyundai therefore had no obligation to respond or to take any action on the proposed transfer in the six days between Mt. Clemens’s proposed transfer and the termination of the dealership agreement. Once the agreement ended, all obligations of the parties ceased, and nothing required Hyundai to consider the proposed transfer after February 1, 2012. Because it had no obligation to consent to the proposed transfer prior to the termination of the agreement, Hyundai could not have unreasonably withheld its consent. However, even if Hyundai did have some obligation to consent, Mt. Clemens has pleaded no facts to show that Hyundai’s withholding was (or would have been) unreasonable. Nothing in the pleadings establishes whether the proposed terms of the transfer and the alleged credit condition of Wolverine Hyundai, LLC were either objectively reasonable in the context of the agreement and the circumstances, or would have met the specific requirements that Hyundai had set. The agreement provides that Mt. Clemens had to maintain financing and credit “as [Hyundai] may require,” but Mt. Clemens has pleaded no facts to show what Hyundai did require, or whether the proposed arrangement would have met its requirements. Moreover, Hyundai might reasonably have refused to consent to the transfer for any number of other business reasons, and Mt. Clemens has shown nothing to suggest that those reasons, whatever they might have been, were unreasonable. Finally, even if the reason for termination can be ascribed to a sales performance failure, triggering the 180-day cure provision, Mt. Clemens has not pleaded facts that demonstrate that is -12- cured the breach. The plain language of Paragraph 13(B) states that the dealer “agrees to maintain and increase as [Hyundai] may require, adequate flooring and lines of credit . . . .” Answer, Ex. A, Dealer Agreement at ¶ 13(B). Nothing in that language allows Mt. Clemens to satisfy its obligations by offering up a credit-worthy third party as a partner. And nothing in the language of the agreement allows Mt. Clemens to satisfy its credit obligations by proposing a transfer of ownership. The agreement requires that Mt. Clemens maintain adequate credit, and it did not. Moreover, even if the proposed transfer of ownership could have addressed Mt. Clemens’s breach, the time for redress had long passed when Mt. Clemens tendered the proposed sale agreement. The termination provision of Paragraph 16(B)(2) states that Hyundai will allow 30 days prior to the notice of termination for the dealer to correct a breach. Hyundai in fact allowed much more. According to the notice-of-termination letter, Hyundai sent its first notice to Mt. Clemens on May 12, 2011 and did not send the notice of termination until August 4, 2011, almost three months later. Once Hyundai issued the notice of termination, it had no further obligations under the agreement to consider any proposed cure of the breach by the dealer. III. The Court finds that even when accepting the facts pleaded in the amended complaint as true, the plaintiff has not stated a claim against the defendant upon which relief can be granted. The allegations in the amended complaint do not establish a breach of the dealer agreement or violation of Michigan law by defendant Hyundai Motor America. Accordingly, it is ORDERED that the defendant’s motion for judgment on the pleadings [dkt. #5] is GRANTED. -13- It is further ORDERED that the amended complaint is DISMISSED WITH PREJUDICE. Dated: October 9, 2012 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 9, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -14-

=== TIANA HOWARD-JOHNSON v. V&S DETROIT GALVANIZING, LLC ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION TIANA HOWARD-JOHNSON, v. Plaintiff, V&S DETROIT GALVANIZING, LLC, Defendant. _____________________________________________/ Case Number 10-13870 Honorable David M. Lawson OPINION AND ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT Darryl Johnson was fatally injured in an industrial accident while he was working for his employer, defendant V&S Detroit Galvanizing, LLC. His estate has sued the employer, alleging that its conduct has brought it within the so-called “intentional tort exception” to the exclusive remedy provision in Michigan’s Worker’s Disability Compensation Act. The defendant filed a motion for summary judgment, now pending before the Court, arguing that the facts in the case developed so far do not support the plaintiff’s claim, and therefore it is entitled to a judgment as a matter of law. After reviewing the record and the parties’ briefs, and hearing oral argument on September 12, 2012, the Court concludes that material fact issues preclude summary judgment. The motion, therefore, will be denied. I. V&S Detroit operates a job-shop hot dip galvanizing plant located in Redford, Michigan. It accepts contracts from various customers to galvanize all manner of metal items, ranging from small washers to large structural fixtures used in road construction. Hot dip galvanizing is a process in which a zinc coating is applied to a steel or iron part to protect it from rust and corrosion. At the Redford plant, metal items to be galvanized are dipped into a vat that contains the coating in liquid form. Multiple parts are dipped at the same time. The parts are hung by wires from a long, steel I-beam called a “rack.” The wires thread through holes drilled in the rack, and workers — such as Darryl Johnson — tie the parts to the wires. When the workers perform that task, the rack is set upon tall steel stands. The rack stands look like trestles; each end of the rack is set on a stand while the laborers work under it to attach the parts. Each rack holds between 5,000 and 15,000 pounds of steel parts when loaded. Sometimes, two racks are set on a single pair of stands so that twice as many parts can be hung. The accident in this case occurred on November 3, 2009. Darryl Johnson was working in the racking department loading metal parts onto one of two racks that were supported by a single pair of stands. Johnson and his coworkers were loading the second of the two racks while another worker — a crane operator — began to lift the first rack and move it away using the large overhead crane. After the first rack was lifted off of the rack stands, the weight of the second rack still resting on the other side of the stands caused the rack stands to lean, and then to tip. As the rack stands started to tip over, the employees began to run. Johnson saw that the rack was falling and tried to get out of the way, but could not escape. The rack with parts attached fell and pinned him to the floor, crushing him. Johnson died soon after from his injuries. That was not the first time an accident of that sort occurred at the Redford facility. In October or November 2008, Lazar Ostravan was injured while working in the racking department. A rack fell on him as it was being hoisted by a crane. One end of the rack remained on its stand, but the other end fell but was caught by the forks of a hi-lo, which stopped that end from hitting the ground. Ostravan was unconscious for ten minutes after the accident. He suffered a broken leg. -2- Other plant employees also testified to “near misses” — that is, a rack falling off a stand that did not injure a worker — on another 20 to 40 occasions. After Darryl Johnson was killed, his personal representative, Tiana Howard-Johnson, filed suit in the Wayne County Circuit Court on August 25, 2010. V&S Detroit removed the case to this Court. After a period of discovery, V&S Detroit filed its motion for summary judgment. II. It is well settled that summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record that demonstrate the absence of a genuine dispute over material facts.” Alexander v. CareSource, 576 F.3d 551, 558 (6th Cir. 2009) (citing Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002 . “Once that occurs, the party opposing the motion then may not ‘rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact’ . . . .” Ibid. (quoting Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989 . Instead, the party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson v. Liberty Lobby, Inc., , 252 (1986). If the non-moving party, after sufficient opportunity for discovery, is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp. v. Catrett, , 322–23 (1986). “Thus, the mere existence of a scintilla of evidence in support of the [opposing party]’s position will be insufficient; there must be evidence on which the jury could reasonably find for the [opposing -3- party].” Highland Capital, Inc. v. Franklin Nat’l Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Anderson, 477 U.S. at 251-52) (internal quotation marks omitted). Darryl Johnson’s estate received worker’s compensation benefits as a result of his work- related death. Under Michigan law, for a worker injured on the job, worker’s compensation benefits are the “exclusive remedy” against an employer. Mich. Comp. Laws § 418.131(1). But an exception to that rule has developed over the years. Michigan’s workers’ compensation law, first enacted in 1912, altered the conventional tort reparations scheme recognized by the common law by providing a schedule of compensation for workers injured or killed on the job. To recover, the worker did not have to prove fault, and the employer was held immune from tort liability and damages. Initially, the program was voluntary; workers and employers could opt out. See Mich. Pub. Act P.A. 10, part I, §§ 5, 8 (1st Ex. Sess. 1912); Dagenhardt v. Special Mach. & Engineering, Inc., 418 Mich. 520, 546-47 & n.26 & 27, 345 N.W.2d 164, 176 & n.26 & 27 (1984) (Levin, J., dissenting). The program was made mandatory in 1943, and the exclusive remedy provision was firmly in place. Ibid. The exclusive remedy provision states that compensation allowed under the act “shall be the employee’s exclusive remedy against the employer for a personal injury or occupational disease [arising out of and in the course of employment].” Mich. Compiled Laws § 418.131(1). In 1986, the Michigan Supreme Court carved out an exception to that immunity for intentional torts, when it allowed a worker to sue his employer for intentionally exposing him to “agent orange” without warning him of the toxic properties of the chemical. Beauchamp v. Dow Chemical Co., 427 Mich. 1, 398 N.W.2d 882 (1986). The Michigan legislature reacted quickly to -4- the Beauchamp decision by enacting the version of the statute in effect today. See Travis v. Dreis and Krump Mfg. Co., 453 Mich. 149, 164-65, 551 N.W.2d 132, 139 (1996). The statute now reads: The right to the recovery of benefits as provided in this act shall be the employee’s exclusive remedy against the employer for a personal injury or occupational disease. The only exception to this exclusive remedy is an intentional tort. An intentional tort shall exist only when an employee is injured as a result of a deliberate act of the employer and the employer specifically intended an injury. An employer shall be deemed to have intended to injure if the employer had actual knowledge that an injury was certain to occur and willfully disregarded that knowledge. The issue of whether an act was an intentional tort shall be a question of law for the court. Mich. Comp. Laws § 418.131(1). The Michigan Supreme Court has recognized that the intentional tort exception — so called — does not actually require an injured worker to prove a true intentional tort. Travis, 453 Mich. at 168, 551 N.W.2d at 141. Certainly, the exception encompasses employer conduct that comprises an actual intent to injure (“. . . deliberate act . . . the employer specifically intended an injury.”). But a plaintiff also may come within the exception if he can show a somewhat relaxed scienter: that the employer committed a deliberate act with actual knowledge that an injury was “certain to occur.” Gray v. Morley, 460 Mich. 738, 745, 596 N.W.2d 922, 926 (1999). And the Michigan courts equate action with a failure to act as well. Travis, 453 Mich. at 170, 551 N.W.2d at 142 (“[W]e construe the phrase ‘deliberate act’ to include a situation in which an employer consciously fails to act.”). It is this latter aspect of the statute upon which the plaintiff in this case relies. The cases that interpret the “deemer” clause (“An employer shall be deemed to have intended to injure if the employer had actual knowledge that an injury was certain to occur and willfully disregarded that knowledge.”) all require a plaintiff to prove the following proposition: that the employer actually knows that if it orders employees to perform an assigned task in a specific way, an injury will occur; and despite that certain knowledge, the employer orders employees to proceed -5- anyway. Proof of knowledge that an injury probably will result is not enough. Travis, 453 Mich. at 174, 551 N.W.2d at 143 (“[T]he laws of probability, which set forth the odds that something will occur, play no part in determining the certainty of injury.”). The plaintiff must demonstrate inevitability: that “no doubt exists with regard to whether it will occur.” Ibid. The employer must know both (1) that a dangerous condition exists; and (2) that injury is certain to occur because of that condition. Id. at 176, 551 N.W.2d at 144. The occurrence of an injury must be a matter of when, not if. An illustration of that point is found in comparing the two cases consolidated on appeal in Travis. In the first, Aimee Travis was injured when a wire press “double cycled” while she was removing an item from the press. She was a novice press operator and had not been informed that the press was double cycling. The court found that the employer had actual knowledge of the dangerous condition, because an employee had told his supervisor that morning that the machine was double cycling and should be shut down. But the plaintiff failed to show that the employer knew that an injury was certain to occur because the machine only double cycled intermittently, and the same supervisor had adjusted it that morning in an attempt to cure the double cycling problem. In the past, such adjustments had allowed the machine to function for a day or two without double cycling again. The court noted that the supervisor, after adjusting the machine, had operated it himself before assigning the plaintiff to work on it. The court also observed that the “plaintiff was not required to confront a continually operating dangerous condition.” Id. at 182, 551 N.W.2d at 146. The court concluded that Travis did not offer facts showing that her injury was certain to occur. -6- Compare the companion case in Travis. There, plaintiff Stanislaw Golec was at work loading scrap metal into a furnace using a tractor. He told his supervisor that the scrap contained aerosol cans, that the scrap was wet, and that when putting one load into the furnace earlier, a small explosion had occurred, which caused the plaintiff a minor injury. The supervisor knew that the scrap contained aerosol cans and water, and that those items could cause explosions when the scrap was loaded into the furnace. Despite that knowledge, the supervisor ordered the plaintiff to continue working and to load all of the scrap, which the plaintiff understood to include the aerosol cans. At some point, as the plaintiff was placing a load in the furnace, a large explosion occurred that injured him severely. The plaintiff testified that he had loaded the scrap in the way he was trained, but that the explosion occurred anyway. The court found that the employer knew an injury was certain to occur, despite the fact that not every load produced an explosion, because each load of scrap could have contained either an aerosol can or water, and thus had the potential to explode. Id. at 186-87, 551 N.W.2d at 148-49. The employer’s knowledge of the certainty of injury must be actual. “[C]onstructive, implied, or imputed knowledge is not enough. Nor is it sufficient to allege that the employer should have known, or had reason to believe, that injury was certain to occur.” Travis, 453 Mich. at 173, 551 N.W.2d at 143. “A plaintiff may establish a corporate employer’s actual knowledge by showing that a supervisory or managerial employee had actual knowledge that an injury would follow from what the employer deliberately did or did not do.” Id. at 173–74, 551 N.W.2d at 143. “[T]o impute an intent to injure to the employer, a plaintiff is required to show that a particular employee of the defendant possessed knowledge of facts from which it could be concluded that this employee had the requisite intent to injure.” Palazzola v. Karmazin Prods. Corp., 223 Mich. App. 141, 152, 565 -7- N.W.2d 868, 874 (1997). Although prior instances of injury are relevant to the questions of knowledge and certainty, alone they do not suffice to show that an injury was certain. Travis, 453 Mich. at 174, 551 N.W.2d at 143. (“[J]ust because something has happened before on occasion does not mean that it is certain to occur again. Likewise, just because something has never happened before is not proof that it is not certain to occur.”). In this case, the crux of the plaintiff’s liability theory is that V&S Detroit exposed its employees who hung parts from the racks to a continuously operative dangerous condition that it knew would inevitably result in an injury. The plaintiff contends that placing two racks on a pair of stands created such an instability that tip-overs were common and injuries were certain to follow. The Michigan Supreme Court held in Travis that the plaintiff could make a showing of actual knowledge and certainty where (1) the employer subjects an employee to a continuously operative dangerous condition (2) that the employer knows will cause an injury, and (3) the employer refrains from informing the employee about the dangerous condition so that he is unable to take steps to keep from being injured. 453 Mich. at 178, 551 N.W.2d at 145. However, “[a] continuously operative dangerous condition may form the basis of a claim under the intentional tort exception only if the employer knows the condition will cause an injury and refrains from informing the employee about it.” Giles v. Ameritech, 468 Mich. 897, 897, 660 N.W.2d 72, 72 (2003). The Michigan Court of Appeals explained that this standard does not require a showing of failure to inform if the employee already knows of the hazard; but in such a case the plaintiff would have to show that the employer (1) knew that employees were taking insufficient precautions to protect themselves against the inherent danger of the condition; and (2) did nothing to remedy the situation. Johnson v. Detroit Edison Co., 288 Mich. App. 688, 704, 795 N.W.2d 161, 172 (2010). -8- As an example of a continuously operative dangerous condition, the Travis court cited a case in which (1) workers at a film reprocessing plant were exposed to hydrogen cyanide gas fumes that arose from chemical vats; (2) the employer knew of the dangers of the gas due to plain warnings on the containers for the chemicals; and (3) the employer hired only workers who could not speak or read English, and did not inform them of the dangers of the gas, despite their repeated complaints about the fumes. The corporate officers involved were convicted of manslaughter for their conduct, which resulted in one death and several serious injuries. Travis, 453 Mich. at 177, 551 N.W.2d at 145. The evidence in this case would permit a reasonable jury to conclude that V&S Detroit knew the racks and stands were dangerous, most likely all the time. Workers complained about the racks and near misses and asked management to bolt the racks to the floor. Dennis Landers — who worked for V&S Detroit off and on between 1993 and 2010, including later tenure as a supervisor — and Corey Lawson — who worked as a plant supervisor and operations manager — both testified that as supervisors they knew the racks were unstable and had asked for the racks to be bolted down. Lawson said that when he started at V&S Detroit, the rack stands had only one rack holder each. At some point the stands were changed to hold two racks, in order to increase productivity. After the change to double rack holders, it was clear that the racks became dangerous, because they could topple over. Darryl Maxey, a sixteen-year veteran of the Redford plant, testified that before the rack stands were bolted down, the stands could tip and fall over if one rack was removed while another loaded rack remained on the stand. And there is testimony that shows that (1) Gary Snyder, the maintenance supervisor for V&S Detroit’s parent company, knew about the hazzard and had made plans to bolt the racks down in order to address those problems prior to Johnson’s death; and (2) -9- plant manager Thomas Bottorff himself only narrowly escaped injury when a rack tipped over while he was standing near it. Whether there is evidence that the defendant knew that an injury was certain to occur presents a closer question. The Sixth Circuit has discussed the requisite level of proof under Michigan Complied Laws § 418.131(1). In Upsher v. Grosse Pointe Public School System, 285 F.3d 448 (6th Cir. 2002), the court held that the plaintiffs, custodians who were exposed to asbestos in the workplace, failed to make the required showing under the continuously operative dangerous condition standard. The employer wanted carpet removed from an area in a school, but a contractor hired for the job refused to proceed because of concerns that a machine scraper might disturb asbestos tiles under the carpet. So the school ordered custodial staff to complete the removal by pulling up the carpet. When they pulled the carpet up, the plaintiffs found some tiles stuck to the back and decided to hammer, scrape, and pulverize the tiles to remove them. The employer did not provide any respirators, particulate vacuums, or air monitoring for the removal operation. Some of the plaintiffs had received two hours of asbestos awareness training, but none had completed the fourteen hours of training that federal regulations require prior to conducting any work which involves disturbing asbestos containing materials. The court found that the failure to provide proper training and safety equipment may have been grossly negligent, but it did not suffice to show that supervisors knew about the dangers and refrained from informing the workers about them, or that the employer had willfully disregarded actual knowledge of a condition certain to cause injury. Id. at 455-56. In House v. Johnson Controls, Inc., 248 F. App’x 645 (6th Cir. 2007), the court held that the plaintiff could not show actual knowledge of an injury certain to occur. The plaintiff was working -10- on a die-flipping operation with coworkers, where large 5,000 to 25,000 pound steel dies were lifted via an I-beam attached to a forklift, pushed by another vehicle in order to flip them over, then lowered to the ground. The die in this case did not flip over, and the plaintiff left a designated safe distance zone to see if it was hung up on something. For unknown reasons, the die broke loose from the I-beam, causing the beam to swing around and hit the plaintiff in the leg. The court held that the employer could not have known that an injury was certain to occur because it did nothing to inhibit the employee from taking precautions that would have saved him (i.e. remaining in the designated safe area), and the employer could not know whether an employee would choose to leave the safe area to investigate a problem with the process. The court was not impressed by a supervisor’s affidavit that stated that he was sure someone would get hurt at some point during the process because it was dangerous, the workers lacked special equipment designed for die flipping, and there were no standard procedures for workers to follow. A critical deficiency, in the court’s view, was the absence of any proof of the actual cause of the accident. Id. at 648-49. The Sixth Circuit in House surveyed a number of decisions applying Michigan Compiled Laws § 418.131(1) and Travis, finding that “House’s evidence of employer knowledge, it bears adding, is far less compelling than the evidence presented in several claims summarily rejected by the Michigan courts.” Id. at 649. In Alexander v. Demmer Corp., 468 Mich. 896, 660 N.W.2d 67 (2001), the plaintiff was injured while cleaning pinch rollers when there had been four prior injuries from the rollers. See Alexander v. Demmer Corp., No. 230417, 2002 WL 1921900, at *2 (Mich. Ct. App. Aug. 20, 2002) (per curiam). The Michigan Supreme Court summarily reversed the court of appeals and granted summary judgment for the employer. Similarly, in Joliff v. Detroit City Dairy, Inc., 468 Mich. 919, 664 N.W.2d 211 (2003), the court summarily reversed and granted summary -11- judgment where the employer had twice ordered the employee — over his protest — to drive a pallet jack that had no brakes. See Joliff v. Detroit City Dairy, Inc., No. 232530, 2002 WL 31012627, at *1-2 (Mich. Ct. App. Sept. 6, 2002). In Giles v. Ameritech, 468 Mich. 897, 660 N.W.2d 72 (2003), the court summarily reversed and granted summary judgment where the employee was instructed to use a torch to splice telephone wires in a hole with a natural gas line. In Menzel v. Light Metals Corp., 464 Mich. 853, 627 N.W.2d 601 (2001), the court summarily reversed and granted summary judgment where the employer knew that a press was double cycling and that a safety device had failed. A central theme of these cases is that when an employer gives a worker discretion in deciding how to accomplish a task, and the employee chooses a dangerous option, the employer cannot be “certain” that an injury will follow. As the Sixth Circuit explained, “[t]o be ‘known’ and ‘certain,’ an injury must spring directly from the employee’s duties and the employee cannot have had the chance to exercise individual volition. In cases where the employee makes a decision to act or not act in the presence of a known risk, the injury is not certain because the employer cannot know what the employee’s reaction will be in advance and the employee is able ‘to take steps to keep from being injured.’ ” House, 248 F. App’x at 648. Here, the defendant points to evidence that workers were instructed to clear the area when a rack was to be hoisted by a crane operator. After Ostravan’s accident, V&S Detroit sent crane operators to additional training and held safety meetings at which the need to clear areas before crane lifts was discussed. Despite the testimony that safety did not come first at V&S Detroit, and her assertion that V&S Detroit “implicitly authorized” workers to ignore safety policies in order to boost production, the plaintiff has offered no evidence that any supervisor actually told workers -12- directly to ignore the stated policies. And it appears that several employees did take care to clear areas or to make sure areas were cleared before a lift occurred, and that as a result they did not have an accident with the racks. But just because the lift operations were performed safely on some occasions does not defeat the proposition that an injury was inevitable. A central point in each of the cases where Michigan courts have found an intentional tort is that, when the employee did exactly as he or she was told, the dangerous condition he or she faced still caused an unavoidable injury. In Golec, for example, if the employee’s testimony was believed, even though he loaded the scrap exactly as directed, each load had the potential to cause a dangerous explosion, and nothing he could have done would have allowed him to avoid injury from the explosion. Likewise in Fries v. Mavrick Metal Stamping, Inc., 285 Mich. App. 706, 777 N.W.2d 205 (2009), the press operator had no idea that her loose clothing would cause the press to cycle, and when that occurred, there was no way for her to remove her hands in time to avoid an injury. And in Johnson v. Detroit Edison Co., 288 Mich. App. 688, 795 N.W.2d 161 (2010), if the employees did exactly as they were told, nothing they could have done would have avoided injuries from ash blowback due to the defective boilers, because the employees lacked the safety equipment that might have protected them. In this case, there is no evidence presented that the plaintiff attended any of the safety meetings or otherwise was informed of the plant’s policy to clear an area when a rack was to be lifted. But even if such evidence exists, there are facts from which a jury could conclude that the custom in the plant was for parts hangers to continue wiring parts to the second rack on a double stand when the loaded first rack was being lifted. Corey White, a five-year employee, testified that there were policies and procedures in the racking department regarding safety, but prior to Johnson’s -13- death, the policy that workers had to clear the area before the crane lifted a rack was never enforced. Before Johnson’s death, managers watched crane operators lift racks over the workers heads often without saying anything; workers had lifted loads off the rack stands and over Bottorff’s head many times, and Bottorff did nothing about it. If a policy did exist requiring workers to clear the area during lifts, it was not enforced. Landers testified that at the time of Ostravan’s accident, it was “kind of a practice to just keep working,” and “nobody like scattered when the other guy was lifting a rack.” Def.’s Mot. Summ. J., Ex. D, Landers dep. at 53. He said it was common practice in the racking department for workers to keep tying up parts on one rack while another rack was lifted and moved overhead. Landers also explained that moving a rack took several minutes, and it would have slowed down the work in the racking department if workers moved away from the racks every time one was lifted. The plant manager and operations manager “pretty much said” that the safety practice was for workers to move away, but the work also had to get done. Id. at 78. Landers testified that the plant manager and operations manager told everybody, “We need to keep production numbers up.” Id. at 79. Maxey also testified that supervisors and managers often told workers to “hang more weight” on the racks to increase production. Pl.’s Reps. to Mot. Summ. J., Ex. 7, Maxey dep. at 26–27. Workers in racking sometimes got into heated arguments with supervisors over the danger of overloading the racks, but management always responded by saying, “Just do what we tell you to do.” Id. at 27. The danger appears to have originated when V&S Detroit changed to the practice of loading two racks perched on a single pair of stands. The purpose of that practice was to increase productivity — a purpose that would be defeated by clearing the area of parts hangers when a loaded -14- rack was lifted. A jury could conclude that Johnson was injured while he was performing his work task exactly as his employer told him. A jury could find the inevitability of the injury from the evidence of the occurrences of other falling racks, which appears to have been common. Corey Lawson saw racks lean, tilt, and topple over when a loaded rack was lifted off of the stands, due to the uneven weight from the partly loaded rack that the stands were still supporting. Lawson testified that on some of the times that he saw racks or stands topple over, people got hurt. Lawson knew that racks could slide out of the holders on the rack stands, either because the racks shifted due to uneven weight, or because a rack stand got twisted out of alignment and no longer supported the rack on one side. Lawson testified that he saw “many, many . . . near misses,” where racks fell off the stands or stands toppled over. Def.’s Mot. Summ. J., Ex. F, Lawson dep. at 39. Lawson also testified that four to six people regularly worked under the racks at a time while another worker operated the crane. When one group would finish loading the rack, “99 percent of the time” the operator would pick up the loaded rack, and all the weight would shift to the side of the stand left holding another rack, which could make the stands topple over. Id. at 16. In one part of the plant the company removed a wall that stood behind the racks because the wall had been knocked out so many times by toppling racks. Landers testified that he saw rack stands tip over onto their sides two times during the time he worked at V&S Detroit. Nobody was injured in either of those two accidents because nobody was working around the racks at the time. Carl Neal recalled four or five occasions when the racks and rack stands fell over, although no one was hurt. Darryl Maxey recalled eight to ten times over the course of sixteen years that he worked at V&S Detroit when he heard of near misses in the -15- racking department, where a rack or stand fell but no one was injured. He said that workers, supervisors, and plant managers all knew about these sorts of accidents. Derrick Riley saw racks and rack stands fall or tip over at least five times in the four years that he worked at V&S Detroit. A rack and stand tipped over and fell on Corey White within the first six months he worked at V&S Detroit, but he was not injured. And, as noted above, Derrick Riley testified that once he was working while Bottorff was in the racking area, and a rack fell, almost hitting Bottorff. All of those incidents preceded Lazar Ostravan’s injury from a falling rack. The jury could infer from that evidence that the occurrence of a serious injury from a rack falling on a worker hanging parts during a crane lift was a matter of when, not if. As noted earlier, the evidence also demonstrates that management at V&S Detroit’s Redford plant was aware of the dangerous condition and the certainty that an injury would occur, and proceeded in willful disregard of that knowledge. The Court finds, therefore, that the record presents material factual issues on the issue of liability. The Court is not able to conclude as a matter of law that the plaintiff cannot establish the exception to the worker’s compensation exclusive remedy bar found in Michigan Complied Laws § 418.131(1). III. The Court concludes that genuine issues of material fact prevent summary judgment in the defendant’s favor. Accordingly, it is ORDERED that the defendant’s motion for summary judgment [dkt. # 28] is DENIED. -16- It is further ORDERED that the case management and scheduling order is modified as follows: The proposed joint final pretrial order is due on or before October 16, 2012. The Final Pretrial Conference shall take place on October 23, 2012, at 9:00 a.m. Trial shall commence on November 6, 2012, at 8:30 a.m. The balance of the Case Management and Scheduling Order remains in effect. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: September 21, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on September 21, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -17-

=== KURT D. GREGORY v. CITIMORTGAGE, INC., et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 11-15521 Honorable David M. Lawson KURT D. GREGORY, Plaintiff, v. CITIMORTGAGE, INC., CITIBANK, NA, BANK OF AMERICA, NA, and STRUCTURED ASSET SECURITIES CORPORATION MORTGAGE PASS-THROUGH CERTIFICATES FOR SERIES 2005-1, ________________________________________/ Defendants. OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS This case involves the foreclosure of a residential mortgage. The defendants claim to hold the mortgage on the plaintiff’s home and began foreclosure proceedings when the payments became delinquent. After the sheriff’s sale and before the redemption period expired, the plaintiff filed suit in state court alleging breach of contract, fraud, quiet title, wrongful foreclosure, and conversion. The defendants removed the case to this Court on the basis of diversity and filed a motion to dismiss. The Court heard oral argument on the motion on September 5, 2012. The plaintiff’s complaint hinges on his argument that the defendants’ securitization of the note left the defendant without the statutory authority to foreclose or the authority to collect mortgage payments from the plaintiff. After due consideration, the Court finds that, except for the breach of contract count, the complaint fails to state claims for which relief can be granted. Therefore, the Court will grant in part and deny in part the motion to dismiss. I. The following facts are taken from the plaintiff’s complaint. The plaintiff resides on Lapeer Road in Lake Orion, Michigan. On November 19, 2004 the plaintiff signed an installment promissory note and mortgage with defendant ABN AMRO in the amount of $124,000. The mortgage was recorded with the Oakland County Register of Deeds. At some point in 2005, the note was transferred into the defendant trust. ABN AMRO, by Citimortgage, its successor in interest through a merger, assigned the mortgage to defendant LaSalle on September 17, 2007; the assignment was recorded on October 16, 2007. The assignment states that ABN/Citimortgage is the holder of the note and assigned the note along with the mortgage. Sometime later, Bank of America acquired LaSalle by merger. In early 2011, the plaintiff fell behind on his mortgage payments and defendant Bank of America commenced foreclosure by advertisement. The subject property was sold at a foreclosure sale on May 17, 2011 and was purchased by Bank of America. The plaintiff filed his complaint in state court on November 14, 2011. The complaint contains claims for breach of contract, fraud in the assignment, fraud in the foreclosure notices, quiet title, wrongful foreclosure, and conversion, as well as a count entitled “defendants are not the true parties in interest.” The plaintiff’s complaint alleges that the mortgage provides that it can only be transferred along with the note, and that therefore defendant ABN AMRO had a duty to keep the mortgage together with the note. The plaintiff alleges that the defendant breached this duty by assigning the note to a securitized trust and by assigning the mortgage without the note. The complaint alleges that defendants ABN and Citimortgage misrepresented their ownership of the note and did not have the authority to foreclose on the subject property. The complaint also alleges that the note was somehow paid off when it entered the trust and therefore the mortgage no longer acts -2- as security for any debt. The defendants removed the complaint to this court on December 16, 2011 and filed a motion to dismiss on January 27, 2012. II. “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief if all the facts and allegations in the complaint are taken as true.” Rippy ex rel. Rippy v. Hattaway, 270 F.3d 416, 419 (6th Cir. 2001) (citing Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993 . Under Rule 12(b)(6), the complaint is viewed in the light most favorable to plaintiffs, the allegations in the complaint are accepted as true, and all reasonable inferences are drawn in favor of plaintiffs. Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Saglioccolo v. Eagle Ins. Co., 112 F.3d 226, 228-29 (6th Cir. 1997) (quoting Columbia Nat’l Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995 . “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Tatum, 58 F.3d at 1109; Tackett v. M & G Polymers, USA, L.L.C., 561 F.3d 478, 488 (6th Cir. 2009). To survive a motion to dismiss, [a plaintiff] must plead “enough factual matter” that, when taken as true, “state[s] a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, , 556, 570 (2007). Plausibility requires showing more than the ‘sheer possibility’ of relief but less than a ‘probab[le]’ entitlement to relief. Ashcroft v. Iqbal, [ , 678] (2009). Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010). “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). -3- Under the new regime ushered in by Twombly and Iqbal, pleaded facts must be accepted by the reviewing court but conclusions may not be unless they are plausibly supported by the pleaded facts. “[B]are assertions,” such as those that “amount to nothing more than a ‘formulaic recitation of the elements’” of a claim, can provide context to the factual allegations, but are insufficient to state a claim for relief and must be disregarded. Iqbal, 556 U.S. at 681 (quoting Twombly, 550 U.S. at 555). However, as long as a court can “‘draw the reasonable inference that the defendant is liable for the misconduct alleged,’ a plaintiff’s claims must survive a motion to dismiss.” Fabian, 628 F.3d at 281 (quoting Iqbal, 556 U.S. at 678). Consideration of a motion to dismiss under Rule 12(b)(6) is confined to the pleadings. Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008). Assessment of the facial sufficiency of the complaint ordinarily must be undertaken without resort to matters outside the pleadings. Wysocki v. Int’l Bus. Mach. Corp., 607 F.3d 1102, 1104 (6th Cir. 2010). However, “documents attached to the pleadings become part of the pleadings and may be considered on a motion to dismiss.” Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 335 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c ; see also Koubriti v. Convertino, 593 F.3d 459, 463 n.1 (6th Cir. 2010). Even if a document is not attached to a complaint or answer, “when a document is referred to in the pleadings and is integral to the claims, it may be considered without converting a motion to dismiss into one for summary judgment.” Commercial Money Ctr., 508 F.3d at 335-36. Further, where the plaintiff does not refer directly to given documents in the pleadings, if those documents govern the plaintiff’s rights and are necessarily incorporated by reference then the motion need not be converted to one for summary judgment. Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir. 1997) (holding that plan documents could be incorporated without converting the motion to one for summary -4- judgment even though the complaint referred only to the “plan” and not the accompanying documents). In addition, “[a] court may consider matters of public record in deciding a motion to dismiss without converting the motion to one for summary judgment.” Commercial Money Ctr., Inc., 508 F.3d at 336. The defendants attached the note, the mortgage, the mortgage assignment, and the certificates of merger to its motion to dismiss. The plaintiff attaches all of these documents, with the exception of the certificates of merger, to his complaint. The certificates of merger are matters of public record. The Court, therefore, considers the documents that the defendants attached to their motion to dismiss when deciding the motion. The plaintiff attached the note, the mortgage, the warranty deed, the assignment of mortgage, the foreclosure notices, the sheriff’s deed, and an affidavit from Gregory Till of Xtreme Legal Research, LLC, to his response. With the exception of the affidavit, each of those documents is referred to in the plaintiff’s complaint and may be considered in deciding the defendants’ motion to dismiss. However, because the affidavit is neither referenced to in the pleadings nor integral to the plaintiff’s claims, the Court will not consider this affidavit in deciding the defendants’ motion to dismiss. A. The defendants begin their attack on the plaintiff’s complaint with a challenge to the plaintiff’s standing to bring the suit. They argue that the plaintiff lost the right to sue when the redemption period following the sheriff’s sale expired. That argument has no merit. Standing is required in order to confer subject matter jurisdiction upon federal courts under Article III of the Constitution. It is “the threshold question in every federal case.” Warth v. Seldin, , 498 (1975). The Supreme Court has stated that the standing requirement “limits -5- federal court jurisdiction to actual controversies so that the judicial process is not transformed into ‘a vehicle for the vindication of the value interests of concerned bystanders.’” Coal Operators & Assocs., Inc. v. Babbitt, 291 F.3d 912, 915-16 (6th Cir. 2002) (quoting Valley Forge Christian College v. Ams. United for Separation of Church & State, Inc., , 473 (1982 . There are three constitutional requirements for standing. See Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 771 (2000); City of Cleveland v. Ohio, 508 F.3d 827, 835 (6th Cir. 2007). “To establish Article III standing, a litigant must show (1) an injury in fact; (2) a causal connection between the injury and the conduct complained of; and (3) that the injury will likely be redressed by a favorable decision.” Barnes v. City of Cincinnati, 401 F.3d 729, 739 (6th Cir. 2005) (citing Lujan v. Defenders of Wildlife, , 560-61 (1992 . In addition to the constitutional requirements, a plaintiff must also satisfy three prudential standing requirements. See City of Cleveland, 508 F.3d at 835. First, a plaintiff must “assert his own legal rights and interests, and cannot rest his claim for relief on the legal rights or interests of third parties.” Warth, 422 U.S. at 499 (citations omitted). Second, a plaintiff’s claim must be more than a “generalized grievance” that is pervasively shared by a large class of citizens. Coal Operators, 291 F.3d at 916 (citing Valley Forge, 454 U.S. at 474-75). Third, in statutory cases, the plaintiff’s claim must fall within the “zone of interests” regulated by the statute in question. Ibid. “These additional restrictions enforce the principle that, ‘as a prudential matter, the plaintiff must be a proper proponent, and the action a proper vehicle, to vindicate the rights asserted.’” Ibid. (quoting Pestrak v. Ohio Elections Comm’n, 926 F.2d 573, 576 (6th Cir. 1991 . The defendants, relying on Overton v. Mortgage Electronic Registration Systems, No. 284950, 2009 WL 1507342 (Mich. Ct. App. May 28, 2009), argue that the plaintiff does not have -6- standing because they no longer retain a legal interest in the property because the redemption period has expired. There is no merit to that argument. First, the defendants’ argument relies on an incorrect notion of standing. District Judge Robert Jonker, in Langley v. Chase Home Finance LLC, No. 10-604, 2011 WL 1130926, at *2 n.2 (W.D. Mich. Mar. 28, 2011), aptly explained the defendants’ mistake: Many Defendants suggest the basis for the ruling in Overton is a lack of Plaintiff’s standing once the redemption period expires, but the Court of Appeals does not actually say this. Nor would it seem like Article III standing could possibly be in doubt. After all, the Plaintiffs in such cases are the last lawful owner and possessor of the property. Moreover, they often remain in continuing possession of the property notwithstanding any Sheriff’s sale and expiration of a redemption period. Moreover, Plaintiffs in such cases claim a continuing right to lawful ownership and possession based on defects in the process used by Defendants to divest them of those rights. This certainly seems to satisfy the basic Article III requirement of “injury in fact,” as well as any prudential considerations tied to a “zone of interests” analysis. Indeed, it is hard to imagine a person with a better claim to standing to challenge the process at issue. Of course, having standing to bring a claim does not mean you have a valid claim on the merits. That is a different question. Overton is best viewed as a merits decision, not a standing case. Langley, 2011 WL 1130926, at *2 n.2. Second, “[t]he [Michigan] Supreme Court has long held that the mortgagor may hold over after foreclosure by advertisement and test the validity of the sale in the summary proceeding.” Manufacturers Hanover Mortgage Corp. v. Snell, 142 Mich. App. 548, 553, 370 N.W.2d 401, 404 (1985) (citing Reid v. Rylander, 270 Mich. 263, 267, 258 N.W. 630 (1935); Gage v. Sanborn, 106 Mich. 269, 279, 64 N.W. 32 (1895 . “Otherwise, the typical mortgagor who faces an invalid foreclosure would be without remedy, being without the financial means to pursue the alternate course of filing an independent action to restrain or set aside the sale.” Ibid. (citing Reid, 270 Mich. at 267, 258 N.W. 630; 16 Michigan Law and Practice, Mortgages, § 174, pp. 438-39). -7- The defendants’ standing argument is rejected. The plaintiff alleges continuing ownership of the property, Compl. ¶¶ 62, 63, and satisfies the constitutional and prudential standing requirements. B. Next the defendants contend that the plaintiff has not stated a cognizable claim for relief because conveyance of the note to a trust did not affect the validity of the mortgage, and there is no legal impediment to or obligation to refrain from separating the note and the mortgage when one or the other is assigned. The Court reads the plaintiff’s claim as an attempt to advance two theories that challenge Bank of America’s authority to foreclose. 1. First, the plaintiff argues that the Court must set aside the foreclosure because the mortgage transfers that were effectuated by merger were not recorded and therefore a record chain of title did not exist at the time of the foreclosure. The plaintiff’s complaint alleges the plaintiff signed a promissory note with ABN AMRO, and CitiMortgage acquired ABN AMRO by merger, including ABN AMRO’s interest in the subject property. CitiMortgage assigned the mortgage to LaSalle by an assignment of mortgage dated September 17, 2007 and recorded on October 18, 2007. Then Bank of America acquired LaSalle by merger, including LaSalle’s interest in the subject property. The plaintiff argues that the “assignments” from ABN AMRO to Citimortgage and from LaSalle to Bank of America were unrecorded, and therefore Bank of America did not have statutory authority to foreclose because there was no record chain of title. The defendants argue that transfers resulting from a merger do not constitute assignments that must be recorded in order to preserve the record chain of title. The plaintiff’s complaint does not challenge the assignment on that basis; the alleged -8- defect in the record chain of title was raised for the first time in the plaintiff’s response to the defendants’ motion to dismiss. Foreclosure sales by advertisement are governed by statute. Senters v. Ottawa Sav. Bank, FSB, 443 Mich. 45, 50, 503 N.W.2d 639, 641 (1993). “Once the mortgagee elects to foreclose a mortgage by this method, the statute governs the prerequisites of the sale, notice of foreclosure and publication, mechanisms of the sale, and redemption.” Ibid. (citing Mich. Comp. Laws § 600.3201). Section 600.3204 provides that a party may foreclose a mortgage by advertisement if all of the following circumstances exist: (a) A default in a condition of the mortgage has occurred, by which the power to sell became operative. (b) An action or proceeding has not been instituted, at law, to recover the debt secured by the mortgage or any part of the mortgage; or, if an action or proceeding has been instituted, the action or proceeding has been discontinued; or an execution on a judgment rendered in an action or proceeding has been returned unsatisfied, in whole or in part. (c) The mortgage containing the power of sale has been properly recorded. (d) The party foreclosing the mortgage is either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage. Mich. Comp. Laws § 600.3204(1). “If the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale under section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage.” Mich. Comp. Laws § 600.3204(3). Michigan courts have differentiated between a foreclosing entity’s failure to satisfy section 600.3204’s requirements and a failure to abide by the notice requirements set forth in sections 600.3208 and 600.3212. See Rainey v. U.S. Bank Nat. Ass’n, No. 11-12520, 2011 WL 5075700, at *6 (E.D. Mich. Oct. 25, 2011). A failure to satisfy section 600.3204’s demands constitutes “a -9- structural defect that goes to the very heart of defendant’s ability to foreclose by advertisement in the first instance” and renders the foreclosure proceedings void ab initio, while “a defect in fulfilling the statutory notice requirements attendant to a foreclosure by advertisement renders the resulting sale voidable rather than absolutely void.” Davenport v. HSBC Bank USA, 275 Mich. App. 344, 347, 739 N.W.2d 383, 384 (2007). The plaintiff cites the Michigan Court of Appeals’ decision in Kim v. JPMorgan Chase Bank, NA, 295 Mich. App. 200, 813 N.W.2d 778 (2012), in support of his argument that a record chain of title did not exist on the date of the foreclosure sale. In Kim, the defendant purchased the plaintiff’s loan from the FDIC after the FDIC acquired it by operation of law. Kim, 295 Mich. App. at 207, 813 N.W.2d at 782. The court held that the defendant was required to record its mortgage interest prior to the sheriff’s sale. Kim, 295 Mich. App. at 208, 813 N.W.2d at 783. The court also stated that Michigan Compiled Laws § 600.3204(3) “makes no exception for mortgage interests acquired ‘by operation of law’”; however, that statement appears to be dictum, as the court went on to state in the next paragraph that “it does not appear that defendant acquired its interest by operation of law.” Kim, 295 Mich. App. at 205-06, 813 N.W.2d at 781-82. Few cases have interpreted Kim’s effect on the transfer of mortgages through merger. However, courts considering the matter after Kim have found that where a mortgage is transferred through merger, there is no need to record the assignment in order for the surviving entity to have authority to foreclose, because the surviving entity has “stepped into the shoes” of the entity that held the mortgage before the merger. See Sesi v. Federal Home Loan Mortg. Corp., No. 12-10608, 2012 WL 628858, at *6 (E.D. Mich. Feb. 27, 2012) (“Mich. Comp. Laws § 600.3204(3) applies to ‘assignments.’ . . . Because CitiMortgage stepped into the shoes of ABN AMRO without necessity -10- of assignment, no recording of the mortgage interest was required and CitiMortgage had the right to initiate foreclosure under Mich. Comp. Laws § 600.3204.”); Meyer v. CitiMortgage, Inc., No. 11- 13423, 2012 WL 511995, at *2 (E.D. Mich. Feb. 16, 2012). Further, the Michigan Court of Appeals has addressed directly the issue of whether a surviving entity after a merger is required to record an assignment of mortgage in order to have statutory authority to foreclose. In Winiemko v. GE Capital Mortg. Service, Inc., No. 177827, 1997 WL 33354482 (Mich. App. Jan. 17, 1997), the court stated that a surviving entity after a merger “was not the assignee of plaintiff’s mortgage. . . . Accordingly, there was no assignment of plaintiff’s mortgage” and the surviving entity did not violate section 600.3204(3) by foreclosing without recording an assignment. Id. at *2. The plaintiff does not dispute (indeed, he alleges in his complaint) that CitiMortgage was the successor to ABN AMRO, that CitiMortgage assigned the note to LaSalle and recorded that assignment, and that Bank of America was the successor to LaSalle. Taking those allegations in the complaint as true, the plaintiff’s argument that defendant Bank of America lacked the statutory authority to foreclose under Mich. Comp. Laws § 600.3204(3) fails. The plaintiff’s complaint also contains an allegation that Bank of America did not have authority to foreclose under Michigan Compiled Laws § 600.3204(1)(d) because it did not have an interest in the indebtedness at the time of the foreclosure. The plaintiff’s complaint cites the Michigan Court of Appeals’ decision in Residential Funding Co. v. Saurman, which held that MERS could not foreclose by advertisement because it did not hold the mortgage note itself. Residential Funding Co., LLC v. Saurman, 292 Mich. App. 321, 807 N.W.2d 412 (2011). The plaintiff’s complaint and arguments relying on that decision must fail, as that case was reversed by the -11- Michigan Supreme Court. See Residential Funding Co., L.L.C. v. Saurman, 490 Mich. 909, 805 N.W.2d 183 (2011). 2. Second, the plaintiff makes a series of arguments that boil down to the contention that because the note is held by the defendant trust and the mortgage is held by defendant Bank of America, the foreclosure by defendant Bank of America was improper in some way. The plaintiff’s complaint states that the defendant trust paid off the original note, and therefore the mortgage no longer securitizes any debt. The complaint states that because the defendant trust can no longer acquire any assets, the trust cannot take possession of the mortgage and the debt and security instruments are separated. The plaintiff argues that this securitization process created a separate, “fictional note”: the real note is held by the trust, while the fictional note is held by Bank of America. The plaintiff contends that he could be liable on both. The plaintiff also points to the assignment of mortgage, which states that both the mortgage and note must be assigned together; the plaintiff contends that defendant ABN AMRO could not have assigned the note because it was held by a trust. The plaintiff argues that the securitization process also gave rise to fraud, as the defendants misrepresented their status as the note holder and mortgage holder. Connected with that argument is the plaintiff’s assertion that the assignment of the mortgage without the note was a breach of paragraph twenty of the mortgage. Attempts to base claims on the securitization of a mortgage and the alleged separation of the mortgage and note have not been well received by courts around the country. See Leone v. Citigroup, No. 12-10597, 2012 WL 1564698, at *3-4 (E.D. Mich. May 2, 2012) (collecting cases); Mitchell v. Mortgage Electronic Registration Systems, Inc., No. 1:11-cv-425, 2012 WL 1094671, -12- at *2-3 (W.D. Mich. Mar. 30, 2012); Bhatti v. Guild Mortg. Co., No. C11-0480JLR, 2011 WL 6300229, at *5 (W.D. Wash. Dec. 16, 2011) (“Securitization merely creates a separate contract, distinct from the Plaintiffs’ debt obligations under the Note, and does not change the relationship of the parties in any way.”). Courts in this district have found such arguments singularly unpersuasive in light of the Saurman decision. See Nelson v. BAC Home Loans Servicing, L.L.P., No. 11-14433, 2012 WL 2064383, at *4 (E.D. Mich. June 7, 2012); Marrocco v. Chase Bank, N.A., No. 12-10605, 2012 WL 3061031, at *3 (E.D. Mich. July 26, 2012); Kiefer v. ABN AMRO, No. 12- 10051, 2012 WL 3600351, at *4 (E.D. Mich. June 12, 2012). In Saurman, the Michigan Supreme Court held that an entity that held the mortgage but not the note could foreclose under Michigan’s foreclosure-by-advertisement statute. Residential Funding Co., L.L.C., 490 Mich. at 910, 805 N.W.2d at 184. In so holding, the court observed that “[i]t has never been necessary that the mortgage should be given directly to the beneficiaries. The security is always made in trust to secure obligations, and the trust and the beneficial interest need not been in the same hands. The choice of a mortgagee is a matter of convenience.” Ibid. (internal quotation and alteration omitted). If an entity that holds the mortgage but not the loan may foreclose, an obvious corollary is that the separation of the mortgage and the note does not invalidate either, nor does it imply the creation of some sort of “fictional note” that remains with the holder of the mortgage. The plaintiff’s citation of Prime Financial Services LLC v. Vinton, 279 Mich. App. 245, 761 N.W.2d 694 (2008), does not compel a different result. To the extent that decision conflicts with Saurman by suggesting that a mortgage and note cannot be separated, the Michigan Supreme Court’s decision must control. Nor did Prime Financial Services address foreclosure and the parties with authority -13- to foreclose under the statute. See Dersch v. BAC Home Loan Servicing LP, No. 1:11-CV-267, 2011 WL 3100561, at *10 (W.D. Mich. July 25, 2011). Following this reasoning, nearly all of the plaintiff’s claims must fail, as explained below. C. In counts II and III of the complaint, the plaintiff alleges fraud in the assignments and fraud in the foreclosure notices. In federal court, when alleging fraud, a party must state with particularity the circumstances constituting the fraud. Fed. R. Civ. P. 9(b); see also Bennett v. MIS Corp., 607 F.3d 1076, 1100 (6th Cir. 2010). The complaint must “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.” Indiana State Dist. Council of Laborers and Hod Carriers Pension and Welfare Fund v. Omnicare, Inc., 583 F.3d 935, 942-43 (6th Cir. 2009) (internal quotations and citation omitted). In addition, a party must “allege the time, place, and content of the alleged misrepresentation on which he or she relied; the fraudulent scheme; the fraudulent intent of [the other party]; and the injury resulting from the fraud.” Coffey v. Foamex L.P., 2 F.3d 157, 161-62 (6th Cir. 1993) (internal quotations and citations omitted). “Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). Where there are multiple defendants, a claim must identify which of the defendants made the alleged misrepresentations. Hoover v. Langston Equip. Assocs., Inc., 958 F.2d 742, 745 (6th Cir. 1992). The elements of fraud in Michigan are: (1) That defendant made a material representation; (2) that it was false; (3) that when he made it he knew that it was false, or made it recklessly, without any knowledge of its truth, and as a positive assertion; (4) that he made it with the intention that it should be acted upon by plaintiff; (5) that plaintiff acted in reliance upon it; and (6) that he thereby suffered injury. -14- Hi-Way Motor Co. v. International Harvester Co., 398 Mich. 330, 336, 247 N.W.2d 813, 816 (1976); Higgins v. Lawrence, 107 Mich. App. 178, 184, 309 N.W.2d 194, 197 (1981). When a contract governs the relationship between the parties, the plaintiff must allege a “violation of a legal duty separate and distinct from the contractual obligation” to support a fraud claim. Rinaldo’s Const. Corp. v. Michigan Bell Tel. Co., 454 Mich. 65, 84, 559 N.W.2d 647, 658 (1997) (citing Hart v. Ludwig, 347 Mich. 559, 560, 79 N.W.2d 895, 897 (1956 . In Hart, for example, the court held that the plaintiff could not bring a tort claim because the defendant had only violated a future promise to perform under a contract. Hart, 347 Mich. at 565, 79 N.W.2d at 898-99. In count II, the plaintiff alleges that defendant CitiMortgage made a false material representation that it was the holder of the note at the time of the assignment of mortgage, when in fact the note had been assigned to a trust. In count III, the plaintiff alleges that defendants ABN and Bank of America made false material representations in stating that they were the proper parties to foreclose. The plaintiff’s fraud claims in count III are based on the argument that those statements were both material and false because “an interest in the note is required for a party to foreclose on a property.” Compl. ¶ 36. The statement by defendant Bank of America that it was the proper party to foreclose was not a false statement, because, as discussed above, Bank of America held the mortgage, which is sufficient to confer statutory authority to foreclose under Michigan law. Because the representation alleged in count III was not false, that count does not state a claim for relief. The defendant also argues that count II must be dismissed because the parties’ relationship is governed by contract, and the plaintiff did not allege a legal duty apart from the contract’s obligation. The plaintiff did not respond to that argument. The Court, therefore, considers that claim abandoned. See Hopkins v. Saint Lucie Cnty. School Bd., 399 F. App’x 563, 565 n.1 (11th Cir. -15- 2010) (“[The plaintiff’s] argument that he should have been granted leave to amend his complaint was abandoned when he failed to raise it in opposing the defendants’ motion to dismiss or in responding to the magistrate judge’s recommendation of dismissal.”); Lipton v. County of Orange, New York, 315 F. Supp. 2d 434, 446 (S.D. N.Y. 2004) (“This Court may, and generally will, deem a claim abandoned when a plaintiff fails to respond to a defendant’s arguments that the claim should be dismissed.”); Mekani v. Homecomings Fin., LLC, 752 F. Supp. 2d 785, 790 n.2 (E.D. Mich. 2010) (stating that where a plaintiff fails to respond to a motion to dismiss a claim, “the Court assumes he concedes this point and abandons the claim”). Moreover, the defendants’ duty not to misrepresent the ownership of the note would not exist in the absence of the contract between the parties. See QQC, Inc. v. Hewlett-Packard Co., 258 F. Supp. 2d 718, 722 (E.D. Mich. 2003). The alleged misrepresentation arises directly from the alleged contractual obligation not to separate the mortgage and the note that the plaintiff in count I argues was breached; the damages on these two counts are the same. Neither count II nor count III states a claim for which relief may be granted. D. In count V of the complaint, the plaintiff alleges that he is entitled to have title to his home quieted in himself. In Michigan a quiet title action is a statutory cause of action. Michigan Compiled Laws § 600.2932(1) states that “[a]ny person, whether he is in possession of the land in question or not, who claims any right in, title to, equitable title to, interest in, or right to possession of land, may bring an action in the circuit courts against any other person who claims or might claim any interest inconsistent with the interest claimed by the plaintiff.” That statute “codifie[s] actions to quiet title and authorize[s] suits to determine competing parties’ respective interests in land.” -16- Republic Bank v. Modular One LLC, 232 Mich. App. 444, 448, 591 N.W.2d 335, 337 (1998), overruled on other grounds by Stokes v. Millen Roofing Co., 466 Mich. 660, 649 N.W.2d 371 (2002). A party seeking to establish clear title has the burden of proof in a quiet title action and must make out a prima facie case that they have title to the disputed land. Beulah Hoagland Appleton Qualified Pers. Residence Trust v. Emmet Cnty. Rd. Comm’n, 236 Mich. App. 546, 550, 600 N.W.2d 698, 700 (1999) (citing Stinebaugh v. Bristol, 132 Mich. App. 311, 316, 347 N.W.2d 219 (1984 . If the plaintiff establishes a prima facie case, the burden of proof shifts to the contestant to establish superior right or title to the property. Beulah, 236 Mich. App. at 550, 600 N.W.2d at 700 (citing Boekeloo v. Kuschinski, 117 Mich. App. 619, 629, 324 N.W.2d 104 (1982 . An action to quiet title is equitable in nature. Ibid. If a defendant fails in its proof and “the plaintiff established his title to the lands, the defendant shall be ordered to release to the plaintiff all claims thereto.” Mich. Comp. Laws § 600.2932(3). Under Michigan law, a former owner’s right, title, and interest in property are extinguished upon the expiration of the redemption period. Piotrowski v. State Land Office Bd., 302 Mich. 179, 187, 4 N.W.2d 514, 517 (1942). In order to set aside a foreclosure sale, a plaintiff must establish some “fraud, accident, or mistake.” Freeman v. Wozniak, 241 Mich. App. 633, 637, 617 N.W.2d 46, 49 (2000); Smith v. Bank of America Corp., No. 10-14161, 2011 WL 653642, at *5 (E.D. Mich. Feb. 14, 2011) (citing Ellison v. Wells Fargo Home Mortg., Inc., No. 09-14175, 2010 WL 3998091, at *4 (E.D. Mich. Oct. 12, 2010 . “Moreover, the fraud, accident, or mistake must relate to the foreclosure proceeding itself.” Stein v. U.S. Bancorp, No.10-14026, 2011 WL 740537, at *6 (E.D. Mich. Feb. 24, 2011). The plaintiff has not made any allegations that would support a finding of fraud, accident, or mistake in the foreclosure process. The plaintiff has not raised any allegations -17- that would suggest that defendant Bank of America lacked the authority to foreclose, other than those allegations the Court already rejected. Nor has the plaintiff alleged any other irregularity in the foreclosure process itself. Count IV of the complaint will be dismissed. E. The plaintiff alleges in count V that defendant Bank of America wrongfully foreclosed on his home. However, as discussed above, Bank of America had authority to foreclose under Michigan Compiled Laws §§ 600.3204(1)(d) and (3) as the record holder of the mortgage. The plaintiff has not set forth any other allegations that would render the foreclosure wrongful under Michigan law. Count V of the complaint will be dismissed as well. F. In count VI of the complaint, the plaintiff alleges that the defendants converted his money because they had no right to collect the installment note payments. He has brought his claim for conversion under Mich. Comp. Laws § 440.3420(1). That statute states that: The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by (i) the issuer or acceptor of the instrument or (ii) a payee or endorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee. Mich. Comp. Laws § 440.3420(1). The plaintiff clearly was the issuer of the note, and therefore his claim is barred under the statute. However, the plaintiff argues that although he was the issuer of the note, he was not the issuer of the “fictional note” that was created when the actual note was transferred into the trust. The plaintiff argues that the defendants’ “creation of a second Note not authorized by Plaintiff amounts to a taking from Plaintiff’s personal property.” Pl.’s Resp. at 15. -18- That argument apparently stems from his overarching argument that the securitization of his note somehow erased his debt or changed the relationship between the plaintiff and the obligor. That theory has been rejected by courts around the country, as discussed above, and by this Court as well. The plaintiff has presented no case law in his response suggesting a viable theory for a conversion claim under Michigan law. The Court will grant the defendant’s motion on count VI of the plaintiff’s complaint. G. Count VII of the complaint is entitled “Defendants Are Not the True Parties in Interest.” There is no such claim known to Michigan law. The allegations in this section of the complaint reprise the plaintiff’s argument that the defendants did not have the authority to foreclose. But as discussed above, they did. The plaintiff does not respond to this portion of the defendants’ argument and the Court may treat this count as abandoned. The Court will grant the defendants’ motion to dismiss on count VII of the plaintiff’s complaint. H. Finally, in count I of the complaint, the plaintiff alleges that the defendants breached the mortgage agreement by violating paragraph 20, which, he says, creates an obligation to assign the mortgage together with the note. The plaintiff asserts that the breach occurred when the note was passed to the trust and the mortgage was assigned without the note. The defendant argues that the assignment in this case states that it transfers “the Mortgage together with the note” and that therefore there are no plausible allegations of breach to support the plaintiff’s claim. The defendant also argues that there is no allegation in the complaint that the plaintiff suffered damages as a result -19- of the split between the mortgage and the note or that he was receiving demands for payment from multiple lenders. Paragraph 20 of the mortgage states, in relevant part: “The Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to the Borrower.” Compl. Ex. 1 at 6 (emphasis added). When construing a contract or one of its provisions, the intentions of the parties govern. First Nat. Bank of Ypsilanti v. Redford Chevrolet Co., 270 Mich. 116, 121, 258 N.W. 221, 223 (1935). To ascertain the parties’ intentions, the Court looks first to the language in the written agreement. Haywood v. Fowler, 190 Mich. App. 253, 258, 475 N.W.2d 458, 461 (1991) (“Where the language of a contract is clear and unambiguous, the intent of the parties will be ascertained according to its plain sense and meaning.”); see also Wilkie v. Auto-Owners Ins. Co., 469 Mich. 41, 61, 664 N.W.2d 776, 787 (2003) (“Well-settled principles of contract interpretation require one to first look to a contract’s plain language. If the plain language is clear, there can be only one reasonable interpretation of its meaning and, therefore, only one meaning the parties could reasonabl[y] expect to apply. If the language is ambiguous, longstanding principles of contract law require that the ambiguous provision be construed against the drafter.” (citation omitted . “Contractual language is construed according to its plain and ordinary meaning, and technical or constrained constructions are to be avoided.” Dillon v. DeNooyer Chevrolet Geo, 217 Mich. App. 163, 166, 550 N.W.2d 846, 848 (1996). The Court should “give effect to every word, phrase, and clause in a contract and avoid an interpretation that would render any part of the contract surplusage or nugatory.” Klapp v. United Ins. Grp. Agency, Inc. 468 Mich. 459, 468, 663 N.W.2d 447, 453 (2003). “‘Where the language of the writing is not ambiguous the construction is a question of law -20- for the court on a consideration of the entire instrument.’” In re Landwehr’s Estate, 286 Mich. 698, 702, 282 N.W. 873, 874 (1938) (quoting Griffin Mfg. Co. v. Mitshkun, 233 Mich. 640, 642, 207 N.W. 814, 814 (1926 . A contract is unambiguous if it “fairly admits of but one interpretation.” Allstate Ins. Co. v. Goldwater, 163 Mich. App. 646, 648, 415 N.W.2d 2, 4 (1987). Disagreement among the parties as to the meaning of a contract term does not necessarily create ambiguity as a matter of law. Steinmetz Elec. Contractors Ass’n v. Local Union No. 58 Int'l Bhd. of Elec. Workers, AFL-CIO, 517 F. Supp. 428, 432 (E.D. Mich. 1981). However, if “the contract language is unclear or susceptible to multiple meanings, interpretation becomes a question of fact.” Port Huron Educ. Ass’n MEA/NEA v. Port Huron Area Sch. Dist., 452 Mich. 309, 323, 550 N.W.2d 228, 237 (1996); see also Klapp, 468 Mich. at 469, 663 N.W.2d at 453-54. Where the terms of a contract are ambiguous, the Court must look to extrinsic facts along with the terms of the agreement to determine the parties’ intentions. Klapp, 468 Mich. at 469, 663 N.W.2d at 454. Ambiguous contracts generally present questions of fact for trial. Klapp, 468 Mich. at 469, 663 N.W.2d at 453-54. Other courts in this district have not thought much of this argument. See Nelson v. BAC Home Loans Servicing, L.L.P., No. 11-14433, 2012 WL 2064383, at *4 (E.D. Mich. June 7, 2012); Fortson v. Federal Home Loan Mortg. Corp., No. 12-10043, 2012 WL 1183692, at *5 (E.D. Mich. Apr. 9, 2012); Cable v. Mortgage Electronic Registration Systems, Inc., No. 11-14877, 2012 WL 2374236, at *5 (E.D. Mich. June 22, 2012). However, this Court believes that the contract language cited by the plaintiff is ambiguous because it fairly admits of more than one interpretation. The language can be read to suggest that the note can only be sold without prior notice only when it is transferred “together” with the mortgage. The defendants’ transfer of the note into the trust without -21- the mortgage and without notifying the plaintiff would violate that provision of the contract as so read. Further, the plaintiff has alleged damages in the form of economic loss because he has been making his mortgage payments to the wrong entity and presumably cannot recover them. Whether he can prove that allegation may be another matter. But the Court cannot grant a motion to dismiss based on a disbelief of the plaintiff’s factual allegations. Therefore, the Court concludes that the plaintiff has stated a claim for which relief could be granted in count I of the complaint. III. The Court finds that the plaintiff has not stated a claim for which relief can be granted in any count of the complaint, save count I. Therefore, the Court will grant the defendant’s motion as to all the counts of the complaint except that one. Accordingly, it is ORDERED that the defendants’ motion to dismiss [dkt. #9] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that counts II through VII are DISMISSED WITH PREJUDICE. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: September 11, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on September 11, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -22-

=== MICHAEL J. BAKER and SUZIE C. BAKER v. RESIDENTIAL FUNDING COMPANY, LLC, and ORLANS ASSOCIATES, P.C., ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION MICHAEL J. BAKER and SUZIE C. BAKER, Plaintiffs, Case No. 11-15169 Honorable David M. Lawson v. RESIDENTIAL FUNDING COMPANY, LLC, and ORLANS ASSOCIATES, P.C., ________________________________________________/ Defendants. ORDER REMANDING CASE Plaintiffs Michael and Suzie Baker borrowed $937,500 in 2006 and secured the loan with a mortgage on their house. They defaulted on their payments and the mortgage was foreclosed. The present case is the latest in a series of lawsuits through which the plaintiffs have attempted to stave off eviction, all the while living in the house rent free for the past 5-1/2 years. The case was filed in state court and removed by the defendants on the basis of diversity jurisdiction. One defendant — Orlans Associates, P.C. — shares Michigan citizenship with the plaintiffs, so diversity is not complete. Orlans is the law firm that represented defendant Residential Funding Company, LLC in the foreclosure proceedings. The defendants contend that Orlans was joined fraudulently. Although the law is clear that a law firm cannot be held liable to its client’s opponent for its conduct in past litigation, the complaint also includes a claim under the Michigan Collection Practices Act. Law firms seeking to collect a debt for a client are covered by that Act and misrepresentations are actionable thereunder. Because the plaintiffs have stated a colorable claim against the nondiverse defendant, there is no fraudulent joinder, diversity is not complete, and the case must be remanded. I. This case comes before the Court on a the defendants’ motion to dismiss or for summary judgment and the plaintiffs’ motion to remand. Both parties have presented materials outside the complaint, and a number of exhibits were attached to the state court complaint. The majority of those materials that were not attached to the complaint were referenced directly in the complaint. The Court has reviewed the pleadings and motion papers and finds that the papers adequately set forth the relevant facts and law and oral argument will not aid in the disposition of the motion to dismiss. Therefore, it is ORDERED that the motion be decided on the papers submitted. See E.D. Mich. LR 7.1(f)(2). The plaintiffs, Michael and Suzie Baker, have resided at the subject property, 5142 N. Territorial Road, Dexter, Michigan, for nine years. On May 15, 2006, the plaintiffs executed a loan for $937,500, secured by a mortgage, with Franklin Financial. Mortgage Electronic Registration Systems is named in the mortgage as the nominee mortgagee. The plaintiffs allege that there is no record that Franklin Financial existed as a California corporation or was registered to do business in Michigan at the time the mortgage and loan were executed and therefore that the mortgage is void. The plaintiffs failed to make payments on the loan. The complaint alleges that defendant Residential Funding was not the servicer of the mortgage. Defendant Residential Funding relied on an assignment of mortgage dated November 10, 2006 and recorded on December 7, 2006 for its authority to foreclose. The assignment states that MERS assigned its interest in the mortgage to Residential Funding. The plaintiffs allege that the assignment purported to assign both the mortgage and the note to Residential Funding, but that MERS had no interest in the note. The plaintiffs allege -2- that the assignment was signed by Matthew Favorite, an employee of Residential Funding, as vice president of MERS, despite the fact that Favorite was not authorized to sign on MERS’s behalf. The plaintiffs allege that Residential Funding acted in concert with Orlans to initiate the foreclosure, and that Orlans supplied the assignment language despite knowing that MERS held no interest in the note. The plaintiffs allege that Orlans sent a letter to the plaintiffs prior to the sheriff’s sale that identified Residential Financial as either the creditor or the servicer, and that the letter was phrased to conceal the actual owner of the note and mortgage in a manner inconsistent with the Fair Debt Collection Practices Act. A sheriff’s sale was held on February 27, 2007, and a sheriff’s deed was conveyed to Residential Funding. The redemption period expired on February 27, 2008 and the plaintiffs did not redeem the property. The plaintiffs filed for Chapter 13 bankruptcy, but the case was dismissed on January 24, 2008. The plaintiffs again filed for Chapter 13 bankruptcy on February 12, 2008. The plaintiffs did not list any claim related to the foreclosure or the subject property on their bankruptcy schedules. That action was converted to a Chapter 7 bankruptcy on May 11, 2008 and discharged on August 26, 2008. In November 2008, Residential Funding filed an action for eviction in Michigan’s 14A District Court. Residential Funding and the plaintiffs reached a consent judgment for possession on December 31, 2008. On March 20, 2009, the plaintiffs filed a complaint in the Washtenaw County, Michigan circuit court against Residential Financial and Homecomings Financial, LLC based on violations of the Michigan Consumer Protection Act. The circuit court granted the defendants’ motion for summary disposition on October 27, 2009 based on the plaintiffs’ failure to respond to the motion. -3- The plaintiffs filed a motion to vacate that order on November 4, 2009, which was denied on January 20, 2010. The plaintiffs appealed to the Michigan Court of Appeals on February 10, 2010, and the appeal was denied on April 4, 2010 because of defective filings. After a motion for reconsideration, which was granted on June 15, 2010, the Michigan Court of Appeals denied the plaintiffs’ appeal on July 26, 2010. On August 11, 2011, Residential Funding moved for a writ of eviction in the 14A District Court. After engaging counsel, the plaintiffs filed a motion to set aside the consent judgment of possession. The 14A District Court denied the motion on October 26, 2011 on the basis of res judicata, relying on the decisions of the Washtenaw County Circuit Court and the Michigan Court of Appeals. The court found that the plaintiffs had the opportunity to raise any counter-claims or evidence suggesting that the foreclosure was wrongful in the eviction action in the 14A District Court and also in the Washtenaw County Circuit Court. The plaintiffs allege that they did not discover the above facts regarding the assignment of the mortgage until May 2011, after briefs were filed before the Michigan Court of Appeals. The plaintiffs state that on March 31, 2009, Michelle Brown, an employee of Homecoming Financial, LLC, faxed the plaintiffs a copy of a corporate resolution between defendant Residential Funding and MERS, dated December 1, 1999. According to the plaintiffs, this list included all of the individuals authorized to sign on behalf of MERS as of August 23, 2006, but did not include Matthew Favorite. The plaintiffs state that they received a further list of authorized signers on June 1, 2010 that again did not include Matthew Favorite. On December 3, 2010, the plaintiffs received from GMAC a copy of their note with an endorsement in blank from Franklin Financial. Also included in that correspondence was an undated allonage from Franklin Financial to Countrywide -4- Bank, NA. On May 19, 2011, the plaintiffs received another copy of the note from GMAC, which was endorsed to Residential Financial. The plaintiffs allege that the note was endorsed to Residential Financial after December 3, 2010. On November 15, 2011, the plaintiffs filed the present complaint in the Washtenaw County Circuit Court. The complaint contains ten counts. The first count is titled “The 22nd Circuit Court Lacked Subject Matter Jurisdiction Thereby Depriving its Ruling of Res Judicata Effect.” Compl. ¶¶ 24-34. The second count is titled “Defendants Perpetrated a Fraud Upon the 14A District Court and the 22nd Circuit Court Thereby Wrongfully Obtaining a Consent Judgment in Violation of Mich. Comp. Laws 600.2907a.” Id. ¶¶ 35-82. Count III alleges concert of action. Id. ¶¶ 83-85. Count IV seeks quiet title based on violations of Mich. Comp. Laws §§ 600.605 and 600.2932. Id. ¶¶ 86- 90. Count V alleges wrongful foreclosure based on a failure to comply with the requirements of Mich. Comp. Laws § 600.3204, in that defendant Residential Funding allegedly was not the owner of the note. Id. ¶¶ 91-102. The remainder of the counts allege violations of various Michigan statutes, including Mich. Comp. Laws § 565.371 (fraudulent conveyance), § 600.1701 (misconduct and abuse of process), § 600.2907a (encumbering property through recording of a document without lawful cause), § 600.5855 (fraudulent concealment of a claim or identity of person liable), and, against defendant Orlans, § 445.252 (regulation of collection practices). Id. ¶¶ 103-113. In their prayer for relief, the plaintiffs request that all foreclosure proceedings and proceedings for possession be stayed, that a temporary restraining order be entered, that the sheriff’s sale and consent judgment in the eviction proceedings be set aside, that the note and mortgage be declared void, and that the plaintiffs be awarded damages. Compl. at 22. The Wastenaw County Circuit Court granted a temporary restraining order against defendant Residential Funding. -5- The defendants filed a notice of removal on November 23, 2011. The defendants asserted in the notice that defendant Orlans was joined fraudulently and therefore that the lack of complete diversity did not render the removal invalid. The defendants filed a motion to dismiss on December 9, 2011 and a motion for sanctions on January 3, 2012. The plaintiffs responded to these motions on December 28, 2011 and January 16, 2012, respectively. The plaintiffs filed a motion to remand on February 23, 2012, and the defendants responded on February 28, 2012. II. Because the Court cannot rule on the defendants’ motions to dismiss and for sanctions if it lacks jurisdiction to hear the action, the Court must address subject matter jurisdiction first. The plaintiffs filed a motion to remand for lack of jurisdiction based on the Rooker-Feldman doctrine. That argument is not persuasive. However, the lack of complete diversity leaves the Court with no basis to find jurisdiction to adjudicate the claims. A. The plaintiffs argue that this Court does not have jurisdiction over their claims because their prayer for relief is that the Court set aside the state court’s judgment and take other action that could only be taken if the state court’s judgment were invalidated. The plaintiffs reason that the Rooker- Feldman doctrine establishes that the Court has no jurisdiction to review the prior state court judgment. The defendants disagree. They argue, first, that the Rooker-Feldman doctrine does not apply to removed actions. The defendants point to language in Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280 (2005), limiting the doctrine to “cases brought by state-court losers complaining of injuries caused by state-court judgments.” Id. at 284. The defendants argue that because the plaintiffs did not bring the case in federal court, the case does not fall into this category. -6- The Rooker-Feldman doctrine, named after the decisions in Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983), prohibits federal courts below the United States Supreme Court from exercising “appellate jurisdiction over the decisions and/or proceedings of state courts, including claims that are ‘inextricably intertwined’ with issues decided in state court proceedings.” Exec. Arts Studio, Inc., v. City of Grand Rapids, 391 F.3d 783, 793 (6th Cir. 2004) (citations omitted). The doctrine stands for the proposition that “the lower federal courts do not have jurisdiction ‘over cases brought by “state-court losers” challenging “state-court judgments rendered before the district court proceedings commenced.”’” Raymond v. Moyer, 501 F.3d 548, 550-51 (6th Cir. 2007) (quoting Lance v. Dennis, 546 U.S. 549, 460 (2006), and Exxon Mobil, 544 U.S. at 284). The Rooker-Feldman doctrine is premised on the notion that only the Supreme Court has jurisdiction to review state court judgments. See 28 U.S.C. § 1257. The Rooker-Feldman doctrine, . . . is confined to cases of the kind from which the doctrine acquired its name: cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments. Rooker-Feldman does not otherwise override or supplant preclusion doctrine or augment the circumscribed doctrines that allow federal courts to stay or dismiss proceedings in deference to state-court actions. Exxon Mobil Corp., 544 U.S. at 284. The doctrine has been applied by the Supreme Court only twice — in the two cases that gave the doctrine its name. Id. at 283. Instead, the Supreme Court has directed that most actions should be dealt with on preclusion grounds, rather than jurisdiction. See id. at 293 (“Nor does § 1257 stop a district court from exercising subject-matter jurisdiction simply because a party attempts to litigate in federal court a matter previously litigated in state court. If a federal plaintiff ‘present[s] some independent claim, albeit one that denies a legal conclusion -7- that a state court has reached in a case to which he was a party . . . , then there is jurisdiction and state law determines whether the defendant prevails under principles of preclusion.’” (quoting GASH Assocs. v. Rosemont, 995 F.2d 726, 728 (7th Cir. 1993 ; Todd v. Weltman, Weinberg & Reis Co., L.P.A., 434 F.3d 432, 437 (6th Cir. 2006) (holding that “even if the [plaintiff’s] independent claim was inextricably linked to the state court decision, preclusion law was the correct solution to challenge the federal claim, not Rooker-Feldman”). The defendant’s argument that the doctrine only applies to original federal actions is not well-taken. The Sixth Circuit has applied the Rooker-Feldman doctrine in cases that have been removed from state court, albeit prior to the decision in Exxon Mobil. See Anderson v. Charter Tp. of Ypsilanti, 266 F.3d 487, 492-93 (6th Cir. 2001). The Sixth Circuit apparently has not had occasion to address the question of whether Rooker-Feldman applies to removed actions since Exxon Mobil. Moreover, other circuits routinely have applied Rooker-Feldman to removed actions since that decision, although some courts found that the doctrine does not apply for other reasons. See Jones v. Commonwealth Land Title Ins. Co., 459 F. App’x 808, 810 (11th Cir. 2012) (finding that Rooker-Feldman did not apply because state court judgment was not final); R.R. Street & Co. Inc. v. Transport Ins. Co., 656 F.3d 966, 974 (9th Cir. 2011) (finding that Rooker-Feldman did not apply because there was no final state court judgment); PJ ex rel. Jensen v. Wagner, 603 F.3d 1182, 1193- 94 (10th Cir. 2010) (finding that Rooker-Feldman barred malicious prosecution claims removed from state court); Bergquist v. Mann Bracken, LLP, 592 F.3d 816, 818 (7th Cir. 2010) (finding that Rooker-Feldman applied to some removed claims). The logic undergirding the Rooker-Feldman doctrine — that federal district courts lack jurisdiction to review state court judgments — applies equally in the context of removed actions. The Court is not vested with jurisdiction to review state -8- court judgments — if that is truly what the Court is being asked to do here — simply because it is the defendant, rather than the plaintiff, who has invoked the federal forum. Nor does the language of Exxon Mobil compel such a result; the Supreme Court referred only to “cases brought by state court losers,” not to “cases brought in federal court by state court losers.” The plaintiffs’ case qualifies as one brought by serial state-court losers, satisfying that requirement. The defendants also argue that even if the Court determines that Rooker-Feldman applies to removed actions, the plaintiffs’ suit is not one “complaining of injuries caused by state-court judgments . . . and inviting district court review and rejection of those judgments.” Exxon Mobil, 544 U.S. at 284. The Court agrees. The plaintiffs’claim, at its base, is that the defendants improperly foreclosed upon the subject property. The source of the injury in this case is not the state court judgments, but rather the defendants’ allegedly improper actions in foreclosing without a valid assignment of the mortgage and in seeking to evict the plaintiffs from their home on this basis. Although it is true that in order to grant the plaintiffs relief on this claim the Court would be required to “den[y] a legal conclusion that a state court has reached in a case” to which the plaintiffs were party, this alone is not sufficient to demonstrate that the Court lacks jurisdiction. Exxon Mobil, 544 U.S. at 293 (internal quotation omitted). The plaintiffs argue that the 14A District Court should not have entered the consent judgment of possession not because the state court erred, but rather because the defendants perpetrated fraud on that court. The source of the plaintiffs’ injury was thus not the state court judgment itself, but rather the defendant’s actions that lead to the allegedly inappropriate consent judgment. See McCormick v. Braverman, 451 F.3d 382, 392-93 (6th Cir. 2006) (finding that claims that “state court judgments were procured by certain Defendants through fraud, misrepresentation, or other improper means” were not barred by Rooker-Feldman). -9- In their complaint, the plaintiffs do not ask this Court to review state court judgments. Instead, they ask that this Court find that the defendant obtained those judgments through fraud. That theory of recovery does not implicate the jurisdictional concerns of the Rooker-Feldman doctrine. B. Although neither party raises the issue in any of their motions or responses, another jurisdictional issue exists in the case and must be addressed. The case was removed from state court on the basis of diversity jurisdiction, and the complaint raises no federal issues. However, as the defendants acknowledged in their notice of removal, the plaintiffs are Michigan residents and defendant Orlans is a citizen of Michigan. Therefore, complete diversity does not exist in this case. The defendants argue in their notice of removal that defendant Orlans was fraudulently joined to defeat diversity jurisdiction. They argued in their removal notice that there can be no colorable claim against Orlans on the basis of Orlans’s representation of Residential Funding during the foreclosure process. Title 28, section 1441(a) of the United States Code permits defendants in civil actions to remove cases originally filed in state courts to federal district courts where the district court would have had original jurisdiction. The plaintiffs have not alleged a federal cause of action in their complaint; therefore, removal is proper only if this Court would have had original jurisdiction based on diversity of citizenship. It is axiomatic that federal diversity jurisdiction exists only when “no plaintiff and no defendant are citizens of the same state.” Jerome-Duncan, Inc. v. Auto-By-Tel, L.L.C., 176 F.3d 904, 907 (6th Cir. 1999) (citing United States Fidelity & Guar. Co. v. Thomas Solvent Co., 955 F.2d 1085, 1089 (6th Cir. 1992 . Therefore, complete diversity of citizenship must -10- exist “both at the time that the case is commenced and at the time that the notice of removal is filed.” Ibid. (citing Easley v. Pettibone Mich. Corp., 990 F.2d 905, 908 (6th Cir. 1993 . There is no dispute that defendant Orlans and the plaintiffs are all Michigan citizens for diversity purposes, and therefore complete diversity does not exist. The doctrine of fraudulent joinder, however, constitutes an exception to the complete diversity rule. “When a non-diverse party has been joined as a defendant, then in the absence of a substantial federal question the removing defendant may avoid remand only by demonstrating that the non-diverse party was fraudulently joined.” Jerome-Duncan, Inc., 176 F.3d at 907 (quoting Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir. 1992 . Establishing that joinder of a party is “fraudulent” requires no proof of the plaintiff’s actual motive. Ibid.; see also 16 Moore’s Fed. Prac. § 107.14(2)(c) (noting that “[t]he term ‘fraudulent joinder’ is a bit misleading because it requires neither a showing of fraud nor joinder in one sense”). Rather, the thrust of the inquiry is “whether [the plaintiff] had at least a colorable cause of action against [the non-diverse defendant] in the Michigan state courts.” Jerome- Duncan, 176 F.3d at 907 (citing Alexander v. Elec. Data Sys. Corp., 13 F.3d 940, 949 (6th Cir. 1994 . Federal courts look to state law to determine whether a plaintiff states “a colorable cause of action” against the non-diverse defendant. Ibid. The plaintiffs’ claims against Orlans are based on Orlans’ conduct as Residential Funding’s attorney on the plaintiffs’ foreclosure proceedings. The plaintiffs’ factual allegations against Orlans — contained in paragraphs 36, 42, 55, and 71 through 81 of the complaint — are that Orlans wrongfully initiated the foreclosure, supplied Residential Funding with language to use in the assignment, conspired with Residential Funding to hide information from the plaintiffs, and sent a -11- misleading demand letter to the plaintiffs prior to the sheriff’s sale. All of those actions were taken in connection with Orlans’s representation of Residential during the foreclosure process. It is well-settled under Michigan law that an opposing party cannot pursue a claim against foreclosure counsel under a negligence theory based on an alleged injury suffered as a result of foreclosure proceedings. “Only if the law recognizes a duty to act with due care arising from the relationship of the parties does it subject the defendant to liability for negligent conduct.” Friedman v. Dozorc, 412 Mich. 1, 22, 312 N.W.2d 585, 591 (1981). The Michigan Supreme Court has declined to find that an attorney’s responsibility “to conduct a reasonable investigation prior to bringing an action . . . [is] the functional equivalent of a duty of care owed to the client’s adversary,” determining that “such a duty [is] inconsistent with the basic precepts of the adversary system . . . [and] would create an unacceptable conflict of interest which would seriously hamper an attorney’s effectiveness as counsel for his client.” Friedman, 412 Mich. at 22-24, 312 N.W.2d at 591-92; see also Johnson v. Trott & Trott, No. 12-10513, 2012 WL 3150954, at *6 (E.D. Mich. Aug. 2, 2012); Barthlow v. Trott & Trott, No. 10-11902, 2010 WL 3258362, at *3 (E.D. Mich. Aug. 17, 2010). The concerns underlying that rule plainly bar claims based on the plaintiffs’ first three factual allegations, which essentially seek to hold Orlans liable for representing Residential Funding in the foreclosure process. However, the plaintiffs also bring a claim under the Michigan Collection Practices Act, Mich. Comp. Laws § 445.252, which regulates debt collection practices. The MCPA prohibits “regulated persons,” including “[a]n attorney handling claims and collections on behalf of a client and in the attorney’s own name,” from engaging in a variety of collection practices. Mich. Comp. -12- Laws § 455.251(g). The plaintiffs allege that defendant Orlans has violated the provisions prohibiting regulated persons from (b) Using forms or instruments which simulate the appearance of judicial process. . . . (e) Making an inaccurate, misleading, untrue, or deceptive statement or claim in a communication to collect a debt or concealing or not revealing the purpose of a communication when it is made in connection with collecting a debt. (f) Misrepresenting in a communication with a debtor 1 or more of the following: (i) The legal status of a legal action being taken or threatened. (ii) The legal rights of the creditor or debtor. (iii) That the nonpayment of a debt will result in the debtor’s arrest or imprisonment, or the seizure, garnishment, attachment, or sale of the debtor's property. (iv) That accounts have been turned over to innocent purchasers for value. Mich. Comp. Laws § 445.252(b), (e), (f). Although the plaintiffs state that this claim is addressed to the “fraud perpetrated upon the court,” that claim appears to be based on the plaintiffs’ fourth set of factual allegations concerning the allegedly misleading demand letter they received from Orlans; that allegation of a communication with the plaintiffs could conceivably be covered under the sections of the MCPA cited in the complaint. The plaintiffs allege that the demand letter is “vague and ambiguous as to the identity of the servicer and creditor of the subject loan,” because it alleged that defendant Orlans represented defendant Residential and that defendant Residential was either the creditor or the servicer. Compl. ¶ 72, 73. The plaintiffs also allege that defendant Residential was neither the creditor nor the servicer at the time of the foreclosure. Id. ¶¶ 38, 69. Defendant Orlans certainly is a regulated person under the MCPA. See Misleh v. Timothy E. Baxter & Associates, 786 F. Supp. 2d 1330, 1335-38 (E.D. Mich. 2011). The plaintiffs have alleged that Orlans represented in a communication to them that Residential Funding was either the creditor or servicer of their loan, when in fact, the plaintiffs allege, that was not the case. That qualifies as “an inaccurate, misleading, untrue, or deceptive statement or claim.” Mich. Comp. Laws -13- § 455.252(e). And the plaintiffs have alleged that the statement was contained in a demand letter, which qualifies as a “communication to collect a debt.” Ibid. The plaintiffs’ likelihood of success on this claim may be remote. However, the question is not whether the plaintiffs have alleged a claim that is likely to succeed, but instead “whether [the plaintiff] had at least a colorable cause of action against [the non-diverse defendant] in the Michigan state courts.” Jerome-Duncan, 176 F.3d at 907 (citing Alexander v. Elec. Data Sys. Corp., 13 F.3d 940, 949 (6th Cir. 1994 . The plaintiffs’ MCPA claim is a colorable cause of action against defendant Orlans, and fraudulent joinder does not apply. III. The case was removed on the basis of diversity jurisdiction. The plaintiffs’ argument that jurisdiction is lacking based on the Rooker-Feldman doctrine has no merit. However, because diversity is not complete, the requirements of 28 U.S.C. §§ 1441(a) and 1332(a) have not been satisfied. Therefore, the Court does not have subject matter jurisdiction over the case. Accordingly, it is ORDERED that the plaintiffs’ motion to remand [dkt. # 15] is DENIED. It is further ORDERED that the case is remanded to the Washtenaw County, Michigan circuit court. It is further ORDERED that the defendants’ motions to dismiss [dkt. #2] and for sanctions [dkt. #8] are DISMISSED. Dated: August 13, 2012 s/David M. Lawson DAVID M. LAWSON United States District Judge -14- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 13, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -15-

=== UNITED STATES OF AMERICA v. HUSSAIN N. ABDULKADIN ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, Case No. 12-20092 Honorable David M. Lawson v. HUSSAIN N. ABDULKADIN, __________________________________/ Defendant. OPINION AND ORDER DENYING MOTION TO SUPPRESS EVIDENCE Police officers in Detroit, Michigan arrested defendant Hussain Abdulkadin at his home on November 30, 2011 and then conducted a protective sweep of his house, during which they discovered two firearms: a Glenfield Model 60, .22 caliber long rifle with a missing serial number and a black Ruger .22 caliber rifle with serial number 353-31112. The defendant was charged with being a felon in possession of firearms, and he has filed a motion to suppress the guns because they were seized without a warrant. In Maryland v. Buie, 494 U.S. 325 (1990), the Supreme Court held that protective sweeps are allowable “as a precautionary matter and without probable cause or reasonable suspicion, [of] . . . spaces immediately adjoining the place of arrest from which an attack could be immediately launched,” and of other spaces if the officers have “articulable facts which, taken together with the rational inferences from those facts, would warrant a reasonably prudent officer in believing that the area to be swept harbors an individual posing a danger to those on the arrest scene.” Id. at 334. The Court held an evidentiary hearing on June 19, 2012 at which it concluded that the government failed to establish articulable facts that would justify a more pervasive protective sweep under the second prong of Buie’s holding. The Court then ordered the parties to submit additional briefs on whether the protective sweep was justified under Buie’s first prong, that is, whether the bedroom in which the guns were found constituted a space immediately adjoining the place of arrest. The parties submitted supplemental briefs on July 8, 2012, and the matter is ready for decision. I. According to the testimony, on November 30, 2011 at approximately noon, Officers Eric Smigielski, Matthew Miller, and Jesse Johns of the Detroit Police Department went to 6361 St. Mary’s Street, Detroit, Michigan, to serve an arrest warrant for drug possession on the defendant. The officers knocked and announced their presence. The defendant’s wife, Nermil Ghali, answered the door. Officer Miller asked her if the defendant was home and she replied “No” as she attempted to pull the door closed. From the doorway, Miller looked over Ghali’s shoulder and saw the defendant standing in the living room of the house. The officers entered the premises and arrested the defendant in the living room without incident. Defendant Abdulkadin was taken into custody in the living room. Officer Smigielski then walked the defendant’s wife to the back room of the house to retrieve a coat and shoes for the defendant. As he walked her toward the bedroom area, he conducted a protective sweep. When Officer Smigielski entered the southwest, back bedroom, he observed in plain view inside the closet a .22 caliber long rifle and an open black rifle case. Inside the open rifle case he saw a black rifle. Officer Johns also swept the upstairs bedroom but apparently found no incriminating evidence. Officer Miller testified that the defendant’s home was approximately 900 square feet, and that immediately upon entering the house, one encounters the living room, a kitchen and dining room to the left of the living room, and a hallway leading to the back bedrooms behind the living room. Officer Smigielski testified that the hallway to the bedroom area was approximately ten to -2- fifteen feet, or two to three strides. Smigielski also testified that the stairway for the upstairs bedroom was located next to the southwest bedroom. Officer Johns testified that the southwest bedroom was approximately six feet down the hall from the living room, and that he could see Officer Smigielski enter the southwest bedroom from where he was standing in the living room. The officers admitted at the hearing that none of them knew of any reason to suspect that others might be present in the house at the time of the arrest. II. It is well established that warrantless searches of a home are presumptively unreasonable. El Bey v. Roop, 530 F.3d 407, 419-20 (6th Cir. 2008) (citing Payton v. New York, 445 U.S. 573, 586 (1980 ; see also United States v. Archibald, 589 F.3d 289, 295 (6th Cir. 2009) (noting that the government bears the burden of proving the constitutionality of a protective sweep). However, the Supreme Court created a limited exception authorizing police officers “making arrests in the home to conduct a ‘protective sweep’ — a ‘quick and limited search of the premises, incident to an arrest and conducted to protect the safety of the police officers and others.’” United States v. Stover, 474 F.3d 904, 911 (6th Cir. 2007) (quoting Buie, 494 U.S. at, 327). The Buie Court pronounced the following two holdings: First, during a search incident to an arrest occurring inside a home, officers may “as a precautionary matter and without probable cause or reasonable suspicion, look in closets and other spaces immediately adjoining the place of arrest from which an attack could be immediately launched.” Second, officers may conduct a search more pervasive in scope when they have “articulable facts which, taken together with the rational inferences from those facts, would warrant a reasonably prudent officer in believing that the area to be swept harbors an individual posing a danger to those on the arrest scene.” -3- United States v. Colbert, 76 F.3d 773, 776 (6th Cir.1996) (quoting Buie, 494 U.S. at 334) (internal citations omitted). In United States v. Archibald, 589 F.3d 289 (6th Cir. 2009), the Sixth Circuit further explained Buie: The first type of sweep requires no probable cause or reasonable suspicion, while the second requires articulable facts which, taken together with the rational inferences from those facts, would warrant a reasonably prudent officer in believing that the area to be swept harbors an individual posing a danger to those on the arrest scene. . . . The . . . second kind of sweep is not a full search of the premises, but extend[s] only to a cursory inspection of those spaces where a person may be found and should last no longer than is necessary to dispel the reasonable suspicion of danger and in any event no longer than it takes to complete the arrest and depart the premises. 589 F.3d at 295 (internal citations and quotations omitted). It is apparent that the sweep of the upstairs bedroom was improper. As noted at the conclusion of the hearing, the police could not articulate any reason to suspect that another person was present in the house, particularly the upstairs bedroom. United States v. Akrawi, 920 F.2d 418 (6th Cir. 1990). And although the Sixth Circuit has not had occasion to discuss what might constitute a “space[] immediately adjoining the place of arrest from which an attack could be immediately launched,” the second story of a house does not appear to qualify. See id. at 421. But the guns were not found upstairs. They were found in the back bedroom. The rationale that justifies the first type of sweep allowed by Buie is solely the safety of the arresting officers. The Supreme Court explained: [T]here is an . . . interest of the officers in taking steps to assure themselves that the house in which a suspect is being, or has just been, arrested is not harboring other persons who are dangerous and who could unexpectedly launch an attack. The risk of danger in the context of an arrest in the home is as great as, if not greater than, it is in an on-the-street or roadside investigatory encounter. A Terry or Long frisk occurs before a police-citizen confrontation has escalated to the point of arrest. A protective sweep, in contrast, occurs as an adjunct to the serious step of taking a person into custody for the purpose of prosecuting him for a crime. Moreover, -4- unlike an encounter on the street or along a highway, an in-home arrest puts the officer at the disadvantage of being on his adversary’s “turf.” An ambush in a confined setting of unknown configuration is more to be feared than it is in open, more familiar surroundings. We recognized in Terry that “[e]ven a limited search of the outer clothing for weapons constitutes a severe, though brief, intrusion upon cherished personal security, and it must surely be an annoying, frightening, and perhaps humiliating experience.” Terry [v. Ohio], 392 U.S. [1], 24-25 [(1968)]. But we permitted the intrusion, which was no more than necessary to protect the officer from harm. Nor do we here suggest, as the State does, that entering rooms not examined prior to the arrest is a de minimis intrusion that may be disregarded. We are quite sure, however, that the arresting officers are permitted in such circumstances to take reasonable steps to ensure their safety after, and while making, the arrest. That interest is sufficient to outweigh the intrusion such procedures may entail. Buie, 494 U.S. at 333-34. The determination, then, whether a sweep is proper must be based on the objective facts viewed as they were presented to the officer on the scene. So viewed, if it appears that the space was so proximate to the location of the arrest that an attack could have been launched or the officer could have been put in peril, the sweep is proper. According to the Supreme Court, “pruden[ce]” is the watchword. Id. at 327. The Sixth Circuit case law suggests that there must be some measure of immediacy to the location of the arrest. A sweep of rooms that are not connected to the arrest site likely will not be justified under the first Buie exception. In United States v. Stover, 474 F.3d 904 (6th Cir. 2007), defendants Stover and Hinton were convicted of various drug crimes. Federal agents went to Hinton’s home to execute an arrest warrant for his arrest. Before entering the home, the agents observed two cars parked in Hinton’s driveway, one of which was not registered to Hinton. While approaching Hinton’s duplex, the agents saw “that there was a light on in the living room, and they could hear noise, which they later determined to be the television. The officers pounded on the door and announced themselves as police. The door was unlocked, and the officers pushed it open. The -5- officers could hear movement inside the house. They entered the house, continuing to announce their presence. Shortly after they were inside, Defendant Hinton came down from the upstairs. While Defendant Hinton was being arrested, Defendant Hinton’s son came down from the upstairs.” Id. at 910. After Hinton was arrested, an officer “left to clear the rest of the house” because of the car parked outside. The officer “went from the living room to the adjacent kitchen. Upon entering the kitchen, he opened a doorway that led into the attached garage. When he looked into the attached garage, he could see that towards the back of the garage, there was another room with light coming from it. He cleared the garage area and discovered that there was a laundry room in the back. To the left of the entrance to the laundry room, there was a door to a crawl space, about three feet by three feet large, and light was emanating from the crawl space. [The] [o]fficer . . . cleared the room and found a marijuana growing operation inside the crawl space, which included multiple marijuana plants. Another officer found a handgun in the upstairs that was in plain view.” Ibid. (footnote omitted). Hinton moved to suppress the evidence on the ground that the search exceeded the permissible scope of a protective sweep, and the district court denied Hinton’s motion to suppress. The Sixth Circuit reversed. The court explained: The testimony of officer Bellinger reveals that, in order to find the marijuana plants, he had to go through the kitchen, open the kitchen door, enter the attached garage, enter the laundry room, and then lean all the way into the crawl space. Nor was the gun, found upstairs, in the area immediately adjoining the downstairs living room where Defendant Hinton’s arrest occurred. Ibid. The court held that neither the marijuana plants nor the gun was in a place that could be considered in the immediately adjoining spaces or rooms. Id. at 911. Contrast that decision with the one in United States v. Kaler, 11 F. App’x 400 (6th Cir. 2001). There, police officers “forcibly entered Kaler’s hotel room . . . to execute an arrest warrant -6- for both Kaler and his companion, John Paul Jones.” Id. at 401. After securing Kaler, Jones, and an unidentified female, “one of the officers pushed open the adjoining bathroom door, turned on the light, stepped into the bathroom, and pushed back the shower curtain,” and discovered approximately 5,000 pills in various plastic bags. Ibid. The district court denied Kaler’s motion to suppress the pills. On appeal, the Sixth Circuit acknowledged that the bathroom constituted an “immediately adjoining space” under Buie and held that it was proper for the officer to pull back the shower curtain because the bathtub was large enough to hide an adult. Id. at 402. Other courts provide guidance as well. In United States v. Thomas, 429 F.3d 282 (D.C. Cir. 2005), U.S. Marshals went to Thomas’s apartment to execute an arrest warrant. The apartment looked like this: “The front door to Thomas’ one-bedroom apartment opens immediately into a hallway. A foot or two to the left is the entrance to the living room and to the right are doorways off the hallway leading to the kitchen, bathroom, and bedroom. The bedroom door at the far end of the hall is 15 feet from the entrance to the apartment. 429 F.3d at 284-85. The defendant was apprehended in the hallway immediately inside his front door. The officers then conducted a sweep of the apartment, including the defendant’s bedroom, which was located fifteen feet from the entrance to the apartment. Id. at 284. The court found the search permissible, reasoning that the entrance to the bedroom was a straight shot down the hallway, and therefore the bedroom was an immediately adjoining space. Id. at 287. The court also suggested that if an apartment is small enough, all of it could be searched because every room immediately adjoined the place of arrest and could be used to launch an immediate attack. Id. at 287-88. In United States v. Lauter, 57 F.3d 212 (2d Cir. 1995), ATF agents executed an arrest warrant for the defendant at his small, two-room apartment. After the defendant was arrested in the -7- first room, an agent went into the back room, and a few moments later, returned escorting Lauter’s girlfriend out of the backroom. A second agent went into the back room “to ‘back up’ [the first agent] and to finish ‘conducting a security sweep of that room.’” Id. at 214. During the sweep, the second agent saw and seized a shotgun protruding from underneath the bed in the back room. The district court denied the defendant’s motion to suppress the shotgun, finding that the back room was immediately adjoining the place of arrest. Ibid. On appeal, the defendant argued that the protective sweep was impermissibly broad. The court of appeals held that the second agent’s sweep was permissible given the small size of the apartment. Id. at 217; see also United States v. Alejandro, 100 F. App’x 846, 848 (2d Cir. 2004) (“Particularly when a district court finds that an apartment is small, an immediately adjoining room is searchable under the ‘protective sweep’ exception.”). In United States v. Lay, 182 F.3d 911 (4th Cir. June 29, 1999) (table), police officers traveled to Lay’s residence to execute an arrest warrant for a murder. After Lay opened the door in response to the officers’ knocks, “he was ordered to lie on the floor and asked whether anyone else was in the premises. When he failed to respond, the officers conducted a protective sweep of the entire one-bedroom apartment.” 182 F.3d 911, at *1. The officers found drugs in a large locker in the bedroom. The district court denied Lay’s motion to suppress based on its finding that “the arrest occurred in ‘a small apartment where effectively every room adjoins every other room.’” Id. at *2. On appeal, Lay asserted, among other things, that the search of his home was improper because the bedroom was not immediately adjoining the area just inside the front door where the arrest took place. The court of appeals rejected Lay’s argument, reasoning: The district court’s ruling is amply supported by the evidence and is in accord with principles enunciated in Buie. One of the arresting officers testified that the distance from the front door through the living room to the bedroom door was fifteen feet. A diagram introduced at the suppression hearing showed that the bedroom did indeed -8- share a wall with the living room but that the door to the bedroom opened into a hallway rather than directly into the living room. However, the same diagram reveals that someone exiting the bedroom would immediately have full view of the area of the arrest, as much or nearly as much as if the bedroom opened directly into the living room. The clear implication of the court’s oral ruling is that the focus of Buie — the possibility of sudden violence to police officers engaged in a dangerous task in unfamiliar territory — militates against the interpretation Lay proposes for the term “immediately adjoining area.” Ibid. In In re Sealed Case 96-3167, 153 F.3d 759 (D.C. Cir. 1998), officers followed the defendant into a home to which the officers believed the defendant had forced entry to burglarize. Once he submitted, the officers chased the defendant up a flight of stairs and into a bedroom. The officers led the defendant, who was not handcuffed, into the hallway, patted him down, and took him to the first floor to hand him to other officers that had just arrived. Id. at 762-63. One of the officers first on the scene immediately returned to the upstairs bedroom in which the defendant was found, searched the room, and found a bag with several large white rocks and a semiautomatic handgun. The officer went back downstairs and handcuffed the defendant. After handcuffing the defendant, two officers made a cursory examination of the house. In a small bedroom on the second floor, adjacent to the room in which the defendant was apprehended, the officers found a bag containing white rocks and a triple-beam scale. Id. at 763. The defendant moved to suppress, and the district court denied his motion, reasoning that the items found in the small bedroom were seized during a valid protective sweep because the small bedroom “‘was only a few feet from the larger bedroom door and only a few feet from the top of the stairs,’ and ‘was a space from which an attack could be immediately launched.’” Id. at 770. On appeal, the D.C. Circuit “[saw] no reason to disturb that finding.” Ibid. (noting that United States v. Ford, 56 F.3d 265 (D.C. Cir. 1995) supported the application of Buie’s first prong). -9- The defendant cites United States v. Ford for the idea that the back bedroom cannot be considered an immediately adjoining space. That case is factually different. In Ford, the officers went to the defendant’s apartment to execute an arrest warrant. “Upon entering the apartment, the FBI agent observed [the defendant] in the apartment hallway and arrested him.” Ford, 56 F.3d at 266. An agent conducted a protective sweep, walking into the bedroom immediately adjoining the hallway in which the defendant was arrested. “Once in the bedroom, the agent spotted a gun clip in plain view on the floor, and, although he realized that there were no people in the bedroom, the agent nevertheless continued to search. He lifted a mattress under which he found live ammunition, money, and crack cocaine, and he lifted the window shades and found a gun on the window sill.” Ibid. The district court denied the defendant’s motion to suppress. On appeal, the court of appeals agreed that the bedroom was a space immediately adjoining the place of arrest, id. at 270 (“Because the arrest took place in the hallway, and the bedroom from which Ford emerged was immediately adjoining the hallway, Agent Godfrey could legitimately look in the bedroom for potential attackers.”), but held that the officer erred in searching under the mattress and behind the window shades because those were not places an immediate attack could be launched from, id. at 266. The scope of the search in Ford certainly exceeded the limits described by the Buie court, and to that extent the search was found to be improper. But the guns in this case were not found under a mattress or in an enclosed space. They were in the open in a bedroom within sight of the arrest location. Ford tends to support the notion that a bedroom just off a common hallway can amount to an immediately adjacent space. The factors used by the courts in the cited cases to determine whether a room is immediate to an arrest site include the size of the dwelling, the floor plan layout, the distance from room to -10- room, and the ease with which one might move from one space to the next. In this case, the officers testified that at most fifteen feet separated the place of arrest and the southwest bedroom where the guns were found in plain view. Officer Smigielski testified that one could cover the distance in two to three strides, and Officer Johns testified that there was a clear view from that bedroom to the living room where the arrest occurred. The Court finds that the southwest bedroom qualifies as a space immediately adjoining the place of arrest from which an attack could be launched. The officers, therefore, were justified in conducting a protective sweep of the southwest bedroom without “probable cause or reasonable suspicion.” Buie, 494 U.S. at 334. The officers seized the weapons, which they could lawfully do because they were in plain view. See United States v. Taylor, 248 F.3d 506, 512 (6th Cir. 2001) (citing Horton v. California, 496 U.S. 128, 136 (1990 . III. The Court finds that the protective sweep of the back bedroom was reasonable under the Fourth Amendment. The firearms that were discovered at that time were in plain view. The officers properly seized them. Accordingly, the defendant’s motion to suppress the evidence [dkt. #14] is DENIED. Dated: July 25, 2012 s/David M. Lawson DAVID M. LAWSON United States District Judge -11- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 25, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -12-

=== James Redmond v. James Worthington and Kenneth J. Aud ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JAMES REDMOND, v. Petitioner, Case No. 07-15152 Honorable David M. Lawson JAMES WORTHINTON and KENNETH J. AUD, __________________________________________/ Respondents. OPINION AND ORDER DENYING PETITION FOR WRIT OF HABEAS CORPUS Petitioner James Redmond, the former superintendent of the Oakland Intermediate School District (OISD), was convicted of the common law crime of misconduct in office as a result of self- dealing and other acts of misconduct. He also was convicted of violating Michigan Compiled Laws § 15.322, which prohibits contracts between public servants and the public entity of which the public servant is an officer or employee. The principal bases of the charges were agreements the petitioner made or arranged between OISD and the MINDS Institute, a nonprofit organization, when the petitioner chaired the MINDS Institute board of directors and simultaneously acted as OISD superintendent. He was sentenced to concurrent custody terms of six months and ninety days for these two convictions, but he has been on bond during his direct appeals and this ensuing habeas proceeding. Redmond’s petition, filed under 28 U.S.C. § 2254, challenges the sufficiency of evidence to support the convictions; attacks the trial court’s use of a general verdict form because the jury could have convicted the petitioner on an invalid legal theory; asserts that his right to due process was violated when the court allowed the prosecutor to use as evidence of misconduct severance agreements not approved by the OISD because the examining magistrate did not bind the petitioner over for trial on that theory of misconduct; disputes the admission into evidence of a school board resolution, contending that it violated his Sixth Amendment right to confrontation; takes issue with a jury instruction that defined the mental state required for misconduct in office; and contends that the prosecutor committed misconduct in closing argument. The respondent has filed an answer to the petition, contending that the petitioner’s claims either lack merit or are procedurally defaulted. The Court finds that the petitioner’s convictions and sentences are constitutionally sound. Therefore, the Court will deny the petition. I. The parties do not contest the fact description made by the Michigan Court of Appeals on direct review, and in any event it is entitled to a presumption of correctness under 28 U.S.C. § 2254(e)(1). Wagner v. Smith, 581 F.3d 410, 413 (6th Cir. 2009). That court of appeals summarized the facts as follows: Defendant’s convictions arose out of his conduct related to his position as superintendent of the Oakland County Intermediate School District (OISD), a position which defendant held from 1995 until he was terminated by the OISD board of education (OISD board) effective January 31, 2003. The evidence at trial established that defendant failed to disclose to the OISD board that he was chairman of the board of directors of the MINDS Institute, a non-profit organization, that he entered into contracts with the MINDS Institute on behalf of the OISD while he was simultaneously acting as superintendent of the OISD and serving on the board of the MINDS Institute, which resulted in the OISD paying the MINDS Institute more than $500,000 for its services, that he failed to truthfully respond to a letter from the Michigan Department of Education inquiring whether defendant or any of his relatives profited financially from the contractual arrangement between the OISD and the MINDS Institute in that he failed to disclose that his son worked for MINDS, LLC, the for-profit companion company of the MINDS Institute, that he authorized severance packages for two OISD employees without the OISD board’s approval, that he authorized the payment of $397,220 to the MINDS Institute without a contract modification, and that he directed John Fitzgerald, Director of Financial Services of the OISD, and Mark Rajter, Assistant Superintendent for Resource Management of the OISD, to recalculate his vacation payout in a manner inconsistent -2- with the standard practices of the OISD, which resulted in defendant receiving an additional vacation payout in the amount of $6,972.50. . . . Evidence established that defendant began his employment as superintendent of the OISD in 1995 and that he became chairman of the board of the MINDS Institute in May 2000. On September 25, 2000, defendant, on behalf of the OISD, signed and entered into two three-year contracts with the MINDS Institute. These contracts were the Subscriber Agreement and the Content Agreement. At the time defendant entered into the Subscriber Agreement and the Content Agreement, he was simultaneously employed as the superintendent of the OISD and serving as chairman of the board of the MINDS Institute. The developer of MINDS, Marvin Sauer, met defendant in 1999. Sauer was seeking an educational partner that understood the educational marketplace and believed that the Oakland schools would be a good partner because the schools were well-known and well-respected. Because defendant was superintendent of the OISD, Sauer asked defendant to participate in the MINDS project so that defendant could offer his vision and guidance and assist with the direction of the MINDS project. According to Sauer, defendant was helpful in validating that the technology would make sense in an educational environment. In light of Marvin Sauer’s testimony regarding defendant’s involvement in the MINDS Institute as the concept was developing and before it was officially incorporated in April 2000, the evidence, the circumstantial evidence, and the reasonable inferences therefrom, establish that defendant solicited, either directly or indirectly, the Subscriber Agreement and the Content Agreement between the OISD and the MINDS Institute in violation of MCL 15.322(2)(b) while he was simultaneously employed as the superintendent of the OISD and acting as the chairman of the board of the MINDS Institute and that by signing those two contracts on behalf of the OISD, defendant represented the OISD in entering into the contracts in violation of MCL 15.322(3)(b). In addition, although other representatives of the OISD and not defendant signed the Contracted Services Contract between the OISD and the MINDS Institute, in which the MINDS Institute agreed to digitize 160 hours of video for the OISD in exchange for payment of $120,000, reasonable inferences from the evidence regarding defendant’s early involvement with the MINDS Institute and his meetings and discussions with OISD administrators regarding MINDS suggest that defendant was part of the discussions and negotiations that led to the formal adoption of the Contracted Services Contract. Thus, there was also sufficient evidence that defendant was involved in soliciting and negotiating the Contracted Services Contract between the OISD and the MINDS Institute in violation of MCL 15.332(2)(b) and (3)(a). People v. Redmond, No. 261458, 2006 WL 3298360, at *1-2 (Mich. Ct. App. Nov. 14, 2006) (footnotes omitted). The Oakland County, Michigan circuit court jury convicted the petitioner of misconduct in office, a common law offense preserved by Michigan Compiled Laws § 750.505, and -3- of violating Michigan Compiled Law § 15.322, which prohibits contracts between public servants and the public entity of which the public servant is an officer or employee. The trial court sentenced him to six months imprisonment and three years probation for the misconduct in office charge, and 90 days imprisonment for violating section 15.322. The petitioner then filed a direct appeal to the Michigan Court of Appeals, in which he raised the following issues: (1) insufficient evidence to sustain his convictions; (2) the trial court erred in permitting the prosecutor to present evidence at trial of improper severance agreements and vacation payout as theories under which defendant engaged in misconduct in office because the district court did not bind defendant over for trial on those two theories, and therefore the trial court lacked jurisdiction with respect to those theories; (3) the trial court erred in refusing to instruct the jury that the issue of Dr. Regis Jacobs’s severance package was no longer before it; (4) the trial court violated the petitioner’s right under the Confrontation Clause when it admitted into evidence the OISD’s resolution terminating the defendant’s employment and because the information contained in the resolution constituted hearsay and was prejudicial; (5) the trial court improperly instructed the jury on the element of corrupt intent necessary to convict defendant of the charge of misconduct in office; (6) the prosecutor made rebuttal closing arguments that were not supported by the evidence, and those arguments deprived him of a fair trial; and (7) erroneous and unconstitutional scoring of his sentencing guidelines. The court of appeals affirmed the conviction in an unpublished opinion, People v. Redmond, No. 261458, 2006 WL 3298360 (Mich. Ct. App. Nov. 14, 2006), and later denied the petitioner’s motion for reconsideration, People v. Redmond, No. 261458 (Mich. Ct. App. Jan. 8, 2007). The petitioner filed an application for leave to appeal in the Michigan Supreme -4- Court raising the same issues, and that application was denied, as was the petitioner’s motion for reconsideration. People v. Redmond, 480 Mich. 883, 960, 738 N.W.2d 225, 360 (2007). In his timely-filed habeas petition in this Court, the petitioner raises the following claims for relief: I. Petitioner’s due process rights were violated by the submission of the charges against him to the jury when no rational factfinder could have found the elements of those charges to have been proven beyond a reasonable doubt. II. Petitioner’s due process rights were violated by the submission of the misconduct in office charge to the jury in such a way that they were allowed to convict him based on an invalid legal theory. III. Petitioner’s due process rights were violated by the trial court’s submission of the misconduct in office count where the circuit court lacked jurisdiction over two of the charges subsumed by it. IV. Petitioner’s Sixth Amendment and fair trial rights were violated by the admission of a school board resolution containing extremely prejudicial “findings.” V. Petitioner’s due process rights were violated by the trial court’s instruction on the misconduct in office charge’s element of “corrupt intent.” VI. Petitioner’s due process rights were denied by uncorrected prosecutorial misconduct in closing argument. Memorandum in Support of Ptn. at 10, 31, 33, 37, 45-46, 49. On January 16, 2008, the petitioner filed an emergency motion for bond pending review of his petition for habeas corpus, which the Court granted on March 14, 2008. Thereafter, the parties filed their respective briefs. II. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the -5- standard of review federal courts must apply when considering an application for a writ of habeas corpus raising constitutional claims, including claims of ineffective assistance of counsel. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) permits a federal court to issue the writ only if the state court decision on a federal issue “was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court,” or it amounted to “an unreasonable determination of the facts in light of the evidence presented in the State court proceeding.” 28 U.S.C. § 2254(d)(1)-(2); Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Under that review standard, mere error by the state court does not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) (internal quotes omitted . Additionally, this Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). The Supreme Court has explained the proper application of the “contrary to” clause as follows: A state-court decision will certainly be contrary to [the Supreme Court’s] clearly established precedent if the state court applies a rule that contradicts the governing law set forth in our cases. . . . A state-court decision will also be contrary to this Court’s clearly established precedent if the state court confronts a set of facts that are materially indistinguishable from a decision of this Court and nevertheless arrives at a result different from [the Court’s] precedent. -6- Williams, 529 U.S. at 405-06. The Supreme Court has held that a federal court should analyze a claim for habeas corpus relief under the “unreasonable application” clause of § 2254(d)(1) “when a state-court decision unreasonably applies the law of this Court to the facts of a prisoner’s case.” Id. at 409. The Court has explained that an unreasonable application of federal law is different from an incorrect application of federal law. Under that language, “a federal habeas court may grant the writ if the state court identifies the correct governing legal principle from [the Supreme] Court’s decisions but unreasonably applies that principle to the facts of the prisoner’s case.” Williams, 529 U.S. at 413. The Supreme Court has continued to emphasize the limited nature of this review. In its recent unanimous decision in Harrington v. Richter, --- U.S. ---, 131 S. Ct. 770 (2011), the Court reiterated that the AEDPA requires federal habeas courts to review state court decisions with “deference and latitude,” and “[a] state court’s determination that a claim lacks merit precludes federal habeas relief so long as ‘fairminded jurists could disagree’ on the correctness of the state court’s decision.” Id. at 786 (quoting Yarborough v. Alvarado, , 664 (2004 . The Sixth Circuit observed recently that “[t]his is a very high standard, which the [Supreme] Court freely acknowledges.” Peak v. Webb, 673 F.3d 465, 472 (6th Cir. 2012). The court suggested that Richter holds that the review standard “is even more constricted than AEDPA’s plain language already suggests.” Ibid. The distinction between mere error and an objectively unreasonable application of Supreme Court precedent creates a substantially higher threshold for obtaining relief than de novo review. The AEDPA thus imposes a highly deferential standard for evaluating state-court rulings, and demands that state-court decisions be “given the benefit of the doubt.” Renico v. Lett, --- U.S. ---, ---, 130 S. Ct. 1855, 1862 (2010) (finding that the state court’s rapid declaration of a mistrial on -7- grounds of jury deadlock was not unreasonable even where “the jury only deliberated for four hours, its notes were arguably ambiguous, the trial judge’s initial question to the foreperson was imprecise, and the judge neither asked for elaboration of the foreperson’s answers nor took any other measures to confirm the foreperson’s prediction that a unanimous verdict would not be reached” (internal quotation marks and citations omitted ; see also Peak, 673 F.3d at 473-74; Bray v. Andrews, 640 F.3d 731, 737-39 (6th Cir. 2011); Phillips v. Bradshaw, 607 F.3d 199, 205 (6th Cir. 2010); Murphy v. Ohio, 551 F.3d 485, 493-94 (6th Cir. 2009); Eady v. Morgan, 515 F.3d 587, 594-95 (6th Cir. 2008); Davis v. Coyle, 475 F.3d 761, 766-67 (6th Cir. 2007); King v. Bobby, 433 F.3d 483, 489 (6th Cir. 2006); Rockwell v. Yukins, 341 F.3d 507, 511 (6th Cir. 2003) (en banc). Moreover, habeas review is “limited to the record that was before the state court.” Cullen v. Pinholster, --- U.S. ---, 131 S. Ct. 1388, 1398 (2011). A. The petitioner first argues that there was insufficient evidence to sustain his convictions. “[T]he Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged.” In re Winship, , 364 (1970). The critical inquiry on habeas review of the sufficiency of the evidence to support a criminal conviction is whether the record evidence could reasonably support a finding of guilt beyond a reasonable doubt . . . . [T]his inquiry does not require a court to “ask itself whether it believes that the evidence at the trial established guilt beyond a reasonable doubt.” Instead, the relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 318-19 (1979) (internal citation and footnote omitted). In the habeas context, “[t]he Jackson standard must be applied ‘with explicit reference to the substantive -8- elements of the criminal offense as defined by state law.’” Brown v. Palmer, 441 F.3d 347, 351 (6th Cir. 2006) (quoting Jackson, 443 U.S. at 324 n.16). “A reviewing court does not reweigh the evidence or redetermine the credibility of the witnesses whose demeanor has been observed by the trial court.” Matthews v. Abramajtys, 319 F.3d 780, 788 (6th Cir. 2003) (citing Marshall v. Lonberger, 459 U.S. 422, 434 (1983 . A habeas court must defer to the fact finder for its assessment of the credibility of witnesses. Id. at 788. “[A] reviewing court ‘faced with a record of historical facts that supports conflicting inferences must presume — even if it does not affirmatively appear in the record — that the trier of fact resolved any such conflicts in favor of the prosecution, and must defer to that resolution.’” McDaniel v. Brown, --- U.S. ---, ---, 130 S. Ct. 665, 673 (2010) (citations omitted). Accordingly, “[t]he mere existence of sufficient evidence to convict . . . defeats a petitioner’s claim.” Id. at 788-89. The Court does not need to be convinced that the petitioner is actually guilty beyond a reasonable doubt. Walker v. Russell, 57 F.3d 472, 475 (6th Cir.1995). “Two layers of deference apply to habeas claims challenging evidentiary sufficiency.” McGuire v. Ohio, 619 F.3d 623, 631 (6th Cir. 2010) (citing Brown v. Konteh, 567 F.3d 191, 204-05 (6th Cir. 2009 . First, the Court “must determine whether, viewing the trial testimony and exhibits in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” Brown, 567 F.3d at 205 (citing Jackson, 443 U.S. at 319). Second, if the Court were “to conclude that a rational trier of fact could not have found a petitioner guilty beyond a reasonable doubt, on habeas review, [the Court] must still defer to the state appellate court’s sufficiency determination as long as it is not unreasonable.” Ibid. 1. -9- The Michigan Supreme Court has defined misconduct in office as “‘corrupt behavior by an officer in the exercise of the duties of his office or while acting under color of his office.’” People v. Perkins, 468 Mich. 448, 456, 662 N.W.2d 727, 732 (2003) (quoting People v. Coutu, 459 Mich. 348, 354, 589 N.W.2d 458, 461 (1999 ; see also People v. Hardrick, 258 Mich. App. 238, 244-45, 671 N.W.2d 548, 552 (2003). Simple nonfeasance, malfeasance, and misfeasance are not enough. Perkins, 468 Mich. at 456, 662 N.W.2d at 732. “In the case of malfeasance and misfeasance, the offender also must act with a corrupt intent, i.e., with a sense of depravity, perversion or taint.” Ibid. (citations and quotations omitted). “Depravity” is defined as “the state of being depraved” and “depraved” is defined as “morally corrupt or perverted.” Random House Webster’s College Dictionary (1997). “Perversion” is “the act of perverting,” and the term “perverted” includes in its definition “misguided; distorted; misinterpreted” and “turned from what is considered right or true.” Id. The definition of “taint” includes “a trace of something bad or offensive.” Id. Pursuant to the definitions, a corrupt intent can be shown where there is intentional or purposeful misbehavior or wrongful conduct pertaining to the requirements and duties of office by an officer. See also Perkins & Boyce[, Criminal Law (3d ed.)], at 542 (“It is corrupt for an officer purposely to violate the duties of his office.”). The corrupt intent needed to prove misconduct of office does not necessarily require an intent for one to profit for oneself. People v. Coutu (On Remand), 235 Mich. App. 695, 706-07, 599 N.W.2d 556, 562 (1999) (citation omitted). The prosecutor offered six instances of corrupt behavior to support the charge of misconduct in office: (1) embezzling money by directing the improper calculation of a per diem pay rate when he redeemed 30 days of vacation pay; (2) paying severance packages to employees the petitioner wanted to quietly separate without Board approval; (3) misrepresenting to the Michigan Department of Education that no one in the petitioner’s family benefitted from his duality with the OISD and the MINDS Institute; (4) signing a contract with the MINDS Institute on behalf of the OISD at the same -10- time the petitioner chairman MINDS Institute’s board of directors; (5) misrepresenting or failing to inform OISD of his position at the MINDS Institute; and (6) authorizing payment of $397,220 by the OISD to the MINDS Institute without a proper contract modification. The State needed to prove only one of the factual predicates beyond a reasonable doubt to convict the petitioner of misconduct in office. The Michigan Court of Appeals reviewed the evidence and found it to be sufficient as to all six theories. That court found that the “[d]efendant committed acts of malfeasance or misfeasance under the color of his position as superintendent of the OISD, and this conduct was bad or offensive. Therefore, there was sufficient evidence that defendant’s conduct was ‘tainted’ and therefore corrupt.” People v. Redmond, 2006 WL 3298360, at *2. This Court has reviewed the record thoroughly and concludes that the state court’s determination amounted to a reasonable application of Supreme Court precedent. There is evidence in the record from which a rational jury could conclude that the petitioner committed misconduct in office under each of the six theories advanced by the State. The Court will address each in turn. a. Vacation payout The petitioner argues that the prosecution failed to demonstrate that he was not entitled to the additional $6,972.50 of vacation payout he required the financial services department to issue. He says that nothing in his contract limited the calculation of his per diem to his base pay divided by the number of business days. Rather, he relies on the Black’s Law Dictionary definition of per diem — by the day; for each day — to suggest that he was entitled to include the non-base pay -11- elements of his compensation package in valuing his 30 days of vacation. The State admits that neither the petitioner’s contract nor OISD had a written definition of per diem. However, testimony offered at trial established that OISD’s standard practice for per diem payouts was to use the base salary divided by the number of business days. The evidence, when viewed in a light most favorable to the prosecution, demonstrates that the petitioner, under the color of his office, committed malfeasance by performing a discretionary act with corrupt motive — that despite legitimate doubts about his entitlement to the extra funds, he directed the payout — and the jury reasonably could have found that the petitioner’s behavior was bad or offensive. Mark Ratjer, OISD’s assistant superintendent for resource management, testified that the per diem rate normally is “calculated using their base pay, base gross pay divided by the number of days,” Trial Tr., Jan. 24, 2005 at 413-44, and that the per diem rate does not include the employee’s tax sheltered annuity contributions (TSA), which is compensation deferred until retirement. Evidence was presented that showed the petitioner directed Ratjer and John Fitzgerald, director of financial services for OISD, to recalculate his cash payout for 30 days of vacation that he sold back to OISD based on a methodology that was not used for other employees. The petitioner directed Fitzgerald and Ratjer to include his TSA contributions, social security, medicare, and member investment plan contributions in his per diem rate, resulting in an additional $6,972.59 being paid out. Ratjer objected because he thought it was improper but relented because the petitioner, as the superintendent, had the final say. Ratjer testified that the petitioner’s position was the sole reason his per diem was recalculated. Janet Thomas, an OISD board member, testified that the board did not approve the payment. -12- The Court finds that a reasonable jury could have found the essential elements of the crime beyond a reasonable doubt based on this theory. The appellate court’s sufficiency determination was not unreasonable. b. Severance Packages The petitioner argues that there is no evidence that he terminated William Lee’s and Barbara Rebbeck’s employment for perverse, depraved, or tainted motives. Rather, he argues, the evidence supports the opposite conclusion because the recommendations for non-renewals were made by other administrators and the petitioner did not prepare their severance packages, make the severance package offers, or sign the severance agreements on behalf of OISD. The State argues that it presented evidence to establish that the petitioner wanted to get rid of Lee and Rebbeck because they had opposed him, and that because he had no sufficient performance-related reason to present to the board of education for not renewing their contracts, the petitioner lied when he told Richard Simonson, OISD’s deputy superintendent who signed the severance agreements, that the board had approved the agreements. The State argues that petitioner’s decision to arrange for Lee’s and Rebbeck’s severance packages without the board of education’s approval because he wanted to terminate their employment for crossing him constitutes malfeasance with corrupt intent. The record evidence supports the States argument. Bill Lee, OISD’s plant and facilities consultant, testified that he had several disagreements with the petitioner during his employment with OISD. One such disagreement was when Lee was asked by Dr. Robert Nugent, an assistant superintendent, at the petitioner’s behest, to recalculate the square footage of the new OISD administration building that would be used for special education purposes to include common areas, corridors, meeting rooms, and storage areas. Lee testified that he was instructed to recalculate the -13- square footage to “make sure that they were getting the maximum amount from special ed as far as being able to charge them in square footage-wise.” Trial Tr., Jan. 20, 2005 at 99. Lee also testified that he disagreed with the petitioner’s idea to build a new administration building on land that contained wetlands. Lee also testified that he was told that his contract would not be renewed due to a reorganization and not because of his performance, and that if he resigned he would receive a severance package. Lee’s severance agreement, which Simonson signed, gave Lee $41,315.87 gross, resulting in a net check for $25,000. Barbara Rebbeck, who was employed by OISD as a language arts consultant and director of the Oakland Writing Project, testified that in 1997, she, along with six other OISD employees, helped conduct a survey of OISD employees’ views on the management of OISD and delivered results to the board of education that painted OISD’s management in a negative light. Rebbeck also testified that after being told her employment contract would not be renewed, she signed a severance agreement that was not approved by the board of education. Rebbeck testified that she did not believe that any of the other survey conductors were terminated. John Fitzgerald testified that Rebbeck received $41,293.70 gross, resulting in a check for $25,000, for her severance package. Fitzgerald also testified that Ms. Rebbeck’s severance was paid at the end of the fiscal year, after the final budget amendments had been made. Dan Austin, the then-current deputy superintendent of OISD, testified that after being informed by Rick Simonson that Rebbeck’s and Lee’s contracts would not be renewed, he advised Simonson that there was not a sufficient record of deficient performance to place Lee and Rebbeck on the non-renewal list. Instead, Austin suggested that Rebbeck and Lee be given severance packages to avoid potential lawsuits. Simonson testified that the petitioner told him that the board -14- had approved the severance packages, but Dianne Leitermann, a member of OISD’s board of education in 2001, testified that the board did not approve Lee’s or Rebbeck’s severance packages. Austin further testified that after the severance packages had been signed, he checked the board of education’s records to determine whether the severance agreements had been approved but could not find any evidence that the board of education approved them. From that evidence, a reasonable jury could have found beyond a reasonable doubt that the petitioner arranged for the severance packages without board approval, which amounted to malfeasance, and he did so with a corrupt motive. But even if that conclusion is not compelled, the Court is satisfied that the state court’s sufficiency determination was reasonable in light of Jackson v. Virginia. c. Misrepresenting facts to Michigan Department of Education In its audit of OISD for fiscal year 2000-2001, KPMG , the audit firm chosen by the board of education to conduct OISD’s annual audit in 2001, included a footnote in its audit report that disclosed the petitioner’s relationship with MINDS. In response, the Michigan Department of Education sent an inquiry to OISD asking for specific information regarding the OISD contracts with MINDS. The inquiry asked whether the petitioner or any of his relatives profited financially from the OISD-MINDS arrangement. The petitioner furnished an affidavit that was included in OISD’s response, in which he answered the question in the negative despite the fact that his son had been hired by MINDS, LLC, a related company, in October 2000. The petitioner argues that his “no” response was true because his son, an entry level employee of MINDS, LLC, was not involved in either contract between OISD and MINDS Institute and did not profit from them. There is no proof, the petitioner argues, that his attempt to protect his son’s privacy rose to the level of -15- “corruption.” The petitioner relies heavily on the fact that much of the digitization work was complete by August 2000, well before Marvin Sauer, chief financial officer of TLC Holding Group (TLC) (Minds’s parent organization), knew that the petitioner’s son was looking for work. The State contends that the evidence establishes that the petitioner, in the exercise of his duties, committed malfeasance by performing a discretionary act with a corrupt motive. It says that the petitioner provided a misleading and non-responsive answer to the Department’s questions; a lie is enough to evince corrupt behavior; and even if a lie is not enough, the inferences arising from the direct and circumstantial evidence supported an argument that the petitioner lied to cover up the questionable circumstances surrounding his son’s hiring and the depth of his personal involvement with the MINDS entities. At trial, Sauer testified that he learned that the petitioner’s son was available to be hired during a conversation he had with the petitioner and that he hired the petitioner’s son to work at MINDS, LLC in October 2000, just months after OISD and the MINDS Institute entered into the digitization contract. Sauer further testified that he expected to enhance his relationship with the petitioner by employing the petitioner’s son. Mark Ratjer testified that the petitioner, despite Ratjer’s advise, did not disclose his son’s employment with MINDS, LLC in his answer and affidavit in response to the Michigan Department of Education’s question about whether any of his relatives profited financially from the digitization contract between OISD and the MINDS Institute. That evidence would permit a rational jury to conclude that the petitioner was engaged in self-dealing through his position at the OISD, and that he misused that position in a corrupt way by deriving a benefit for his son, which he concealed from the Michigan Department of Education. The -16- Court finds, therefore, that a reasonable jury could have found the essential elements of the crime beyond a reasonable doubt and that the state court’s sufficiency determination was not unreasonable. d. Self-dealing contracts The petitioner argues that the evidence produced at trial overwhelmingly proved that his only purpose for signing the Subscriber and Content Agreements and for sitting on the board of directors of the MINDS Institute was to protect OISD’s assets. Put more simply, he argues that the State failed to show that he entered the contracts for a corrupt purpose. The petitioner also argues that the evidence clearly showed that his presence on the MINDS Institute board of directors was as a representative of OISD. Further to that point, the petitioner argues that not one witness testified that he personally benefitted from his relationship with the MINDS Institute. The State counters that the petitioner acted wrongfully by entering into a contract on behalf of OISD with the MINDS Institute at the same time he was chairman of the board of the MINDS Institute in violation of Michigan Compiles Laws § 15.322, and that the jury reasonably could have found that the petitioner’s behavior was bad or offensive. Marvin Sauer testified that TLC served as an umbrella corporation to provide financial operations assistance to DataServ, which sells, installs, and maintains voice, video, and data equipment, and MINDS, LLC, which sells educational content to schools. The MINDS Institute, which was incorporated to gather the education content MINDS, LLC was to sell, was a separate organization that had a management agreement with TLC. The Michigan Court of Appeals summarized the companies’ relationships. The concept behind the MINDS Institute was that it would provide digitized media services to educational institutions via fiber optic wiring that could be displayed on computers. The MINDS Institute itself was incorporated in 2000 to search out and obtain voice, video and data technology that would be supplied to educational -17- institutions, and MINDS LLC was created to sell the voice, video and data technology to educational institutions. Redmond, 2006 WL 3298360, at *1 n.3. Sauer testified that the petitioner was one of the signatory incorporators of the MINDS Institute and eventually was made chairman of the board in May 2000. Sauer also testified that the petitioner did not receive any compensation for serving on the board of directors of the MINDS Institute. But Sauer said that in return for providing MINDS Institute with OISD’s educational content, MINDS Institute would digitize the content and make it available to OISD schools for a yearly membership fee of $50,000, and that it was vital to have the petitioner on the board of the MINDS Institute because the petitioner would assist in acquiring and getting licensing for the educational content MINDS, LLC would sell and to get business. Sauer testified that OISD and the MINDS Institute entered into the Subscriber Agreement and the Content Agreement on September 25, 2000. Karl Seiler, who is the CEO of TLC, president of DataServ, president of MINDS, LLC, and a board member of the MINDS Institute, signed on behalf of the MINDS Institute and the petitioner signed on behalf of OISD. In December 2000, OISD and the MINDS Institute entered into a $120,000 contract for the digitization of 160 hours of videotape. Sauer testified that although not expressed in the digitization contract, the 160-hour contract was part of a proposal to digitize 674 hours of videotape for OISD for $530,000. Sauer explained that the contract for 160 hours was all OISD could afford in that fiscal year and that the balance would be billed the following fiscal year. Although there was no written contract for the remainder of the proposal, Sauer testified that MINDS, LLC, which was performing the digitalization work, continued to digitize OISD’s videotapes without a contract because he was confident in OISD’s ability to pay. -18- The Court is left with little doubt that the petitioner violated the precepts of Michigan Compiled Laws § 15.322. While superintendent of OISD and chairman of the board of the MINDS Institute, the petitioner represented a party to a contract between the two entities. The only question left is whether sufficient evidence was offered to establish corrupt intent. Under Michigan law, “a corrupt intent can be shown where there is intentional or purposeful misbehavior or wrongful conduct pertaining to the requirements and duties of office by an officer.” Coutu, 235 Mich. App. at 706, 599 N.W.2d 562. There is sufficient evidence in the record that the petitioner’s actions were intentional and that his dual role benefitted MINDS Institute’s procurement of the contracts. The Court finds that a rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. e. Failing to reveal position on MINDS Institute board to OISD board The petitioner argues that his relationship with the MINDS Institute was disclosed as early as 1999. He argues that the evidence demonstrated that Carol Klenow, assistant superintendent of student performance, received a memorandum from Jan VanDam regarding MINDS in October 1999; the memorandum recalled a meeting between VanDam, Karl Seiler, and Sauer regarding a collaboration between DataServ and OISD; Diane Leitermann, an OISD trustee, confirmed that the memorandum was provided to OISD’s board; and the petitioner spoke to the board on November 9, 1999 about DataServ, the offer to form a partnership, and the request that he serve as CEO of the project. The petitioner also argues that Rick Simonson testified that MINDS was discussed at OISD board meetings beginning in the winter of 1999; the need for the petitioner to sit on the MINDS board was one of the subjects discussed; there were frequent discussions about the petitioner’s position with MINDS during the summer of 2000; at an OISD board meeting, VanDam presented -19- the petitioner with an award that identified him as a founding board member of MINDS; and he recalled the petitioner disclosing his position with MINDS to the OISD board on more than one occasion. Additionally, the petitioner argues that he divulged his position on the MINDS Institute board to Carolyn Claerhout and Dennis Pollard when he sought a legal opinion as to the propriety of the MINDS Institute arrangement. The State responds that the petitioner never affirmatively informed the OISD board that he was the chairman of the board for the MINDS Institute, and that the evidence supports an inference that petitioner did not inform the OISD board because he knew there was a question as to whether the relationship was appropriate because of the large contracts being executed between the organizations. The State also argues that the credibility of Simonson’s testimony that the petitioner informed the OISD board of his position is questionable because the petitioner recommended Simonson be appointed deputy superintendent, Simonson grew close to petitioner, and Simonson received a $35,000 contract from petitioner to provide lobbying and consulting services after he retired. The arguments raised by the parties plainly demonstrate that the fact question was vigorously contested at trial. However, the arguments the petitioner makes essentially are jury arguments. The evidence identified by the State permitted the jury to conclude that the petitioner committed misconduct by failing to disclose his position at MINDS Institute during the time when the lucrative contracts were negotiated and signed. In addition, Mark Ratjer testified that the petitioner was displeased that KPMG included a footnote in its 2001 audit report that disclosed the petitioner’s relationship with the MINDS Institute. The petitioner also told Ratjer that he wanted to select a new auditing firm for the next fiscal year. Dianne Leitermann, an elected board member of the OISD in -20- 2001, testified that in July 2001 at a board retreat, the petitioner presented information regarding the MINDS entities to the board and asked the board members what their thoughts were of his idea to sit on the board of the MINDS Institute, but he did not tell the board he had been serving as chairman of the board of the MINDS Institute for over a year. Leitermann testified that the petitioner did not inform the board that he was chairman of the board of the MINDS Institute at the retreat. Leitermann also testified that she did not know that the petitioner would serve on the board of the MINDS Institute when the board voted to join the MINDS Institute. Board member Janet Thomas testified similarly that although the OISD board often was presented with information about MINDS, they were never informed that the petitioner was chairman of the board. The Court finds there is sufficient evidence in the record from which a reasonable juror could conclude that the petitioner did not inform the OISD board of his position with the MINDS Institute until KPMG included it in a footnote in the annual audit and that he did so with corrupt intent. f. Authorizing additional $397,220 payout The final factual predicate underlying the misconduct in office charge was that the petitioner, with corrupt intent, illegally authorized an additional $397,220 payment to the MINDS Institute without a written contract modification. The petitioner argues that the uncontroverted evidence showed that the OISD board’s June 25, 2001 consent agenda included approval of the payment to the MINDS Institute for digitization services and that the board meeting minutes reflected a purchase order for that amount. The petitioner further argues that Katrina Brunette, OISD’s purchasing manager, testified that no written contract modification was required. The State argues -21- that the evidence demonstrates that the petitioner used his position as superintendent of OISD to advance the interests of the MINDS Institutes through the use of irregular procedures to effect the additional payment of $397,220, and that when the petitioner learned that OISD had additional funds, he immediately suggested that most of it be used to pay MINDS more money. Mark Ratjer testified that in May 2001, he reported to the petitioner that OISD would have between $500,000 and $1,000,000 in extra money for the 2000-2001 fiscal year, which ended June 30, 2001, and that the petitioner immediately suggested making additional payments to the MINDS Institute. Ratjer also testified that he did not contact anyone at the MINDS entities to let them know there was extra money available in OISD’s budget, yet OISD received invoices from the MINDS entities for $397,220 within a few weeks of the petitioner being notified of the budget surplus. The board of education approved paying the $397,220 purchase order from OISD’s 2000-2001 fiscal year budget. Katrina Brunette, OISD’s purchasing manager, testified that contract amendments valued over $18,000 required the OISD department originating the contract to submit a contract amendment form to her office and then get approval from the board of education. She also testified that to get a contract modification on the board of education’s consent agenda, the requesting department had to complete a board consent agenda form that included the name of the contractor, the dollar amount, the amount of the increase, the reason for the increase, the contract’s time period, and the scope of services being provided. The $397,220 payment to the MINDS Institute was added to the board’s consent agenda on June 25, 2011, just one day before the last board meeting of the fiscal year. Ms. Brunette testified that she was out of town on June 25 and the only way the $397,200 purchase order -22- could have been added to the board’s consent agenda that quickly was if the petitioner approved the addition himself. The Court finds that a reasonable jury could have found the essential elements of the crime of misconduct in office beyond a reasonable doubt based on this theory of misconduct. Moreover, even if the Court did not find as much, the Court is satisfied that the appellate court’s sufficiency determination was not an unreasonable application of Supreme Court precedent. Michigan Compiled Laws § 15.322 provides, in part: 2. (1) [A] public servant shall not be a party, directly or indirectly, to any contract between himself . . . and the public entity of which he . . . is an officer or employee. (2) . . . [A] public servant shall not directly or indirectly solicit any contract between the public entity of which he . . . is an officer or employee and any of the following: (a) Him[self] . . . . (b) Any firm, meaning a co-partnership or other unincorporated association, of which he . . . is a partner, member, or employee. (c) Any private corporation in which he or she is a stockholder owning more than 1% of the total outstanding stock of any class if the stock is not listed on a stock exchange, or stock with a present total market value in excess of $25,000.00 if the stock is listed on a stock exchange or of which he or she is a director, officer, or employee. (3) In regard to a contract described in subsection (2), a public servant shall not do either of the following: (a) Take any part in the negotiations for such a contract or the renegotiation or amendment of the contract, or in the approval of the contract. (b) Represent either party in the transaction. Mich. Comp. Laws § 15.322. Violation of the statute is a misdemeanor. Mich. Comp. Laws § 15.327. The Michigan Court of Appeals discussed the evidence that supported the petitioner’s conviction. -23- Evidence established that defendant began his employment as superintendent of the OISD in 1995 and that he became chairman of the board of the MINDS Institute in May 2000. On September 25, 2000, defendant, on behalf of the OISD, signed and entered into two three-year contracts with the MINDS Institute. These contracts were the Subscriber Agreement and the Content Agreement. At the time defendant entered into the Subscriber Agreement and the Content Agreement, he was simultaneously employed as the superintendent of the OISD and serving as chairman of the board of the MINDS Institute. The developer of MINDS, Marvin Sauer, met defendant in 1999. Sauer was seeking an educational partner that understood the educational marketplace and believed that the Oakland schools would be a good partner because the schools were well-known and well-respected. Because defendant was superintendent of the OISD, Sauer asked defendant to participate in the MINDS project so that defendant could offer his vision and guidance and assist with the direction of the MINDS project. According to Sauer, defendant was helpful in validating that the technology would make sense in an educational environment. In light of Marvin Sauer’s testimony regarding defendant’s involvement in the MINDS Institute as the concept was developing and before it was officially incorporated in April 2000, the evidence, the circumstantial evidence, and the reasonable inferences therefrom, establish that defendant solicited, either directly or indirectly, the Subscriber Agreement and the Content Agreement between the OISD and the MINDS Institute in violation of MCL 15.322(2)(b) while he was simultaneously employed as the superintendent of the OISD and acting as the chairman of the board of the MINDS Institute and that by signing those two contracts on behalf of the OISD, defendant represented the OISD in entering into the contracts in violation of MCL 15.322(3)(b). In addition, although other representatives of the OISD and not defendant signed the Contracted Services Contract between the OISD and the MINDS Institute, in which the MINDS Institute agreed to digitize 160 hours of video for the OISD in exchange for payment of $120,000, reasonable inferences from the evidence regarding defendant’s early involvement with the MINDS Institute and his meetings and discussions with OISD administrators regarding MINDS suggest that defendant was part of the discussions and negotiations that led to the formal adoption of the Contracted Services Contract. Thus, there was also sufficient evidence that defendant was involved in soliciting and negotiating the Contracted Services Contract between the OISD and the MINDS Institute in violation of MCL 15.332(2)(b) and (3)(a). People v. Redmond, 2006 WL 3298360, at *2 (footnote omitted). In addition to the evidence reviewed by the Michigan Court of Appeals, Carol Klenow testified that the petitioner insisted that the MINDS Institute do all the work with respect to digitizing OISD’s educational assets. -24- There is no question that the a reasonable jury could have found the essential elements of the crime beyond a reasonable doubt. The Michigan Court of Appeals reasonably applied Jackson v. Virginia when it concluded that the trial evidence was sufficient to support the conviction. B. The petitioner’s second claim is that the trial judge erred by refusing his request for a special verdict requiring jurors to specify the theory, or theories, of liability on which the misconduct in office conviction was premised. The petitioner argues that the sixth theory of liability for the misconduct in office charge — that the petitioner authorized payment of $397,000 to the MINDS Institute without a contract modification — was a legally insufficient basis on which to predicate criminal responsibility; therefore, his misconduct in office conviction must be set aside because the general verdict form did not reveal which theory the jury relied on to find petitioner guilty. “A conviction based on a general verdict is subject to challenge if the jury was instructed on alternative theories of guilt and may have relied on an invalid one.” Hedgpeth v. Pulido, 555 U.S. 57, 58 (2008). An alternative-theory error is harmless if the error “does not categorically vitiate all the jury’s findings.” Id. at 61 (quotations and alterations omitted). Although the Supreme Court “did not specifically identify the harmless-error standard that is applicable to alternative-theory errors,” “it cited [] a string of cases that apply a common harmless-error standard to other types of instructional errors.” United States v. Skilling (after remand), 638 F.3d 480, 481 (5th Cir. 2011) (citing Pulido, 55 U.S. at 60-61 (citing Neder v. United States, 527 U.S. 1 (1999) (omission of an element of an offense); California v. Roy, 519 U.S. 2 (1996) (per curiam) (erroneous aider-and-abettor instruction); Pope v. Illinois, 481 U.S. 497 (1987) (misstatement of an element of an offense); Rose v. Clark, 478 U.S. 570 (1986) (erroneous burden-shifting as to an element of an -25- offense . In Neder v. United States, the Court found that an error was harmless if a court, after a “thorough examination of the record,” is able to “conclude beyond a reasonable doubt that the jury verdict would have been the same absent the error.” 527 U.S. at 19. If the defendant “raised evidence sufficient to support a contrary finding,” then the error was not harmless. Id. As discussed above, the sixth factual predicate was legally sufficient to support a conviction for misconduct in office. However, there is some doubt whether the fourth factual predicate — engaging in the self-dealing contracts in violation of Michigan Compiles Laws § 15.322 — can support the conviction of that common law crime because a specific statute applies to the conduct called into question. See People v. Waterstone, --- N.W.2d ---, 2012 WL 1192137 (Mich. Ct. App. Apr. 10, 2012) (holding that Mich. Comp. Laws § 750.505 cannot be invoked as a basis to convict if the elements of the crime are the same as another statutory offense). Nevertheless, even if that were the case, the petitioner never raised that argument, and it is abundantly clear from the record that the jury verdict would have been same absent the error. The petitioner has not raised any evidence to support a contrary finding, and the record evidence to support the other five grounds was sufficient. C. Third, the petitioner claims that his due process rights were violated by the trial court’s submission of the misconduct-in-office count to the jury because the circuit court lacked jurisdiction over two of the grounds included in that charge. The petitioner posits that the theories of misconduct based on the severance agreements and the vacation payout were never adjudicated by the examining magistrate at a preliminary examination, the district court did not bind the petitioner -26- over for trial on those theories, and therefore the circuit court was without jurisdiction to include them in the trial. The state district court plainly did not address all the State’s theories of misconduct in office, as the Michigan Court of Appeals acknowledged. “In making its ruling, the district court stated that ‘[b]eing cognizant of the fact that this court sits not as the ultimate trier of fact, but rather as the examining magistrate, the Court finds that the People have met their burden of proof in at least one of the areas set forth.’” Redmond, 2006 WL 3298360, at *4. However, the court of appeals noted that the bind-over was proper because probable cause existed, and because the State offered evidence at the preliminary examination on those theories, the petitioner had notice of the charges. Ibid. The question of the trial court’s jurisdiction is a state law matter. “A federal court may not issue the writ on the basis of a perceived error of state law.” Pulley v. Harris, 465 U.S. 37, 41 (1984). As a matter of federal law, the purpose of a preliminary examination is to determine whether probable cause exists to justify continued detention of a person charged by complaint or information. See Gerstein v. Pugh, 420 U.S. 103, 118 (1975). The abridgement of that right may undermine the validity of continued pretrial detention, but not the ensuing conviction. Under Michigan law, any error in the sufficiency of the proofs at preliminary examination is considered harmless if there is sufficient evidence to convict at trial. See People v. Hall, 435 Mich. 599, 602-03, 460 N.W.2d 520, 522 (1990). So it is under federal law as well. See United States v. Mechanik, 475 U.S. 66, 73 (1986). Moreover, there is no federal constitutional right to a preliminary examination. See Gerstein, 420 U.S. at 123 & 125 n.26 (1975); Dillard v. Bomar, 342 F.2d 789, 790 (6th Cir. 1965). -27- Of course, the petitioner was entitled to notice of the charges against him so he could prepare an adequate defense. Cole v. Arkansas, 333 U.S. 196, 201 (1948); see also Valentine v. Konteh, 395 F.3d 626, 631 (6th Cir. 2005). But the petitioner does not allege that he was surprised by the inclusion of the two theories of misconduct at trial. The bind-over decision itself invokes a question of state law, which is not cognizable on habeas corpus review. See Estelle v. McGuire, 502 U.S. 62, 67-68 (1991); Dorchy v. Jones, 320 F. Supp. 2d 564, 578-79 (E.D. Mich. 2004) (denying habeas relief on petitioner’s claim there was insufficient evidence to bind him over for trial). The petitioner has not identified any federal right that was abridged by the inclusion of those theories at the trial. He is not entitled to a writ of habeas corpus on the basis of this claim. D. Fourth, the petitioner claims that his Sixth Amendment right to confront witnesses was violated when the trial court admitted into evidence an OISD school board resolution, identified as Exhibit 88, that contained the school board’s reasons for terminating the petitioner’s contract. The State argues that this Court may not reach this claim because it was procedurally defaulted. When the state offered Exhibit 88 during trial, defendant’s counsel made the following objection: Mr. La Rene: Okay. Exhibit 88, the proposed Board resolution. I argued previously to the extent that it incorporates the investigative findings of the Whall Group, it should not be admissible under Rule 803.8, that is the public records exception -- 808 -- 803.8(B) to the extent that it encompasses assertions of fact and it is offered for the truth of the matter asserted therein, that is -- The Court: No. This is the problem. You offered an exhibit, it was admitted in, to show that they got an award because they -- you just made the argument a moment ago, in July they got this information, in April they give him, and then they fire him. Why would they fire him? That would be hanging out there as a fact question for the jury, and -28- I think that that exhibit, which is what we’re using, apparently, of these minutes, is going to be admitted, for that simple reason. Mr. La Rene: There’s testimony about why he was fired. I believe the question is -- The Court: I don’t think there’s any testimony specifically setting forth, enunciating reason after reason. Mr. La Rene: Perhaps not. The Court: I think that document is very specific. Mr. La Rene: Is the Court admitting this document as evidence -- The Court: Yes, I am admitting it. Mr. La Rene: -- of the truth of the matters asserted therein? The Court: I’m -- Mr. La Rene: If not, I’d ask for an instruction by the jury -- to the jury. The Court: Well, what I’m doing is I’m admitting it as an exhibit to, from the minutes of the meeting showing why he was terminated. Whether it’s the truth of the matter asserted, I don’t care. You can argue that, that it’s not. But then we have to do that to everyone of these documents that you, in fact -- maybe it’s not true that he, in fact, got that award. Do you understand what I’m saying? You offered it for the truth of the matter asserted. Mr. La Rene: No, I did not. The Court: You can’t have your cake and eat it. Mr. La Rene: No, I did not offer it for the truth of the matter. The Court: What did you offer it for? Mr. La Rene: I offered it to prove that the fact occurred, that the event occurred. The Court: Well, we don’t know that it occurred. You’re offering it to prove that it occurred, and I don’t know that it occurred. -29- Mr. La Rene: The public record is competent to prove -- The Court: Thank you. That same argument is applied to this one. Mr. La Rene: I -- I -- The Court: Thank you. Mr. La Rene: I must respectfully disagree. The Court: Well, I thank you for doing it respectfully. It can be admitted. Tr. Transcript, Vol. VI, Jan. 27, 2005, at 794-96. After the defense rested, the Court led a discussion regarding jury instructions, during which defense counsel mentioned the Crawford challenge during a testy exchange with the trial judge: Mr. La Rene: . . . Mr. Rollstin’s cross-examination of Mr. Simonson yesterday suggests to me that the prosecution is relying on Exhibit 88, which is the Board’s resolution, as substantive evidence of the allegations made therein. I believe that such use would contravene the defendant’s Sixth Amendment rights, and I specifically am thinking about the most recent united States Supreme Court case, Crawford against Louisiana. The Court: Help me with that. How is that violating his Fifth (sic) Amendment? If you -- Mr. La Rene: Well, for example -- The Court: If you -- look. We started down that slippery slope when you all wanted to get in as public records. If you’ll recall, I was hesitant towards that. Once we started down that slope and it started in, that’s the way it’s going to be. Mr. La Rene: Well, Judge, respectfully, the -- I believe that to use -- I move to strike Exhibit 88 or to bar argument to the effect that it’s, the statements made therein or attributed therein to the Board should be considered in the case against the defendant on the basis of Crawford against Washington and the Sixth Amendment of the United States Constitution. -30- The Court: Thank you. I’m denying it. I don’t think it’s applicable and I think, in fact, if it were, it was waived during a portion of the trial. Okay? Does that help? Tr. Transcript, Vol. VII, Jan. 28, 2005, at 986-87. After the case had been submitted to the jury, defense counsel moved to strike portions of Exhibit 88, and the following exchange took place: Mr. Kriger: The next -- my problem with all of this is it talks about high standards of honesty, integrity, impartiality. I don’t have any problem with where it says, “whereas the Oakland School Board finds good and just cause for the termination of James G. Redmond’s employment as Superintendent of Oakland Schools and,” which would be the last paragraph on that page. And then it just says, “Whereas,” on the next page, “Whereas the Oakland School Board finds that based on” and strike “a pattern and practice of numerous deliberate and specific instances which have come to Oakland --“ The Court: Now I’m going to tell you. I want to repeat what I said once before. You both started with this about introducing these records as public records and you insisted on it. Listen. Mr. Kriger: All right. The Court: Secondly, in this particular thing, I dedacted [sic] matters that I thought were inflammatory, potentially more prejudicial than probative. Actually, a number of the things here were definitely and could have been easily probative. Do you understand that? But since they weren’t part of the proofs, that’s why they were dedacted [sic]. Everything else is exactly what the Board did for the reason it is. And so we’re not going to talk about it anymore. This is actually the third time you’ve raised the issue in connection with this. And you’ve already pointed out that you looked at it. Perhaps you should have looked at it more carefully before. So I repeat. Your motion is denied. You’ve noted it for the record. Mr. Kriger: May I just -- The Court: But I repeat what I said for the record. I gave you one big break by dedacting [sic] it in the first place. I could have just said, “Well, it’s the whole record. Let it go in.” I didn’t think it was fair to the defendant, and that’s why I didn’t allow it. -31- Mr. Kriger: Judge, may I just mark this as an exhibit to the record so they know which specific portion -- The Court: It’s already in the record. Mr. Kriger: No, no. What I specifically objected to is noted in red. I would mark it -- The Court: No. What you specifically object to is anything you don’t like in it, and that’s, and that, and that particularly scuttles the reason. And the first -- Mr. Kriger: There is -- The Court: -- it is a public record. It is in. The answer is -- you want it marked as a special exhibit? Be my guest. Mr. Kriger: Thank you. That’s all -- and I’ll mark it -- The Court: Thank you. Tr.Transcript, Vol. VII, Jan. 28, 2005, at 1173-75. On direct appeal, the Michigan Court of Appeals applied a plain-error standard to review the constitutional claim. The court reasoned that the petitioner, who had objected to admission based on hearsay grounds, had failed to preserve his constitutional claim by not making a contemporaneous objection on the constitutional ground. Redmond, 2006 WL 3298360, at *6. The court of appeals concluded that “reversal [was] not warranted based on [petitioner’s] Sixth Amendment [claim] because admission of the resolution did not result in the conviction of an actually innocent defendant and did not affect the fairness, integrity, or public reputation of the judicial proceedings. Ibid. The respondent argues that failure to make a contemporaneous objection serves as an independent and adequate state law ground on which the state court properly denied relief, and that plain-error review does not constitute a waiver of state procedural default rules. -32- A procedural default is “a critical failure to comply with state procedural law.” Trest v. Cain, 522 U.S. 87, 89 (1997). Such a default may occur if the state prisoner fails to present an issue to a state appellate court at his only opportunity to do so, Rust v. Zent, 17 F.3d 155, 160 (6th Cir. 1994), or if he fails to comply with a state procedural rule that required him to have done something at trial to preserve his claimed error for appellate review, e.g., make a contemporaneous objection or file a motion for a directed verdict, see Simpson v. Sparkman, 94 F.3d 199, 202-03 (6th Cir. 1996). The petitioner, citing People v. Jones, 468 Mich. 345, 354-55, 662 N.W.2d 376, 381 (2003) (“The purpose of requiring objections to be timely . . . is to give the trial court an opportunity to correct the error.”) and People v. Grant, 445 Mich. 535, 551, 520 N.W.2d 123, 130 (1994) (“[T]he United States Supreme Court has recognized the importance of an incentive for criminal defendants to raise objections at a time when the trial court has an opportunity to correct the error, which could thereby obviate the necessity of further legal proceedings and would be by far the best time to address a defendant’s constitutional and nonconstitutional rights.”), argues that his Crawford objection was timely because it was made as soon as the constitutional dimension of the error in admitting Exhibit 88 became apparent, before the damage had been wrought and at a time when the trial court still had a meaningful opportunity to prevent the harm which the objection sought to avoid. The petitioner has a point. The record suggests that the trial court did not permit trial counsel to complete the record when he barely got out his objections on hearsay grounds. And the Confrontation Clause ground for contesting the exhibit was presented to the trial with plenty of time to deal with it. Moreover, “federal courts are not required to address a procedural-default issue before deciding against the petitioner on the merits.” Hudson v. Jones, 351 F.3d 212, 215 (6th Cir. 2003) (citing Lambrix v. Singletary, 520 U.S. 518, 525 (1997 . Although a procedural bar may -33- preclude relief, “[j]udicial economy might counsel giving the [other] question priority, for example, if it were easily resolvable against the habeas petitioner, whereas the procedural-bar issue involved complicated issues of state law.” Lambrix, 520 U.S. at 525. In this case, the Court finds that the interests of judicial economy are best served by addressing the merits of the petitioner’s claims. The Confrontation Clause of the Sixth Amendment provides: “In all criminal prosecutions, the accused shall enjoy the right . . . to be confronted with the witnesses against him.” U.S. Const. amend. VI. “The Sixth Amendment’s right of an accused to confront the witnesses against him is . . . a fundamental right and is made obligatory on the States by the Fourteenth Amendment.” Pointer v. Texas, 380 U.S. 400, 403 (1965). The rights of confrontation and cross-examination “have ancient roots” which the “Court has been zealous to protect . . . from erosion.” Id. at 404-05 (internal quotation omitted). The right to a trial by jury is predicated upon the belief “‘that the “evidence developed” against a defendant shall come from the witness stand in a public courtroom where there is full judicial protection of the defendant’s right of confrontation, of cross-examination, and of counsel.’” Id. at 405 (quoting Turner v. Louisiana, 379 U.S. 466, 472-73 (1965 . In Crawford v. Washington, 541 U.S. 36 (2004), the Supreme Court held that certain out-of-court statements are barred by the Confrontation Clause unless the witness is unavailable and the defendant had a prior opportunity for cross-examination, even if the trial court finds the statements to be otherwise reliable. 541 U.S. at 68. The Supreme Court has held that the Confrontation Clause applies only to out-of-court statements that are “testimonial” in nature. See Whorton v. Bockting, 549 U.S. 406, 419-20 (2007) (explaining that, under Crawford, the Confrontation Clause has no application to non-testimonial out-of-court statements); Davis v. Washington, 547 U.S. 813, 821 (2006) (“It is the testimonial character of the statement that separates -34- it from other hearsay that, while subject to traditional limitations upon hearsay evidence, is not subject to the Confrontation Clause.”). The Crawford court did not define “testimonial,” but it “provided examples of those statements at the core of the definition, including prior testimony at a preliminary hearing, previous trial, or grand jury proceeding, as well as responses made during police interrogations.” United States v. Saget, 377 F.3d 223, 228 (2d Cir. 2004); see Crawford, 541 U.S. at 51-52. In Davis v. Washington, the Court explained that “[s]tatements are . . . testimonial when the circumstances objectively indicate that there is no . . . ongoing emergency, and that the primary purpose of the interrogation is to establish or prove past events potentially relevant to later criminal prosecution.” Davis, 547 U.S. at 822. Based on that elucidation, the Sixth Circuit clarified in Miller v. Stovall, 608 F.3d 913(6th Cir. 2010), that “[t]he proper inquiry . . . is whether the declarant intends to bear testimony against the accused[,which,] in turn, may be determined by querying whether a reasonable person in the declarant’s position would anticipate his statement being used against the accused in investigating and prosecuting the crime.” Id. at 924 (quoting United States v. Cromer, 389 F.3d 662, 675 (6th Cir. 2004); see also United States v. Johnson, 581 F.3d 320, 325 (6th Cir. 2009) (explaining that when “determining whether statements are testimonial, we ask whether the declarant ‘intend[ed] to bear testimony against the accused’ (quoting Cromer, 389 F.3d at 675 . Exhibit 88 was a resolution by the OISD that set out the reasons for terminating the petitioner. The exhibit consists of recitals in which the board expressed its reasons that justified the firing, and the resolution of termination itself. The petitioner has not pointed to any feature of the resolution that suggests that its primary purpose was “to establish or prove past events potentially relevant to later criminal prosecution,” Davis, 547 U.S. at 822, or that a reasonable person in the -35- positions of the board members would anticipate would anticipate [the board resolution] being used against the accused in investigating and prosecuting the crime,” Johnson, 581 F.3d at 325. And even if that were a close question, which it very well may be, “there is a possibility for fairminded disagreement on the issue, and under clear, and increasingly strident, Supreme Court precedent, that is all that is required to [deny the writ].” Peak, 673 F.3d at 474 (footnote omitted). Admission of statements that cannot be deemed testimonial does not violate the Confrontation Clause. Michigan v. Bryant, --- U.S. ---, ---, 131 S. Ct. 1143, 1155 (2011) (“Where no such primary purpose exists, the admissibility of a statement is the concern of state and federal rules of evidence, not the Confrontation Clause.”). The petitioner has not identified a clear violation of the Confrontation Clause that warrants issuance of the writ. He is not entitled to relief on this claim. E. The petitioner claims that his due process rights were violated by the trial court’s instruction on the “corrupt intent” element of the misconduct-in-office charge because the court left out the words “depravity” and “perversion” from the jury instruction, leaving only the term “taint.” The Michigan Court of Appeals rejected the petitioner’s claim. The parties agreed on the elements of the offense, agreed that the prosecutor had to establish that defendant acted with a “corrupt intent,” and agreed that Coutu, supra, was the relevant case that defined the term “corrupt intent.” In Coutu, this Court stated that the term “corruption” means “a ‘sense of depravity, perversion or taint.’” Coutu, supra at 706. In discussing the proper instructions regarding the term “corrupt intent,” the prosecution explained to the trial court that it was only proceeding on the theory of “taint,” and not under the theory that defendant’s conduct constituted “depravity” or “perversion.” Therefore, the prosecutor argued that the trial court only needed to define the term “taint” for the jury, and not the words “depravity” or “perversion.” Defendant contended that the trial court should instruct the jury on all three definitions because “it fleshes out the concept of what corruption means[.]” The trial court disagreed, observing that the use of the word -36- “or” in Coutu meant that the prosecutor had a choice of which theory of corrupt intent it wanted to proceed under. The trial court’s corrupt intent instruction is as follows: Fourth, these acts must be done with a corrupt intent. A corrupt intent can be shown where there is intentional or purposeful misbehavior or wrongful conduct pertaining to the requirements and duties of an officer . . . . Corruption means depravity, perversion, or taint. Now, the definition of taint includes a trace of something bad or - - we’re not - - apparently they’re not worrying about depravity or perversion here, but they’re concerned about taint, so we’ll define taint. And taint includes a trace of something bad or offensive. . . . According to defendant, by only defining the word “taint” to the jury, the trial court took the word out of context and “diluted the level of proof required to maintain a conviction.” We disagree. Under MCR 2.516(D)(4), a trial court may give additional instructions concerning an area that was not covered in the standard jury instructions as long as the additional instructions accurately state the law and are applicable, concise, understandable, conversational, unslanted, and nonargumentative. People v. Lynn, 229 Mich. App 116, 121; 580 NW2d 472 (1998), rev’d on other grounds 459 Mich. 53 (1998). In this case, the trial court’s corrupt intent instructions accurately stated the law and otherwise complied with these requirements. In Coutu, this Court stated that the term “corruption” means “a ‘sense of depravity, perversion or taint.’” Coutu, supra at 706 (citation omitted; emphasis added). The use of the disjunctive word “or” generally refers to a choice or alternative between two or more things. See People v. Neal, 266 Mich. App 654, 656; 702 NW2d 696 (2005) (interpreting the word “or” in MCL 750.335a). The words “depravity,” “perversion,” and “taint” express three alternative concepts or choices of corrupt behavior. Therefore, corrupt behavior for purposes of the misconduct in office charge is behavior that falls into any one of the three alternative definitions. Because the prosecutor proceeded on the theory that defendant’s conduct constituted “taint,” it was reasonable for the trial court to instruct the jury only on the definition of “taint.” The trial court’s definition of the term “corrupt intent” therefore fairly presented the issues to be tried and sufficiently protected defendant’s rights. Moreover, a trial court’s refusal to give a requested instruction only warrants reversal if a defendant shows that it is more probable than not that the trial court’s failure to give the requested instruction undermined the reliability of the verdict. People v. Tierney, 266 Mich. App 687, 714; 703 NW2d 204 (2005). In this case, the fact that the trial court did not define the “depravity” and “perversion” alternatives of “corrupt intent” did not undermine the reliability of the verdict because the prosecutor did not proceed under those theories and did not present evidence regarding those theories at trial. The prosecutor’s theory and evidence related solely to the theory that -37- defendant’s conduct constituted “taint” and was bad or offensive. Therefore, the trial court’s instructions did not undermine the reliability of the verdict. People v. Redmond, 2006 WL 3298360, at *8-9. The petitioner argues that “wrenching” the word “taint” from the Coutu formulation of corrupt intent itself perverts the definition of that element because it leaves the jury to guess at what might constitute “a trace of something bad”; and it allowed the prosecutor to argue that the law merely required him to prove that the petitioner’s actions could not “pass the smell test.” The definition of elements of a crime under state law is left to state, not federal, courts. See Bradshaw v. Richey, 546 U.S. 74, 76 (2005) (“We have repeatedly held that a state court’s interpretation of state law, including one announced on direct appeal of the challenged conviction, binds a federal court sitting in habeas corpus” (citations omitted . That is why, “[g]enerally speaking, a state court’s interpretation of the propriety of a jury instruction under state law does not entitle a habeas claimant to relief.” Rashad v. Lafler, 675 F.3d 564, 569 (6th Cir. 2012) (citing 28 U.S.C. § 2254(a); Estelle v. McGuire, , 67-68 (1991 . As the Sixth Circuit has explained, “[t]he exception is when the instruction is so flawed as a matter of state law as to ‘infect[] the entire trial’ in such a way that the conviction violates federal due process.” Ibid. (citing Henderson v. Kibbe, 431 U.S. 145, 154 (1977 . Other formulations of that test use even stronger language. Donnelly v. DeChristoforo, 416 U.S. 637, 643 (1974) (“[I]t must be established not merely that the instruction is undesirable, erroneous, or even ‘universally condemned,’ but that it violated some [constitutional] right . . . .”). When assessing a potential due process violation, the jury instruction “‘may not be judged in artificial isolation,’ but must be considered in the context of the instructions as a whole and the trial record.” Estelle, 502 U.S. at 72 (quoting Cupp v. Naughten, 414 U.S. 141, 147 (1973 . -38- The petitioner’s way around the language discouraging review by habeas courts of state court jury instructions is a due process argument that says either the petitioner did not have fair warning that his conduct was criminal, or that the jury was not given sufficient guidance by the court’s corrupt intent instruction and therefore had to guess at the meaning of the criminal law. The petitioner did not raise that argument in the trial court, but the state court of appeals addressed it on the merits anyway. That court stated: Defendant next argues that the terms “bad” or “offensive” are unconstitutionally vague because they are so indefinite that they confer unlimited discretion on the trier of fact to determine whether an offense has been committed. Defendant did not make this vagueness argument before the trial court. Generally, issues that are not raised before and addressed by the trial court are not preserved for appellate review. Fast Air, Inc v. Knight, 235 Mich. App 541, 549; 599 NW2d 489 (1999). However, because this Court may consider a significant constitutional issue that has not been raised before the trial court, People v. Walker, 234 Mich. App 299, 302; 593 NW2d 673 (1999), we will address the issue. An unpreserved constitutional error is reviewed for plain error affecting substantial rights. Carines, supra at 763, 774. Reversal is warranted when plain, unpreserved error resulted in the conviction of an actually innocent defendant or when an error seriously affected the fairness, integrity or public reputation or judicial proceedings independent of the defendant’s innocence. Id. The trial court’s instructions to the jury included instructions that the prosecutor had to prove the following elements of the misconduct in office offense beyond a reasonable doubt: that defendant either held public office or was the agent or servant of a public official, that defendant’s acts must have been conducted in the exercise of the duties of the office or done under the color of the office, that the defendant’s acts constituted malfeasance, misfeasance, or nonfeasance (the trial court defined all three of these terms in its instructions), and that defendant’s acts must have been done with a corrupt intent. In explaining the corrupt intent element, the trial court asserted that a corrupt intent could be established “where there is intentional or purposeful misbehavior or wrongful conduct pertaining to the requirements and duties . . . of an office by an officer.” The trial court then defined the term “taint” as “a trace of something bad or offensive” and observed that “[t]he corrupt intent needed to prove misconduct of office does not necessarily require an intent for one to profit for oneself.” The trial court also defined the term public officer. These instructions, viewed as a whole, would not confer unlimited discretion on the trier of fact to determine whether an offense was committed. The trial court’s jury -39- instructions on the misconduct offense accurately stated the applicable law and the jury was therefore properly instructed. There was no plain error. Redmond, 2006 WL 3298360, at *9. The Court cannot say that the state court of appeals’s treatment of the instructional issue amounted to an unreasonable application of federal law. The petitioner’s argument presumably derives from a line of cases that proscribe criminal legislation that is vague. The twin evils of a vague criminal statute are the failure to provide fair notice “with sufficient definiteness that ordinary people can understand what conduct is prohibited,” and the allowance or encouragement of “arbitrary and discriminatory enforcement.” Kolender v. Lawson, 461 U.S. 352, 357 (1983). The petitioner does not argue a lack of fair notice, but he does contend that the instructions left the jury on its own to determine whether the petitioner had a corrupt intent. He cites Smith v. Goguen, 415 U.S. 566 (1974), where the Supreme Court invalidated a flag-misuse statute criminalized “treat[ing] contemptuously the flag of the United States,” because the statutory language “fail[ed] to draw reasonably clear lines between the kinds of nonceremonial treatment that are criminal and those that are not.” Id. at 574. The jury instruction in this case does not share the same flaws, however. Although defining “taint’s” contextual partners — depravity and perversion — would have been preferable so as to give the jury a broader view of the intent element of this common law crime as contemplated by the state courts, the definition of “taint” as a trace of something bad or offensive, when read along with the requirement to find “intentional or purposeful misbehavior,” was not unconstitutionally vague. The jury could not convict under the instructions unless it found that the petitioner intentionally engaged in misbehavior that was motivated by a trace of something bad or offensive. The state court’s determination that a person of ordinary intelligence would understand what conduct was -40- prohibited, and that the jury was not left to convict based only on its subjective assessment of the petitioner’s motive, did not unreasonably apply federal law. See Belle Maer Harbor v. Charter Twp. of Harrison, 170 F.3d 553, 557 (6th Cir. 1999) (citing Springfield Armory, Inc. v. City of Columbus, 29 F.3d 250, 252-54 (6th Cir. 1994) (rejecting district court’s “as applied” analysis of statute with criminal penalties, and concluding that the particular statute was unconstitutionally vague on its face . The petitioner is not entitled to a writ of habeas corpus on this ground. F. Lastly, the petitioner claims that the prosecutor committed misconduct in his closing arguments by stating that the petitioner had used his influence to obtain employment for his son and that the petitioner might work one day for the MINDS entities. The petitioner takes issue with the prosecutor’s statements made during rebuttal: And, you know, one point, you know, kind of trivializing what happened on behalf of his client, you know, Mr. LaRene says, “Well, what’s wrong with that?” You know, “what’s the matter with that?”, you know, when he was talking about Jim Redmond’s son getting a job. There’s nothing wrong with his son going out and getting a job. What’s wrong is, number one, Dr. Redmond using his influence as a public official to benefit his family. Trial Tr., Jan. 28, 2005 at 1128. In response to the prosecutor’s remarks, the following exchange occurred. Mr. La Rene: I’m going to object. This isn’t a part of the charges. The Court: I’m sorry? What? Mr. La Rene: There’s no charge here that Dr. Redmond improper[ly] used his influence as a public official to get his son a job. That’s the specifications of misconduct in office are what they are. I mean, don’t include that. -41- The Court: Excuse me. The testimony is what it is. I’ll let the jury decide in connection with it. I’m - - Confine yourself to the counts that we have, though. Thank you. Mr. Rollstin: And lying to the Michigan Department of Education about it. You know, I mean, and he can talk about profiting and, you know, Mr. LaRene can try and spin it in any way he wants, but, yeah, his son got a job out of the deal, he did. That job was created for Jim Redmond’s son. And Marvin Sauer said so. I mean, he didn’t say it exactly that way, but he you know, “Was the job there before?” “No.” Okay. Well, when it was - - in other words, according to Marv Sauer, when he talked about it, “Yeah, my son is looking for a job.” “Oh, okay. Well, you know, have him send his resume over.” You know? It wasn’t vacant before, though, so there’s a position for him. And then he tries to trivialize, you know, the $674 a week. Well, you know, to some people, that’s a salary. To some people, you know, that’s real money. “Yeah, my son is profiting from this arrangement.” . . . And you know, he worked for MINDS. Okay? That’s what the testimony was. Jim Redmond, Jr. worked for MINDS. And some of the time the defense, you know, wants to talk about who did the work. Well, they say, “Well, it really wasn’t The MINDS Institute. It was MINDS, LLC.” Well, they’re doing – according to that, if you attach yourself to that theory, they’re doing $500,000 plus worth of work. It’s a $900,000 a year company, is what their revenues were back in 2000/2001. Well, and his son is, you know, on the payroll for $34,000 a year. I mean, did that give, did that contract give them the ability to hire his son? I mean, if they don’t get that contract, now they’re only making 4 or $500,000 a year. Id. at 1128-30. The petitioner also takes issue with the prosecutor’s statement that the petitioner likely was going to work for TLC after he left OISD. The prosecutor stated: Mr. Rollstin: . . . The -- if you’re going to wire up -- if you’re going to have this plan to get all this product or content to the kids, you’d wire up all the schools. Well, anyway, Marv Sauer says, “We wanted to use Oakland Intermediate School District as a platform that we could market to other school districts, other people throughout the country.” These guys believed they were going to make a lot of money. And maybe they were. I mean, these -- they, they were, they thought they were on the cutting edge, they were, they were on the front end of a dot.com idea, you know, where visionaries, where technology is -42- going to be, get us into the next millennium. Okay? Marv Sauer wants to be able to go out and show the world what he did at the Oakland Intermediate School District. Okay? Well -- and he does show a propensity for hiring people that are close to this project into his organization. How much of a leap is it that Jim Redmond might one day work for TLC? Mr. La Rene: I just can’t imagine how that could be proper argument. There’s not a single shred -- The Court: I think it’s -- excuse me -- I think you don’t want to enter into speculation. It’s a valid argument that you might want to make, but don’t enter into speculation. Mr. Rollstin: I won’t, Judge. May I continue the argument? The Court: Yes. Go right ahead. Mr. Rollstin: Thank you. How much of a leap is that, that, you know, a guy nearing retirement is going to go over to -- Mr. La Rene: I’m sorry, Judge. I thought the Court sustained the objection. The Court: Excuse me. Mr. Rollstin: You know what? The Court: Pardon? Mr. La Rene: I misheard. I thought you sustained the objection. The Court: You put on the record when we’re off, when he’s done. Mr. La Rene: Very well. The Court: Okay? At this point in time, I have heard nothing that shakes me. You understand? Now, you may not like it, but this is argument. That’s why it’s called argument. Mr. La Rene: I thought the Court was, was -- counsel -- The Court: Counsel, I don’t remember him interrupting one time during some of the statements you made. -43- Mr. La Rene: Well, that’s -- he certainly was at liberty to do so, sir. The Court: Thank you very much. I, I disagree. Mr. La Rene: I don’t think I -- The Court: At this point it is disruptive. So please don’t do it. Mr. La Rene: I’m, I - - well, I - - no more objections, I guess. The Court: Thank you. Mr. Rollstin: Ask yourself, you know, one of the things you’re allowed to do as a jury is draw reasonable inferences from the evidence. That’s what you’re allowed to do. Well, how many people did TLC hire out of the Oakland Intermediate School District’s family, if you will? And Marv Sauer said, “Oh, he’s a visionary, he’s highly valued.” Okay? Well, when Marv Sauer wanted to take this idea on the road and tell everybody what a great thing he was doing, what kind of value would Jim Redmond have if he were part of the TLC group then? He would be somebody that - - I mean, with in-house, we have the former superintendent of Michigan’s largest intermediate school district. And this is where it all got off the ground. You know, Simonson went out and made $40,000 plus five days a month like that (snapping fingers). Defendant was making $250,000 working in the public sector. What would his value be at TLC? You know, greed can come in many ways. It can come in greed for power or greed for money. I told you earlier that this case captured both, I believe. And when you think about what Marv Sauer and Karl Seiler were willing to do with Jan VanDam’s daughter and his son and also their statement that this guy was valuable, he was somebody who was recognized as a visionary, wouldn’t they want him in house? Wouldn’t he add value to this concept of where they could take this idea on the road to sell it to other districts? Wouldn’t he bring instant credibility to them if they had him within their business? Trial Tr., Jan. 28, 2005 at 1138-41. The Michigan Court of Appeals rejected this claim, stating: Defendant is correct that a prosecutor is not permitted to argue facts that are not supported by the evidence. People v. Watson, 245 Mich. App 572, 588; 629 NW2d 411 (2001). However, a prosecutor is free to argue the evidence and any reasonable inferences arising therefrom as they relate to the prosecutor’s theory of the case. Id. -44- The prosecutor’s comment about defendant using his influence as a public official to benefit his family was not improper because it was based on the evidence and reasonable inferences from the evidence. Marvin Sauer hired defendant’s son to work for MINDS LLC. Sauer explained that he became aware that defendant’s son was looking for work through a conversation he had with defendant. Sauer hired defendant’s son to fill a newly created position on October 16, 2000, which was approximately two months before the $120,000 Contracted Services Contract was signed between the OISD and the MINDS Institute. Based on this evidence, an inference can be made that defendant used his influence as superintendent of the OISD and the possibility of a contract with the OISD to procure a position for his son with MINDS LLC. Therefore, the prosecutor’s comment was not improper because it was based on the evidence or reasonable inferences from the evidence. Similarly, the prosecutor’s comment about the possibility of defendant working for one of the MINDS corporations was also based on reasonable inferences from the evidence. Sauer testified that he met defendant in 1999 and recruited defendant to become involved in the development of the MINDS project because of defendant’s vision and guidance. According to Sauer, he sought an educational partner for the MINDS project, and the Oakland schools and defendant, as superintendent of the Oakland schools, were a good match. The MINDS Institute earned over $500,000 from the Oakland OISD because of defendant’s assistance. Based on this evidence, it is reasonable to infer the possibility that defendant might work for TLC or the MINDS entities as a reward for his efforts in securing the OISD’s involvement with the MINDS project and also because defendant had the educational background that made him a good educational partner for the MINDS Institute. Therefore, the prosecutor’s comments about defendant potentially working for the MINDS Institute in the future were based on reasonable inferences from the evidence, and the trial court did not abuse its discretion in denying defendant’s motion for a directed verdict. People v. Redmond, 2006 WL 3298360, at *10-11. It is well established that prosecutors must “‘refrain from improper methods calculated to produce a wrongful conviction.’” United States v. Young, 470 U.S. 1, 7 (1985) (quoting Berger v. United States, 295 U.S. 78, 88 (1935 . However, “[c]laims of prosecutorial misconduct are reviewed deferentially on habeas review.” Millender v. Adams, 376 F.3d 520, 528 (6th Cir. 2004) (citing Bowling v. Parker, 344 F.3d 487, 512 (6th Cir. 2003 . Prosecutorial misconduct will form the basis for a new trial and habeas relief only if the alleged misconduct “‘so infected the trial with -45- unfairness as to make the resulting conviction a denial of due process.’” Darden v. Wainwright, 477 U.S. 168, 181 (1986) (quoting Donnelly v. DeChristoforo, , 643 (1974 . “To constitute a denial of due process, the misconduct must be ‘so pronounced and persistent that it permeates the entire atmosphere of the trial.’” Byrd v. Collins, 209 F.3d 486, 529-30 (6th Cir. 2000) (quoting Pritchett v. Pitcher, 117 F.3d 959, 964 (6th Cir. 1997 . “The Court must examine ‘the fairness of the trial, not the culpability of the prosecutor.’” Pritchett, 117 F.3d at 964 (quoting Serra v. Michigan Dep’t of Corrs., 4 F.3d 1348, 1355 (6th Cir. 1993 . When assessing such a claim, the Court first considers whether the prosecutor’s conduct or remarks were improper. Slagle v. Bagley, 457 F.3d 501, 515-16 (6th Cir. 2006). If they were, the Court then must decide whether the improper acts were so flagrant as to warrant relief. Id. at 516. The Sixth Circuit applies a four-factor test to any inappropriate prosecutorial conduct to determine whether it was flagrant: “(1) whether the evidence against the defendant was strong, (2) whether the conduct of the prosecution tended to mislead the jury or prejudice the defendant; (3) whether the conduct or remarks were isolated or extensive; and (4) whether the remarks were made deliberately or accidentally.” Id. (citation omitted). The Court does not find improper the prosecutor’s statements concerning the petitioner’s son. Testimony offered at trial revealed that Marvin Sauer became aware that the petitioner’s son was looking for a job through a conversation he had with the petitioner around the same time OISD contracted with the MINDS Institute to perform more than $500,000 worth of work. Sauer also testified that the position had been newly created. The prosecutor’s statement regarding the petitioner using his influence to get his son a job was not improper because it was a reasonable inference drawn from Sauer’s trial testimony and the petitioner’s refusal to disclose his son’s -46- employment relationship. “A prosecutor has ‘leeway to argue reasonable inferences from the evidence’ during closing arguments.” United States v. Crosgrove, 637 F.3d 646, 664 (6th Cir. 2011) (quoting Byrd, 209 F.3d at 535). The prosecutor’s statement that the petitioner might work for TLC after leaving OISD is a different story. There was no testimony or evidence presented at trial that would allow a rational trier of fact to draw that inference. Byrd, 209 F.3d at 535 (“It is improper for a prosecutor, during closing arguments, to bring to the attention of the jury any ‘purported facts that are not in evidence and are prejudicial.’” (quoting United States v. Wiedyk, 71 F.3d 602, 610 (6th Cir. 1995 . Although improper and potentially misleading, however, the comment was not so flagrant as to warrant habeas relief. The evidence against the petitioner was strong, the prosecutor’s conduct was isolated, and the prosecutor’s comment was not framed as an assertion of fact. Rather, the prosecutor, in stating, “How much of a leap is it that Jim Redmond might one day work for TLC?” asked the jury to consider the possibility and did not state affirmatively that the petitioner would be employed by TLC or a MINDS entity. Moreover, the Sixth Circuit “has held that the trial court can generally correct such improprieties by instructing the jury that closing arguments are not evidence.” Crosgrove, 637 F.3d at 664 (citing United States v. Emuegbunam, 268 F.3d 377, 406 (6th Cir. 2001 . And in this case, the trial court instructed the jury to consider only properly admitted evidence. After closing arguments, the trial court gave the following instructions, among others: When you discuss the case and decide on your verdict, you may only consider the evidence that has been properly admitted in this case. Therefore, it’s important for you to understand what evidence is and what’s not evidence. Evidence includes only the sworn testimony of witnesses, the exhibits admitted into evidence, and anything else I told you you could consider as evidence, such as stipulations by the parties. Now, many things are not evidence, and you must be careful not to consider them as such. And I’ll describe some of the things that are not evidence. -47- The fact that the defendant is charged with a crime and is on trial is not evidence. Likewise, the fact that he’s charged with more than one crime is not evidence. The lawyers’ statements and arguments are not evidence. They’re only meant to help you understand the evidence and each side’s legal theories. Trial Tr., Jan. 28, 2005 at 1146-47. The Court finds that the Michigan Court of Appeals’s decision with respect to the petitioner’s prosecutorial misconduct claim was not contrary to clearly established federal law as determined by the Supreme Court. Therefore, the petitioner is not entitled to habeas relief on this claim. III. The state courts’ decisions in this case were not contrary to federal law, an unreasonable application of federal law, or an unreasonable determination of the facts. The petitioner has not established that his convictions or sentences were obtained in violation of the Constitution or laws of the United States. Accordingly, it is ORDERED that the petition for a writ of habeas corpus is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 17, 2012 -48- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 17, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -49-

=== City of Detroit v. State of Michigan and Comcast of Detroit, and Michigan Attorney General ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION CITY OF DETROIT, v. Plaintiff, Case Number 10-12427 Honorable David M. Lawson STATE OF MICHIGAN and COMCAST OF DETROIT, Defendants, and MICHIGAN ATTORNEY GENERAL, __________________________________________/ Intervening Defendant. OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTIONS FOR PARTIAL SUMMARY JUDGMENT AND REQUIRING ADDITIONAL BRIEFING The City of Detroit has sued defendant Comcast of Detroit, the City’s cable television provider, seeking to enforce the terms of the latest negotiated franchise agreement between Comcast and the City, which expired on February 28, 2007. The City contends that Comcast is a holdover tenant, and it must comply with all the terms of the expired agreement. Comcast maintains that it is operating under a new agreement that took effect by operation of a state law — the Uniform Video Services Local Franchise Act, Mich. Comp. Laws § 484.3301 et seq. — which took effect in 2007 and resulted in the elimination of the terms in the old franchise agreement that the City seeks to enforce. The City insists, however, that certain provisions of the Michigan Act are preempted by federal law and violate the Michigan constitution’s guarantee to local units of government of control over their public spaces and rights-of-way, and the end result is that Comcast must comply with the old franchise agreement until a new one is approved by the City. After the Court denied Comcast’s motion to dismiss, the Michigan attorney general intervened to defend the Michigan Act, and all parties filed cross motions for partial summary judgment. The Court heard oral argument on October 27, 2011, and the parties have since sought and received permission to submit additional authority. The Court also received several amicus briefs. The Court now finds that the City has standing to challenge the validity of certain aspects of the Michigan Act on federal preemption grounds, but that it has no standing to challenge the Act’s removal of municipalities’ authority to enforce customer service and anti-discrimination provisions in existing franchise agreements, and that controversy is not ripe. The Court also finds invalid on federal preemption grounds the provisions of the Michigan Act addressing the modification of existing franchise agreements and barring enforcement provisions relating to public, government, and education channels. However, the Act’s renewal procedures and its failure to require universal build-outs are not preempted by federal law. The Court also finds that the state attorney general has offered a construction of the Act that avoids a conflict with the state constitution, that is, that municipalities may refuse to approve a franchise renewal application and negotiate acceptable terms with the cable provider, without the standard form agreement automatically taking effect. Therefore, the Act does not violate the Michigan constitution. That holding leads to the conclusion that Comcast and the City have no current franchise agreement in place. Because Michigan law does not permit a franchisee to be regarded as a holdover tenant, Comcast must be found to be a trespasser. The parties will be directed to address an appropriate remedy. Therefore, the Court will grant in part and deny in part each of the parties’ motions for partial summary judgment. -2- I. Facts and legislation The facts of the case and the nature of the dispute were described in detail in the Court’s earlier opinion denying Comcast’s motion to dismiss. See City of Detroit v. Comcast of Detroit, Inc., 771 F. Supp. 2d 781, 783-85 (E.D. Mich. 2011). To summarize, in 1994, Comcast assumed the obligations of a franchise agreement negotiated by the City and Comcast’s predecessor, Barden Cablevision of Detroit. That agreement contained several features that were favorable to the City, including provisions that required Comcast to provide free hook-ups (“drops”) and service to municipal and school buildings; maintain a network to facilitate communications among City buildings; furnish additional public, education, and government (PEG) channels and at least three PEG studios, plus mobile units, staff, and equipment; make payments to the Public Benefit Corporation to support PEG channels; and provide free transmission lines for the City’s PEG channels. Before the agreement expired in February 2007, Comcast and the City began negotiating to renew the franchise. The City insisted that Comcast include in the new agreement language concerning consumer protections, anti-discrimination, and PEG channels, and on March 16, 2007, the City approved Comcast’s application subject to additional terms that included those provisions. However, Comcast sent the City a letter on April 23, 2007 rejecting the franchise as approved. Instead, Comcast unilaterally declared that Michigan law deemed the franchise approved without the additional terms and has continued to operate in the City of Detroit despite the absence of a franchise agreement approved by the City. Comcast relies primarily on Michigan’s Uniform Video Services Local Franchise Act (“the Michigan Act”), Mich. Comp. Laws § 484.3301 et seq., to justify its position. The City insists that several parts of the Michigan Act are preempted by the Cable Communications Policy Act (“the -3- Cable Act”), 47 U.S.C. § 521 et seq. Each body of legislation sets forth the respective obligations and limitations on cable operators and governmental franchising authorities. The dispute in this case can fairly be characterized as a disagreement over which provisions of the Cable Act are mandatory concerning cable operators’ obligations and the authority of local governmental units, and which are merely permissive. The Cable Act contains an express preemption provision, and the parties do not seriously dispute the general proposition that state law cannot lawfully excuse a cable provider from complying with the mandatory parts of the Cable Act. As with most regulatory conflicts, however, the devil is in the details. A. The Cable Act When Congress enacted the Cable Act in 1985 to add Title VI to the Communications Act of 1934, there existed an “‘illdefined [sic] . . . state of regulatory uncertainty’” created by the overlapping authority held by the FCC and local municipalities. Alliance for Cmty. Media v. FCC, 529 F.3d 763, 767-68 (6th Cir. 2008) (quoting American Civil Liberties Union v. FCC, 823 F.2d 1554, 1559 (D.C. Cir. 1987). The amending legislation “preserv[ed] the critical role of municipal governments in the franchise process . . . while affirming the FCC’s exclusive jurisdiction over cable service, and overall facilities which relate to such service.” Id. at 768 (quoting City of New York v. FCC, 814 F.2d 720, 723 (D.C. Cir. 1987 . The Act, together with the Cable Television Consumer Protection and Competition Act, Pub. L. No. 102-385, 106 Stat. 1460, passed in 1992, establishes a minimum level of services, PEG channel access, consumer protections, and anti-discrimination requirements that franchising authorities must include in their franchise agreements with cable operators. See Time Warner Ent. Co., L.P. v. FCC, 93 F.3d 957, 966 (D.C. Cir. 1996). The national legislation establishes both a floor and a ceiling concerning performance requirements that must be -4- included in franchise agreements and may be demanded from cable providers, it permits local franchising authorities to negotiate with cable operators for higher levels of service, and it prohibits laws and practices that fall below those levels. See 47 U.S.C. § 556(c) (stating that “any provision of law of any State, political subdivision, or agency thereof, or franchising authority, or any provision of any franchise granted by such authority, which is inconsistent with this chapter shall be deemed to be preempted and superseded”). The Cable Act states that “[a] franchising authority may award, in accordance with the provisions of this subchapter, 1 or more franchises within its jurisdiction.” 47 U.S.C. § 541(a)(1). A franchising authority can be “any governmental entity empowered by Federal, State, or local law to grant a franchise.” 47 U.S.C. § 522(10). A “franchise” is defined as “an initial authorization, or renewal thereof . . . , which authorizes the construction or operation of a cable system.” 47 U.S.C. § 522(9). “A municipal franchise granted to a cable operator has commonly specified the nature of the cable system to be constructed, the service to be provided, and the rate which may be charged for those services.” H.R. Rep. 98-934, at 19 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4656. The “franchising authority,” sometimes called a “local franchising authority, or “LFA,” refers to “any governmental entity empowered by Federal, State, or local law to grant a franchise.” 47 U.S.C. § 522(10). In states where the franchising process includes approval by a state agency as well as the local government, the legislative history indicates that the term “franchising authority” should include the agency as well as the local government. H.R. Rep. 98-934, at 45 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4682. Without a franchise, a cable operator cannot provide cable services. 47 U.S.C. § 541(b)(1). “By delegating this task to LFAs, the 1984 Act effectively ‘preserve[d] the -5- role of municipalities in cable regulation.’” Alliance for Cmty. Media, 529 F.3d at 768 (quoting City of Dallas, Tex. v. FCC, 165 F.3d 341, 345 (5th Cir. 1999 . Section 541 “enumerates various requirements cable operators must follow to acquire cable franchises.” Alliance for Cmty. Media, 529 F.3d at 768. Under section 541, the franchising authority also “shall assure” that no local residents are denied cable services based on their income, “may require adequate assurance that the cable operator will provide adequate public, educational, and governmental access channel capacity, facilities, or financial support,” and “may require adequate assurance that the cable operator has the financial, technical, or legal qualifications to provide cable service.” 47 U.S.C. § 541(a)(3)-(4). The public, educational, and governmental access channels (“PEG channels”) also receive special protection in section 531, which allows a franchising authority to set requirements within a franchise for designating certain channels for PEG use — but “only to the extent provided in this section” — and to require such designations within the franchise or franchise proposal documents. 47 U.S.C. § 531(a)-(b). Subsection 531(c) grants enforcement authority for PEG channel designation to the franchising authority: A franchising authority may enforce any requirement in any franchise regarding the providing or use of such channel capacity. Such enforcement authority includes the authority to enforce any provisions of the franchise for services, facilities, or equipment proposed by the cable operator which relate to public, educational, or governmental use of channel capacity, whether or not required by the franchising authority pursuant to subsection (b) of this section. 47 U.S.C. § 531(c). This section does not specify how the franchising authority may pursue enforcement measures. Section 544 governs the regulation of services, facilities, and equipment under a franchise and prevents the franchising authority regulating those aspects from taking action “except to the extent consistent with this subchapter.” 47 U.S.C. § 544(a). The subchapter allows the local -6- franchising authority to establish requirements for new or renewed franchises and enforce the obligations in existing franchise agreements. 47 U.S.C. § 544(b)-(c). However, “[a]ny Federal agency, State, or franchising authority may not impose requirements regarding the provision or content of cable services, except as expressly provided in this subchapter.” 47 U.S.C. § 544(f)(1). Sections 545 and 546 govern the procedures for modification and renewal of existing franchises. The legislative history of the Cable Act indicates that these provisions were established to “provide protection to the cable operator” and are “not mandatory.” H.R. Rep. 98-934, at 20, 26, 72 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4657, 4663, 4709. But the drafters anticipated that these provisions would supplement existing procedures and that the majority of renewals would occur “without regard to this section.” H.R. Rep. 98-934, at 72 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4709. A cable provider may request modification of a franchise if the provider demonstrates that an existing requirement of the franchise is “commercially impracticable” or, with respect to a change in services, that the change will not affect “the mix, quality, and level of services” provided under the franchise agreement. 47 U.S.C. § 545(a)(1); H.R. Rep. 98-934, at 71 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4708. The Act requires that a franchising authority make a final decision on a modification request in a public proceeding within 120 days; that decision is appealable to either a federal or state court. 47 U.S.C. § 545(a)(2), (b)(1) & 555(a). To commence the renewal process, the franchising authority may hold a public proceeding, affording notice and participation opportunities to the public, to discuss the cable needs of the community and the cable operator’s performance. The franchising authority must hold such a proceeding if timely requested by the cable operator, and the cable operator may not begin the renewal process until after the proceeding has been completed. 47 U.S.C. § 546(a), (b)(1). The -7- statute also lays out a detailed procedure for renewing a franchise. The cable operator’s renewal proposal submitted to the franchising authority “shall contain such material as the franchising authority may require.” 47 U.S.C. § 546(b)(2). After the franchising authority receives the proposal, the Cable Act instructs it to provide public notice of the proposal and either renew the franchise or issue a preliminary assessment against renewal within four months. 47 U.S.C. § 546(c)(1). Either the cable operator or the franchise authority may commence an administrative proceeding to consider whether the operator has complied with governing laws and to assess the quality of services provided, the operator’s ability to provide the services, and whether the proposal is reasonable. Ibid. Following the proceeding, the franchising authority “shall issue a written decision granting or denying the proposal for renewal based upon the record of such proceeding.” 47 U.S.C. § 546(c)(3). The statute sets out several valid grounds for denying a renewal proposal and grants a cable operator the right to appeal the final decision or failure to decide to a state or federal district court. 47 U.S.C. § 546(d), (e)(1). Finally, the Cable Act includes a provision clarifying the interaction between Federal, State, and local authority. The Cable Act provides that “[n]othing in this subchapter shall be construed to affect any authority of any State, political subdivision, or agency thereof, or franchising authority, regarding matters of public health, safety, and welfare,” and that “[n]othing in this subchapter shall be construed to restrict a State from exercising jurisdiction with regard to cable services.” 47 U.S.C. § 556(a)-(b). However, both provisions caution that State action is not restricted or affected to the extent that it is consistent with the provisions of the Act. Ibid.; see also H.R. Rep. 98-934, at 94 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4731. For example, “the state may exercise its authority over cable either by establishing a state franchising authority or by placing conditions on -8- a local government’s grant of a cable franchise” in order to ensure that certain mandatory federal provisions are included in the franchise. H.R. Rep. 98-934, at 94 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4731. The Cable Act also states that “any provision of law of any State, political subdivision, or agency thereof, or franchising authority . . . which is inconsistent with this chapter shall be deemed to be preempted and superseded.” 47 U.S.C. § 556(c); see also H.R. Rep. 98-934, at 94 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4731. B. The Michigan Act According to the legislative analysis furnished by the Michigan house of representatives fiscal agency, the Michigan Act was intended to facilitate new cable operators’ entrance into the market throughout Michigan communities in order to foster competition by eliminating the cumbersome process of navigating through the varied requirements of individual municipalities. It was not intended to favor incumbent operators, who in many markets enjoyed a de facto monopoly, but rather to “encourag[e] more providers to enter the market.” House Fiscal Agency, Legislative Analysis of Uniform Video Services Local Franchise Act (House Bill 6456, H-2 Substitute, with Floor Amendment), First Analysis, dated November 14, 2006, at 2, available at http://www.legislature.mi.gov/documents/2005-2006/billanalysis/House/pdf/2005-HLA-6456-3.pdf (last visited July 9, 2012) (hereinafter “House Legislative Analysis”). The Michigan Act, promulgated in early 2007, reaffirmed that a cable operator cannot provide cable or video services within an area without first obtaining a franchise from the local unit of government, and it created a uniform form for cable operators to use when applying for a franchise from a municipality anywhere in the state. Mich. Comp. Laws §§ 484.3302-484.3303. After a cable operator submits the proposed Uniform Franchise Agreement to the “franchising -9- entity” (i.e., the local unit of government), the Michigan Act requires the franchising entity to notify the provider as to the completeness of its submission within 15 days and inform the operator of the portions that are not complete. Mich. Comp. Laws § 484.3303(2). The franchising entity has 30 days from the submission date to approve a complete agreement. Mich. Comp. Laws § 484.3303(3). “If the franchising entity does not notify the provider regarding the completeness of the franchise agreement or approve the franchise agreement within the time periods required under this subsection, the franchise agreement shall be considered complete and . . . approved.” Mich. Comp. Laws § 484.3303(3). The Michigan Act establishes ten-year terms under a Uniform Franchise, with a ten-year renewal period available upon application by the cable operator. Mich. Comp. Laws § 484.3303(7). The Michigan Act provides no further details on the renewal process for uniform franchise agreements, except to reference the process for initial applications. For franchises existing at the time of the Michigan Act’s promulgation, the Act explicitly states that “any provisions of an existing franchise that are inconsistent with or in addition to the provisions of a [uniform franchise agreement] are unreasonable and unenforceable by the franchising entity” and that “no existing franchise agreement . . . shall be renewed or extended upon the expiration date of the agreement.” Mich. Comp. Laws § 484.3305(3), (1). Instead, the Act establishes three ways to create a valid Uniform Franchise: terminate the existing agreement and enter into a Uniform Agreement before the expiration date; amend the existing franchise agreement to include only the provisions applicable under the Michigan Act and the Uniform Franchise Agreement; or operate under the expired franchise until a uniform agreement is put into place, which must occur within 120 days of enactment. Mich. Comp. Laws § 484.3305(2). Legislative history for the Michigan Act makes little reference to the Cable Act or the potential conflict between the -10- state and federal law, except to note that “[a]mong the stated purposes of federal telecommunications law is . . . to ‘establish franchise procedures and standards which encourage the growth and development of cable systems and which assure that cable systems are responsive to the needs and interests of the local community.’” House Legislative Analysis at 5. On January 30, 2007, the Michigan Public Service Commission issued the standard form pursuant to the Act. See Mich. Comp. Laws § 484.3302. The form includes a list of requirements with which cable operators must comply, including: C. The Provider agrees to comply with all valid and enforceable federal and state statutes and regulations. D. The Provider agrees to comply with all valid and enforceable local regulations regarding the use and occupation of public rights-of-way in the delivery of the video service, including the police powers of the Franchising Entity. . . . F. The Provider shall comply with the public, education, and government programming requirements of Section 4 of the Act. G. The Provider shall comply with all customer service rules of the Federal Communications Commission under 47 CFR 76.309 (c) applicable to cable operators and applicable provisions of the Michigan Consumer Protection Act, 1976 PA 331, Mich. Comp. Laws 445.901 to 445.922. . . . I. The Provider shall comply with the Consumer Privacy Requirements of 47 U.S.C. § 551 applicable to cable operators. . . . A. The Provider shall not deny access to service to any group of potential residential subscribers because of the race or income of the residents in the local area in which the group resides. . . . A. A video service Provider shall calculate and pay an annual video service provider fee to the Franchising Entity. . . . C. The Franchising Entity shall not demand any additional fees or charges from a provider and shall not demand the use of any other calculation method other than allowed under the Act. . . . A. The video service Provider shall designate a sufficient amount of capacity on its network to provide for the same number of public, education, and government access -11- channels that are in actual use on the incumbent video provider system on the effective date of the Act or as provided under Section 4(14) of the Act. . . . A. The video service Provider shall also pay to the Franchising Entity as support for the cost of PEG access facilities and services an annual fee . . . . . . . A. The Provider shall establish a dispute resolution process for its customers. Provider shall maintain a local or toll-free telephone number for customer service contact. Michigan Public Service Commission, Instructions for Uniform Video Service Local Franchise Agreement, available at http://www.michigan.gov/documents/mpsc/uniform_video_services_ local_franchise_agrement_275178_7.doc (last visited July 10, 2012); see also Mich. Comp. Laws §§ 484.3302(3), 484.3304. The form itself specifically prevents municipalities from altering the Uniform Franchise Agreement. However, the franchising entity and a cable operator may enter into a “voluntary franchise agreement” with additional terms. Mich. Comp. Laws § 484.3313. The Michigan Act also grants the Michigan Public Service Commission the authority to adjudicate violations of the Act and award remedies consisting of fines, revocation of franchise agreements, or cease and desist orders. Mich. Comp. Laws § 484.3314. II. Parties’ arguments The City argues in its motion for partial summary judgment that several provisions of the Michigan Act conflict with the Cable Act expressly or by implication, and therefore the Michigan law is preempted by federal law. The conflicting provisions, says the City, are those dealing with renewal and modification of franchises, requiring support for PEG programming, enforcement of franchise provisions including those regulating PEG channels and customer service requirements, anti-discrimination and redlining, and build-out requirements. The City also contends that article 7, section 29 of the Michigan constitution commits to local governments the authority to issue -12- franchises to public utilities seeking to operate within municipal boundaries, and the Michigan Act contravenes that provision by prescribing a uniform franchise agreement that interferes with the City’s authority to negotiate terms with franchisors. Finally, the City argues that because the Michigan Act is preempted and the Cable Act requires that cable operators have a franchise, the 1985 Agreement remains in effect. The City notes that the Cable Act does not allow cable operators to operate without a franchise and argues that operators that continue to operate after a franchise agreement expires are holdover tenants, subject to the terms of the expired agreement. Intervening defendant State of Michigan bases its argument primarily on the idea that local governments are creatures of legislation and subdivisions of the state, and derive any franchising authority they have from the state. Therefore, the argument goes, the Michigan legislature has the power to place limits on the terms that local governments may impose on companies through their power to grant franchises. Of course, the relationship between the state and its local units of government is governed by the state constitution, and article 7, section 29 of that constitution speaks to a municipality’s authority to grant franchises. But another section of that constitution , article 7, section 22, addresses in general terms the authority of cities to adopt ordinances and subjects that authority “to the constitution and law.” Mich. Const. art. 7, § 22 (1963). The State contends, therefore, that the Michigan Act is a proper limitation on the City’s franchising authority. The State also contends that the City does not have standing to challenge the Michigan Act because it has not suffered any harm. It presents its standing argument in four parts. First, the State argues that the City was not harmed by the purported modification of the 1985 Agreement by the Michigan Act, primarily because the City has not alleged that Comcast violated the terms of the 1985 Agreement, nor that the City attempted to enforce the terms of that Agreement. Second, the -13- State contends that the City has not been harmed because it has not been denied PEG channel access. The State points out that the City has not alleged that it requested assurances of adequate capacity from Comcast, nor explained when it might require more PEG channels than are currently available. Third, the State says that the City has not alleged that defendant Comcast has violated the Michigan Act’s customer service provisions. Fourth, the State argues that the City cannot challenge the Michigan Act’s anti-discrimination provisions because it has not alleged that Comcast has violated those provisions. Finally, the State maintains that the renewal provisions of the Michigan Act do not conflict with and therefore are not preempted by the Cable Act. It insists that the Michigan Act’s renewal procedures supplement the Cable Act’s renewal procedures and are consistent with the goals of the Cable Act. The State believes that the Cable Act sets forth mostly broad guidelines for the regulation of cable systems, and therefore it does not occupy the entire regulatory field and leaves certain issues to state and local determination. More significantly, the State does not read the Michigan Act as precluding franchising entities from rejecting a franchising agreement proposal. The State argues that the provision that the City cites for the proposition that franchising authorities are not permitted to deny franchise applications under the Michigan Act actually provides only that if a franchising proposal is not approved — that is, acted upon — within 30 days, it is considered approved. See Mich. Comp. Laws § 484.3303(3). The State reads that section as allowing a franchising authority to announce that it plans to review the proposal, and then the Cable Act permits the franchising entity to conduct a contested case to determine whether it had a legal basis to reject the proposal. See 47 U.S.C. § 546(c)(1), (d). The States argues that the Michigan Act should be interpreted to be consistent with the federal act to the extent possible, and it urges the -14- Court to interpret the Michigan Act to permit a franchising entity to deny a proposal even if the proposal is a uniform agreement. The State points out that the Michigan Act allows franchise authorities and cable operators to reach voluntary agreements that are different from the uniform franchise agreement contained in the Michigan Act, and therefore a franchising authority would be in its rights to reject a uniform agreement and work towards a voluntary agreement. For its part, Comcast repeats the State’s argument that the power to define the extent of local governments’ role as a franchising authority lies with the state. Therefore, Comcast insists, the Michigan Act is consistent with the Cable Act and the state constitution. Comcast reads the Cable Act and its legislative history as allowing the state to take over some or all of the franchise process; the division of labor on franchising was left to the state. Comcast also says that although the renewal and modification provisions of the Michigan Act are consistent with the Cable Act, those provisions do not apply here in any event because the 2007 franchise was a new agreement, not a renewal. Moreover, it argues, the renewal procedures established by the Cable Act are permissive only and not mandatory; therefore, the State is free to establish procedures of its own. Next, Comcast argues that the anti-discrimination provisions of the Michigan Act are consistent with the Cable Act; the Michigan Act prohibits discrimination against low-income persons just as the Cable Act does. Next, Comcast contends that the PEG provisions of the Cable Act do not provide minimum requirements for cable operators and thus do not preempt the Michigan Act. Moreover, according to Comcast, the Cable Act’s language is permissive and does not require any franchising authority, whether state or local, to establish PEG capacity, facilities, or financial support. Comcast also argues that the customer service provisions of the Michigan Act are not preempted by the Cable Act because the state, not the city, retains the power under the Cable Act to allocate franchising -15- authority, responsibilities, and oversight. Comcast also believes that the Michigan Act is compatible with the Cable Act’s customer service standards; the Michigan Act not only fully incorporates the customer service standards in the Cable Act, but also incorporates that Michigan consumer protection act. Comcast also mimics the State’s argument that there is no implied preemption because the Michigan Act, intended to promote and foster competition, is in harmony with the stated purposes of the Cable Act. Lastly, Comcast says that each of the plaintiff’s claims anticipate events that have not yet happened and may never happen, and therefore the controversy is not ripe for adjudication. Comcast observes that the franchise renewal process had stalled before the Michigan Act was enacted, and because the Cable Act gives cable operators, and not cities, the right to challenge a renewal or modification process in court or require a cable operator to renew a franchise, there is nothing in the Cable Act to prevent a cable operator from allowing its unmodified franchise to expire consistent with state law and to obtain a “new” authorization under that state law. Comcast also states that the plaintiff has made no factual allegation of a concrete dispute with respect to any other provision of the Cable Act. III. As mentioned above, the parties have filed cross motions for partial summary judgment. The fact that the parties have filed cross motions for summary judgment does not automatically justify the conclusion that there are no facts in dispute. Parks v. LaFace Records, 329 F.3d 437, 444 (6th Cir. 2003) (“The fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate.”). Instead, the Court must apply the well-recognized summary judgment standards when deciding such cross -16- motions: when this Court considers cross motions for summary judgment, it “must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party.” Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003). Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A trial is required only when “there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Anderson v. Liberty Lobby, Inc., , 250 (1986). The parties have not seriously contested the basic facts of the case. Where the material facts are mostly settled, and the question before the court is purely a legal one, the summary judgment procedure is well suited for resolution of the case. See Cincom Sys., Inc. v. Novelis Corp., 581 F.3d 431, 435 (6th Cir. 2009). Although some of the parties’ arguments apply to the concept of preemption generally, the Court believes it is more useful to address the specific provisions of the statutes in turn. The ultimate question is whether Comcast is in compliance with the terms of both federal and state law that mandates that a valid franchise be in place before a cable operator can furnish and charge for cable services in a municipality. A. Renewal and modification procedures The State and Comcast contend that the Court does not have subject matter jurisdiction to entertain the City’s challenge to the Michigan Act’s renewal and modification procedures. The State argues that the City lacks standing, and Comcast contends the claim is not ripe. Standing and ripeness are important jurisdictional concepts, although neither defendant raised them in their initial challenge to jurisdiction stated in their motions to dismiss. Nevertheless, -17- “‘a plaintiff must demonstrate standing separately for each form of relief sought.’” DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006) (quoting Friends of Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., , 185 (2000 ; see also Johnson v. Turner, 125 F.3d 324, 338 (6th Cir. 1997). “To establish Article III standing, a litigant must show (1) an injury in fact; (2) a causal connection between the injury and the conduct complained of; and (3) that the injury will likely be redressed by a favorable decision.” Barnes v. City of Cincinnati, 401 F.3d 729, 739 (6th Cir. 2005) (citing Lujan v. Defenders of Wildlife, , 560-61 (1992 . The injury must be “actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560 (internal quotations and citations omitted). “[A] plaintiff is not entitled to injunctive or declaratory relief ‘[a]bsent a sufficient likelihood that he will again be wronged in a similar way,’ City of Los Angeles v. Lyons, 461 U.S. 95, 111 (1983), unless the plaintiff is subject to ‘continuing, present adverse effects,’ O’Shea v. Littleton, , 496 (1974).” Schultz v. United States, 529 F.3d 343, 349 (6th Cir. 2008); see also Fieger v. Ferry, 471 F.3d 637, 643 (6th Cir. 2006) (“In the context of a declaratory judgment action, allegations of past injury alone are not sufficient to confer standing. The plaintiff must allege and/or ‘demonstrate actual present harm or a significant possibility of future harm.’”) (quoting Peoples Rights Org., Inc. v. City of Columbus, 152 F.3d 522, 527 (6th Cir. 1998 . For example, the Sixth Circuit has held that a plaintiff who has repeatedly attempted to obtain employment with a municipality had standing to challenge certain hiring practices. Cleveland Branch, N.A.A.C.P. v. City of Parma, OH, 263 F.3d 513, 528 (6th Cir. 2001). The injury also must be “fairly traceable” to the defendants’ conduct. Schultz, 529 F.3d at 349 (internal quotation marks omitted). -18- The State argues that the City has no standing to challenge the franchise modification provisions of the Michigan Act insofar as it permitted modification of the 1985 Agreement because the City has not alleged that Comcast breached the 1985 Agreement and the City has not attempted to enforce the 1985 Agreement. This contention is perplexing; the central focus of City’s complaint is that Comcast must abide by the terms of the 1985 Agreement and has failed to do so. The lone case that the State cites for the proposition that the plaintiff cannot challenge the modification of the 1985 Agreement until it seeks to enforce it, Warth v. Seldin, (1975), does not stand for that proposition. In Warth, the Supreme Court held that a building association lacked standing to challenge a zoning ordinance because none of the members of the association had been precluded from pursuing a project because of the ordinance. Id. at 516. In other words, the building association could not point to any specific injury to any of its members resulting from the ordinance. There is simply nothing in this case that implies that in order to have standing to challenge a modification to a contract one must first have sought to enforce the terms of the contract. In contrast, here the City points to a specific injury resulting from the modification of the 1985 Agreement: defendant Comcast has ceased providing services and funds to the plaintiff. The City has satisfied the constitutional requirements of standing for its challenge to the renewal and modification procedures mandated by the Michigan Act. The concept of “ripeness ‘is drawn both from Article III limitations on judicial power and from prudential reasons for refusing to exercise jurisdiction.’ . . . The ripeness doctrine serves to ‘avoid[ ] . . . premature adjudication’ of legal questions and to prevent courts from ‘entangling themselves in abstract’ debates that may turn out differently in different settings.” Warshak v. United States, 532 F.3d 521, 525 (6th Cir. 2008) (quoting Nat’l Park Hospitality Ass’n v. Dep’t of -19- Interior, 538 U.S. 803, 807-08 (2003 . The Sixth Circuit has explained that “‘“a claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all.”’Cooley v. Granholm, 291 F.3d 880, 883-84 (6th Cir. 2002) (quoting Texas v. United States, 523 U.S. 296 (1998 . As a rule, we do not allow litigation on premature claims to ensure that courts litigate ‘only existing, substantial controversies, not hypothetical questions or possibilities.’ City Commc’ns, Inc. v. City of Detroit, 888 F.2d 1081, 1089 (6th Cir. 1989).” Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 581-82 (6th Cir. 2008). Another factor in the ripeness consideration is whether there is sufficient “hardship to the parties [in] withholding court consideration” until there is a legal action for damages. See Abbott Laboratories v. Gardner, 387 U.S. 136, 149 (1967), abrogated with respect to other principles by Califano v. Sanders, 430 U.S. 99 (1977). Comcast argues that the City’s claims are not ripe because the City alleges only that Comcast breached the 1985 Agreement after that agreement had already expired. That argument in turn is based on Comcast’s notion that once the franchise agreement expires on its own terms, there can be no “renewal,” and Comcast must be treated as a new applicant for a new franchise. But that idea ignores the reality that Comcast is the incumbent cable operator and has no intention of withdrawing from that market. Treating Comcast as a “new” applicant makes no sense under the language and purposes of either the Cable Act or the Michigan Act. The Cable Act builds in due process protections for incumbent operators throughout the renewal process, presumably recognizing their capital investment in infrastructure. See, e.g., 47 U.S.C. § 546(c)(1) (requiring public notice of an incumbent operator’s renewal proposal and a decision within four months); § 546(c)(3) (requiring “a written decision granting or denying the proposal for renewal based upon the record of such -20- proceeding”); § 546(d), (e)(1) (establishing grounds for denial of renewal and a right to appeal); see also H.R. Rep. 98-934, at 73 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4710. The Michigan Act focuses primarily on new applicants for a franchise and purportedly was intended to facilitate market entrance by them and competition. See House Legislative Analysis at 2. The fact that the alleged breaches of the 1985 Agreement occurred after that agreement expired, therefore, is irrelevant. The City contends that Comcast remained bound by the 1985 Agreement after its expiration, and therefore its failures to provide services and funds as required under that agreement constituted a breach of the agreement. Comcast’s failure to provide those services and funds is the concrete factual claim that allows the Court to adjudicate this dispute under Article III; the risk that Comcast will continue to withhold those services and funds constitutes the hardship faced by the City if the Court refuses to adjudicate the complaint. See Sch. Dist. of City of Pontiac v. Sec’y of U.S. Dep’t of Educ., 584 F.3d 253, 263 (6th Cir. 2009). This aspect of the City’s claim is clearly ripe for judicial resolution. The City contends that the renewal and modification procedures are preempted by the Cable Act. Federal preemption is based on the Supremacy Clause of the United States Constitution. U.S. Const. art. 6, cl. 2. In preemption cases, “[t]he purpose of Congress is the ultimate touchstone.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996). Traditionally, the Supreme Court has identified two types of preemption: express preemption and implied preemption. State Farm Bank v. Reardon, 539 F.3d 336, 341-42 (6th Cir. 2008) (citing Fidelity Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 152-53 (1982 . Express preemption occurs when Congress so states in legislation. “There is no doubt that Congress may withdraw specified powers from the States by enacting a statute containing an express preemption provision.” Arizona v. United States, --- U.S. ---, 2012 -21- WL 2368661, at *7 (June 25, 2012) (citing Chamber of Commerce of United States of America v. Whiting, 563 U.S. ---, ---, 131 S. Ct. 1968, 1974-75 (2011 . Implied preemption is further subdivided into at least two categories: “field pre-emption, where the scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it, and conflict pre-emption, where compliance with both federal and state regulations is a physical impossibility, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 98 (1992) (internal citations and quotation marks omitted). “[I]n all preemption cases, and particularly in those in which Congress has legislated in a field which the States have traditionally occupied, we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.” Wyeth v. Levine, 555 U.S. 555, 565 (2009) (internal quotation marks and ellipses omitted); see also Wimbush v. Wyeth, 619 F.3d 632, 642-43 (6th Cir. 2010). The Supreme Court has explained that conflict preemption can occur in one of two ways: “when compliance with both federal and state regulations is a physical impossibility, or when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Fidelity Fed. Sav. and Loan Assoc. v. de la Cuesta, 458 U.S. 141, 153 (1982) (internal quotations and citations omitted). Conflict preemption analysis “should be narrow and precise, ‘to prevent the diminution of the role Congress reserved to the States while at the same time preserving the federal role.’” Downhour v. Somani, 85 F.3d 261, 266 (6th Cir. 1996) (quoting Nw. Cent. Pipeline Corp. v. State Corp. Comm’n, 489 U.S. 493, 515 (1989 . -22- The Cable Act contains express preemption language, providing that “any provision of the law of any State . . . which is inconsistent with this chapter shall be deemed to be preempted and superseded.” 47 U.S.C. § 556(c). The City argues that the Michigan Act is preempted by the Cable Act based on both express preemption and implied preemption. It does not contend that field preemption applies here, but it does maintain that the Michigan Act conflicts with the Cable Act, both because it is impossible to comply with certain aspects of both laws, and because the Michigan Act creates an obstacle to achieving the purpose behind the Cable Act. The City argues that the Cable Act provides a set of procedures for renewal and modification of franchise agreements that are designed to protect the needs of local communities, and the Michigan Act eliminates those procedures and provides for unilateral renewal and modification of franchise agreements. The defendants argue that the Michigan Act fills gaps in the procedures outlined in the Cable Act and the renewal and modification procedures in the Cable Act are optional rather than mandatory. 1. Renewal Both the text and the legislative history of the Cable Act suggest that the renewal procedures contained in 47 U.S.C. § 546 are not mandatory. Section 546 governs the procedures to be used in the event that a franchising authority and a cable operator cannot agree to a renewal of the franchise. In such an event, the statute provides that “[a] franchising authority may . . . commence a proceeding which affords the public in the franchise area appropriate notice in participation,” after which a “cable operator seeking renewal of a franchise may . . . submit a proposal for renewal.” 47 U.S.C. § 546(a)(1), (b)(2) (emphasis added). Use of the word “may” in this context suggests that neither the public proceeding nor the submission of proposals is required, and that the parties are free to -23- proceed in a different manner. The legislative history of the Cable Act supports this view of the language. The House Committee stated in its report that it expected that the “vast majority” of franchises would not go through this renewal process. Union CATV, Inc. v. City of Sturgis, 107 F.3d 434, 438 n.2 (6th Cir. 1997) (quoting H.R. Rep. No. 98-934 at 72, reprinted in 1984 U.S.C.C.A.N. 4655, 4709). The House Report describes this provision in the legislation and then states explicitly that “[t]he provisions contained in this section are not mandatory.” H.R. Rep. No. 98-934 at 72, reprinted in 1984 U.S.C.C.A.N. 4655, 4709. The fact that this renewal procedure is not mandatory suggests that Congress envisioned the possibility of alternative procedures, such as those contained in the Michigan Act. The Cable Act merely describes one possible renewal procedure; using another procedure, such as that contained in the Michigan Act, would not put a franchising authority out of compliance with the Cable Act. Therefore, the Michigan Act renewal procedures do not contradict the Cable Act and are not preempted on that basis, as it would not be physically impossible to comply with both the Michigan Act and the Cable Act. Comcast reads the Michigan Act as mandating renewal 30 days after a franchising authority receives a “complete” renewal application, even if the franchising authority disagrees with the cable operator’s renewal proposal. See Mich. Comp. Laws § 484.3303(3). If that is so, the City counters, then the state statute trenches upon the City’s home rule rights granted by article 7, section 29 of the Michigan constitution. That provision states: No person, partnership, association or corporation, public or private, operating a public utility shall have the right to the use of the highways, streets, alleys or other public places of any county, township, city or village for wires, poles, pipes, tracks, conduits or other utility facilities, without the consent of the duly constituted authority of the county, township, city or village; or to transact local business therein without first obtaining a franchise from the township, city or village. Except as -24- otherwise provided in this constitution the right of all counties, townships, cities and villages to the reasonable control of their highways, streets, alleys and public places is hereby reserved to such local units of government. Mich. Const. art. 7, § 29 (1963). And, the City asserts, those rights must be broadly construed per article 7, section 34, which states: The provisions of this constitution and law concerning counties, townships, cities and villages shall be liberally construed in their favor. Powers granted to counties and townships by this constitution and by law shall include those fairly implied and not prohibited by this constitution. Mich. Const. art. 7, § 34 (1963). The Michigan attorney general, on behalf of the State, correctly points out that the Court should interpret the state law in a way that is consistent with federal law where possible, see Rushton v. Schram, 143 F.2d 554, 559 (6th Cir. 1944), and the general caution against avoiding a statute on constitutional grounds where possible counsels the same approach, U.S. ex rel Attorney General v. Delaware & Hudson Co., 213 U.S. 366, 407-08 (1909) (“It is elementary when the constitutionality of a statute is assailed, if the statute be reasonably susceptible of two interpretations, by one of which it would be unconstitutional and by the other valid, it is our plain duty to adopt that construction which will save the statute from constitutional infirmity. . . . [W]here a statute is susceptible of two constructions, by one of which grave and doubtful constitutional questions arise and by the other of which such questions are avoided, our duty is to adopt the latter.” (internal citations omitted ; see also National Federation of Independent Business v. Sebelius, --- U.S. ---, ---, 2012 WL 2427810, at *23 (June 28, 2012) (observing that “‘every reasonable construction must be resorted to, in order to save a statute from unconstitutionality’” (quoting Hooper v. California, 155 U.S. 648, 657 (1895 . He reasons that the two statutes can be reconciled because the Cable Act offers the option to both a cable operator and a franchising authority of pursuing a contested -25- case when the renewal process is stalled by disagreements, see 47 U.S.C. §§ 546, 555, and the Michigan Act allows the parties to negotiate additional terms on a consensual basis, see Mich. Comp. Laws § 484.3313. The Michigan Act does contain language that seems to vitiate municipalities’ power to withhold consent from a uniform franchise agreement. See Mich. Comp. Laws § 484.3303(3) (“A franchising entity shall have 30 days after the submission date of a complete franchise agreement to approve the agreement. If the franchising entity does not notify the provider regarding the completeness of the franchise agreement or approve the franchise agreement within the time periods required under this subsection, the franchise agreement shall be considered complete and the franchise agreement approved.”); Mich. Comp. Laws § 484.3308(1) (“A franchising entity shall allow a video service provider to install, construct, and maintain a video service or communications network within a public right-of-way and shall provide the provider with open, comparable, nondiscriminatory, and competitively neutral access to the public right-of-way.”). But the interpretation of the Michigan Act urged by the State — that municipal governments retain the right to deny franchising entities’ proposed agreements, and that in the event a municipality denied a uniform franchise application within the 30-day period, a municipal government would be permitted to work toward achieving a voluntary agreement under the Michigan Act — is a plausible construction of the statutory text. The State presumably reads section 3303(3) as requiring “action” on an application by a municipality within 30 days, and that action could be in the form an approval or rejection. Such an interpretation preserves the City’s rights under article 7, section 29 of the state constitution and is consistent with the procedures outlined in the Cable Act. -26- The Court finds that the Michigan Act’s procedures for renewal, as so interpreted, do not conflict with (and therefore are not preempted by) the Cable Act and do not violate the Michigan constitution. 2. Modification The modification procedures in the Cable Act, by contrast, contain language suggesting that the prescribed procedures are mandatory. The Cable Act states that a cable operator may obtain a modification “if the cable operator demonstrates” that the requirement it seeks to modify is commercially impracticable and that the proposed modification is appropriate on that basis or that the level of services under the franchise will be maintained. 47 U.S.C. § 545(a)(1)(A), (B) (emphasis added). Franchising authorities “shall” make final decisions on these modification requests “in a public proceeding . . .within 120 days.” 47 U.S.C. § 545(a)(2) (emphasis added). That language suggests, in contrast to the language governing renewal procedures, that Congress intended the modification procedure to be exclusive, and thus that a state act that purported to allow modification of franchise agreements in a different way would expressly conflict with the Cable Act. The contextual use of “may” in this section of the Cable Act is quite different from its use in the previous section governing renewals. In this case, the Act states that cable operators may obtain modifications if certain conditions are met – “may” is used to demonstrate that the cable operator is able to obtain modifications, but only if it follows the procedure outlined in the Act. In contrast, in the section governing renewals, the Act states that franchising authorities may use the outlined procedures, and does not place any conditions on that permission. The Michigan Act, by rendering unenforceable all provisions of existing franchise agreements that do not accord with the uniform agreement, purports to modify franchise agreements -27- in a manner not contemplated by the Cable Act. See Mich. Comp. Laws § 484.3305(3) (“On the effective date of this act, any provisions of an existing franchise that are inconsistent with or in addition to the provisions of a uniform video service local franchise agreement are unreasonable and unenforceable by the franchising entity.”); see also H.R. Rep. No. 98-934 at 94, reprinted in 1984 U.S.C.C.A.N. 4655, 4731 (“A state may not, with regard to [a requirement on a cable operator], enact a statute which requires compliance prior to the expiration of the current franchise.”). Section 3305(3) can be read to mean only that any franchise authorities with agreements containing terms inconsistent with the uniform agreement saw those terms invalidated and replaced by the uniform terms, which certainly would constitute a modification of those agreements. The allegations in the complaint follow that argument: Comcast is no longer providing PEG support and funds that it was required to provide under the 1985 Agreement because it contends that it is no longer obligated to do so as a result of the Michigan Act. Because the Michigan Act purports to modify franchise agreements in a manner at odds with the procedures set out in the Cable Act, the Michigan Act expressly conflicts with the Cable Act on this point. The provision of the Michigan Act invalidating provisions in existing franchises is expressly preempted by the Cable Act. B. PEG channels The City contends that Comcast was required under the terms of the 1985 Agreement to provide an additional PEG channel, and that Comcast is not providing that channel because of the modifications in the agreement as a result of the Michigan Act. The defendants contend that this claim must be dismissed on standing and ripeness grounds. The argument need not detain the Court for long. The City has asserted that it was harmed by the Michigan Act’s limiting the number of PEG channels because as a result Comcast has not provided an additional PEG channel as required -28- by the 1985 Agreement. That is sufficient to constitute an actual and concrete injury conferring standing to challenge the Michigan Act on this point, and the controversy is ripe for adjudication. Lujan, 504 U.S. at 560. One aspect of the City’s claim here is that the Michigan Act denies it and other local franchising authorities power to establish requirements that cable operators must meet. The City argues that the Cable Act grants those powers to it and other local franchising authorities, and thus that the Michigan Act’s implementation of uniform requirements on those features conflict with the Cable Act. Comcast counters that states are the ultimate franchising authorities under the Cable Act, and therefore the Michigan Act’s determinations as to PEG channel requirements do not conflict with the Cable Act. The defendants have the better argument, inasmuch as the Cable Act purports to establish only minimum — not absolute — requirements for including PEG channel services in franchising agreements. The Cable Act states that “[n]othing in this subchapter shall be construed to restrict a State from exercising jurisdiction with regard to cable services consistent with this subchapter.” 47 U.S.C. § 556(b). That language suggests that states retain the power under the Cable Act to regulate cable franchising by local governments, as long as the states’ regulation does not violate any requirements of the Cable Act. The legislative history supports that view: The Committee does not intend Title VI to upset the traditional relationship between state and local governments, under which a local government is a political subdivision of the state and derives its authority from the state. A state may, for instance, exercise authority over the whole range of cable activities, such as negotiations with cable operators; consumer protection; construction requirements; . . . and other franchise-related issues — as long as the exercise of that authority is consistent with Title VI. If, under [this Act] or any state law, a requirement imposed upon a cable operator must be reflected in a franchise, the state may exercise its authority over cable either by establishing a state franchising authority or by placing conditions on a local government’s grant of a cable franchise. -29- H.R. Rep. No. 98-934 at 94, reprinted in 1984 U.S.C.C.A.N. 4655, 4731 (emphasis added). There is no conflict between the Michigan Act and the Cable Act (and therefore no preemption) unless the PEG access requirement in the Michigan Act permits a cable operator to avoid requirements established in the Cable Act. But the City does not assert that the Michigan Act establishes specific requirements for furnishing PEG channels that conflict with requirements in the Cable Act. Therefore, that aspect of the City’s preemption claim fails. The City also asserts that the Michigan Act’s provisions governing PEG channel support expressly conflict with the Cable Act’s requirements on that point because the Michigan law limits franchising authorities’ right to enforce PEG requirements contained in existing franchising agreements and prohibits franchising authorities from increasing the number of PEG channels. That is a materially different argument. The Cable Act provides that franchising authorities “may enforce any requirement in any franchise regarding the providing or use of [PEG] channel capacity. Such enforcement authority includes the authority to enforce any provisions of the franchise for services, facilities, or equipment proposed by the cable operator which relate to public, educational, or governmental use of channel capacity.” 47 U.S.C. § 531(c). The Cable Act also states that when awarding a franchise, a franchise authority “may require adequate assurance that the cable operator will provide adequate [PEG] channel capacity, facilities, or financial support.” 47 U.S.C. § 541(a)(4)(B). Comcast argues that section 541(a)(4)(B) actually limits franchising authorities’ enforcement power under section 531(c), because authorities may only enforce demands for “adequate” PEG channel support. It asserts that because the Cable Act does not define “adequate,” the state, as the ultimate franchising authority, has the right to determine what constitutes “adequate” support for PEG channels and thus what is enforceable under the Cable Act. -30- Comcast may be correct that the Michigan Act is not preempted with respect to its grant of authority to the state to determine what PEG support may be deemed “adequate.” However, the Michigan Act’s provisions that curtail a municipality’s authority to enforce PEG channel requirements in existing agreements conflicts with the Cable Act. Section 541(a)(4)(B) of the Cable Act allows a franchising authority — which certainly included the City — to include in a franchise agreement “adequate assurance” from the cable operator for support of PEG channels. But once the agreement is in place, “[a] franchising authority may enforce any requirement in any franchise regarding the providing or use of such channel capacity.” 47 U.S.C. § 531(c). The Michigan Act states that any franchise agreement provisions conflicting with the uniform agreement are unenforceable, including provisions regarding PEG channel support. See Mich. Comp. Laws § 484.3305(3). The Michigan Act therefore prohibits franchising authorities from enforcing franchise provisions that the Cable Act grants franchising authorities the explicit power to enforce. That conflict invokes the explicit preemption language of the Cable Act, 47 U.S.C. § 556(c) (stating that “any provision of law of any State, political subdivision, or agency thereof, or franchising authority . . . which is inconsistent with this chapter shall be deemed to be preempted and superseded”). See City of Dearborn v. Comcast of Michigan III, Inc., No. 08-10156, 2008 WL 4534167 at *5 (E.D. Mich. Oct. 3, 2008, as amended Nov. 25, 2008). Other courts have recognized a franchising authority’s enforcement power under section 531(c). See Denver Area Educ. Telecommunications Consortium, Inc. v. FCC, 518 U.S. 727, 789 (1996) (Kennedy, J., concurring in part, concurring in the judgment in part, and dissenting in part) (“[§ 531(b)] authorize[s] local franchise authorities to require cable operators to set aside channel capacity for PEG [channel] access when seeking new franchises or renewal of old ones”); Goldberg v. Cablevision Sys. Corp., 261 F.3d 318, 320-21 (2d -31- Cir. 2001) (a franchising authority can “enforce any requirement in any franchise [agreement] regarding the providing or use of [PEG] channel capacity”) (citation omitted); Time Warner Ent. Co., L.P., 93 F.3d at 972 (franchising authorities may mandate PEG channel access as a franchise condition); Time Warner Cable of New York City v. City of New York, 943 F. Supp. 1357, 1367 (S.D.N.Y. 1996) (“The [Cable Act gave] . . . a franchising authority the power to require an operator to provide PEG channels.”). “Because the [Michigan Act] makes unenforceable what federal law explicitly makes enforceable, the [Michigan Act] is preempted by 47 U.S.C. § 531.” City of Dearborn, 2008 WL 4534167 at *5. C. Customer service provisions For the same reasons, the Michigan Act’s restrictions against municipalities from enforcing customer service likely conflict with 47 U.S.C. § 552(a)(1) (“A franchising authority may establish and enforce . . . customer service requirements of the cable operator . . . .”). Similarly, the Michigan Act’s safe harbor provisions, which provide defenses to claims that a cable operator has violated the Cable Act’s prohibition on income discrimination, are problematic. The Cable Act states: In awarding a franchise or franchises, a franchising authority shall assure that access to cable service is not denied to any group of potential residential cable subscribers because of the income of the residents of the local area in which such group resides. 47 U.S.C. § 541(a)(3). The legislative history of the Cable Act suggests that Congress intended this provision to require franchise authorities to mandate the wiring of all areas covered by the franchise. H.R. Rep. No. 98-934 at 59, reprinted in 1984 U.S.C.C.A.N. 4655, 4696 (“Under this provision, a franchising authority in the franchise process shall require the wiring of all areas of the franchise area to avoid this type of practice [income-based discrimination].”). In contrast, the Michigan Act -32- provides that it shall be a defense to a charge of race- or income-based denial of access (which is prohibited under the Michigan Act, see Mich. Comp. Laws § 484.3309(1 that: (a) Within 3 years of the date it began providing video service under this act, at least 25% of households with access to the provider’s video service are low-income households. (b) Within 5 years of the date it began providing video service under this act and from that point forward, at least 30% of the households with access to the provider’s video service are low-income households. Mich. Comp. Laws § 484.3309(2). The plaintiff’s argument that the Cable Act requires, or at least permits franchising authorities to require, universal wiring in the franchise area is not compelled by the statutory text. There is nothing in the plain language of the statute to suggest such a requirement; instead, the statute merely requires that a decision not to provide service to an area not be based on the income of the area’s residents. A cable operator would be within its rights under the language of the Cable Act to not provide cable service to one part of a franchise area because, for example, the existence of many competing cable services in the area would render the provision of service by a new operator unprofitable. Further, the FCC has rejected the plaintiff’s contention that the Cable Act requires universal build-out. See American Civil Liberties Union v. F.C.C., 823 F.2d 1554, 1579-80 (D.C. Cir. 1987) (The FCC concluded that “the intent of [the Cable Act’s anti-discrimination provision] was to prevent the exclusion of cable service based on income and that this section does not mandate that the franchising authority require the complete wiring of the franchise area in those circumstances where such an exclusion is not based on the income status of the residents of the unwired area.”) (quoting 50 Fed. Reg. at 18,647). This aspect of the plaintiff’s preemption argument fails. -33- However, by precluding liability for violations of an anti-discrimination provision in the event that 25 or 30 percent of the households with access to a cable operator’s service are low- income, the Michigan Act conflicts with the Cable Act. As the plaintiff points out, Comcast could actually discriminate against every low income resident in the City, as long as 30% of households anywhere in Michigan with access to its service are “low-income.” Mich. Comp. Laws 484.3309(2)(b). This application of a state-wide standard, in place of a franchise-area one, clearly conflicts with the Federal Act's prohibition on income-based discrimination “of the residents of the local area in which such group resides.” 47 U.S.C. § 541(a)(3). Pl.’s Br. in Support of Mot. for Partial Summ. J. at 18. Because the Michigan Act’s provision of a defense to a charge of discrimination in a franchise area would actually allow a cable operator to discriminate based on income in violation of the Cable Act, the safe harbor provisions are probably preempted by the Cable Act. But that conflict will does not furnish a basis for relief to the City. Comcast is the incumbent cable operator, and the City has not alleged that Comcast has any obligation to wire additional areas within the service area. Nor has the City alleged that Comcast has failed to abide by the customer service or the anti-discrimination provisions in the 1985 Agreement. Nor has the City alleged that such a breach “is certainly impending.” Babbit v. United Farm Workers Nat. Union, 442 U.S. 289, 298 (1979); Peoples Rights Organization Inc., 152 F.3d at 527. Therefore, a determination of whether the Michigan Act’s customer service and anti-discrimination provisions are preempted by the Cable Act is not necessary to resolve the City’s breach of franchise claim, and the claim is not ripe for adjudication. There is no concrete factual context in which the Court can decide the dispute as to those provisions. The City argues that it will suffer hardship if the Court declines to adjudicate these contentions because it would be “powerless” to prevent Comcast from discriminating in the provisions of services. But, as the Sixth Circuit has explained, “‘a claim is not ripe for adjudication -34- if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all.’” Cooley v. Granholm, 291 F.3d 880, 883-84 (6th Cir. 2002) (quoting Texas v. United States, 523 U.S. 296, 300 (1998 . The plaintiff’s claim is based only on the possibility that Comcast will in the future violate anti-discrimination provisions of the Cable Act. Because build-out has already occurred and the franchise negotiations deal with renewal with the incumbent cable operator, there is little likelihood that violations will take place. D. Implied preemption The City alleges that those provisions of the Michigan Act that are not expressly preempted by the Cable Act are impliedly preempted because they “stand[] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Fidelity Fed. Sav. and Loan Assoc., 458 U.S. at 153. Comcast responds that the Michigan Act promotes the purposes of the Cable Act. The Cable Act identifies as its goals to: (1) establish a national policy concerning cable communications; (2) establish franchise procedures and standards which encourage the growth and development of cable systems and which assure that cable systems are responsive to the needs and interests of the local community; (3) establish guidelines for the exercise of Federal, State, and local authority with respect to the regulation of cable systems; (4) assure that cable communications provide and are encouraged to provide the widest possible diversity of information sources and services to the public; (5) establish an orderly process for franchise renewal which protects cable operators against unfair denials of renewal where the operator’s past performance and proposal for future performance meet the standards established by this subchapter; and (6) promote competition in cable communications and minimize unnecessary regulation that would impose an undue economic burden on cable systems. -35- 47 U.S.C. § 521. The City contends that the Michigan Act conflicts with the first and second purposes, while the defendants contend that the Michigan Act supports the first, second, and sixth purposes of the Cable Act. The Sixth Circuit has held that “Congress . . . sought in the Cable Act to provide a balance between respecting the needs and interests of communities and protecting cable operators against unreasonable demands.” Union CATV, Inc., 106 F.3d at 442. Of course, the City and Comcast represent the two sides of this balancing attempt, and therefore each party asserts that its side of the equation is the more weighty in determining whether the Michigan Act comports with the purposes of the Cable Act. However, Comcast’s argument is ultimately more persuasive, as the City’s cited cases differ in material ways from the present case, the existence of state-wide franchising procedures does not subvert the Cable Act’s goal of creating national standards, municipalities retain a role in the franchising process under the Michigan Act, and many other states have state-wide franchising procedures and standards. The City cites Crosby v. National Foreign Trade Council, 530 U.S. 363 (2000). In that case, the Supreme Court found that a Massachusetts statute restricting the state’s ability to purchase goods or services from companies that did business in Burma was preempted by a federal law placing sanctions on Burma. Id. at 366. However, that case involved foreign policy, an area in which the interest in a uniform national policy is much stronger than in the case of cable regulation. The Supreme Court in that case also put great weight on the executive’s authority under the federal act to speak for the United States in the international community; no such consideration exists in this case. Id. at 381. That case does not support the idea that the Michigan Act’s provisions directed primarily toward approval of new entrants in the cable market conflicts with the purposes of the -36- Cable Act. In Qwest Broadband Services, Inc. v. City of Boulder, 151 F. Supp. 2d 1236 (D. Col. 2001), also cited by the City, the district court invalidated a local ordinance requiring that franchise agreements be approved by a vote of taxpayers, finding that it conflicted with the goal of promoting competition between cable providers embodied in the Cable Act. Id. at 1244. The case does tend to demonstrate that it is possible for the Cable Act to impliedly preempt local and state laws on cable franchising, but the ordinance found to be preempted in Qwest bears no similarity to the Michigan Act, and thus the case does not provide support to the City’s position. The existence of a state-wide franchising procedure does not necessarily subvert the Cable Act’s goal of creating a uniform national policy regarding cable communications. Indeed, the Cable Act explicitly contemplates a role for the state in regulating cable franchising. See 47 U.S.C. § 521(3). As Comcast points out, 19 other states have established statewide franchising procedures and standards. That tends to demonstrate that such standards and procedures do not subvert the national policy embodied in the Cable Act as a matter of course. Moreover, the Michigan Act does not entirely erase the role of municipalities in cable franchising. As noted earlier, the Michigan Act provides that local governments and cable operators may enter into voluntary agreements that include conditions from those in the uniform agreement. Mich. Comp. Laws § 484.3313 (“This act does not prohibit a local unit of government and a video service provider from entering into a voluntary franchise agreement that includes terms and conditions different than those required under this act.”). Further, the Michigan Act’s uniform franchise agreement includes a clause requiring cable operators “to comply with all valid and enforceable local regulations regarding the use and occupation of public rights-of-way in the delivery of the video service, including the police powers of the franchising entity.” Mich. Comp. Laws § 484.3302(3)(i). Therefore, although it might be -37- said that the Michigan Act tips the balance implicated in the Cable Act toward the protection of cable companies, it cannot be said that the Michigan Act is an obstacle to achieving the balance sought by Congress in passing the Cable Act where the Michigan Act provides some protection to local interests and regulation. E. The 1985 agreement and holdover tenancy It is undisputed that the 1985 franchise agreement expired by its own terms on February 28, 2007. It is also undisputed that Comcast withdrew from negotiations to renew the franchise, and that the last proposal came from the City, which contained conditions concerning consumer protections, anti-discrimination, and PEG channels. Under the interpretation of the Michigan Act urged by the State and approved herein by the Court, the City timely acted on Comcast’s application to renew the franchise and did not approve it. Neither the City nor Comcast has pursued a contested case concerning the renewal, see 47 U.S.C. §§ 546, 555, and the parties have not successfully negotiated additional terms on a consensual basis. See Mich. Comp. Laws § 484.3313. Because the City responded in a timely manner, no new franchise agreement has taken effect by operation of state law. Therefore, there is no franchise agreement in place that allows Comcast to engage in cable operations in the City of Detroit. That circumstance, the City insists, renders Comcast a holdover tenant; otherwise, Comcast would be a trespasser and would be in violation of the Cable Act and the Michigan Act, both of which require Comcast to have a franchise with the municipalities where it provides cable service. See 47 U.S.C. § 541(b)(1) (stating that “a cable operator may not provide cable service without a franchise”); Mich. Comp. Laws §§ 484.3303(1) (stating that “[b]efore offering video services within -38- the boundaries of a local unit of government the video provider shall enter into or possess a franchise agreement with the local unit of government as required by this act”). The plaintiff cites cases from California and Florida in which courts have found that a cable operator that continues to provide cable services after the expiration of its franchise is in the position of a holdover tenant and is bound by the terms of the expired franchise agreement. Comcast of Ca. I, Inc. v. City of Walnut Creek, 371 F. Supp. 2d 1147, 1155 (N.D. Cal. 2005); Florida Power Corp. v. City of Winter Park, 887 So.2d 1237, 1241 (Fla. 2004). The Michigan courts have not yet decided the precise issue of the relationship between a municipality and a cable operator when the franchise agreement has terminated and the cable operator continues to provide cable services in the municipality. However, in determining issues of state law such as this, the Court is bound by the pronouncements of the state’s highest court. Erie R.R. Co. v. Tompkins, , 78 (1938). And the Michigan Supreme Court has refused to characterize the relationship between a municipality and a franchisee who continues to operate after the franchise has expired as a holdover tenancy. In City of Detroit v. Detroit United Ry., 172 Mich. 136, 137 N.W. 645 (1912), aff’d sub nom. Detroit United Ry. v. City of Detroit, 229 U.S. 39 (1913), the Michigan Supreme Court held that a railcar company that continued to operate in Detroit after its franchise had expired was not analogous to a tenant who has held over on its lease, as the City had argued. In so holding, the Court stated: The matter of defining the relations between these parties under the circumstances of this case is not without its difficulties. We think, however, that complainant in stating its contention that the relations in all respects are analogous to the relations between landlords and tenants of real estate under similar circumstances makes an impossible comparison, for the reason that similar circumstances could not arise between an ordinary landlord and tenant. In the instant case the municipality, which -39- has but a circumscribed interest in its streets, has granted the right to defendant to occupy certain portions of its public streets for the purpose of maintaining and operating thereon a street railway, under certain terms and conditions accepted by it, for a certain length of time, which has expired. This presents a relation which cannot be described as a tenancy. Defendant’s rights under the franchises terminated by their express provisions, and, because of the interest of a municipality in and to its streets, no such relation as a tenancy has been created or can exist. Id. at 154-55, 653. The Supreme Court concluded instead that “the contractual relations between these parties ended upon the expiration of the franchises, and all rights in the defendant company to occupy the city streets, and maintain and operate a street railway thereon, then terminated, and defendant thereafter became a trespasser.” Id. at 158, 654. That decision has never been overturned, was affirmed by the United States Supreme Court, and was cited by the Michigan Court of Appeals as recently as 2004. See TCG Detroit v. City of Dearborn, 261 Mich. App. 69, 87, 680 N.W.2d 24, 35 (2004). The Court must abide by the Michigan Supreme Court’s determination of state law on this issue. In City of Detroit, Michigan Supreme Court found that the city could compel the defendant to cease operating in the City and to remove its tracks from the streets. Detroit United Ry. v. City of Detroit, 229 U.S. at 43. Based on that precedent, the Court could find that the City may compel Comcast to cease operating within its boundaries. However, in City of Detroit, the Supreme Court also based its remedial decision on the fact that the plaintiff was attempting to impose fees unilaterally on the defendant in excess of those contemplated in the original franchise agreement. City of Detroit, 172 Mich. at 158-59, 137 N.W. at 654. It is not clear how the Court would have ruled had the plaintiff merely attempted to enforce the original terms of the agreement. The City argues that because Comcast has continued to operate in the City without an agreement, it has enjoyed a windfall and been unjustly enriched to the detriment of the City. -40- Therefore, the City contends, the Court could imply a contract at law to avoid an inequitable result. Under Michigan law as described by the Michigan Supreme Court, a court may imply a contract at law where the plaintiff can show that the defendant has received a benefit from the plaintiff and it would be unjust to allow the defendant to retain that benefit. Kammer Asphalt Paving Co., Inc. v. East China Tp. Schools, 443 Mich. 176, 185, 504 N.W.2d 635, 640 (1993). Neither defendant has addressed the City’s remedial arguments, and the Court believes that additional briefing would assist in the determination of an appropriate remedy. Therefore, the Court will direct the parties to file briefs addressing that issue. IV. Conclusion The Court finds that it does not have subject matter jurisdiction to adjudicate the City’s claims that the customer service, anti-discrimination , universal build-out, and safe harbor provisions of the Michigan Act are preempted by federal law because of lack of standing and ripeness. The Court does have jurisdiction to decide whether the renewal and modification procedures in the Michigan Act are preempted, and whether the Michigan Act can curtail the enforcement of existing PEG requirements in the franchise agreement. The Court finds that although the Michigan Act’s renewal provisions are not preempted by the Cable Act, the provisions that purport to modify existing franchise agreements by operation of law to curtail a municipality’s authority to enforce PEG channel requirements in existing agreements are expressly preempted by the Cable Act. The Court also finds that the Michigan Act does not prevent municipalities from refusing to approve franchise renewal proposals from cable operators as long as the municipality acts on the proposal within the 30-day limit set forth in the Act. The Court determines that the undisputed facts establish that the City timely rejected Comcast’s renewal proposal by proposing allowable additional -41- conditions, and because Comcast thereafter withdrew from negotiations, no new franchise agreement was established. Because Michigan law will not permit Comcast to be treated as a holdover tenant, Comcast must be considered a trespasser. Accordingly, it is ORDERED that the motions for partial summary judgment filed by the plaintiff, defendant Comcast, and intervening defendant State of Michigan [dkt. #41, 59, 63] are GRANTED IN PART AND DENIED IN PART. It is further ORDERED that Comcast is found to be a trespasser in the public spaces and rights-of-way within the City of Detroit in which it has placed its facilities and equipment. It is further ORDERED that the parties must file briefs addressing an appropriate remedy for the trespass and failure to renew the franchise agreement for provision of cable services on or before July 31, 2012. Briefs must conform to E.D. Mich LR 7.1(d) and may not may not exceed (10) ten pages. Dated: July 10, 2012 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 10, 2012. s/Susan K. Pinkowski SUSAN K. PINKOWSKI -42-

=== UNITED STATES OF AMERICA v. BOBBY W. FERGUSON, et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, Case No. 10-20535 Honorable David M. Lawson v. BOBBY W. FERGUSON, MICHAEL WOODHOUSE, CALVIN L. HALL, FERGUSON ENTERPRISES, INC., XCEL CONSTRUCTION SERVICES, INC., and A & F ENVIRONMENTAL/ JOHNSON CONSTRUCTION SERVICES, _______________________________________/ Defendants. OPINION AND ORDER DENYING DEFENDANTS’ JOINT MOTION TO STRIKE THE VENIRE DUE TO AN UNDERREPRESENTATION OF AFRICAN-AMERICANS Trial commenced in this case on May 8, 2012 when 116 prospective jurors were summoned from the Qualified Jury Wheel in the Detroit division of this district. Jury selection was protracted because of pretrial publicity that has exposed exactly one-half of the jury venire to information about the case, some of the defendants, the witnesses, or the attorneys. Midway through the jury selection process, the defendants filed a joint motion seeking to strike the venire, alleging an underrepresentation of African-Americans. The individual defendants assert that they are all African-Americans. The Court shortened the response time; the government filed a response and the defendants filed a joint reply. The Court heard oral argument on May 14, 2012. The Court indicated its intention to deny the motion in a written decision and jury selection was completed the next day. The Court concludes that although the defendants’ motion identifies a criticism that has been leveled in the past against the apparent lack of diversity of jury pools in this district, the defendants have not established a right to relief, and certainly not the relief they have requested. I. The jury venire in this case was assembled by following the procedures in the United States District Court for the Eastern District of Michigan’s jury selection plan that was approved by the United States Court of Appeals for the Sixth Circuit. Under that plan, the district is separated into five divisions. The Detroit division draws jurors from the Michigan counties of Jackson, Lenawee, Macomb, Monroe, Oakland, St. Clair, Sanilac, Washtenaw, and Wayne. See E.D. Mich. Admin. Order No. 00-AO-083 § (d) (Dec. 26, 2000) (Juror Selection Plan). The process of assembling prospective jurors for trials was described in detail by another judge of this district in United States v. Bates, No. 05-81027, 2009 WL 5033928 (E.D. Mich. Dec. 15, 2009): The jury-selection process begins when the Eastern District’s Jury Department obtains three lists from the Michigan Secretary of State: registered voters, licensed drivers, and holders of state-issued identification documents. Juror Selection Plan § (f); . . . [s]ee also 28 U.S.C. § 1863(b)(2) (a district must use “some other source or sources of names in addition to voter lists” if doing so is necessary to ensure representativeness and avoid excluding jurors on the basis of race, color, religion, sex, national origin, or economic status). The Jury Department provides the list of registered voters to Sutera Data Systems (“SDS”), a data-processing firm contracted to compile the Master Wheel. Juror Selection Plan § (g)(3) (Jury Department may hire outside contractors to implement the Plan) . . . . SDS determines the number of registered voters in each of the nine counties comprising the Detroit Division, and calculates each county’s proportionate share of the Division’s total voting population. Based on these figures, the Court issues an Administrative Order to create a new Master Wheel for the Division, in which it specifies the number of people to be drawn from each county for possible jury service. Juror Selection Plan § (h)(2) (voter-registration lists must be used to determine the proportion of jurors from each county) . . . . The Jury Department next provides the list of licensed drivers and holders of state-issued ID cards to SDS, with instructions to create the Master Wheel; it is to be filled with actual names of potential jurors. SDS begins by making separate lists of licensed drivers and state ID holders for each county in the Division. Next, for each -2- county, SDS merges the three lists (registered voters, licensed drivers, people with state-issued IDs) and eliminates duplicate names. . . . Finally, SDS selects names at random from the merged list for each county, based on the proportions set forth in the Administrative Order, to create the Master Wheel. . . . In the next step, the Jury Department randomly draws 5,000 names from the Master Wheel and sends juror questionnaires to these people. See Juror Selection Plan § (i)(1) (Clerk of the Court decides how many names are necessary to maintain “an adequate number of names” in the jury wheel). At this point, questionnaires may fall into one of three categories: (1) “non responses,” which are questionnaires never returned; (2) “undeliverables,” questionnaires returned unopened by the Post Office; and (3) “completed” questionnaires filled out and returned by their intended recipients. The Jury Department’s procedure for following up on undeliverables and nonresponses is limited. If the Post Office provides a forwarding address for an undeliverable, the Department mails a questionnaire to the new address; if no address is provided, no further action is taken. . . . The Jury Department also sends follow-up questionnaires to nonresponses; however, there is no standard practice if the second mailing elicits no response. . . . Juror Selection Plan § (j). The Jury Department then processes the completed questionnaires and decides who is not qualified or who should be excused. Noncitizens, convicted felons, and people who cannot read and write English, among others, are disqualified from jury service under federal law. Juror Selection Plan § (k); 28 U.S.C. § 1865(b). Active members of the armed forces, police and fire department members, and certain public officials are also exempt. Juror Selection Plan § (m); 28 U.S.C. § 1863(b)(6). The Eastern District also exempts people over 70, firefighters and ambulance crews, and persons who served on a jury within the last two years. Juror Selection Plan § (l). Once unqualified and exempt respondents are eliminated, what remains are the completed questionnaires of people who will make up the Detroit Division’s Qualified Jury Wheel (“the Qualified Wheel”). In the final step, the Jury Department randomly draws a “jury pool” of about 400 people from the Qualified Wheel. . . . As they are selected, each person is assigned a number from one to 400; when they are called to service, jurors are called in sequence, starting with the number one. . . . A given jury pool remains on call for two weeks, and its members must be ready to report on a day’s notice. . . . Depending on the Court’s trial calendar, any number of jury-pool members may be called upon to serve as jurors. After two weeks, regardless of how many members were summoned, the entire jury pool is retired and a new group of 400 is drawn to form a new jury pool. As jurors are summoned and pools retired, the Detroit Division’s Qualified Wheel is gradually depleted. To replenish it, the Jury -3- Department draws new names from the Master Wheel and sends out more questionnaires. Those who are not excused or disqualified join the Qualified Wheel. Each Master Wheel is kept in service for two years; during that time, the Jury Department draws as many names as the Court’s trial schedule demands. . . . After two years, the Master Wheel is retired, even if some names remain which were never sent questionnaires or selected for placement in the Qualified Wheel. For example, the 2004-2006 Master Wheel contained 100,000 names, but the Jury Department mailed only 50,650 questionnaires; the remaining names were not used. . . . Records relating to old jury pools, Master Wheels and Qualified Wheels, are kept for a minimum of four years and are available for public inspection. Juror Selection Plan § (s)(2); 28 U.S.C. § 1868. Id. at *2-4. The venire was assembled for this trial on May 8, 2012. After initial introductory remarks, jurors who had heard of the case or the parties or their lawyers self-identified, and the Court conducted individual voir dire in a separate courtroom with those prospective jurors as to the effect of pretrial publicity. The parties posed their cause challenges, and the Court then reconvened in its courtroom to empanel jurors from the groups that were cleared for cause and who had not indicated prior knowledge of the case or parties. The jury venire for this case was comprised of citizens from each of the counties in the Detroit division. The defendant have suggested the racial composition of the venire — at least with respect to African-Americans — did not reflect or even approximate the racial diversity of the district. The defendants have offered their view of the number of African-American jurors in the venire, but their information is entirely anecdotal, since no records are kept of the race identities of jurors, and no survey was conducted of the present venire. A casual observation of the venire revealed the presence of several dark-skinned individuals, but no formal count was made, nor was any attempt made by the parties or the Court to associate skin color with race. The absence of reliable statistical evidence notwithstanding, however, the defendants’ criticism of the jury pool -4- echoes the lament of a colleague three years ago, who wrote: “Wayne County residents and African Americans are consistently and pervasively underrepresented in Detroit-Division juries, from one year, and one jury wheel, to the next.” Bates, 2009 WL 5033928, at *17. This Court attempted to address the issue of underrepresentation directly in a prior jury selection plan that was implemented in 1992. That plan used a method that has come to be known as the “subtraction method,” wherein potential jurors who were members of a cognizable group that was overrepresented would be selected at random and removed from the jury pool. See 92-AO-035 (stating that “if the Court determines that a cognizable group of persons is substantially overrepresented in the qualified jury wheel, the Chief Judge shall order the Clerk to remove randomly a specific number of names so that the population of each cognizable group in the qualified wheel closely approximates the percentage of the population of each group in the area of each place of holding court, according to the most recently published national census report”). However, the Sixth Circuit held that the plan’s “subtraction method” violated the Jury Selection and Service Act, 28 U.S.C. § 1861, et seq., and the Fifth and Sixth Amendments. United States v. Ovalle, 136 F.3d 1092, 1100, 1105 (6th Cir. 1998). The court held that the district court’s efforts to ensure that African-Americans were not underrepresented in the jury pool itself violated the command that “[n]o citizen shall be excluded from service as a grand or petit juror in the district courts of the United States . . . on account of race, color, religion, sex, national origin, or economic status.” 28 U.S.C. § 1862. The court explained: The implementation of the jury selection plan is clearly not race neutral. Individuals were eliminated from consideration for jury service on the basis of their race. Any non-African-American had a chance of being eliminated from the jury wheel solely based on race. Additionally, as noted above, at the time of the selection of the jury wheel relevant to the appellants’ cases, a random list of non-African-Americans was -5- removed from the jury wheel. Excluding non-African-Americans in this manner discriminates against potential jurors solely because of their racial status. Ovalle, 136 F.3d at 1105 (footnote omitted). After the 1992 jury selection plan was struck down, this Court adopted the present plan. There is no suggestion by the parties in this case that the plan is other than race-neutral. However, the results yielded by its implementation — at least with respect to the diversity of some of the panels — is unsatisfying in some cases. The Court has studied the circumstances that have led to the current composition of jury venires and has reached some conclusions as to why it appears that African-American citizens appear to be underrepresented on some jury panels in the Detroit division. The Court discovered that the rate of undeliverable jury questionnaires sent to addresses in Wayne County is proportionally higher than in other counties in the division by a significant number. Because Wayne County has a larger minority and ethnic population, the impact of undelivered jury notices possibly manifests itself in the racial makeup of jurors in the Qualified Wheel. Also, Wayne County has a larger percentage of citizens over age 70, who are exempt from jury service under the present plan. Those exemptions may also have an impact. All of this, however, is merely conjecture. To address those issues, the Court has proposed to modify the jury selection plan in a few important respects. For one, at the 2011 October Judges’ Meeting, the Bench approved a motion to modify the Court’s Jury Selection Plan by sending a new questionnaire to a randomly-selected address in a zip-code area for every undeliverable form returned from that area. Also, in addition to running more frequent National Change of Address checks, the Jury Department is in the process of implementing eJuror. That program gives a prospective juror the option to complete the qualification questionnaire online. Other jurisdictions that have implemented eJuror report increased -6- response rates. The Court also approved a motion to modify the Jury Selection Plan by eliminating jury service exemptions for those over age 70 and by raising the exemptions to those over age 73. The effect of those changes, however, have not impacted this case, and there is no guarantee that they will effect changes in the composition of the jury pools. The problem came to a head in this case when the government used peremptory strikes to exclude an African-American woman from the principal jury and an African-American male as one of the alternate jurors. The defendants raised a challenge under Batson v. Kentucky, 476 U.S. 79 (1986), and the Court, after applying the three-step procedure, see Miller-El v. Cockrell, 537 U.S. 322, 328-29 (2003), determined that the government had not engaged in purposeful discrimination in making either strike. The Court observed that many times lawyers exercise peremptory strikes based on intuition (which the defendants mischaracterized in their motion papers as “instinct”), and the government’s justification for striking the first African-American woman was based on appearance and body language that conveyed to the government an attitude of hostility. Based on the Court’s own observations, the government’s reasoning was plausible. However, the issue would not have meant much if more African-American citizens were present in the jury venire to take the place of the struck jurors. In the end, based on casual observation, the jury selected is comprised of ten Caucasians and two African-Americans in the principal jury and three Caucasians and one African-American as alternate jurors. II. The defendants seek an order striking the jury venire and summoning another panel of jurors because the one they have does not represent a fair cross-section of the community in this district. -7- By making the motion midway through the jury selection process, the defendants face both a timing problem and a substantive one. A. Federal Rule of Criminal Procedure 12(b)(3) governs motions raising a Sixth Amendment fair cross-section challenge, and such motions must be filed before trial. United States v. Boulding, 412 F. App’x 798, 802 (6th Cir. 2011). The defendants filed their motion on the fourth day of voir dire. The Sixth Circuit has not published a decision fixing the time when trial begins under Rule 12(b)(3). But for the purpose of the Speedy Trial Act, trial commences with voir dire. United States v. Crane, 776 F.2d 600, 603 (6th Cir. 1985) (citing United States v. Gonzalez, 671 F.2d 441 (11th Cir. 1982 . The same holds true for constitutional speedy trial challenges, United States v. Young, 657 F.3d 408, 416 (6th Cir. 2011), for 18 U.S.C. § 3432 (which requires the government to provide a witness list to criminal defendants three days before the commencement of trial in capital cases), United States v. Young, 533 F.3d 453, 461 (6th Cir. 2008), and for Federal Rule of Criminal Procedure 43 (which requires the defendant’s presence “at . . . every trial stage, including jury impanelment”), United States v. Burke, 345 F.3d 416, 422 (6th Cir. 2003). It follows, then, that pretrial motions attacking the jury composition also must be filed before voir dire. By that standard, the present motion was late. A late motion, that is, one not raised before trial, is considered waived; however, the Court may grant relief from that waiver for good cause shown. Fed. R. Crim. P. 12(e). In order to show cause to excuse a waiver, a defendant must show that “some objective factor external to the defense impeded counsel’s efforts to comply with the . . . procedural rule.” Murray v. Carrier, 477 U.S. 478, 488 (1986). Although cause may be found upon a showing that “the factual or legal basis for a claim -8- was not reasonably available to counsel,” “the mere fact that counsel failed to recognize the factual or legal basis for a claim, or failed to raise the claim despite recognizing it, does not constitute cause for a procedural default.” Id. at 488, 486. At oral argument, the Court understood the defendants to say that they could not have known the racial composition of the jury venire until the jurors entered the courtroom. True enough. However, the mere happenstance of an unrepresentative jury panel taken from a properly assembled Qualified Wheel does not violate the Constitution. In order to prove a constitutional violation, the defendants must show: (1) that the group alleged to be excluded is a “distinctive” group in the community; (2) that the representation of this group in venires from which juries are selected is not fair and reasonable in relation to the number of such persons in the community; and (3) that this underrepresentation is due to systematic exclusion of the group in the jury-selection process. Duren v. Missouri, 439 U.S. 357, 364 (1979). In order to satisfy the second prong, the defendants “must show more than that their particular panel was unrepresentative.” United States v. Allen, 160 F.3d 1096, 1103 (6th Cir. 1998). Instead, the Court is required to examine the “venires” from which “juries” are selected, suggesting a defendant’s burden is not to demonstrate that his particular venire is unrepresentative, but rather that venires in the district in general are unrepresentative. See ibid. In order to satisfy the third prong, a defendant must show that “underrepresentation is inherent in the selection process used.” Id. at 1104. The defendants have neither alleged nor shown that the Court’s Jury Selection Plan systematically excludes minorities. The current Jury Selection Plan has been in place since 2000. Under its prescriptions, hundreds of juries have been selected for trials in this district. The defendants have not made any showing that any of the elements of the defendants’ prima facie case were “not reasonably available -9- to counsel” prior to the commencement of trial. Murray, 477 U.S. at 488; see also Bates v. United States, No. 10-1094, 2012 WL 1071806, at *2 (6th Cir. Apr. 2, 2012) (rejecting a fair cross-section challenge to a jury selected under the present plan and noting that “a reasonable investigatory effort could have allowed Bates to present his Sixth Amendment challenge to the district court”). A showing that the defendants’ particular venire was unrepresentative is neither necessary nor sufficient to establish the second element of the defendants’ prima facie case, and therefore the defendants were not precluded from raising a fair cross-section challenge prior to trial on that basis. The defendants argue that the particular facts of this case, including the circumstances surrounding their failed Batson challenge, make the under-representation of African-Americans in the venire more egregious. Even if true, it does not change the fact that the factual and legal bases for the defendants’ challenge were available prior tor trial. B. Even if the defendants’ motion were timely, the Court would deny it because it does not present a prima facie case for a fair cross-section violation. The defendants have failed even to discuss the process by which jury panels are selected in this district, instead focusing on the jury panel in this case alone. The manner in which jury selection has been conducted in this case can hardly be evidence of the systematic exclusion of African-Americans that is required to satisfy the third prong of the Duren test. And although the defendants have pointed to a low number of African-Americans in this particular venire, they have not presented any information — statistical or otherwise — as to the percentage of the population of this district that is African-American or evidence that venires in this district as a whole are unrepresentative. -10- As the Sixth Circuit observed fourteen years ago, “it has long been the case that defendants are not entitled to a jury of any particular composition — only to a panel from which distinctive groups were not ‘systematically excluded.’” Allen, 160 F.3d at 1103 (quoting Taylor v. Louisiana, 419 U.S. 522, 538 (1975 . “In the absence of a per se systematic exclusion, [which certainly does not exist in this case,] a defendant must establish that the challenged disparity is ‘inherent’ in the jury selection process itself.” Bates, 2012 WL 1071806, at *4 (citing Allen, 160 F.3d at 1104). The only possibilities for an argument of systematic exclusion are the higher rate of undeliverable jury questionnaires in Wayne County, and the relatively lower response rate from that same county. But the Sixth Circuit has rejected those grounds as speculative. Ibid. at *5 (noting that speculation that an issue might contribute to the underrepresentation of African-Americans is not enough to establish a prima facie Sixth Amendment violation” (citing Berghuis v. Smith, 130 S. Ct. 1382, 1395 (2010 . As for the lower response rate, this Court has adopted the practice of summoning non-responding jurors to show cause under 28 U.S.C. § 1866(g). Although that practice is forward-looking and would have no direct effect on the present trial, it underscores the absence of a systematic tolerance of habitual non-responders. And the Bates court has stated that “[n]on-responses . . . are not a problem ‘inherent’ to the jury selection procedures, but are the result of individual choice.” Bates, 2012 WL 1071806, at *5. Other courts have reached the same conclusion. See United States v. Cecil, 836 F.2d 1431, 1447 (4th Cir. 1988) (observing that disparities attributable to “personal predilection” cannot form the basis of a fair cross-section claim). Smith v. Berghuis, 543 F.3d 326, 341 n.5 (6th Cir. 2008), reversed on other grounds, Berghuis v. Smith, 130 S. Ct. 1382 (2010) (“Courts, however, have been relatively uniform in finding that the failure to send additional letters to individuals who did not [] respond to questionnaires was not -11- ‘systematic exclusion’ within the meaning of Duren.”) (citing cases); United States v. Orange, 447 F.3d 792, 800 (10th Cir. 2006) (“Discrepancies resulting from the private choices of potential jurors do not represent the kind of constitutional infirmity contemplated by Duren.”); United States v. Craft, 165 F.3d 28, 1998 WL 702348, at *3 (6th Cir. 1998) (table) (holding that the failure to respond to a jury summons is not a systematic defect in a jury selection plan, but a “private sector influence[]”); United States v. Murphy, No. 94 CR 794, 1996 WL 341444, at *5 (N.D. Ill. June 18, 1996) (“The jury selection system . . . is not excluding African-Americans as a group, but many African-American individuals are excluding themselves by not responding to jury questionnaires.”). Finally, it is worth mentioning that even if there were merit to the defendants’ argument that an underrepresentation claim can focus narrowly on a particular jury pool, the remedy they seek would provide no guarantee of relief. The best the Court could do is assemble a new jury pool that was selected by the same method the defendants would have to criticize in order to succeed on their claim. The results from the defendants’ perspective might be better, worse, or the same, which is all one could expect from a truly randomized selection method that hinges on the luck of the draw. III. The Court finds that the defendants’ motion challenging the jury venire was filed out of time, and the method for selecting juries in this district, while not perfect, comports with the Constitution and the Jury Selection and Service Act. -12- Accordingly, it is ORDERED that the defendants’ joint motion to strike the venire due to an underrepresentation of African-Americans [dkt. # 199] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 31, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 31, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -13-

=== 360 CONSTRUCTION COMPANY, INC. v. ATSALIS BROTHERS PAINTING CO., et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION 360 CONSTRUCTION COMPANY, INC., Plaintiff, v. ATSALIS BROTHERS PAINTING CO., GARRY D. MANOUS, NICK ATSALAKIS, and ANDREW RICHNER, _____________________________________/ Defendants. Case Number 11-12344 Honorable David M. Lawson MEMORANDUM ORDER DENYING MOTION FOR PROTECTIVE ORDER Defendants Atsalis Brothers Painting Company (Atsalis Brothers Painting), Garry Manous, and Nick Atsalakis (collectively, the moving defendants) seek a protective order to prevent co- defendant Andrew Richner and Richner’s law firm, Clark Hill, PLC, from producing certain documents to the plaintiff in response to a discovery subpoena. The moving defendants contend that the documents are protected by either the attorney-client privilege or the attorney work product doctrine. However, as explained below, the moving defendants have waived the attorney-client privilege with respect to the requested documents and that the work product doctrine does not apply. Therefore, the Court will deny the motion for a protective order and order production of the documents. I. Plaintiff 360 Construction Company, Inc. filed this suit against the moving defendants for sending allegedly defamatory communications to the Michigan Department of Transportation (MDOT) in connection with bidding on a contract to clean and recoat the Mackinac Bridge’s structural steel. 360 Construction was the lowest bidder on the project, and Atsalis Brothers Painting was the second lowest bidder. Shortly after MDOT announced that the plaintiff was the low bidder, the plaintiff alleges that the moving defendants began a smear campaign against the plaintiff. One of the allegedly defamatory communications was a June 23, 2010 memorandum (the Memorandum) drafted by attorney Andrew Richner, a lawyer employed by the Clark Hill law firm. The Memorandum was directed to Nick Atsalakis and asserted that the plaintiff should be disqualified from bidding on the Mackinac Bridge project because the plaintiff was related through common ownership and management to Allstate Painting & Contracting Company — a company that had been sued by the MDOT and the Mackinac Bridge Authority for breach of warranty. The Memorandum found its way to William Gnodtke of the Mackinac Bridge Authority. The Office of Commission Audits investigated Atsalis’s allegations, including those set forth in the Memorandum. Although the Commission found most of the allegations to be without merit, it did find that George Roditis, a former officer, director, and employee of Allstate Painting and current employee of 360 Construction, was unsuitable to participate in a publicly funded project. After a seven-month delay, the contract was awarded to the plaintiff on the condition that Roditis be barred from the project. On May 27, 2011, the plaintiff filed a complaint against Atsalis Brothers Painting, Garry Manous, and Nick Atsalakis alleging claims for defamation, libel, unlawful disparagement, respondeat superior, interference with business contract, and interference with business relationship based on communications between Atsalis (and its employees and agents) and the MDOT. On October 14, 2011, defendants Atsalis Brothers Painting, Garry Manous, and Nick Atsalakis filed notice of non-party fault alleging that liability rests with Clark Hill, Andrew Richner, and several other individuals and businesses. On January 20, 2012, the Court granted the plaintiff leave to -2- amend its complaint; the first amended complaint added Andrew Richner as a defendant. On February 28, 2012, the plaintiff filed its second amended complaint adding a claim for negligence. In response to the plaintiff’s first set of interrogatories, the moving defendants admitted that Richner sent the Memorandum to William Gnodtke of the Bridge Authority. In response to the plaintiff’s first set of requests for documents, the moving defendants produced a copy of the Memorandum and its attachments. On December 14, 2011, the plaintiff served Andrew Richner and Clark Hill with subpoenas commanding them to produce the following documents on December 30, 2011: 1. Any and all drafts of the Memorandum. 2. Any communication (including e-mails) to and or from Nick Atsalakis, Garry Manous, Atsalis Brothers Painting Co. (“Atsalis”), or to or from anyone on Atsalis’s behalf, which mentions, refers to, and/or concerns the Memorandum. 3. Any and all research which supports the comments, statements, and/or allegations in said Memorandum; 4. Any and all notes, logs, records, or other documents illustrating your investigation into the comments, statements, and/or allegations in said Memorandum; 5. Any and all documents which prompted you to prepare said Memorandum (including requests, demands, instructions). 6. Any and all transmittal documents with which the Memorandum was sent. 7. Any and all documents requesting that you send or forward the Memorandum. 8. Any and all documents you received in response to said Memorandum, including follow up letters to, and/or from, Atsalis, the Mackinac Bridge Authority, and/or Michigan Department of Transportation. 9. Any and all billing records (including invoices) from Andrew C. Richner, and/or the Clark Hill law firm, which relate to, concern, or mention said Memorandum (including but not limited to billing records and invoices concerning the discussion of, the research of, the preparation of, and any follow up to, the Memorandum). -3- 10. Any and all documents, including e-mails or letters, demonstrating the transmittal of the Memorandum to Nick Atsalakis, Garry Manous, Atsalis Brothers Painting Co. (“Atsalis”), or to or from anyone on Atsalis’s behalf. 11. Any and all documents, including emails or letters, demonstrating the transmittal of the Memorandum to the Mackinac Bridge Authority, and/or the Michigan Department of Transportation. Mot. for Protective Order, Ex. 1, Subpoena. On December 12, 2011, the moving defendants’ position was that Richner went “rogue” and acted on his own in producing and sending the Memorandum to the MDOT. Although the Memorandum is addressed to the defendants, the moving defendants’ position was that they had not seen, nor did they authorize, the Memorandum. However, on December 22, 2011, the moving defendants’ attorney retracted the previous statements and revealed that the moving defendants saw and approved the Memorandum before it was published by Richner. On December 27, 2011, the moving defendants filed the present motion for a protective order to block the production of the requested documents based on attorney-client privilege and the attorney work product doctrine. II. Federal Rule of Civil Procedure 26 allows broad discovery in civil litigation, including “any nonprivileged matter that is relevant to any party’s claim or defense.” Fed. R. Civ. P. 26(b)(1). By its own terms, the rule contains a built-in limitation that protects from disclosure materials subject to an evidentiary privilege. That limitation can be enforced through Federal Rule of Civil Procedure 26(c)(1), which authorizes a court to enter protective orders “to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.” Fed. R. Civ. P. 26(c)(1); Surles ex rel. Johnson v. Greyhound Lines, Inc., 474 F.3d 288, 306 (6th Cir. 2007). -4- The moving defendants argue that they should not be required to produce the requested documents because they are protected by the attorney-client privilege, and the requested documents are subject to the work-product rule. A. The elements of the attorney-client privilege were summarized decades ago by Dean Wigmore as follows: (1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) unless the protection is waived. 8 Wigmore, Evidence (McNaughton rev. ed.1961), § 2292, p. 554; see also Reed v. Baxter, 134 F.3d 351, 355-56 (6th Cir. 1998). The purpose of the attorney-client privilege is to encourage clients to communicate freely with their attorneys. Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). It is a matter of common law right, “the oldest of the privileges for confidential communications known to the common law.” Ibid. But the essence of the privilege is confidentiality, and when confidentiality is destroyed, there is little justification for incurring the heavy cost to the production of relevant evidence which the privilege exacts. Parkhurst v. Lowten, 2 Swanst. 194, 216; 36 Eng. Rep. 589, 596 (Ch. 1895) (“The moment confidence ceases, privilege ceases.”); see also In re Grand Jury Proceedings Oct. 12, 1995, 78 F.3d 251, 254 (6th Cir. 1996). Because the privilege operates to reduce the amount of information discoverable during the course of a lawsuit, it is narrowly construed. In re Grand Jury Investigation No. 83-2-35, 723 F.2d 447, 451 (6th Cir. 1983). By voluntarily disclosing an attorney’s advice to a third party, for example, a client is held to have waived the privilege because the disclosure runs counter to the notion of confidentiality. See Westinghouse Elec. Corp. v. Republic of the Philippines, 951 F.2d 1414, 1424 (3d Cir. 1991) -5- (holding that “voluntary disclosure to a third party of purportedly privileged communications has long been considered inconsistent with an assertion of the privilege.”). Federal Rule of Evidence 501 states that “state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.” Fed. R. Evid. 501. The plaintiff’s claims all arise under Michigan law, which recognizes an attorney-client privilege that is harmonious with the principles outlined above. See Augustine v. Allstate Ins. Co., 292 Mich. App. 408, 420, 807 N.W.2d 77, 85 (2011) (“The attorney-client privilege attaches to direct communication between a client and his attorney as well as communications made through their respective agents.” (quoting Reed Dairy Farm v. Consumers Power Co., 227 Mich. App. 614, 618, 576 N.W.2d 709, 711 (1998 . Under Michigan law, the privilege attaches to both written and oral communication, In re Bathwick’s Will, 241 Mich. 156, 158-59, 216 N.W. 420, 421 (1927), but “[t]he scope of the attorney-client privilege is narrow, attaching only to confidential communications by the client to his advisor that are made for the purpose of obtaining legal advice,” Augustine, 292 Mich. App. at 420, 807 N.W.2d at 85 (quoting Reed Dairy Farm, 227 Mich. App. at 618-19, 576 N.W.2d at 711); see also Alderman v. People, 4 Mich. 414, 422 (1857). “‘Once otherwise privileged information is disclosed to a third party by the person who holds the privilege, or if an otherwise confidential communication is necessarily intended to be disclosed to a third party, the privilege disappears.’” Leibel v. General Motors Corp., 250 Mich. App. 229, 242, 646 N.W.2d 179, 186-87 (2002) (quoting Oakland Co. Prosecutor v. Dep’t of Corr., 222 Mich. App. 654, 658, 564 N.W.2d 922 (1997 . 1. -6- The subpoena’s first request demands production of all drafts of the Memorandum. It is undisputed that the moving defendants voluntarily provided the final version of the Memorandum to the MDOT, thereby waiving the attorney-client privilege with respect to the final version. Leibel, 250 Mich. App. at 242, 646 N.W.2d at 186-87. The moving defendants argue that their disclosure did not waive the privilege as to the Memorandum’s earlier drafts. In Berryman v. Madison School District, No. 265996, 2007 WL 549230, at *4 (Mich. Ct. App. Feb. 22, 2007), the court of appeals stated that “[t]here is no indication that waiving the privilege to the final document waives the privilege to its rough drafts.” Even where the final document is intended to be disclosed to third parties, the drafts of the document may contain “confidential facts disclosed to the attorney for the purpose of securing the attorney’s legal advice concerning how to proceed.” Id. at *3. On the other hand, once a waiver is effectuated, all communications on the same subject matter are subject to disclosure and are not protected by the attorney-client privilege. See Fort James Corp. v. Solo Cup Co., 412 F.3d 1340, 1350-51 (Fed. Cir. 2005). “The waiver extends beyond the document initially produced out of concern for fairness, so that a party is prevented from disclosing communications that support its position while simultaneously concealing communications that do not.” Id. at 1349. Moreover, Berryman is distinguishable from the present case because the moving defendants have attributed fault to Richner. “When the client alleges a breach of duty to him by the attorney, the privilege is waived as to all communications relevant to that issue.” People v. Houston, 448 Mich. 312, 332, 532 N.W.2d 508, 516 (1995) (quoting 8 Wigmore, Evidence § 2327, 636-38). Additionally, the Michigan Rules of Professional Conduct include an exception to the attorney-client privilege that allows an attorney to reveal “confidences or secrets necessary to establish or collect -7- a fee, or to defend the lawyer or the lawyer’s employees or associates against an accusation of wrongful conduct.” Mich. R. Professional Conduct 1.6(c)(5). The comments to the rule explain: Where a legal claim or disciplinary charge alleges complicity of the lawyer in a client’s conduct or other misconduct of the lawyer involving representation of the client, the lawyer may respond to the extent the lawyer reasonably believes necessary to establish a defense. The same is true with respect to a claim involving the conduct or representation of a former client. The lawyer’s right to respond arises when an assertion of complicity or other misconduct has been made. Mich. R. Professional Conduct 1.6, Comment. Initially, 360 Construction sued only Atsalis Brothers Painting, Manous, and Atsalakis. But on October 14, 2011, the moving defendants filed a Notice of Non-Party Fault that alleged that the true culprit was their attorney, Andrew Richner. Based on that notice, 360 Construction moved to amend its complaint to add Richner as a defendant as permitted by Michigan Compiled Laws § 600.2957(2), and the Court granted the motion. It makes no difference that the formal charge against Richner is brought by 360 Construction and not by his former clients; he was brought into the case as a direct result of the moving defendants’ decision to name him in the Notice of Non-Party Fault. The Michigan Supreme Court has held that “[t]he object of the [attorney-client privilege] ceases and the attorney is no longer bound by his obligation of secrecy when his client or his representatives charge him, either directly or indirectly, with fraud or other improper or unprofessional conduct. Under such circumstances he may testify as to the facts.” Everett v. Everett, 319 Mich. 475, 483, 29 N.W.2d 919, 922 (1947) (emphasis added) (quoting 5 Jones’ Commentaries on Evidence (2d ed.) § 2165, 4114). Because the moving defendants have asserted that their former attorney is complicit in the defamatory conduct with which they are charged, they have waived the protection of the attorney-client privilege with respect to the Memorandum and its earlier drafts. -8- 2. The subpoena’s second, fifth, sixth, seventh, eighth, ninth, and tenth requests demand that Richner supply a variety of documents and communications concerning the Memorandum. The moving defendants have waived the attorney-client privilege with respect to those documents and communications. Additionally, “[a] bill for legal services . . . is only protected [by the attorney-client privilege] to the extent that it contains confidential client information or the opinions of counsel.” Huron Restoration, Inc. v. Bd. of Control of E. Michigan Univ., No. 203719, 1999 WL 33455136, at *2 (Mich. Ct. App. 1999). The attorney-client privilege does not protect those documents from disclosure. 3. The subpoena’s third and fourth requests demand production of Richner’s research used to complete the Memorandum and any document illustrating Richner’s investigation of the Memorandum’s allegations. Those documents do not constitute written or oral communications between a client and its attorney for the purpose of seeking legal advice. 4. The subpoena’s eleventh request is for any document demonstrating the transmittal of the Memorandum to the MDOT or the Mackinac Bridge Authority. That request does not seek communications between a client and its attorney; therefore the attorney-client privilege is no bar to the production of those documents. B. The defendants also argue that the requested documents are protected by the attorney work product doctrine. “The work-product doctrine protects an attorney’s trial preparation materials from -9- discovery to preserve the integrity of the adversarial process.” In re Professionals Direct Ins. Co., 578 F.3d 432, 438 (6th Cir. 2009) (citing Hickman v. Taylor, 329 U.S. 495, 510-14 (1947 . In a diversity case, the work product doctrine is governed by federal law; therefore, Federal Rule of Civil Procedure 26 governs. See Taylor v. Temple & Cutler, 192 F.R.D. 552, 559-60 (E.D. Mich. 1999). “Rule 26(b)(3) protects (1) ‘documents and tangible things’; (2) ‘prepared in anticipation of litigation or for trial’; (3) ‘by or for another party or its representative.’” In re Professionals Direct Ins. Co., 578 F.3d at 438 (quoting In re Powerhouse Licensing, LLC, 441 F.3d 467, 472 (6th Cir. 2006 . Whether a document is prepared in anticipation of litigation depends on “(1) whether that document was prepared ‘because of’ a party’s subjective anticipation of litigation, as contrasted with ordinary business purpose; and (2) whether that subjective anticipation was objectively reasonable.” In re Professionals Direct Ins. Co., 578 F.3d at 439 (quoting United States v. Roxworthy, 457 F.3d 590, 594 (6th Cir. 2006 . The party claiming the protection bears the burden of showing “that anticipated litigation was the ‘driving force behind the preparation of each requested document.’” Ibid. (quoting United States v. Roxworthy, 457 F.3d 590, 595 (6th Cir. 2006 . In this case, the moving defendants bear the burden of showing that the requested materials were prepared in anticipation of litigation. They have not done so. Indeed, during the hearing on the present motion, counsel for the moving defendants admitted that the Memorandum and its drafts were not prepared in anticipation of any litigation. That acknowledgment ends the analysis. The materials sought by the subpoena are not protected by the work product doctrine. Even without the defendants’ concession at the hearing, the issue is easily resolved: where the moving defendants have waived the attorney-client privilege, they have also waived the protection of the work product doctrine. See In re Powerhouse Licensing, LLC, 441 F.3d 467, 474 (6th Cir. 2006). -10- III The Court finds that the materials sought by the subpoena are not protected by attorney-client privilege or the work product doctrine. The moving defendants waived the attorney-client privilege by naming their attorney as a non-party at fault, and the work product doctrine does not apply because the materials sought were not prepared in anticipation of litigation. Accordingly, it is ORDERED that the motion for a protective order [dkt #24] is DENIED. It is further ORDERED that Andrew Richter and Clark Hill, PLC must comply with the subpoena on or before April 26, 2012. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: April 12, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on April 12, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -11-

=== UNITED STATES OF AMERICA v. GERALD LEE DUVAL, JR and JEREMY DUVAL ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. GERALD LEE DUVAL, JR and JEREMY DUVAL, ______________________________________/ Defendants. Case Number 11-20594 Honorable David M. Lawson ORDER GRANTING IN PART AND DENYING IN PART GOVERNMENT’S MOTION IN LIMINE TO PRECLUDE CERTAIN EVIDENCE, QUESTIONING, AND TESTIMONY The defendants are charged with various offenses relating to manufacturing and distributing marijuana, maintaining a drug house, and firearms violations. The government has filed a motion in limine to prevent the defendants from offering evidence that tends to justify their marijuana growing activity and attacks the policy that makes the growing, possession, and use of marijuana illegal. The defendants responded to the motion and later filed a lengthy supplemental brief, which the government moved to strike. The Court believes that the supplemental brief should be filed and considered. The Court heard oral argument on March 27, 2012, and at the conclusion announced its decision from the bench granting in part and denying in part the motion. This order memorializes the Court’s ruling. I. The defendants are charged with a number of drug and firearm crimes, including but not limited to conspiracy to manufacture marijuana, manufacture with intent to distribute marijuana, maintaining a drug premises, and possessing a firearm in furtherance of a drug trafficking crime. During an earlier evidentiary hearing, Jeremy Duval testified that he and his sister are licensed by the State of Michigan to grow medical marijuana for up to five patients each. Before embarking on his venture, apparently Jeremy Duval sought and obtained advice from law enforcement officials about compliance with laws regulating marijuana growing activity. Up to now, the Duvals have not named a federal official who provided such advice, but they did identify a state law enforcement official who gave them advice. That individual turned out to be deployed to a joint federal-state drug task force and was working for the Drug Enforcement Administration. In its motion, the government seeks to prevent the defendants from offering any evidence and making arguments on the following topics: 1. It is lawful to possess, manufacture, sell or distribute “medical marijuana” (or that defendants believed it was lawful). 2. Defendants were in compliance with Michigan state law regarding “medical marijuana” and the Michigan Medical Marijuana Act (MMMA) (or that Defendants believed they were in compliance or that their actions were lawful). 3. Defendants were ignorant of federal laws regarding marijuana and/or possession of firearms in furtherance of marijuana offenses. 4. Defendants were mistaken about federal laws regarding marijuana and/or possession of firearms in furtherance of marijuana offenses. 5. Marijuana has any legitimate medical value (or that Defendants believed it had legitimate medical value). 6. Marijuana should not be a Schedule I controlled substance. 7. Marijuana should not be illegal. 8. Defendants made efforts (consulting with an attorney, corresponding with state officials, research, etc.) to comply with marijuana laws. 9. Defendants or their customers were “medical marijuana” patients. -2- 10. Defendants had a medical or humanitarian motive or justification for manufacturing and distributing marijuana. The defendants have responded with several arguments indicating that they would like to champion the cause of legalizing marijuana, but their most persuasive assertions are that they have a right to present the defenses of entrapment by estoppel and necessity. At oral argument, the defendants expressed their intention to raise the defenses of entrapment of estoppel, necessity, and medical necessity. They also stated that they intended to offer evidence that marijuana should not be a Schedule I controlled substance because it has legitimate medical value, they were ignorant of federal law, and they had patients that required the marijuana for medical reasons. II. The main thrust of the government’s argument is that the evidence it seeks to exclude is irrelevant to the charges in the indictment. Even though the threshold for relevancy under Federal Rule of Evidence 401 is quite low, United States v. Whittington, 455 F.3d 736, 738 (6th Cir. 2006) (noting that “[t]he standard for relevancy is ‘extremely liberal.’” (quoting Douglass v. Eaton Corp., 956 F.2d 1339, 1344 (6th Cir. 1992 , for many of the items listed, the Court is inclined to agree with the government. For instance, the government insists that evidence of Michigan’s medical marijuana laws, the defendants’ compliance with those laws, the defendants’ medical marijuana patients’s reliance on marijuana, and the defendants’ ignorance of federal drug law are irrelevant because they do not make the existence of any fact likely to establish an element of the charges more or less likely. See Fed. R. Evid. 401. At oral argument, the defendants did not dispute that proposition. Instead, they argued that some of the evidence the government seeks to preclude is relevant to their defenses of entrapment by estoppel, medical necessity, and mistake of law. -3- A federal criminal trial is not a forum for a policy debate, especially the policy underlying the federal criminal drug laws. On the other hand, the defendants have a right to advance, or at least attempt to advance, legally-recognized defenses. Crane v. Kentucky, 476 U.S. 683, 690 (1986) (stating that “the Constitution guarantees criminal defendants a meaningful opportunity to present a complete defense” (internal quotation marks and citation omitted . And their rights “to present relevant evidence” in support of those defenses is subject only to “reasonable restrictions.” United States v. Geisen, 612 F.3d 471, 495 (6th Cir. 2010) (quoting United States v. Scheffer, 523 U.S. 303, 308 (1998 . A. The defendants argue that some of the evidence the government seeks to exclude will support the defense of entrapment by estoppel. “The defense of entrapment by estoppel, recognized by the Supreme Court and several circuit courts, ‘is based upon fundamental notions of fairness embodied in the Due Process Clause of the Constitution.’” United States v. Ormsby, 252 F.3d 844, 851 (6th Cir. 2001) (quoting United States v. Levin, 973 F.2d 463, 468 (6th Cir. 1992) (citations omitted . To prove entrapment by estoppel, “a defendant must show that: (1) a government agent announced that the charged conduct was legal; (2) the defendant relied on the agent’s announcement; (3) the defendant’s reliance was reasonable; and (4) given the defendant’s reliance, prosecution would be unfair.” United States v. Triana, 468 F.3d 308, 316 (6th Cir. 2006) (citing Levin, 973 F.2d at 468). The government predicts that the defendants cannot succeed in proving that defense because they will not be able to show that a federal official gave them misleading advice about federal law upon which they relied to their detriment. That, indeed, is a valid point. “When this defense is asserted with respect to a federal offense, representations or assurances by state or local officials -4- lack the authority to bind the federal government to an erroneous interpretation of federal law.” Ormsby, 252 F.3d at 851 (citing United States v. Brebner, 951 F.2d 1017, 1026 (9th Cir. 1991); United States v. Hurst, 951 F.2d 1490, 1499 (6th Cir. 1991) (defendants charged under 18 U.S.C. § 1955 could not rely upon statements by state officials concerning state law to establish defense to federal offense ; see also United States v. Kidwell, 217 F. App’x 441, 447 (6th Cir. 2007) (rejecting entrapment by estoppel defense to federal drug charges where defendant relied on state court’s probation condition that allowed him to grow marijuana for medical purposes). But a slim chance of success does not justify a ruling pretermitting the attempt. What the government seeks, in essence, is an advance ruling on the viability of the defense of entrapment by estoppel without allowing the Court to hear the evidence. However, the rule governing pretrial motions instructs that only those “defense[s], objection[s], or request[s] that the court can determine without a trial of the general issue” may be raised before trial by motion. Fed. R. Crim. P. 12(b). The Court may not adjudicate the validity of a defense in advance of trial if doing so would “invade the province of the ultimate finder of fact.” United States v. Jones, 542 F.2d 661, 664 (6th Cir. 1976). According to Rule 12(b), “a defense is capable of determination [only] if trial of the facts surrounding the commission of the alleged offense would be of no assistance in determining the validity of the defense.” Id. at 665 (internal quotations omitted . That rule ought to apply to proving the defense of entrapment by estoppel, which is a fact-intensive enterprise. See Levin, 973 F.2d at 471-73 (Martin, J., dissenting); see also United States v. Knox, 396 U.S. 77, 83 (1969) (reversing indictment’s dismissal based on duress defense and, citing Rule 12(b)(1), stating that “the question whether Knox’s predicament contains the seeds of a ‘duress’ defense, or perhaps -5- whether his false statement was not made ‘willfully’ as required by s 1001, is one that must be determined initially at his trial”). The defendants are entitled to attempt to prove their defense. They say, for now, that they relied on the statements of a Monroe County sheriff deputy about the legality of their operation. Perhaps they relied on others. The sheriff deputy has testified at a pretrial hearing in this case that he was working as part of a joint task force operation with the DEA. Perhaps the defendants will be able to offer evidence that the deputy spoke with the authority of the federal government or led the defendants to believe that he did. The way the Court understands it, the defendants will describe their understanding that if they complied with Michigan’s medical marijuana laws, they would not be prosecuted by any government authority. Consequently, proof of compliance with those state laws would necessarily be part of their defense. So would the conversations they had with the “authorities” upon which they allegedly relied. It is certainly possible that none of those proofs will materialize, in which case the jury will not be instructed on the entrapment by estoppel defense. And wisdom may suggest a different course, as well. But the defendants should not be frustrated in the attempt to bring their defense to the trial. B. The defendants also believe that some of the evidence the government seeks to exclude is relevant to prove the defense of necessity. Gerald Duval’s attorney argued that Gerald suffers from several ailments that can only be treated with marijuana, and using that drug is necessary to address his pain and other symptoms. The defendants also intend to offer evidence that their other patients need the drug. -6- However, the Supreme Court has made clear that “medical necessity is not a defense to manufacturing and distributing marijuana.” United States v. Oakland Cannabis Buyers’ Co-op., 532 U.S. 483, 494, & n.7 (2001) (“[T]he very point of our holding is that there is no medical necessity exception to the prohibitions at issue, even when the patient is ‘seriously ill’ and lacks alternative avenues for relief.”); see also United States v. Henry, --- F.3d ---, 2012 WL 745536, at *5-6 (4th Cir. 2012). Therefore, the Court will bar the introduction of evidence for the purpose of establishing a necessity defense. C. The defendants also argue that they were mistaken about the prospect of their activity violating federal law when they were in compliance with state law. Once again, however, mistake of law is not a valid defense to criminal prosecution except “where the defendant’s knowledge of the lawfulness of his conduct is an express element of the offense, including where the defendant has been charged under a ‘highly technical statute[ ] that present[s] the danger of ensnaring individuals engaged in apparently innocent conduct.’” United States v. Javaherpour, 78 F. App’x 452, 455 (6th Cir. 2003) (quoting Bryan v. United States, 524 U.S. 184, 194 (1998 . Knowledge of the lawfulness of the conduct is not an element to any of the charges in this case. Id. at 455-56 (“In a criminal statute, ‘the term “knowingly” merely requires proof of knowledge of the facts that constitute the offense.’” (quoting Bryan v. United States, 524 U.S. 184, 193 (1998 . Mistake of law cannot be a valid defense to the charges in this case, unless that mistake is provoked by a misleading statement made with the authority of the federal government. If such a statement was made, the defendants still would have to establish the other elements of the -7- entrapment-by-estoppel defense. The Court will preclude evidence and testimony of the defendants’ ignorance of the law insofar as such evidence is not part of that recognized defense. D. The defendants also contend that much of the other evidence the government seeks to exclude is necessary to allow the defendants to tell their story. The Court interprets that argument as a thinly-veiled effort to offer evidence that would invite jury nullification. The defendants are not entitled to offer evidence and testimony for the sole purpose of inviting jury nullification. United States v. Castro, 411 F. App’x 415, 420 (2d Cir. 2011); United States v. Sepulveda, 15 F.3d 1161, 1190 (1st Cir. 1993) (“A trial judge . . . may block defense attorneys’ attempts to serenade a jury with the siren song of nullification . . . .”); United States v. Scarmazzo, 554 F. Supp. 2d 1102, 1108 (E.D. Cal. 2008) (“It is appropriate to exclude evidence and argument to the jury related to medicinal use of marijuana, introducing evidence or arguing jury nullification.”). Therefore, the Court will not allow evidence or testimony that marijuana has any medical value, should not be a Schedule I controlled substance, otherwise should be legal, or that the defendants had a medical or humanitarian motive for manufacturing and distributing marijuana, as the Court sees no purpose for that evidence other than to ask the jury to acquit despite proof of the elements of the crimes beyond a reasonable doubt. E. The government also contends that even if any of the evidence is relevant to prove a valid defense, it is unfairly prejudicial because the jury might take it to mean that no conviction should befall medical marijuana growers. “Relevant evidence ‘may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice.’” Whittington, 455 F.3d at 739 (quoting -8- Fed. R. Evid. 403). This Court has explained that “the concept of ‘unfair prejudice’ embraces two distinct notions:” First, when the evidence may tend to prove more than one proposition and thus could be considered for both a proper and an improper purpose, unfair prejudice can result when the improper purpose overwhelms or substantially overshadows any legitimate basis for receiving the evidence. See United States v. Vandetti, 623 F.2d 1144, 1149 (6th Cir. 1980) (quoting Advisory Comm. Note to R. 403, stating, “‘Unfair prejudice’ within its context means an undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one”). Second, unfair prejudice can result when evidence that is only marginally probative tends to be given preemptive weight by the jury substantially out of proportion to its logical force. See Sutkiewicz v. Monroe Cnty. Sheriff, 110 F.3d 352, 360 (6th Cir. 1997) (stating that “[o]therwise relevant evidence may permissibly be excluded if it serves to inflame the passions of the jury”); Vandetti, 623 F.2d at 1149 (observing that evidence of a witness’s invocation of his Fifth Amendment right before the jury raised “a real danger that . . . [it] may be given undue weight” to the evidence “although it is entitled to none in the law”). Dresser v. Cradle of Hope Adoption Ctr., Inc., 421 F. Supp. 2d 1024, 1030 (E.D. Mich. 2006); see also Old Chief v. United States, 519 U.S. 172, 180 (1997) (quoting Advisory Committee’s Notes on Fed. R. Evid. 403). Applying Rule 403 necessarily contemplates a balance that is weighted in favor of admissibility, with the countervailing forces being the strength of the evidence’s legitimate value and the tendency of the evidence’s improper purpose(s) to overwhelm it. Evaluation of legitimate probative value requires consideration of the strength of the evidence itself, whether the evidence may be the only available proof of a material point, and whether the focus of the proof is genuinely in issue, among other things. The Court believes that those factors are most effectively assessed in the context of the other evidence presented at trial. F. The Court concludes that evidence that may have a bearing on the defense of entrapment by estoppel ought not be excluded. Evidence that likely would have no bearing on that defense -9- probably includes evidence of the defendants’ ignorance of or mistakes about federal marijuana laws, marijuana’s medical value, whether marijuana should be Schedule I controlled substance or otherwise should be legal, and the defendants’ humanitarian motive for manufacturing and distributing marijuana. The Court will grant the government’s motion to exclude that evidence. III. After the Court’s bench ruling, the government suggested that the trial — now scheduled to begin April 10, 2012 — might have to be delayed so the government could seek permission from the Solicitor General to file an interlocutory appeal. The Court certainly does not discourage the government or any party to file an appropriate challenge to the Court’s rulings. However, the authorizing statute allows the government to take an interlocutory appeal “to a court of appeals from a decision or order of a district court suppressing or excluding evidence.” 18 U.S.C. § 3731 (emphasis added). There is no authority for an interlocutory appeal from an adverse decision admitting evidence. See United States v. W.R. Grace, 526 F.3d 499, 505 (9th Cir. 2008); cf. United States v. Shameizadeh, 41 F.3d 266, 267 (6th Cir. 1994). In addition, “the United States attorney [must] certif[y] to the district court that the appeal is not taken for purpose of delay and that the [excluded] evidence is a substantial proof of a fact material in the proceeding.” 18 U.S.C. § 3731. The Court does not believe authority exists for the government to file an interlocutory appeal of an order denying its motion in limine that will postpone the commencement of trial when the challenge is to the possible admission of evidence. The Court, therefore, will not countenance delay from such an effort. -10- IV. For the reasons discussed above and on the record, the Court finds that some of the proposed evidence challenged by the government ought to be excluded at trial, and other evidence should be allowed because it is or may be relevant to a legally-recognized defense. Accordingly, it is ORDERED that the government’s motion in limine to preclude certain evidence, questioning, and testimony [dkt. #21] is GRANTED IN PART AND DENIED IN PART for the reasons stated on the record and above. It is further ORDERED that the defendants are precluded from offering evidence, questioning, and testimony regarding the following subjects: (a) (b) (c) (d) (e) (f) defendants’ ignorance of federal laws regarding marijuana and possession of firearms in furtherance of marijuana offenses; defendants’ mistake about federal laws regarding marijuana and possession of firearms in furtherance of marijuana offenses; marijuana’s medical value and defendants’ belief of marijuana’s medical value; whether marijuana should be Schedule I controlled substance; whether marijuana should be illegal; and defendants’ humanitarian motive for manufacturing and distributing marijuana. It is further ORDERED that the government’s motion in limine is DENIED in all other respects. -11- It is further ORDERED that the government’s motion to strike defendants’ supplemental brief [dkt. #51] is DENIED. Dated: March 30, 2012 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 30, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -12-

=== UNITED STATES OF AMERICA v. $463,497.72 IN U.S. CURRENCY FROM BEST BANK, et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, Case No. 08-11564 Honorable David M. Lawson OPINION v. FOUR HUNDRED SIXTY-THREE THOUSAND FOUR HUNDRED NINETY-SEVEN DOLLARS AND SEVENTY-TWO CENTS ($463,497.72) IN U.S. CURRENCY FROM BEST BANK ACCOUNT # XXX2677, NINETEEN THOUSAND NINE HUNDRED THIRTY- SIX DOLLARS AND SEVENTY-SEVEN CENTS ($19,936.77) IN U.S. CURRENCY FROM BEST BANK ACCOUNT # XXX8558, ONE HUNDRED ONE THOUSAND FIVE HUNDRED EIGHTY-THREE DOLLARS AND NINETY-EIGHT CENTS ($101,583.98) IN U.S. CURRENCY FROM COUNTRYWIDE BANK ACCOUNT # XXX5890, NINETEEN THOUSAND NINE HUNDRED EIGHTY-SEVEN DOLLARS AND SEVEN CENTS ($19,987.07) IN U.S. CURRENCY FROM COMERICA BANK ACCOUNT # XXX0766, BEST BUY BANK ACCOUNT # 259207438, ONE HUNDRED ONE THOUSAND SEVEN HUNDRED AND THREE DOLLARS AND TEN CENTS ($101,703.10) IN U.S. CURRENCY FROM COUNTRYWIDE BANK ACCOUNT # XXX5890, NINETEEN THOUSAND NINE HUNDRED TWELVE DOLLARS AND SEVEN CENTS ($19,912.07) IN U.S. CURRENCY FROM COMERICA BANK ACCOUNT # XXX0766, FIFTY-ONE THOUSAND THREE HUNDRED SEVENTEEN DOLLARS AND SIX CENTS ($51,317.06) IN U.S. DOLLARS FROM COUNTRYWIDE BANK ACCOUNT # XXX7528, and SAFESCRIPT PHARMACY # 19, LLC, Defendants, and STACEY HOGAN GIANOPLOS, RONALD G. CARSON, and H.D. SMITH WHOLESALE DRUG COMPANY, INC., _________________________________________/ Claimants. OPINION The government commenced this asset forfeiture case against cash in bank accounts allegedly connected to the Safescript Pharmacy in Farmington Hills, Michigan, contending that it was proceeds from the illegal sale of controlled substances by pharmacy employees. Claims were filed by three claimants: Stacey Hogan Gianoplos, Ronald G. Carson, and H.D. Smith Wholesale Drug Company, Inc. A consent order was entered on May 23, 2011 disposing of the claims by Gianoplos and Carson and dismissing H.D. Smith’s cross claims against them. The consent order also established that the money in the bank accounts is subject to forfeiture under 21 U.S.C. § 881(a)(6) and 18 U.S.C. § 981(a)(1)(A), but also subject to H.D. Smith’s valid first priority lien as a secured creditor of Safescript. The parties agreed that a fact issue remains as to whether H.D. Smith is an innocent owner within the meaning of 18 U.S.C. § 983(d)(1) & (2)(A). The case came on for trial before the Court without a jury on August 11 and 12, 2011. The Court heard the testimony of six witnesses in person and six by deposition, and received 52 exhibits. The parties also submitted several stipulations of fact that were incorporated in the joint final pretrial order. The parties filed post-trial briefs and proposed findings. The following constitutes the Court’s findings of fact under Federal Rule of Civil Procedure 52(a)(1), followed by its application of the governing law. I. Facts -2- A. Background This in rem civil forfeiture proceeding was commenced by the United States on April 11, 2008 against five bank account defendants containing cash in the total amount of approximately $650,000.00. The FBI seized the funds on April 10, 2008. Since the seizure, the United States has maintained the funds previously contained in the Safescript bank accounts in the interest-bearing Seized Asset Fund, which, following a settlement distribution to other claimants, had a balance on July 27, 2011 of $606,450.29. The seizure was part of an investigation into the activities of individuals associated with the Safescript Pharmacy in Farmington Hills, Michigan involving the diversion of Schedule II controlled substances into the illegal market. Safescript was owned and operated by Stacey Hogan Gianoplos. Ronald G. Carson was Gianoplos’s husband and business partner. Claimant H.D. Smith Wholesale Drug Company, Inc. was a pharmaceutical supplier to Safescript Pharmacy. H.D. Smith sold pharmacy products, including controlled substances, to Safescript on account and had a perfected security interest in Safescript’s collateral, which was defined by the security agreement to include identifiable cash proceeds in Safescript’s bank accounts. At the time the bank accounts were seized, Safescript owed H.D. Smith approximately $540,000 on account; the balance accrued interest at the contractual rate of 18% per year. H.D. Smith filed a claim to the cash proceeds seized by the government, alleging that its security interest conferred ownership status to the funds and contending that it was an innocent owner of the funds within the meaning of 18 U.S.C. § 983(d). As the issues were refined through this litigation, the parties have come to agree that the cash is subject to forfeiture and there is no evidence that employees of H.D Smith had actual knowledge that the controlled substances the -3- company supplied to Safescript Pharmacy were being diverted for unlawful purposes. However, the government contends that H.D. Smith was willfully blind to the illegal diversions, and that willful blindness disqualifies H.D. Smith from claiming innocent owner status. The United States does not contest H.D. Smith’s properly perfected and secured claim for the invoiced amounts for pharmaceuticals sold to Safescript through April 11, 2008. The government agrees that if H.D. Smith prevails on its innocent owner claim, it is entitled to all of the seized account proceeds (less $50,000 already returned to Gianoplos and Carson) together with interest earned while on deposit in the Seized Asset Fund. The fact issue presented at trial was whether H.D. Smith was willfully blind to the illegal diversions of controlled substances that were occurring at Safescript sometime before H.D. Smith terminated its relationship with Safescript on April 11, 2008. The crux of the claimant’s case is that it had in place reasonable measures to detect suspicious orders of controlled substances by its customers, and it had no reason to believe that the volume of orders for oxycodone and its branded equivalent, OxyContin, indicated that the drugs were destined for the illegal market. Therefore, the claimant reasons, it has sustained its burden that it is an innocent owner of the bank account proceeds subject to forfeiture. The government seeks to rebut that claim by proof that Safescript’s purchases of oxycodone and OxyContin from January 2006 through April 2008 were so voluminous that H.D. Smith personnel should have investigated Safescript’s purchasing and distribution activity and suspended shipments of the controlled substances. Its failure to do so, the government argues, amounts to deliberate action to avoid learning the true facts and amounts to willful blindness. -4- H.D. Smith is a national wholesaler of pharmaceuticals and a registrant supplier licensed by the Drug Enforcement Administration (DEA) to distribute controlled substances. H.D. Smith’s license was and is currently in good standing with the DEA. The responsibility to register wholesale drug distributors falls to the Attorney General. See 21 U.S.C. § 823(b). A license is issued if the Attorney General determines that the registration is consistent with “the public interest.” Ibid. Among the factors the Attorney General must consider is whether the registrant “maint[ains] effective control[s] against diversion of particular controlled substances into other than legitimate medical, scientific, and industrial channels.” 21 U.S.C. § 823(b)(1). To fulfill that congressional mandate, the Attorney General has promulgated rules for registrants. For instance, 21 C.F.R. § 1301.74(b) requires a registrant supplier to “design and operate a system to disclose to the registrant suspicious orders of controlled substances.” Registrants are required to disclose “suspicious orders” to the DEA field office. Ibid. “Suspicious orders include orders of unusual size, orders deviating substantially from a normal pattern, and orders of unusual frequency.” Ibid. B. Illegal activity at Safescript The DEA began investigating the activities at Safescript Pharmacy in 2006. The lead investigator was James Rafalski. The investigation eventually revealed that a Dr. Sohrab Shafinia was writing prescriptions for pain-killing narcotic drugs, including OxyContin and oxycondone, for no valid medical purpose. A “runner” named George Scott came to the Safescript pharmacy three times per week, sometimes twice a day, posing as an employee of a group home, and presented the prescriptions, which were filled by Safescript’s pharmacist Richard Riozzi. -5- On January 29, 2009, Dr. Shafinia Riozzi was indicted, along with four other individuals, Richard Riozzi, Stuart Stein, Randell McDaniel, and Gerald Richards, on charges of distributing controlled substances, including the Schedule II drug OxyContin, in violation of 21 U.S.C. § 841(a)(1) and 21 U.S.C. § 846. The government alleged that Stein, McDaniel, and Richards paid Dr. Shafinia from $100 to $300 per occasion for prescribing a mixture of drugs containing OxyContin (the mixture that would later become known as the “Shafinia Cocktail”) without examining or sometimes even seeing the patients. Some of the prescriptions also were for Lorcet, Lortab, Xanax, and Soma. George Scott (who was charged with conspiracy to distribute controlled substances in a separate indictment) would then present those prescriptions to Richard Riozzi at the Safescript Pharmacy, and Riozzi would fill them without the patients being present. Riozzi was paid around $400 per occasion. Neither Gianoplos nor Carson were indicted. Shafinia, Stein, Riozzi, McDaniel, and Scott eventually pleaded guilty to one or more counts of their respective indictments. They have been sentenced to substantial prison terms. The government acknowledges that H.D. Smith had no actual knowledge of any of the criminal conduct that gave rise to the indictments at any time before learning of the seizure of the Gianoplos and Carson accounts on April 10, 2008 and the filing of the forfeiture complaint immediately thereafter on April 11, 2008. C. In rem defendants The bank accounts seized on April 10, 2008 consist of the following: (1) BestBank account ending in 2677 ($463,497.72) — Safescript’s interest-bearing money market account (and its predecessor account ending in 0160, in the names of Safescript Pharmacy, Gianoplos, and Carson, closed on August 21, 2007). The government alleges that of the $703,210 deposited into this account, at least $400,000 represents proceeds from illegal sales of controlled substances. The account absorbed part of the cash Safescript earned in the illegal sale of controlled substances on May 9 and 11, 2007. The deposits of -6- cash from fraudulent prescriptions continued into the account after the predecessor account was closed. During this same period, Scott paid cash for illegal prescriptions. For example, on May 9 and May 11, 2007, Scott purchased 28 illegal prescriptions for approximately $39,200. On May 12, 2007, a cash deposit of $19,500 was made to Account Number *0160. Bank records show similar transactions occurring frequently between February and May 2007. The Michigan Automated Prescription Service (MAPS) data shows that on 29 separate days, approximately 333 prescriptions were filled using unassigned DEA number BD9374911; the government attributes the frequency to Scott’s presentation of fraudulent prescriptions filled by Riozzi. Scott paid approximately $1,400 for each prescription or approximately $466,200 for 333 prescriptions. Safescript Pharmacy BestBank Account Number *0160 records show cash deposits made on or near the day of each transaction involving illegal prescriptions. (2) BestBank account ending in 8558 ($19,936.77) — Safescript’s checking account out of which payroll is paid. According to the records, this account received between 33% and 95% of its funds from transfers from Safescript Pharmacy BestBank Account Number *0160 and Safescript Pharmacy BestBank Account Number *2677 since August 2007. (3) Countrywide Bank account ending in 5890 ($101,703.10) — Carson’s interest-bearing savings account. The government alleged and bank records established an internet transfer of $100,000.00 from BestBank Account Number *2677 to BestBank Account Number *8558. On October 16, 2007, a check made payable to Ronald G. Carson for $100,000.00 from BestBank Account Number *8558 was endorsed by Carson and deposited into BestBank Account Number *7438. On or about October 19, 2007, Carson transferred $100,000.00 via wire transfer from BestBank Account Number *7438 to Countrywide Bank Account Number *5890. These transactions involved illegal drug sales proceeds and were intended to disguise and conceal the true nature and source of the [illegal drug sales] proceeds, and thus constituted money laundering. (4) Comerica Bank account ending in 0766 ($19,912.07) — Carson’s personal checking account. The government alleges that this account received deposits made payable to Carson amounting to $62,197.39 from BestBank Account Number *8558. The memo section indicates that the deposits were paychecks. However, Carson is not an employee of Safescript Pharmacy. These transactions involved [fraudulent drug sales] proceeds and were intended to disguise and conceal the true nature and source of the [fraudulent drug sales] proceeds, and thus constituted money laundering. (5) Countrywide Bank account ending in 7528 ($51,317.06) – Gianoplos and Carson’s joint savings account. The government alleges and records establish that this account was opened on July 19, 2006 in the names of Carson and Gianoplos. Between July 2006 and November 2007, $41,250.00 was deposited via wire transfer into this account from Comerica Bank Account Number *0766. Some or all of these deposits constitute transactions involving fraudulent prescription sales proceeds involved in money laundering to disguise their true nature and origin. -7- The parties agree that the cash in these accounts represent proceeds of the illegal activity that was conducted at Safescript Pharmacy. D. H.D. Smith’s Involvement with Safescript Safescript was a retail pharmacy that began purchasing generic pharmaceuticals, including controlled substances, from Smart Source, an H.D. Smith affiliate, sometime prior to 2006. Smart Source was a telemarketing company; accounts serviced through that company typically placed small telephone orders for generic drug products. SafeScript continued that relationship with H.D. Smith until it was designated as a primary account of H.D. Smith on June 29, 2006. Around February 14, 2006, Daniel Roberts, a sales representative for H.D. Smith, met with Stacy Gianoplos at Safescript to discuss converting Safescript from Smart Source to an H.D. Smith primary account. On June 15 and 16, 2006, Roberts met with Gianoplos at Safescript again to continue those discussions. At that time, Gianoplos completed the necessary documents, which included a detailed customer profile, and Roberts completed his due diligence investigation of the pharmacy. Roberts testified at deposition that he never witnessed any suspicious conduct or activity indicative of criminal activity while at Safescript on any of those occasions, and the government has no evidence that Roberts observed any such conduct or activity that would have been indicative of criminal activity. Roberts determined that the pharmacy had a valid DEA license, had no Internet pharmacy operations, was serving doctors who had valid DEA licenses, and was located in a strip mall with good tenants in an upscale suburb of Detroit, Michigan. Roberts also visited Gianoplos at Safescript and conducted an in-person site inspection on July 27, 2006 and December 20, 2007. H.D. Smith has produced records of an additional visit by -8- Roberts on February 9, 2007. Roberts testified that he did not monitor the nature or volume of controlled substance purchases by Safescript, deferring instead to the company’s compliance officer to conduct that task. Safescript purchased products from H.D. Smith on account. Safescript executed a security agreement conveying to H.D. Smith a security interest in all its fixtures, equipment, accounts, and proceeds. Thereafter, Safescript’s orders were submitted to and shipped from the Springfield, Illinois Division of H.D. Smith. H.D. Smith ceased doing business with Safescript on April 11, 2008, immediately after the government seized Safescript’s bank accounts. At that time, Safescript owed H.D. Smith $540,049.10 for products it received, but for which H.D. Smith has never been paid. The financing agreement between Safescript and H.D. Smith called for interest on the unpaid balance to accrue a contractual rate of 18% per year. The balance owed to H.D. Smith at the time of trial was $921,886.89. E. H.D. Smith’s monitoring system As mentioned earlier, the DEA’s regulations require drug wholesalers to “design and operate a system to disclose to the registrant suspicious orders of controlled substances.” 21 C.F.R. § 1301.74(b). The regulations do not prescribe any particular form or style of monitoring system. Throughout all of 2006 and 2007, at the end of each month, the Operations Manager of the Springfield, Illinois distribution facility manually reviewed customer orders for the previous month to determine whether any of those orders were unusual or suspicious. The use of a manual monitoring system is not a per se ineffective or unacceptable method of identifying suspicious -9- orders, and prior to this litigation, H.D. Smith’s manual monitoring system had never been found to have been in violation of 21 C.F.R. § 1301.74 or any other DEA law or regulation. DEA Investigator Scott Garriott testified that during a regulatory investigation he conducted at the Springfield distribution facility in late August and early September 2006, he suggested to H.D. Smith personnel that the company should automate their suspicious order monitoring system. Garriott explained that the manual system required the exercise of subjective judgment as to whether an order was suspicious, and an automated system would more objectively track volumes and patterns of orders. Garriott subsequently drafted a report of investigation dated December 5, 2006, which set forth various regulatory violations and concerns identified during the course of the inspection. He mentioned in that report that H.D. Smith should explore an automated system to monitor suspicious orders of controlled substances because of human error and issues with personnel changes attendant to a manual system. However, Garriott’s report did not cite H.D. Smith for any violations of 21 C.F.R. § 1301.74 with respect to H.D. Smith’s suspicious order monitoring system. On or about February 5, 2007, Gary G. Olenkiewicz, special agent in charge of the DEA’s Chicago field office, sent correspondence to H.D. Smith, which is known as a “letter of admonition,” detailing the regulatory violations of the Controlled Substances Act that were identified during Garriott’s August 2006 regulatory inspection. The DEA’s letter of admonition did not indicate that H.D. Smith’s suspicious order monitoring system violated 21 C.F.R. § 1301.74 or that it was otherwise deficient in any manner. Sometime in 2007, H.D. Smith began developing an automated suspicious order monitoring system, referred to as Controlled Substance Order Monitoring Program (“CSOMP”), to replace the -10- manual process that had been implemented to identify suspicious orders. At some point in March 2008, an automated system to identify suspicious orders was fully implemented at the Springfield Division. An automated system had been Beta tested and used on at least one occasion prior to that time. According to the regulations, if a suspicious order is detected, the registrant’s obligation is to “inform the Field Division Office of the Administration in his area of suspicious orders when discovered by the registrant.” 21 C.F.R. § 1301.74(b). The government offered testimony that the DEA sought to expand drug wholesalers’ obligations by a policy change in 2006 and 2007, although there was never a change to the regulations. One of the changes in interpretation by the DEA concerned the circumstances under which a distributor should suspend shipments to a customer if it identified an order as suspicious. That change in policy apparently prompted concern within the DEA compliance sectors that confusion would result, since the prior “report-only” policy had been in place for 35 years. Therefore, DEA personnel began to conduct distributor briefings to familiarize drug wholesalers with the new policy. Kyle Wright, the unit chief of the e-commerce section at the Office of Diversion Control at the DEA Headquarters in Washington D.C. in 2006 and 2007, testified that he played an important role in developing the briefings. He shared his work via e-mail with other DEA personnel. The evolution of the policy and the corresponding briefings, however, are not available because Wright, remarkably, deleted all his e-mails even after this lawsuit was commenced and Wright was called upon to respond to discovery. In all events, Wright testified that the DEA was aware that it was standard practice in the industry to file suspicious order reports while continuing to ship products, and that practice had been -11- approved by the DEA. Garriott testified that he knew that it was H.D. Smith’s practice to routinely ship products after filing a suspicious order report. On January 4, 2006, Kyle Wright gave his first distribution briefing to representatives of H.D. Smith, the purpose of which was to address the problem of Internet sales of controlled substances as identified to the DEA. Wright’s supervisor, Michael Mapes, told distributors at the DEA’s Pharmaceutical Industry Conference on September 11, 2007 that the DEA’s new interpretation of the suspicious order regulation was that distributors should suspend shipments if they “routinely report suspicious orders with reason to believe they are destined for the illicit market.” Mapes informed Wright of that policy interpretation as well. George Euson, H.D. Smith’s Director of Corporate Compliance and Security from January 1, 2006 to April 11, 2008, attended that conference and testified that he relied on Mapes’ statement. Wright also acknowledged that what he had communicated to Euson at H.D. Smith distributor briefings he hosted was the same policy that Mapes communicated at the September 2007 conference. Wright said he gave H.D. Smith a second briefing on October 10, 2007 and conveyed the same information. Euson testified that he believed that the DEA’s policy was that the distributor should only suspend shipments if it believed illegal activity was occurring with a customer. H.D. Smith filed suspicious order reports with the DEA on various occasions concerning orders placed by Safescript Pharmacy. Robert Denta, the Operations Manager of the H.D. Smith’s Springfield, Illinois distribution from January 1, 2006 to January 1, 2007, filed a suspicious order report at the end of March, 2006, after conducting his month-end review of customer orders and seeing that Safescript purchased 3,700 dosing units of 80mg oxycodone. Denta testified that he believed the amount of oxycodone purchased by Safescript in March 2006 was large for a Smart -12- Source customer because Smart Source accounts typically only place small orders of generic products over the phone. Garriott forwarded Denta’s suspicious order report to DEA investigators in the Detroit Field Office, which had geographic jurisdiction for Safescript. The DEA did not open an investigation into Safescript at that time. Denta filed a second suspicious order report on a Safescript order after his month-end review in April 2006. The report did not mention oxycodone; the volume of purchase of that drug was 1000 dosing units, which Denta did not believe was suspicious. Denta did not believe that any of the purchases identified in the April 2006 suspicious order report were an indication that criminal activity was occurring at Safescript. Garriott acknowledged receiving and reviewing that report, and he also did not believe the volumes of purchases reflected in the report indicated a high probability of criminal activity occurring at Safescript. Garriott sent a copy of the report to DEA investigators in the Detroit Field Office, who also did not open an investigation into Safescript. George Euson testified that in December 2007, a test run of H.D. Smith’s new automated suspicious order monitoring system identified sales of OxyContin to Safescript between November 6, 2007 to December 6, 2007 that were excessive. Euson reviewed the results of that test run and instructed Scott Hebisen, who replaced Denta as Operations Manager of the Springfield distribution center in January 2007, to file a suspicious order report regarding Safescript with the DEA and told Roberts to conduct an in-person due diligence investigation of the pharmacy itself. H.D. Smith regularly filed suspicious order reports with the DEA on other pharmacies, including ten separate reports between January 1, 2006 and April 11, 2008. Denta testified that Garriott complimented him on the company’s regular practice of submitting suspicious order reports -13- during the company’s routine regulatory investigation in August 2006, after Garriott had received two reports related to Safescript. Neither Garriott nor any other representative of the DEA directed H.D. Smith to suspend any shipments to Safescript or take any other action in response to the March or April 2006 or December 2007 suspicious order reports, and at no time did H.D. Smith suspend or discontinue its shipment of products to Safescript, including those identified as suspicious. The parties agree that at all times relevant to this case, neither the DEA nor its officers, employees, or agents told registrant suppliers whether to ship or not ship a specific order or orders of a specific product or products even if the order or orders had been identified as suspicious. F. Safescript’s purchases of OxyContin and oxycondone Safescript was a high volume seller of the pain medications OxyContin and oxycondone. The Customer Profile that Stacy Gianoplos completed in December 2007 indicated that Safescript was a retail pharmacy, that Safescript’s purchases from H.D. Smith consisted of 90% controlled substances, and that 900 out of 1140 of the prescriptions dispensed by Safescript per month were written by three doctors. Roberts testified that he understood Safescript to specialize in serving patients of pain clinics. According to the records, it appears that over the 27 months during which H.D. Smith did business with Safescript, OxyContin sales were nil from January 2006 to June 2006 and were unremarkable until February 2007, with a substantial spike in sales in March through May 2007, continuing at a high level through March 2008. Sales of oxycodone peaked in August 2006 and again in March 2007, but disappeared in May 2007. The dosing unit summary is as follows: -14- Month January 2006 February 2006 March 2006 April 2006 May 2006 June 2006 July 2006 August 2006 Month January 2007 February 2007 March 2007 April 2007 May 2007 June 2007 July 2007 August 2007 September 2007 October 2007 November 2007 December 2007 Oxycondone Tablets 1,800 2,000 3,700 1,000 1,800 2,600 3,900 5,400 OxyContin Tablets 1,400 2,400 17,600 24,400 18,200 12,600 13,200 13,200 15,000 16,800 14,400 16,400 -15- Drug wholesalers are required to report information on sales of controlled substances to the DEA. The reported information is collected in the Automation of Reports and Consolidated Orders System (ARCOS), which is a database that houses controlled substance activity as reported by DEA- registered manufacturers and distributors. June Howard, a DEA analyst, testified that James Rafalski asked her to prepare a ranked listing from ARCOS data of the top 25 pharmacy purchasers from H.D. Smith Wholesale Drug Company of 80 milligrams OxyContin and generic oxycodone tablets during the period from January 1, 2006 to April 11, 2008. Her report focused only on H.D. Smith’s Springfield distribution center. Howard’s report indicated that Safescript’s purchases of OxyContin and oxycodone dosing units far exceeded the volume purchased by the next highest pharmacy customer of H.D. Smith’s top 25 customers dealing with the Springfield distribution center. The total purchases over the 27- month period was approximately nine times the volume of the next highest purchaser. Between January and August 2006, and between January 2007 and April 2008, Safescript’s monthly purchases of OxyContin and oxycodone were higher than any other customer at the Springfield distribution center. George Euson testified that although the percentage of controlled substances identified in Safescript’s customer profile that was being purchased by Safescript was higher than other Springfield division customers, it was not unusual or suspicious to Euson because he was familiar with customers of other H.D. Smith divisions that specialized in serving pain clinics, like Safescript, who had similar controlled substance buying percentages. Euson testified that Safescript was not even among the top 25 purchasers of oxycodone or OxyContin for all H.D. Smith customers nationally during the same time period analyzed by Howard. Additionally, Safescript was -16- purchasing a wide variety of noncontroversial controlled and noncontrolled substances, such as Paxil, Lipitor, Clarinex, Wellburtrin, Prevacid, and Allegra-D, among others. G. Factual conclusions The government contends that H.D. Smith cannot sustain its burden of showing it is an innocent owner of the cash accounts because it violated regulations, DEA policies, and its own internal policies by not suspending shipments of OxyContin and oxycondone to Safescript Pharmacy. The evidence certainly establishes that H.D. Smith was lax in its monitoring of Safescript’s controlled substance orders and that it could have done a far better job of monitoring. For example, agent Rafalski testified that after H.D. Smith filed a suspicious order report for March 2006, it did nothing to look into why the amount (3,700 units of 80 mg oxycodone) was identified as suspicious. George Euson testified that all H.D. Smith did in terms of due diligence in 2006 and 2007 with respect to suspicious orders was report them to the DEA. Of course, that is all the regulation requires. H.D. Smith had a written compliance policy in place before 2006. It apparently was drafted by then-company president Henry Dale Smith, Jr. But although some of the employees testified that they had seen the document, it was not widely disseminated. The Controlled Substance Monitoring Statement states that if a suspicious order is discovered by a picker it shall be brought to the attention of the Controlled Substances Coordinator, and that the local DEA office should be contacted before the order is shipped, and in no event later than the next day. The policy also counsels consultation with the local DEA office for guidance. Denta testified that although he had not seen the controlled Substances Coordinator statement (Jnt. Tr. Exh. 210) prior to his June 21, -17- 2011 deposition, it accurately described his responsibilities as Operations Manager and Controlled Substances Coordinator. Other employees and former employees of H.D. Smith, including Hebisen, Steven Wasser, Edwin Brewton, and Rhonda Folkerts, testified they had not seen or did not recall seeing either of the policy statements. Vice-President and Springfield Division Manager John Olejar stated that he never saw either statement. It does not appear that anyone at H.D. Smith contacted the DEA before shipping an order to Safescript (or anyone else) that had been identified as suspicious. That conduct violated H.D. Smith’s own internal policy. Picker Edwin Brewton testified that he should have spotted the increase in orders for 80 mg oxycodone from 1,800 in February 2006 to 3,700 units in March 2006, but did not. Hebisen also testified that a picker should have reported the increase in orders for 80 mg OxyContin from February 2007 (2,400 dosage units) to March 2007 (17,600 units) to him as suspicious, both according to H.D. Smith’s standard procedures and common practice. Hebison admitted that through an effective, historic review of purchase orders he would have caught the increases in the orders of 80 mg OxyContin from Safescript from and after March 2007 through November 2007. Olejar testified that sometime during the summer of 2007 George Euson conducted an internal audit of the Springfield distribution facility and that, as a result, Olejar identified Safescript as a pharmacy of concern. There appears to be no evidence in the record that anyone at H.D. Smith was aware of the large volume and frequency of shipments of 80 mg OxyContin to Safescript commencing in March 2007 until the internal audit was conducted and Safescript was brought to Olejar’s attention. Despite Olejar communicating his concerns to his colleague, Ronda Folkerts, -18- who was acting in his stead on the eve of his departure sometime around the first week of October 2007, nothing was done by way of due diligence until pictures of the Safescript premises were taken and a completed customer profile for Safescript was obtained in late December 2007 during one of Roberts’s site visits to Safescript. However, the violation of a regulatory provision does not amount to a forfeiture of the right to make a claim as an innocent owner. More so, the failure to follow the DEA’s interpretation of a regulation that extends beyond its plain language does not justify an inference that a wholesale drug supplier has knowledge of a customer’s illegal activity or necessarily constitute deliberate action to avoid learning about such activity. The most the government has shown is that H.D. Smith was negligent, albeit on several occasions, about monitoring or acting on suspicious customer orders. For their part, H.D. Smith has offered credible explanations why the spikes in OxyContin and oxycondone orders did not provoke suspicious order reports or provoke action to suspend shipments to Safescript. With respect to Daniel Roberts, the sales representative with hands-on contact with Safescript Pharmacy and sole responsibility for Safescript’s account, there is no evidence that he had actual knowledge or subjective suspicion of any nefarious activity at Safescript. Although he conceded that he did not specifically monitor the sales of controlled substances to Safescript, he explained that he did not consider it his task to do so. Therefore, he did not know about the spike in Safescript’s orders of oxycodone around February 2007 or March 2007. And to the extent the government alleges he should have been alarmed by sizeable orders from Safescript from the beginning, Roberts’s explanation — that he deemed the orders legitimate given the proximity of several pain clinics — is plausible. Roberts testified that at the time Safescript -19- converted to a primary account, Gianoplos told Roberts that Safescript was interested primarily in purchasing oxycodone-family products from H.D. Smith because Safescript marketed itself to doctors at several pain clinics near the pharmacy, who prescribed large volumes of pain medicine. Before opening the primary account for Safescript, Roberts confirmed that there were at least ten pain clinics near Safescript’s location. As the Court stated in an earlier filing, at most Roberts might have been negligent in failing to inquire into Safescript’s distribution of Schedule II and III drugs, but a showing of negligence alone will not support a finding of willful blindness. See United States v. Hoffman, 918 F.2d 44, 46-47 (6th Cir. 1990). H.D. Smith also has offered plausible explanations why, when it saw several spikes in Safescript’s orders of controlled substances, it did not report all of them to the DEA. As noted, although H.D. Smith filed a suspicious order report in March and April 2006 and then again in November 2007, it did not file similar reports for other spikes in July or August 2006, April 2007, or other months when Safescript’s orders of controlled substances increased dramatically. The records show that between January 1 and November 30, 2006, Safescript purchased a range between 700 and 5,400 dosing units of oxycodone 80mg tablets from H.D. Smith each month. In December 2006, Safescript purchased no orders of oxycodone or OxyContin. In July 2006, Safescript purchased 3,900 dosing units of oxycodone 80mg, and in August 2006, Safescript purchased 5,400 dosing units of oxycodone 80mg from H.D. Smith. Safescript purchased higher quantities of oxycodone 80mg in July and August 2006 than it did in March 2006, which Denta previously reported to the DEA as a suspicious order. However, Denta did not report the July and August 2006 orders to the DEA as suspicious, he said, because he did not believe that the July and August 2006 orders were indicative of a high probability of criminal activity occurring -20- at Safecript. Denta explained that he was expecting to see increases in the purchases of oxycodone by Safescript in both those months, so the quantities in July and August 2006 were not unusual or suspicious to him. He said that his expectations were based on the fact that H.D. Smith was conducting its regular summer promotion at that time, which provided discounts on generic products, including oxycodone, and all customers’ purchases of generic products increased during that period of time. Denta also said he was aware that on June 16, 2006, Safescript had transitioned from a Smart Source account to a primary retail account and therefore, he expected to see its purchases of all products increase as is required for all primary account holders. Denta acknowledged that he understood that after conducting his month-end review of customer orders, it was part of his job responsibilities to report orders that he deemed to be excessive, unusual, or too frequent to the DEA each month. The Court is convinced that Denta’s failure to report those orders to the DEA was not deliberate. Moreover, the government has acknowledged that reports filed with the DEA under 21 C.F.R. § 1301.74 are not necessarily indicative of criminal activity. The evidence also shows that H.D. Smith was unaware that throughout much of 2006 Anda Pharmaceuticals, another national pharmaceutical wholesaler, was supplying Safescript with over 15,000 dosing units of oxycodone and OxyContin per month, and over 20,000 dosing units of oxycodone and OxyContin the last four months of 2006. Investigator Rafalski testified that Anda never filed a suspicious order report regarding Safescript and continued to supply Safescript with controlled substances after the April 2008 seizure. Rafalski has acknowledged that Anda was in a better position than H.D. Smith to identify potential criminal conduct at Safescript, and yet they -21- never did so, and the DEA has never initiated civil or administrative action against the company for failing to do so. In January 2007, Safescript began purchasing OxyContin 80mg each month from H.D. Smith, and between February and March 2007, Safescript’s purchases of OxyContin increased from 2,400 dosing units a month to 17,600 dosing units. Scott Hebisen testified that he did not report that increase as suspicious to the DEA because he did not believe the March 2007 order was indicative of a high probability of criminal activity occurring at Safescript. Hebisen explained that under the terms of a settlement agreement between Purdue Pharma L.P. and Endo Pharmaceuticals, Inc., Endo was prohibited from manufacturing and selling generic oxycodone after December 31, 2006, and that product was no longer available to retail pharmacies such as Safescript once the supply in the wholesale market was depleted. Roberts and Euson both testified that as a result of the Purdue-Endo settlement, purchases of OxyContin dramatically increased for all customers who previously purchased the generic version of oxycodone, which was no longer available on the market. Another factor explaining to H.D. Smith’s personnel the spike in OxyContin purchases in March 2007 was Roberts’s contact with Stacy Gianoplos. Euson testified that despite converting to primary retail customer statue in June 2006, Safescript failed to meet its volume purchasing obligations under its Purchase Agreement with H.D. Smith. Roberts visited Gianoplos at Safescript on February 9, 2007 to urge her to comply with the purchasing requirements, and as a result of the Purdue-Endo settlement and Roberts visit to Safescript, H.D. Smith expected the sharp increase in orders that occurred in March 2007. Hebisen testified that he was aware of those factors when deciding not to submit a suspicious order report in March 2007. The Court finds that explanation to be plausible as well. -22- Those explanations undermine the inference that H.D. Smith personnel had knowledge of a high likelihood that Safescript was diverting controlled substances to an illegal market. In addition, it appears that DEA personnel did not view the order pattern at Safescript to be indicative of illegality, either. Garriott testified that none of the volumes of oxycodone or OxyContin purchased by Safescript in the three suspicious order reports that he received from H.D. Smith indicated to him that there was a high probability of criminal activity occurring. And Garriott testified that he believed he had no obligation to investigate or follow up on any of those reports. James Rafalski analyzed all of the invoices for products ordered by Safescript from H.D. Smith from January 1, 2006 to April 11, 2008 and testified, based on his analysis of those invoices, that neither the volume nor frequency of oxycodone and OxyContin purchases by Safescript indicated a high probability of criminal activity occurring at Safescript. Similarly, before conducting a distributor briefing with H.D. Smith on October 10, 2007, Kyle Wright performed his own detailed analysis of ARCOS data to identify H.D. Smith customers whom he believed needed additional scrutiny based on unusual or suspicious ordering patterns. Wright’s analysis included all customers who ordered oxycodone or OxyContin products from the Springfield division from January through July 2007. Wright did not identify Safescript as a problem customer. Further, James Rafalski, the DEA’s lead case agent, testified that he was not aware of any evidence, direct or circumstantial, that H.D. Smith or any of its employees had knowledge of a high probability of the criminal activity that he was investigating at Safescript. Scott Garriott testified similarly. George Euson, vice president and division manager John Olejar, Robert Denta, and Scott Hebisen all testified that they were not aware of any facts that led them to believe that Safescript was involved in any criminal activity. Both James Rafalski and Scott Garriott testified that they were -23- not aware of any evidence that H.D. Smith ever deliberately ignored signs of criminal activity involving Safescript or deliberately tried to avoid learning of evidence of criminal conduct at Safescript. Moreover, H.D. Smith had no knowledge that the FBI and the DEA had been investigating Safescript for the two years prior to the seizure of the Safescript bank accounts. None of the information that triggered or was obtained throughout the course of the investigation was provided to H.D. Smith by the DEA or the FBI before April 11, 2008. The lack of sharing information certainly is typical in government investigations of this type. But it underscores the conclusion that H.D. Smith personnel were unaware of the criminality occurring at Safescript Pharmacy. In fact, as of the date of trial, neither Gianoplos nor Carson had been indicted for their knowledge and complicity in the prescription mill conspiracy. The Court concludes, therefore, that H.D. Smith had no knowledge of illegal activity occurring at Safescript Pharmacy, did not deliberately ignore signs of illegal activity at the pharmacy, and did not believe that there was probability of criminal activity occurring at Safescript until April 11, 2008 when the government seized Safescript’s bank accounts. Upon learning of the seizure, H.D. Smith suspended all shipments of controlled substances and terminated its vendor’s relationship with Safescript. II. Conclusions of law Assets, including cash, that are the proceeds or are derived from proceeds traceable to a violation or violations of 21 U.S.C. §§ 841(a)(1) and 841(a)(2) (Illegal Distribution of a Controlled Substance), 21 U.S.C. § 843(a)(2) (Use of a Fictitious Registration Number in the Distribution of a Controlled Substance), or 21 U.S.C. § 846 (Conspiracy); or were involved in a transaction or -24- attempted transaction in violation of 18 U.S.C. §§1956(a)(1)(A)(i) (Promotional Money Laundering), or 1956(a)(1)(B)(ii) (Money Laundering to Disguise and Conceal) may be seized and forfeited to the United States. 18 U.S.C. § 981(a)(1)(A); 21 U.S.C. § 881(a)(6), (b). Under the Civil Asset Forfeiture Reform Act (CAFRA), “the burden of proof is on the Government to establish, by a preponderance of the evidence, that the property is subject to forfeiture.” 18 U.S.C. § 983(c)(1). The parties agree and the Court finds that the following bank accounts constitute such assets that were derived from or are proceeds of such illegal conduct and are subject to forfeiture: (1) BestBank account ending in 2677 ($463,497.72) (2) BestBank account ending in 8558 ($19,936.77) (3) Countrywide Bank account ending in 5890 ($101,703.10) (4) Comerica Bank account ending in 0766 ($19,912.07) (5) Countrywide Bank account ending in 7528 ($51,317.06) “The government can acquire through forfeiture no greater interest than that held by the defendant at the time the criminal acts were committed.” United States v. Jones, 502 F.3d 388, 392 (6th Cir. 2007). A perfected security interest in a business’s assets may take priority over the government’s claim to assets through forfeiture. H.D. Smith Wholesale Drug Company, Inc. has a valid and perfected security interest in the bank accounts and has made a claim for the cash in those accounts under 18 U.S.C. § 983(a)(4). The Court has jurisdiction over this action. 28 U.S.C. § 1331. “An innocent owner’s interest in property shall not be forfeited under any civil forfeiture statute.” 18 U.S.C. § 983(d)(1). “With respect to a property interest in existence at the time the illegal conduct giving rise to forfeiture took place,” an “innocent owner” is “an owner who — (i) did not know of the conduct giving rise to forfeiture; or (ii) upon learning of the conduct giving rise to the forfeiture, did all that reasonably could be expected under the circumstances to terminate such -25- use of the property.” 18 U.S.C. § 983(d)(2)(A). “With respect to a property interest acquired after the conduct giving rise to forfeiture has taken place,” an “innocent owner” includes one “who, at the time that person acquired the interest in the property . . . did not know and was reasonably without cause to believe that the property was subject to forfeiture.” 18 U.S.C. § 983(d)(3)(A)(ii). “The claimant shall have the burden of proving that the claimant is an innocent owner by a preponderance of the evidence.” 18 U.S.C. § 983(d)(1); see also United States v. Lots 12, 13, 14, & 15, 869 F.2d 942, 948 (6th Cir. 1989). “The burden of showing something by a preponderance of the evidence, the most common standard in the civil law, simply requires the trier of fact to believe that the existence of a fact is more probable than its nonexistence before [he] may find in favor of the party who has the burden to persuade the [fact finder] of the fact’s existence.” Concrete Pipe and Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602, 622 (1993) (quoting In re Winship, , 371-72 (1970) (Harlan, J., concurring (quotation marks omitted). An innocent owner is “one who either lacks knowledge of the illicit activities giving rise to the forfeiture, or who has knowledge of the activity but has evinced his lack of consent by affirmatively attempting to stop it.” United States v. One 1988 Checolet 410 Turbo Prop Aircraft, 282 F. Supp. 2d 1379, 1382 (S.D. Fla. 2003) (emphasis added). Actual, rather than constructive, knowledge of the wrongdoing is required to rule out the defense. See United States v. $4,255,000 in U.S. Currency, 762 F.2d 895, 906 (11th Cir. 1985) (holding that, under 21 U.S.C. § 881(a)(6), the application of the innocent owner defense “turns on the claimant’s actual knowledge, not constructive knowledge”); United States v. $10,694.00 in U.S. Currency, 828 F.2d 233, 234-35 (4th Cir. 1987) (stating that “§ 881(a)(6) envisions an actual knowledge inquiry”), overruled on other -26- grounds by United States v. Walker, 889 F.2d 1317 (4th Cir. 1989) (en banc ; United States v. Real Property at 2659 Roundhill Drive, 283 F.3d 1146, 1152 n.8 (9th Cir. 2002) (requiring actual knowledge); United States v. $175,260 in U.S. Currency, 741 F. Supp. 45, 48 (E.D.N.Y. 1990) (same); but see United States v. Real Property Located at 10936 Oak Run Circle, 9 F.3d 74, 76 (9th Cir. 1993) (leaning towards a constructive-knowledge approach and holding that “innocence is incompatible with knowledge that puts the owner on notice that he should inquire further”). Actual knowledge can be proven by circumstantial evidence. See One 1988 Checolet 410 Turbo Prop Aircraft, 282 F. Supp. 2d at 1383 (noting that a property owner “may not ‘turn a blind eye’ toward [evidence of drug involvement] and still claim ‘innocent owner’ status under CAFRA”). In addition, “a defendant’s knowledge of a fact may be inferred from willful blindness to the existence of the fact.” United States v. Prince, 214 F.3d 740, 761 (6th Cir. 2000). CAFRA did not eliminate willful blindness from the innocent owner analysis. See, e.g., One 1988 Checolet 410 Turbo Prop Aircraft, 282 F. Supp. 2d at 1382-83; United States v. 2001 Honda Accord Ex VIN # 1HGCG22561A035829, 245 F. Supp. 2d 602, 611 & n.8 (M.D. Pa. 2003) (noting that the innocent owner defense under CAFRA does not have a provision expressly mentioning willful blindness, but nevertheless applying pre-CAFRA willful blindness standard). Proof of willful blindness includes “two basic requirements: (1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact.” Global-Tech Appliances, Inc. v. SEB S.A., --- U.S. ---, ---, 131 S. Ct. 2060, 2070 (2011). The parties have stipulated that no H.D. Smith employee had actual knowledge of the illegal activity at Safescript Pharmacy involving diversion of controlled substances for illegal purposes. The Court has found that no H.D. Smith employee had a subjective belief of a high probability that -27- Safescript Pharmacy was diverting controlled substances for illegal purposes. The Court concludes, therefore, that H.D. Smith was not willfully blind to the conduct giving rise to the seizure and forfeiture of the assets of Safescript Pharmacy either before or after it acquired its interest in the property. Claimant H.D. Smith, therefore, has sustained its burden of proving that it is an innocent owner of its interest in the assets subject to forfeiture within the meaning of 18 U.S.C. § 983(d)(2)(A) and 18 U.S.C. § 983(d)(3)(A)(ii). III. Conclusion Claimant H.D. Smith is entitled to judgment in its favor in the amount of $606,450.29 plus the actual interest that has accrued in the interest-bearing Seized Asset Fund since July 27, 2011 plus imputed interest in accordance with 28 U.S.C. § 2465(b)(1)(C)(ii). s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 30, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 30, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -28-

=== CHILDREN’S LEGAL SERVICES, PLLC, v. SHOR LEVIN AND DERITA, PC ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION CHILDREN’S LEGAL SERVICES, PLLC, Plaintiff, Case Number 10-13000 Honorable David M. Lawson v. SHOR LEVIN AND DERITA, PC, ______________________________________/ Defendant. OPINION AND ORDER DENYING DEFENDANT’S MOTION TO DISMISS FOR WANT OF PERSONAL JURISDICTION OR IMPROPER VENUE OR TO TRANSFER VENUE On July 30, 2010, plaintiff Children’s Legal Services, PLLC, a Michigan law firm, filed the present lawsuit in this Court against defendant Shor, Levin, & DeRita, P.C., a Pennsylvania law firm, alleging breach of a settlement agreement, fraud, promissory estoppel, and unjust enrichment. At the core of the dispute is a marketing plan designed to attract families with children suffering from cerebral palsy and other birth trauma related ailments, and the division of attorney’s fees generated by the prosecution of medical malpractice cases involving those victims. The defendant has moved to dismiss on the ground of lack of personal jurisdiction. Alternatively, the defendant would like the case transferred to the Eastern District of Pennsylvania. The plaintiff opposes the motion. The Court heard oral argument on October 12, 2011 and now concludes that the motion should be denied. I. Facts The parties’ relationships are tangled, which lends an air of complexity to the facts. Here is the quick version. Some Michigan lawyers devised a marketing plan to locate potential medical malpractice clients who may have birth trauma cases. They advertised under the name of 4MyChild, and published contact information. When potential clients called, the cases were screened and referrals were made to law firms around the country. The law firms paid advertising fees and referral fees in some cases. The lawyers and their law firms that devised the program filed for bankruptcy, and the plaintiff, Children’s Legal Services, PLLC, (“CLS”) purchased the assets, including the rights to the 4MyChild program, from the bankruptcy estate. Defendant Shor, Levin, & DeRita, P.C., (“Shor Levin”) was one of the law firms that paid advertising fees and received referrals. At some point, however, Shor Levin decided to start its own advertising program, which it called 4MyBaby. CLS believed that the 4MyBaby program infringed the 4MyChild trademark and protested to Shor Levin. A settlement agreement supposedly was reached, which involved yet another Pennsylvania law firm — Villari, Kusturiss, Brandes & Kline (“Villari Kusturiss”) — to whom Shor Levin referred medical malpractice cases and received referral fees. As part of the alleged settlement agreement, Villari Kusturiss paid over to CLS referral fees it held in escrow to which both Shor Levin and CLS had made a claim. CLS apparently wanted to find peace between Shor Levin and Villari Kusturiss, because CLS had agreed to indemnify Villari Kusturiss for the legal fees Villari Kusturiss incurred as part of the dispute with Shor Levin. CLS alleges in the complaint that Shor Levin breached the settlement agreement by filing a subsequent lawsuit against Villari Kusturiss to recover the escrowed funds that were paid over to CLS as part of the settlement agreement. Shor Levin filed its motion to dismiss under Federal Rule of Civil Procedure 12(b)(2), or in the alternative to dismiss for lack of venue under Rule 12(b)(3) and 28 U.S.C. § 1406(a) or to transfer venue under 28 U.S.C. § 1404(a), alleging that all of the activity in this case, including the alleged settlement agreement, occurred in Pennsylvania, and it -2- has no contact with Michigan. CLS disagrees. To demonstrate Shor Levin’s contacts with Michigan, a more extensive discussion of the facts is necessary. The details follow. Stern & Associates, another Michigan law firm, was the creator and original holder of the intellectual property rights in the 4MyChild program. The partners in that law firm were Kenneth Stern and Lawrence Korn, both residents of Michigan. Those lawyers also were members of another law firm called Korn & Stern, P.C., (“Korn & Stern”), which was a Pennsylvania professional corporation. Stern also happens to be the founder of CLS, which Stern characterizes as the “successor in interest” to Stern & Associates. Korn & Stern had no employees except the two members. All work performed by Korn & Stern was done by Stern & Associates employees in Michigan. Stern advertised 4MyChild as a program that provided counseling to parents of children with cerebral palsy, Erb’s Palsy, and other neurological injuries. Calls from interested parties who responded to the advertising were fielded in Michigan by employees of Stern & Associates. If the law firm determined that medical malpractice may have been involved in the injury, then it either handled the case itself, jointly represented the client with an affiliated law firm in nearly every state, or referred the case entirely to an affiliated law firm. In 2004, Lawrence Korn filed an involuntary chapter 7 bankruptcy petition against Stern & Associates after a disagreement over the value of Korn’s share of the law firm after he was unable to practice law due to a disability. The petition was filed in the Eastern District of Michigan. Although the parties are not clear on this point, it appears that Sterns & Associates already had filed for bankruptcy, because the bankruptcy court consolidated the two cases. In 2005, CLS purchased the proceeds, rights, and claims of both Stern & Associates and Korn & Stern from the consolidated -3- bankruptcy estate. As part of the purchase, CLS acquired all of the rights, including intellectual property rights, associated with the 4MyChild program. When the bankruptcy proceedings terminated, CLS was the owner and operator of the 4MyChild program. Defendant Shor Levin is a Pennsylvania professional corporation located in Jenkintown, Pennsylvania. In 1998, Shor Levin and Korn & Stern formed a Pennyslvania partnership called Larry Korn and Associates. The purpose of the partnership was to offer essentially the same services that 4MyChild offers. The partnership agreement never mentions 4MyChild by name, but it does describe a similar concept. The plaintiff alleges that Shor Levin funded the advertising for the 4MyChild program by advancing funds to Korn & Stern in Michigan. Korn & Stern, however, made all the purchases. When a prospect called 4MyChild, the call would be answered in Michigan by the Stern & Associates office employees. Korn & Stern and Stern himself would screen the cases to determine if a viable malpractice case could be filed. If there was a potentially meritorious suit, the case would be either handled by Korn & Stern or Stern & Associates, or sent to affiliated counsel, including the Michigan law firm of Sommers Schwartz and the Pennsylvania firm of Villari Kusturiss. If the case yielded fees, Shor Levin would receive a share. Shor Levin was making substantial advances for the advertising of 4MyChild to the tune of approximately $50,000 per month, and it was interested in the procedures taking place in Michigan. Jay Shor and Lawrence Levin of Shor Levin took a trip to Detroit in 1998 to find out exactly how the program was being operated in Michigan. When the trip failed to impress, Shor Levin terminated the relationship with respect to the 4MyChild advertising. -4- Although the relationship between Shor Levin and the 4MyChild program had ended, there were still pending cases in which Shor Levin claimed a right to fees once completed. Villari Kusturiss was responsible for litigating the remaining cases that had come to Pennsylvania through Shor Levin and the 4MyChild advertising. Shor Levin negotiated referral fees with Villari Kusturiss that were to be paid upon completion of the 4MyChild cases. When a 4MyChild case concluded, the attorney’s fee would be paid directly to Villari Kusturiss. From there, if the case had started during the time Shor Levin was paying for the advertising for 4MyChild, Villari Kusturiss would distribute a 20% referral fee each to Korn & Stern and Shor Levin. If the case had started after Shor Levin had stopped paying for advertisements, and Korn & Stern had started paying, Villari Kusturiss would distribute 5% of the attorney’s fee to Shor Levin and a 38% fee to Korn & Stern. At some point in time before all fees had been distributed to Shor Levin from Villari Kusturiss, Shor Levin created and began marketing its own program, which was almost identical to 4MyChild, called 4MyBaby. Korn & Stern and Stern & Associates learned that Shor Levin created 4MyBaby and accused Shor Levin of trademark infringement. Believing that potential infringement damages were accruing to Korn & Stern and Stern & Associates, Korn & Stern informed Villari Kusturiss to stop distributing fees to Shor Levin that were generated from the 4MyChild cases. Korn & Stern informed Villari Kusturiss that the money was to be held in escrow until the issues between the two parties were resolved. Shortly thereafter, and before a resolution was negotiated, the involuntary bankruptcy commenced, and CLS purchased the assets of Stern & Associates and Korn & Stern. On January 13, 2005, CLS and Shor Levin met in Pennsylvania to settle the dispute that had arisen regarding 4MyChild and 4MyBaby. On that day, the two firms reached an oral agreement, -5- which was memorialized in an e-mail from Jay Shor. The specifics of that agreement, however, are unclear. Shor’s e-mail fails to shed much light: it only states: “We just finished meeting with Ken Stern regarding the above mentioned matters. As you know, Ken Stern proposed a settlement of all issues and I am hereby advising you that those terms and conditions are acceptable.” CLS alleges that on that day Jay Shor admitted that 4MyBaby was infringing on CLS’s trademark for 4MyChild. Further, CLS alleges that during that same meeting, the two parties reached an agreement that Shor Levin would stop its infringing advertisements and agree that it had no claim to the money held in escrow by Villari Kusturiss. In exchange, CLS agreed that it would not litigate the breach of contract and trademark infringement claims that it purchased from Korn & Stern’s bankruptcy estate. CLS alleges that Shor Levin complied with the agreement in most ways, in that it never filed a claim for the funds held in escrow by Villari Kusturiss, stopped its advertising of 4MyBaby, and never filed suit against CLS to recover the fees CLS received from Villari Kusturiss. Villari Kusturiss then distributed the escrowed funds to CLS. On April 5, 2007, Shor Levin filed suit in Pennsylvania state court against Villari Kusturiss for, among other things, distributing money to CLS in violation of Shor Levin’s rights. On July 30, 2010, CLS filed the present lawsuit against Shor Levin alleging claims for breach of contract (Count I), fraudulent misrepresentation (Count II), promissory estoppel (Count III), unjust enrichment (Count IV), and declaratory and injunctive relief (Count V). CLS alleges that the bankruptcy order approving the asset sale gave them full legal rights to the funds being held in escrow by Villari Kusturiss, and for Villari Kusturiss to distribute those funds to anyone else would have been in violation of the bankruptcy order. Apparently, pursuant to the purchase agreement approved by the -6- bankruptcy court, CLS is required to indemnify Villari Kusturiss for any litigation expenses Villari Kusturiss incurs regarding the escrowed funds. CLS alleges that it has already reimbursed approximately $500,000 to Villari Kusturiss to support its litigation with Shor Levin. CLS also alleges that Shor Levin’s attempt to recover the funds previously held in escrow is a violation of the settlement agreement allegedly made in Pennsylvania on January 13, 2005. Shor Levin contends in its motion to dismiss or transfer venue that it has no connection to Michigan. Lawrence Levin insists that the substantial monthly advertising payments Shor Levin made were intended only to be used in an advertising campaign that targeted potential clients in Pennsylvania. He also says that the only fees Shor Levin received were from cases that were handled in Pennsylvania by Pennsylvania law firms. Shor Levin also has general advertising through a website called“Bulldog Lawyers,” which CLS alleges contains direct advertising toward the State of Michigan. That does not appear to be true. The first thing one notices when opening the “Bulldog Lawyers” website is a pop-up screen that states, in its entirety, “Hi . . . You may just be browsing but we are available to answer your questions. Click ‘Yes’ for live help. (Please let us know what state you live in as we handle cases in the following states: PA, NJ, DE, SC, MD and IL.)” Def.’s Reply, Ex. D, Print-Out of Pop-Up Window. The website also carries a slew of National Institute for Occupational Safety and Health (NIOSH) articles. In an article about hearing loss, the page opens first with a “Michigan’s Example,” followed by an article pertaining to on-the-job hearing loss in the State of Michigan. At the end of the article is a link which states, “ASK THE BULLDOG LAWYERS ABOUT YOUR RIGHTS.” Ibid. Several other articles on the website mention the State of Michigan, but not exclusively. At the bottom of each page is the difficult-to-read legend: “This website is not intended -7- to solicit clients outside the states of Pennsylvania, New Jersey, Ohio, West Virginia and Arizona.” Def.’s Reply, Ex. C, NIOSH Article Print-Outs at 99. CLS points out that although Korn & Stern was a Pennsylvania law firm, it had no employees of its own, and the advertising money Shor Levin sent to Korn & Stern would be spent at the offices of Stern & Associates. Lawrence Levin acknowledges that the calls received in response to the advertisements were handled in Michigan, and that Korn & Stern set up a forwarding agreement with the Michigan law firm Sommers Schwartz. CLS also contends that Shor Levin received fees from lawsuits gathered by advertising that Shor Levin paid for, which were handled by Stern & Associates and Stern & Associates’s Michigan employees, and where the initial steps of the litigation process took place in Michigan. II. Jurisdiction Defendant Shor Levin insists that it may not be sued in Michigan. It argues that no Michigan court can exercise personal jurisdiction over it. Alternatively, the defendant contends that venue is improper in this Court, and even if proper, venue should be transferred to the Eastern District of Pennsylvania for the convenience of the parties. “The question of personal jurisdiction, which goes to the court’s power to exercise control over the parties, is typically decided in advance of venue, which is primarily a matter of choosing a convenient forum.” Leroy v. Great W. United Corp., 443 U.S. 173, 180 (1979). A. Personal jurisdiction In a motion to dismiss for want of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), the plaintiff has the burden of proving the court’s jurisdiction over the defendant. Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002). “[I]n the -8- face of a properly supported motion for dismissal, the plaintiff may not stand on his pleadings but must, by affidavit or otherwise, set forth specific facts showing that the court has jurisdiction.” Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). However, [w]here, as here, the district court relies solely on written submissions and affidavits to resolve a Rule 12(b)(2) motion, rather than resolving the motion after either an evidentiary hearing or limited discovery, the burden on the plaintiff is “relatively slight,” Am. Greetings Corp. v. Cohn, 839 F.2d 1164, 1169 (6th Cir. 1988), and “the plaintiff must make only a prima facie showing that personal jurisdiction exists in order to defeat dismissal.” Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). In that instance, the pleadings and affidavits submitted must be viewed in a light most favorable to the plaintiff, and the district court should not weigh “the controverting assertions of the party seeking dismissal.” Id. at 1459. Air Prods. & Controls, Inc. v. Safetech Int’l., Inc., 503 F.3d 544, 549 (6th Cir. 2007). A plaintiff “can meet this burden by ‘establishing with reasonable particularity sufficient contacts between [the defendant] and the forum state to support jurisdiction.’” Neogen, 282 F.3d at 887 (internal citations omitted). In a diversity case, “‘[t]he exercise of personal jurisdiction is valid only if it meets both the state long-arm statute and constitutional due process requirements.’” Gerber v. Riordan, 649 F.3d 514, 517 (6th Cir. 2011) (quoting Calphalon Corp. v. Rowlette, 228 F.3d 718, 721 (6th Cir. 2000 . The Sixth Circuit has explained that “[w]here the state long-arm statute extends to the limits of the due process clause, the two inquiries are merged and the court need only determine whether exercising personal jurisdiction violates constitutional due process.” Bridgeport Music, Inc. v. Still N The Water Publ’g, 327 F.3d 472, 477 (6th Cir. 2003) (per curiam) (internal citations omitted). “[T]his Circuit historically has understood Michigan to intend its long-arm statute to extend to the boundaries of the fourteenth amendment.” Theunissen, 935 F.2d at 1462; see also Green v. Wilson, 455 Mich. 342, 350-51, 565 N.W.2d 813, 816-17 (1997) (stating that “[t]he long-arm statute is -9- coextensive with due process insofar as the statute is limited by due process, and, therefore, the statute and due process share the same outer boundary” (citing Sifers v. Horen, 385 Mich. 195, 188 N.W.2d 623 (1971 . In Michigan, jurisdiction may be asserted over a corporation on the basis of general personal jurisdiction, see Mich. Comp. Laws § 600.711, or limited personal jurisdiction, see Mich. Comp. Laws § 600.715. 1. General personal jurisdiction General personal jurisdiction exists over any corporation that is incorporated in Michigan, consents to jurisdiction, or engages in continuous and systematic business in Michigan. Mich. Comp. Laws § 600.711. General jurisdiction is consistent with due process when the corporation’s relationship with the state is “of a continuous and systematic nature.” Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 421 (1984) (internal quotations omitted). Sporadic or temporary contacts for a particular purpose are not sufficient to establish general jurisdiction. Nationwide Mut. Ins. Co. v. Tryg Intern. Ins. Co., Ltd., 91 F.3d 790, 794 (6th Cir. 1996); cf. Landoil Res. Corp. v. Alexander & Alexander Serv., Inc., 918 F.2d 1039, 1046 (2nd Cir. 1990) (holding that thirteen business trips made by different employees of defendant over eighteen months was insufficient for general jurisdiction under N.Y. C.P.L.R. 301). Ths plaintiff contends that the defendant is subject to general jurisdiction because it systematically and continuously conducted business here. However, the defendant never actually was located in the state. In Storie v. Beech Aircraft Corporation, 417 F. Supp. 141 (E.D. Mich. 1976), the court held that before general jurisdiction could be exercised over a foreign corporation, the corporation must actually be regularly present in the State, either through someone who works for the corporation or an independent agent of the corporation. 417 F. Supp. at 145; see also Kircos -10- v. Lola Cars Ltd., 97 Mich. App. 379, 386, 296 N.W.2d 32, 35 (1980) (interpreting section 600.711(3) to require that “[a] foreign corporation . . . actually be present within the forum state on a regular basis, either personally or through an independent agent” (citing Storie, 417 F. Supp. at 145 . Maintaining business contacts in Michigan through telephone communication, but not actually entering the state on a regular basis is not enough to establish continuous and systematic business in Michigan. Storie, 417 F. Supp. at 145. Nor will a single trip to Michigan approximately 12 years before the present suit suffice. The plaintiff also argues that the advertising on Shor Levin’s website and the advertising Shor Levin funded through the partnership agreement with Korn & Stern are enough to establish general personal jurisdiction. Once again, however, precedent does not support the argument. See Bird v. Parsons, 289 F.3d 865, 874 (6th Cir. 2002) (holding that maintaining a website that is available to everyone through the Internet is not sufficient to support a finding of general personal jurisdiction). The Court concludes that the defendant is not subject to general personal jurisdiction in this Court. 2. Limited personal jurisdiction Limited personal jurisdiction may be exercised over a defendant who has certain minimum contacts with the forum over claims that arise from or relate to those contacts. Theunissen, 935 F.2d at 1459-61. Under the Michigan statute, limited personal jurisdiction may be exercised over a corporation that has one of the following relationships with the state: (1) The transaction of any business within the state. (2) The doing or causing any act to be done, or consequences to occur, in the state resulting in an action for tort. -11- (3) The ownership, use, or possession of any real or tangible personal property situated within the state. (4) Contracting to insure any person, property, or risk located within this state at the time of contracting. (5) Entering into a contract for services to be performed or for materials to be furnished in the state by the defendant. Mich. Comp. Laws § 600.715. A single contact with the forum state may suffice for personal jurisdiction if it is directly and substantially related to the plaintiff’s claim. Red Wing Shoe Co., Inc. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1359 (Fed. Cir. 1998). The plaintiff contends that defendant Shor Levin qualifies as having transacted business in Michigan. The Sixth Circuit has explained that the “transaction of any business” clause is quite broad: [T]he Michigan Supreme Court stated that “[t]he word ‘any’ means just what it says. It includes ‘each’ and ‘every.’ . . . It comprehends the ‘slightest.’” Lanier v. Am. Board of Endodontics, 843 F.2d 901, 905-06 (6th Cir. 1988) (quoting Sifers v. Horen, 385 Mich. 195, 199 n.2, 188 N.W.2d 623, 624 n.2 (1971 . This construction applies with equal force to section 705. Hertzberg & Noveck v. Spoon, 681 F.2d 474, 478 (6th Cir. 1982). Theunissen, 935 F.2d at 1463-64. A transaction of business includes “contact with Michigan customers through the mail and the wires.” Neogen, 282 F.3d at 892 (citing Sifers v. Horen, 385 Mich. 195, 188 N.W.2d 623 (1971 . Shor Levin agrees that it has transacted business in Michigan in the past; however, it does not agree that the present suit “arises” out of the contact with Michigan. The due process requirements parallel to some extent the terms of the statute. The Sixth Circuit has identified three considerations to determine whether limited personal jurisdiction extends to a defendant in a particular case: First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing consequence in the forum state. Second, the cause of action must arise from the defendant’s activities there. Finally, the acts of the defendant or -12- consequences must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable. Gerber v. Riordan, 649 F.3d 514, 518 (6th Cir. 2011) (internal quotations omitted); see also Neogen Corp., 282 F.3d at 890 (quoting Southern Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968 . The Sixth Circuit “views the purposeful availment prong of the Southern Machine test as ‘essential’ to a finding of personal jurisdiction.” Intera Corp. v. Henderson, 428 F.3d 605, 616 (6th Cir. 2005) (citing Calphalon Corp. v. Rowlette, 228 F.3d 718, 722 (6th Cir. 2000 . “Purposeful availment” occurs when “the defendant’s contacts with the forum state ‘proximately result from actions by the defendant himself that create a “substantial connection” with the forum State.’” Neogen Corp., 282 F.3d at 889 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985 . This requirement “ensures that a defendant will not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts, or of the ‘unilateral activity of another party or a third person.’” Ibid. (quoting Burger King, 471 U.S. at 475). In that respect, the Sixth Circuit “has found that contacts lack quality when they are initiated by the plaintiff rather than the defendant, in part because ‘[t]he unilateral activity of those who claim some relationship with a non-resident defendant cannot satisfy the requirement of contact with the forum.’” Air Products, 503 F.3d at 552 (quoting LAK, Inc. v. Deer Creek Enters., 885 F.2d 1293, 1301 (6th Cir. 1989) and Helicopteros, 466 U.S. at 417). On the other hand, “parties who reach out beyond one state and create continuing relationships and obligations with citizens of another state are subject to regulation and sanctions in the other State for the consequences of their activities.” Burger King, 471 U.S. at 473 (internal quotation omitted). -13- The mere act of entering into a contract with a party in a state is insufficient to establish purposeful availment. Burger King, 471 U.S. at 478. The law is clear that the act of an out-of-state entity contracting with an in-state entity, and undertaking communication related to that contract, does not constitute purposeful availment of the forum state for an action based on the breach of that contract. Instead, “prior negotiations and contemplated future consequences, along with the terms of the contract and the parties’ actual course of dealing . . . must be evaluated in determining whether the defendant purposefully established minimum contacts within the forum.” Id. at 479. “The acts of making phone calls and sending facsimiles into the forum, standing alone, may be sufficient to confer jurisdiction on the foreign defendant where the phone calls and faxes form the bases for the action.” Neal v. Janssen, 270 F.3d 328, 332 (6th Cir. 2001) (holding that sending fraudulent communications into a forum state constituted purposeful availment). Ultimately, though, “[i]t is the quality of the contacts, not the quantity, that determines whether they constitute ‘purposeful availment.’” Ibid. (citing LAK, Inc., 885 F.2d at 1301). For again, “telephone calls and letters on which the plaintiff’s claim of jurisdiction primarily depends [can also] strike . . . as precisely the sort of ‘random,’ ‘fortuitous' and ‘attenuated’ contacts that the Burger King Court rejected as a basis for haling non-resident defendants into foreign jurisdictions.” LAK, 885 F.2d at 1301. The “arising from” prong is satisfied “when the operative facts of the controversy arise from the defendant’s contacts with the state.” Calphalon, 228 F.3d at 723. The Sixth Circuit has held that personal jurisdiction may exist over a non-resident defendant if the defendant “purposefully directs communications into the forum that cause injury within the forum, and those communications form the ‘heart’ of the cause of action.” Neal, 270 F.3d at 333. However, “‘the locus of . . . a monetary -14- injury is immaterial, as long as the obligation did not arise from “a privilege the defendant exercised in the forum state.”’” Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 151 (6th Cir. 1997) (quoting LAK, 885 F.2d at 1301); but see Neogen, 282 F.3d at 892 (determining that the plaintiff’s allegations of economic harm from trademark infringement were sufficient to support a prima facie case for personal jurisdiction). The court of appeals found the “arising from” component satisfied in Lanier v. American Board of Endodontics, 843 F.2d 901, 908-09 (6th Cir. 1988), where a female dentist sued the Illinois-based American Board of Endodontics in federal court in Michigan, alleging that she was denied a license by the Board on the basis of gender. The Board moved to dismiss, arguing that it had insufficient contacts with the State of Michigan. The court of appeals disagreed, finding that the Board had transacted business within Michigan by exchanging correspondence and telephone calls with the plaintiff, and that the plaintiff’s cause of action arose out of those business transactions. The court considered two possible theories defining the “arising from” requirement: whether the business transactions “made possible” the cause of action; and whether the cause of action arose in the “wake” of the business transactions. Id. at 909. Applying both theories, the court held that the discrimination was made possible and occurred in the wake of the plaintiff’s filing of her application, which constituted the transaction of business in Michigan by the Board. Id. at 908-09. The court found that the application process, evaluation, testing, and rejection were part of a “mosaic of activity,” “every step of which was a constituent part of the whole.” Id. at 908. The court reasoned that if the defendant discriminated against Dr. Lanier on account of her gender, it “must have done so, based at least in part, upon what it learned about her from its professional business contacts with her in Michigan during the very earliest stages of the application process.” -15- Id. at 909. Because those contacts made possible the rejection and concomitant discrimination, and the cause of action lay in the wake of them, the court found that the claims arose from the contacts with the forum. If the first two elements are met, an “inference of reasonableness arises . . . [and] only the unusual case will not meet this third criterion.” Theunissen, 935 F.2d at 1461 (internal quotations and citations omitted); see also Intera Corp., 428 F.3d at 618. In the Sixth Circuit, courts also determine the reasonableness of exercising personal jurisdiction over a defendant by weighing several factors, including “(1) the burden on the defendant; (2) the interest of the forum state; (3) the plaintiff’s interest in obtaining relief; and (4) other states’ interest in securing the most efficient resolution of the controversy.” Intera Corp., 428 F.3d at 618. Regular business relationships with a forum, and plans to continue those relationships, can support a finding of reasonableness. See Neogen, 282 F.3d at 892 (“[The defendant] anticipates from year to year that it will conduct a given level of sales in Michigan. . . . Although [the defendant’s contacts with] individual customers do not represent ‘continuing relationships and obligations’ with those particular customers, its predictable yearly business in Michigan does represent such a continuing relationship with the state overall.”) The plaintiff alleges that Shor Levin had contact with Michigan through its Internet advertising, the bilateral communications necessitated by its agreements with Stern & Associates and Sommers Schwartz in the 4MyChild cases that were obtained through advertising paid for by Shor Levin, and the 1998 trip to Michigan. Shor Levin points out that none of that activity forms the basis of the present lawsuit, which Shor Levin seeks to confine narrowly to the oral settlement agreement negotiated in Pennsylvania. -16- However, the settlement agreement itself did not occur in a vacuum. If it was “made possible by” or “lies in the wake of” Shor Levin’s contact with Michigan, personal jurisdiction may be appropriately exercised. The Court finds that it does lie in the wake of the well-developed relationship Shor Levin had consummated with the Stern law firms, which operated primarily in Michigan. In order to understand the mosaic of activity that led to the oral settlement agreement and its alleged breach, one must start with Shor Levin’s first contact in Michigan, which was forming a partnership agreement with Korn & Stern. Although Korn & Stern is incorporated in Pennsylvania, Shor Levin acknowledges (or at least never denies) that it knew Korn & Stern was staffed fully by the Michigan employees of Stern & Associates. Next, Shor Levin paid for advertising that was developed by the Michigan employees of Stern & Associates. The content of those advertisements is unclear, but it is clear that the calls generated by the advertisements were answered in Michigan by employees of Stern & Associates or Sommers Schwartz. From those calls, some cases were referred to Shor Levin in Pennsylvania and were later litigated by Villari Kusturiss. When Villari Kusturiss was paid a fee, it gave a share, through one avenue or another, to Shor Levin. Therefore, the fees paid to Villari Kusturiss were “made possible by” the advertising and Michigan employees that Shor Levin was working with. There is a clear path that starts with Shor Levin’s contact with Michigan and ends with money in the hands of Villari Kusturiss. Further, Shor Levin committed an act in Pennsylvania whose effects were felt in Michigan. By starting the 4MyBaby program, Shor Levin allegedly infringed on the trademark of Stern & Associates and caused damage to the 4MyChild program in Michigan. When Korn & Stern and Stern & Associates discovered that activity, they made Villari Kusturiss aware and asked that all -17- fees that were destined for Shor Levin arising from the 4MyChild program be sequestered in escrow until the issues between the companies could be resolved. Korn & Stern and Stern & Associates then went through bankruptcy and CLS purchased the assets, including claims against Shor Levin. The bankruptcy process — a Michigan proceeding — generated an order that all money held in escrow by Villari Kusturiss be paid to CLS. Without that order, Villari Kusturiss would never have distributed the money in the escrow account to CLS. If Shor Levin had not infringed the trademark, no settlement agreement would have emerged. And if Villari Kusturiss had never distributed the money to CLS as part of that settlement, then Shor Levin never would have sued Villari Kusturiss. Also, without the bankruptcy order, CLS would never have indemnified Villari Kusturiss from further suit regarding the money in escrow, and the alleged violation of the settlement agreement would have never arisen. The breach of settlement agreement arose in the wake of the mosaic of activities that lead to the settlement agreement itself. Although the settlement agreement was crafted in Pennsylvania, the activity, which included Shor Levin’s partnership with Korn & Stern, involved contact with Michigan when Shor Levin made substantial payments to Korn & Stern in Michigan, interacted with the case-processing personnel there, engaged in business contacts with both Stern & Associates and Sommers Schwartz, and ultimately infringed a trademark belonging to the Michigan entity. The Court finds, therefore, that the present claims “arise from” the defendant’s contact with this forum. For the same reasons, the Court finds that Shor Levin purposely availed itself of the privilege of doing business in Michigan. See Air Prods., 503 F.3d at 550 (holding that a non-Michigan corporation purposefully availed itself of doing business in Michigan by contracting with a company whose principle place of business was in Michigan and by committing tortious conduct that caused -18- effects felt in Michigan). Shor Levin agreed with Korn & Stern to pay advertising fees to Korn & Stern. Shor Levin has admitted that the advertisements would result in phone calls, and that those phone calls would be answered by Michigan employees of Stern & Associates and Sommers Schwartz. After those calls were screened, certain cases would be transferred to Pennsylvania and would result in fees to Shor Levin. The plaintiff has offered a prima facie case that Shor Levin had a business relationship with Stern & Associates and Sommers Schwartz in that Shor Levin knew that phone calls arising out of its advertising were being handled by those firms, which are Michigan companies. And, of course, according to CLS, Shor Levin committed a tortious act which caused effects that were primarily felt in Michigan. Finally, the Court finds that the defendant’s alleged conduct is connected to Michigan sufficiently enough to make the exercise of jurisdiction over it to be reasonable. As a general rule, “an inference of reasonableness arises where the first two criteria are met and that ‘only the unusual case will not meet this third criterion.’” Theunissen, 935 F.2d at 1461 (internal citations omitted). Because the first two prongs of the test have been fulfilled, the plaintiff has the benefit of an “inference of reasonableness.” Ibid. The Court concludes, therefore, that it has personal jurisdiction over the defendant to adjudicate the claims in the complaint. III. Venue The defendant argues that venue does not properly lie in this district. Under 28 U.S.C. § 1391(b)(1) venue is proper in “a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located.” Venue is proper in the Eastern District of Michigan if Shor Levin “resides” in this district. Under 28 U.S.C. § 1391(c)(2), a corporation is -19- deemed to reside “in any judicial district in which such defendant is subject to the court’s personal jurisdiction.” The Court has determined that it has personal jurisdiction over Shor Levin; therefore, the defendant is deemed to reside in this district, and venue is properly laid here. The defendant has moved to transfer venue under 28 U.S.C. § 1406(a). However, that statute furnishes the defendant no help, because it applies only where “a case [is filed] laying venue in the wrong division or district.” (emphasis added). The defendant also asks to transfer the case to the Eastern District of Pennsylvania under 28 U.S.C. § 1404(a) for its convenience. That statute states: “For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.” “[I]n ruling on a motion to transfer under § 1404(a), a district court should consider the private interests of the parties, including their convenience and the convenience of potential witnesses, as well as other public-interest concerns, such as systemic integrity and fairness, which come under the rubric of ‘interests of justice.’” Moses v. Bus. Card Express, Inc., 929 F.2d 1131, 1137 (6th Cir. 1991). The case certainly could have been filed in the Eastern District of Pennsylvania. However, CLS argues that it will be inconvenienced if venue is changed to Pennsylvania. CLS contends that where the factors demonstrate that transferring the case merely would shift the inconvenience from one party to the other, the plaintiff’s choice of forum should be honored and transfer should be denied. In this case, all of the factors seem to weigh about equally between the two parties. CLS’s witnesses and evidence are mostly in Michigan, while Shor Levin’s evidence and witnesses are in -20- Pennsylvania. Pennsylvania has an interest in the suit because it involves one of its corporations and there is already a suit pending in Pennsylvania state court on the collateral matter between Shor Levin and Villari Kusturiss. However, Michigan is also interested in the dispute because CLS, a Michigan company, has been harmed by having to reimburse legal fees to Villari Kusturiss. In Nicol v. Koscinski, 188 F.2d 537 (6th Cir. 1951), the Sixth Circuit held that a plaintiff’s choice of forum should rarely be disturbed, and that only a strong showing of inconvenience to a defendant would be enough to necessitate venue transfer. 188 F.2d at 537. The defendant has not made that showing here. Therefore, the motion to transfer venue will be denied. IV. Conclusion The Court finds that it has personal jurisdiction over the defendant because the plantiff has established a prima facie case that satisfies Michigan’s long-arm statute defining limited personal jurisdiction over corporations and the Due Process Clause. The Court also finds that transferring the case out of this district is not appropriate. Accordingly, it is ORDERED that the defendant’s motion to dismiss for want of personal jurisdiction or improper venue or to transfer venue [dkt. # 12] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 28, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 28 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -21-

=== 1200 Sixth Street, LLC, v. USA ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION 1200 SIXTH STREET, LLC, Plaintiff, v. UNITED STATES OF AMERICA, acting by and through the GENERAL SERVICES ADMINISTRATION, Defendant. ___________________________________/ Case Number 11-12948 Honorable David M. Lawson CORRECTED OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO DISMISS Justice Oliver Wendell Holmes, Jr. once wrote: “Men must turn square corners when they deal with the Government.” Rock Island, A. & L.R. Co. v. United States, 254 U.S. 141, 143 (1920). Add to that caution the further warning that one chooses to do business with the General Services Administration at its peril, and the lesson of this case emerges. The plaintiff has brought suit to recover the considerable expenses it incurred based on a representation made by a General Services Administration (GSA) employee that the GSA intended to exercise an option to purchase the plaintiff’s office building complex. As it turns out, the GSA fumbled the deal when it failed to contractually bind a developer whose participation was integral to the closing. The sale fell through, and the plaintiff — who might have had a remedy against the GSA and its employees had they been private actors — has run into the obstacle of sovereign immunity in its efforts to recover its losses. Although the plaintiff has tried to plead around that doctrine, in the end the plaintiff’s theories of liability all are based on the statements by the GSA’s employees that the government intend to close the deal, which proved to be a misrepresentation for which the government is immune from liability. The Court, therefore, must grant the government’s motion to dismiss for want of subject matter jurisdiction. I. The facts of the case come from the complaint, which are taken as true because of the procedural posture of the case. The office building complex is located at 1200 Sixth Street on the western edge of Detroit’s downtown area. The eponymous plaintiff is a limited liability company whose sole business purpose is to own and operate that land, building, and adjoining parking areas. Its managing partner is Samir A. Danou. The plaintiff purchased the land from the State of Michigan in 2005 for $6.3 million. The building was vacant at the time; however, the State reserved an easement under which two entities — the Federal Aviation Administration (FAA) and the Michigan State Police (MSP) — could continue to operate tower antenna systems that had been installed on the building, which the plaintiff was obligated to maintain. The easement was to last for five years or until the plaintiff decided to terminate it, whichever occurred first. In the meantime, in the summer and fall of 2005, Congress authorized the GSA to lease up to 266,200 square feet and 271 parking spaces for the Federal Bureau of Investigation (FBI) for a term of 15 years. The plan was for the GSA to obtain an option on a suitable building, assign the option to a developer who would purchase and refurbish the building, and then the GSA would enter into a long-term lease of the premises for the FBI. The plaintiff and the GSA negotiated an assignable one-year option on the 1200 Sixth Street land and building effective August 1, 2006. The purchase price was $9 million, and the GSA had the right to extend the option for one thirty-day period. The option agreement required the plaintiff -2- to accomplish a number of tasks at the plaintiff’s expense before the real estate transaction could close. Those tasks included delivering a topographical metes and bounds land title survey, delivering a preliminary title commitment for an owner’s title insurance policy, funding any unapproved “due care” activities referenced in Michigan’s hazardous substances law, Mich. Comp. Laws § 324.20107a, obtaining governmental approvals to vacate Sixth and Abbott Streets, and obtaining any zoning variances. The option obliged the plaintiff to deliver clear title, which apparently included the obligation to eliminate the easement for the communications antennae. Several of the tasks required the parties to the option to spend substantial amounts of money, time, and effort, presumably on the hope that the deal would be finalized. Except for reimbursement of the plaintiff for the cost of a traffic study, the option contained no provision to compensate either party for the expenses of bringing the deal together before the option actually was exercised. To the contrary, the option explicitly stated: 14. Failure to Exercise Option. If Optionee elects not to exercise the rights, option, or fee simple interests granted herein and to complete the purchase within the time and in the manner provided herein, then this Option shall terminate without further action or obligation on the part of either party. Compl., Ex. D, Option Agreement ¶ 14. The plaintiff’s transactional attorney was Neil Silver. The GSA’s contact person in charge of the project was Julie Hoffman. On February 16, 2007, Hoffman sent a letter to the Michigan State Housing Development Authority and Silver in which she stated, in part: “This Project will be built. There is no speculation. In short, this Project will be a tremendous success story demonstrating what can be accomplished when private parties and federal, state, and local government partner to revitalize our older urban areas.” Compl., Ex. L, Feb. 16, 2007 correspondence at 2. On May 10, 2007, Hoffman e-mailed Silver and asked him to “proceed with -3- contacting the State regarding the 90-day notice for removal of the antennaes [sic].” Compl., Ex. J, Tower Removal Notice. The plaintiff complied; it cost the plaintiff $114,000 to vacate the easement and remove the tower. The plaintiff also incurred legal fees in preparing for the closing on the property. Higgins Development Partners, Inc. (Higgins) was the developer that initially won the bid for the FBI project in late 2006. According to Silver, Forrest Hudson of the GSA stated that the bid specifications required the successful bidder to accept the option to purchase and close the transaction as soon as the plaintiff removed all the contingencies. Silver says that he repeatedly requested and received assurances from Hudson and Latrice Lacey, GSA’s contract procurement officer, that Higgins was “locked in” to the deal. The plan, apparently, was to assign the option to Higgins and have Higgins complete the purchase according to the terms of the option. However, during 2007, Higgins attempted to restructure the agreement, and the plaintiff inquired of the GSA how Higgins could do that. In June 2007, Silver began asking for copies of Higgins’s written acceptance of the assignment and its execution of the option agreement. In response, Hoffman and Robinson told Silver for the first time that Higgins had not been contractually bound to the deal due to an “oversight” by the GSA. They assured Silver that the deal would close even if another developer had to be found. Higgins ultimately walked away from the project. GSA issued a second set of bid solicitations, but no satisfactory bidder responded. On July 21, 2010, plaintiff’s counsel sent a letter to the GSA demanding reimbursement for its expenditures of approximately $4.3 million. The plaintiff summarized the basis for its claims as follows: -4- [T]he so called ‘Real Estate Option Agreement’ between the GSA and 1200 Sixth Street LLC . . . was represented by yourself to my client and Mr. Silver as a mere formality necessitated because the Government was involved and that, in fact, the transaction was an assured purchase whereby the Government would absolutely secure the purchase of the property. These representations were made by you at the insistence of Mr. Danou due to Mr. Danou’s stated financial concerns as to why would he spend hundreds of thousands of dollars meeting ‘pre-conditions’ to closing if the Government could merely walk away at any time it chose. According to Mr. Danou and Mr. Silver such statements were made on a minimum of 4 or 5 occasions and in all instances you assured them that there was nothing to be concerned over as the option is merely the format of the way the Government acquires property but that notwithstanding the format if my client performed all of the preconditions at its expense the sale would consummate. Compl., Ex. M, July 21, 2010 Letter to GSA. The plaintiff described its theories of recovery thus: Without providing an extended dissertation of the law relative to all the conduct above described, my client claims that because of the special trust relationship created by you and the GSA that various causes of action exist including but not limited to innocent, negligent, silent and active misrepresentation, detrimental reliance, promissory estoppel and of course, breach of contract. Ibid. The GSA acknowledged receipt of the plaintiff’s claims on March 22, 2011 but rejected all of them, except for $13,814.98 for the traffic study. Despite the government’s willingness to reimburse the plaintiff for the cost of the traffic study, it has not done so yet. The plaintiff filed the present action alleging promissory estoppel and detrimental reliance (Count 1), quasi contract (Count 2), negligent misrepresentation for future facts and negligent directives (Count 3), declaratory and injunctive relief (Count 4), and attorney’s fees under the EAJA (Count 5). Count 4 alleges a class claim for declaratory and injunctive relief regarding the disputes clause in the option agreement that refers to the Contract Disputes Act. The option stated that the parties agreed that disputes would be resolved under that Act, which by its own terms does not apply to procurement contracts involving real estate. See 41 U.S.C. § 7102(a)(1) (formerly codified as 41 -5- U.S.C. § 602). The complaint alleges that jurisdiction exists for Counts 1 through 3 under the Federal Tort Claims Act (FTCA), and that jurisdiction exists for Count 4 under 28 U.S.C. § 1331. The government has filed a motion to dismiss alleging that the Court does not have subject matter jurisdiction because the government has not waived its sovereign immunity for any of the plaintiff’s causes of action. The Court heard oral argument on the motion on March 13, 2012. II. The government’s motion is based on Federal Rule of Civil Procedure 12(b)(1) and (6). Lack of subject matter jurisdiction may be asserted at any time, either in a pleading or a motion. Fed. R. Civ. P. 12(b)(1); Television Reception Corp. v. Dunbar, 426 F.2d 174, 177 (6th Cir. 1970). When subject matter jurisdiction is challenged, the plaintiff has the burden of proving jurisdiction in order to survive the motion. Michigan S. R.R. Co. v. Branch & St. Joseph Cntys. Rail Users Ass’n, Inc., 287 F.3d 568, 573 (6th Cir. 2002); see also Moir v. Greater Cleveland Reg’l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990). There are two types of challenges to subject matter jurisdiction that can be raised by a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1): facial attacks or factual attacks. Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007). In a facial attack on the subject matter jurisdiction, as here, the district court accepts the parties’ allegations as true, similar to the standard employed in motions under Rule 12(b)(6). Ibid. It is well established that a claim against the United States is barred absent waiver of sovereign immunity, “‘and the terms of [the government’s] consent to be sued in any court define that court’s jurisdiction to entertain the suit.’” United States v. Testan, 424 U.S. 392, 399 (1976) (quoting United States v. Sherwood, 312 U.S. 584, 586 (1941 . A waiver of immunity cannot be -6- implied; it must be “unequivocally expressed in statutory text.” Lane v. Pena, 518 U.S. 187, 192 (1996); FDIC v. Meyer, 510 U.S. 471, 475 (1994) (holding that federal courts have no subject matter jurisdiction to hear a claim against the United States or one of its agencies absent a clear waiver of sovereign immunity). A. Counts 1 through 3 The plaintiff has invoked the FTCA as a basis for jurisdiction and waiver of sovereign immunity. The FTCA provides a limited waiver of sovereign immunity and subjects the United States to liability for “tort claims, in the same manner and to the same extent as a private individual under like circumstances.” 28 U.S.C. § 2674. The district court has jurisdiction over “civil actions on claims against the United States, for money damages . . . for . . . loss of property . . . caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.” 28 U.S.C. § 1346(b)(1). However, there is an exception. “The provisions of [the FTCA] and section 1346(b) of this title shall not apply to . . . [a]ny claim arising out of . . . misrepresentation, deceit, or interference with contract rights.” 28 U.S.C. § 2680(h). The defendant argues that the plaintiff’s claims stated in counts 1 through 3 of the complaint fall squarely within section 2680(h)’s exception and are barred by sovereign immunity because they depend on a false or incorrect statement by employees of the GSA. The plaintiff insists that its claims are not based on any misrepresentation, but rather it acted on a directive from the GSA that was negligently made, and as a result, the plaintiff incurred its considerable expenses even though the deal would never close. -7- Two cases decided by the Supreme Court have defined the territory covered by section 2680(h): United States v. Neustadt, 366 U.S. 696 (1961) and Block v. Neal, 460 U.S. 289 (1983). Neustadt involved a claim by a home purchaser who said he was induced to pay more than fair market value for a house based on an inaccurate Federal Housing Authority (FHA) inspection and appraisal. The 16-year-old house was inspected by FHA inspectors and an appraisal was issued based on the inspection. About a year after the closing, the Neustadts noticed cracks in the walls and ceiling, which later were discovered to be caused by substrate settling that the FHA inspector missed. They sued the federal government alleging that the FHA negligently inspected and appraised the property for mortgage insurance purposes, they were justified in relying on the inspection and appraisal, and they would not have bought the home but for the FHA’s negligence. The Court held that the Neustadts’ claim was barred by section 2680(h). The Court interpreted the term “misrepresentation in section 2680(h) to mean negligent misrepresentation, which . . . Congress had in mind when it placed the word ‘misrepresentation’ before the word ‘deceit’ in s[ection] 2680(h).” 366 U.S. at 706-07. The essence of the plaintiffs’ claim in that case was not so much the negligent inspection, but the inaccurate communication of the home’s value to the plaintiffs and their reliance on that information. Dismissing the idea that a negligent inspection was at the root of the claim, the Court quoted approvingly the instruction that “‘[w]e must then look beyond the literal meaning of the language to ascertain the real cause of complaint.’” Id. at 703 (quoting Hall v. United States, 274 F.2d 69, 71 (10th Cir. 1959 . The Court then acknowledged that government agents breach a common law duty when misinformation is communicated to people who rely on it; but the government is immune from such conduct under section 2680(h). Id. at 710-11 (stating: “In -8- practically all such instances, it may be said that the Government owes a ‘specific duty’ to obtain and communicate information carefully, less the intended recipient be misled to his financial harm. While we do not condone carelessness by government employees in gathering and promulgating such information, neither can we justifiably ignore the plain words Congress has used in limiting the scope of the Government’s tort liability.”). The Court held that sovereign immunity barred the claim against the government. Block v. Neal also involved a disgruntled home purchaser, but the Court distinguished Neustadt based on the plaintiffs’ cause of action. In that case, Neal obtained a loan from the Farmers Home Administration (FmHA) for the construction of a pre-fabricated house. Neal’s agreement with the building contractor required the building to conform to the FmHA’s approved plans, and it gave the FmHA the right to inspect and test materials and workmanship and reject defective work. An FmHA official inspected the house three times during different phases of construction, and her reports did not note any discrepancies. After the final inspection, the FmHA official issued a signed report that the house conformed with the FmHA’s approved specifications; but after Neal moved in, she discovered a number of defects with the house, some of which involved deviations from the FmHA-approved plans. When the FmHA refused Neal’s request to pay for repairs, she sued for breach of contract, negligence in performing the inspections and supervising construction, and “detrimental reliance.” The district court dismissed the complaint on the grounds that the FmHA had no contractual or statutory duty to supervise construction because the inspection regulations were intended to benefit only the government’s security interest in the dwelling, and Neal failed to state a tort claim under Tennessee law. The Sixth Circuit agreed that no contractual duty existed but reversed because Neal had stated a claim for negligent performance of a voluntary -9- undertaking. The Supreme Court granted certiorari to determine whether Neal’s claim was barred by section 2680(h) because it arose out of misrepresentation. The Court affirmed the Sixth Circuit’s decision and distinguished Neustadt. The Court characterized the claim in Neustadt as one of misrepresentation because the plaintiff there alleged that they were “misled by a ‘Statement of FHA Appraisal’ prepared by the Government.” Block, 460 U.S. at 296. As the Court saw it, “Neustadt alleged no injury that he would have suffered independently of his reliance on the erroneous appraisal.” Ibid. Without that misrepresentation, presumably Neustadt would not have purchased the house for the price he paid. Therefore, “[b]ecause the alleged conduct that was the basis of his negligence claim was in essence a negligent misrepresentation, [his] action was barred under the ‘misrepresentation’ exception.” Id. at 296-97. In contrast, the Court found that the core of Neal’s claim was not a representation of the house’s condition, but the faulty inspections performed by the government inspector. Although there was no statutory duty that ran from the inspector to the home buyer, the Court credited the lower court’s finding that “to prevail under the [state common law] Good Samaritan doctrine, Neal must show that FmHA officials voluntarily undertook to supervise construction of her house; that the officials failed to use due care in carrying out their supervisory activity; and that she suffered some pecuniary injury proximately caused by FmHA’s failure to use due care.” Ibid. Because the claim did not rely on government misstatements, the Court reasoned, the misrepresentation exception to the sovereign immunity waiver in section 2680(h) did not preclude the action. The Supreme Court explained: “Neither the language nor history of the [Federal Tort Claims] Act suggest that when one aspect of the Government’s conduct is not actionable under the ‘misrepresentation’ exception, a claimant is -10- barred from pursuing a distinct claim arising out of other aspects of the Government’s conduct.” Id. at 298. Following Neustadt and Neal, circuit courts have held that section 2680(h) bars any claim in which the government’s misstatements, either negligently or intentionally made, were “essential” to the plaintiff’s claims. See JBP Acquisitions, LP v. United States ex rel. FDIC, 224 F.3d 1260, 1264 (11th Cir. 2000) (“The test in applying the misrepresentation exception is whether the essence of the claim involves the government’s failure to use due care in obtaining and communicating information.”); Dorking Genetics v. United States, 76 F.3d 1261, 1264-65 (2d Cir. 1996) (“In determining the applicability of the § 2680(h) exception, a court must look, not to the theory upon which the plaintiff elects to proceed, but rather to the substance of the claim which he asserts. . . . Recovery is not barred . . . if the plaintiff alleges the breach of a cognizable duty owed to him which is distinct from any duty to use due care in communicating information.” (internal quotations and citations omitted ; Mt. Homes, Inc. v. United States, 912 F.2d 352, 355 (9th Cir. 1990) (holding that plaintiff’s claim for failure to communicate correct sales tax information was in essence one for negligent misrepresentation); JM Mech. Corp. v. United States by U.S. Dep’t of Housing and Urban Dev., 716 F.2d 190 (3d Cir. 1983); Gaudet v. United States, 517 F.2d 1034, 1035 (5th Cir. 1975) (“It is the substance of the claim and not the language used in stating it which controls.”). The parties do not dispute this general statement of the law. They disagree vigorously, however, in its application. Count Three of the plaintiff’s complaint is a claim for “negligent misrepresentation for future facts and negligent directives.” Compl. at 20. The complaint alleges that “the Defendant . . . issued communications and directives to the Plaintiff which were negligent in that they were intended to -11- induce the Plaintiff to take action based upon the representation of future conduct that the transaction would be closing . . . and Plaintiff justifiably relied on those representations of the Defendant.” Compl. ¶¶ 98-99. The defendant argues that Count Three should be dismissed because the substance of Count Three is indistinguishable from Neustadt. Citing Frigard v. United States, 862 F.2d 201 (9th Cir. 1988); Boda v. United States, 698 F.2d 1174 (11th Cir. 1983); Redmond v. United States, 518 F.2d 811 (7th Cir. 1975); Jones v. United States, 207 F.2d 563 (2d Cir. 1953); and United States v. Sheehan Props., Inc., 285 F. Supp. 608 (D. Minn. 1968), the defendant argues that courts have consistently held that the misrepresentation exception bars suits by disappointed investors seeking to hold the United States liable for monetary losses resulting from reliance on government misinformation or the government’s failure to provide correct information. The plaintiff attempts to save its claim by (1) characterizing it as a claim for detrimental reliance on the GSA’s negligent directive, which “was the collateral result of the GSA’s negligent performance of an operational task,” Resp. at 2; (2) citing Michigan cases that hold that a misrepresentation claim must be based only on a statement of existing fact; and (3) citing a number of federal cases that purportedly support the proposition that the misrepresentation exception does not apply to a negligent directive resulting from negligent performance of an assumed task, including United States v. Fowler, 913 F.2d 1382 (9th Cir. 1990); Cross Bros. Meat Packers, Inc. v. United States, 705 F.2d 682 (3d Cir. 1983); Guild v. United States, 685 F.2d 324 (9th Cir. 1982); Carter v. United States, 725 F. Supp. 2d 346 (E.D.N.Y. 2010); and Moyer Packing Co. v. United States, 567 F. Supp. 2d 737 (E.D. Pa. 2008). The plaintiff correctly states that courts have recognized that the misrepresentation exception does not bar suits for negligent performance of an operational task. See Metro. Life Ins. Co. v. -12- Atkins, 225 F.3d 510, 513 (5th Cir. 2000) (holding that claim that federal personnel clerk negligently failed to secure and retain signed copy of FEGLIA Designation of Beneficiary form was not barred by misrepresentation exception); Guild, 685 F.2d at 325-26 (holding that misrepresentation exception did not apply to claim against government for negligently designing dam because designing the dam was an operational task and any misrepresentation was collateral). However, the plaintiff’s characterization of its claim is unconvincing for a few reasons. First, the plaintiff refers repeatedly to an operational task but fails to clearly identify that task. Perhaps it was the obligation to contractually bind a developer to purchase the property. Or maybe it was the directive for the plaintiff to remove the antenna tower. Either way, those allegations must be viewed in context. It is not plausible for the plaintiff to say it incurred expenses, for example, by following the instructions to remove the tower in the absence of an understanding that the government intended the deal to close. And that understanding could only have come from the government’s false statements that the developer was “locked in” and that the land sale would be consummated. Could the plaintiff credibly allege that it would have incurred its considerable expenses absent such an understanding? Without the context of the GSA employees’ false assurances, the plaintiff’s claim makes no sense. Second, the plaintiff fails to allege that the contract created a duty on the government’s part to secure a developer. In fact, the option agreement provides that the government’s failure to exercise the option terminates the agreement without further obligation to either party. Third, the court must “‘look beyond the literal meaning of the language to ascertain the real cause of complaint.’” Neustadt, 366 U.S. at 703 (quoting Hall, 274 F.2d at 71). To determine whether the plaintiff’s claim is barred, the court must consider “whether the focal point of the claim -13- is negligence in the communication of (or failure to communicate) information or negligence in the performance of an operational task, with misrepresentation being merely collateral to such performance.” Life Partners Inc. v. United States, 650 F.3d 1026, 1032 (5th Cir. 2011) (internal quotations omitted). Drilling into the claim itself, it is apparent that the plaintiff’s damages flow not from the GSA’s failure to “lock up” the developer, but from the plaintiff’s decision to incur closing expenses based on the understanding that the path to closing was clear. It is true that the GSA’s statement that the deal “will” close misrepresents a future fact. But that is no less a “misrepresentation” within the meaning of section 2680(h). The Court, therefore, must conclude that the government’s false statement is essential to the plaintiff’s claim. Plaintiff’s July 21, 2010 letter further supports that conclusion. The plaintiff cannot escape section 2680(h)’s bar by artful pleading. Count 1 of the complaint more obviously is based on the GSA’s misrepresentations. It alleges a claim for promissory estoppel and detrimental reliance. It is worth noting in passing that “Michigan does not recognize an independent cause of action for detrimental reliance.” Erickson’s Flooring & Supply Co. v. Tembec, Inc., 212 F. App’x 558, 562 (6th Cir. Jan. 9, 2007); Aero Taxi- Rockford v. General Motors Corp., No. 259565, 2006 WL 1479915, at *9 (Mich. Ct. App. May 30, 2006). “Rather, detrimental reliance is an element of other causes of action, for example, promissory estoppel and innocent misrepresentation.” Aero Taxi-Rockford, 2006 WL 1479915, at *9. Michigan courts recognize that promissory estoppel is a cause of action. Novak v. Nationwide Mut. Ins. Co., 235 Mich. App. 675, 686, 599 N.W.2d 546, 552 (1999) (“[P]romissory -14- estoppel is a distinct cause of action.”). The plaintiff has acknowledged, however, that the claims pleaded in Counts 1 through 3 merely are alternative theories on which the action is to proceed. The essence of a promissory estoppel claim is “a promise” that eventually is unfulfilled. See State Bank of Standish v. Curry, 442 Mich. 76, 83, 500 N.W.2d 104, 107 (1993) (quoting 1 Restatement Contracts, 2d, § 90, p. 242). “A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.” Id. at 85, 500 N.W.2d at 108 (quoting 1 Restatement Contracts, 2d, § 2, p. 8). Michigan courts have characterized a claim for promissory estoppel as both one “akin to a contract claim” and as a tort. See Byrne v. Republic Bank, No. 268762, 2007 WL 2560467, at *4 n.2 (Mich. Ct. App. Sept. 6, 2007). But the way the plaintiff describes the “promise” in this case, it can be viewed as nothing other than a misrepresentation of facts, both existing and in the future. Count 1 relies on Hoffman’s directive to remove the antennae and Hoffman’s public statements that there was no question the project would be completed. The complaint alleges that “[t]he Plaintiff in reliance upon all the communications leading up to the demand to remove the tower, gave notice to the [Michigan State Police] to effectuate the removal and then set upon a course involving itself and its attorneys in preparation for closing with expenses and the incurrence of costs in excess [of] anything agreed to or contemplated under the ultimately non-exercised Option,” Compl. ¶ 79, and that “[t]he actions of the GSA in directing Plaintiff to remove the tower and to take further actions to close in light of its failure, amongst other things, to secure a commitment from its selected Developer was negligent and wrongful, as the natural reaction of the Plaintiff to the request of the Defendant would be to follow the Defendant’s instructions and directives,” id. ¶ 81. These are claims of detrimental reliance on what turned out to be a -15- misrepresentation. The plaintiff argues that the Court has jurisdiction over Count 1 under the FTCA and that Counts 1 through 3 are all different theories of relief for the same conduct — the government’s negligent collection and dissemination of information that it knew the plaintiff would rely on. The plaintiff also advances the theory of equitable estoppel. However, that equitable doctrine was never thought to provide affirmative relief. Dobrowski v. Jay Dee Contractors, Inc., 571 F.3d 551, 554 n.1 (6th Cir. 2009) (“[E]quitable estoppel is not a cause of action but a judicial doctrine that bars the assertion of a claim or defense.”). Moreover, it is doubtful that equitable estoppel was ever intended to apply to the government. Office of Personnel Mgmt v. Richmond, 496 U.S. 414, 419-23 (1990). And the Sixth Circuit has observed that “[w]hile the Supreme Court refused to adopt a flat rule that estoppel may never lie against the government, they noted that they have reversed every finding of estoppel that they have reviewed. The Court further noted that they have never upheld an estoppel claim against the government for the payment of money.” United States v. Guy, 978 F.2d 934, 937 n.3 (6th Cir. 1992). The Supreme Court has not found estoppel claims as an effective means of avoiding the exception in section 3680(h). Richmond, 496 U.S. 429- 30 (“The claim brought by respondent is in practical effect one for misrepresentation, despite the application of the ‘estoppel’ label. We would be most hesitant to create a judicial doctrine of estoppel that would nullify a congressional decision against authorization of the same class of claims.”). The plaintiff has not stated a claim in counts 1 or 3 of the complaint that fall within the government’s waiver of immunity in the FTCA. Therefore, the Court has no subject matter jurisdiction to hear them. -16- Count 2 of the complaint alleges that “the acts and activities of the Defendant through its authorized representatives created a quasi contract as a matter of law to compel the Government to purchase the Property and close[ ] on it or pay the Plaintiff’s loss of the benefit of its bargain including holding costs and building rehabilitation expenses.” Compl. ¶ 93. The Court does not have jurisdiction over that claim, either. For claims against the United States, the Court’s jurisdiction is “concurrent with the United States Court of Federal Claims, [over a]ny other civil action or claim . . . not exceeding $10,000 in amount, founded . . . upon any express or implied contract with the United States . . . except that the district courts shall not have jurisdiction of any civil action or claim against the United States founded upon any express or implied contract with the United States or for liquidated or unliquidated damages in cases not sounding in tort which are subject to [the Contract Disputes Act (which is not applicable to contracts for real property)].” 28 U.S.C. § 1346(a)(2). Claims for more than $10,000 must be brought before the United States Court of Federal Claims. 28 U.S.C. § 1491(a)(1); see United States v. Hohri, 482 U.S. 64, 67 n.1 (1987). Counts 4 and 5 Count 4 seeks an injunction prohibiting the government “from enforcing any dispute provision in a contract involving the GSA which compels the parties to resolve their disputes arising or relating to the acquisition of real estate under the Contract Disputes Act” and an order relieving and reimbursing anyone compelled to resolve their dispute with the GSA under the Contract Disputes Act. Compl. ¶ 128. The plaintiff alleges that the Court has jurisdiction of this claim under 28 U.S.C. § 1331. However, the plaintiff has failed to allege a waiver of sovereign immunity that vests this Court with -17- jurisdiction. Munaco v. United States, 522 F.3d 651, 653 n.3 (6th Cir. 2008) (“[J]urisdictional statutes, such as the statute giving federal district courts original jurisdiction of civil actions arising under Constitution, laws, or treaties of United States, do not operate as waivers of sovereign immunity.”); Heydon v. MediaOne of Se. Mich., Inc., 327 F.3d 466, 470 (6th Cir. 2003) (“The Declaratory Judgment Act does not create an independent basis for federal subject matter jurisdiction. The Act only provides courts with discretion to fashion a remedy. Thus, before invoking the Act, the court must have jurisdiction already.” (internal citations omitted . The plaintiff cites Ex parte Young, (1908) and Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952), for the idea that a court may enjoin a government official from violating the constitution or federal law. Young stands for the proposition that “a federal court can issue prospective injunctive and declaratory relief compelling a state official to comply with federal law.” S & M Brands, Inc. v. Cooper, 527 F.3d 500, 507 (6th Cir. 2008) (emphasis added) (explaining that under the Young exception to state sovereign immunity, a federal court may enjoin a state official from interfering with federal rights); see also Whitfield v. Tennessee, 639 F.3d 253, 257 (“An Ex parte Young action may be commenced only against a state official acting in her official capacity and may ‘seek [only] prospective relief to end a continuing violation of federal law.’” (quoting Carten v. Kent State Univ., 282 F.3d 391, 395 (6th Cir. 2002 . Young does not support the plaintiff’s argument because the plaintiff has sued the federal government, not an official of a state government. In Youngstown Sheet & Tube Co. v. Sawyer, the Supreme Court was “asked to decide whether the President was acting within his constitutional power when he issued an order directing the Secretary of Commerce to take possession of and operate most of the Nation’s steel mills.” -18- Youngstown, 343 U.S. at 582. Under the authority of an executive order, the Secretary of Commerce took possession of the nation’s steel mills and directed the presidents of the mills to serve as operating managers for the United States. Id. at 583. The companies brought suit against the Secretary of Commerce, and the district court granted a preliminary injunction enjoining enforcement of the seizure order. The Supreme Court affirmed. Youngstown does not discuss the waiver of sovereign immunity. Instead, Youngstown, like Young, stands for the proposition that government officials may be enjoined from violating federal law and the Constitution. Youngstown and Young are not helpful to the plaintiff because it is not suing a government official. The plaintiff bears the burden of establishing the waiver of sovereign immunity and the court’s subject matter jurisdiction. See Westfield v. Federal Republic of Germany, 633 F.3d 409, 413 (6th Cir. 2011); Ohio Nat’l Life Ins. Co. v. United States, 922 F.2d 320, 324 (6th Cir. 1990); see also Levin v. United States, 663 F.3d 1059, 1063 (9th Cir. 2011) (noting that “plaintiff bears the burden of pointing to . . . an unequivocal waiver of immunity” (internal quotation marks omitted ; Spotts v. United States, 613 F.3d 559, 568 (5th Cir. 2010). The plaintiff has failed to meet its burden; therefore, Count 4 must be dismissed. Count 5 alleges that the plaintiff is entitled to attorney’s fees under the Equal Access to Justice Act, 28 U.S.C. § 2412, if the plaintiff prevails on any of its non-tort claims. Under the EAJA, the Court must “award to a prevailing party other than the United States fees and other expenses . . . incurred by that party in any civil action (other than cases sounding in tort) . . . brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.” 28 U.S.C. § 2412(d)(1)(A). -19- The plaintiff cannot prevail on any of its claims because the Court has dismissed all of them. Therefore, Count 5 must be dismissed as well. III. The result in this case will be deeply unsatisfying to the plaintiff. It was observed in Neustadt that courts “do not condone carelessness by government employees in gathering and promulgating . . . information,” Neustadt, 366 U.S. at 710, but it is difficult to view the outcome of this case as anything but condonation. The Court is powerless to mete out justice when the claims, as here, are based on the GSA’s misrepresentation, regardless of whether the misstatements were based on incompetence or mendacity. On the other hand, citizens dealing with the government are charged with knowledge of the limits imposed on governmental employees’ authority and the narrow scope of their accountability. A contractor is well advised not to rely on promises that an agency makes unless they are in the form of an enforceable contract. Anything less will leave plaintiffs holding the bag, possibly at great expense to themselves. The United States has not waived immunity for the claims brought by the plaintiff in this case. This Court has no subject matter jurisdiction to adjudicate them. Perhaps the plaintiff might find relief in another forum; the dismissal here is not final. See Michigan Surgery Inv., LLC v. Arman, 627 F.3d 572, 576-77 (6th Cir. 2010) (observing that “[d]ismissals of actions that do not reach the merits of a claim, such as dismissals for lack of jurisdiction, ordinarily are without prejudice” (quoting Mitan v. Int’l Fid. Ins. Co., 23 F. App’x 292, 298 (6th Cir. 2001 . Accordingly, it is ORDERED that the defendant’s motion to dismiss [dkt. #9] is GRANTED. -20- It is further ORDERED that the complaint is DISMISSED without prejudice. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 16, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 16, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -21-

=== LARRY R. TALTON and STACIE C. TALTON v. BAC HOME LOANS SERVICING LP ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION LARRY R. TALTON and STACIE C. TALTON, Plaintiffs, v. BAC HOME LOANS SERVICING LP, ___________________________________/ Defendant. Case No. 11-14512 Honorable David M. Lawson OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO DISMISS The plaintiffs, Larry and Stacie Talton, brought an action against the defendant, BAC Home Loans Servicing, in part to stop the foreclosure on their residence at 28885 Ranchwood Drive, Unit #7, Southfield, Michigan. They originally filed their fifteen-count complaint in the Oakland County, Michigan circuit court. After the defendant removed the case to this Court on diversity of citizenship grounds, the defendant filed a motion to dismiss. At oral argument on the motion on January 31, 2012, the plaintiffs conceded the invalidity of five of the counts. The Court now concludes that the remaining counts must be dismissed as well, although some of them, which could conceivably be saved by better pleading (which has not been requested), will be dismissed without prejudice. I. According to the complaint, on April 25, 2008, plaintiffs Larry and Stacie Talton obtained a mortgage loan from Taylor, Bean & Whitaker Mortgage Corporation (TBW) in the amount of $187,271. The plaintiffs signed a promissory note requiring monthly principal and interest payments of $1,153.06. The note also included an acceleration clause that was triggered by the plaintiffs’ failure to make a timely and full monthly payment. As security for the loan, the plaintiffs granted a mortgage on the Ranchwood property to Mortgage Electronic Registration Systems, Inc. (MERS) solely as nominee for TBW and its successors and assigns. The mortgage granted MERS, as nominee of the lender, a power of sale. The mortgage expressly states that the plaintiffs: “understand[ ] and agree[ ] that MERS holds only legal title to the interests granted by [plaintiff] in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’ s successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.” Mot. to Dismiss, Ex. C, Mortgage at 2. The mortgage was “granted under the authority of the U.S. Department of Housing and Urban Development (HUD).” Compl. ¶ 9. The plaintiffs allege that BAC Home Loans Servicing has serviced the Loan for several years, and that TBW never assigned its rights as mortgagee to any other person or entity. The defendant has produced a copy of the assignment of MERS’s interest in the mortgage to BAC Home Loans Servicing, which was signed on August 10, 2010 by Kenneth Kurel on behalf of MERS pursuant to a signing authority agreement, and recorded by the Oakland County register of deeds on September 1, 2010. Kenneth Kurel is a partner at Trott & Trott, the firm hired by the defendant to foreclose the plaintiffs’ mortgage. The assignment states that: [MERS] as nominee for Lender and Lenders successors and/or assigns . . . has sold, assigned and transferred, and does hereby sell, assign and transfer to [BAC Home Loans Servicing, L.P.], all the right, title and interest of [MERS] in and to a certain real estate mortgage made by Larry R. Talton II and Stacie C. Talton. Mot. to Dismiss, Ex. D, Assignment of Mortgage. The plaintiffs allege that they suffered a reduction in income due to “a recession,” and they contacted the defendant to request a Home Affordable Modification Program (HAMP) loan -2- modification. The plaintiffs allege that the defendant “strung [them] along quite literally for years, in the HAMP modification process, including numerous fraudulent and otherwise bogus denials of HAMP modification although they qualified for the same.” Compl. ¶ 15. As an example, the plaintiffs allege that the defendant oscillated at least four times between denying the plaintiffs’ request because they made too much money and denying it because they did not make enough money. At some point after being rejected multiple times, the defendant allegedly told the plaintiffs that they qualified for a HAMP modification and a package would be coming in the mail. However, the HAMP modification package never came. The plaintiffs allege that the defendant told them they waited too long to mail back the package, and the application for the HAMP modification was canceled. The complaint does not state when or whether the plaintiffs stopped making timely and complete monthly mortgage payments. The plaintiffs do allege that they paid the substantial sums of money requested by the defendant, but were told that the mortgage on their home would be foreclosed regardless of those payments. The plaintiffs also allege that the defendant failed to provide a face-to-face meeting to resolve any default before they fell three months behind on their mortgage payments. Although the exact circumstances of the plaintiffs’ default are unclear, it appears that the plaintiffs defaulted at some point in time, sought a loan modification, and continued to make less-than-complete payments each month in the hope that the defendant would approve their request for a loan modification. The defendants hired the law firm of Trott & Trott to foreclose the mortgage. One of Trott & Trott’s first acts was to record the assignment of MERS’s interest in the mortgage to BAC Home -3- Loans Servicing. Defendant BAC began preparations to foreclose by advertisement on August 10, 2010, when Trott & Trott mailed a 14-day notice to plaintiffs. That notice, although referenced in the complaint, was not attached to the pleading. However, the defendant furnished a copy with its motion to dismiss. The notice states: This notice is being sent to the borrowers and/or mortgagors pursuant to MCL 600.3205a(1) pertaining to the mortgage for property located at 28885 Ranchwood Dr Unit 7, Southfield, MI 48076-2465. The mortgage loan is in default for non- payment. As of the date of this notice, the total amount due and owing under the mortgage loan is $189,502.75. Trott & Trott, P.C., represents BAC Home Loans Servicing, L.P., which is the creditor to which your mortgage debt is owed or the servicing agent for the creditor to which the debt is owed. The agent designated by the Mortgage Servicer and/or Mortgage Holder to contact and that has authority to make agreements under MCL sections 600.3205b and 600.3205c is: Trott & Trott, P.C. 31440 Northwestern Highway, Suite 200, Farmington Hills MI 48334-2525 at (248) 593-1302 or fax written requests to (248) 205-4130 and reference T&T # 337477F01 Enclosed with this notice is a list of housing counselors prepared by the Michigan State Housing Development Authority (MSHDA). Within 14 days of the date of this notice, you may request a meeting with the agent designated above to attempt to work out a modification of the mortgage loan to avoid foreclosure by contacting a housing counselor from the list provided with this notice. You may also request a housing counselor to attend the meeting. If you request a meeting with the agent designated above by contacting a housing counselor from the list provided with this notice within 14 days of the date of this notice, foreclosure proceedings will not be commenced until 90 days after the date of this notice. For this provision to be applicable, the request for a meeting must be made despite any independent loss mitigation options you may be pursuing with your lender. If you and the agent designated above reach an agreement to modify the mortgage loan, the mortgage will not be foreclosed if you abide by the terms of the agreement. Mot. to Dismiss, Ex. E, August 10, 2010 Letter. -4- The plaintiffs do not allege that they requested a meeting with BAC Home Loans Servicing’s designated representative, Trott & Trott, by contacting a housing counselor from the list provided with the notice within 14 days of the date of the notice. Rather, they allege that they retained a lawyer and “participated in the Michigan statutory modification process.” Compl. ¶ 26. The correspondence from the plaintiffs’ lawyer, however, does not bear that out. Instead of contacting a housing counselor, as the statute directed at the time, on August 21, 2010, plaintiffs’ counsel sent a letter to Trott & Trott that stated: This office represents the borrower(s), with regard to the above-referenced matter. As such, please direct all future correspondence regarding this matter to my attention. In addition, please accept this correspondence as a formal request for a meeting pursuant to MCL 600.3205b. Resp., Ex. F, Aug. 21, 2010 Letter from Gantz to Trott & Trott. Trott & Trott replied to plaintiff’s counsel on September 16, 2010 in a letter that stated, among other things: You, a co-mortgagor, or an approved housing counselor have requested a meeting with a designate of the servicer and/or lender to discuss loan modification and/or loss mitigation options, relative to the above-referenced property. As a result, the foreclosure process will not continue until on or after November 8, 2010. Resp., Ex. G, Sept. 16, 2010 Letter from Trott & Trott to Plaintiff’s counsel. On April 8, 2011, plaintiffs were provided notice that they did not qualify for a loan modification and that BAC Home Loans Servicing would be proceeding with foreclosure. The plaintiff alleges that the defendant took eight months to review their request, as opposed to 90 days, because it “was reeling from the ‘robo-signing’ scandal it was implicated in and needed several months to figure out how to foreclose on properties.” Compl. ¶ 27. The plaintiffs also allege that the defendant denied their modification request, even though they qualified, because the defendant -5- wanted an immediate repayment of the entire loan from HUD. The plaintiffs challenged the defendant’s denial, and the defendant allegedly agreed to continue its review of the loan modification application. To that end, the defendant requested several additional documents from the plaintiffs between April and July 2011. The plaintiffs allege that they provided all of the requested documentation in the manner and within the time frame required by the defendant. To date, the plaintiffs have not received a loan modification. It is unclear when the defendant published the first foreclosure notice required by state law, although presumably that occurred at least four weeks before August 30, 2011, the date on which the original sheriff’s sale was scheduled. The defendant represents that the sheriff’s sale has been stayed until this case is decided. On August 25, 2011, the plaintiffs filed suit against the defendant in the Oakland County, Michigan circuit court, alleging that the defendant: violated Michigan’s foreclosure by advertisement statute by relying on an invalid assignment (Count 1); violated Michigan’s foreclosure by advertisement statute by commencing foreclosure when the plaintiffs were eligible for a loan modification (Count 2); violated the Michigan loan modification statute by failing to designate a person authorized to enter a loan modification agreement (Count 3); violated Michigan’s Mortgage Brokers, Lenders, and Servicers Licensing Act (Count 4); violated several federal regulations, including violation of 24 C.F.R. § 203.604 (Count 5); violated Michigan’s Truth In Lending Act (Count 6); has unclean hands and thus cannot seek equitable foreclosure (Count 7); breached an implied duty of good faith and fair dealing (Count 8); violated the federal Fair Debt Collection Practices Act (Count 9); violated the Michigan’s Collection Practices Act (Count 10); breached a contract supposedly made during the HAMP modification process (Count 11); is estopped from -6- denying the modification because of the plaintiffs’ detrimental reliance (Count 12); was unjustly enriched (Count 13); committed intentional fraud (Count 14); and committed constructive fraud (Count 15). The defendant removed the case on the basis of federal question and diversity jurisdiction on October 13, 2011 and filed the present motion to dismiss six days later. The plaintiffs filed an untimely response to the motion. II. At oral argument on the motion, the plaintiffs conceded the invalidity of their claims in counts 4, 6, 9, 10, and 13. Those counts will be dismissed with prejudice. The plaintiff argues that because the defendant attached documents to its motion to dismiss and therefore referred to matters outside the pleadings, the motion should be converted to one for summary judgment under Federal Rule of Civil Procedure 56. If the Court proceeds under Rule 56, the plaintiffs argue, the decision should be deferred until discovery is completed. It is true that consideration of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) is confined to the pleadings. Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008). Assessment of the facial sufficiency of the complaint ordinarily must be undertaken without resort to matters outside the pleadings. Wysocki v. Int’l Bus. Mach. Corp., 607 F.3d 1102, 1104 (6th Cir. 2010). However, “documents attached to the pleadings become part of the pleadings and may be considered on a motion to dismiss.” Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 335 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c ; see also Koubriti v. Convertino, 593 F.3d 459, 463 n.1 (6th Cir. 2010). Even if a document is not attached to a complaint or answer, “when a document is referred to in the pleadings and is integral to the claims, it may be considered -7- without converting a motion to dismiss into one for summary judgment.” Commercial Money Ctr., 508 F.3d at 335-36. Further, where the plaintiff does not refer directly to given documents in the pleadings, if those documents govern the plaintiff’s rights and are necessarily incorporated by reference, then the motion need not be converted to one for summary judgment. Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir. 1997) (holding that plan documents could be incorporated without converting the motion to dismiss to one for summary judgment even though the complaint referred only to the “plan” and not the accompanying documents). In addition, “a court may consider matters of public record in deciding a motion to dismiss without converting the motion to one for summary judgment.” Northville Downs v. Granholm, 622 F.3d 579, 586 (6th Cir. 2010) (citing Commercial Money Ctr., Inc., 508 F.3d at 335-36). The plaintiffs attached the mortgage, the assignment, and Trott & Trott’s April 8, 2011 letter to their complaint. The defendant attached several additional documents to its motion to dismiss, including the promissory note and Trott & Trott’s August 10, 2010 letter, both of which the plaintiffs reference in the complaint. All of those may be considered when deciding a motion under Rule 12. The only additional document attached to the defendant’s motion to dismiss is the Michigan Attorney General’s August 28, 2002 opinion that a country register of deeds has a duty to record a mortgage where the mortgagee is identified as a nominee of a disclosed or undisclosed mortgagee. The Michigan Attorney General’s opinion is a matter of public record. The Court finds no good reason to convert the motion to a summary judgment motion. The Court will proceed under Rule 12. “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief if all the facts and allegations in the complaint are taken as true.” -8- Rippy ex rel. Rippy v. Hattaway, 270 F.3d 416, 419 (6th Cir. 2001) (citing Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993 . Under Rule 12(b)(6), the complaint is viewed in the light most favorable to plaintiffs, the allegations in the complaint are accepted as true, and all reasonable inferences are drawn in favor of plaintiffs. Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Saglioccolo v. Eagle Ins. Co., 112 F.3d 226, 228 (6th Cir. 1997) (quoting Columbia Nat’l Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995 . “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Tatum, 58 F.3d at 1109; Tackett v. M & G Polymers, USA, L.L.C., 561 F.3d 478, 488 (6th Cir. 2009). To survive a motion to dismiss, [a plaintiff] must plead ‘enough factual matter’ that, when taken as true, ‘state[s] a claim to relief that is plausible on its face.’ Bell Atl. Corp. v. Twombly, , 556, 570 (2007). Plausibility requires showing more than the ‘sheer possibility’ of relief but less than a ‘probab[le]’ entitlement to relief. Ashcroft v. Iqbal, [556] U.S. [662], 129 S. Ct. 1937, 1949 (2009). Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010). “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of ‘entitlement to relief.’” Ashcroft v. Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 557). Under the new regime ushered in by Twombly and Iqbal, pleaded facts must be accepted by the reviewing court but conclusions may not be unless they are plausibly supported by the pleaded facts. “[B]are assertions,” such as those that “amount to nothing more than a ‘formulaic recitation of the elements’” of a claim, can provide context to the factual allegations, but are insufficient to state a claim for relief and must be disregarded. Iqbal, 129 S. Ct. at 1951 (quoting Twombly, 550 U.S. at 555). However, as long as a court can “‘draw the reasonable inference that the defendant -9- is liable for the misconduct alleged,’ a plaintiff’s claims must survive a motion to dismiss.” Fabian, 628 F.3d at 281 (quoting Iqbal, 129 S. Ct. at 1949). A. Count 1 — Foreclosure by advertisement irregularities The plaintiffs allege that the foreclosure proceeding, which was initiated some at point before the originally scheduled sheriff’s sale on August 31, 2011, is void and must be restarted because the defendant did not have authority to foreclose. They contend the proceeding is void because (a) the defendant, who was assigned MERS’s interest in the mortgage, cannot foreclose because MERS did not have the authority to foreclose; (b) the assignment is invalid without proof that MERS signatory maintained a valid power of attorney; and (c) the assignment was invalid because TBW ceased to exist prior to the assignment date. None of these arguments has merit. 1. MERS’s authority to foreclose “Under general contract law, rights can be assigned unless the assignment is clearly restricted.” Burkhardt v. Bailey, 260 Mich. App. 636, 653, 680 N.W.2d 453, 462 (2004) (citing Calamari & Perillo, Contracts (3d ed.), § 18–10, p. 735). When an assignment is made, “[a]n assignee stands in the position of the assignor, possessing the same rights and being subject to the same defenses.” Ibid. (citing Nichols v. Lee, 10 Mich. 526, 528-29 (1862 . The plaintiffs rely on the Michigan Court of Appeals’s decision in Residential Funding Co., LLC v. Saurman, 292 Mich. App. 321, 807 N.W.2d 412 (2011) (holding that MERS, as nominee for the Lender, does not meet the requirements of Mich. Comp. Laws § 600.3204(1)(d to support their argument that MERS, because itself could not foreclose, cannot assign someone else authority to do so. The Michigan Supreme Court, however, recently reversed the judgment of the court of appeals and held that MERS, acting as nominee of the lender, had a security lien on the property and -10- was authorized to foreclose by advertisement. Residential Funding Co., LLC v. Saurman, 490 Mich. 909, 805 N.W.2d 183 (2011). 2. Invalid assignment and TBW dissolution The plaintiffs argue that the Assignment is invalid unless the defendant has proof that signatory Kenneth Kurel maintained a valid power of attorney to execute foreclosure documents on behalf of MERS. The defendant argues that the plaintiffs do not have standing to challenge the assignment because the parties to the assignment have not contested its validity. The defendant’s argument relies primarily on Livonia Properties Holdings, LLC v. 12840-12976 Farmington Road Holdings, LLC, 399 F. App’x 97, 102-03 (6th Cir. Oct. 28, 2010), in which the court of appeals affirmed the district court’s rejection of a challenge to a foreclosure of commercial property. The landowner alleged that the foreclosure was invalid because the defendant had failed to comply with Mich. Comp. Laws § 600.3204(3), which states that “[i]f the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale under section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage.” Mich. Comp. Laws § 600.3204(3). There was no question in that case that the assignment of the mortgage to the foreclosing defendant had been recorded before the date of sale; the plaintiff argued instead that the assignment was not valid because the trust to which the mortgage was assigned did not exist as of the date of the assignment. Id. at 102. The court found that the plain language of the statute required only that the public record show that the mortgage had passed to the foreclosing party and that a record chain of title is not “destroyed by an irregularity affecting the validity of the transfer” because “[e]ven if the transfer were invalidated, the public record would remain as it is, and the record chain of title would not be disturbed.” Ibid. Therefore, it was possible -11- for the court in Livonia to say that even if there were a flaw in the assignment, the defendant had complied with the statute and was permitted to foreclose. The plaintiffs’ attack on the foreclosure proceedings in this case is based on a different statutory provision. Section 600.3204(1) states four prerequisites that must exist before foreclosure by advertisement may occur: (a) A default in a condition of the mortgage has occurred, by which the power to sell became operative. (b) An action or proceeding has not been instituted, at law, to recover the debt secured by the mortgage or any part of the mortgage; or, if an action or proceeding has been instituted, the action or proceeding has been discontinued; or an execution on a judgment rendered in an action or proceeding has been returned unsatisfied, in whole or in part. (c) The mortgage containing the power of sale has been properly recorded. (d) The party foreclosing the mortgage is either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage. Mich. Comp. Laws § 600.3204(1). The plaintiffs’ argument focuses on the fourth requirement, that the foreclosing entity must be the owner of the debt or an interest in the mortgage, or be the servicing agent. The Livonia Properties court did not address that section of the statute. It is true that the Livonia Properties opinion contains the statement that “there is ample authority to support the proposition that ‘a litigant who is not a party to an assignment lacks standing to challenge that assignment,’” Livonia Properties, 399 F. App’x at 102 (quoting Livonia Properties Holdings, LLC v. 12840-12976 Farmington Road Holdings, LLC, 717 F. Supp. 2d 724, 736-37 (E.D. Mich. 2010 ; but when read carefully the case does not stand for such a general and unqualified position. The Court believes, therefore, that Livonia Properties does not compel the conclusion that a foreclosure plaintiff can never attack the foreclosure by challenging the validity of an underlying assignment. -12- The Livonia Properties opinion contains a number of caveats to its general statement about lack of standing that would permit a plaintiff to challenge the validity of an assignment in different circumstances. First, immediately after observing the general rule that a third party cannot challenge an assignment, the court noted that “[a]n obligor ‘may assert as a defense any matter which renders the assignment absolutely invalid or ineffective, or void.’” Livonia Properties, 399 F. App’x at 102 (quoting 6A C.J.S. Assignments § 132 (2010 . The court stated that this rule exists to protect obligors “from having to pay the same debt twice.” Ibid. The court found that the rule was not implicated in that case because the defendant owned the original note as well as the mortgage and the district court reviewed copies of the original note and was satisfied that it was authentic. Ibid. Recently, the Michigan Supreme Court’s ruling in Residential Funding Co., LLC v. Saurman, 490 Mich. 909, 805 N.W.2d 183 (2011), made it clear that a party holding a mortgage is authorized to foreclose by advertisement even where that party does not also hold an interest in the note. The assurance that the court had in Livonia that the plaintiffs would not be subject to double liability on their debt is therefore not necessarily present in all cases. In cases where the foreclosing party was not the holder of the note but only a holder of the mortgage, a plaintiff might have “a genuine claim . . . that [he or she] might therefore be subject to double liability on [his or her] debt.” Livonia Properties, 399 F. App’x at 102. In such a situation, a plaintiff should be able to assert a challenge to the assignment that would render it invalid, ineffective, or void. Second, the court’s actual holding on the question of whether the plaintiff could challenge the assignment was that “even if there were a flaw in the assignment, Livonia does not have standing to raise that flaw to challenge Farmington’s chain of title.” Ibid. (emphasis added). Further elaborating that point, the court stated that “a party subject to foreclosure has standing to challenge -13- whether a lender holds record chain of title, but that determination is limited to an examination of the public records.” Id. at 103. That statement suggests that the court’s holding is premised on the fact that the plaintiff’s challenge was to the existence of a record chain of title sufficient to meet the requirements of Mich. Comp. Laws § 600.3204(3). Section 600.3204(1)(d) does not refer to a record chain of title or provide that the record owner of the note or the mortgage may initiate foreclosure, but rather its plain terms require that the party initiating foreclosure actually be the holder of the note or the mortgage, or the servicer. The court’s logic in Livonia that a challenge must be limited to the public record therefore does not address the context of a challenge under Mich. Comp. Laws § 600.3204(1)(d). Third, the Livonia court relied on two Michigan cases to buttress its conclusion that the plaintiff did not have standing to challenge the assignment: Bowles v. Oakman, 246 Mich. 674, 225 N.W. 613 (1929), and Pashak v. Interstate Highway Construction, Inc., No. 189886, 1998 WL 2001203 (Mich. App. Mar. 20, 1998). However, those two cases do not deal with the foreclosure statute at issue here and are otherwise distinguishable. In Bowles, the defendant was refusing to pay the holder of a note and attempted to challenge a fraudulent assignment to the holder. In Pashak, a defendant challenged the validity of an assignment of rights under a lease in an attempt to avoid duties arising out of those rights. However, in this case, the plaintiffs are not challenging the debt or arguing that a flaw in an assignment removes their obligation to pay the debt, but instead question the defendant’s statutory right to foreclose. That is a distinction with a difference: the Michigan Supreme Court has held that “[t]he right to foreclosure by advertisement is conferred solely by the statute, and its provisions must be strictly complied with.” Dohm v. Haskin, 88 Mich. 144, 147, 50 N.W. 108, 109 (1891); see also Kim v. JP Morgan Chase Bank,--- N.W.2d ---, 2012 WL 104463 -14- (Mich. App. Jan. 12, 2012). The statute requires that the party initiating foreclosure actually be the holder of the note or the mortgage or the servicer; a party wishing to foreclose by advertisement must strictly comply with that requirement. Livonia Properties does not foreclose a challenge to compliance with the statute based on an argument that because an assignment was invalid (for example, because it was a forgery), the purported mortgage-holder did not actually hold the mortgage and therefore was not entitled to foreclose. A successful challenge on this ground would mean, simply, that the foreclosure by advertisement was void. But that is not what the plaintiffs alleged in their complaint in this case. They have not contended that the defendant actually lacked authority to foreclose. To the contrary, they have alleged that BAC Home Loans has been the servicing agent for the mortgage for years. Instead, the plaintiffs posit that the assignment filed by the Trott & Trott lawyer from MERS to BAC Home Loans would be invalid “without proof that the alleged agent maintained a valid and binding power of attorney to execute such documents as the time of the execution of the assignment.” Compl. ¶ 48. The plaintiffs never alleged that no such power of attorney existed, or that the assignment was invalid for some other actual reason. Offering hypothetical scenarios does not satisfy the requirement that the claim must be supported by a factual statement. See Fabian, 628 F.3d at 280. The complaint does not successfully attack the foreclosure on the ground that the assignment executed by Trott & Trott was ultra vires. No pleaded facts back up the plaintiffs’ theorizing. The plaintiff also argues that the assignment is invalid because TBW ceased to exist prior to MERS’s assignment to the defendant. That argument is irrelevant. Before assigning its interest in the mortgage, MERS had the authority to foreclose by advertisement. The status of TBW’s -15- interest in the Note does not matter according to the Michigan Supreme Court’s decision in Saurman. 3. Defendant as servicer The defendant argues that the plaintiffs’ arguments concerning whether it owned an interest in the indebtedness are irrelevant because it, as servicer of the Loan, has the authority to foreclose under Michigan Compiled Laws section 600.3204(1)(d). The complaint alleges: “For the past several years, Plaintiffs’ loan has purportedly been serviced by BAC, although Plaintiffs challenge whether BAC was lawfully retained by TBW to do the same,” Compl. ¶ 11, and “Plaintiffs contacted the purported servicer of their loan, Defendant, BAC, and requested a HAMP and/or other modification,” id. ¶ 13. Section 600.3204(1)(d) requires the party foreclosing by advertisement to be “either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage.” The plaintiffs allege that BAC Home Loans Servicing was their mortgage servicer, a fact that the Court must accept as true at this stage of the proceedings. The plaintiffs’ allegation that BAC Home Loans Servicing was not retained lawfully to act as the servicer is a conclusion that the Court may not accept as true unless it is plausibly supported by the pleaded facts. Iqbal, , 129 S. Ct. at 1951. The plaintiffs do not allege any facts that support the conclusion that BAC Home Loans Servicing was not the lawful servicer of the plaintiffs’ mortgage. The only conclusion that can be drawn from the record is that BAC Home Loans Servicing was the servicer of the plaintiffs’ mortgage and had the authority under Mich. Comp. Laws § 600.3204(1)(d) to foreclose by advertisement. Count 1 of the complaint will be dismissed with prejudice. -16- B. Count 2 — Stay of foreclosure pending modification request The plaintiffs allege that the defendant violated Michigan Compiled Laws section 600.3204(4) when it initiated foreclosure proceedings even though the plaintiffs were eligible for a loan modification under section 3205c(1). The defendant argues that section 600.3205c does not apply because the plaintiffs did not contact a housing counselor. Section 600.3204(4) precludes the initiation of foreclosure proceedings if “[c]alculations under section 3205c(1) show that the mortgagor is eligible for a loan modification and foreclosure under this chapter is not allowed under section 3205c(7).” Mich. Comp. Laws § 600.3204(4)(f) (2010) (the statute was amended effective December 22, 2011; this requirement is now found in section 600.3204(4)(g . Section 600.3205c(1) (2010) stated: If a borrower has contacted a housing counselor under section 3205b but the process has not resulted in an agreement to modify the mortgage loan, the person designated under section 3205a(1)(c) shall work with the borrower to determine whether the borrower qualifies for a loan modification. (statute amended effective December 22, 2011, but the prior version controls because it was in effect when the complaint in this case was filed, see In re Certified Questions from U.S. Court of Appeals for the Sixth Circuit, 416 Mich. 558, 573-74, 331 N.W.2d 456, 464 (1982 . The statute further provides that when a borrower is eligible for a loan modification, the mortgage holder may not pursue foreclosure by advertisement unless it offers the borrower a modification agreement and the borrower fails to accept it within 14 days. Mich. Comp. Laws § 600.3205c(7). If the mortgage holder commences foreclosure proceedings in violation of this statute, the borrower may bring suit to “convert the foreclosure proceeding to a judicial foreclosure.” Mich. Comp. Laws § 600.3205c(8). -17- The plaintiffs do not allege that they contacted a housing counselor as required by the statute. Instead, the complaint alleges: “Plaintiffs therefore retained counsel, and participated in the Michigan statutory modification process, which was supposed to last 90 days, and based on their income was required to conclude with a permanent loan modification, and the cancel[l]ation of foreclosure proceedings on or about November 10, 2010.” Compl. ¶ 26. Courts that have addressed this issue have found that mortgagors may not seek relief under section 600.3205c(8) unless they comply with the statute’s requirements. See Tawfik v. BAC Home Loans Servicing, LP, No. 11- 12590, 2011 WL 6181441, at *4 (E.D. Mich. Dec. 13, 2011); Galati v. Wells Fargo Bank, No. 11- 11487, 2011 WL 5178276, at *5 (E.D. Mich. Nov. 1, 2011); Carl v. BAC Home Loans Servicing, LP, No. 11-11255, 2011 WL 3203086, at *3 (E.D. Mich. July 27, 2011). The Michigan legislature recently amended the statute, which now allows a borrower to suspend foreclosure proceedings “either by contacting the [servicer] directly or by contacting a housing counselor” to request a meeting. 2011 Mich. Pub. Act No. 302 (effective Dec. 22, 2011). However, that amendment was not in effect on August 21, 2010 when the plaintiffs’ lawyer sent his letter to Trott & Trott, and there is no allegation that the plaintiffs, either themselves or through counsel, contacted a housing counselor, as the statute required at the time. Moreover, the foreclosure proceeding has been suspended and remains so while this lawsuit is pending. Because the plaintiffs have not alleged that they complied with Michigan Compiled Laws section 600.3204(4), Count 2 fails as a matter of law. C. Count 3 — Michigan loan modification statute The plaintiffs allege that “by naming their foreclosing law firm as the person [with authority to enter into loan modifications],” the defendant violated Michigan Compiled Laws section -18- 600.3205a(1)(c) because foreclosing law firms are not authorized to grant loan modifications. Trott & Trott’s August 10, 2010 letter clearly indicated that the defendant designated Trott & Trott as its agent with authority to enter into loan modifications. But the plaintiffs have cited no authority to support their conclusion that such a designation does not comply with section 600.3205a(1)(c), and the Court has found none. Count 3 also alleges that section 600.3205c requires the party authorized to enter loan modifications to work with the mortgagor to determine whether the borrower qualifies for a loan modification. The complaint alleges that “Defendant has failed to satisfy this condition precedent by engaging in meeting with the borrower . . . without the presence and/or input of any person who is actually authorized to grant a loan modification.” That claim must fail, because under the plain language of section 600.3205c, the person designated under section 3205a(1)(c) is not required to work with the borrower unless the borrower has contacted a housing counselor under section 3205b. Section 600.3205c(1) states: “If a borrower has contacted a housing counselor under section 3205b but the process has not resulted in an agreement to modify the mortgage loan, the person designated under section 3205a(1)(c) shall work with the borrower to determine whether the borrower qualifies for a loan modification.” (Emphasis added.) Contact with a housing counselor, therefore, is a condition precedent to any duty on the part of the person designated under section 3205a(1)(c). Count 3 has failed to state a claim upon which relief may be granted. D. Count 5 — Violation of federal regulations The complaint alleges that the defendant failed to “provide the borrower with a face-to-face meeting to resolve any default before the borrower falls three monthly payments behind in their -19- mortgage.” Compl. ¶ 80. The plaintiffs’ allegation is commonly known as the “mortgage servicing defense.” The Michigan Court of Appeals aptly described it as follows: The gist of the “mortgage servicing defense” is the notion that an FHA lender has some duty to work with a defaulting FHA mortgagor in order to assist the mortgagor in meeting his obligations under the mortgage agreement by altering the payment terms of that agreement. The sources of these alleged duties are the regulations promulgated by the Department of Housing and Urban Development (HUD) pursuant to 12 U.S.C. § 1709 and the “lender’s handbook” issued by HUD. Mfrs. Hanover Mortg. Corp. v. Snell, 142 Mich. App. 548, 551, 370 N.W.2d 401, 403 (1985). Servicing practices prescribed by the Department of Housing and Urban Development for lenders servicing government insured mortgages are found at 24 C.F.R. § 203.500 through 203.656. Section 203.500 states: This subpart identifies servicing practices of lending institutions that HUD considers acceptable for mortgages insured by HUD. Failure to comply with this subpart shall not be a basis for denial of insurance benefits, but failure to comply will be cause for imposition of a civil money penalty, including a penalty under § 30.35(c)(2), or withdrawal of HUD’s approval of a mortgagee. It is the intent of the Department that no mortgagee shall commence foreclosure or acquire title to a property until the requirements of this subpart have been followed. 24 C.F.R. § 203.500. One of those servicing practices is that “[t]he mortgagee must have a face-to-face interview with the mortgagor, or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage are unpaid.” 24 C.F.R. § 203.604(b). The plaintiffs assert that section 203.604 requires the Court to enjoin the foreclosure sale. However, federal regulations by themselves do not create private causes of action, at least in the present case. Parry v. Mohawk Motors of Michigan, Inc., 236 F.3d 299, 309 (6th Cir. 2000) (stating that “federal regulations in and of themselves cannot create a private cause of action unless the action is at least implied from the applicable statute”). The Supreme Court has explained: -20- [P]rivate rights of action to enforce federal law must be created by Congress. The judicial task is to interpret the statute Congress has passed to determine whether it displays an intent to create not just a private right but also a private remedy. Statutory intent on this latter point is determinative. Without it, a cause of action does not exist and courts may not create one, no matter how desirable that might be as a policy matter, or how compatible with the statute. Raising up causes of action where a statute has not created them may be a proper function for common-law courts, but not for federal tribunals. Alexander v. Sandoval, 532 U.S. 275, 286-87 (2001) (internal quotation marks and citations omitted). “For a statute to create such private rights, its text must be ‘phrased in terms of the persons benefited.’” Johnson v. City of Detroit, 446 F.3d 614, 619-20 (6th Cir. 2006) (quoting Cannon v. University of Chicago, 441 U.S. 677, 692, n.13 (1979 . The plaintiffs have not pointed to a federal statute that supports their claim, and the Sixth Circuit has held that there is no private right of action for breach of HUD’s mortgage servicing policies. Fed. Nat’l Mortg. Ass’n v. LeCrone, 868 F.2d 190, 193 (6th Cir. 1989); see also Miller v. GE Capital Mort. Servs. (In re Miller), 124 F. App’x 152, 155 (4th Cir. 2005); Perry v. Hous. Auth. of City of Charleston, 664 F.2d 1210, 1215-17 (4th Cir. 1981). Therefore, Count 5 must be dismissed. E. Count 7 — Unclean hands Count 7 of the complaint alleges that the defendant’s bad faith negotiations with respect to the loan modification and processing the loan preclude the defendant from exercising the equitable relief of foreclosure because it has unclean hands. Under Michigan law, “one who seeks the aid of equity must come in with clean hands,” Rose v. Nat’l Auction Grp., Inc., 466 Mich. 453, 463, 646 N.W.2d 455, 461 (2002), and fraudulent conduct is one way that a litigant can have unclean hands, ibid. However, the clean hands doctrine is an equitable defense, not a cause of action. Heritage -21- Broad. Co. v. Wilson Commc’ns, Inc., 170 Mich. App. 812, 819, 428 N.W.2d 784, 787 (1988). Therefore, the Court finds that Count 7 fails to state a claim upon which relief can be granted. F. Count 8 — Breach of implied contract of good faith and fair dealing In Count 8, the plaintiffs allege that because HUD has granted the defendant discretion to determine whether the plaintiffs qualify for a HAMP loan modification, the defendant has a duty to exercise its discretion in good faith and that the defendant breached that duty. The defendant argues that the claim should be dismissed because Michigan does not recognize an independent action for breach of a contract’s implied covenant of good faith and fair dealing. The defendant is correct. Michigan does not recognize a cause of action for breach of the implied covenant of good faith and fair dealing. Fodale v. Waste Mgmt. of Mich., Inc., 271 Mich. App. 11, 35, 718 N.W.2d 827, 841 (2006). Therefore, Count 8 must be dismissed. G. Count 11 — Breach of contract In Count 11, the plaintiffs allege that a valid contract existed between the parties that required the defendant to send a HAMP modification package to the plaintiffs via overnight mail. The plaintiffs’ claim lacks merit. The mortgage, the only binding contract that the plaintiffs allege exists between the parties, does not contain such a provision. Nor does it contain a provision that requires BAC Home Loans Servicing to modify the plaintiffs’ loan before or after default. It is impossible, therefore, for the plaintiffs to state a claim. In re Brown, 342 F.3d 620, 628 (6th Cir. 2003) (holding that, once the plaintiff establishes a valid contract, the plaintiff must “then prove by a preponderance of the evidence the terms of the contract, that the defendant breached the terms of the contract, and that the breach caused the plaintiff’s injury”). -22- Additionally, to the extent that the plaintiffs are seeking to enforce an oral statement by a BAC Home Loans Servicing employee regarding the terms of their loan or a modification, the statute of frauds bars the plaintiffs’ claim. Mich. Comp. Laws § 566.132(2); Crown Techn. Park v. D&N Bank, FSB, 242 Mich. App. 538, 550, 619 N.W.2d 66, 72 (2000). Michigan’s statute of frauds states: An action shall not be brought against a financial institution to enforce any of the following promises or commitments of the financial institution unless the promise or commitment is in writing and signed with an authorized signature by the financial institution: . . . (b) A promise or commitment to renew, extend, modify, or permit a delay in repayment or performance of a loan, extension of credit, or other financial accommodation. Mich. Comp. Laws § 566.132(2)(b). Therefore, the Court will dismiss Count 11 of the complaint. H. Count 12 — Promissory estoppel In Count 12, the plaintiffs allege that the defendant has promised to place the plaintiffs in a permanent home loan modification in exchange for the payment of various sums of money. However, Michigan decisional law forecloses the plaintiffs’ claim in this count, which is barred by the statute of frauds. Crown Technology Park v. D&N Bank, FSB, 242 Mich. App. 538, 550, 619 N.W.2d 66, 72 (2000). The Michigan Court of Appeals explained: [The plaintiff’s] argument that M.C.L. § 566.132(2); MSA 26.922(2) does not eliminate promissory estoppel as a cause of action for an unfulfilled oral promise to waive a loan term is unpersuasive. The statute of frauds specifically bars “an action.” By not specifying what sort of “action” M.C.L. § 566.132(2); MSA 26.922(2) prohibits, we read this as an unqualified and broad ban. We also note that the subsections of M.C.L. § 566.132(2); MSA 26.922(2) use generic and encompassing terms to describe the types of promises or commitments that the statute of frauds now protects absolutely. This is consistent with interpreting M.C.L. § 566.132(2); MSA 26.922(2) to preclude all actions for the enumerated promises -23- and commitments, including actions for promissory estoppel. Further, it would make absolutely no sense to conclude that the Legislature enacted a new section of the statute of frauds specifically addressing oral agreements by financial institutions but, nevertheless, the Legislature still intended to allow promissory estoppel to exist as a cause of action for those same oral agreements. Ibid. Therefore, the Court must grant the defendant’s motion to dismiss as to Count 12 of the complaint. I. Count 14 — Intentional fraud The defendant argues that the fraud allegations in the complaint are not pleaded with sufficient particularity. Federal pleading requirements govern actions commenced in or removed to federal court. See Herron v. Jupiter Transp. Co., 858 F.2d 332, 335-36 (6th Cir. 1988). When alleging fraud in federal court, a party must state with particularity the circumstances constituting the fraud. Fed. R. Civ. P. 9(b); see also Bennett v. MIS Corp., 607 F.3d 1076, 1100 (6th Cir. 2010). The complaint must “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.” Indiana State Dist. Council of Laborers and Hod Carriers Pension and Welfare Fund v. Omnicare, Inc., 583 F.3d 935, 942-43 (6th Cir. 2009) (internal quotations and citation omitted). In addition, a party must “allege the time, place, and content of the alleged misrepresentation on which he or she relied; the fraudulent scheme; the fraudulent intent of [the other party]; and the injury resulting from the fraud.” Coffey v. Foamex L.P., 2 F.3d 157, 161-62 (6th Cir. 1993) (internal quotations and citations omitted). “Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). Under Michigan law, the elements of fraud are as follows: (1) That defendant made a material representation; (2) that it was false; (3) that when he made it he knew that it was false, or made it recklessly, without any knowledge -24- of its truth, and as a positive assertion; (4) that he made it with the intention that it should be acted upon by plaintiff; (5) that plaintiff acted in reliance upon it; and (6) that he thereby suffered injury. Hi-Way Motor Co. v. Int’l Harvester Co., 398 Mich. 330, 336, 247 N.W.2d 813, 816 (1976); Higgins v. Lawrence, 107 Mich. App. 178, 184, 309 N.W.2d 194, 197 (1981). In this case, the plaintiffs allege that “from the date Plaintiffs first contacted Defendant to request assistance with their loan payments, and running through the Statutory Modification Process, agents of Defendant have represented to Plaintiffs that they would be granted a permanent modification under HAMP, if they qualified for the same, and if they refrained from exercising [their] rights under the law, and continued to send payments.” Compl. ¶ 127. The plaintiffs have failed to plead fraud with the particularity required by Federal Rule of Civil Procedure 9(b), and count 14, therefore, is defective. However, dismissal with prejudice on the basis of failure to plead with particularity ordinarily should be done only after the plaintiff has a chance to amend the complaint. United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634, 644 (6th Cir. 2003). But the plaintiffs have not sought leave to amend, despite the fact that the defendant’s motion was filed on October 19, 2011 and the plaintiffs did not file their answer — normally due within twenty-one days, see E.D. Mich. LR 7.1(e)(1)(B) — until January 22, 2012. Therefore, the Court will dismiss Count 14 of the complaint without prejudice. J. Count 15 — Constructive fraud The plaintiffs plead constructive fraud in the alternative to their intentional fraud complaint. Constructive fraud is an actual fraud without the element of intent. See Gen. Elec. Credit Corp. v. Wolverine Ins. Co., 420 Mich. 176, 188-90, 362 N.W.2d 595, 601 (1984). As the Michigan Court -25- of Appeals explains it, “the distinction between actual fraud and constructive fraud is that actual fraud is an intentional misrepresentation that a party makes to induce detrimental reliance, while constructive fraud is a misrepresentation that causes the same effect, but without a purposeful design to defraud.” Feldkamp v. Farm Bureau Ins. Co., No. 272855, 2009 WL 103223, at *5 (Mich. Ct. App. Jan. 15, 2009). But for the purpose of the Federal Rules of Civil Procedure, fraud is fraud. Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” The claim in count 15 must fail for the same reasons as the plaintiffs’ intentional fraud claim: they have failed to allege fraud with the specificity required by Rule 9(b). They have failed to identify the speaker or where and when the statements were made. Therefore, Count 15 will be dismissed without prejudice. III. The Court finds that the defendant’s motion may be decided properly under Federal Rule of Civil Procedure 12(b)(6). The Court also finds that the complaint fails to state a claim for which relief may be granted. However, the plaintiffs may be able to save counts 14 and 15 with proper pleading, so those counts will be dismissed without prejudice. Accordingly, it is ORDERED that the defendant’s motion to dismiss [dkt. #3] is GRANTED. -26- It is further ORDERED that all counts of the complaint are DISMISSED WITH PREJUDICE, save counts 14 and 15, which are DISMISSED WITHOUT PREJUDICE. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 7, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 7, 2012. s/Susan K Pinkowski SUSAN K. PINKOWSKI -27-

=== UNITED STATES of AMERICA v. THEODORE COOPER STEWART ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. THEODORE COOPER STEWART, ______________________________________/ Defendant. Case No. 10-20436 Honorable David M. Lawson OPINION AND ORDER DENYING MOTION FOR JUDGMENT OF ACQUITTAL OR A NEW TRIAL The defendant was convicted by a jury in September 2010 of two counts of knowingly transporting child pornography in interstate commerce, 18 U.S.C. § 2252A(a)(1). Before the Court is his timely-filed motion for a judgment of acquittal and for a new trial. While the motion was pending, the defendant sought the withdrawal of his counsel and the appointment of new counsel. The Court granted that request and permitted appointed defense counsel the opportunity to file a supplemental brief in support of the defendant’s motion and to raise new issues in that brief. The defendant advances the following grounds in support of his motion for a judgment of acquittal: (1) the government failed to present sufficient evidence to support his conviction or to demonstrate that he knew the images were lascivious, and (2) the indictment criminalizes conduct that is protected by the First Amendment because no children were harmed. The Court finds no merit in either of those arguments. The government has presented sufficient evidence on each element of the crime and persuasive precedent suggests that the jury reasonably may consider certain manipulations to an image (either in its taking or thereafter) to demonstrate that the images were lascivious or intended to elicit a sexual response. The Court will deny the motion for judgment of acquittal. The defendant requests a new trial because (1) the Court improperly joined the two counts in the same trial, (2) the prosecutor committed misconduct by certain comments and demonstrative exhibits presented during closing arguments, (3) the jury instructions failed to define an identifiable minor and allowed the jury to convict the defendant of an offense that did not exist, (4) the Court improperly admitted Exhibits 15 and 16 in violation of the limited context test; (5) the government failed to publish the computer’s hash value and performed an unfair investigation; and (6) the Court should have recognized a distinction between an emotional and a sexual response under the law. The Court finds no merit in arguments (1) through (3), (5), and (6). The defendant has failed to present any authority supporting the final two arguments. The defendant failed to object to joinder and the jury instructions prior to trial, and did not object at trial to the prosecutor’s alleged misconduct with respect to statements made during closing arguments, and he cannot overcome the plain error standard the Court must apply to those issues. The defendant did object to the prosecutor’s use of certain images during closing argument, but Sixth Circuit precedent suggests that the Court’s curative instruction was sufficient to overcome any potential prejudice. Argument (4) presents a closer question. The Sixth Circuit’s limited context test allows additional images only of the same victims and explicitly excludes images of other victims. Exhibits 15 and 16 include hundreds of pictures of a variety of children (although none constitutes pornography), and it appears at first glance that their admission violates the limited context test, an error that the Sixth Circuit has described as highly prejudicial even under a plain error standard. However, the defendant stipulated to the admission of those exhibits during trial and has not -2- explained to the Court which images he believes properly fall without the limited context test. It is impossible for the Court to determine whether the majority of those images involve the same victims as the charged images. Therefore, the Court will deny the motion because the defendant has failed to carry his burden of demonstrating that a new trial is warranted because the exhibits contained primarily images of other child victims. Therefore, the Court will deny the defendant’s motion for a new trial. I. The facts are familiar to the parties and will be summarized briefly here. On May 12, 2009, defendant Theodore Cooper Stewart, an American ex-patriot, was traveling from Thailand, where he lived, to the United States and entered the country at the Detroit Metropolitan Airport via a flight from Japan. Customs and Border Patrol officer Marvin Steigerwald approached Stewart at the baggage carousel and found Stewart to be “standoffish and confrontational.” He referred Stewart to secondary inspection, where Steigerwald inspected the defendant’s two laptop computers (a Sony VAIO and a Twinhead), digital camera, and three memory sticks. He found suspicious images suggestive of child pornography on the Sony computer but was unable to power up the Twinhead and called in Immigration and Customs Enforcement (ICE) Special Agent Andre Young. Young decided to transport the Twinhead to local ICE headquarters in Detroit for forensic examination and detained both computers. The agents returned the digital camera and memory sticks to Stewart and informed him that he was free to go. At ICE headquarters, forensic analysts reported images of suspected child pornography on the Twinhead computer as well. On January 26, 2009, a complaint was issued against the defendant and he made an initial appearance on August 7, 2009. The grand jury returned an indictment charging two counts of -3- transportation of child pornography in violation of 18 U.S.C. § 2252A(a)(1) on September 8, 2009. Count I alleged that five images that appeared to have been downloaded from the Internet were child pornography, and count II alleged that eight photographs of children playing on a beach that had been cropped to focus on genitalia also were child pornography. After several continuances and a change in counsel, the defendant filed a motion to suppress evidence on February 5, 2010. The Court heard oral argument on March 18, 2010 and issued an opinion denying the motion to suppress on May 24, 2010. However, the time limit imposed by the Speedy Trial Act had elapsed, and the Court dismissed the case without prejudice on June 14, 2010. A new complaint was issued the same date and the grand jury returned a new indictment charging the same two counts of child pornography transportation on July 13, 2010. After the Court denied motions in limine, the matter proceeded to trial on September 14, 2010. On September 16, 2010, after the government concluded its case in chief, the defendant made an oral motion for judgment of acquittal under Federal Rule of Criminal Procedure 29, arguing that the government failed to present sufficient evidence that the charged images in count II were lascivious or that the images in count I involved minors, the charge of possession of potential young-adult pornography in count I raised First Amendment concerns, and the government failed to demonstrate that the defendant knew the images were lascivious. Trial Tr., vol. II, at 454-60. The Court denied that motion from the bench, finding that the government had presented sufficient evidence from which a jury could find that the defendant committed each element of the charged crime and that the images as cropped could be considered child pornography under the test in United States v. Brown, 579 F.3d 672 (6th Cir. 2009). Trial Tr., vol. III, at 493. -4- After the proofs were concluded, the Court conducted a charge conference after presenting the parties with a draft of jury instructions compiled from submissions by each side. The defendant objected to the definition of sexually explicit conduct, arguing that the Court should have used the definitions in 18 U.S.C. §§ 2256(2)(a) and 2256(8)(a)&(c) rather than section 2256(2)(b). Trial Tr., vol. II, at 481-84. Both parties agreed that the Court should use the language in section 2256(2)(a), and the Court agreed to substitute those definitions into its jury instructions. Id. at 483. The defendant raised no other objections to the proposed jury instructions. Id. at 484; see also Trial Tr., vol. III, at 570 (lodging no objections at the close of the jury instructions). During closing argument, the defendant objected to a government slideshow that allegedly used images of better quality and resolution than those introduced as exhibits or provided to defense counsel during pretrial discovery. Trial Tr., vol.II, at 468-69; Trial Tr., vol. III, at 520-25. The Court allowed the government to use the images and gave the jury a cautionary instruction to consider only the exhibits as evidence, not the images presented in closing arguments. Jury deliberations began on September 16 and proceeded to September 17. On September 16, 2010, the Court addressed a note from the jury concerning the definition of child pornography and whether all elements of this definition must be satisfied. Trial Tr., vol. III, at 571-73. The Court re- instructed the jury with the definition of child pornography as follows: Child pornography is the visual depiction by film, video, computer-generated image and so forth, as mentioned in the instruction, where the production of the visual depiction involves the use of a minor engaged in sexually-explicit conduct, or such visual depiction has been created, adapted or modified to appear that an identifiable minor is engaging in sexually-explicit conduct. Those are the — that’s the definition of child pornography. Trial Tr., vol. III, at 575. The Court went on to clarify that the additional items in the jury instructions were intended to serve as definitions for the elements of child pornography and the jury -5- was not limited to the factors listed in the instructions when making its determination of lasciviousness, nor was it required to find the existence of all of the listed factors. Id. at 575-76. The Court concluded by reminding the jury that the government was required to prove its case beyond a reasonable doubt and the defendant did not have to prove anything. Id. at 576. The instructions and verdict form directed the jury to consider each of the five images charged in count I and the eight images charged in count II, and decide whether each image satisfied the definition of child pornography. On September 17, 2010, the jury returned a verdict of guilty on count I as to images 0099401031.jpg (Exhibit 8) and 0925224924.jpg (Exhibit 9), but not as to images 18_100x136.jpg (Exhibit 10), fox11.jpg (Exhibit 11), or roxy_2.jpg (Exhibit 12), and guilty on count II as to all images: contemplation.jpg (Exhibit 18), P1020704.jpg (Exhibit 20), P1010203.jpg (Exhibit 22), P1010660.jpg (Exhibit 24), P1000667.jpg (Exhibit 27), P1010292.jpg (Exhibit 29), P1010141.jpg (Exhibit 31), P1010210.jpg (Exhibit 34). On October 1, 2010, the defendant filed a combined renewed motion for judgment of acquittal under Rule 29 and for a new trial under Rule 33. The government filed a responsive brief, but the defendant did not file a reply. Instead, on February 16, 2011, defense counsel filed a motion to withdraw, asserting a potential conflict of interest between the defendant and his attorneys. The defendant himself concurred in the motion. The Court granted this motion following a hearing on February 23, 2011 and a new lawyer was appointed to represent the defendant. Upon new counsel’s request, the Court permitted the defendant to file a supplemental brief in support of the pending post- trial motion in order to raise new issues. Supplemental briefs were filed, and the Court heard oral argument at a hearing on June 30, 2011. II. Motion for judgment of acquittal -6- The defendant properly made and preserved his right to challenge the sufficiency of evidence under Rule 29. See Fed. R. Crim. P. 29(a), (c)(3). When addressing a motion for judgment of acquittal under Rule 29(c), the Court must view the evidence in the light most favorable to the prosecution and determine whether there was sufficient evidence offered at trial to convince a rational trier of fact beyond a reasonable doubt that all of the elements of the charged crimes had been established. United States v. Graham, 622 F.3d 445, 448 (6th Cir. 2010); see also Jackson v. Virginia, , 318-19 (1979). “The relevant question in assessing a challenge to the sufficiency of the evidence is whether any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” United States v. McAuliffe, 490 F.3d 526, 537 (6th Cir. 2007); see also Jackson, 443 U.S. at 318. The evidence need not exclude every theory of innocence. Jackson, 443 U.S. at 319. The testimony of a single witness is generally sufficient to demonstrate guilt beyond a reasonable doubt. “The prosecution, however, must present substantial evidence as to each element of the offense from which a jury could find the accused guilty beyond a reasonable doubt.” Brown v. Davis, 752 F.2d 1142, 1145 (6th Cir. 1985) (internal citation omitted). “Substantial evidence is more than a scintilla. It means such relevant evidence as a reasonable mind might accept to support a conclusion. It is evidence affording a substantial basis of fact from which the fact in issue can be reasonably inferred.” United States v. Martin, 375 F.2d 956, 957 (6th Cir. 1967). But where the evidence is at least as indicative of innocence as guilt, the Court must direct a verdict of acquittal. United States v. Berger, 224 F.3d 107, 116 (2d Cir. 2000). A. Sufficiency of evidence -7- The defendant was charged under 18 U.S.C. § 2252A(a)(1), which penalizes “[a]ny person who . . . knowingly . . . transports . . . using any means or facility of interstate or foreign commerce or in or affecting interstate or foreign commerce by any means, including by computer, any child pornography.” The statute defines “child pornography” as: any visual depiction, including any photograph, film, video, picture, or computer or computer-generated image or picture, whether made or produced by electronic, mechanical, or other means, of sexually explicit conduct, where-- (A) the production of such visual depiction involves the use of a minor engaging in sexually explicit conduct; (B) such visual depiction is a digital image, computer image, or computer-generated image that is, or is indistinguishable from, that of a minor engaging in sexually explicit conduct; or (C) such visual depiction has been created, adapted, or modified to appear that an identifiable minor is engaging in sexually explicit conduct. 18 U.S.C. § 2256(8). “Sexually explicit conduct” involves “actual or simulated . . . sexual intercourse . . . ; . . . bestiality; . . . masturbation; . . . sadistic or masochistic abuse; or . . . lascivious exhibition of the genitals or pubic area of any person.” 18 U.S.C. § 2256(2)(A); see also 18 U.S.C. § 2256(2)(B) (providing similar definitions for conduct defined in 18 U.S.C. § 2256(8)(B . The government contended that the images on the defendant’s computers met only one part of the definition of “sexually explicit conduct”: the “lascivious exhibition of the genitals or pubic area” of the children in the photos. The parties’ present dispute involves the definition of the term “lascivious” in the requirement of sexually explicit conduct, which remains undefined in the statute. The Sixth Circuit, along with a majority of circuits, has adopted the test for “lasciviousness” from United States v. Dost, 636 F. Supp. 828, 832 (S.D. Cal. 1986). See United States v. Brown, 579 F.3d 672, 680 (6th Cir. 2009); see also United States v. Campbell, 81 F. App’x 532, 536 (6th Cir. 2003 . The Dost test asks the factfinder to evaluate the following six factors: -8- 1) whether the focal point of the visual depiction is on the child’s genitalia or pubic area; 2) whether the setting of the visual depiction is sexually suggestive, i.e., in a place or pose generally associated with sexual activity; 3) whether the child is depicted in an unnatural pose, or in inappropriate attire, considering the age of the child; 4) whether the child is fully or partially clothed, or nude; 5) whether the visual depiction suggests sexual coyness or a willingness to engage in sexual activity; 6) whether the visual depiction is intended or designed to elicit a sexual response in the viewer. Dost, 636 F. Supp. at 832; Brown, 579 F.3d at 680; see also United States v. Steen, 634 F.3d 822, 828 (5th Cir. 2011) (“We have previously adopted the ordinary meaning of the phrase ‘lascivious exhibition,’ which we defined as ‘a depiction which displays or brings forth to view in order to attract notice to the genitals or pubic area of children, in order to excite lustfulness or sexual stimulation in the viewer.’” (quoting United States v. Grimes, 244 F.3d 375, 381 (5th Cir. 2001), and United States v. Knox, 32 F.3d 733, 746 (3d Cir. 1994 . “[T]his list is not exhaustive, and an image need not satisfy every factor to be deemed lascivious.” Campbell, 81 F. App’x at 536. Other circuits have noted that the factors “are neither comprehensive nor necessarily applicable in every situation” and caution that a court’s inquiry must be case-specific. United States v. Frabizio, 459 F.3d 80, 87 (1st Cir. 2006). The images charged in count 2 of the indictment all share the same characteristic: each of the eight images was a cropped version of a larger photograph. The larger images, the government agrees, did not meet the definition of child pornography; they were photographs of young girls swimming naked at a beach. However, the cropped images all focused on the girls’ genitalia, and the government contends that the concentration of the photographic image on that sexual organ rendered the images lascivious. Although Exhibit 9, which is one of the images charged in count -9- 1, likely did not originate from a beach photo, it is cropped in the same fashion to focus in a young girl’s vulva; and the government contends that image is lascivious for the same reason. Both parties agree that the Dost test applies to the issue before the Court and argue only as to the interpretation and application of the factors to the images presented to the jury in this case, particularly with respect to the sixth factor — “whether the visual depiction is intended or designed to elicit a sexual response in the viewer.” The articulation of that factor, especially the choice of the words “intended or designed,” has provoked a debate over whether the determination of lasciviousness must be confined to the four corners of the image, or if consideration of the context from which the photograph arose is allowable to assess the creator’s intent or design. In United States v. Brown, the Sixth Circuit weighed the competing arguments and adopted a “limited context test” that “permits consideration of the context in which the images were taken, but limits the consideration of contextual evidence to the circumstances directly related to the taking of the images.” Brown, 579 F.3d at 683. The court explained how that test might be applied: A number of factors can illuminate the context in which photographs were taken. These include, inter alia, evidence about (1) where, when, and under what circumstances the photographs were taken, (2) the presence of other images of the same victim(s) taken at or around the same time, and (3) any statements a defendant made about the images. Consideration of these factors can help factfinders consider the way a defendant “arranged the poses and took the photographs” . . . and can help them resolve close judgment calls about whether an image inadvertently focuses on a child’s genitalia, or whether it is intended to elicit a sexual response in the viewer. Id. at 683-84 (internal citation and footnote omitted). The court was careful to caution against consideration of other factors, however, “that do not relate directly to the taking of the images, such as past bad acts of the defendant, the defendant’s possession of other pornography (pornography of another type or of other victims), and other generalized facts that would relate only to the general ‘unseemliness’ of the defendant.” Id. at 684. -10- The defendant does not contest the fact that Exhibit 8, which depicts a young girl’s vulva next to an adult penis, constitutes child pornography. However, he argues that the act of cropping the photographs cannot render lascivious an image that was not initially so. Therefore, he contends that he is entitled to a judgment of acquittal on Exhibits 9, 18, 20, 22, 24, 27, 29, 31, and 34. He also argues that there was no evidence from which the jury could find that he knew those images were pornographic. The defendant bears a “heavy burden” of demonstrating that the evidence failed to provide grounds on which a reasonable jury could have concluded that the condemned images met the definition of child pornography. United States v. Abboud, 438 F.3d 554, 589 (6th Cir. 2006). As to Exhibit 9 in count 1 (the close cropped image merely depicting a vulva), the government presented evidence that the image could be considered lascivious because it involved a minor (based on the testimony of forensic pathologist Dr. Kanu Virani), focused on the child’s genitalia, and the area photographed was nude. The jury properly could infer that the image was intended to elicit a sexual response in the viewer because of how it was cropped and where it was located on the defendant’s computer. The government presented evidence that the images in count 2 involved minors (a fact that appears to be undisputed by the defendant), the focal point of the images was the child’s genitalia, the children were partially clothed or nude, and photographs were cropped from larger images that largely were innocuous. The jury could have inferred that the act of cropping demonstrated that the images were intended to elicit a sexual response in the viewer and constituted a lascivious exhibition of the genitals, despite the defendant’s argument to the contrary. The government offered evidence that the larger images were taken with a camera that had the same characteristics as the camera -11- possessed by the defendant and edited using the same software found on the computers seized from the defendant at the border. The defendant contends that the act of cropping cannot as a matter of law render an image lascivious when the larger image from which it was cropped was undisputably not lascivious. However, several courts, including the Sixth Circuit in United States v. Brown, have suggested that a reasonable jury may consider evidence of cropping or a focus on a specific area to support a finding of lasciviousness. See Brown, 579 F.3d at 681; see also United States v. Johnson, 639 F.3d 433, 440-41 (8th Cir. 2011) (holding that “a reasonable jury could find the video clips were intended to be lascivious” because the video camera involved in the production of the images was angled and zoomed such that “the frame encompassed their nude bodies from their shoulders to below their knees.”); United States v. Freeman, 808 F.2d 1290, 1292 (8th Cir. 1987) (noting that the statute provided sufficient notice to the defendants that their conduct of zooming their camera to focus on the girl’s genitalia was illegal under the statute); United States v. Dauray, 76 F. Supp. 2d 191, 196-97 (D. Conn. 1999) (cropped images alone may be sufficient to support a finding of lasciviousness), reversed on other grounds, 215 F.3d. 251 (2d Cir. 2000). Similarly, the evidence supporting the inference that the images were cropped by the defendant is sufficient to establish the knowledge element of the offense. See Freeman, 808 F.2d at 1292 (noting that the statute provided sufficient notice to the defendants that their conduct of zooming their camera to focus on the girl’s genitalia was illegal under the statute). The Court is satisfied that the record contains sufficient evidence from which the jury could have found all the elements of the crime charged beyond a reasonable doubt as to both counts of the indictment. B. First Amendment bar -12- The defendant also argues that his conviction should be reversed on First Amendment grounds because it is unconstitutional to criminalize the manipulation of photographs where no child abuse or exploitation occurred. The defendant describes his modifications as expressive conduct that should be protected by the First Amendment. He relies on State v. Zidel, 156 N.H. 684, 940 A.2d 255 (2008), where the New Hampshire Supreme Court held that the defendant could not be convicted under a child pornography statute based on images he created by morphing an identifiable child’s face onto an adult’s body and which he kept in his possession alone. In New York v. Ferber, 458 U.S. 747 (1982), the Supreme Court held that “[w]hen a definable class of material . . . bears so heavily and pervasively on the welfare of children engaged in its production, we think . . . that it is permissible to consider these materials as without the protection of the First Amendment” based on the state’s special province for protecting minors and the “intrinsic[] relat[ion]” between the production of child pornography and the sexual abuse of children. Id. at 759, 764; see also Ashcroft v. Free Speech Coalition, 535 U.S. 234, 240, 250 (2002); United States v. Amirault, 173 F.3d 28, 34 n.3 (1st Cir. 1999). The Supreme Court also upheld a ban on the possession of pornography produced using children in Osborne v. Ohio, 495 U.S. 103 (1990), based on “the State’s interest in protecting the victims of child pornography.” Id. at 110; see also Free Speech Coalition, 535 U.S. at 250. In Free Speech Coalition, the Supreme Court turned to the constitutionality of the Child Pornography Prevention Act of 1996, 18 U.S.C. § 2251 et seq., the statute under which the defendant is convicted in this case. Free Speech Coalition, 535 U.S. at 243-44. The issue before the Supreme Court was slightly different that in the present case, however, because it involved the production of material that “appears to be” child pornography under 18 U.S.C. § 2256(8)(B). Id. -13- at 241. The Court focused on pornography involving “virtual minors,” that is, images made on a computer to appear like child pornography but that do not necessarily involve the use of an actual child victim. The Court expressed grave concerns over the scope of speech prohibited by the law and the lack of a connection established in the statute between the speech (or the production and distribution of child pornography) and sexual abuse of children. Id. at 247-50. Ultimately, the Supreme Court concluded that the prohibition in section 2256(8)(B) could not be justified under the Court’s precedents and was overbroad and unconstitutional. Id. at 256. The Court also sustained a similar challenge to section 2256(8)(D), which prohibited material that “convey[ed] the impression” that it depicted minors, as overbroad and unconstitutional. Id. at 258. Under a revised version of the statute, the Supreme Court held in United States v. Williams 553 U.S. 285, 299 (2008), that “offers to provide or requests to obtain child pornography are categorically excluded from the First Amendment.” Id. at 299. The Court again noted that “[c]hild pornography harms and debases the most defenseless of our citizens.” Id. at 307. It also asserted that Congress’s “carefully crafted” response to the Court’s decision in Free Speech Coalition was “successful.” Ibid. In Doe v. Boland, 630 F.3d 491 (6th Cir. 2011), the Sixth Circuit applied those precedents to a circumstance that approaches the factual circumstances of the present case. There, the defendant challenged his conviction for morphed child pornography images under section 2256(8)(C). The court noted that the situation was dissimilar from one involving an image morphed from two innocent images or an image of an adult morphed into an image of a child engaging in sexual activity; instead, the defendant “morphed images of minors into pornography, images that ‘implicate the interests of real children.’” Id. at 497 (quoting Free Speech Coalition, 535 U.S. at -14- 242). The court determined that the defendant’s morphed images were directly covered by section 2256(8)(C) and “the reality that Boland himself did not ‘use’ real children to produce the images makes no difference” under section 2252A. Ibid. Boland suggests that children are harmed whenever they actually appear in lascivious photographs, even if they were not posed and even when the lasciviousness results from image manipulation. The Court, therefore, must reject the defendant’s argument on First Amendment grounds. The Supreme Court has made clear that once an image is determined to constitute child pornography, no protection can be derived from the First Amendment. The Sixth Circuit has upheld the criminalization of graphic manipulation of a photograph by a defendant even where a child was not used to create the original images and where there is no explicit evidence of harm to the photographed child. The statute explicitly criminalizes the transportation of child pornography, and there is evidence in the record from which the jury could have concluded that the images showed a lascivious display of the children’s genitals. Although many of the cases have focused on the exploitation of the child in the production process, there is also harm to the child in his or her objectification by a single viewer and in the transportation of his or her images of unintended intimacy in commerce. On these bases, a child may still be exploited even without knowingly participating in the taking of the photograph. The Court finds that the First Amendment presents no bar to the defendant’s convictions in this case. III. Motion for new trial “Upon the defendant’s motion, the court may vacate any judgment and grant a new trial if the interest of justice so requires.” Fed. R. Crim. P. 33(a). “The decision whether to grant a new -15- trial is left to the sound discretion of the district court.” United States v. Pierce, 62 F.3d 818, 823 (6th Cir. 1995). “A reversal based on the verdict being against the manifest weight of the evidence is proper when the government has presented sufficient evidence to convict, but the judge disagrees with the jury’s resolution of conflicting evidence.” United States v. Lutz, 154 F.3d 581, 589 (6th Cir. 1998). “A district judge, in considering the weight of the evidence for purposes of adjudicating a motion for new trial, may act as a thirteenth juror, assessing the credibility of witnesses and the weight of the evidence.” United States v. Hughes, 505 F.3d 578, 593 (6th Cir. 2007) (quoting Lutz, 154 F.3d at 589). Moreover, “it is widely agreed that Rule 33’s ‘interest of justice’ standard allows the grant of a new trial where substantial legal error has occurred.” United States v. Munoz, 605 F.3d 359, 373 (6th Cir. 2010) (citing cases). A. Improper joinder Among the several grounds on which the defendant’s motion for new trial is based is the contention that the Court improperly joined the two counts in the same trial. Federal Rule of Criminal Procedure 12 states that motions to sever charges under Rule 14 “must be raised before trial.” Fed. R. Civ. P. 12(b)(3)(D); United States v. Wallace, 597 F.3d 794, 798 (6th Cir. 2010). Objections and motions properly brought under Rule 12(b)(3) are waived if not made in the allotted time prior to trial. Fed. R. Civ. P. 12(e); Wallace, 597 F.3d at 798; United States v. Deitz, 577 F.3d 672, 692 (6th Cir. 2009) (“Thus, because the record reveals that Deitz failed to file a Rule 14(a) motion prior to trial, he waived his objection.”); see also United States v. Rox, 692 F.2d 453, 454 (6th Cir. 1982) (determining that the defendant waived her objection to misjoinder when she failed to raise the issue until the third day of trial and could not challenge the allegedly improper joinder on appeal). A court may grant relief from the waiver “[f]or good cause,” Fed. R. Civ. P. 12(e); -16- Wallace, 597 F.3d at 798, where the defendant can “articulat[e] some compelling reason for not filing the motion within the deadline,” United States v. Walden, 625 F.3d 961, 966 (6th Cir. 2010); see also Wallace, 597 F.3d at 798-99 (holding that “the verdict must stand because Defendant waived her right . . .[,] has suffered no constitutional harm as a result of all charges being tried together in a single trial,” and failed to make “‘any substantive objections’ to the allegedly improper joinder.” (quoting Abboud, 438 F.3d at 567 . The defendant did not file a motion to sever before trial. Therefore, the defendant has waived this objection under Federal Rule of Criminal Procedure 12(b)(3). The defendant has presented no arguments tending to demonstrate good cause for failing to file a motion within the deadline and instead argues only prejudice. The defendant has failed to meet the standards applicable under Federal Rule of Civil Procedure 12(e) for the Court to grant relief from his waiver. The Court will deny the defendant’s motion for a new trial on this ground. B. Prosecutorial misconduct The defendant points to three incidents during trial as constituting misconduct by the prosecutor: (1) stating during closing argument that the defendant was responsible for cropping the images; (2) referring to him as a “bad guy” during the direct examination of ICE agent Joshua Edwards; and (3) using images of exhibits during closing that were enhanced in size and had resolution greater than the images actually received in evidence. The first item was not preserved by objection. In the absence of an objection, the Court applies a plain error analysis. Fed. R. Crim. P. 52(b); United States v. Warshak, 631 F.3d 266, 304 n.42 (6th Cir. 2010) (citing Cristini v. McKee, 526 F.3d 888, 901 (6th Cir. 2008 . Under the plain error standard, the defendant must demonstrate (1) error, (2) that was plain, (3) that affects -17- substantial rights, and that (4) “seriously affect[s] the fairness, integrity or public reputation of judicial proceedings.” Puckett v. United States, 556 U.S. 129, 135 (2009) (quoting United States v. Olano, 507 U.S. 725, 736 (1993 (alterations in original). “A ‘plain error’ is one that is clear or obvious,” either at the time of trial or while pending appeal. United States v. Oliver, 397 F.3d 369, 379 (6th Cir. 2005) (citing Olano, 507 U.S. at 734). For an error to affect a defendant’s substantial rights under the third element of the test, the defendant “must generally show that the error was prejudicial, that is, that it affected the outcome of the district court proceedings.” United States v. Smith, 601 F.3d 530, 541 (6th Cir. 2010) (citing United States v. Jones, 108 F.3d 668, 672 (6th Cir. 1997 . The defendant does not clear the starting gate on the first item. The argument attributing the cropping activity to the defendant was not misconduct and not error. Attorneys are permitted to draw reasonable inferences during closing argument that are based on the evidence presented at trial. Cristini, 526 F.3d at 901; see also United States v. Crosgrove, 637 F.3d 646, 663-64 (6th Cir. 2011); Byrd v. Collins, 209 F.3d 486, 535 (6th Cir. 2000). The government presented evidence that each image was taken with the same camera as was found on the defendant at the border, was edited with the same software as was on the computers collected from the defendant at the border, and was stored on the computers found on the defendant at the border. It is worth noting in passing that the defendant did not present any evidence contesting ownership of the camera, the image editing software, or the computers, and did not argue that any other individuals had used the camera or the software to take or crop the images at issue. It was not an error for the prosecutor to argue the inference that the defendant had taken and cropped the images. See, e.g., Byrd, 209 F.3d at 535 -18- (holding that the prosecutor’s inference that the shirt sleeve was bloody and involved in the crime because it was missing was not an error). The defendant did object to the prosecutor’s use of the term “bad guy” during agent Edwards’s examination. In response, the Court sustained the objection and told the government to rephrase the question. If the statement was improper, which it arguably was, then the Court must evaluate the four flagrancy factors generally used by the Sixth Circuit: “(1) the likelihood that the remarks of the prosecutor tended to mislead the jury or prejudice the defendant; (2) whether the remarks were isolated or extensive; (3) whether the remarks were deliberately or accidentally made; and (4) the total strength of the evidence against the defendant.” United States v. Ham, 628 F.3d 801, 810 (6th Cir. 2011) (quoting United States v. Davis, 514 F.3d 596, 613 (6th Cir. 2008 . To the extent that this statement may be construed to refer to the defendant (which is not altogether clear), it certainly is improper — as noted by the Court on the record — and also presents an expression of personal opinion that the Sixth Circuit has found to be prejudicial under the first flagrancy factor. See United States v. Dandy, 998 F.2d 1344, 1353 (6th Cir. 1993); United States v. Bess, 593 F.2d 749, 755 (6th Cir. 1979). However, the Court asked the government to rephrase its question and it did so, which lessens prejudice to the defendant. Cf. Warshak, 631 F.3d at 306 (discussing ameliorative instructions). Therefore, the first factor cuts in favor of the defendant, but not substantially. The second factor weighs in favor of the government. The “bad guy” reference was a single statement made in isolation. The record reflects that this statement was made by accident, which the Court itself suggested, and the government apologized for this slip. In fact, the context of the question indicated that the prosecutor intended to refer to a hypothetical “bad guy,” and not the defendant per se. The fourth factor is a wash. As noted above, the government -19- presented sufficient evidence to support the jury’s conviction; however, the Court noted in its ruling on the Rule 29 motion that the issue was a close factual one for the jury: the evidence that the defendant possessed the images was overwhelming, but the question whether cropping may render an image lascivious has not been ruled on by a court as a matter of law. The Court is satisfied that the prosecutor’s isolated statement, unfortunate as it was, did not constitute prosecutorial misconduct. The defendant also objected several times to the use of larger and higher resolution images of the accused photographs as demonstrative evidence during closing argument. The government insists that it did nothing to enhance the images, and the larger size was simply a function of using the video screen in the courtroom instead of letter-size paper to reproduce the images. The defendant has offered nothing to contradict that assertion. But even if the government did alter the images, the Sixth Circuit has held that “the trial court can generally correct such improprieties by instructing the jury that closing arguments are not evidence.” Crosgrove, 637 F.3d at 664 (citing United States v. Emuegbunam, 268 F.3d 377, 406 (6th Cir. 2001 ; see also Warshak, 631 F.3d at 306. In this case, the Court addressed the defendant’s objection with the following instruction: Members of the jury, you have seen a display of a couple of images on the screen during the Government’s closing argument here. It has been brought to my attention that the appearance of those images appear — looks clearer and more defined and the resolution is better than the actual exhibits that were received in the case. That may be true. That’s up to you to decide. However, you must decide the case based on the evidence. The evidence of the images themselves will be the pictures that were marked and received by me in court. And when you return to the jury room, we will have a notebook with those exhibits in them and those are the ones that you must consider in determining whether the images themselves, whether the pictures themselves, constitute child pornography as I have defined it for you. -20- I will permit the parties, particularly the Government, to use those images that have been prepared for the demonstrative purposes; however, those are not the evidence in the case. The evidence in the case that you must consider are the photographs that are marked as exhibits and that you will have in the jury room. Trial Tr., vol. III, at 524-25. This instruction is in line with — and in fact, more extensive than — instructions that have been found to “cure” any potential impropriety in prior cases. See Crosgrove, 637 F.3d at 664; Warshak, 631 F.3d at 306. The jury is presumed to follow such instructions. Ham, 628 F.3d at 811 (citing United States v. Moreno, 933 F.2d 362, 368 (6th Cir. 1991 . In addition, the likelihood of prejudice is diminished by the fact that the allegedly improper images were shown for only a couple seconds, at most ten, during closing argument, and the images that the jury considered throughout their deliberations were the copies of the “lower resolution” photographs that had been admitted as evidence. The defendant is not entitled to a new trial on this ground. C. Jury instructions The defendant argues that the jury instructions were erroneous and misleading because the Court did not inform the jury of the statutory definition of an “identifiable minor” as set out in 18 U.S.C. § 2256(9). The precise nature of the criticism is not clear, but it appears that the defendant is asserting that without that definition, the jury could have convicted the defendant even if it found that the images were not created, adapted, or modified using images of real minors and instead using images of virtual humans. The defendant also appears to argue that the instructions allowed the jury to convict even if the real humans in the photographs were over 18 years old. Federal Rule of Criminal Procedure 30(d) requires that “[a]party who objects to any portion of the instructions or to a failure to give a requested instruction must inform the court of the specific objection and the grounds for the objection before the jury retires to deliberate.” The defendant neither requested an instruction along the lines of section 2256(9) nor objected to the absence of -21- such an instruction. “Failure to object in accordance with this rule precludes appellate review, except as permitted under Rule 52(b)[, the plain error rule].” Ibid. When the defendant fails to object to the jury instructions, “plain error requires a finding that, taken as a whole, the jury instructions were so clearly erroneous as to likely produce a grave miscarriage of justice.” United States v. Morrison, 594 F.3d 543, 546 (6th Cir. 2010) (quoting United States v. Newsom, 452 F.3d 593, 605 (6th Cir. 2006 . The Court agrees that it would have been preferable to instruct the jury on the definition set out in section 2256(9). That statute states: (9) “identifiable minor”-- (A) means a person-- (i)(I) who was a minor at the time the visual depiction was created, adapted, or modified; or (II) whose image as a minor was used in creating, adapting, or modifying the visual depiction; and (ii) who is recognizable as an actual person by the person’s face, likeness, or other distinguishing characteristic, such as a unique birthmark or other recognizable feature . . . 18 U.S.C. § 2256(9). And certainly, had either party requested the instruction, the Court would have given it. But the question of “virtual images” was never in play in this case. As the government points out, neither party presented any evidence concerning computer-generated images involving avatars or other simulations. The Court’s jury instruction defining a minor as “a person younger than 18 years old,” Trial Tr., vol III, at 508, is merely a clearer way of stating that the image must be of a real person who was a minor at the time of the image’s creation or whose image as a minor was used in creating the visual depiction. The omission of the statutory language of section 2256(9) did not result in a miscarriage of justice, grave or otherwise. -22- If the defendant instead is arguing that the instructions allowed the jury to convict on the cropped images, even though several of them did not include a face, likeness, or other identifying characteristic of the child in the photograph, the argument is not supported by precedent. As noted earlier, several courts have upheld convictions for cropped images that did not include faces without suggesting that the images did not meet the statutory definition for an identifiable minor. Johnson, 639 F.3d at 440-41; Brown, 579 F.3d at 681; Freeman, 808 F.2d at 1292; Dauray, 76 F. Supp. 2d at 197. There was evidence in the case from which the jury could “identify” the minors whose images were cropped: the jury properly could consider the images from which the cropped pictures were taken, Brown, 579 F.3d at 684, and those images provided sufficient information from which the jury could find that an identifiable minor was involved in the production of the accused photographs. The defendant points out that the jury submitted a question asking about the definition of child pornography. The Court interpreted the jury’s question to ask which elements the jury was required to find and not what constituted a minor within the image. After the Court responded to the jury, the Court asked counsel if they had any objections to the explanation and both parties indicated that they did not. Trial Tr., vol. III, at 578. There is no basis on which to conclude that the jurors were confused as to the requirement that a real minor must be the subject of the accused image. A new trial is not warranted on this ground. D. Admission of Exhibits 15 and 16 On the second day of trial, the government moved for the admission of exhibits 14 through 34A. Trial Tr., vol II, at 387-88. Defense counsel stated that he had no objection and the Court -23- admitted the entire range of exhibits. Among them were Exhibits 15 and 16, which were collections of photographs retrieved from the defendant’s computers that did not amount to child pornography, but were characterized by the government as “child erotica.” The defendant now argues that the Court should not have received those collections because they exceeded the scope of the limited context test announced by the Sixth Circuit in United States v. Brown. As noted earlier, in Brown, the court permitted the consideration of images (other than the accused images) “of the same victim(s) taken at or around the same time” to evaluate “the circumstances directly related to the taking of the images.” 579 F.3d at 683-84. However, “the defendant’s possession of other pornography (pornography of another type or of other victims), and other generalized facts that would relate only to the general ‘unseemliness’ of the defendant” is not admissible. Id. at 684. Exhibits 15 and 16 contain hundreds of images of different children playing on the beach in different stages of disrobing. In most cases, the children are photographed from the back or their faces are otherwise obscured by the scenery or their positions (indeed, several of the larger images connected to the charged images do not present sufficient personal characteristics to identify one child victim from another). It is difficult to tell whether any of the images in these exhibits include the same victims in the charged images; it is likely that there is some overlap. However, it is safe to say that the majority of the images depict children not presented in the accused images. It is somewhat of a stretch to say that the admission of images of other children as found in Exhibits 15 and 16 was erroneous under Brown. Certainly, an objection at trial on the basis of Brown would have had to have been considered seriously, and possibly it would have been sustained. However, Brown’s caution was directed toward “pornographic images of other children” that could amount to “a separate criminal act.” Id. at 686 (emphasis added). The danger of allowing -24- “unrelated” child pornography into evidence, the court explained, was that the factfinder could “find an otherwise innocuous photograph lascivious, and . . . convict[] a defendant for conduct unrelated to the charges at hand.” Id. at 686. Admission of the exhibits did not amount to plain error. The Sixth Circuit has stated that the test “encourages litigants to decide what issues really matter and to raise them while the district court still has time to take action, rather than ‘sandbagging’ and remaining silent pending the outcome of the case.” United States v. Williams, 641 F.3d 758, 770-71 (6th Cir. 2011) (Thapar, J., concurring). Even if the defendant could satisfy the first three elements of the plain error test, the Court cannot find that “the error seriously affect[ed] the fairness, integrity or public reputation of the judicial proceedings.” Puckett, 556 U.S. at 135. The Supreme Court has observed that “[i]n cases applying this fourth criterion, we have suggested that, in most circumstances, an error that does not affect the jury’s verdict does not significantly impugn the ‘fairness,’ ‘integrity,’ or ‘public reputation’ of the judicial process.” United States v. Marcus, --- U.S ---, 130 S. Ct. 2159, 2166 (2010). The main issue in this case, except with respect to Exhibit 8, which the defendant acknowledged was child pornography, was whether the act of cropping itself rendered the images lascivious. Neither party argued that the initial images — or any similar images of other victims, including those in Exhibits 15 and 16 — were lascivious. The Court cannot say that admission of those exhibits affected the jury’s verdict in this case. The defendant is not entitled to a new trial on this ground. E. Unfair investigation -25- The defendant argues that the government did not engage in a fair investigation, reorganized and planted evidence on his computer to make him appear more guilty, and failed to publish the hash value of the computer until after it completed its investigation in order to perform an unfair investigation. The hash value is the result of a calculation — a hash algorithm — that can be performed on a string of text, an electronic file or an entire hard drive’s contents. The likelihood of two data collections having the same hash value is extremely remote, so hash values can be used to verify that a forensic image or clone was captured successfully. Cf. United States v. Richardson, 607 F.3d 357, 362-63 (4th Cir. 2010). The virtue of publishing a hash value in a public place before the computers’ hard drives were analyzed would be to provide a means to ensure that no tampering occurred. But the defendant’s argument puts the cart before the horse. There is no precedent that suggests that the government must take prophylactic measures to guard against an accusation of evidence tampering. And there is no suggestion in this case beyond the defendant’s wild speculation that the government did anything to alter the contents of the hard drives. The defendant’s argument to the contrary is frivolous; he certainly is not entitled to a new trial on this ground. F. Distinction between an emotional and a sexual response Finally, the defendant asks the Court to recognize a distinction between an emotional and a sexual response to images of naked children’s genitalia, only the latter of which, he argues, may support a finding of child pornography. The defendant argues that the government failed to submit evidence to support a finding that the images were intended to elicit a sexual, rather than an emotional, response. -26- The defendant again has not presented any legal authority supporting a distinction between those two types of responses, except for his own opinion. The statute under which the defendant was convicted does not focus on the viewer’s response to an image, see 18 U.S.C. § 2252A(a)(1) (penalizing conduct); 18 U.S.C. § 2256(8) (defining “child pornography”); 18 U.S.C. § 2256(2)(A) (defining “sexually explicit conduct”). Instead, the language involving an intent to elicit a sexual response comes from the judicial test for determining whether an image is lascivious established in United States v. Dost, 636 F. Supp. 828, 832 (S.D. Cal. 1986). No courts have discussed a distinction between sexual and emotional responses when applying that element of the test, and the Court has found no support in the law for such a distinction. The defendant has not carried his burden of demonstrating that a new trial on this issue is warranted on this ground. IV. Conclusion The Court finds that the record contains evidence from which the jury could find beyond a reasonable doubt that all the elements of the crime defined by 18 U.S.C. § 2252A(a)(1) were satisfied. The Court also finds that the verdict was not against the manifest weight of the evidence, nor has a substantial legal error occurred. Accordingly, it is ORDERED that the defendant’s renewed motion for judgment of acquittal or a new trial [dkt. #29] is DENIED. It is further ordered that counsel and the parties shall appear for sentencing on March 29, 2012 at 10:00 a.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 12, 2012 -27- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 12, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -28-

=== TRUSTEES OF PLASTERS LOCAL 67 PENSION TRUST FUND et. al v. MARTIN MCMAHON PLASTERING, INC. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 11-11602 Honorable David M. Lawson TRUSTEES OF PLASTERS LOCAL 67 PENSION TRUST FUND, TRUSTEES OF PLASTERS APPRENTICESHIP TRUST FUND, and TRUSTEES OF MICHIGAN TROWEL TRADES HEALTH & WELFARE FUND, Plaintiffs, v. MARTIN MCMAHON PLASTERING, INC., _______________________________________/ Defendant. OPINION AND ORDER DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT, GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT, AND DISMISSING COMPLAINT The plaintiffs in this case are trustees of multi-employer pension plans that have brought suit against a putative employer to collect unpaid fringe benefit contributions. The issue raised in the cross motions for summary judgment now before the Court is whether the defendant, who never signed a collective bargaining agreement or participation agreement with any union, can be held responsible under section 515 of the Employee Retirement and Income Security Act of 1974 (ERISA), 29 U.S.C. § 1145, for fringe benefit payments based on the apparent authority of office personnel, custom and practice, or ratification. Based on the present record, the Court concludes that the answer must be “No.” Therefore, the Court will deny the plaintiffs’ motion for summary judgment, grant the defendant’s motion for summary judgment, and dismiss the complaint. I. The plaintiffs are the Trustees of the Plasterers Local 67 Pension Trust Fund, the Plasterers Apprenticeship Trust Fund, and the Michigan Trowel Trades Health & Welfare Fund (collectively, Funds), which were established through collective bargaining and are maintained and administered under section 302 of the Labor-Management Relations Act of 1947, as amended (LMRA), 29 U.S.C. §186, et seq., and ERISA, 29 U.S.C. §1001, et seq. The Funds collect and administer fringe benefit contributions made by employers who are bound by labor contracts. Martin McMahon has worked in construction since he was 15 years old, and he became a plasterer in 1976. He emigrated to the United States from Ireland in 1985 and began working as a plasterer for a number of different employers. He joined Local 67 of the Operative Plasterers’ and Cement Masons’ International Union in May 1988. While he was employed by those various employers, the employers made contributions on his behalf for pension and health insurance benefits through the Local 67. Martin decided to start his own business, and in March 1995, he formed Martin McMahon Plastering Company (MMP) and registered it as a Michigan for-profit corporation, which he operated out of the family home. Martin held a 51% ownership stake and was its president. His then-wife, Leslie McMahon (now known as Leslie Allen), held a 49% ownership stake in the company from March 1995 until December 2001. Leslie served as MMP’s treasurer and secretary from February 1999 to March 2001. Leslie was replaced by her husband as MMP’s treasurer in April 2001, but continued to serve as secretary. Martin and Leslie divorced on February 27, 2002. -2- Neither Martin nor Leslie had any background in business when they formed the company. During the early years, Leslie performed office tasks such as preparing invoices, completing tax withholding forms, and opening mail, and Martin was responsible for writing and signing checks, obtaining jobs, and performing the plastering work. Although Martin stated that Leslie was authorized to complete forms on behalf of MMP from March 1995 until December 2002, he also stated that he was MMP’s only agent from March 1995 until December 2002. The plaintiffs have offered no contrary evidence. Martin has averred that he never authorized Leslie McMahon to sign his name and never authorized her to sign contracts on behalf of himself or MMP. Once again, the plaintiffs have offered no direct evidence to contradict that assertion. Martin testified that he was interested in continuing the benefits that he had when he was working as a plasterer for other employers. He contacted Dan McInerney, one of his former employers, and asked about how to obtain those benefits, and McInerney told him to contact the fringe benefit funds’ administrative office. Martin believes that he called the fringe benefits office and that he received a package with three or four forms in it after making the phone call. Martin testified that he had health insurance and pension benefits through the Union because he was paying dues for himself. On November 16, 1995, Martin signed the Local 67 Pension Trust Fund form entitled “Enrollment, Investment Election and Beneficiary Designation.” The form named Leslie as the sole beneficiary. MMP made regular contributions for fringe benefits on behalf of Martin McMahon for all the plastering work he did since May 1999 through February 2009. The contributions were allocated to the Pension Fund, the Health and Welfare Fund, the Apprenticeship Fund, and the International Pension Fund. Martin signed the checks himself, but he insists that he believed that he was -3- maintaining his benefits by paying dues and fringe benefits solely for himself and not as an employer on behalf of anyone else. In fact, no contributions were made on behalf of anyone but Martin, which does not prove much either way, since MMP never employed anyone else during that period who performed covered work, except in the final period when the dispute arise over MMP’s obligation to contribute under the Master Agreements. The plaintiffs contend that MMP is liable for fringe benefits because it has on file a letter agreement that bound the company to the terms of a contract between the plasters’ trade association and the union. The master labor contract at issue in this case is the Plasterers’ Agreement between the Architectural Contractors Trade Association (the Employer Association) and Local 67 of The Operative Plasterers’ and Cement Masons International Association in the Detroit Area, originally signed in 1997 and renewed every three years through 2009. Article II of the Master Agreements obligates covered employers to make fringe benefit contributions. The plaintiffs rely on an agreement entitled “Agreement for Non-Association Members” (Letter Agreement), which states that any employer who signs it is bound by all provisions contained in the Master Agreement, including its fringe benefit provisions. The record in this case establishes that at some point after MMP was formed, Leslie McMahon obtained the Letter Agreement form and filled it out in her own handwriting. The key language in the Letter Agreement states: This is to certify that I have read the Agreement between the Detroit Association of Wall and Ceiling Contractors and Plasterers’ Local Union No. 67 and I agree to be bound by all provisions contained in this Agreement and any changes that may be made in the future by mutual consent of said parties for the life of this Agreement and any successor agreements negotiated by them. I hereby specifically submit to the jurisdiction of the joint Negotiating Committee and further agree that, with regard to the provisions of the Agreement relating to the -4- settlement of grievances, the Association Representatives shall be deemed my Representative. Def.’s Mot. for Summ. J., Ex. 6. Leslie completed the form on December 26, 1997 with the following information: Dated: December 26, 1997 EMPLOYER: Martin McMahon Plastering Inc. By: Martin P. McMahon Its: President Address: 2238 Lyonia, Wixom Michigan 48393 Phone: (248) 624-4411 M.E.S.C. No. Not received yet Workers Compensation Carrier: Liberty Mutual Policy No. WCI-345-307359-017. Ibid. The Letter Agreement bears only one signature, that of Charles Novak, Local 67’s business agent. Neither Leslie nor Martin McMahon signed the Letter Agreement, and Martin testified that he never saw the Letter Agreement until the present litigation was initiated. Charles Novak testified that he delivered the Letter Agreement to Martin and Leslie McMahon during a meeting at a restaurant in Wixom, Michigan in December 1997. Novak said that he explained the contents of the Letter Agreement to Leslie because Martin was not paying attention. Novak got the impression that Martin would be doing all the plastering and Leslie would be performing the office work. But as far as legal authority to act for the company was concerned, Novak “didn’t think [Leslie] had any position” with the company. Def.’s Mot. for Summ. J., Ex. 4, Charles Novak dep. at 69. Nevertheless, MMP continued to send in contributions for Martin’s work and used the benefit report forms furnished by Local 67. For instance, in February 1998, Leslie McMahon submitted a fringe benefit contribution report for the work month of January 1998 that listed Martin McMahon as MMP’s only plasterer employee. The report also contained the following statement: -5- I hereby certify that this is a true report of all hours paid during the report month, in accordance with the obligations assumed by this firm under the current applicable collective bargaining agreement and the provisions of the applicable trust agreements. I further certify that this report does not include contributions on behalf of any self-employed individuals or any employee not covered by the collective bargaining agreement. Pls.’ Mot. for Summ. J., Ex. I. Martin McMahon signed a contribution form containing the same certification clause for the work month of March 2001. Subsequent contribution forms were signed on behalf of MMP by Sue Maynard, whom Martin hired as a secretary in late 2001 when he and Leslie were divorcing. Sue Maynard’s duties for MMP included preparing and submitting various tax forms, including W-2 wage and tax statements, W-3 forms, and 1099-MISC forms. She had access to MMP’s bank records. However, Martin McMahon testified that he was the only person that opened mail for MMP after Leslie McMahon left the company. He did not recall receiving the January 22, 2003 letter from the Funds’ Payroll Auditing Services that informed him that his January 2001 to December 2002 contributions to the Fringe Benefit Fund had been audited and found to be properly made. MMP has cooperated with several audits of its fringe benefits contributions. MMP’s records were audited by Stefansky, Holloway & Nichols, Inc., the Funds’ auditing firm, for the period of January 1998 through December 1999, and periodically thereafter for periods through March 2006. MMP cooperated with the auditors. The audits always revealed that no fringe benefit contributions were due. However, the audit for the period beginning April 2006 revealed that MMP owed $47,932.37 in overdue fringe benefit contributions for the period from April 1, 2006 to May 20, 2009 and $4,793.24 in liquidated damages, totaling $52,725.61. For the first time, covered workers in -6- addition to Martin McMahon were included. Martin did not receive the results of the audit until March 24, 2011. That is when Martin protested his obligation to pay fringe benefit contributions on behalf of other workers, contending that he never agreed to do so. In March 2009, after deciding that he no longer wished to receive health and pension benefits through the Union, Martin McMahon directed Sue Maynard to notify Local 67 that he no longer wanted to receive benefits. He did not review Maynard’s letter before it was sent. Id. ¶ 16. The letter states: We hereby wish to give notice of our withdrawal from membership in the Plasterer’s Local Union 67 of the Operative Plasterers’ and Cement Masons International Association in the Detroit Area. We ask that you forward any information regarding continuance of the group health insurance plan under COBRA regulations to the address of record for our company. Def.’s Mot. for Summ. J., Ex. 14, March 20, 2009 Termination letter. On April 14, 2011, the plaintiffs commenced the present action to obtain a judgment for the audited indebtedness incurred by Martin McMahon Plastering for the period of April 2006 through June 2009, an order directing defendant to cooperate with an audit for the period of June 2009 through the present, and judgment for money damages owing under ERISA and the plaintiffs’ plan documents. The Court bifurcated the proceedings and directed the parties to address the liability question first. They completed their discovery on that issue and filed cross motions for summary judgment. The Court heard oral argument on the motions on February 16, 2012. II. -7- The standards for evaluating a motion for summary judgment are well known but bear repeating here. As the Sixth Circuit recently explained: Both claimants and parties defending against a claim may move for summary judgment “with or without supporting affidavits.” Fed. R. Civ. P. 56(a), (b). Such a motion presumes the absence of a genuine issue of material fact for trial. The court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record that demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). Once that occurs, the party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). Alexander v. CareSource, 576 F.3d 551, 557-58 (6th Cir. 2009). In addition, when “‘reviewing a summary judgment motion, credibility judgments and weighing of the evidence are prohibited. Rather, the evidence should be viewed in the light most favorable to the non-moving party. Thus, the facts and any inferences that can be drawn from those facts[] must be viewed in the light most favorable to the non-moving party.’” Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 374 (6th Cir. 2009) (citations omitted) (quoting Bennett v. City of Eastpointe, 410 F.3d 810, 817 (6th Cir. 2005 ; see also Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003) (“In evaluating the evidence, [the district court] ‘draw[s] all reasonable inferences therefrom in a light most favorable to the non-moving party.’”) (quoting PDV Midwest Refining, LLC v. Armada Oil & Gas Co., 305 F.3d 498, 505 (6th Cir. 2002 . The fact that the parties have filed cross motions for summary judgment does not automatically justify the conclusion that there are no facts in dispute. Parks v. LaFace Records, 329 -8- F.3d 437, 444 (6th Cir. 2003) (“The fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate.”). Instead, the Court must apply the well-recognized summary judgment standards when deciding such cross motions: when this Court considers cross motions for summary judgment, it “must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party.” Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003). The defendant’s main argument is that the Labor-Management Relations Act requires a written agreement to which an employer has assented in order for an employer to be bound to make fringe benefit contributions on behalf of its employees. That much is certainly true. Under section 302(c)(5)(B) of the LMRA, an employer’s obligation to contribute to a multi-employer trust fund is unenforceable unless “the detailed basis on which such payments are to be made is specified in a written agreement.” 29 U.S.C. § 186(c)(5)(B); Merrimen v Paul F. Rost Elec., Inc., 861 F.2d 135, 137 (6th Cir. 1988). Moreover, ERISA section 515, upon which the plaintiffs’ claim for enforcement of contribution obligations is based, states: Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement. 29 U.S.C. § 1145. As the Sixth Circuit has explained, that obligation is non-existent unless the obligation to contribute is specified in a written agreement. Nat’l Leadburners Health & Welfare Fund v. O.G. Kelley & Co., 129 F.3d 372, 374 (6th Cir. 1997). The court explained: Section 302(a) of the LMRA prohibits employers from making payments to representatives of employees unless the payments fall within one of the statutory exceptions. 29 U.S.C. § 186(a). One exception allows an employer to make -9- contributions to a trust fund established for the benefit of employees if the obligation to contribute is specified in a written agreement. Merrimen v. Paul F. Rost Elec., Inc., 861 F.2d 135, 137 (6th Cir. 1988). Under § 302(c)(5)(B) of the LMRA, an employer’s contributions to a multi-employer trust fund are unenforceable unless “the detailed basis on which such payments are to be made is specified in a written agreement with the employer.” 29 U.S.C. § 186(c)(5)(B). O.G. Kelley & Co., 129 F.3d at 374. The plaintiffs counter that the labor agreement with the trade association plus the Letter Agreement combine to satisfy the requirement of a writing. They point to language in O.G. Kelley & Co. that confirms that the LMRA’s written agreement requirement is satisfied “by a written agreement to which an employer is bound, not a written agreement to which an employer is bound which also carries that employer’s signature.” Id. at 376. The plaintiffs acknowledge that Martin McMahon never signed the Letter Agreement on behalf of MMP. But the plaintiffs contend that the agreement is enforceable and MMP is bound by it nonetheless because (1) Leslie McMahon had actual authority to bind MMP; (2) she had apparent authority to do so; (3) the course of dealing established MMP’s intent to be bound by the Letter Agreement; and (4) MMP, by its conduct, ratified the Letter Agreement after the fact and should be bound by the requirement to make fringe benefit contributions. The Court considers each of these arguments in turn. A. Actual authority The LRMA anticipates that unions and employers will act through their respective agents. Section 301 states that “[a]ny labor organization which represents employees in an industry affecting commerce . . . and any employer whose activities affect commerce . . . shall be bound by the acts of its agents.” 29 U.S.C. § 185(b). However, another provision in that same section states that “in -10- determining whether any person is acting as an ‘agent’ of another person so as to make such other person responsible for his acts, the question of whether the specific acts performed were actually authorized or subsequently ratified shall not be controlling.” 29 U.S.C. § 185(e). In Central States Southeast and Southwest Areas Pension Fund v. Kraftco, Inc., 799 F.2d 1098 (6th Cir. 1986) (en banc), the Sixth Circuit explained that “[t]hese provisions have been construed as adopting common law standards of agency.” Id. at 1112 (citing Carbon Fuel Co. v. United Mine Workers, 444 U.S. 212, 217 (1979 . Nonetheless, “[w]ith respect to agency and apparent authority, [the Sixth Circuit has] held that common law principles are not to be applied rigidly.” Ibid. The defendant argues that Martin McMahon never authorized Leslie McMahon to sign his name and never authorized her to sign contracts on behalf of himself or MMP. The plaintiffs argue that Martin’s statements about the direction and authority given to Leslie more than a decade after the Letter Agreement was completed are self-serving and contradictory and should be given little weight in determining whether MMP intended to be bound by the CBA. The plaintiffs also point to the fact of Leslie’s co-ownership and her position as corporate treasurer and secretary as evidence of her authority to fill out and bind the company to the Letter Agreement. It is true that the nature and scope of an agent’s authority generally are questions of fact. Kraftco, 799 F.2d at 1112-13. However, like all fact questions, summary judgment is appropriate when the party opposing the motion has not come forth with evidence to create a genuine dispute. Street, 886 F.2d at1479. The plaintiffs here have offered no evidence that Martin authorized Leslie to bind MMP to a union contract. And the plaintiffs have offered no authority for the proposition that a minority shareholder, a corporate secretary, or treasurer has the authority to contractually bind a corporation by virtue of those positions alone. In fact, Michigan law appears to be to the contrary. -11- See In re Union City Milk Co., 329 Mich. 506, 512, 46 N.W.2d 361, 364 (1951) (holding that general manager of a corporation did not have authority to bind the corporation to a guaranty); McBroom v. Cheboygan Brewing & Malting Co., 162 Mich. 323, 329,127 N.W. 361, 363 (1910) (holding that the secretary of a brewery corporation had no authority by virtue of his office to bind corporation as guarantor for payment of rent). The Court finds, therefore, that the uncontradicted evidence compels the conclusion that Leslie McMahon did not have the actual authority to bind the defendant to the Letter Agreement (which she never signed in any event) or otherwise oblige it to make fringe benefit contributions. B. Apparent authority The plaintiffs next argue that Leslie McMahon had the apparent authority to enter into the Letter Agreement on behalf of MMP. They contend that it was reasonable for Local 67’s business manager, Charles Novak, in light of his experience in dealing with family businesses, to infer that Leslie had authority to bind MMP because she was the wife of Martin McMahon and accompanied him to the restaurant meeting with the union representative; she completed forms for the company; and she remitted contribution reports on behalf of the company. Once again, the law does not favor the plaintiffs’ position. In Kraftco, the court explained: Apparent authority cannot be established merely by showing that the agent claimed authority or purported to exercise it, but must be established by proof of something said or done by the principal on which a third person reasonably relied. The burden of proving apparent authority rests on the party asserting that the act was authorized. . . . Apparent authority can, therefore, be created only by the principal’s manifestations to a third party. . . . The agent’s representations of authority to a third person, standing alone, are insufficient to create apparent authority in the agent to act for the principal. -12- Kraftco, 799 F.2d at 1113 (quoting Moreau v. James River-Otis, Inc., 767 F.2d 6, 9-10 (1st Cir. 1985) (footnotes omitted . The court elaborated on that rule in Anderson v. International Union, United Plant Guard Workers of America, 150 F.3d 590 (6th Cir. 1998), reiterating that “[u]nder the federal common law of agency, apparent authority arises in those situations where the principal causes persons with whom the agent deals reasonably to believe that the agent has authority.” Id. at 593 (citing Taylor v. Peoples Natural Gas Co., 49 F.3d 982 (3d Cir. 1995 . The court then articulated the following test: It is well-settled that apparent authority (1) results from a manifestation by a person that another is his agent, regardless of whether an actual agency relationship has been formed and (2) exists only to the extent that it is reasonable for the third person dealing with the agent to believe that the agent is authorized. Ibid. (citing Restatement (Second) of Agency §§ 8, 27 & cmts.). In Trustees of the Ohio Bricklayers Pension Fund v. Skillcraft Systems of Toledo, Inc., 99 F. App’x 600 (6th Cir. 2004), the court applied that test in a case factually similar to the one presently before the Court. In that case, Gail Mitchell worked as a secretary, bookkeeper, and office manager for Skillcraft. She filled out a form that was quite similar to the Letter Agreement in the present case. When Mitchell returned the form, she wrote in “the names of Skillcraft’s president and vice president on the line labeled ‘authorized representative and title’ [ ]and returned the union copy of the form to . . . the union’s business manager. Despite the lack of a signature line for Skillcraft’s ‘authorized representative,’ or anything purporting to be an actual signature, [the business manager] nevertheless assumed that [the union] had a binding contract with Skillcraft.” Id. at 601. The trustees sued to collect unpaid fringe benefits, and the district court granted summary judgment to the defendant because Mitchell did not have apparent authority to bind Skillcraft. The court of appeals affirmed, approving the district court’s finding that “Skillcraft had not explicitly or -13- implicitly manifested that Mitchell was its agent for executing a binding [CBA] . . . [and] there was nothing in the record to establish that the plaintiffs could have believed the agent was authorized to sign the document at issue.” Id. 601-02. The court of appeals also rejected the argument that Mitchell could bind the company where the form was filled out and returned as requested in the normal course of business, because “such a rule — taken to its logical extreme — would allow any employee, even a mail room clerk or an intern, to bind a company to a contract.” Id. at 602. In the present matter, Charles Novak testified that he did not rely in any way on Leslie McMahon’s apparent authority to bind MMP to the labor agreement. First, Novak knew that Martin did not complete the Letter Agreement. The parties have agreed, for the purpose of these motions, that Leslie filled out the Letter Agreement. Second, when Novak met with Martin and Leslie, he did not think that she had any position of authority with MMP, and Martin said nothing to give Novak the impression that Leslie was his agent. Skillcraft suggests that the plaintiffs in this case cannot point to the concept of apparent authority to validate the unsigned Letter Agreement. Charles Novak’s testimony negates the possibility that Local 67 relied on Leslie McMahon’s conduct to conclude that MMP opted in to the labor agreement between the union local and the trade association. C. Course of conduct The plaintiffs finally argue that the subsequent course of dealing by MMP either manifested an intent to be bound to the Letter Agreement or amounted to ratification of Leslie McMahon’s conduct of filling out and returning the Letter Agreement form. They point out that nothing in the LMRA requires that a participating employer actually sign the written agreement to pay fringe benefit contributions, and the agreement to opt in to a written CBA can be inferred by operation of -14- law. O.G. Kelley & Co., 129 F.3d at 376. The course of conduct identified by the plaintiffs consists of MMP making voluntary contributions on behalf of Martin McMahon, furnishing fringe benefit contribution reports that contained clauses that certified that the payments were made pursuant to a collective bargaining agreement, and cooperation in the audits. 1. Voluntary contributions The Sixth Circuit has held that where an employer has never assented to a CBA, the employer is not “bound to make pension contributions in accordance therewith merely because it did so voluntarily for a time.” Merrimen v. Paul F. Rost Electric, Inc., 861 F.2d 135, 139 (6th Cir. 1988); see also O.G. Kelley & Co., 129 F.3d at 374-75 (“In Merrimen, this court held that an employer’s assent to be bound by the pension provisions of a [CBA] could not be inferred from conduct alone where the employer indisputably did not adopt or promise to adopt the agreement in any form of writing and where the [CBA] required a signature in order to bind an employer.”); Michigan Bricklayers & Allied Craftsmen Health Care Fund v. Northwestern Constr., Inc., 116 F.3d 1480, at *2 (6th Cir. 1997) (table) (“An employer’s intent to be bound by the benefits fund provisions of a collective bargaining agreement cannot be inferred when the employer has not signed a collective bargaining agreement.”). As noted above, MMP did not sign the Letter Agreement, and it did not otherwise assent in writing to be bound by the Master Agreements. The Master Agreements by their own terms are between the union local and the Employer Association, which can act “as the Bargaining Agent for and on behalf of its members and all independent employers who are or become members.” The Master Agreements further provide that “the [Employer] Association is acting only as an agent in the negotiation of this agreement and is the agent only for those employers, individuals, partnerships and corporations who have authorized -15- it to do so.” See Def.’s Mot. for Summ. J., Ex. 1, Master Agreement from 1997-2000 at 1. MMP is not and never was a member of the Employer Association. The plaintiffs have called the Court’s attention to cases in which voluntary contributions were found to support a conclusion that an employer was bound to labor agreements that mandated fringe benefit contributions. However, in those cases, other factors contributed to the ultimate findings. For instance, in Central States, Southeast and Southwest Areas Pension Fund v. Behnke, Inc., 883 F.2d 454 (6th Cir. 1989), the employer made voluntary fringe benefit contributions after the CBA expired. But in that case, the employer signed a participation agreement that incorporated an earlier Trust Agreement, which in turn provided that the employer would continue to make contributions while a renewed CBA was being negotiated. Id. at 461. The Sixth Circuit made that very point in Central States, Southeast & Southwest Areas Pension Fund v. General Materials, Inc., 535 F.3d 506 (6th Cir. 2008), when it explained that Behnke does not stand for the proposition that an employer may be bound by an expired CBA solely on the basis of its conduct. The court held in that case that an employer’s continuing contributions to a fringe benefit plan after the CBA expired did not amount to an adoption of the Participation Agreement or an acknowledgment of an obligation to be contractually bound. General Materials, 535 F.3d at 509; see also Teamsters for Michigan Conference of Teamsters Welfare Fund v. Blue Sky Heavy Hauling, Inc., No. 09-10837, 2010 WL 522786, at *6 (E.D. Mich. Feb. 8, 2010) (Edmunds, J.) (“The Behnke court found that the interim agreement served as an independent contractual basis to hold the defendant liable.”). The plaintiffs also cite Gariup v. Birchler Ceiling & Interior Company, 777 F.2d 370 (7th Cir. 1985), and Board of Trustees of the Plumbers Local Union No. 93 U.A. v. Waterworks, Inc., 524 -16- F. Supp. 2d 1081 (N.D. Ill. 2007), to support the position that paying wages and fringe benefit contributions can bind an employer to a CBA. But neither case governs here. In Gariup, the president of the employer signed two “Assent of Participation” forms in 1979 and returned them to the union; he also returned, without signing, the union’s “Acceptance of Working Agreement,” which included his federal employer identification number. Gariup, 777 F.2d at 372. One of the Assent of Participation forms stated: I . . . have read a certain agreement, known as an ‘Agreement and Declaration of Trust’ entered into by Laborer’s Union . . . # 81 . . .” and “[i]t is my . . . desire to participate and become a party in the same manner and form as any other participating employer . . . .” Id. at 372 n.2. From May 1979 until January 1981, the employer submitted contribution reports and payments to the pension fund based on the rates listed in the CBA. The employer continued to employ two union members until January 1983. The trial court found that the employer adopted the subsequent CBAs through its course of conduct, but the employer did not challenge that finding on appeal. The court ultimately held that section 302(c)(5)(B) of the LMRA was satisfied because the employer’s execution of the Assent of Participation constituted a written agreement that demonstrated the employer’s intent to contribute to the union fund. Gariup is distinguishable because the employer’s president signed the Assent of Participation form and testified that his “intention was to satisfy the Union, you know, to whatever extent they wanted me to so I could keep peace with them.” Id. at 374. That key fact was crucial to the Sixth Circuit in Merrimen, which discussed Gariup and ultimately stated: “[G]iven the clear import of the statute and the tenor of the cases which have interpreted it, this Court declines to hold that an employer which never signed its assent to a CBA is bound to make pension contributions in -17- accordance therewith merely because it did so voluntarily for a time.” Merrimen, 861 F.2d at 139. Of course, the court narrowed Merrimen’s holding in O.B. Kelley, but the Sixth Circuit has never dispensed with the requirement that an employer assent to be bound by a written agreement to make fringe benefit contributions. The court in Board of Trustees of the Plumbers Local Union No. 93 U.A. v. Waterworks, Inc., 524 F. Supp. 2d 1081 (N.D. Ill. 2007), simply held that voluntary payment of fringe benefits did not establish an intent to be bound by a CBA, even though such payments under an oral agreement would be illegal under the LMRA. The court found that factual issues precluded summary judgment in that case. In this case, MMP’s contributions cannot unequivocally be referable to its intention to opt in to the Master Agreement. No one with authority from MMP ever agreed in writing to participate, and Martin McMahon has expressed the unrebutted intention to contribute only for his own pension benefits. 2. Certification Clauses The plaintiffs, citing Trustees of Flint Michigan Laborers’ Pension v. In–Puls Construction Co., 835 F. Supp. 972 (E.D. Mich. 1993), argue that Martin McMahon’s signature on the forms containing the certification clauses show that MMP intended to be bound to the CBA. In In-Puls, the president of the employer never signed the CBA but signed payroll reports that indicated he paid his employees the union rate, included references to both unions that plainly referred to contributions to the fringe benefit fund, and deducted $1 per hour from each employee’s gross pay pursuant to the CBA to pay into the vacation fund, although those contributions were never paid to the union. In-Puls, 835 F. Supp. at 973. The president of the employer also wrote the employer’s -18- name in two places on the union CBA. The president authorized another employee to sign fringe benefit contribution reports stating that the employer “agrees to the terms of payment as set forth in the current Collective Bargaining Agreement and Trust Agreement.” Ibid. The court held that Behnke, and not Merrimen, controlled and that the employer “provided clear evidence of its intent to provide benefits pursuant to the CBA.” Ibid. But the persuasive force of In-Puls was diminished by the Sixth Circuit in General Materials, when it stated that another district court that relied on Behnke for the idea that certifications in reporting forms can establish the intent to be bound by a Master Agreement read the Behnke decision to broadly. General Materials, 535 F.3d at 510. Instead, the General Materials court summarized the state of the law in this circuit as follows: No Sixth Circuit case law supports the Fund’s contention [that the certification clauses established the employer’s duty to contribute]. Given the paucity of pertinent Sixth Circuit precedent — as well as the equivocal weight the Seventh Circuit gives certification clauses — we conclude that the Certification Clause did not obligate General to contribute after the 1991 CBA expired. Ibid. In addition, the language in the reporting forms in this case is far less indicative of an intent to be bound by the Master Agreement than the counterpart in In-Puls. Where the In-Puls form contained an actual agreement with the CBA’s payment terms, the forms in this case stated that data furnished was “a true report of all hours paid during the report month, in accordance with the obligations assumed by this firm under the current applicable collective bargaining agreement . . . .” The certification did not acknowledge that MMP actually had assumed any obligation under the CBA, and it was entirely consistent with Martin McMahon’s understanding that he was making contributions on behalf of himself only so that his benefits would continue. -19- The Court concludes that the certification statements on the reporting forms do not establish MMP’s intent to be bound by the Master Agreement, nor do they show that Martin McMahon intended to adopt or ratify the unsigned Letter Agreement. 3. Cooperation with audits The plaintiffs have not cited any case law that supports the proposition that cooperation with an audit can bind an employer to a CBA. Moreover, all the audits except the final one resulted in a finding of no liability. That evidence does not tell much about either party’s intent or understanding. D. Ratification The plaintiffs argue that MMP’s course of conduct — a decade of contribution history, compliance with multiple audit requests, and completion of contribution reports with signed certification statements — is sufficient for the Court to find that MMP ratified Leslie McMahon’s submission of the Letter Agreement on behalf of MMP. Once again, the Court turns to agency principles to address that argument. Kraftco, Inc., 79 F.2d at 1112. Under Michigan law, “[f]ailure to repudiate an unauthorized agreement and accepting the benefits of such an agreement can constitute a ratification” as long as the “principal ha[d] knowledge of all material facts.” Capital Dredge and Dock Corp. v. City of Detroit, 800 F.2d 525, 530 (6th Cir. 1986) (citing Langel v. Boscaglia, 330 Mich. 655, 48 N.W.2d 119 (1951); Restatement (Second) of Agency §§ 91, 94, 98 (1958 . Similarly, “[r]atification occurs where the principal receives and retains the benefits of a transaction with full knowledge of all material facts.” Davis v. Mut. Life Ins. Co. of New York, 6 F.3d 367, 374 (6th Cir. 1993) (applying Ohio law). In order for “ratification of an unauthorized act of an agent to be made binding on a principal[, it] must have been done with a -20- full knowledge of all the material facts, and if they have been suppressed or unknown, the ratification is treated as invalid.” Grant Cnty. Deposit Bank v. Greene, 200 F.2d 835, 838 (6th Cir. 1953) (applying Kentucky law). Ratification by silence may occur “only if the principal failed to repudiate the agent’s conduct within a reasonable time after learning of the conduct.” Richards v. General Motors Corp., 876 F. Supp. 1492, 1507 (E.D. Mich. 1995) (citing Capital Dredge, 800 F.2d at 530). The record evidence in this case is not sufficient to establish ratification by MMP of any acts of Leslie McMahon or any other employee concerning the Letter Agreement or the Master Agreements. Martin McMahon has testified that he “never entered, or intended to enter, into a labor contract on behalf of MMP” and that he believed that he “could maintain pension and health insurance benefits for [himself], personally and individually, through the Plasterers Local 67 by paying contributions only on [his] behalf and not as part of any requirement under a labor contract.” Def.’s Mot. for Summ. J., Ex. 13, Martin McMahon aff. ¶¶ 7, 12. He also testified that he never saw the Letter Agreement until the present litigation was initiated. Id., Ex. 12, Martin McMahon dep. at 34, 42. There is no evidence to the contrary. Martin denies that the restaurant meeting described by Charles Novak ever occurred. The Court must credit Novak’s testimony on that point on summary judgment, taking the evidence in the light most favorable to the nonmoving party. But Novak testified that Martin did not pay attention to Novak’s explanation of the Letter Agreement to Leslie. Accepting Novak’s evidence at face value, there still is no proof that Martin was aware of the Letter Agreement until this lawsuit was underway, so a key component of the plaintiffs’ ratification theory fails for lack of evidentiary support. -21- Martin McMahon did sign the March 2001 fringe benefit contribution form that included the certification clause. But as noted earlier, that form did not contain language that constituted an agreement to be bound by the Master Agreements or an acknowledgment that MMP actually had opted in to that Agreement. III. The Court finds that the record contains no evidence that an authorized representative of Martin McMahon Plastering Company signed an agreement that bound the company to the obligation to pay fringe benefit contributions under the Master Agreements between the Architectural Contractors Trade Association and Local 67 of The Operative Plasterers’ and Cement Masons International Association in the Detroit Area. Nor is there sufficient evidence from which a fact finder could conclude that MMP intended to be bound by those agreements. The defendant, therefore, is entitled to judgement in its favor as a matter of law. Accordingly, it is ORDERED that the plaintiffs’ motion for summary judgment [dkt. #16] is DENIED. It is further ORDERED that the defendant’s motion for summary judgment [dkt. #10] is GRANTED. -22- It is further ORDERED that the complaint is DISMISSED WITH PREJUDICE. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 21, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 21, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -23-

=== THOMAS DELAZZER v. MITCH PERRY ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION THOMAS DELAZZER, Petitioner, Case Number 11-13613 Honorable David M. Lawson v. MITCH PERRY, __________________________________/ Respondent, OPINION AND ORDER DENYING MOTION TO CORRECT OR CHANGE PETITION FOR WRIT OF HABEAS CORPUS Petitioner Thomas J. Delazzer filed a pro se petition for writ of habeas corpus on August 18, 2011 alleging that he is unconstitutionally confined at the Newberry Correctional Facility in Newberry, Michigan because of a judgment of conviction entered by a Michigan judge. He invoked 28 U.S.C.§ 2254 to challenge a conviction and sentence for prison escape following his plea of guilty in the Jackson County, Michigan circuit court. The petitioner has now filed a motion to correct or change his petition to delete the reference to section 2254 and instead to seek relief under 28 U.S.C. § 2241. “Congress’s general grant of habeas authority to the federal courts appears in 28 U.S.C. § 2241, which extends the writ to, among others, persons ‘in custody in violation of the Constitution or laws or treaties of the United States.’” Phillips v. Court of Common Pleas, Hamilton County, Ohio, No. 10-4280, 2012 WL 413837, at *4 (6th Cir. Feb. 10, 2012) (quoting 28 U.S.C. § 2241(c)(3 . However, as the Phillips court explained, another section of the habeas statute, section 2254, “concerns habeas relief available to a subset of petitioners: those ‘in custody pursuant to the judgment of a State court . . . .’” Ibid. (quoting 28 U.S.C. § 2254(a . It is understandable that the petitioner would want to proceed under section 2241 instead of section 2254, because the latter statute requires a more deferential standard of review, which is inapplicable to cases brought under section 2241. Phillips, 2012 WL 413837, at *4 (“We agree with our sister circuits and hold that habeas petitions governed by § 2241 are not subject to the heightened standards contained in § 2254(d).”). However, that relief is not available to the petitioner in this case; he must proceed under the more specific statute that is intended to apply to his circumstances. When two statutes cover the same subject matter, the more specific statute takes precedence over the more general one. See Edmond v. United States, 520 U.S. 651, 657 (1997). Because section 2254 is the more specific statute that, by its own terms, applies to habeas petitions that challenge state court judgments, the provisions of that section govern over the more general allowances of section 2241. See Medberry v. Crosby, 351 F. 3d 1049, 1060 (11th Cir. 2003); Cook v. N.Y. State Division of Parole, 321 F. 3d 274, 279, n. 4. (2d Cir. 2003); Coady v. Vaughn, 251 F. 3d 480, 484-85 (3rd Cir. 2001). The Sixth Circuit has observed that “numerous federal decisions . . . support the view that all petitions filed on behalf of persons in custody pursuant to State court judgments are filed under section 2254” and are subject to the limitations imposed by the Antiterrorism and Effective Death Penalty Act (AEDPA) for obtaining habeas relief from a state conviction. Rittenberry v. Morgan, 468 F.3d 331, 337 (6th Cir. 2006). Therefore, regardless of the label or statutory reference in the habeas petition, state prisoners challenging the validity of their state court conviction are governed by 28 U.S.C. § 2254. See Greene v. Tennessee Dep't of Corr., 265 F. 3d 369, 371 (6th Cir. 2001) (finding that “‘when a [state] prisoner begins in the district court, § 2254 and all associated statutory requirements . . . apply no -2- matter what statutory label the prisoner has given the case. (Roughly speaking, this makes § 2254 the exclusive vehicle for prisoners in custody pursuant to a state court judgment who wish to challenge anything affecting that custody, because it makes clear that bringing an action under § 2241 will not permit the prisoner to evade the requirements of § 2254.)’” (quoting Walker v. O'Brien, 216 F. 3d 626, 633 (7th Cir. 2000 . There is no doubt that the petitioner in this case has challenged the validity of his guilty-plea- based conviction and the resulting sentence. He must proceed under the rules set out in 28 U.S.C. § 2254. Converting his petition to one brought under 28 U.S.C. § 2241 would make no practical difference to the determination of the matter, and the Court sees no good reason to allow it. Accordingly, it is ORDERED that the motion to correct or to change the petition for writ of habeas corpus [dkt. # 10] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 17, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 17, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -3-

=== UNITED STATES OF AMERICA v. BOBBY W. FERGUSON, et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, Case No. 10-20535 Honorable David M. Lawson v. BOBBY W. FERGUSON, MICHAEL WOODHOUSE, CALVIN L. HALL, FERGUSON ENTERPRISES, INC., XCEL CONSTRUCTION SERVICES, INC., and A & F ENVIRONMENTAL/ JOHNSON CONSTRUCTION SERVICES, _______________________________________/ Defendants. OPINION AND ORDER DENYING MOTIONS TO DISMISS, SEVER, AND FOR PRODUCTION OF GRAND JURY AND BRADY MATERIAL The defendants are charged with various offenses concerning the formation and execution of contracts for the development of a phase of a federal housing project. The grand jury has alleged that the defendants manipulated bids for the project so they could overcharge, that they laundered the money they may have received as proceeds, and that they illegally dumped materials at the building site. The defendants contend that their part of the project — development of the infrastructure — did not involve the expenditure of any federal funds and therefore the Court has no subject matter jurisdiction, so the case must be dismissed. Some of the defendants also have moved to compel discovery and for severance. The Court heard oral argument on all of these motions on December 22, 2011 and now concludes that the motions should be denied. I. Facts and proceedings Defendants Bobby Ferguson, Calvin Hall, Michael Woodhouse, Ferguson Enterprises, Inc., Xcel Construction Services, Inc., A&F Environmental/Johnson Construction Services, and Shakib Deria are charged in an eight-count indictment. The indictment charges defendants Ferguson, Ferguson Enterprises, Woodhouse, Hall, and Xcel Construction Services with conspiracy to defraud the United States, in violation of 18 U.S.C. § 371 (Count One) and conspiracy to commit mail fraud, in violation of 18 U.S.C. §§ 1341 and 1349 (Count Two); defendants Ferguson, Woodhouse, Hall and Xcel Construction Services with conspiracy to launder monetary instruments, in violation of 18 U.S.C. § 1956 (Count Three); defendants Ferguson, Woodhouse, Ferguson Enterprises, and Xcel Construction with conspiracy to wilfully injure property of the United States, in violation of 18 U.S.C. §§ 1361 and 371 (Count Four); defendant Ferguson with two counts of being a felon in possession of a firearm, in violation of 18 U.S.C. §§ 922 and 924 (Counts Five and Seven) and, along with defendant Deria, conspiracy to obstruct justice, in violation of 18 U.S.C. §§ 1503 and 371 (Count Six); and defendants Ferguson, Deria, Ferguson Enterprises, and A&F Environmental/Johnson Construction Services with conspiracy to structure financial transactions, in violation of 31 U.S.C. § 5324 and 18 U.S.C. § 371 (Count Eight). The following facts are taken from the indictment, which the defendants dispute in many material respects. Defendant Bobby Ferguson owned and operated defendant Ferguson Enterprises, Inc. In 2002, defendant Ferguson formed Johnson Construction Services, Inc., which embarked on a joint venture in May 2003 to form defendant A&F Environmental/Johnson Construction Services. Also in 2002, defendant Ferguson formed Xcel Construction services. Defendant Ferguson named defendant Woodhouse as president of defendant Xcel Construction Services in 2006. -2- Garden View Estates (GVE) was a housing development located on the site of the former Herman Gardens housing project. GVE was a joint project of the United States Department of Housing and Urban Development (HUD) and the Detroit Housing Commission. Between 1996 and 2005, HUD invested approximately $44 million in the demolition of Herman Gardens and the construction of GVE. That funding came in the form of both Hope VI Revitalization Grants and Major Reconstruction of Obsolete Public Housing funds. The City of Detroit also contributed approximately $13 million in 2006 towards infrastructure development at GVE, which included installation and improvement of roads, water and sewer lines, and utilities. The Detroit Building Authority was retained to oversee the infrastructure construction at GVE. In October 2006, the Detroit Housing Commission issued a request for proposals inviting bids from entities to serve as the construction manager of the GVE infrastructure project. In December 2006, HUD and the Detroit Housing Commission agreed to provide an additional $2 million for infrastructure construction at the GVE project. In January 2007, defendant Xcel Construction, Inc. signed a contract with the Detroit Building Authority to serve as construction manager for the infrastructure phase of the GVE project. The government alleges that defendants Ferguson, Hall, Woodhouse, Ferguson Enterprises, Inc., and Xcel Construction Services, Inc. engaged in a conspiracy through which defendant Xcel Construction Services would ensure that the companies controlled by defendant Ferguson were awarded contracts to perform the work on the infrastructure of the GVE project. The government alleges that those defendants manipulated the bidding process and submitted fabricated bids to ensure that defendant Ferguson Enterprises was the low bidder on the infrastructure phase of the project and would be awarded a contract for $11.9 million, and that the companies that submitted -3- false bids were awarded subcontracts as compensation for their participation in the scheme. The government also states that between August 2008 and January 2009, the defendants submitted $1.5 million in change orders as part of the GVE project. The government alleges that the defendants committed mail fraud, laundered money, and structured financial transactions to avoid reporting obligations in executing the conspiracy. Between April 2007 and August 2010, the government alleges, the defendants conspired to dump soil and other refuse at the GVE site, requiring the federal government to spend more than $1.2 million to clean up the site. The primary relevant factual dispute concerns the $2 million provided by HUD for infrastructure development. The defendants contend that no federal money was actually spent on the infrastructure phase of the GVE project (which was the only phase in which they were involved), and therefore there is no federal subject matter jurisdiction over the conspiracy and other related charges. The $2 million is referenced in a contract between the Detroit Housing Commission and the City of Detroit. The relevant contract language states: [Detroit Housing Commission] or HUD shall place the sum of $2,000,000 in an HUD LOCCS escrow account. That sum shall be used to cover the cost of change orders to the Infrastructure construction contracts caused by site conditions at the project site. The full amount of the City’s financial contribution must be spent before the escrowed funds may be used for project cost. If the bids for the infrastructure construction work exceed the City’s financial contribution to the project, the City and DHC may agree that the escrowed funds may be used for the increased costs. Defs.’ Mot. to Suppress Ex. 4 at 3. The contract also includes an exhibit that states that the total City funds available for the project were $13,726,544. The contract between the Detroit Building Authority and defendant Xcel Construction provided that Xcel would be paid $557,512.16 for acting as construction manager. The defendants have not furnished a copy of the contract awarded to defendant Ferguson Enterprises, nor do they state the amount of consideration stated in the contract. -4- However, the indictment alleges that defendant Ferguson Enterprises submitted a bid proposal in the amount of $11.9 million and that defendant Woodhouse recommended that it be awarded a contract in the amount of $12 million. The defendants assert that the full amount of the City of Detroit’s financial contribution was not spent, and therefore the escrowed (federal) funds were never used. The indictment was returned on September 1, 2010 and unsealed on September 8, 2010. After several time enlargements to accommodate the defendants’ needs to review the voluminous discovery materials, five defense motions were filed in October 31, 2011. Defendant Hall filed a motion to sever his case for trial [dkt. #116] that was joined by defendants Ferguson and Ferguson Enterprises on November 2, 2011 [dkt. #129]. Defendants Woodhouse, Hall, and Xcel Construction services filed a motion for disclosure of the grand jury testimony of Brian Dodds and Marc Burrell [dkt. #117] that was joined by defendant Ferguson on October 31, 2011 [dkt. #120] and by defendant Ferguson Enterprises on November 2, 2011 [dkt. #128]. Defendants Woodhouse, Hall, and Xcel Construction Services filed a motion for disclosure of Brady materials pertaining to Brian Dodds, Marc Burrell, and Don Roberts [dkt. #118]. Defendants Woodhouse, Hall, and Xcel Construction Services filed a motion to sever their cases for trial [dkt. #119] that was joined by defendant Ferguson Enterprises on November 2, 2011 [dkt. #130]. Finally, defendants Ferguson and Ferguson Enterprises filed a motion to dismiss for lack of jurisdiction [dkt. #124]. The Court heard oral argument on the motions on December 22, 2011. They will be addressed in reverse order. II. Motion to dismiss The gravamen of the defendants’ motion to dismiss is that because no federal funds were spent on the infrastructure phase of the GVE project — the only phase in which the defendants were -5- involved — and none of the defendants’ contracts were paid with federal funds, there is no federal interest to protect and no subject matter jurisdiction over the conduct charged in the indictment. The defendants contend that the crimes in counts I, III, IV, VI, and VIII of the indictment should be dismissed because there is insufficient evidence that the federal government was a victim of those crimes. The defendants highlight the growing concern about federalism reflected in the Supreme Court’s decisions in United States v. Lopez, 514 U.S. 549 (1995), and United States v. Morrison, 529 U.S. 598, 617-19 (2000), so presumably their challenge to those counts takes root in Commerce Clause jurisprudence. In Lopez, the Court invalidated the defendant’s conviction of possessing a firearm in a school zone in violation of the Gun-Free School Zones Act, finding that the statute exceeded Congress’s Commerce Clause authority because possession of gun in local school zone was not economic activity that substantially affected interstate commerce. 514 U.S. at 561-62 (finding that the statute, which did not contain an element that ensured a case-by-case examination of a federal connection, “by its terms has nothing to do with ‘commerce’ or any sort of economic enterprise, however broadly one might define those terms. . . . It cannot . . . be sustained under our cases upholding regulations of activities that arise out of or are connected with a commercial transaction, which viewed in the aggregate, substantially affects interstate commerce”). Similarly, in Morrison, the Court declared unconstitutional the civil enforcement remedy in the Violence Against Women Act because it found no authority in the Commerce Clause for Congress to enact that law. 529 U.S. at 617-18 (“The Constitution requires a distinction between what is truly national and what is truly local. . . . The regulation and punishment of intrastate violence that is not directed at the instrumentalities, channels, or goods involved in interstate commerce has always been the province of the States.”). -6- The defendants argue that counts II, V, and VII of the indictment should be dismissed because the connection to interstate commerce is insufficient to support federal jurisdiction. The defendants, once again, quote extensively from United States v. Lopez. The government bases its opposition to the motion primarily on the general premise that a motion to dismiss must be denied if it requires the district court to find facts that make up the elements of the case or determine the truth or falsity of facts in the indictment, which, perhaps, explains the government’s anemic response to the substance of the defendants’ arguments. The government also points out that the indictment identifies $43.5 million in federal funds spent on the GVE project, with at least $2 million in HUD funds designated for the infrastructure portion of the project. However, the defendants spend much effort on demonstrating through documentary evidence that none of the HUD funds were ever used to pay for infrastructure work. The defendants have produced a Revitalization Plan submitted by the Detroit Housing Commission to HUD that states that the non-residential component of the plan will be funded with money from the City of Detroit and the Detroit Public Schools and that HUD funds would be used only for the residential components. The government also demonstrates that the defendants’ arguments that counts II, V, and VI of the indictment must be dismissed on the basis of Lopez have been uniformly rejected by the Sixth Circuit and by other circuits throughout the land. Federal Rule of Criminal Procedure 12(b)(2) provides that “[a] party may raise by pretrial motion any defense, objection, or request that the court can determine without a trial of the general issue.” Fed. R. Crim. P. 12(b)(2). Citing Universal Milk Bottle Serv., Inc. v. United States, 188 F.2d 959, 962 (6th Cir. 1951), the government argues that the Rule prohibits adjudication of a pretrial -7- motion to dismiss when the Court must determine the truth or falsity of the indictment’s factual allegations. However, “[d]istrict courts may ordinarily make preliminary findings of fact necessary to decide questions of law presented by pretrial motions so long as the trial court’s conclusions do not invade the province of the ultimate factfinder.” United States v. Craft, 105 F.3d 1123, 1126 (6th Cir. 1997); see also United States v. Jones, 542 F.2d 661, 665 (6th Cir. 1976) (holding that “[t]he District Court was not limited to the face of the indictment in ruling on the motion to dismiss. . . . Rule 12 vests the Court with authority ‘to determine issues of fact in such manner as the court deems appropriate.’” (quoting Notes of the Advisory Committee to Fed. R. Crim. P. 12, reprinted in 8 Moore P 12.01(3) at 12-8 . “[A] claim that the indictment or information fails to invoke the court’s jurisdiction” may be heard “at any time while the case is pending.” Fed. R. Crim. P. 12(b)(3)(B). A. Counts I, III, IV, VI, and VIII Count I of the indictment charges defendants Ferguson, Woodhouse, Hall, Ferguson Enterprises, and Xcel Construction Services with conspiracy to defraud the United States in violation of 18 U.S.C. § 371. That statute states, in relevant part: If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both. 18 U.S.C. § 371. “Conspiracy involves an agreement willfully formed between two or more persons to commit an offense, attended by an act of one or more of the conspirators to effect the object of the conspiracy.” United States v. Dolt, 27 F.3d 235, 238 (6th Cir. 1994). The government must also prove an intent to defraud, which can be demonstrated by proof of reckless disregard of the interests of a government agency. United States v. Hoffman, 918 F.2d 44, 46 (6th Cir. 1990); United States -8- v. Luxenberg, 374 F.2d 241, 249 (6th Cir. 1967). Further, it is well established that the meaning of fraud in that statute “is not confined to fraud as that term has been defined in the common law. It reaches any conspiracy for the purpose of impairing, obstructing or defeating the lawful function of any department of government.” Dennis v. United States, 384 U.S. 855, 861 (1966) (internal quotation omitted). Success in defrauding the United States is not an element of this crime, nor is it required that the government actually have been “cheated out of money or property.” United States v. Thompson, 366 F.2d 167, 171 (6th Cir. 1966). The defendants argue that count I should be dismissed for lack of subject matter jurisdiction because the GVE infrastructure project was not federally funded. That theory views too narrowly the government’s interest in the GVE project. The entire venture was funded with federal, state, and local money; the fact that the defendants were involved in a phase that may have been satisfied out of the local funding component is entirely beside the point. There is no dispute that the GVE project as a whole was one that was substantially funded by HUD funds and that it was a joint project between HUD and the Detroit Housing Commission. Around $44 million in federal funds were contributed to the GVE project before infrastructure construction began. The attempt to separate the infrastructure construction funding from the overall joint HUD/Detroit Housing Commission venture ignores the reality of the federal government’s interest in the GVE project, as well as the fact that the installation of infrastructure was essential to further the federal government’s aim of creating residential housing at the site. The federal government therefore has an interest in seeing that the GVE project as a whole “was administered honestly, fairly and free from corruption, deceit, trickery, [and] dishonesty.” Thompson, 366 F.2d -9- at 169. That interest did not disappear abruptly when the project entered the infrastructure construction phase, only to reappear when the residential construction began. Although not entirely analogous, the Sixth Circuit’s decision in Thompson is instructive. In that case, the federal government provided 52 percent of the construction costs of a hospital pursuant to the Hill-Burton Act, 42 U.S.C. § 291, and the county in which the hospital was to be located contributed 48 percent of the costs. The architects hired to construct the hospital paid a $6,000 kickback to the defendants, who were members of the county council. The defendants were found guilty of conspiracy to defraud the United States and appealed, challenging the district court’s denial of their motions to dismiss and for a judgment of acquittal. The defendants argued that the kickback money did not come from federal funds and that the architectural fees were paid by the county, rather than out of federal funds. The court found that although there was evidence in the record that could support a finding that the architectural fees had been paid with federal funds, “it was not necessary . . . for the Government to prove that part of the architect fee was reimbursed with federal funds. . . . The administration of this Hill-Burton project . . . included a dishonest influence in the form of a kickback. This constituted a crime within the scope of the statute under the facts of this case.” Id. at 173. In this case, the question whether the defendants actually received payment from federal funds is likewise irrelevant in determining whether the Court has subject matter jurisdiction, as the federal government’s interest in seeing that a project it has funded is administered honestly and fairly is sufficient to confer jurisdiction. The defendants’ argument that the increased concern for federalism embodied in Lopez mandates a stronger federal connection than that described in Thompson to confer jurisdiction on -10- this Court does not carry much weight for several reasons. First, the authority on which they rely has been undermined. They analogize the charge in count I to crimes charged under 18 U.S.C. § 666, which proscribes bribery of local, state, and tribal officials where the local governments receive at least $10,000 in federal funds, and cite three cases suggesting that some nexus beyond the receipt of federal money is necessary to charge defendants under the statute. However, two of the three cases cited by the defendants in support of that argument were abrogated expressly by the Supreme Court on this point in Sabri v. United States, 541 U.S. 600, 604 (2004). In United States v. Zwick, 199 F.3d 672 (3d Cir. 1999), one of the defendants’ cases, the Third Circuit held that 18 U.S.C. § 666 required a connection between the federal funds and the defendant’s conduct in order to create liability, but stated that a “highly attenuated implication of a federal interest” would be sufficient. Id. at 687. As examples of such attenuated federal interests, the court mentioned federal funds being used to house federal prisoners in local prisons, and bribing an official of a town that received the majority of its budget from federal funding. Ibid. Similarly, in United States v. Santopietro, 166 F.3d 88 (2d Cir. 1999), the Second Circuit held that 18 U.S.C. § 666 required “at least some connection between the bribe and a risk to the integrity of the federally funded program.” Id. at 93. In that case, the court reasoned that the government should not be allowed “to use section 666(a)(1)(B) to prosecute a bribe paid to a city’s meat inspector in connection with a substantial transaction just because the city’s parks department had received a federal grant of $10,000.” Ibid. However, in Sabri, the Supreme Court held that 18 U.S.C. § 666 did not require a nexus between a defendant’s conduct and federal funds, and that the statute was constitutional even in the face of the enhanced federalism concerns embodied in Lopez and Morrison. Sabri, 541 U.S. at 605- 08. One main reason is that where federal funds are involved, the constitutional authority to punish -11- mischief in expropriating the money derives not from the Commerce Clause but from the Spending Clause. Id. at 605 (“Congress has authority under the Spending Clause to appropriate federal moneys to promote the general welfare, Art. I, § 8, cl. 1, and it has corresponding authority under the Necessary and Proper Clause, Art. I, § 8, cl. 18, to see to it that taxpayer dollars appropriated under that power are in fact spent for the general welfare, and not frittered away in graft or on projects undermined when funds are siphoned off or corrupt public officers are derelict about demanding value for dollars.”). And this authority to protect the fisc extends to local projects on a project-wide basis. So when considering whether the government must prove a connection between federal funds and the defendant’s bribery, the Court explained: It is true, just as [the defendant] says, that not every bribe or kickback offered or paid to agents of governments covered by § 666(b) will be traceably skimmed from specific federal payments, or show up in the guise of a quid pro quo for some dereliction in spending a federal grant. Cf. Salinas v. United States, 522 U.S. 52, 56- 57 (1997) (The “expansive, unqualified” language of the statute “does not support the interpretation that federal funds must be affected to violate § 666(a)(1)(B)”). But this possibility portends no enforcement beyond the scope of federal interest, for the reason that corruption does not have to be that limited to affect the federal interest. Money is fungible, bribed officials are untrustworthy stewards of federal funds, and corrupt contractors do not deliver dollar-for-dollar value. Liquidity is not a financial term for nothing; money can be drained off here because a federal grant is pouring in there. Id. at 605-06 (emphasis added). The same reasoning applies to the crime of conspiracy to defraud the government under 18 U.S.C. § 371. Whether federal funds were provided to support infrastructure construction in particular is irrelevant where the project as a whole was largely federally funded and city money could be drained off by an allegedly corrupt contractor on the infrastructure project because federal grants were pouring in on other parts of the project. Salinas v. United States, 522 U.S. 52 (1997), likewise supports that reasoning. There, the Supreme Court held that the government need not show -12- that federal funds were actually used or involved in a specific bribery transaction under 18 U.S.C. § 666. Id. at 56-57. Similarly, the government need not show that federal funds were actually used or involved in the specific contract won by bid-fixing in this case to prove a violation of 18 U.S.C. § 371; nor must the government show a nexus between the defendants’ conduct and federal funds to prove a federal crime. Second, the defendants’ Commerce Clause argument mises the mark. The Supreme Court has held that the increased federalism concerns expressed in Lopez and Morrison did not affect the constitutionality of 18 U.S.C. § 666. The Court found that those precedents did not control, because the question of an insufficient connection to commerce was irrelevant where the statute was meant to control corruption affecting federal spending. Sabri, 541 U.S. at 607-08. The Court stated that “Congress was within its prerogative to protect spending objects from the menace of local administrators on the take. The power to keep a watchful eye on expenditures and on the reliability of those who use public money is bound up with congressional authority to spend in the first place, and [the defendant] would be hard pressed to claim, in the words of the Lopez Court, that § 666(a)(2) ‘has nothing to do with’ the congressional spending power.” Id. at 609 (quoting Lopez, 514 U.S. at 561). In this case, the federal authority to prosecute the defendants is based on Congress’s power to spend and to protect the objects of its spending from corruption. Third, the defendants’ citation to Fischer v. United States, 529 U.S. 667 (2000), in an effort to isolate the infrastructure component of the project, is unavailing. In that case, the issue the Court was decided was whether Medicare payments to a hospital constituted “benefits” within the meaning of 18 U.S.C. § 666. Fischer, 529 U.S. at 671. The Court found that the payments at issue in that case constituted benefits because they were intended to ensure the availability of quality medical -13- care and required compliance with a host of Medicare regulations. Id. at 679-80. The language cited by the defendants, to the effect that not every expenditure of federal funds through an assistance program constitutes a benefit, comes in the context of that discussion. See id. at 682. However, there is no similar question of the definition of benefits in this case, as 18 U.S.C. § 371 does not mention “benefits,” and instead criminalizes a conspiracy to defraud the United States. Further, the Court explained: To determine whether an organization participating in a federal assistance program receives “benefits,” an examination must be undertaken of the program’s structure, operation, and purpose. The inquiry should examine the conditions under which the organization receives the federal payments. The answer could depend, as it does here, on whether the recipient’s own operations are one of the reasons for maintaining the program. . . . The Government has a legitimate and significant interest in prohibiting financial fraud or acts of bribery being perpetrated upon Medicare providers. Id. at 681. Thus, the Court’s analysis here — even if inapplicable under the defendants’ gloss on it — actually suggests that federal jurisdiction is proper. The government has a significant interest in prohibiting fraud being perpetrated in connection with a project that was largely federally funded. The defendants’ motion to dismiss count I of the indictment for want of federal jurisdiction, therefore, must be denied. The motion to dismiss count III suffers the same fate. Count III charges defendants Ferguson, Woodhouse, Hall, and Xcel Construction Services with conspiracy to launder monetary instruments in violation of 18 U.S.C. §§ 1956(a)(1)(B)(i) and 1956(h). That statute states, in relevant part, that “[w]hoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity — . . . knowing that the transaction is designed in whole or in part — to conceal the nature, location, the -14- source, the ownership, or the control of the proceeds of specified unlawful activity . . . shall be sentenced” as specified in the statute. 18 U.S.C. § 1956(a)(1)(B)(i). In this case, the specified unlawful activity alleged by the government was mail fraud in violation of 18 U.S.C. § 1341. Mail fraud constitutes a “specified illegal activity” as defined in 18 U.S.C. § 1956(c)(7)(A). See 18 U.S.C. § 1956(c)(7)(A) (“As used in this section – . . . the term ‘specified unlawful activity’ means – (A) any act or activity constituting an offense listed in section 1961(1) of this title except an act which is indictable under subchapter II of chapter 53 of title 31 . . . .”); 18 U.S.C. § 1961(1) (listing “section 1341 (relating to mail fraud)” as an act constituting racketeering activity). The defendants do not make a specific argument as to why the Court lacks subject matter jurisdiction over this count of the indictment. However, the Sixth Circuit has held, post-Lopez, that “the use of federally insured banks . . . create[s] a sufficient nexus to interstate commerce to allow application of § 1956. . . . This connection alone is enough to place § 1956 into Lopez’s second category, i.e., into the range of statutes governing ‘the instrumentalities of interstate commerce . . . even though the threat may come only from intrastate activities.’” United States v. Owens, 159 F.3d 221, 226 (6th Cir. 1998) (quoting Lopez, 514 U.S. at 559). The grand jury alleged in the indictment that the defendants used First Independence Bank in their money-laundering scheme, and First Independence Bank is a member of the Federal Deposit Insurance Corporation. Indictment at 17; First Independence Bank, http://www.firstindependence.com (last visited Feb. 15, 2012). Under Sixth Circuit law, that is sufficient to confer jurisdiction on this Court. Count IV of the indictment charges defendants Ferguson, Woodhouse, Ferguson Enterprises, Inc., and Xcel Construction Services with conspiracy to willfully injure property of the United States in violation of 18 U.S.C. § 1361. That statute provides criminal liability for anyone who “willfully -15- injures or commits any depredation against any property of the United States, or of any department or agency thereof, or any property which has been or is being manufactured or constructed for the United States. . . .” 18 U.S.C. § 1361. The government alleges that the charged defendants dumped soil, debris, and excavated material at the GVE site and that HUD and the DHC have been required to pay more than $1.2 million for the removal of those materials and the environmental remediation made necessary by those materials. Indictment at 20. The defendants do not challenge the government’s allegation that the GVE project’s residential component was federally funded, and thus the housing at the GVE site was being constructed for the United States. Nor do they specifically challenge the assertion that federal money was spent to clean up materials dumped at the GVE site. Therefore, even if the Court accepted the defendants’ premise that the infrastructure portion of the project can be isolated for funding purposes, which it does not, the defendants’ motion to dismiss count IV on jurisdiction grounds must be denied. In count VI, defendants Ferguson and Deria are charged with conspiracy to obstruct justice under 18 U.S.C. § 1503. The indictment charges that the defendants conspired to have defendant Deria provide false statements to federal law enforcement agents conducting an investigation on behalf of a federal grand jury. This Court plainly has subject matter jurisdiction over such a claim, and the defendants do not provide any specific argument to the contrary. Similarly, in count VIII of the indictment, defendants Ferguson, Deria, Ferguson Enterprises, and A&F Environmental/Johnson Construction Services are charged with conspiracy to structure financial transactions to evade federal reporting requirements under 31 U.S.C. § 5324. The defendants have not provided any specific argument that would justify dismissal of that count on any basis. Therefore, the defendants’ motion to dismiss counts VI and VIII of the indictment will be denied. -16- B. Counts II, V, and VII The defendants challenge count II of the indictment, in which defendants Ferguson, Woodhouse, Hall, Ferguson Enterprises, and Xcel Construction Services are charged with conspiracy to commit mail fraud under 18 U.S.C. §§ 1341 and 1349, and counts V and VII, in which defendant Ferguson is charged with being a felon in possession of a firearm under 31 U.S.C. § 5324, by arguing that the mail fraud and felon in possession statutes exceed Congress’s power under the Commerce Clause. The defendants rely on arguments that, as they acknowledge, have been rejected by the Fourth and Sixth Circuits. The Sixth Circuit repeatedly has rejected the argument that the felon in possession statute exceeds Congress’s powers under the Commerce Clause. See United States v. Henry, 429 F.3d 603, 619-20 (6th Cir. 2005) (noting that the Sixth Circuit has “explicitly held post-Lopez that a § 922(g)(1) conviction comports with the Commerce Clause so long as the defendant possessed a gun that previously had moved in interstate commerce” (internal quotation omitted ; United States v. Chesney, 86 F.3d 564, 572 (6th Cir. 1996). That argument also has been rejected by every other circuit to address the issue. See Henry, 429 F.3d at 620 (citing cases). Although the Sixth Circuit has not yet addressed the question of the constitutionality of the mail fraud statute, the constitutionality of that statute has been upheld by every circuit to consider the matter post-Lopez. See United States v. Gil, 297 F.3d 93, 100 (2d Cir. 2002) (upholding the constitutionality of the mail fraud statute even where the mailings at issue are intrastate); United States v. Photogrammetric Data Servs., Inc., 259 F.3d 229, 249-52 (4th Cir. 2001), abrogated with respect to other principles by Crawford v. Washington, (2004); United States v. Brumley, 116 F.3d 728, 730 (5th Cir. 1997); United States v. Elliott, 89 F.3d 1360, 1363-64 (8th Cir. -17- 1996) (finding the statute constitutional under the Postal Power). Further, the Sixth Circuit has upheld the constitutionality of a federal statute criminalizing using fire or explosives to commit a federal offense against a Commerce Clause challenge in a case where the underlying offense was mail fraud. United States v. McAuliffe, 490 F.3d 526, 536 (6th Cir. 2007). Finally, in United States v. Lopez, 514 U.S. 549, 558 (1995), the Supreme Court held that Congress has the power “to regulate and protect the instrumentalities of interstate commerce . . . even though the threat may come from only intrastate activities.” Ibid. This Court finds that reasoning persuasive and adopts it as its own, and holds that the mail fraud statute is constitutional under the Commerce Clause as a regulation of an instrumentality of interstate commerce. The motion to dismiss the indictment for want of jurisdiction will be denied. III. Motions to sever Defendant Calvin L. Hall argues that severance of his case for trial is required under Federal Rule of Criminal Procedure 14 because he would be prejudiced by the joinder of his trial with that of the other defendants. He states that the risk of prejudice inherent in a joint conspiracy trial is accentuated here where the co-defendants are charged in three additional conspiracies and two additional substantive offenses and where evidence will be admitted that would be inadmissible in a separate trial, although he does not identify that evidence with any specificity. He does anticipate generally, however, that the evidence of the conspiracies in which he was not involved will overshadow the evidence presented against him. He also argues that a separate trial should be allowed on the grounds of misjoinder because multiple defendants have been charged with offenses arising out of different transactions. -18- Defendants Michael Woodhouse and Xcel Construction Services argue that their cases should be severed for trial and observe that under Federal Rule of Criminal Procedure 14, a district court should grant a motion for severance if there is a serious risk that a joint trial will compromise the rights of a defendant, prevent the jury from making a reliable determination as to guilt, or involve complex issues and differing degrees of culpability among the defendants. They note that the Sixth Circuit has found severance proper where it is necessary to safeguard the right to a fair trial or where inflammatory evidence will be presented against some but not all of the defendants. See United States v. Wirsing, 719 F.2d 859, 863 (6th Cir. 1983); United States v. Breining, 70 F.3d 850, 853 (6th Cir. 1995). Woodhouse and Xcel believe that the government has a great deal of evidence against the other defendants in the case, but that much of that evidence is not applicable to them. They also say that if the motion to sever is not granted, their entire trial strategy will have to change and defense counsel will have to spend “a considerable amount of time and energy” distinguishing defendant Woodhouse from his co-defendants. The government cites the preference in the federal system for joint trials when defendants are indicted together, and argues that the defendants have not shown that a joint trial would cause them “specific and compelling prejudice,” which they must show. See United States v. Harris, 9 F.3d 493, 500 (6th Cir. 1993). The government asserts that defendant Hall is a central member of the conspiracies charged in the first three counts of the indictment and that much of the evidence presented at trial on these counts will concern his actions. The government further asserts that defendant Woodhouse only offers vague and conclusory allegations of inflammatory evidence and complex conspiracies that fail to meet the burden of demonstrating prejudice. Finally, the government points out — accurately — that defendants Bobby Ferguson and Ferguson Enterprises -19- filed notices of joinder in the severance motions, but offered no factual or legal arguments in support of their notices. As an initial matter, there is no improper joinder here. Under Federal Rule of Criminal Procedure 8(a), indictments may charge defendants with more than one offense “if the offenses charged . . . are of the same or similar character, or are based on the same act or transaction, or are connected with or constitute parts of a common scheme or plan.” Fed. R. Crim. P. 8(a). Rule 8(b) states that an “indictment . . . may charge 2 or more defendants if they are alleged to have participated in the same act or transaction, or in the same series of acts or transactions, constituting an offense or offenses. The defendants may be charged in one or more counts together or separately.” Fed. R. Crim. P. 8(b). Rule 8(b) “can, and should, be broadly construed in favor of initial joinder, because of the protection Rule 14 offers against unnecessarily prejudicial joinder.” United States v. Swift, 809 F.2d 320, 322 (6th Cir. 1987) (internal quotations omitted). Defendant Hall argues that the cases are joined improperly because the indictment charges multiple defendants with different offenses arising out of separate transactions, and other defendants are charged with unrelated offenses. The government does not address that argument in its response, but Hall does not elaborate on the argument beyond an assertion that the indictment does not allege that each defendant participated in the same transaction or series of transactions. However, “[a]ll defendants need not be charged in each count.” Fed. R. Crim. P. 8(b). Further, “[i]n the decision of whether to join, the predominant consideration is whether joinder would serve the goals of trial economy and convenience; the primary purpose of this kind of joinder is to insure that a given transaction only be proved once.” Swift, 809 F.2d at 322 (internal quotation omitted). The Sixth -20- Circuit has held that a group of acts or transactions constitutes a series if they “are logically interrelated and involve overlapping proof.” Ibid. A casual reading of the indictment demonstrates that all of the charges arise out of the defendants’ alleged misconduct in connection with the Garden View Estates project and their attempts to disguise money flowing to the various defendants as a result of that misconduct. Those charges may be joined together. See United States v. Bibby, 752 F.2d 1116, 1121 (6th Cir. 1985) (“[C]oncealment of ill-gotten gain is an integral part of assuring the success of that illegal activity.”). The only charges that arguably are not connected to that underlying criminal scheme are the felon in possession charges against defendant Ferguson and obstruction of justice charges against defendants Ferguson and Deria. However, the firearms were presumably found in a search that resulted from the investigation of the misconduct surrounding the GVE project, and the obstruction of justice charges are based on misleading information provided by defendant Deria in connection with one of the firearms. Joining those charges are in the interests of trial economy, as it appears that both the guns were found when other evidence was seized. See United States v. Hang Le-Thy Tran, 433 F.3d 472, 478 (6th Cir. 2006) (finding that the fact that witnesses for two offenses would overlap supported joinder). Rule 14(a) states that “[i]f the joinder of offenses or defendants in an indictment . . . or a consolidation for trial appears to prejudice a defendant or the government, the court may order separate trials of counts, sever the defendants’ trials, or provide any other relief that justice requires.” Fed. R. Crim. P. 14(a). But in the federal system, there is a preference for joint trials of defendants who are indicted together. Zafiro v. United States, 506 U.S. 534, 537 (1993). Joint trials “promote efficiency and ‘serve the interests of justice by avoiding the scandal and inequity of -21- inconsistent verdicts.’” Ibid. (quoting Richardson v. Marsh, 481 U.S. 200, 210 (1987 . The preference for joint trials is especially strong where “two defendants are accused of participating in a conspiracy or joint scheme.” United States v. Cope, 312 F.3d 757, 780 (6th Cir. 2002). The Supreme Court has held that “when defendants properly have been joined under Rule 8(b), a district court should grant a severance under Rule 14 only if there is a serious risk that a joint trial would compromise a specific trial right of one of the defendants, or prevent the jury from making a reliable judgment about guilt or innocence.” Zafiro, 506 U.S. at 539. A risk of prejudice might occur where “evidence that the jury should not consider against a defendant and that would not be admissible if a defendant were tried alone is admitted against a codefendant.” Ibid. But the defendants have cited no such evidence here. It is true that the risk of prejudice is heightened where “defendants are tried together in a complex case and they have markedly different degrees of culpability.” Ibid. (citing Kotteakos v. United States, 328 U.S. 750, 774-75 (1946 . However, “less drastic measures, such as limiting instructions, often will suffice to cure any risk of prejudice.” Ibid. (citing Richardson, 481 U.S. at 211). “Juries are presumed to be capable of following instructions . . . regarding the sorting of evidence and the separate consideration of multiple defendants.” United States v. Walls, 293 F.3d 959, 966 (6th Cir. 2002) (citations omitted). Therefore, in order to prevail on a motion to sever, a defendant must show “compelling, specific, and actual prejudice” resulting from a joint trial. United States v. Driver, 535 F.3d 424, 427 (6th Cir. 2008) (citation omitted). Moreover, “[d]efendants are not entitled to severance merely because they may have a better chance of acquittal in separate trials.” United States v. Long, 190 F.3d 471, 476 (6th Cir. 1999) (citing Zafiro, 506 U.S. at 540). Nor is severance required “if some evidence is admissible against some defendants and not others” -22- or “because the proof is greater against a co-defendant.” United States v. Warner, 971 F.2d 1189, 1196 (6th Cir. 1992). Defendants Woodhouse and Hall argue that their trials should be severed on the grounds of undue prejudice, but neither has met his burden of showing specific and compelling prejudice that would result from a joint trial. In support of their motions, the defendants state that the evidence that will be presented in the case is complex and that some of it will not apply to them. No doubt. That often happens in conspiracy cases in which the government has alleged misconduct on the part of persons accused of playing different roles involving varying levels of culpability. However, neither defendant has pointed to any specific item of evidence that would be prejudicial to him if introduced. Instead, the defendants allege in a conclusory fashion that a majority of evidence presented in the case will not be applicable to them, and thus that the jury will not be able to compartmentalize the evidence even with the aid of a limiting instruction. But such generalities are not enough to demonstrate the requisite level of prejudice. Moreover, even if the defendants’ characterization of the evidence to be presented at trial is correct, the Sixth Circuit has held that the fact that a majority of evidence offered at trial does not implicate a co-defendant does not, without more, justify severance. Warner, 971 F.2d at 1196. Nor has either defendant pointed to a specific trial right that would be abridged, beyond generally stating that a joint trial would compromise his right to a fair trial. Defendant Woodhouse states that being tried along with his co-defendants would require an alteration of his trial strategy to differentiate him from his co-defendants, but he does not state that his current strategy requires admission of evidence that would be inadmissible in a joint trial. See Zafiro, 506 U.S. at 539. A need to employ a trial strategy of differentiating a defendant from his co-defendants cannot be -23- sufficient to demonstrate prejudice requiring severance; if it were, it would be virtually impossible to try co-defendants, whose levels of culpability differ, together in a single trial. Because the defendants have not made a “strong showing of factually specific and compelling prejudice resulting from a joint trial,” Warner, 971 F.2d at 1196, their motions to sever must be denied. IV. Motions for discovery The defendants have moved for disclosure of the grand jury testimony of Brian Dodds and “Marc Burrell,” who created fraudulent bid forms for the GVE project. The defendants also seek information that they characterize as Brady material, consisting of any information indicating that Brian Dodds, Marc Burrell, or Don Roberts faced pressure to or received a reward for agreeing to testify unfavorably about the defendants and information that could tend to impeach the witnesses, including inconsistent statements and grants of immunity. The defendants believe that the government has offered the named individuals immunity or leniency in exchange for their testimony, and state that they are aware that Donald Roberts has a use immunity agreement and Brian Dodds has entered into a plea agreement. The government asserts that there is no witness in the case named “Marc Burrell,” although there is one identified as Rodney Burrell. The government assumes, as does the Court, that the defendants meant to ask for materials that relate to him. That said, the government erects the Jencks Act, 18 U.S.C. § 3500(a), as a barrier to the production of the grand jury testimony sought. The government also contends that the defendants have not met their burden of demonstrating the materiality of the information they seek under Brady, and also asserts that it already has produced copies of Donald Roberts’ immunity agreement and Brian Dodds’s and Rodney Burrell’s plea agreements. It maintains that it does not intend to call Donald Roberts as a witness in its case in -24- chief. The government also argues that it has furnished all relevant materials subject to disclosure, including voluminous materials that have exceeded the government’s discovery obligations under Rule 16 and Brady. And it insists that all potential impeachment materials have either been turned over, are set forth in publically available documents, or are Jencks Act materials. The government’s argument that the Jencks Act bars pretrial production of the grand jury testimony of a potential trial witness is not supported by the law in this circuit. The Sixth Circuit has held that “the general prohibition in [the Jencks Act] against requiring disclosure of statements of witnesses until after they have testified does not apply to grand jury testimony.” United States v. Short, 671 F.2d 178, 186 (6th Cir. 1982). In reaching that conclusion, the Short court considered the legislative history of the 1970 amendment to the Jencks Act, which led to the Act’s present language. The amendment was enacted after the Supreme Court construed the Act in Pittsburgh Plate Glass Co. v. United States, 360 U.S. 395 (1959), as having no application to grand jury transcripts. Short, 671 F.2d at 185. Congress then amended the Act to include grand jury testimony in the Act’s definition of “statement.” Ibid. However, the Act only defines the term “statement” as used in subsections (b), (c), and (d) of the Act. See 18 U.S.C. § 3500(e) (“The term ‘statement’, as used in subsections (b), (c), and (d) of this section . . . means – . . . (3) a statement, however taken or recorded, or a transcription thereof, if any, made by said witness to a grand jury.”). That definition explicitly excludes subsection (a), which “refers to statements or reports in possession of the prosecution made by a government witness or prospective government witness,” and governs pre-trial discovery. Short, 671 F.2d at 185-86. By contrast, subsections (b), (c), and (d) of the Jencks Act refer to statements of witnesses who have actually testified at trial. The Sixth Circuit reasoned, therefore: -25- The 1970 amendment by its terms made the definition of “statement” include grand jury testimony only when sought after a witness has testified at trial. The 1970 amendment did not affect a trial court’s discretion to order pretrial discovery of grand jury testimony. . . . The amendment merely made clear that after a government witness has testified, that witness’s grand jury testimony, if any, is included among the “statements” which the defendant is entitled to have produced. The Jencks Act does not apply to a motion for pretrial disclosure of a grand jury transcript. Such a motion is covered by [Federal Rule of Criminal Procedure] 6(e). Ibid. (internal citations omitted). Therefore, the Court must analyze the defendants’ request for transcripts of the grand jury testimony of Dodds and Burrell under the Federal Rules of Criminal Procedure 6(e). Rule 6(e) allows a court to “authorize disclosure — at a time, in a manner, and subject to any other conditions that it directs — of a grand-jury matter preliminarily to or in connection with a judicial proceeding.” Fed. R. Crim. P. 6(e)(3)(E)(I). The Supreme Court has recognized that “the proper functioning of our grand jury system depends upon the secrecy of grand jury proceedings,” but that “in some situations justice may demand that discrete portions of transcripts be made available for use in subsequent proceedings.” Douglas Oil Co. of California v. Petrol Stops Northwest, 441 U.S. 211, 218-20 (1979). “Parties seeking grand jury transcripts under Rule 6(e) must show that the material they seek is needed to avoid a possible injustice in another judicial proceeding, that the need for disclosure is greater than the need for continued secrecy, and that their request is structured to cover only material so needed.” Douglas Oil Co. of California, 441 U.S. at 222. “[T]he secrecy of grand jury proceedings may be lifted only to the extent necessary to fulfill a narrowly tailored and compelling need.” In re Grand Jury 89-4-72, 932 F.2d 481, 489 (6th Cir. 1991). It is well established that a defendant seeking pretrial disclosure of grand jury testimony under Rule 6(e) must demonstrate a “particularized need” for the material. United States v. Azad, -26- 809 F.2d 291, 295 (6th Cir. 1986); see also United States v. Rutherford, 509 F.3d 791, 795 (6th Cir. 2007) (citing Federal Deposit Ins. Corp. v. Ernst & Whinney, 921 F.2d 83, 86-87 (6th Cir. 1990 . “A general claim . . . that disclosure of grand jury transcripts would reveal exculpatory evidence is not sufficient to satisfy the requirement of a showing of particularized need.” Short, 671 F.2d at 187. “Where a particularized need for disclosure has been demonstrated, a district court that is properly seized of the question is given wide discretion to decide whether it is the need for secrecy that predominates, or the need for disclosure.” In re Grand Jury Proceedings, 841 F.2d 1264, 1268- 69 (6th Cir. 1988). This need for secrecy is reduced when a grand jury’s functions are ended; in that case, “disclosure is wholly proper where the ends of justice require it.” United States v. Socony- Vacuum Oil Co., 310 U.S. 150, 234 (1940). The defendants’ description of their particularized need is quite weak. It goes something like this: the testimony of Brian Dodds and [Rodney] Burrell likely will be important at trial, and therefore the defendants need their grand jury testimony to prepare for trial effectively. The defendants arguably have identified a need, but it is hardly particularized. In fact, it is difficult to imagine what need could be more general than a need to prepare for trial. However, the defendants also state that they believe that Dodds and Burrell may have embellished testimony or made inconsistent statements before the grand jury. A need for impeachment evidence has been found to be a particularized need sufficient to justify disclosure of grand jury transcripts, especially where the witnesses concerned are important to the government’s case. See Dennis v. United States, 384 U.S. 855, 869-70 (1966). In Dennis, however, the motion for disclosure was made after the witnesses testified at trial, there was a gap of seven years between the grand jury testimony and the trial, the witnesses’ testimony was largely uncorroborated, and one witness admitted that he had -27- been mistaken about key dates. Id. at 872-73. In this case, the defendants have offered no specific reason to believe that Dodds or Burrell may have fabricated their testimony, nor any specific reason to think that their testimony will be unreliable. Moreover, the grand jury testimony will be available for the defendants under the Jencks Act, which the government intends to relax when it produces the testimony three weeks before trial. The defendants’ general statements that they need the grand jury testimony to prepare for trial and for possible impeachment of the witnesses are insufficient to demonstrate a particularized need for disclosure of grand jury testimony. It is not clear that the other witness material falls within the rule of Brady v. Maryland, (1963). But the defendants are entitled to production where “[t]he evidence at issue [is] favorable to the accused, either because it is exculpatory, or because it is impeaching . . . .” Strickler v. Greene, 527 U.S. 263, 281-82 (1999). The defendants must demonstrate that the information is material, but “the issue of materiality for Brady purposes pertains only to the question of a defendant’s guilt or innocence, not to the issue of a defendant’s ability or inability to prepare for trial.” United States v. Phillips, 948 F.2d 241, 249 (6th Cir. 1991) (citing United States v. Agurs, 427 U.S. 97, 112 n. 20 (1976 . “Impeachment evidence . . . , as well as exculpatory evidence, falls within the Brady rule.” United States v. Bagley, 473 U.S. 667, 676 (1985). However, “[t]he Brady doctrine did not create a constitutional right of pre-trial discovery in criminal cases.” United States v. Presser, 844 F.2d 1275, 1284 (6th Cir. 1988). The constitutional right “to question adverse witnesses . . . does not include the power to require the pretrial disclosure of any and all information that might be useful in contradicting unfavorable testimony.” Pennsylvania v. Ritchie, 480 U.S. 39, 53 (1987) (plurality opinion). -28- Brady, of course, is a constitutional rule, and the Jencks Act cannot trump it. The issue that arises when the government interposes the Jencks Act to resist pretrial discovery, as here, even of exculpatory or impeaching material, is one of timing. “The clear and consistent rule of [the Sixth] circuit is that the intent of Congress expressed in the Act must be adhered to and, thus, the government may not be compelled to disclose Jencks Act material before trial.” Presser, 844 F.2d at 1283 (citing United States v. Algie, 667 F.2d 569, 571 (6th Cir. 1982); United States v. Carter, 621 F.2d 238, 240 (6th Cir. 1980 . The Sixth Circuit has held that material that is arguably exculpatory under Brady and yet arguably protected by the Jencks Act must be “disclosed in time for its ‘effective’ use at trial.” Presser, 844 F.2d at 1283. Further, Federal Rule of Criminal Procedure 16(a)(2) states that the rule governing disclosure in criminal cases does not “authorize the discovery or inspection of statements made by prospective government witnesses except as provided in 18 U.S.C. § 3500.” Fed. R. Crim. P. 16(a)(2). The defendants’ request for any materials that may tend to impeach Brian Dodds, Rodney Burrell, and Donald Roberts, as well as the substance and subject matter of all discussions between those individuals and the government, must be viewed in that context. The government states that all of that material either has been disclosed to the defendants already, is publicly available, or is Jencks Act material and is thus not subject to pretrial disclosure. The government promises that it will provide all Jencks Act material that is also potentially Brady material to the defendants three weeks before trial in accordance with Presser. The defendants have not suggested any reason to believe that the government is withholding Brady material to which the defendants are entitled, beyond the somewhat enigmatic statement that “[d]efense counsel has reason to believe that the prosecution offered” the above-named potential witnesses “some sort of immunity or lenient -29- sentence in exchange for their testimony against the Defendants.” Def.’s Mot. for Disclosure of Brady Materials at 6. Nor do the defendants specify what they wish to obtain in discovery, beyond the substance of conversations between these individuals and the government. The Court does not have the authority to order the disclosure of the substance of conversations between potential witnesses and the government under Federal Rule of Criminal Procedure 16(a)(2) or the Jencks Act. Nor do the defendants’ requests fall under any other discovery provision contained in Rule 16. The defendants are entitled to pretrial disclosure of plea agreements and immunity promises for those witnesses, but the government has represented that it has furnished that material already. The Court will deny the defendants’ motion to produce the other items, although without prejudice to a subsequent showing if new information comes to light. V. Conclusion The Court has subject matter jurisdiction over all counts of the indictment. There is no misjoinder of counts, and the defendants have not demonstrated the prejudice necessary to justify severance. The defendants have not shown a particularized need for the grand jury testimony of Brian Dodds or Rodney Burrell at this time, and they have not identified any Brady material that has not been produced. Accordingly, it is ORDERED that the motion to dismiss the indictment for want of subject matter jurisdiction [dkt. #124] is DENIED. It is further ORDERED that the motions to sever by defendants Hall, Woodhouse, and Xcel Construction Services [dkt. #116, 119] are DENIED. It is further ORDERED that the motions for disclosure of grand jury and Brady materials [dkt. #117, 118] are DENIED WITHOUT PREJUDICE. -30- s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 16, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 16, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -31-

=== STATE OF MICHIGAN, DEPARTMENT OF TREASURY v. JAMES AND RENAY WILSON ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 10-12886 Bankr. Number 10-45791 Honorable David M. Lawson IN RE: JAMES AND RENAY WILSON, Debtor(s), ______________________________________/ STATE OF MICHIGAN, DEPARTMENT OF TREASURY, v. Plaintiff-appellant, JAMES AND RENAY WILSON, Defendants-appellees. ______________________________________/ OPINION AND ORDER AFFIRMING DECISION OF BANKRUPTCY COURT Debtors James and Renay Wilson filed a petition for Chapter 13 bankruptcy protection on February 26, 2010 and proposed a plan that would treat the State of Michigan as a priority creditor for the debtors’ 2009 income tax obligation, meaning that the claim would be paid in full but the payments would be deferred over the life of the plan. The State objected, arguing that it could not be forced to participate in the plan as a creditor because the income tax was not due until April 15, 2010, which rendered the tax a post-petition debt. The State also objected to the debtors filing a claim on its behalf. The bankruptcy court overruled the objection and confirmed the plan. It held that the Bankruptcy Code treats as pre-petition debts obligations for taxes that accrue before the petition is filed but do not become payable until afterward. Such claims have come to be known as “straddling income tax claims.” See In re Senczyszyn, 444 B.R. 750, 753 n.1 (E.D. Mich. 2011). The State appealed. The Court agrees with the bankruptcy court’s conclusion that the 2009 income tax obligation properly was included in the plan as a priority claim and that the court correctly confirmed the plan. Therefore, this Court will affirm the order of the bankruptcy court. I. The facts are not in dispute. James and Renay Wilson filed for bankruptcy protection under Chapter 13 of the Bankruptcy Code on February 26, 2010. The debtors timely filed their joint Michigan income tax return for 2009 around March 26, 2010. The debtors’ 2009 Michigan tax year ended on December 31, 2009. The debtors’ return showed that they owed the State of Michigan $1,576 in income tax for 2009. The deadline for filing the 2009 Michigan income tax return was April 15, 2010. The debtors acknowledge that the State could not collect their 2009 income tax debt until April 15, 2010, even though they filed their tax return before the deadline. The State did not file any proof of claim in this case for the debtors’ 2009 income tax liability. The deadline for filing a proof of claim was August 25, 2010 — 180 days after the filing of the bankruptcy petition. However, the debtors filed their first amended Chapter 13 plan on April 30, 2010, which listed the 2009 income tax obligation as a priority claim. The debtors addressed the priority unsecured claims in paragraph I.D.6., “Class six,” of the amended Chapter 13 plan. That section of the plan identified the State as holding a priority unsecured claim in the amount of $1,576 for the tax year 2009. The plan listed the priority unsecured claims as being treated under Class Six, as required by 11 U.S.C. § 1322(a)(2) (requiring the plan to “provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507 of this title [which includes certain income taxes], unless the holder of a particular claim agrees to a different treatment of such claim”). -2- The State was served with the first amended Chapter 13 plan on April 30, 2010. Paragraph II.F.4 of the plan contained the following language, which “deemed” the State’s proof of claim “filed,” despite the State’s inaction: In the event that a creditor files a proof of claim that is at variance with the provisions of this Plan, the following method is to be employed to resolve the conflict: A proof of claim or interest shall be deemed filed under 11 U.S.C. §501 for any claim or interest that appears in Classes Two, Three, Four, Five or Six of this plan, except a claim or interest that is disputed, contingent or nonliquidated and labeled as such in this plan. . . . The debtors also filed an amended Schedule E on April 30, 2010. The debtors’ amended Schedule E specified that the State was to be paid as a priority creditor the amount of $1,576 for the 2009 state income tax obligation. The debtors listed the amount on Schedule E based upon their state income tax return for the year, which was filed post-petition around March 26, 2010. On May 6, 2010, the State filed objections to the plan, arguing that the State cannot be forced to participate in the Debtors’ Chapter 13 bankruptcy because the income taxes for the 2009 tax year were not due until April 15, 2010, making it a post-petition debt. The State had not filed a proof of claim, and it insisted that the debtors could not do so on its behalf. The bankruptcy court heard oral argument on May 20 and July 1, 2010. On July 7, 2010, the bankruptcy court overruled the State’s objections to confirmation with respect to allowing the 2009 tax claim to be paid as a priority claim through the Chapter 13 plan. The bankruptcy court relied heavily on In re Hight, 426 B.R. 258 (Bankr. W.D. Mich. 2010), which held that straddling tax claims must be treated as pre-petition claims. Id. at 260-63. The bankruptcy court acknowledged as a general matter that a claim cannot arise under the Bankruptcy Code until the creditor has a right to payment, and under that definition the 2009 income tax obligation was a post-petition debt. However, the court determined that section 502(i) of the Bankruptcy Code directs that taxes “entitled to priority under section 507(a)(8)” are -3- to be allowed “the same as if such claim had arisen before the date of the filing of the petition,” 11 U.S.C. § 502(i), and the 2009 income tax due in this case was a tax included within 11 U.S.C. § 507(a)(8). The bankruptcy court also held that only the State may file a proof of claim under 11 U.S.C. § 501 in the first instance. However, if the State failed to do so within the deadline, the debtor could file a proof of claim within thirty days thereafter under 11 U.S.C. § 501(c) and Federal Rule of Bankruptcy Procedure 3004. The court sustained the State’s objections to confirmation insofar as the plan fixed the amount of the claim and “deemed” a proof of claim in that amount as having been filed, because the State did not file a proof of claim and the time when the debtor could file a protective claim had not yet arrived. The court overruled the State’s objection to the debtors’ inclusion of the 2009 income tax debt as a priority claim to be satisfied by deferred cash payments. Finally, the court found that its ruling did not contravene 11 U.S.C. § 1305(a)(1), which states that “[a] proof of claim may be filed by any entity that holds a claim against the debtor for taxes that become payable to a governmental unit while the case is pending . . . .” The State’s option to file a claim under section 1305, the court reasoned, is not a basis for disallowance of a claim under section 502(b) (which requires disallowance of claims for an unmatured interest) filed by the debtors. The State timely appealed. The Court heard oral argument on January 11, 2011 and took the matter under advisement. The bankruptcy court’s decision in In re Hight raising the same issues, which had been affirmed by the district court, was appealed to the Sixth Circuit, and this Court was awaiting guidance from the appellate court. However, an opinion has not been forthcoming, and the present matter is ready for decision. -4- II. On July 7, 2010, the bankruptcy court overruled the State of Michigan’s objections to the confirmation of the debtors’ Chapter 13 plan and confirmed the plan. District courts have jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy courts. 28 U.S.C. § 158(a)(1); Central States, Se. & Sw. Areas Pension Fund v. U.S. Truck Co. Holdings, Inc. (In re U.S. Truck Co. Holdings), 341 B.R. 596, 599 (E.D. Mich. 2006). The Sixth Circuit has held that “finality ‘is considered in a more pragmatic and less technical way in bankruptcy cases than in other situations.’” Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 578 (6th Cir. 2008) (quoting Lindsey v. O'Brien, Tanksi, Tanzer & Young Health Care Providers of Conn. (In re Dow Corning), 86 F.3d 482, 488 (6th Cir. 1996 . “Therefore, where an order in a bankruptcy case finally dispose[s] of discrete disputes within the larger case, it may be appealed immediately.” Ibid. (internal quotation marks omitted); see also Morton v. Morton (In re Morton), 298 B.R. 301, 303 (B.A.P. 6th Cir. 2003) (noting that a bankruptcy court’s order overruling a Chapter 13 debtor’s objection to claims was a final order because it ended litigation on the merits and left nothing for the court but the execution of judgment). “The bankruptcy court’s findings of fact are reviewed under the clear-error standard, and its conclusions of law are reviewed de novo.” B-Line, LLC v. Wingerter (In re Wingerter), 594 F.3d 931, 935-36 (6th Cir. 2010) (citing Behlke v. Eisen (In re Behlke), 358 F.3d 429, 433 (6th Cir. 2004 . The State’s main argument focuses on 11 U.S.C. § 1305(a)(1), which states: “A proof of claim may be filed by any entity that holds a claim against the debtor for taxes that become payable to a governmental unit while the case is pending.” Seizing on the language “may be filed by any -5- entity that holds a claim against the debtor,” the State contends that the statute creates a one-way street. The prerogative to file a claim for a post-petition tax debt, the State insists, lies solely with the creditor, which may chose to participate in the debtor’s plan for repayment or not, as it sees fit. The State acknowledges that under sections 502(i) (“A claim that does not arise until after the commencement of the case for a tax entitled to priority under section 507(a)(8) of this title shall be determined . . . the same as if such claim had arisen before the date of the filing of the petition.”) and 501(c) (“If a creditor does not timely file a proof of such creditor’s claim, the debtor or the trustee may file a proof of such claim.”), the debtor may file a proof of claim for certain taxes if the governmental creditor does not do so on time. But the State says that section 502(i) does not apply because the straddling tax claim in this case does not meet the requirements of section 507(a)(8), specifically subparagraph (A)(i) of that section, because the tax return was not due before the petition date, which the State believes is a requirement of that subparagraph. The debtors argue that the State misreads section 507(a)(8)(A)(i), and the straddling 2009 income tax claim must be considered a post-petition claim that is entitled to priority, and therefore included, in the plan and treated as a pre-petition debt. Alternatively, the debtors argue that the tax debt was payable at the end of the tax year, not when the return was due, and therefore the 2009 tax liability arose pre-petition. Either way, the debtors contend, they had a right under section 501(c) to file a claim for the State if it did not do so on time. A. To begin, the debtors here were obliged to include their 2009 income tax obligation in their plan to be paid in full, albeit in deferred payments, if it was entitled to priority. Section 1322 states: -6- (a) The plan — . . . (2) shall provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507 of this title, unless the holder of a particular claim agrees to a different treatment of such claim. . . . 11 U.S.C. § 1322(a)(2) (emphasis added). The Court finds that the 2009 income tax is entitled to priority under 11 U.S.C. § 507(a)(8). That statute, which establishes the priority of claims, reads: Eighth, allowed unsecured claims of governmental units, only to the extent that such claims are for — (A) a tax on or measured by income or gross receipts for a taxable year ending on or before the date of the filing of the petition — (i) for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition . . . . 11 U.S.C. § 507(a)(8)(A)(i). The State’s argument that this section only applies to tax returns that were due before the petition was filed does not follow the statutory language. As one court explained, the statute “actually applies when the return was last due after, not within, three years before the petition was filed.” Dixon v. IRS (In re Dixon), 218 B.R. 150, 153 (B.A.P. 10th Cir. 1998). The debtors’ tax return was first due April 15, 2010, which fell inside that window. The Chapter 13 petition was filed on February 26, 2010. “[A] return coming due after the petition was filed is indeed due ‘after three years before’ the petition, which is what the statute requires.” Ibid. And the 2009 taxable year ended before the petition was filed. B. The question whether a debtor may file a protective claim for a post-petition debt under section 1305(a)(1) has divided the courts. Compare In re Senczyszyn, 444 B.R. 750, 755-57 (E.D. Mich. 2011) (holding that section 1305(a)(1) implicitly bars debtors from filing claims for post- -7- petition debts on behalf of creditors); In re Smith, 192 B.R. 712, 714 (Bankr. E.D. Tenn. 1996) (holding that section 1305(a)(1) does not permit a debtor to file tax claim on behalf of government) ; In re Rhodes, No. 93-02411, 1994 WL 738645, at *2 (Bankr. D. Idaho Dec. 21, 1994) (same); In re Hudson, 158 B.R. 670, 674 (Bankr. N.D. Ohio 1993) (same); In re Dickey, 64 B.R. 3, 4 (Bankr. E.D. Va. 1985) (same) with In re Hight, 434 B.R. 505, 509-10 (W.D. Mich. 2010) (holding that section 1305(a) does not prohibit a debtor from filing a claim on behalf of a creditor if another section of the Bankruptcy Code authorizes it); In re Flores, 270 B.R. 203, 206 (Bankr. S.D. Tex. 2001) (same). Section 1305(a)(1) states: A proof of claim may be filed by any entity that holds a claim against the debtor for taxes that become payable to a governmental unit while the case is pending. As the statutory text makes clear, the authority conferred by this statute to file a claim for a post- petition tax debt is confined to the “entity that holds the claim,” which plainly does not include the debtor. However, as the bankruptcy court observed in this case, section 502(i) relegates the 2009 tax debt to pre-petition status, and section 501(c) would allow the debtor to file a protective claim for a creditor who did not do so on time. The district court in Senczyszyn considered the interplay of these statutes when deciding whether a straddling state income tax claim properly was included in a Chapter 13 plan, and held that section 1305(a) not only failed to grant permission to a debtor to file a protective claim for the State, but that it actually barred the debtor from doing so. This Court cannot subscribe to that conclusion for several reasons. First, the court in Senczyszyn viewed section 1305(a) as an “exception” to the general rules that apply to claims in bankruptcy proceedings, and therefore reasoned that the specific provision in this statute, which is limited to Chapter 13 proceedings, must govern the general provisions. -8- Senczyszyn, 444 B.R. at 756-57. However, neither the text nor the history of section 1305 supports the view that it was intended to displace the general rules set forth in Chapter 5 of the Bankruptcy Code. The statute certainly contains no express disqualification of a debtor as a claim filer for post- petition debts. It does not state, for instance, that a post-petition claim may be filed only by a creditor; nor does it purport to suspend the application of the general provisions found in Chapter 5. And the language — “A proof of claim may be filed” — is permissive, not restrictive. “It does not exclude other means of allowing postpetition claims.” In re Flores, 270 B.R. at 206. The Senate Report on the legislation is consistent with that view: Section 1305, exclusively applicable in chapter 13 cases, supplements the provisions of sections 501-511 of Title 11, dealing with the filing and allowance of claims. Sections 501-511 apply in chapter 13 cases by virtue of section 103(a) of this title. Section 1305(a) provides for the filing of a proof of claim for taxes and other obligations incurred after the filing of the chapter 13 case. Subsection (b) prescribes that section 502 of title 11 governs the allowance of section 1305(a) claims, except that its standards shall be applied as of the date of allowance of the claim, rather than the date of filing of the petition. S. Rep. No. 95-989, at 140 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5926 (emphasis added). And in subparagraph (b) of section 1305, Congress specifically addressed the more general provision for claim determination in section 502 and altered its application for post-petition claims filed under section 1305 by fixing the date for determining claims “as of the date such claim arises,” 11 U.S.C. § 1305(b) instead of “the date of the filing of the petition,” id. § 502(b). If Congress intended section 1305 to modify or suspend other sections in Chapter 5, it certainly knew how to do so. Second, the canons of statutory construction do not support the idea that a restriction that prohibits debtors from filing post-petition claims on behalf of creditors can be implied from section 1305(a). The Senczyszyn court employed the canon expressio unius est exclusio alterius (“the -9- expression of one thing is the exclusion of others”) to reach the conclusion that Congress implied a bar against debtors filing such claims, even when section 501(c) would otherwise allow the filings. But that canon does not fit here. “[T]he canon expressio unius est exclusio alterius does not apply to every statutory listing or grouping; it has force only when the items expressed are members of an ‘associated group or series,’ justifying the inference that items not mentioned were excluded by deliberate choice, not inadvertence.” Barnhart v. Peabody Coal Co., 537 U.S. 149, 168 (2003) (citing United States v. Vonn, 535 U.S. 55, 65 (2002 . Section 1305(a) contains no list or grouping of authorized post-petition claim filers; it identifies only one: “any entity that holds a claim against the debtor for taxes.” And while the statutory language plainly supports the idea that this section, by itself, does not authorize a debtor to file such a post-petition claim on behalf of a creditor, there is no basis to conclude that Congress intended to prohibit a debtor from filing such a claim if a different statute authorized it. Millsaps v. Thompson, 259 F.3d 535, 546-47 (6th Cir. 2001) (holding that Congress’s establishment of an election day did not imply that voting could not occur on other days as well). Third, as mentioned above, the debtor is obliged to provide for such claims in his or her plan. Section 1322(a)(2) requires a debtor’s Chapter 13 plan to “provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507 . . . unless the holder of a particular claim agrees to a different treatment of such claim.” 11 U.S.C. § 1322(a)(2). When section 1322(a)(2) is read in conjunction with sections 507(a)(8) and 502(i), it becomes apparent that the debtor has little alternative but to file a proof of claim on behalf of a governmental creditor for straddling tax claims entitled to priority. -10- Fourth, reading these statutes together to permit a debtor to file a proof of claim for a post- petition tax debt “that does not arise until after the commencement of the case” 11 U.S.C. § 502(i), “does not render § 1305 meaningless because . . . § 1305’s reach is not limited to claims that arise immediately following the commencement of the case. It also covers postpetition claims that may not arise until years after the plan’s confirmation.” Michigan Dep’t of Treasury v. Hight (In re Hight), 434 B.R. 505, 509 (W.D. Mich. 2010). The Court concludes, therefore, that although 11 U.S.C. § 1305(a) does not authorize a debtor to file a proof of claim on behalf of a creditor for taxes that become payable while the bankruptcy case is pending, neither does it prohibit such action. C. The debtors argue that their 2009 income tax obligation was a pre-petition debt. If it is, section 1305(a)(1) would not apply to that debt because the tax would have “become payable” before the petition was filed. Once again, courts are divided on the question of when an income tax debt becomes payable. The Senczyszyn court observed that three views have emerged from the decisions on this issue: taxes become payable at the end of the tax year, when the return is actually filed, or when the return is first due according to law. 444 B.R. at 757. The Senczyszyn court thoroughly discussed the cases that yielded those three options and ultimately settled on the approach taken by In re Joye, 578 F.3d 1070 (9th Cir. 2009), concluding that income taxes “become payable” at the close of the tax year. 444 B.R. at 759. The Joye court, in turn, took its lead from the Tenth Circuit Bankruptcy Appellate Panel’s decision in Dixon v. IRS (In re Dixon), 218 B.R. 150 (B.A.P. 10th Cir. 1998). This Court is persuaded by the reasoning in these decisions, best summarized by the court in Joye, which is quoted at length here: -11- [T]he panel in Dixon rightly stated that Chapter 13 of the Code is generally concerned with satisfying or discharging “claims” against a given debtor. Dixon, 218 B.R. 150, 152 (B.A.P. 10th Cir. 1998) (citing 11 U.S.C. §§ 1322, 1325 & 1328). A “claim” is broadly defined as the “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” 11 U.S.C. § 101(5)(A). This broad definition supports Dixon’s conclusion that the term “payable,” which is used to define a certain class of claims, refers to a time before the creditor’s right to payment matures into a legally enforceable prerogative. . . . Reviewing the statutory scheme of the Bankruptcy Code and the relevant legislative history, we conclude that Congress meant section 1305(a)(1) to refer to taxes that were incurred by the debtor during the pendency of the debtor’s bankruptcy case. We would frustrate this congressional intent were we to construe the word “payable” to refer to only those taxes that have become “legally enforceable” or “justly due.” Rather, as the court in Ripley stated, payable can also describe amounts that are simply “capable of being paid.” . . . Applying this construction here, we hold that the Joyes’ outstanding state taxes for the year 2000 cannot give rise to a post-petition claim pursuant to section 1305(a)(1). Under California law, personal taxes are calculated based on the given taxpayer’s income earned “for each taxable year.” A “taxable year” is in turn defined as a calendar year. Thus, the Joyes could have technically determined and paid their year 2000 taxes on the day after the close of the corresponding calendar year. Although the Joyes were not required to pay these taxes until April 15, 2001 (or at the latest October 15, 2001), their tax liability to the state for the year 2000 was nonetheless capable of being paid, and thus payable, as of January 1, 2001. Because this date fell prior to the date the Joyes filed their bankruptcy petition on March 7, 2001, these taxes cannot give rise to a post-petition claim under section 1305(a)(1). 578 F.3d at 1075-77. The Court adopts this reasoning and the discussion by the court in Senczyszyn, 444 B.R. 759- 761, and holds that the debtors’ 2009 income taxes were payable on January 1, 2010. Therefore, the claim for those taxes was a pre-petition claim for which the debtors could file a proof of claim on behalf of the State once the State’s time for filing lapsed. Because the claim was a priority claim that the debtors were obliged to include in their plan under 11 U.S.C. § 1322(a)(2), the bankruptcy court properly overruled the State’s objection and confirmed the plan. -12- III. Accordingly, it is ORDERED that the bankruptcy court’s order overruling objections and confirming the Chapter 13 plan is AFFIRMED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 10, 2012 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 10, 2012. s/Deborah R. Tofil DEBORAH R. TOFIL -13-

=== JULIE A PUCCI v. CHIEF JUDGE MARK W. SOMERS ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JULIE A PUCCI, v. Plaintiff, Case No. 07-10631 Honorable David M. Lawson CHIEF JUDGE MARK W. SOMERS, in his individual capacity, ________________________________________/ Defendant. OPINION AND ORDER DENYING DEFENDANT’S MOTION FOR JUDGMENT AS A MATTER OF LAW, REMITTITUR, AND STAY, AND GRANTING IN PART PLAINTIFF’S MOTION FOR ATTORNEY’S FEES AND PREJUDGMENT INTEREST Defendant Mark Somers has moved to set aside a jury verdict finding that he violated plaintiff Julie Pucci’s federal constitutional rights, or, failing that, to reduce the damage award against him. The plaintiff opposes the motion and seeks attorney’s fees and costs under 42 U.S.C. § 1988 and prejudgment interest. The Court heard argument on the motions in open court on December 13, 2011. The Court now finds that a proper balance of the interests of the plaintiff and defendant under Pickering v. Board of Ed. of Tp. High School Dist. 205, Will County, Illinois, 391 U.S. 563 (1968), yields the conclusion that the plaintiff engaged in conduct protected by the First Amendment, and the defendant retaliated against her for engaging in that conduct. The damage award is not excessive or beyond the range supported by the proofs. The plaintiff is entitled to attorney’s fees and costs, but not in the amount she claims. And the defendant is not entitled to a stay of the judgment pending appeal without posting a supersedeas bond. Therefore, the Court will deny the defendant’s motion for judgment as a matter of law, stay, and remittitur, and grant in part and deny in part the plaintiff’s motion for attorney’s fees and prejudgment interest. I. The facts of the case are well known to the parties and have been recited in detail in previous opinions of this Court and the Sixth Circuit. See Pucci v. Nineteenth Dist. Court, 628 F.3d 752, 755- 60 (6th Cir. 2010); Pucci v. Nineteenth Dist. Court, 565 F. Supp. 2d 792, 796-802 (E.D. Mich. 2008). After the case was remanded to this Court by the court of appeals, it was tried to a jury beginning June 22, 2011. The jury returned a verdict on June 30, 2011 finding that when the defendant fired the plaintiff from her job as deputy court administrator at the Nineteenth District Court in Dearborn, Michigan, he violated the plaintiff’s right to procedural due process under the Fourteenth Amendment, and he retaliated against her in violation of the First Amendment. The jury assessed compensatory damages in the amount of $434,361 for economic loss and $100,000 for non- economic loss. The jury also assessed punitive damages of $100,000 for the violation of the plaintiff’s right to due process of law, and $100,000 for retaliation in violation of the First Amendment. The jury found for the defendant on the plaintiff’s claim of sex discrimination. The Court submitted special interrogatories to the jury to decide fact issues that could relate to the Pickering balancing test the Court would apply later. The jury answered “Yes” to the question: Did the plaintiff’s act of lodging a complaint about the defendant’s use of religious references in the performance of his judicial duties cause, or could it have caused, disharmony in the workplace at the Nineteenth District Court? The jury answered “No” to the question: Did the plaintiff’s activity of lodging a complaint about the defendant’s use of religious references in the performance of his judicial duties impair the plaintiff’s ability to perform her duties? The Court entered judgment on June 30, 2011 in favor of the plaintiff and against the defendant in the amount of $734,361. On July 8, 2011, the defendant moved for relief from -2- judgment so he could file his motion for judgment as a matter of law. The Court granted the defendant’s motion for relief from judgment on October 24, 2011, suspending the judgment pending adjudication of the motion requesting relief under Pickering. On July 13, 2011, the plaintiff moved for attorney’s fees, and on July 14, 2011, the defendant moved for judgment as a matter of law, stay and remittitur. II. The cornerstone of the defendant’s argument in favor of a judgment as a matter of law and remittitur is that the plaintiff’s First Amendment claim must be dismissed because her workplace complaints about Judge Somers proselytizing from the bench cannot be protected speech. The defendant insists that even if the complaint raised a matter of public concern, the plaintiff’s interest in speaking out on those issues did not outweigh her employer’s interest in promoting an efficient workplace. The defendant then reasons that if the First Amendment claim is dismissed, then the proofs cannot support the compensatory damage award on the remaining procedural due process violation claim, so the judgment should be remitted to reflect only the punitive damage award on that claim. Federal Rule of Civil Procedure 50(a) allows the Court to grant a motion for judgment as a matter of law “[i]f a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.” Fed. R. Civ. P. 50(a)(1). The defendant in this case preserved his right to make such a motion after judgment by moving for such relief after presentation of all the evidence at trial and specifying the same grounds he raises here. See Fed. R. Civ. P. 50(b); Ford v. Cnty. of Grand -3- Traverse, 535 F.3d 483, 492-93 (6th Cir. 2008); Portage II v. Bryant Petrol. Corp., 899 F.2d 1514, 1522 (6th Cir. 1990). The Seventh Amendment to the Constitution provides that “no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.” U.S. Const. Am. VII. Therefore, in reviewing a motion for judgment as a matter of law under Federal Rule of Civil Procedure 50(b), the Court must give substantial deference to the jury’s verdict. Radvansky v. City of Olmsted Falls, 496 F.3d 609, 614 (6th Cir. 2007). “The motion may be granted only if in viewing the evidence in the light most favorable to the non-moving party, there is no genuine issue of material fact for the jury, and reasonable minds could come to but one conclusion, in favor of the moving party.” Gray v. Toshiba Am. Consumer Prods., Inc., 263 F.3d 595, 598 (6th Cir. 2001) (citing K & T Enters., Inc. v. Zurich Ins. Co., 97 F.3d 171, 174-76 (6th Cir. 1996 . “Neither the district court nor the reviewing court may reweigh the evidence or assess the credibility of witnesses.” Radvansky, 496 F.3d at 614 (citing Gray, 263 F.3d at 600). The element of the First Amendment claim challenged by the defendant in the present motion is the plaintiff’s protected conduct. “To demonstrate First Amendment protection, a public employee must show (1) that the speech at issue addresses a matter of public concern, and (2) that the employer had no overriding state interest in efficient public service that would be undermined by the speech.” Silberstein v. City of Dayton, 440 F.3d 306, 318 (6th Cir. 2006) (citing Pickering, 391 U.S. at 568). In the prior appeal of this case, the Sixth Circuit has already held that the complaints the plaintiff made touched on a matter of public concern. Pucci, 628 F.3d at 768 (holding that “the nature of Pucci’s complaints implicates the propriety and legality of public, in- court judicial conduct, and renders her speech of sufficient public gravity to warrant First -4- Amendment protection”). The defendant’s argument focuses on the counterweight component of the balancing test — the overriding state interest in quashing the speech — which, he says, is supported by the jury’s answers to the special interrogatories. “Application of the Pickering balancing test is a matter of law for the court to decide.” Farhat v. Jopke, 370 F.3d 580, 593 (6th Cir. 2004) (citing Leary v. Daeschner, 349 F.3d 888, 898 (6th Cir. 2003 . However, “there may be some factual questions for a jury.” Id. at 589. As the Eighth Circuit explained, “[a]lthough the court should resolve each of these questions as a matter of law, ‘[a]ny underlying factual disputes concerning whether the plaintiff's speech is protected . . . should be submitted to the jury through special interrogatories or special verdict forms.’” Washington v. Normandy Fire Protection Dist., 328 F.3d 400, 404 (8th Cir. 2003) (quoting Shands v. City of Kennet, 993 F.2d 1337, 1342 (8th Cir. 1993 ; see also Bennis v. Gable, 823 F.2d 723, 729 & n. 6 (3d Cir. 1987). “For example, the jury should decide factual questions such as the nature and substance of the plaintiff's speech activity, and whether the speech created disharmony in the work place. The trial court should then combine the jury’s factual findings with its legal conclusions in determining whether the plaintiff's speech is protected.” Shands v. City of Kennett, 993 F.2d 1337, 1342-43 (8th Cir. 1993) (citations omitted). The defendant reasons that it would have been appropriate to suppress the speech because Pucci’s complaint caused or could have caused disruption in the workplace, as the jury found. He asserts that the plaintiff’s complaints were informal and private, the plaintiff became aware of the defendant’s religious references through her role as deputy court administrator, and the relationship between the defendant and Judge Hultgren deteriorated after the defendant was told of the plaintiff’s complaint about defendant Somer’s conduct, causing a disruption in the workplace. The defendant -5- insists that the Nineteenth District Court had a compelling interest in maintaining morale and the efficiency of public operations, as well as an interest in ensuring that judges operate effectively, and argues that those factors weigh in favor of finding that the plaintiff’s speech was not protected. The defendant relies heavily on two prior decisions in which the courts’ Pickering balancing favored the public employer: Farhat v. Jopke, 370 F.3d 580, 593 (6th Cir. 2004), and Montle v. Westwood Heights Sch. Dist., 437 F. Supp. 2d 652, 653 (E.D. Mich. 2006). The facts of those cases, however, differ significantly from those in the present case. In Farhat, the plaintiff was fired from his job as a custodian for the school district after he wrote a series of letters to union and district officials complaining about discipline and warnings he had received for his obnoxious and confrontational behavior. In those letters, the plaintiff “routinely referred to others as ‘sick and demented,’. . . ‘mentally ill freak,’ ‘jack ass,’ and similar terms.” Id. at 584-85. The plaintiff called a fellow employee at work and told her, “When I get through with you, you won’t be driving a bus or doing custodial work”; when he was suspended as a result of that statement, he sent a “vituperative” letter containing unspecific charges of corruption. Id. at 585-86. The court held that “the disruptiveness of his speech in the workplace outweighed any value his expression might have had.” Id. at 593. In Montle, the plaintiff was a teacher working in a school district that had no collective bargain with the teachers’ union for a few years. The plaintiff was vocal in protesting the lack of a contract, and on certain Fridays he wore a bright green t-shirt to school and in class that read “Working Without a Contract” and confronted teachers who declined to wear the shirt. Montle, 437 F. Supp. 2d at 653. The plaintiff also “upbraided co-workers . . . and his confrontational behavior actually prompted complaints to the principal from other teachers.” Id. at 656. In both cases, the -6- respective plaintiffs behaved in a confrontational manner prompting complaints and fear from other workers. None of that conduct occurred in the present case. In contrast, here, the plaintiff’s speech indisputably regarded matters of public concern and was made by approaching the State Court Administrator’s Office. The “disruption” caused by the speech was a deterioration in the relationship between the defendant and Judge Hultgren — a relationship that the defendant admits was already troubled for different reasons — and an apparent decline in morale at the Nineteenth District Court. There was no evidence demonstrating that the plaintiff’s coworkers felt threatened by the plaintiff’s speech or that they complained about the speech. Nor is there any evidence to show that the plaintiff’s speech was inflammatory, abusive, or insulting, or that the plaintiff engaged in confrontation with any of her coworkers. Although the jury made a finding that the plaintiff’s speech did or could have caused disharmony at the Nineteenth District Court, the disruption — even as described by the defendant — was minimal: the disruption of an already troubled relationship between judges on the court and the accompanying morale problems at the court. Although the jury found that the plaintiff’s complaints caused “disharmony” in the workplace (not “disruption,” as the defendant argues), the jury also found that those complaints did not interfere with the performance by the plaintiff of her job duties. The question, then, is whether the defendant’s interest in reducing tension and disharmony in the workplace outweighed the plaintiff’s interest in speaking out. The Sixth Circuit has struck that balance in favor of the right to speak out. See Murphy v. Cockrell, 505 F.3d 446, 453 (6th Cir. 2007). In that case, a public employee was terminated by an elected county property valuation administrator because the employee was campaigning to replace the administrator and called into question the administrator’s -7- experience and party affiliation. The only negative impact of the employee’s speech was the deterioration of her relationship with the administrator and resulting tension in the office. The court held that the political speech was protected under the First Amendment. The court stated that “it is impermissible to allow a superior to terminate an employee simply because tensions that did not impede the functions of the workplace arose over such protected speech.” Id. at 453. In addition, there are numerous cases in which courts have found that a public employee’s right to speak outweighed the workplace disruption that the speech may have caused. In Rodgers v. Banks, 344 F.3d 587 (6th Cir. 2003), for instance, the court stated that it had “never held that the relatively minor associated risk of disharmony . . . would ordinarily overcome an interest in making sure a state hospital maintains its certification.” Id. at 602. In that case, the court found it relevant that the plaintiff’s speech was not “particularly inflammatory,” did not contain “abusive language,” and did not contain any “exceptionally insulting aspect.” Id. at 601. In Williams v. Commonwealth of Kentucky, 24 F.3d 1526 (6th Cir. 1986), the Sixth Circuit held that although the plaintiff’s reports of political patronage and other forms of corruption “did have the effect of creating disharmony between [the plaintiff] and the employees she reported, . . . no reasonable official could conclude that this interest outweighed Williams’ interest in reporting these instances of political misconduct.” Id. at 1537. The Court explained that “‘when an employee exposes unscrupulous behavior in the workplace, his interests are co-extensive with those of his employer; both want the organization to function in a proper manner.’” Ibid. (quoting Marohnic v. Walker, 800 F.2d 613, 616 (6th Cir. 1986 . Finally, in Leary v. Daeschner, 228 F.3d 729 (6th 2000), the court found that although the defendant’s “interest in performing its function efficiently was particularly strong,” and “the -8- plaintiffs’ speech was often conducted in a disruptive manner,” the plaintiffs’ interest in speaking out on school administration trumped those concerns. Id. at 738. There is, perhaps, a small irony here, where the plaintiff invokes the First Amendment’s Speech Clause to protect her complaint about a violation of another clause in that Amendment, the Establishment Clause, and defendant Somers’s application of religious tenets in his judicial decision making. That conduct offended Pucci, and her complaint to the State Court Administrator about the practice was an extraordinary communication that fell well outside her job responsibilities. See Garcetti v. Ceballos, 547 U.S. 410, 425 (2006). Her concerns placed her in good company. See Arnett v. Jackson, 393 F.3d 681, 691 (6th Cir. 2005) (Clay, J., dissenting) (observing that “[w]hen . . . a judge directly and publicly relies on a religious source to reach a specific legal result, she flouts a defendant’s fundamental expectation that he will not be adjudged according to any religious tenets, regardless of whether the sentencing judge herself adheres to those tenets. . . . Under this approach, the judgments of trial courts could begin to resemble the fatwas of religious clerics, and the opinions of appellate courts echo the proclamations of the Sanhedrin”); North Carolina Civil Liberties Union Legal Foundation v. Constangy, 947 F.2d 1145, 1151 (4th Cir. 1991) (reiterating the rule that “the government must pursue a course of complete neutrality toward religion” (quoting Wallace v. Jaffree, 472 U.S. 38, 60 (1985 , and holding that “[t]his principle applies with even greater force to the judicial branch because judges are sworn to be neutral arbiters and must apply the law even-handedly without letting bias or personal feeling enter into the decision”); United States v. Bakker, 925 F.2d 728, 740 (4th Cir. 1991) (vacating a sentence of a televangelist for fraud where the sentencing judge referenced his religion, because “[c]ourts . . . cannot sanction sentencing procedures that create the perception of the bench as a pulpit from which judges announce their -9- personal sense of religiosity and simultaneously punish defendants for offending it”). There is ample evidence to support the jury’s finding that the plaintiff was speaking as a concerned citizen and not as part of her official duties. The subject of her complaints enjoys a high level of importance. “Public interest is near its zenith when ensuring that public organizations are being operated in accordance with the law.” Marohnic, 800 F.2d at 616. In cases such as these, the Sixth Circuit has held that “an employer may be required to make a particularly strong showing that the employee’s speech interfered with workplace functioning.” Leary, 228 F.3d at 737-38. In this case, the defendant has shown only that the plaintiff’s speech caused disharmony in a workplace already ringing with sour notes. The Court finds that the plaintiff’s interest in speaking outweighed the defendant’s interest in suppressing the speech. The speech, therefore, was protected by the First Amendment. Pickering, 391 U.S. at 568. III. The defendant next asks that the Court reduce the amount of the jury verdict. “As a general rule,” the Sixth Circuit “has held that a jury verdict will not be set aside or reduced as excessive unless it is beyond the maximum damages that the jury reasonably could find to be compensatory for a party’s loss.” Am. Trim, L.L.C. v. Oracle Corp., 383 F.3d 462, 475 (6th Cir. 2004) (internal quotation marks omitted). A district court has discretion to remit a compensatory damages “verdict only when, after reviewing all the evidence in the light most favorable to the prevailing party, it is convinced that the verdict is clearly excessive; resulted from passion, bias, or prejudice; or is so excessive or inadequate as to shock the conscience of the court.” Ibid. “If there is any credible evidence to support a verdict, it should not be set aside.” Ibid. -10- The Sixth Circuit clarified the “maximum damages that the jury reasonably find” standard in Denhof v. City of Grand Rapids, 494 F.3d 534, 547 (6th Cir. 2007). The court explained that “[a] court should not reduce an award unless it is: 1) beyond the range supported by proof; 2) so excessive as to shock the conscience; or 3) the result of mistake.” Ibid. (citing Bickel v. Korean Air Lines Co., 96 F.3d 151, 156 (6th Cir. 1996 . The defendant first requests that the Court remit the damages awarded by the jury on the plaintiff’s First Amendment retaliation claim on the assumption that the Court will find in favor of the defendant on his argument that the speech is not protected and the claim should be dismissed. However, the Court will not upset the jury’s liability finding on that claim. The defendant also requests that the economic and non-economic damages granted by the jury be reduced to nominal damages. Here, too, the defendant’s argument is premised on the assumption that the Court will find in his favor on his motion for judgment as a matter of law. The defendant contends that the full damage award cannot be sustained by the scant evidence of loss attributable to the procedural due process violation alone. However, the defendant has not argued that the plaintiff’s First Amendment retaliation claim could not support the damages awarded by the jury, and he has not challenged the punitive damage awards on grounds that they are excessive or violate due process. The Court finds that the proofs at trial support the jury’s damage determination. “[T]he basic purpose of § 1983 damages is to compensate persons for injuries that are caused by the deprivation of constitutional rights.” Memphis Cmty. Sch. Dist. v. Stachura, 477 U.S. 299, 307 (1986) (citing Carey v. Piphus, 435 U.S. 247, 254 (1978) (internal quotation marks omitted . “[C]ompensatory damages may include not only out-of-pocket loss and other monetary harms, but also such injuries as impairment of reputation . . ., personal humiliation, and mental anguish and suffering.” Ibid. The -11- plaintiff offered evidence that supports the economic loss she encountered when she lost her job as the deputy court administrator and had to take a lesser-paying job with the City of Dearborn. She also testified that the defendant dealt her a career-ending blow when he eliminated her job with the court, and she and other witnesses amply described the personal loss she has endured as a result. The Court does not find that the damage award is unsupported by the proofs, conscience-shocking, or the product of a mistake. IV. A. The plaintiff has moved for attorney’s fees and costs under 42 U.S.C. § 1988. Section 1988 permits an award of attorney’s fees to the prevailing party in a civil rights case. See 42 U.S.C. § 1988(b). However, the statute also states that “in any action brought against a judicial officer for an act or omission taken in such officer’s judicial capacity such officer shall not be held liable for any costs, including attorney’s fees, unless such action was clearly in excess of such officer's jurisdiction.” Ibid. Defendant Mark Somers plainly was a judicial officer, but his termination of the plaintiff and elimination of her job were actions taken in an administrative capacity, not a judicial one. Forrester v. White, , 229-30 (1988). To be a prevailing party under section 1988, a party must receive “at least some relief on the merits of at least some of his claims.” Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Res., 532 U.S. 598, 603 (2001) (quoting Hewitt v. Helms, 482 U.S. 755, 760 (1987). A party prevails in his lawsuit when there has been a “material alteration of the legal relationship of the parties in a manner which Congress sought to promote in the fee statute.” Texas State Teachers -12- Ass'n v. Garland Indep. Sch. Dist., 489 U.S. 782, 792-93 (1989). That material alteration must affect the behavior of the defendant towards the plaintiff. Rhodes v. Stewart, 488 U.S. 1, 4 (1988). A prevailing party has no right to attorney’s fees under section 1988; the statute makes such awards discretionary. 42 U.S.C. § 1988(b) (“[T]he court, in its discretion, may allow the prevailing party . . . a reasonable attorney’s fee as part of the costs. . . .” (emphasis added ; Day v. James Marine, Inc., 518 F.3d 411, 419 (6th Cir. 2008) (“Statutes like § 1988 make fees permissible, not mandatory. . . .”). Absent special circumstances, however, prevailing plaintiffs generally are awarded section 1988 fees as a matter of course. Newman v. Piggie Park Enters., Inc., 390 U.S. 400, 402. The defendant does not dispute the plaintiff’s prevailing party status, but he argues that the plaintiff cannot be found to have prevailed in full because some of her claims were dismissed before trial and the jury found in the defendant’s favor on the plaintiff’s sex discrimination claim. The defendant requests that the requested attorney’s fee be reduced by one third in view of the fact that the plaintiff did not prevail on her sex discrimination claim. The defendant’s argument on this issue is not well supported by prevailing authority. As the Sixth Circuit has explained, Work on an unsuccessful claim cannot be considered to have been “expended in pursuit of the ultimate result achieved” where the plaintiff has presented distinctly different claims for relief based on different facts and legal theories. But where the plaintiff’s claims for relief involve common facts or related legal theories, such that much of counsel’s time will have been devoted generally to the litigation as a whole, the court should focus on the significance of the overall relief obtained by the plaintiff in relation to the hours reasonably expended on the litigation. Imwalle v. Reliance Med. Prods., Inc., 515 F.3d 531, 552 (6th Cir. 2008) (citation and quotation marks omitted). Further, the Sixth Circuit has held that “a court should not reduce attorney fees -13- based on a simple ratio of successful claims to claims raised.” Thurman v. Yellow Freight Systems, Inc., 90 F.3d 1160, 1169 (6th Cir. 1996) (citing Phelan v. Bell, 8 F.3d 369, 374 (6th Cir. 1993 . Although the plaintiff’s claims were based on different constitutional and statutory violations by the defendant, all of the plaintiff’s legal theories derived from the defendant’s termination of the plaintiff; they arose from common facts and are related. The defendant’s attempt to characterize the plaintiff’s claims as unrelated is unpersuasive. The defendant argues inaccurately that the plaintiff’s First Amendment retaliation claim related solely to the plaintiff’s complaints of the defendant’s misconduct without mentioning the fact that the plaintiff’s claim was based on the defendant’s termination of the plaintiff in retaliation for the plaintiff’s complaints. The plaintiff indisputably prevailed at trial, and she established a violation of her constitutional rights. The verdict for the defendant on the sexual discrimination aspect of the case does not alter that conclusion. Once the decision has been made to award section 1988 fees, the Court must decide what fee is “reasonable.” Hensley v. Eckerhart, , 433 (1983); Adcock-Ladd v. Sec'y of Treasury, 227 F.3d 343, 349 (6th Cir. 2000). In determining a “reasonable” fee under section 1988, the court must first determine the “lodestar” amount (the product of multiplying the number of hours reasonably expended on the litigation by a reasonable hourly fee) and then reduce or augment that amount by considering other case-specific factors. Hensley, 461 U.S. at 433-37; Imwalle, 515 F.3d at 552; Bldg. Serv. Local 47 Cleaning Contractors Pension Plan v. Grandview Raceway, 46 F.3d 1392, 1401-02 (6th Cir. 1995). The party seeking to recover fees bears the initial burden of substantiating the hours worked and the rate claimed. Hensley, 461 U.S. at 433; Wooldridge v. Marlene Indus. Corp., 898 F.2d 1169, 1176 (6th Cir. 1990). -14- Generally, a reasonable hourly rate is calculated by reference to the prevailing market rates in the relevant community. Blum v. Stenson, , 895 (1984). “The appropriate rate . . . is not necessarily the exact value sought by a particular firm, but is rather the market rate in the venue sufficient to encourage competent representation.” Gonter v. Hunt Valve Co., 510 F.3d 610, 618 (6th Cir. 2007). State Bar surveys of rates may be an appropriate guide, although they are not dispositive in establishing the market rate. B & G Min., Inc. v. Dir., Office of Workers’ Comp. Programs, 522 F.3d 657, 664 (6th Cir. 2008) (citing Gonter, 510 F.3d at 618 & n. 6 (referring to an Ohio State Bar Association survey of hourly billing rates “[a]s a point of reference” . Attorney Joel Sklar requests an hourly rate of $400, and attorney Sanford Plotkin requests an hourly rate of $350. Both attorneys have been practicing law for twenty-six years, and both state that their requested rate is their customary hourly rate. Mr. Sklar contradicted that statement at oral argument, acknowledging that he generally does not charge by the hour, and the vast majority of his work is based on contingent fees. The defendant points to the State Bar of Michigan 2010 economics of law practice summary report, which states that the median hourly litigation billing rate for Wayne County and downtown Detroit are $255 and $257. Def.’s Resp. to Mot. for Atty.’s Fees, Ex. A. The mean hourly litigation billing rates for attorneys in practice 25 to 29 years is $255. The mean hourly rate for attorneys in civil litigation is $255. The mean hourly rates for a firm the size of which Sklar operates is $227; it is unclear from the information provided by the parties what the size of Plotkin’s firm is. The fees in this case were earned between 2008 and the present, so the survey provides relevant information that is useful in determining market rates. -15- The survey rates are lower than those sought by plaintiff’s counsel, but as mean and median rates they serve as a guidepost against which to measure a reasonable rate “sufficient to encourage competent representation.” Gonter, 510 F.3d at 618. Moreover, the plaintiff filed a motion for sanctions earlier in this case [dkt. #39] in which counsel requested an award of attorney’s fees for time spent in an ultimately unsuccessful facilitative mediation. In the documentation submitted by the plaintiff, both Plotkin and Sklar requested fees at the rate of $250 per hour, alleging that rate was a reasonable one for their services. The Court found the requested rate reasonable and “appropriate for the experience of the attorneys involved” and awarded attorney’s fees at that rate. Pucci v. 19th Dist. Court, No. 07-10631, 2009 WL 596196 at *7 (E.D. Mich. Mar. 6, 2009). Certainly, hourly rates can change, and the plaintiff’s suggestion of a reasonable rate earlier in the case does not irretrievably lock them in to that rate. However, the hourly rate suggested tracks the survey data, and nothing convincing has been presented that would justify the substantial increase counsel are advocating in their present motion. The Court finds, as before, that $250 is a reasonable hourly rate for both lawyers. The number of hours reasonably expended on a matter includes time spent drafting and revising pleadings, meeting with clients, and preparing the case for trial. Hensley, 461 U.S. at 433- 34. The court may reduce the hours claimed where the documentation is inadequate or the time was not “reasonably expended.” Mehney-Egan v. Mendoza, 130 F.Supp.2d 884, 886 (E.D. Mich. 2001). “Hours are not reasonably expended if they are excessive, redundant, or otherwise unnecessary. ‘A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee.’ Mich. R. Prof’l Conduct (MRPC) 1.5.” Ibid. (citation omitted). -16- Attorney Sklar asserts that he has worked 1,222.5 hours, and attorney Plotkin asserts that he has worked 684.35 hours. They have submitted itemized time records, but they acknowledge that those records were reconstructed because neither kept contemporaneous billing records. The defendant challenges the reasonableness of the hours expended on this case on several bases. The defendant criticizes plaintiff’s counsels’ charges for conferences and e-mails between the attorneys as well as for one attorney’s revision of another’s work, vague entries and block billing, and the practice of billing in fifteen minute increments for routine legal matters and e-mails. These criticisms are well-founded, as the billing statements submitted by the attorneys are often so vague as to make it difficult to determine the reason for the charges, and the bills contain many charges for routine matters such as filing appearances and e-mailing back and forth. It is difficult to discern from the billing statements how much time spent was duplicative. The Court has reviewed the billing records carefully and has eliminated duplicate and unnecessary charges. Those adjustments reduce attorney Sklar’s hours to 1107.75, and attorney Plotkin’s hours to 656.9. In addition, the Court finds that some of the non-duplicative charges are excessive. For instance, attorney Sklar’s billing statement includes 83 hours charged before the complaint was filed, 32.75 hours charged for preparing for the defendant’s deposition, and 83.5 hours charged for preparing the brief on appeal. Similarly, attorney Plotkin’s billing statement appears to include 36 hours billed for responding to the defendant’s motions in limine. Some of that overbilling may have resulted from the difficulty reconstructing time records after the fact, and some might have been caused by spending more time on a task than can be found to be reasonable. Regardless of the cause, the Court believes that the total time charges should be reduced by an additional ten percent. -17- Therefore, the Court finds that the reasonable time charged by the plaintiff’s attorneys is 1,588 hours. At $250 per hour, the lodestar fee amounts to $397,000. There is a “strong presumption” that the lodestar represents the “reasonable” fee. City of Burlington v. Dague, 505 U.S. 557, 562 (1992) (holding that lodestar figure has “become the guiding light of our fee-shifting jurisprudence”). The party advocating a departure from the lodestar amount bears the burden of establishing that the adjustment is “necessary to the determination of a reasonable fee.” Ibid. In determining whether to adjust the lodestar amount, courts may consider the following factors: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. Hensley, 461 U.S. at 430 n. 3 (citing Johnson v. Georgia Hwy. Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974 . The plaintiff argues that most of these factors apply. The Court cannot accept that argument in full, but it does find that three factors are particularly important and suggest that an upward departure from the lodestar is warranted in this case. First, the plaintiff represents that plaintiff’s counsel was forced to turn away other cases because this case placed extraordinary demands on counsel’s time. That claim is quite plausible, particularly for a small-firm practitioner called upon to litigate a complex constitutional case such as this. Second, this case has lasted for more than four years, and plaintiff’s counsel has been active on the case for most of the period. The billing statements submitted demonstrate that the relationship between the plaintiff and plaintiff’s counsel -18- was close, as plaintiff’s counsel was in near constant communication with the plaintiff. The case required considerable attention, and it justified the attorneys’ constant efforts. Third, and probably most importantly, the undesirability of this case weighs in favor of an upward adjustment to the lodestar. The plaintiff was suing a sitting chief judge in a local district court. That activity entails significant professional risk for attorneys who may practice in that court. The Court’s objective is to establish a fee that is “sufficient to encourage competent representation.” Gonter, 510 F.3d at 618. The Court finds that an enhancement to the lodestar of five percent is necessary to achieve that goal. The Court will award the plaintiff an attorney’s fee of $416,850. B. The plaintiff seeks costs in the amount of $18,492.59. The defendant has not objected to any of the specific items on the list of costs except an for an expert witness fee for Dr. Robert Ancell. Costs may not be awarded under section 1988 unless the “action or proceeding [was] to enforce a provision of section 1981 or 1981a . . . title [42].” 42 U.S.C. § 1988(c). The plaintiff’s claims were brought under section 1983, not the sections mentioned in the fee statute. Moreover, Dr. Ancell did not testify in the case. As a general matter, “ costs — other than attorney’s fees — should be allowed to the prevailing party.” Fed. R. Civ. P. 54(d)(1). The costs that are allowed in that rule are those allowed by 28 U.S.C. § 1920. Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 441 (1987) (“[Section] 1920 defines the term ‘costs’ as used in Rule 54(d).”). The costs allowed under that statute are: (1) Fees of the clerk and marshal; -19- (2) Fees for printed or electronically recorded transcripts necessarily obtained for use in the case; (3) Fees and disbursements for printing and witnesses; (4) Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case; (5) Docket fees under section 1923 of this title; (6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of this title. 28 U.S.C. § 1920. Local Rule 54.1 states: A party seeking costs must file a bill of costs no later than 28 days after the entry of judgment. The clerk will tax costs under Fed. R. Civ. P. 54(d)(1) as provided in the Bill of Costs Handbook available from the clerk’s office and the court’s web site. E.D. Mich. LR 54.1. The plaintiff submit a list of her costs as part of her motion for attorney’s fees filed thirteen days after the judgment was entered. The lists includes cost items not allowed by the statute. The cost list was not presented in the form prescribed by the Bill of Costs Handbook. That oversight is one of form, not substance, and can be corrected. The plaintiff may resubmit her bill of costs in the manner prescribed by LR 54.1 within seven days, and the Clerk may tax the proper costs of the action. C. The plaintiff also argues that she is entitled to pre- and post-judgment interest from the date that the complaint was filed. The plaintiff asserts that pre-judgment interest accords with the remedial purpose of section 1983 and is often included in damage awards, and she contends that prejudgment interests is also permitted on attorney’s fees and costs. The defendant argues that the plaintiff should not be awarded pre-judgment interest because she has already been made whole by -20- the judgment, and much of the delay in bring the case to a conclusion was caused by the plaintiff bringing claims barred by the Eleventh Amendment. The plaintiff is entitled to post-judgment interest as a matter of course “at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of judgment.” 28 U.S.C. § 1961(a). “[I]n the absence of explicit statutory direction on the issue, the award of prejudgment interest is . . . in the discretion of the court. Green v. Nevers, 196 F.3d 627, 633 (6th Cir. 1999) (citing Bricklayer’s Pension Trust Fund v. Taiariol, 671 F.2d 988, 990 (6th Cir. 1982 . “Awards of prejudgment interest are compensatory, not punitive, and a finding of wrongdoing by the defendant is not a prerequisite to such an award.” E.E.O.C. v. Kentucky State Police Dept., 80 F.3d 1086, 1097 (6th Cir. 1996) (internal quotation omitted). The Sixth Circuit has found awards of prejudgment interest are “usually appropriate to make a discrimination plaintiff whole . . . . Discrimination victims should not be penalized for delays in the judicial process and discriminating employers should not benefit from such delays.” Thurman, 90 F.3d at 1170. Although the plaintiff in this case did not prevail on a claim of employment discrimination and was not awarded back pay, the facts in this case are in some ways similar to an employment discrimination claim: the plaintiff was wrongfully terminated from employment in violation of her constitutional rights. The concerns animating the award of prejudgment interest in cases of employment discrimination therefore also apply in this case. The defendant has not cited any authority that would suggest that an award of prejudgment interest is inappropriate in this case, instead making the conclusory argument that the plaintiff has -21- already been made whole by the jury’s award of damages. The argument has some force, however, because at least a part of the jury’s award of compensatory economic damages represented future wage loss. The Court believes that prejudgment interest is appropriate only to that part of the award attributable to back pay and non-economic loss. The plaintiff’s economist expert witness presented evidence that the lost earnings differential from December 15, 2006 until December 31, 2010 was $92,281, and the differential for the first six months of 2011 can be calculated to equal $9,107. Based on the evidence presented at trial, the back pay damages would have been $101,388, and the non-economic loss was $100,000. The plaintiff has requested that the prejudgment interest rate of 5.1%, which represents the weekly average 1-year constant maturity Treasury yield for the week prior to the filing of the complaint, for a total of $130,299.06. See 28 U.S.C. § 1961(a). At least one court has found that the prejudgment interest rate should be the same as the rate established for post-judgment interest. See Dye v. Bellsouth Telecommunications, Inc., 462 F. Supp. 2d 845, 859 (W.D. Tenn. 2006). This Court agrees. However, “[w]hile prejudgment interest should be awarded . . . it should be excluded for delays specifically attributable to the plaintiff.” Trurman, 90 F.3d at 1170. The defendant argues that most of the delay was caused by the plaintiff’s filing claims barred by the Eleventh Amendment or that could not be supported by the evidence. The Court disagrees. Considerable delay resulted from the interlocutory appeal taken by the defendant in which he was only partially successful, having failed to prevail on his qualified immunity argument. In any event, it cannot be said that any of the delay in this litigation was attributable specifically to the plaintiff. -22- The complaint in this case was filed February 12, 2007. Prejudgment interest in the amount of $21,914.30 will be awarded to the plaintiff. V. The defendant requests that the Court stay enforcement of the judgment pending appeal without requiring a bond. That is not the norm. A stay of a judgment usually requires a bond. Fed. R. Civ. P. 62(d). In fact, “Rule 62(d) entitles a party who files a satisfactory supersedeas bond to a stay of money judgment as a matter of right.” Arban v. West Pub. Corp., 345 F.3d 390, 409 (6th Cir. 2003). The reason supersedeas bonds generally are required is to level the balance of interests between a successful plaintiff and a defendant challenging the result in the lower court. As this Court has explained: [T]he Court is mindful of the rationale underlying the rule itself. The framework of Rule 62(d) represents a balancing of both parties’ interests, in that it preserves the status quo while also protecting the appellee’s rights. Poplar Grove Planting and Refining Co., Inc. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1190 (5th Cir. 1979). Rule 62(d) permits an appellant to obtain a stay “to avoid the risk of satisfying the judgment only to find that restitution is impossible after reversal on appeal.” Poplar Grove, 600 F.2d at 1191. However, to preserve this right, the appellant must forego the use of the bond money during the appeal period. For the appellee, Rule 62(d) effectively deprives him of his right to enforce a valid judgment immediately. Consequently, the appellant is required to post the bond to provide both insurance and compensation to the appellee. The supersedeas bond protects the non-appealing party “from the risk of a later uncollectible judgment” and also “provides compensation for those injuries which can be said to be the natural and proximate result of the stay.” NLRB v. Westphal, 859 F.2d 818, 819 (9th Cir. 1988), Moore v. Townsend, 577 F.2d 424, 427 (7th Cir. 1978) (citing Weiner v. 222 East Chestnut St. Corp., 303 F.2d 630, 634 (7th Cir. 1962 . Therefore, Rule 62(d) establishes not only the appellant’s right to a stay, but also the appellee’s right to have a bond posted. Because of Rule 62(d)’s dual protective role, a full supersedeas bond should almost always be required. Hamlin v. Charter Tp. of Flint, 181 F.R.D. 348, 351 (E.D. Mich. 1998). -23- There are times, however, when a lesser bond or even no bond will be adequate to protect the appellee. In Olympia Equipment Leasing Co. v. Western Union Tel. Co., 786 F.2d 794 (7th Cir. 1986), the Seventh Circuit affirmed a district order allowing alternate security to be posted when it stayed a large antitrust judgment. The court held that an inflexible requirement of a bond would be inappropriate in two sorts of case: where the defendant’s ability to pay the judgment is so plain that the cost of the bond would be a waste of money; and — the opposite case, one of increasing importance in an age of titanic damage judgments — where the requirement would put the defendant’s other creditors in undue jeopardy. Olympia Equipment, 786 F.2d at 796. Olympia Equipment was quoted favorably by the sixth circuit in Arban v. West Pub. Corp. 345 F.3d 390, 409 (6th Cir. 2003) (holding that Rule 62(d) “in no way necessarily implies that filing a bond is the only way to obtain a stay”). The defendant relied on the first ground for his argument that he should be relieved of the bond requirement. He says that the judgment against him will be satisfied by the Nineteenth District Court, which in turn would look to its local funding unit, the City of Dearborn. He reasons further that if the city does not satisfy the judgment, it may be enrolled on the tax assessment rolls for collection from the taxpayers. See Mich. Comp. Laws § 600.6093(1). The defendant contends, therefore, that the plaintiff will be secure and a bond is not needed. The defendant’s argument breaks down, however, when confronted with the demonstrated resistance by the City of Dearborn to acknowledge any responsibility for Judge Somers’s conduct or the resulting liability for his constitutional violations. The more likely scenario is that Dearborn’s obligation to pay the judgment will have to be litigated. In the meantime, the judgment will remain against the defendant in his individual capacity, and he has not demonstrated that his “ability to pay the judgment is so plain that the cost of the bond would be a waste of money.” -24- The Court concludes, therefore, that the request to stay the judgment pending appeal without bond must be denied. VI. After balancing the plaintiff’s right to speak on a matter of public concern with the defendant’s interest in suppressing the speech to maintain order in the workplace — a balance required by Pickering v. Board of Education, the Court finds that the plaintiff’s speech interest prevails and her speech was protected by the First Amendment. The Court finds no good reason to reduce the amount of the verdict. The Court also concludes that the plaintiff is entitled to an award of attorney’s fees, some prejudgment interest, and post-judgment interest; but her attorneys must resubmit a bill of costs in compliance with the local rule. The Court also finds that the defendant’s request for a stay pending appeal without bond cannot be granted. Accordingly, it is ORDERED that the defendant’s motion for judgment as a matter of law, remittitur, and stay of judgment without bond [dkt. #107] is DENIED. It is further ORDERED that the plaintiff’s motion for attorney’s fees, interest, and costs [dkt. #110] is GRANTED IN PART. It is further ORDERED that the plaintiff is awarded attorney’s fees in the amount of $416,850.00, and pre-judgment interest in the amount of $21,914.30. Post-judgment interest may accrue in accordance with 28 U.S.C. § 1961(a). It is further ORDERED that the plaintiff may resubmit her bill of costs to the Clerk of the Court in accordance with E.D. Mich. LR 54.1. on or before December 23, 2011. -25- It is further ORDERED that an amended judgment will be entered by the Court. Dated: December 16, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 16, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -26-

=== LARRY McGHEE v. CITIMORTGAGE, INC. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION LARRY McGHEE, Plaintiff, v. CITIMORTGAGE, INC., ___________________________________/ Defendant. Case No. 11-13665 Honorable David M. Lawson OPINION AND ORDER GRANTING PLAINTIFF’S MOTION TO REMAND On August 22, 2011, the defendant removed this case from the Wayne County, Michigan circuit court, asserting that this Court had subject matter jurisdiction on the basis of diversity of citizenship. See 28 U.S.C. § 1332(a). The plaintiff seeks to set aside a foreclosure sale, void a sheriff’s deed, and quiet title to the residential property that is the subject of this litigation. The property was sold at a foreclosure sale on February 2, 2011. Defendant Citimortgage, Inc., the assignee of the original note and mortgage, purchased the property at the sheriff’s sale for $86,774.37, which was the amount outstanding on the defaulted loan plus attorney’s fees, late charges, and interest. On September 21, 2011, the plaintiff filed a motion to remand the case to state court. He argues that the Court has no subject matter jurisdiction because the amount in controversy, which must be measured by the value of the residential property, is at most $11,101, based on a comparable market analysis of the fair market value of the property. The plaintiff also states that the value of his home as listed on his Bankruptcy Schedule A was $72,238. The defendant opposes the motion, arguing that in seeking to quiet title, the plaintiff is really attempting to extinguish the mortgage and promissory note, which have outstanding balances exceeding the $75,000 jurisdictional threshold. In addition, the sheriff’s deed was procured for nearly $87,000, and setting aside the foreclosure sale would place that amount in controversy. The Court heard oral argument on the motion to remand on October 19, 2011. Since then, the plaintiff supplemented his motion by filing a statement required by E.D. Mich. LR 81.1 explaining that his damage claims amount to no more than $12,000 — which consist mainly of attorney’s fees — and in seeking to quiet title the plaintiff desires to extinguish the sheriff’s deed but not the underlying mortgage. The defendant has responded, arguing that the complaint does not make that distinction in the quiet title count, and the Court must assess the amount in controversy as of the time of removal without the plaintiff’s subsequent elaboration. The defendant acknowledges that this Court’s subject matter jurisdiction is limited. The Court possesses only “that power authorized by Constitution and statute.” Metro Hydroelectric Co., LLC v. Metro Parks, 541 F.3d 605, 610 (6th Cir. 2008) (citation omitted). A civil action brought in a state court may be removed to federal court only if the federal court would have had original jurisdiction. 28 U.S.C. § 1441(a). There is no dispute in this case that the citizenship of the parties is diverse. But when jurisdiction is based on diversity of citizenship, “the matter in controversy [must] exceed[] the sum or value of $75,000, exclusive of interest and costs,” 28 U.S.C. § 1332(a)(1). A party invoking the federal court’s jurisdiction has the burden of establishing subject matter jurisdiction. Cleveland Housing Renewal Project v. Deutsche Bank Trust Co., 621 F.3d 554, 559 (6th Cir. 2010) (citing Hertz Corp. v. Friend, 130 S. Ct. 1181, 1194-95 (2010 . When a plaintiff seeks equitable or declaratory relief, “we measure the amount in controversy by ‘the value of the object of the litigation.’” Northup Props., Inc. v. Chesapeake Appalachia, LLC, 567 F.3d 767, 770 (6th Cir. 2009) (quoting Hunt v. Washington State Apple -2- Adver. Comm’n, 432 U.S. 333, 347 (1977 . “Applying this principle, [the Sixth Circuit] has said that, ‘[w]here a party seeks a declaratory judgment, “the amount in controversy is not necessarily the money judgment sought or recovered, but rather the value of the consequences which may result from the litigation.”’” Freeland v. Liberty Mut. Fire Ins. Co., 632 F.3d 250, 253 (6th Cir. 2011) (citations omitted) (holding that where the matter in controversy fails to exceed $75,000 — even by a penny — the case must be remanded for want of subject matter jurisdiction). The burden is on the removing party “to show by a preponderance of the evidence that the allegations in the complaint at the time of removal satisfy the amount-in-controversy requirement.” Northup Props., 567 F.3d at 769-70 (citing Hayes v. Equitable Energy Res. Co., 266 F.3d 560, 572 (6th Cir. 2001 . The amount in controversy should be considered “from the perspective of the plaintiff, with a focus on the economic value of the rights he seeks to protect.” Smith v. Nationwide Prop. & Cas. Ins. Co., 505 F.3d 401, 407 (6th Cir. 2007). The plaintiff in this case does not contest the validity of the promissory note, the mortgage, or the amount of the debt. He concedes that even if he wins relief by quieting title and quashing the sheriff’s deed, he would still own the property subject to his mortgage. Rather, the focus of his complaint is the foreclosure process and the resulting sheriff’s deed that would dispossess him of his property. The “object of the litigation,” therefore, is the residential property located at 12068 Beaverland in the City of Detroit. The Court is not aware of any binding precedent in this Circuit the furnishes guidance on how to value foreclosed property for the purpose of assessing the amount in controversy. There appear to be two main approaches, however. A majority of courts addressing the valuation issue have found that, in the context of wrongful foreclosure, the amount in controversy is measured by -3- the market value of the property. See Meriedeth v. Mae, No. 11-11866, 2011 WL 2456630 at *1 (E.D. Mich., June 13, 2011); Bobel v. Met Life Home Loans, No. 11-10574, 2011 WL 1831741 at *2 (E.D. Mich., May 13, 2011). Courts adopting that approach have reasoned that “generally at a foreclosure sale . . . the sale price is closely tied to fair market value. . . . Since the enjoinder of a foreclosure sale prohibits a transaction involving the whole value of the property, then the most appropriate way to measure the value of the rights at stake when a foreclosure is at issue is the value of the property itself.” Brown v. Citimortgage, No. 10-0709-KD-M, 2011 WL 1059206 at *3 (S.D. Ala., Mar. 4, 2011) (internal citations and quotations omitted). However, courts taking that approach have used the foreclosure sale price to determine the value of the property. See Meriedeth, 2011 WL 2456630 at *2 (finding that the fact that the property sold for $303,811.66 at a sheriff’s sale demonstrated that the value of the property exceeded $75,000); Kehoe v. Aurora Loan Services LLC, No. 3:10-cv-00256-RCJ-RAM, 2010 WL 4286331 at *4 (D. Nev., Oct. 20, 2011) (finding that a property that sold at a foreclosure sale for $981,000 was worth more than $75,000 and thus the amount in controversy requirement was met). The second approach is that the amount in controversy is the amount owed on the mortgage loan. See Meredith, 2011 WL 2456630 at *1; Bobel, 2011 WL 1831741 at *3. However, many courts considering that approach have found that the amount of indebtedness and the market value of the property both exceeded $75,000, and therefore have declined to decide conclusively which method to use. See, e.g., Garfinkle v. Wells Fargo Bank, 483 F.2d 1074, 1076 (9th Cir.1973) (finding that both the amount of indebtedness and the fair market value exceeded the jurisdictional minimum); Reyes v. Wells Fargo Bank, N.A., C–10–01667 JCS, 2010 WL 2629785 at *6 (N.D. Cal. June 29, 2010) (same); Garland v. Mortgage Elec. Registration Sys., Inc., No. 09–71 (JNE/JJG), -4- 2009 WL 1684424 at *3 (D. Minn., June 16, 2009) (same). The Court finds persuasive the reasoning supporting a market value rule. That approach best conforms to the requirement that the Court consider the amount in controversy “from the perspective of the plaintiff, with a focus on the economic value of the rights he seeks to protect.” Smith v. Nationwide Prop. & Cas. Ins. Co., 505 F.3d 401, 407 (6th Cir. 2009). The plaintiff here is attempting to quiet title to a property; the value to him of that relief would be the market value of the property he wishes to possess. Because the property is the object of the litigation, the market value of the foreclosed property is the best measure of the amount in controversy in this case. But this case differs in important particulars from other cases applying the market value approach. Unlike Bobel and Brown, the plaintiff in this case is seeking not to enjoin a foreclosure sale, but to undo a sale that has already occurred. See Bobel, 2011 WL 1831741 at *1; Brown, 2011 WL 1059206 at *1. In those cases, the courts did not have the benefit of a foreclosure sale price as evidence of the value of the subject property. And unlike Meredith and Kehoe, the foreclosure sale price in this case did not far exceed the amount in controversy threshold. In those cases, an inquiry into the fair market value of properties that sold for $303,811.66 and $981,000, respectively, was unnecessary to determine whether the value of the property exceeded $75,000. See Meriedeth, 2011 WL 2456630 at *2; Kehoe, 2010 WL 4286331 at *4. In contrast, the foreclosure sale price in this case was $86,774.37, and the plaintiff has presented evidence that the fair market value of the property is much lower: only $11,101 at most. The foreclosure sale price equaled the amount of the outstanding debt, nothing more. And the defendant has offered no rebuttal evidence that the fair market value of the property much exceeds the plaintiff’s appraisal. -5- The defendant does not face a “daunting burden” of establishing the amount-in-controversy threshold. See Gafford v. General Elec. Co., 997 F.2d 150, 159 (6th Cir. 1993), abrogated on other grounds by Hertz Corp. v. Friend, 130 S. Ct. 1181 (2010). It need only show “by a preponderance of the evidence that the amount in controversy requirement for a diversity action has been met.” Hayes v. Equitable Energy Res. Co., 266 F.3d 560, 572 (6th Cir. 2001) (citing Gafford, 997 F.2d at 161). To meet that burden, the defendant “may submit a wide range of evidence in order to satisfy the jurisdictional requirements of removal.” Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 755- 56 (11th Cir. 2010) (collecting cases). However, the removing party must provide facts in support of its removal notice. Conclusory statements alone do not establish the amount in controversy. See Garza v. Bettcher Indus., Inc., 752 F. Supp. 753, 763-64 (E.D. Mich. 1990) (citing McNutt v. General Motors Acceptance Corp. of Indiana, 298 U.S. 178, 189 (1936) (stating that if a party’s “allegations of jurisdictional facts are challenged by [the] adversary in an appropriate manner, [it] must support them by competent proof” . Moreover, “because lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts resolved in favor of remand.” Eastman v. Marine Mech. Corp., 438 F.3d 544, 549-50 (6th Cir. 2006) (quoting Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996 . After reviewing the applicable authority and the parties’ submissions, the Court is not convinced that the defendant has met its burden of demonstrating by a preponderance of the evidence that the amount in controversy is more than $75,000. The defendant has presented only one piece of evidence — the foreclosure sale price — in support of its allegation that the value of the property exceeds $75,000. The defendant was apparently the only bidder at the foreclosure sale, -6- and as mentioned, the amount bid reflected the loan balance. According to the defendant, the mortgage was obtained in 1999 in the amount of $89,954. The Court is painfully aware that residential property values in the City of Detroit have plummeted since then. The Court does not believe that the foreclosure sale price is an accurate measure of the present true value of the property. Meanwhile, the plaintiff has presented a comparable market analysis that tends to show that the fair market value of the property is, at most, $11,101, and his Bankruptcy Schedule A, on which the value of the property is listed as $72,238. Viewing all of the evidence presented by the parties, the Court is not persuaded that it is “more likely than not” that the amount in controversy exceeds $75,000. Gafford, 997 F.2d at 158. Accordingly, it is ORDERED that the plaintiff’s motion to remand [dkt. #15] is GRANTED. It is further ORDERED that the case is REMANDED to the Wayne County, Michigan circuit court. Dated: December 19, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 19, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -7-

=== Mt. Cleens Auto Center, Inc. v. Hyundai Motor America ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION MT. CLEMENS AUTO CENTER, INC. d/b/a HYUNDAI OF JACKSON, Plaintiff, Case No. 11-14878 Honorable David M. Lawson v. HYUNDAI MOTOR AMERICA, Defendant. __________________________________________ / OPINION AND ORDER GRANTING PLAINTIFF’S MOTION TO REMAND Before the Court is a motion by the plaintiff to remand this case to state court. The plaintiff, Mt. Clemens Auto Center, Inc. d/b/a Hyundai of Jackson, filed this action in the Jackson County, Michigan circuit court. The plaintiff seeks declaratory and injunctive relief prohibiting the defendant from terminating an automobile dealership agreement until January 31, 2012. The defendant, Hyundai Motor America, removed the case, invoking the Court’s diversity jurisdiction under 28 U.S.C. § 1332(a). There is no question that the citizenship of the parties is diverse, but the plaintiff contends that the defendant has not offered sufficient evidence that it is more likely than not that the amount in controversy exceeds $75,000. The Court agrees, and therefore the motion to remand will be granted. I. Plaintiff Mt. Clemens Auto Center is a Delaware corporation with its principal place of business in Jackson, Michigan. Defendant Hyundai Motor America is a California corporation with its principal place of business in Fountain Valley, California. The defendant and the plaintiff entered into a Hyundai Dealer Sales and Service Agreement (“DSSA”) on December 25, 2009, which established the plaintiff as an authorized dealer of Hyundai products. Among other things, the DSSA requires the dealer to “maintain flooring and lines of credit adequate to meet its ongoing obligations.” Def.’s Resp., Ex. A, Decl. of Guy Warner, Ex. 2 to Decl., DSSA ¶ 13(B). On April 14, 2011, the defendant became aware that the plaintiff’s floor plan line of credit with JPMorgan Chase Bank had been placed on “Finance Hold.” On May 12, 2011, the defendant sent the plaintiff a letter notifying the plaintiff that it had thirty days, or until June 12, 2011, to rectify the situation or the defendant would enforce its remedies under the DSSA. Tibor Gyarmati, the plaintiff’s owner, responded to the defendant’s correspondence on June 10, 2011, informing the defendant that he had finalized a purchase agreement on his Kia franchise, which would result in a cash infusion of $750,000 to $1,000,000 into Hyundai of Jackson, and applied for loans from four different banks. The DSSA states that the agreement may be terminated by Hyundai on sixty days notice if the “Dealer [fails] to establish or maintain required net working capital or adequate wholesale credit.” Def.’s Resp., Ex. A, Decl. of Guy Warner, Ex. 2 to Decl., DSSA ¶ 16(B)(2)(k). If the “Dealer has failed to perform adequately its sales, service or parts responsibilities or to provide adequate dealership facilities,” id. at ¶ 16(B)(3), the dealer will be allowed 180 days to correct the deficiency, and failing that, the DSSA may be terminated “upon sixty (60) days notice or such other notice as may be required by law.” Ibid. On August 4, 2011, the defendant sent the plaintiff a notice of termination. The letter of termination stated that the plaintiff failed to operate the dealership successfully because the plaintiff did not maintain adequate financing. Hyundai invoked paragraph 16(B)(2)(k) of the DSSA in its letter. Hyundai stated that -2- [m]ore than forty-five (45) days have passed since [Hyundai]’s deadline to re- establish credit and, despite [Hyundai]’s demands that this condition be corrected, Hyundai of Jackson has failed or been unable to correct this condition (a breach of the Agreement). Hyundai of Jackson has now continuously failed to maintain adequate wholesale credit for business at its Approved Location since at least April 14, 2011. HMA believes this lengthy, substantial and material breach of the Agreement curtails Hyundai of Jackson’s ability to reasonably serve the interests of the public. . . . Pl.’s Mot. to Remand, Ex. 6, Termination Letter at 1-2. Because of the breach of the DSSA, Hyundai said “that the Agreement shall be terminated within 90 days of your receipt of this letter, which we calculate to be no later than November 7, 2011.” Ibid. On November 4, 2011, Mr. Gyarmati sent via facsimile to Brian O’Malley, the defendant’s general manager for its central region, a letter indicating that he had received a letter of intent to purchase the dealership assets, and that he wished to sell the assets of Hyundai of Jackson to a yet- to-be-formed entity, which was represented by Richard LaLonde, for approximately $250,000. Also on November 4, 2011, the plaintiff filed suit in the Jackson County, Michigan circuit court seeking a declaratory ruling on the application of state law and a preliminary injunction preventing termination of the DSSA until January 31, 2012. On the same day, the plaintiff obtained a temporary restraining order from the Jackson County circuit court preventing termination of the agreement. The defendant removed the case to this Court on the same day. The notice of removal alleges that “[t]he complaint seeks damages in an amount that exceeds $75,000.” Notice of Removal ¶ 4. That statement is false. The complaint contains no prayer for damages. The complaint asks only for declaratory and injunctive relief, limited to enjoining the dealership termination until January 31, 2012. II. -3- The dispute in this case boils down to the interpretation of language in the Michigan Motor Vehicle Dealer Act, Mich. Comp. Laws §§ 445.1561 et seq., which sets forth the minimum advance notice an automobile manufacturer must give its dealer before terminating a franchise agreement. If the cause for termination “relates to the performance of the new motor vehicle dealer in sales or service,” the notice period must be 180 days. Mich. Comp. Laws § 445.1567(3)(d). If the cause for termination is a “general” breach of the dealership agreement, the manufacturer must provide notice “not less than 90 days prior to the effective date of the termination.” Mich. Comp. Laws § 445.1570(a). Finally, if the termination is provoked by insolvency, closure of the dealership for seven consecutive days, the dealership owner’s conviction of a felony, revocation of the dealership license, or fraudulent misrepresentation, the notice period is fifteen days. Mich. Comp. Laws § 445.1570(c)(i)-(v). The plaintiff contends that its failure to maintain its floor plan line of credit affects its performance in sales and therefore it is entitled to 180 days notice. The defendant says the breach is a general one to which the 90-day notice requirement applies. There is no Michigan decisional law that sheds any light on a construction of the statute that might resolve the dispute. Before this Court may do so, the defendant, as the removing party, must establish that the Court has subject matter jurisdiction to adjudicate the case. Charvat v. EchoStar Satellite, LLC, 630 F.3d 459, 462 (6th Cir. 2010). The parties agree on the basics of that point: a civil action brought in a state court may be removed to federal court if the federal court would have had original jurisdiction, 28 U.S.C. § 1441(a); a party invoking the federal court’s jurisdiction has the burden of establishing subject matter jurisdiction, Cleveland Housing Renewal Project v. Deutsche Bank Trust Co., 621 F.3d 554, 559 (6th Cir. 2010) (citing Hertz Corp. v. Friend, 130 S. Ct. 1181, 1194-95 -4- (2010 ; and when jurisdiction is based on diversity of citizenship, “the matter in controversy [must] exceed[] the sum or value of $75,000, exclusive of interest and costs,” 28 U.S.C. § 1332(a)(1). Despite the defendant’s allegation to the contrary, the plaintiff does not seek money damages in its complaint, only declaratory and injunctive relief that allows it a full 180 days before the dealership franchise can be terminated, which the plaintiff calculates to be January 31, 2012. How is the “value” of the controversy determined in such a case? As the Sixth Circuit has explained, “[o]ne principle is well-settled: for actions seeking a declaratory judgment, we measure the amount in controversy by ‘the value of the object of the litigation.’” Northup Props., Inc. v. Chesapeake Appalachia, LLC, 567 F.3d 767, 770 (6th Cir. 2009) (quoting Hunt v. Washington State Apple Adver. Comm’n, 432 U.S. 333, 347 (1997 . The Sixth Circuit has interpreted that to mean that “[w]here a party seeks a declaratory judgment, the amount in controversy is not necessarily the money judgment sought or recovered, but rather the value of the consequences which may result from the litigation.” Freeland v. Liberty Mut. Fire Ins. Co., 632 F.3d 250, 253 (6th Cir. 2011) (internal quotations omitted). In the case of injunctions, the Sixth Circuit has “observed that the ‘costs of complying with an injunction . . . may establish the amount-in-controversy [sic].’” Cleveland Housing Renewal Project, 621 F.3d at 560 (quoting Everett v. Verizon Wireless, Inc., 460 F.3d 818, 829 (6th Cir. 2006 . The plaintiff argues that the value of its Hyundai franchise comes nowhere near the jurisdictional threshold because its business essentially is dead in the water. It asserts that for the last 90 days since the termination letter was sent, it sold only four cars in August 2011, and no cars in September or October 2011. Extrapolating its sales figures, the plaintiff contends that the dealership’s value over the next 90 days cannot possibly amount to $75,000. -5- The defendant counters this argument with two of its own. First, the defendant points to the letter of intent sent to the plaintiff in which a third party has agreed to purchase the dealership’s assets for $250,000. The defendant reasons that once the dealership agreement has been terminated, the plaintiff will have no interest in the dealership that it could transfer to a third party, and therefore the value of the object of the litigation — the franchise — is well over $75,000. Second, the defendant submitted a declaration from Guy Warner, its marketing manager for Hyundai’s central region. Warner avers that he is familiar with the value of Hyundai dealerships because he has been employed in the automotive industry for over twenty years and has reviewed dozens of dealership asset transfer agreements. He concludes that “the value of the Hyundai dealership in Jackson, Michigan is in excess of $75,000.” Def.’s Resp., Ex. A, Decl. of Guy Warner ¶ 7. How Mr. Warner arrived at his conclusion and what he considered in this case remains a mystery. The defendant does not face a “daunting burden” of establishing the amount-in-controversy threshold. See Gafford v. General Elec. Co., 997 F.2d 150, 158 (6th Cir. 1993), abrogated on other grounds by Hertz Corp., 130 S. Ct. 1181. It need only “show by a preponderance of the evidence that the amount in controversy requirement has been met.” Hayes v. Equitable Energy Res. Co., 266 F.3d 560, 572 (6th Cir. 2001) (citing Gafford, 997 F.2d at 158). To meet that burden, the defendant “may submit a wide range of evidence in order to satisfy the jurisdictional requirements of removal.” Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 755-56 (11th Cir. 2010) (collecting cases). However, the removing party must provide facts in support of its removal notice. Conclusory statements alone do not establish the amount in controversy. See Garza v. Bettcher Indus., Inc., 752 F. Supp. 753, 763-64 (E.D. Mich. 1990) (citing McNutt v. General Motors Acceptance Corp. of Indiana, 298 U.S. 178, 189 (1936) (stating that if a party’s “allegations of jurisdictional facts are -6- challenged by [the] adversary in any appropriate manner, [it] must support them by competent proof” . Moreover, “because lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts resolved in favor of remand.” Eastman v. Marine Mech. Corp., 438 F.3d 544, 549-50 (6th Cir. 2006) (quoting Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996 . The argument that the $250,000 letter of intent satisfies the required showing has some appeal, but only on the surface. When the letter of intent is examined, it does little to establish the “value” of the franchise itself. And it is the franchise — not the dealership as a whole — that is the object of the controversy. The notice of the letter of intent apparently was sent on November 4, 2011 by Gyarmati, the plaintiff’s owner, to Hyundai’s central region general manager, stating that Gyarmati wished to “sell the assets and Hyundai franchise [he] owns in Jackson, MI.” The assets would include “Machinery and equipment; Work in progress; Hyundai and non-Hyundai Parts and Accessories; Intellectual Property (including URL’s and websites); Goodwill (including numbers and name);” and a “Non- compete” agreement. Def.’s Resp., Ex. A, Decl. of Guy Warner, Ex. 4 to Decl., Ltr. of Intent. It does not appear that the purchase amount would include inventory or trade fixtures; under the terms of the DSSA, the defendant must repurchase all new, unused, unmodified and undamaged current model Hyundai Motor Vehicles, Hyundai genuine parts and accessories, tools and equipment required or recommended by the defendant, and signs that the defendant required or recommended, upon termination of the DSSA. Def.’s Resp., Ex. A, Decl. of Guy Warner, Ex. 2 to Decl., DSSA ¶ 16.D.3.(a). The other hard assets belong to the plaintiff and their transfer does not depend on the vitality of the franchise. Therefore, the amount in controversy is the value of the plaintiff’s business -7- as a going concern, which amounts to its goodwill and intellectual property. See Pergament v. Frazer 93 F. Supp. 13, 30-31 (E.D. Mich. 1950) (observing that intangible assets include such things as acquisition of patents, trademarks, and trade names, the goodwill and going concern value of the dealership, acquisition of the dealer’s distributor organization, and funds spent on advertising). “There is no rigid approach for determining questions of . . . valuation.” In re Regency Intern. Flooring, LLC, No. 09-1146, 2010 WL 4053982, at *8 (W.D. Mich. 2010) (citing In re Roblin Indus., Inc., 78 F.3d 30, 38 (2d Cir. 1996 . It is particularly difficult to calculate the value of a young business — in this case the parties signed the dealership agreement in December 2009 — because “there is no reliable track record to look back on.” Terrell v. Household Goods Carriers’ Bureau, 494 F.2d 16, 23 n.12 (5th Cir. 1974). Other courts have recognized that an automobile dealership’s going concern value is decimated when it loses the ability to carry on its business as the dealer of a particular brand of vehicle. Matter of Chick Smith Ford, Inc., 46 B.R. 515, 519 (Bankr. M.D. Fla. 1985) (“It needs no elaborate discussion to point out the peculiar character of the contractual relationship of the Debtor with the Defendants. It is a Ford automobile dealership. It is obvious that the Debtor cannot obtain Ford automobiles from anyone except Ford Motor Company. Without its ability to carry on the business as a Ford dealership, the going concern value of its business and its good will will be destroyed and no remedy at law would adequately compensate the Debtor for this loss.”). However, the question in the present case is what that value was when this case was removed. Rogers v. Wal- Mart Stores, Inc., 230 F.3d 868, 871 (6th Cir. 2000) (holding that the amount in controversy is assessed at the time the case is removed). -8- In this case, the defendant makes no attempt to attribute value to the franchise itself. The letter of intent does not do so. The plaintiff’s statement that the dealership has conducted virtually no sales business since August suggests that the value of the plaintiff’s goodwill is de minimis. The Warner declaration raises more questions about value than it answers. Warner avers that he is familiar with the general value of Hyundai dealerships based on other asset transfer agreements. But he offers no insight as to how he reached his conclusion that the value of the plaintiff’s dealership “is in excess of $75,000.” He does not state what he includes in that valuation, and he makes no effort to tie his opinion to the consideration recited in the letter of intent. His bald opinion is unexplained and therefore unpersuasive. The defendant has not offered sufficient evidence of the value of the franchise — the object of the litigation — or the cost of complying with the injunction the plaintiff seeks. The record does not contain enough facts for the Court to make a determination that the amount in controversy exceeds the jurisdictional threshold. III. The defendant has not established that it is more likely than not that the amount in controversy in this case exceeds $75,000. Therefore, the Court does not have subject matter jurisdiction under 28 U.S.C. § 1332(a), and the case must be remanded. 28 U.S.C. § 1447(c) (“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”). Accordingly, it is ORDERED that the plaintiff’s motion to remand [dkt. #4] is GRANTED. -9- It is further ORDERED that the case is REMANDED to the Jackson County, Michigan circuit court. Date: December 12, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 12, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -10-

=== SALLY HILDEN and JEROME FLYNN v. HURLEY MEDICAL CENTER et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION SALLY HILDEN and JEROME FLYNN, Plaintiffs Case No. 10-12526 Honorable David M. Lawson v. HURLEY MEDICAL CENTER, VARUNA TEWARI, SHEILA MOORE, and DAVID SZCZEPANSKI, _________________________________________ / Defendants. OPINION AND ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Plaintiffs Sally Hilden and Jerome Flynn were employed as medical technologists in the microbiology laboratory at the Hurley Medical Center in Flint, Michigan. Part of their duties was to receive swabs containing specimens collected from patients at area doctors’ offices and try to grow bacteria to identify infectious organisms. Hurley Medical Center furnishes kits the doctors can use to collect the specimens and transport them to the laboratory. The kits include plastic tubes that contain a nutrient liquid in which the bacteria can grow from the time the swab is placed in the tube until it is transported and processed in the laboratory. The kits are marked with an expiration date, after which they should not be used, but sometimes the doctors’ offices used expired transport kits to send their specimens to the laboratory. The plaintiffs took issue with the Medical Center’s practice of testing the specimens sent in expired transport media: they lodged a complaint with a regulatory authority, and they even destroyed some of the specimens. The resulting discipline for insubordination — Flynn’s suspension and Hilden’s termination — prompted the present lawsuit. The plaintiffs brought their action for violation of Michigan’s Whistleblowers’ Protection Act, violation of public policy, intentional infliction of emotional distress, and unlawful retaliation in violation of the First Amendment. The defendants filed a motion for summary judgment, and the Court heard oral argument on May 11, 2011. The Court now finds that the facts cannot establish that the plaintiffs’ protected conduct motivated the defendants’ actions in disciplining the plaintiffs, and therefore the defendants are entitled to a judgment of dismissal as a matter of law. The Court will grant the motion for summary judgment and dismiss the case. I. Plaintiff Hilden alleges that she was fired unlawfully for blowing the whistle on the defendants’ condonation of the use of expired media by doctors to transport specimens to the laboratory for testing, and for filing a complaint with Hurley Medical Center dealing with workplace harassment by her supervisors. Plaintiff Flynn alleges that he was disciplined unlawfully as a whistleblower. The defendants contend that Hilden was fired for insubordination and patient endangerment when she destroyed specimens and cultures and cancelled tests in direct disobedience of the laboratory director’s instructions for dealing with specimens that arrived at the laboratory in expired transport media, and then filed a false report relating to violence in the workplace when she tried to avoid a conversation with a supervisor who wanted to place Hilden on administrative leave. Flynn was suspended, the defendants insist, for destroying specimens, although he did not destroy any cultures or cancel tests. The underlying dispute over laboratory procedures and the circumstances of the job actions require some background information on the operation of the microbiology laboratory at the Hurley Medical Center. -2- A. Transport Media and Cultures The microbiology laboratory tests specimens of tissue and bodily fluid collected from patients to detect the presence of disease-causing pathogens. Sometimes, the specimens are collected from remote locations — doctors’ offices — and transported to the laboratory for testing. Testing consists of introducing the specimen to a nutrient medium in an effort to grow a culture of bacteria and identify the microorganism. To begin the culturing process, a doctor must collect the specimen from the patient. The collecting doctor uses a cotton swab kept in a sterile plastic tube with a small amount of nutrient liquid to maintain an environment in which bacteria could grow between the time of collection and culturing. The plastic tube containing the swab is sent to the Hurley Medical Center laboratory. The swab and the container together are referred to as “transport media.” When the transport medium arrives at the laboratory, a medical technologist, like the plaintiffs in this case, removes the swab from the container and inoculates a culture plate or a vial consisting of “Lim broth,” which provides nutrients to the bacteria. After bacteria grow on the culture media, a medical technologist who specializes in microbiology identifies the bacteria and provides a report to the doctor. Hurley Medical Center furnishes transport media to doctors’ offices. Each plastic tube container has an expiration date. The defendants contend that the expiration date merely signifies the date beyond which the manufacturer cannot guarantee a reliable result. The defendants insist that the only risk in using expired transport media is that the transport media’s nutrient may have lost its ability to sustain bacteria growth during transmittal back to the Hurley laboratory. Therefore, a negative growth culture may not be reliable, but a positive culture likely would be a true result. -3- B. Discovery of Expired Transport Media On January 19, 2010, second-shift medical technologist Sarah Martinson noticed that the laboratory had received a microbiology specimen from a physician’s office in expired transport medium. Martinson contacted the “outreach troubleshooter group” — an off-site organization that acts as the liaison between the physician offices and Hurley Medical Center — and asked it to notify the physician’s office that it had submitted an expired swab, inform the physician’s office that a culture had been set up, and request that the physician’s office discard any other expired swabs in stock. Hurley Medical Center has a laboratory information system (LIS) that is separate from Hurley’s e-mail system. Laboratory employees are able to send “mailbox messages” instead of e- mails. Martinson’s message to the troubleshooter group was such a message. C. Events Leading to Hilden’s Discipline Sally Hilden arrived at work the evening of January 19, 2010 at 10:30 p.m. and read her mailbox messages. Hilden spoke with Martinson and reminded her that she was not to inoculate culture media with swabs from expired transport media. Hilden maintained that such practice was forbidden by the “Joint Commission.” That body, formerly known as the Joint Commission for Accreditation of Hospitals Organization (JCAHO), is an independent, not-for-profit organization that operates accreditation programs for a fee that regulate quality and safety in the delivery of health care. The Joint Commission has administered a program for the accreditation of hospital laboratories since 1979. Hilden’s interpretation of the Joint Commission’s directive — which occurred in 2008 and addressed “reagents” — is disputed. During the course of her shift, Hilden sent two messages to the troubleshooter group the morning of January 20: one at 5:30 a.m. and another at 5:56 a.m. The body of the first e-mail stated, -4- “Swab for GENBHS [genital Beta-haemolytic streptoccus] submitted in expired culture transport system. Please notify office for recollect.” Mot., Ex. 3, Hilden Jan. 20, 2010, 5:30 a.m. e-mail. The second e-mail stated: The BBL culture/swab transport system contains transport medium . . . . Per manufacturer, these devices are stored 5-25 degrees C and are not used if damaged, dehydrated, contaminated, or if past expiration date. Joint Commission Laboratory Standard QC.1.140, EP#4. Please notify our clients to verify that their inventory is current. Mot., Ex. 3, Hilden Jan. 20, 2010, 5:56 a.m. e-mail. Hilden then discarded both the swab and the Lim broth that Martinson had prepared. She did not tell anyone of her actions. Later that same day, Varuna “Mitch” Tewari, Hurley’s microbiology laboratory director, sent the following e-mail to all laboratory staff: To those doing setups, please keep an eye on swabs coming in and notify someone in micro when expired swabs are noted. We will let the offices know to change them out. However, these cultures should be setup. Bacti techs, if you are notified that cultures have been received on expired swabs, please include a comment on the report to indicate this, as the integrity of the specimen may have been compromised. I am insisting that cultures be set up because in many cases, patients do not return for recollection. Many of the clinics deal with patients that have poor compliance with medical instruction. Therefore, the best course of action is to set the culture up while we are waiting for a recollection. If pathogens are recovered, the patient will get treatment earlier than if we had to wait for a recollection. Obviously, a recollection is the only sure way to know that the specimen was not compromised, and we should always request another. But I think that we do owe it to the patient to get started on the work as quickly as we can. Thanks. Mot. Summ. J., Ex. 5, Tewari Jan. 20, 2010 e-mail. After reading the Tewari’s e-mail, both plaintiffs spoke to their immediate supervisor, Emily Mahank, about their objections to Tewari’s directive to inoculate cultures with swabs from expired transport media. Ms. Mahank explained to Hilden that she understood both Tewari’s and Hilden’s -5- viewpoints and would leave a note for Tewari outlining their concerns. Hilden informed Mahank that she was going to speak to clinical laboratory administrative director Sheila Moore in the morning, and Hilden believed that Moore would not support Tewari’s instructions. Early on January 21, 2010, Hilden found two specimens that had been submitted from a physician using expired transport media and that had been processed on the second shift. Again, she discarded both swabs and the culture plates that had been inoculated by the second-shift medical technologist, and canceled the culture request on the Hurley laboratory computer system. One of the specimens was from a wound culture from which the physician suspected Methicillin-resistant Staphylococcus aureus (MRSA), a virulent strain of Staph bacteria resistant to antibiotics, and had isolated the patient from his family. Hilden sent the troubleshooter group an e-mail at 3:15 a.m. that stated, with respect to one of the discarded specimens, “Inappropriate specimen submitted for throat culture BBL culture/swab transport media expired 12/2009,” and, with respect to the other discarded specimen, “Inappropriate specimen submitted for abscess culture BBL culture/swab transport media expired 06/2008. Please notify office.” Mot. Summ. J., Ex. 6, Jan. 21, 2010 Mailbox message from Hilden. On January 21, 2010 at 6:30 a.m., both plaintiffs met with clinical laboratory administrative director Sheila Moore and discussed their objections to Tewari’s directive. Hilden told Moore that “if [Moore] didn’t resolve this, and [Moore’s] understanding of resolving it was to make [Tewari] retract his directive, that she would take it further to Joint Commission.” Resp. to Mot. Summ. J., Ex. 4, Moore dep. at 11. Moore told them that she would talk to Tewari. However, Hilden did not tell Moore that she had destroyed swabs and culture plates during her last two shifts, and Moore was not otherwise aware of that. At the time of their meeting with Moore, the plaintiffs had not -6- attempted to discuss their concerns directly with Tewari or to contact a Joint Commission standards interpreter. Moore then spoke with Tewari and told him to call Megan Sawchuk, a Joint Commission standards interpreter. Tewari sent an e-mail to Sawchuk and received a reply at 1:06 p.m. the same day. Sawchuk’s e-mail, which addressed the appropriateness of Tewari’s directive, stated in part: While the standards do require use of “in-date” materials (QSA.02.14.01), the laboratory director may use clinical judgment to determine a reasonable specimen rejection policy when receiving expired collection or culture materials. . . . If the laboratory has had experience with recovering significant isolates from expired materials and it is suspected that recollection will be difficult or impossible, it is reasonable to proceed and perform the testing. The physician should be informed of the test limitations and that recollection is suggested. It is preferable to include this information in the laboratory report as a comment or disclaimer. There should also be follow-up to replace expired materials at outreach locations when this occurs. Mot. Summ. J., Ex. 9, Sawchuk e-mail. Tewari also spoke with Sawchuk on the telephone about inoculating cultures with swabs in expired transport media. At 2:30 p.m. on January 21, Tewari sent another email to all laboratory staff members. It stated: When resulting cultures setup from expired media, please use the comment code “EXPMED”. This code lets the office know the media was expired, the results may be suspect, and to discard any remaining expired media. Thanks. Mot. Summ. J., Ex. 10, Tewari Jan. 21, 2010 2:39 e-mail. Later on January 21, Moore discovered that Hilden had destroyed the swabs and cultures for three specimens. She requested that Hilden be suspended pending discharge for insubordination and patient endangerment for destroying the two specimens and culture plates on January 21, in direct defiance of Tewari’s January 20 directive. Hilden was not disciplined for destroying the specimen on January 20 because management assumed Hilden did not understand the proper procedure at that -7- time. Moore informed the Hurley Labor Relations department that she wanted to place Hilden on notice of investigation and suspend her pending the completion of the investigation. She was informed that she could not suspend Hilden without a union representative present and that one would not be present when Hilden came into work on January 22, 2010. David Szczepanski, from the Hurley Labor Relations department, told Moore that she could place Hilden on paid administrative leave until a meeting could be arranged with a union representative on Monday, January 25, 2010 to present her with the suspension pending permission to terminate. Moore also spoke with Robert Lavole, Moore’s vice president, and told him that she thought placing Hilden on administrative leave “ha[d] the potential to be ugly.” Mot. Summ. J., Ex. 7, Moore dep. at 90. Lavole suggested that Moore call Mark Mitchell, the second or third-shift supervisor for public safety. Hilden apparently suspected trouble herself, as she called her immediate supervisor, Emily Mahank, in the afternoon of January 22, 2010 and asked if she was going to receive discipline. D. Attempt to Place Hilden on Administrative Leave When Moore came into work around 10:00 p.m. on January 22, she spoke with Mitchell and told him that she “intended to send someone home on administrative tonight at 10:30 and it has the potential to be ugly.” Mot. Summ. J., Ex. 7, Moore dep. at 91. Mitchell asked Moore if she thought they should involve the house director. She replied in the negative, and Mitchell told Moore to call him if things got out of hand. Tewari agreed to be present with Moore when she placed Hilden on administrative leave, in the event that Hilden declined union representation and wanted to talk about the situation. -8- Shortly after Hilden arrived for work that evening, Moore asked to speak with her. Hilden peeked her head into Moore’s office and asked if she had a union representative, and Moore replied that she did not. Hilden refused to speak with Moore and walked down the hall into the locker room. Moore approached the locker room and opened the door to discover that several people were in the locker room. Hilden called out: “Sally, I really need to talk to you,” to which Hilden replied, “Not without union representation.” Mot. Summ. J., Ex. 7, Moore dep. at 93. Moore went back to her office and called Nancy Brooks, the house director — the registered nurse in charge of the nursing activities on the third shift who also periodically provides assistance to other department supervision — who agreed to talk to Hilden. At some point, Hilden left the locker room and moved to the “PCR,” a subsection of the microbiology laboratory that tests for sexually transmitted diseases. Brooks met with Moore in her office and asked Moore to point out Hilden so Brooks could ask her to step out in the hallway and talk. Brooks, followed by Moore and Tewari, entered the PCR. Brooks introduced herself to Hilden and asked “if she would just step out in the hall so we could talk.” Id. at 96. Sally responded that “she was being threatened and harassed by management due to an ongoing Joint Commission investigation and if Nancy continued in that manner she’d be added to the list.” Ibid. Brooks replied, “I’m not threatening you, I just asked you to step out in the hall to talk.” Ibid. At that point, Hilden walked past Brooks and Moore to the telephone and called the public safety department and told public safety that “she needed an officer because she was being threatened and harassed by management.” Id. at 97. Brooks, Moore, and Tewari stepped out into the hallway. Mitchell arrived along with two other safety officers, and Moore and Brooks updated him on the situation. Mitchell told Moore, Brooks, and Tewari that he was going to “go in there and tell -9- her that she’s being sent home on administrative leave and it would be better if she came with me, because otherwise I’m going to have to escort her out.” Id. at 99. Mitchell entered the PCR alone and came out with Hilden. Id. at 99-100. Brooks spoke with Hilden, asking her if she was okay, and Moore told Hilden she was being placed on administrative leave until they could get union representation, which she assumed would be Monday. Hilden was escorted from the building. Moore alleges that she did not raise her voice or yell at Hilden during this interaction. Hilden remembers otherwise. E. Hilden’s Unsafe Work Complaint Hilden filed an unsafe workplace complaint against Moore and Tewari on January 27, 2010. Her complaint stated that she “was completely astonished that [Moore and Tewari] would come in on a Friday night to issue a discipline that Emily [Mahank] would have normally been left with to deliver. It was apparent to [her] that this was deliberate and intimidating.” Mot. Summ. J., Ex. 12, Hilden unsafe work complaint. The text of the complaint need not be set forth here. It is sufficient to note that factually it parallels Moore’s account of the events, albeit with more dramatic language and written from Hilden’s point of view. However, in the complaint, Hilden accused Moore and Tewari of trying to harass and intimidate her and accused Moore of “stalking” her. Hurley conducted an investigation, and the investigator, Jamal Ghani, found Hilden’s complaint to be meritless. On February 5, 2010, Hurley’s vice president of procedural and ambulatory services sent a memorandum on behalf of Ghani to the Safe Workplace Oversight Team that stated: I have completed my investigation of the safe workplace incident #1007. I found the complaint to be unsubstantiated and actions of lab management and the house director to be professional and appropriate. -10- Witness statements support the investigative findings. No corrective action necessary. Mot. Summ. J., Ex. 13, Complaint Investigation. F. Hilden’s Termination Hilden’s employment was terminated on March 10, 2010 for insubordination. The Notice of Layoff explained: On February 12, 2010, you were suspended pending permission to terminate for violation of Employee Conduct Rule #10 and #34. Your behavior on 1/21/10 amounted to clear insubordination when you discarded culture material and cancelled tests that were set up by other Medical Technologist. This behavior was complete [sic] disregard to a clear directive from your supervisor. You put our patients at risk with this gross misconduct. Mot. Summ. J., Ex. 18, First Notice of Layoff. On May 4, 2010, Hurley issued an additional notice of layoff for Hilden’s false report of violence in the workplace. It stated: On January 22,2010 you filed a false report related to violence in the workplace. You are hereby terminated for gross misconduct related to violation of Employee Conduct Rule #16 and Employee Conduct Rule #32 as outlined in your suspension. Permission was previously granted for your termination on March 10, 2010. Accordingly, you are also terminated effective May 4, 2010 for these additional violations of Employee Conduct Rules. Mot. Summ. J., Ex. 18, Second Notice of Layoff. G. Jerome Flynn’s discipline On January 22, 2010, at 6:11 a.m., Flynn discarded transport media that had been processed by a co-worker on the previous shift and canceled a culture request on the computer, but he did not discard the culture plate; the inoculated specimen results could be recovered. In the afternoon on January 22, Tewari called Flynn to ask where the discarded swab had been discarded. Flynn did not return his call that day. -11- On February 17, 2010, Moore suspended Flynn for 15 calendar days. The disciplinary action stated: An investigation has substantiated the allegation that you refused to obey the orders of a supervisor. By your own admission, you discarded a culture swab and canceled a culture that had previously been processed by a coworker, potentially placing the patient’s safety at risk. You have demonstrated a willful disrespect of managerial authority. Due to the serious nature of this work rule violation, you are hereby suspended for 15 calendar days. Future violations of HMC work rules will be met with progressive discipline, up to and including termination. Mot., Ex. 17, Flynn Record of Disciplinary Action. H. Hilden’s complaint to the Joint Commission On February 4, 2010, Hurley’s medical director, Dr. Michael Boucree, was notified that the Joint Commission had received an anonymous complaint regarding the Hurley laboratory. Moore provided information for Dr. Boucree’s response, and the Joint Commission Office of Quality Monitoring sent a letter to Hurley’s chief executive officer dated February 26, 2010 that stated no action was needed. The letter stated: I am writing to inform you that based on review of your organization’s response to incident number 122494, The Joint Commission will take no further action at this time. However, should we receive additional information that may be relevant to these issues in the future, a determination will be made at that point if further evaluation will be required. Mot. Summ. J., Ex. 16, Joint Commission e-mail to HMC. Hilden alleges that she complained to the Joint Commission about Hurley’s use of expired transport media via e-mail early in the afternoon on January 22, 2010, well before she had any contact with Moore and Tewari. Hilden also complained to the Corporate Compliance Hotline on January 22, 2010 and January 24, 2010. There is no evidence in the record that either Moore or Tewari were aware of the complaints when they placed Hilden on administrative leave. -12- I. Post-termination incident At some point after Hilden had been fired, Carma Huff, a friend of Moore’s and a former Hurley employee, had a conversation over lunch with Moore in which Moore bragged about firing Hilden and stated that “she knew Sally [Hilden] would get her job back but that it would be a very long time.” Resp. to Mot. Summ. J., Ex. 6, Huff Aff. ¶ 11. J. The present action The plaintiffs filed suit against the defendants in the Genesee County, Michigan circuit court on March 19, 2010. After amending their complaint several times, the plaintiffs filed a third amended complaint on June 18, 2010, which included a federal claim. The defendants then removed the case to this Court. The third amended complaint included claims on behalf of both Hilden and Flynn for violations of Michigan’s Whistleblowers’ Protection Act (WPA) (Count I and II); violation of public policy, if the Whistleblowers’ Protection Act is found not to apply (Count III); intentional infliction of emotional distress of Hilden (Count IV); and violations of the plaintiffs’ First Amendment rights via 42 U.S.C. § 1983 (Count V). The defendants filed a motion for summary judgment attacking all of the counts of the third amended complaint. The main thrust of their argument is that the undisputed evidence shows that the plaintiffs were not disciplined for speaking out about the use of expired transport media; rather, Flynn was suspended for discarding specimens, and Hilden was fired for that and taking the temerarious and insolent action of destroying the culture media and cancelling tests set up by other laboratory technicians. The defendants also argue that the WPA claims must fail because the Joint Commission requirements are not laws, rules, or regulations and therefore the plaintiff’s complaints to the Joint Commission were not protected activity; Hilden’s complaint to the public safety -13- department is not protected because it was made in bad faith; the discipline does not violate public policy because the plaintiffs’ complaints deal only with a breach of internal rules, and the claim is preempted by the WPA; the claim for intentional infliction of emotional distress fails because the defendants’ conduct was not “outrageous”; and the First Amendment claim cannot proceed because the plaintiffs were complaining about matters within their official duties and not as citizens speaking out on a matter of public concern. II. Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A trial is required only when “there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Anderson v. Liberty Lobby, Inc., , 250 (1986). A motion for summary judgment under Rule 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one- sided that one party must prevail as a matter of law.” Id. at 251-52. The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). The party bringing the summary judgment motion has the initial burden of informing the court of the basis for its motion and identifying portions of the record that demonstrate the absence -14- of a genuine dispute over material facts. Fed. R. Civ. P. 56(c)(1)(A), (B); Mt. Lebanon Pers. Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). If the party opposing the motion contends that facts are in dispute, he may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the [non-moving party].” Anderson, 477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to meet his burden of proof, summary judgment is clearly proper. Fed. R. Civ. P. 56(e)(3); Celotex Corp. v. Catrett, , 322-23 (1986). At the summary judgment stage, “the evidence should be viewed in the light most favorable to the non-moving party[, and] the facts and any inferences that can be drawn from those facts[] must be viewed in the light most favorable to the non-moving party.’” Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 374 (6th Cir. 2009) (quoting Bennett v. City of Eastpointe, 410 F.3d 810, 817 (6th Cir. 2005) (citations omitted ; see also Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003) (“In evaluating the evidence, [the district court] ‘draw[s] all reasonable inferences therefrom in a light most favorable to the non-moving party.’”) (quoting PDV Midwest Ref., L.L.C. v. Armada Oil & Gas Co., 305 F.3d 498, 505 (6th Cir. 2002 . Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. -15- Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics & Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). A. First Amendment claim To prevail on a First Amendment retaliation claim, a plaintiff must show that (1) she was “engaged in protected conduct; (2) an adverse action was taken against the plaintiff that would deter a person of ordinary firmness from continuing to engage in that conduct; and (3) there is a causal connection between elements one and two — that is, the adverse action was motivated at least in part by the plaintiff’s protected conduct.” Thaddeus-X v. Blatter, 175 F.3d 378, 394 (6th Cir. 1999) (en banc); see also Evans-Marshall v. Board of Educ. of Tipp City Exempted Vill. Sch. Dist., 624 F.3d 332, 337 (6th Cir. 2010). Notwithstanding a showing of all three, the defendants may escape liability by showing that they would have taken the same action in the absence of the protected activity. Thaddeus-X, 175 F.3d at 399; see also Jenkins v. Rock Hill Local Sch. Dist., 513 F.3d 580, 586 (6th Cir. 2008). 1. Protected conduct “It is well settled that ‘a State cannot condition public employment on a basis that infringes the employee’s constitutionally protected interest in freedom of expression.’” Garcetti v. Ceballos, 547 U.S. 410, 413 (2006) (quoting Connick v. Myers, 461 U.S. 138, 142 (1983 . However, the Supreme Court has held that “when public employees make statements pursuant to their official duties, the employees are not speaking as citizens for First Amendment purposes, and the Constitution does not insulate their communications from employer discipline.” Id. at 421. -16- The defendants contend that the plaintiffs’ complaints to them about the use of expired transport media and the Hurley laboratory’s response fell within their job duties. There is no evidence of the plaintiffs’ formal job descriptions that include a reporting obligation. But, as the defendants point out, the pursuant-to-official-duties rule applies equally to “ad hoc or de facto duties not appearing in any written job description” as long as the speech “‘owes its existence to [the speaker’s] professional responsibilities.’” Fox v. Traverse City Area Pub. Schs. Bd. of Educ., 605 F.3d 345, 348 (6th Cir. 2010) (quoting Weisbarth v. Geauga Park Dist., 499 F.3d 538, 544 (6th Cir. 2007 . To determine whether public employee speech is protected by the First Amendment, a court must ask two questions: (1) did “the employee [speak] as a citizen on a matter of public concern” and (2) if so, did “the relevant government entity ha[ve] an adequate justification for treating the employee differently from any other member of the general public.” Garcetti, 547 U.S. at 418. The second question “reflects the importance of the relationship between the speaker’s expressions and employment. A government entity has broader discretion to restrict speech when it acts in its role as employer, but the restrictions it imposes must be directed at speech that has some potential to affect the entity’s operations.” Ibid. The Garcetti Court “acknowledged the importance of promoting the public’s interest in receiving the well-informed views of government employees engaging in civic discussion,” but refused public employees the power to “‘constitutionalize [their] grievance[s].’” Id. at 419-20 (quoting Connick, 461 U.S. at 154). The plaintiffs contend that they were speaking out on a matter of public concern, not as employees of the laboratory. They rely heavily on the Sixth Circuit’s opinion in Rodgers v. Banks, 344 F.3d 587 (6th Cir. 2003), in which the court stated that the “quality of patient care in state -17- hospitals presents an issue of public concern.” Id. at 600-01. In that case, Carolyn Rodgers was fired after she wrote a memorandum to the CEO of the Pauline Warfield Lewis Center, an Ohio state mental hospital. Rodgers was employed as the Director of Quality Management, and her principal job duty was to “prepare the Center for surveys by the Joint Commission on Accreditation of Hospitals . . . and other surveying organizations.” Ibid. Rodgers drafted the memorandum in response to the hospital CEO’s decision to grant a psychiatrist’s request to move his office to one of the patient units; the memorandum highlighted how the move could negatively affect patient privacy and potentially cause the hospital to lose its certification. The Sixth Circuit held that Rodgers’s memorandum dealt with an issue of public concern and was protected by the First Amendment. Several recent Sixth Circuit cases suggest that the Rodgers rationale would not survive Garcetti. In Fox, for instance, the court held that a teacher’s “complaints to her supervisors about the size of her teaching caseload were not protected . . . [because] the speech in question . . . was made not in her role as a ‘public citizen’ but as an employee, that it was made to her immediate supervisors, and that it did not address a matter of ‘public concern’ but, rather, only the conditions of her employment.” Fox, 605 F.3d at 346-47. In Weisbarth v. Geauga Park District, 499 F.3d 538 (6th Cir. 2007), the plaintiff cited as protected speech a conversation she had with an outside consultant whom the ranger department had engaged to assess morale and performance within the department. The court held that the conversation was made pursuant to the plaintiff’s official duties, even though giving the interview was “an ad hoc or de facto dut[y that did not] fall within the scope of an employee’s official responsibilities . . . appearing in [her] written job description.” Weisbarth, 499 F.3d at 543-44. -18- In Haynes v. City of Circleville, 474 F.3d 357 (6th Cir. 2007), the plaintiff was a police officer who wrote a memorandum to a supervisor expressing discontent about the financial cutbacks and changes to the canine-training program that he directed. The court had no trouble concluding that the memo was not protected speech, but amounted to nothing more than “‘the quintessential employee beef: management has acted incompetently.’” Id. at 365 (quoting Barnes v. McDowell, 848 F.2d 725, 735 (6th Cir. 1988 . In Rodgers v. Banks, Carolyn Rodgers made her statements pursuant to her duties as Director of Quality Management. It is difficult to distinguish that case from the Sixth Circuit’s post-Garcetti cases that have found such conduct not protected by the First Amendment. That court’s more recent treatment of the issue calls into question the plaintiffs’ arguments that their complaints about processing specimens sent to the laboratory in expired transport media were protected speech. And to the extent that the plaintiffs complained to their supervisors or other hospital personnel, the Court must conclude that Garcetti would preclude a First Amendment retaliation claim based on those communications. The plaintiffs took their complaints one step further, however, by lodging them with an outside regulatory agency. The fact remains that the “quality of patient care in state hospitals presents an issue of public concern.” Rodgers, 344 F.3d at 600-01. And bringing to light a concern about an internal hospital practice that impacts the potential accuracy of diagnostic tests — when those complaints are shared outside the confines of the employment setting — can amount to protected speech. See Pucci v. Nineteenth Dist. Ct., 628 F.3d 752, 768 & n.13 (6th Cir. 2010) (holding that a court administrator’s complaints that a judge was proselytizing from the bench “fell outside [her] assigned tasks as an administrator, given that this was an extraordinary rather than -19- everyday communication,” and that “the nature of [her] complaints implicates the propriety and legality of public, in-court judicial conduct, and renders her speech of sufficient public gravity to warrant First Amendment protection”); see also Marohnic v. Walker, 800 F.2d 613, 616 (6th Cir. 1986) (“Public interest is near its zenith when ensuring that public organizations are being operated in accordance with the law.”). The plaintiffs allege that they complained to the Hurley Medical Center corporate compliance hotline. That is an internal body. Presumably, all employees are expected to notify the compliance department when they have an appropriate concern. That complaint is not protected by the First Amendment. However, the plaintiffs also complained to the Joint Commission, an outside regulatory body. That conduct transcended their job duties and most likely constituted protected speech. Hilden also contends that her contact with the public safety department complaining of workplace harassment was protected by the First Amendment. It is not. The complaint was made to an internal body, and the plaintiffs have not established that the speech touched on a matter of public concern. See Farhat v. Jopke, 370 F.3d 580, 593 (6th Cir. 2004) (holding that employee speech was not a matter of public concern since the focus of employee’s letters was a personal gripe with employer); Rahn v. Drake Ctr., Inc., 31 F.3d 407, 412 (6th Cir. 1994) (stating that press release issued by nurse did not touch upon public concern because the focus was not on patient endangerment so much as it was employee dissatisfaction with work rules). Finally, and perhaps most importantly, it is beyond peradventure that the plaintiffs’ actions of discarding specimens, destroying the inoculated cultures, and cancelling tests are not protected by the First Amendment. That conduct cannot be considered symbolic action, because it was not -20- “‘sufficiently imbued with elements of communication to fall within the scope of the First . . . Amendment[].’” Texas v. Johnson, 491 U.S. 397, 404 (1989) (quoting Spence v. Washington, 418 U.S. 405, 409 (1974) (holding that prosecution of defendant for burning an American flag during a protest rally violated the defendant’s right to free expression under the First Amendment). It is abundantly clear that the destruction of the test samples was not intended as a communication; the acts were done in secret and not reported. Rather, the conduct was intended to ensure that the tests would not be completed and that no results would be obtained. The destruction of the cultures and specimens was not protected speech. 2. Adverse action There is no dispute that Hilden’s termination and Flynn’s fifteen-day suspension without pay constituted adverse employment action. 3. Causation The plaintiffs argue that they have two “smoking guns,” that is, admissions from the defendants that they fired Hilden for inappropriate reasons. The first relates to the First Amendment claim, and consists of Hilden’s first notice of layoff because the defendants admit that they fired Hilden for discarding outdated specimens in expired collection devices and canceling tests, all to protect Hurley Medical Center, patients, and their doctors. That evidence does not establish causation. Instead, it proves that the defendants fired Hilden for a proper reason: destroying the specimens and test samples. The conduct amounts to obvious insubordination. It is noteworthy that Hilden was not disciplined for destroying the inoculated cultures before she received Terawi’s memorandum instructing that tests should be set -21- up and run on specimens received in expired transport media. The discipline was based on Hilden’s post-memo conduct. What about the plaintiffs’ protected speech? The plaintiffs must prove “‘that the speech at issue represented a substantial or motivating factor in the adverse employment action. Specifically, [they] must point to specific, nonconclusory allegations reasonably linking [their] speech to employer discipline.’” Vereecke v. Huron Valley Sch. Dist., 609 F.3d 392, 400 (6th Cir. 2010) (quoting Rodgers, 344 F.3d at 602). The Sixth Circuit has interpreted “motivating factor” to mean the but-for cause, “without which the action being challenged simply would not have been taken.” Ibid. (quoting Leonard v. Robinson, 477 F.3d 347, 355 (6th Cir. 2007 . Although the Sixth Circuit is reluctant to find causation in temporal proximity alone, see, e.g., Tuttle v. Metropolitan Gov’t of Nashville, 474 F.3d 307, 321 (6th Cir. 2007) (“The law is clear that temporal proximity, standing alone, is insufficient to establish a causal connection for a retaliation claim.”); Randolph v. Ohio Dep’t of Youth Servs., 453 F.3d 724, 737 (6th Cir. 2006) (“Although temporal proximity itself is insufficient to find a causal connection, a temporal connection coupled with other indicia of retaliatory conduct may be sufficient to support a finding of a causal connection.”); Cooper v. City of N. Olmsted, 795 F.2d 1265, 1272 (6th Cir. 1986) (“The mere fact that Cooper was discharged four months after filing a discrimination claim is insufficient to support an interference [sic] of retaliation.”), that court “recogniz[es] the possibility that, on a particular set of facts, extremely close temporal proximity could permit an inference of retaliatory motive, but also recogniz[es] that often evidence in addition to temporal proximity is required to permit the inference.” Vereecke, 609 F.3d at 401. -22- The plaintiffs have failed to show that their speech — the complaint to the Joint Commission — was the but-for cause of their respective adverse employment actions. The plaintiffs have offered only temporal proximity as evidence of causation. Tuttle, 474 F.3d at 321 (“The law is clear that temporal proximity, standing alone, is insufficient to establish a causal connection for a retaliation claim.”). There is no evidence that any personnel at Hurley Medical Center was aware prior to the decision to impose discipline that either of the plaintiffs complained to the Joint Commission or any other outside agency. The only evidence in the record is that the hospital’s medical director was notified on February 4, 2010 that an anonymous complaint had been filed. Moreover, Mahank and Moore, the only people the plaintiffs spoke with about their concerns before Moore decided to discipline them both, were receptive to the plaintiffs’ reports and immediately took action to discover whether Tewari’s directive contravened any rules or regulations. That fact alone strongly suggests that Hilden and Flynn would not have suffered adverse employment actions if they had simply reported what they believed was a violation of law and not destroyed swabs and culture media. There is no direct evidence of causation, and there is no evidence from which a reasonable jury could infer that the defendants disciplined the plaintiffs on account of speech protected by the First Amendment. * * * * * * * * * The plaintiffs have not offered evidence sufficient to create a fact question on all the elements of their First Amendment retaliation claim. Therefore, the defendants are entitled to summary judgment on that claim as a matter of law. B. Whistleblowers’ Protection Act claim The WPA prohibits an employer from: -23- discharg[ing], threaten[ing], or otherwise discriminat[ing] against an employee regarding the employee’s compensation, terms, conditions, location, or privileges of employment because the employee . . . reports or is about to report, verbally or in writing, a violation or a suspected violation of a law or regulation or rule promulgated pursuant to law of this state, a political subdivision of this state, or the United States to a public body, unless the employee knows that the report is false. Mich. Comp. Laws § 15.362. “To establish a prima facie case under [the WPA], a plaintiff must show that (1) the plaintiff was engaged in a protected activity as defined by the act, (2) the plaintiff was discharged or discriminated against, and (3) a causal connection exists between the protected activity and the discharge or adverse employment action.” West v. General Motors Corp., 469 Mich. 177, 183-84, 665 N.W.2d 468, 471-72 (citing Chandler v. Dowell Schlumberger, Inc., 456 Mich. 395, 399, 572 N.W.2d 210 (1998 . Once the plaintiff has proved a prima facie case, the defendant then must articulate a legitimate business reason for the plaintiff’s discharge. Shaw v. Ecorse, 283 Mich. App. 1, 8, 770 N.W.2d 31, 37 (2009). If the defendant is able to articulate such a reason, the plaintiff bears the burden of showing that the defendant’s reason was merely pretextual. Shaw, 283 Mich. App. at 8, 770 N.W.2d at 37; Eckstein v. Kuhn, 160 Mich. App. 240, 246-47, 408 N.W.2d 131, 134 (1987). The defendant contends that a complaint to the Joint Commission is not protected activity because the Joint Commission is not a state agency. Protected activities consist of “(1) reporting to a public body a violation of a law, regulation, or rule; (2) being about to report such a violation to a public body; or (3) being asked by a public body to participate in an investigation.” Chandler, 456 Mich. at 399, 572 N.W.2d at 212 (citing Mich. Comp. Laws § 15.362); Shallal v. Catholic Soc. Servs. of Wayne Cnty., 455 Mich. 604, 610, 566 N.W.2d 571, 575 (1997). The WPA defines “public body” to include “[a]ny other body which is created by state or local authority or which is primarily funded by or through state or local authority, or any member -24- or employee of that body.” Mich. Comp. Laws § 15.361(d)(iv). Under that definition, the hospital itself and the plaintiffs’ supervisors qualify. The WPA “does not require that an employee of a public body report violations or suspected violations to an outside agency or higher authority to receive the protections of the WPA.” Brown v. Mayor of Detroit, 478 Mich. 589, 591, 734 N.W.2d 514, 515 (2007); see also Debano-Griffin v. Lake Cnty., 486 Mich. 938, 938, 782 N.W.2d 502 (2010) (“Reporting a ‘suspected violation of a law’ is a protected activity.”). Moreover, the Joint Commission likely qualifies as well. The Centers for Medicare and Medicaid Services (CMS) is a federal agency within the United States Department of Health and Human Services that administers the Medicare program. CMS regulates all laboratory testing (except research) performed on humans in the United States through authority conferred by the Clinical Laboratory Improvement Amendments (CLIA), 42 U.S.C. § 263a, and its implementing regulations. All clinical laboratories must be certified to receive Medicare or Medicaid payments. Wade Pediatrics v. Dep’t of Health and Human Servs., 567 F.3d 1202, 1203 (10th Cir. 2009). CMS has determined that accreditation by private “accreditation organizations” may satisfy a clinical laboratory’s obligation to meet applicable CLIA program requirements if certain conditions are met. 42 C.F.R. § 493.551(a). One such condition is that “[t]he requirements of the accreditation organization . . . are equal to, or more stringent than, the CLIA condition-level requirements . . . .” 42 C.F.R. § 493.551(a)(1). The Joint Commission is one such private accreditation organization. It has administered a program for the accreditation of hospital laboratories since 1979. In their Third Amended Complaint, the plaintiffs allege that they reported violations of the Joint Commission standard QC.1.140; 42 C.F.R. § 493.1252(d); 21 C.F.R. § 610.53; and 21 C.F.R. § 809.10 to the following individuals and entities: (a) Hurley Medical Center Corporate Compliance -25- on January 22 and 23, 2010; (b) Joint Commission on January 22, 2010; (c) Sheila Moore, administrative laboratory director on January 21, 2010; (d) Emily Mahank, laboratory service coordinator on January 19, 2010 and January 20, 2010; (e) Dr. Michael Boucree, chief quality officer on January 25, 2010; (f) Jamal Ghani, senior vice-president of operations on February 25, 2010; (g) David Szczepanski, director of labor relations, “on or about 1/23/10-1/30/10”; (h) Elizabeth Henkel, human resources department, “on or about 1/23/10-1/30/10”; (i) Aaron Moses, laboratory coordinator, on January 23, 2010; and (j) HMC’s Board of Managers on February 20, 2010. Plaintiff Hilden also argues that her complaint to the hospital public safety department that she was being harassed by management constitutes protected conduct. She says that the second notice of layoff is the second “smoking gun” establishing illegal motivation by the defendants in firing her. The notice states, “On January 22, 2010 you filed a false report related to violence in the workplace. You are hereby terminated for gross misconduct related to violation of Employee Conduct Rule #16 and Employee Conduct Rule #32 as outlined in your suspension.” Resp. to Mot. Summ. J., Ex. 9, May 4, 2010 Notice of Layoff. The plaintiffs insist that the law allows Hilden to file a complaint against a co-employee and firing her for it constitutes a violation of the WPA. The plaintiffs also argue that whether Hilden filed the allegedly false report in bad faith is a jury question, not one the Court can answer. 1. Complaints regarding expired transport media With respect to the complaints about the use of expired transport media, the defendants correctly argue that the plaintiffs have furnished no evidence of a causal connection between their protected activity and their adverse employment actions. The plaintiffs argue that Hilden’s notices -26- of layoff, which states, “Your behavior on 1/21/10 amounted to clear insubordination when you discarded culture material and cancelled tests that were set up by other Medical Technologist,” Mot. Summ. J., Ex. 18, First Notice of Layoff, is proof that she was fired for engaging in protected activity, namely discarding outdated specimens and canceling tests. As noted above, the plaintiffs’ contention that discarding specimens and canceling tests constituted protected activity is devoid of merit. The WPA protects employees that report, or are about to report, a violation of a law or regulation to public body, unless the employee knows that the report is false. Discarding specimens cannot be equated with making a report. Not only can discarding specimens not be considered protected activity, Hilden, when given the chance to “report” her activities, did not tell Moore that she had destroyed swabs and culture plates during their early-morning meeting on January 21, 2010. Moreover, two pieces of evidence weigh strongly against the plaintiffs’ attempt to establish causation. First, when both plaintiffs met with Moore on January 21, 2010 to discuss their concerns, Moore immediately spoke with Tewari and instructed him to contact a Joint Commission standards interpreter. Mahank and Moore, the only people the plaintiffs spoke with about their concerns prior to receiving disciplinary actions, were receptive to the plaintiffs’ reports and immediately took action to discover whether Tewari’s directive contravened any rules or regulations. Hilden and Flynn likely would not have suffered adverse employment actions if they simply had reported what they believed was a violation of law. Moore did not make the decision to terminate Hilden’s employment until she discovered that Hilden had discarded two swabs and culture media after Tewari’s January 20 directive. Second, Hilden called Mahank in the afternoon of January 22, 2010, and asked if she was going to receive discipline. Her phone call indicates that she knew she had done something wrong. -27- Her good working relationship with Tewari makes that even more clear. Hilden testified that she had an acceptable working relationship with Tewari, she felt comfortable giving him ideas and suggestions, and he had never responded negatively to her. Mot. Summ. J., Ex. 4, Hilden dep. at 29. The plaintiffs do point to a lunchtime conversation between Moore and Huff during which Moore bragged about firing Hilden. That conversation certainly suggests that a personality conflict existed between Moore and Hilden, but it does nothing to establish that Moore fired Hilden because of her decision to report a suspected violation of any law, rule, or regulation. The plaintiffs argue that they can establish a causal connection with evidence of displeasure, hostility, or anger towards the plaintiffs. The Michigan Court of Appeals has found that a close temporal relationship, combined with “clear displeasure with the protected activity,” was enough to establish causation, West v. General Motors Corp., 469 Mich. 177, 186-87, 665 N.W.2d 468, 473 (2003), but the plaintiffs do not have such evidence in this case. The “anger” (perhaps an exaggerated characterization of Moore’s disposition that evening) the plaintiffs point to stems from Hilden’s refusal to speak with Moore, not the plaintiffs’ comments regarding Tewari’s directive. Hilden thought she might be in trouble, and she became irrational when she came into work on January 22, 2010 and found Moore waiting to speak with her. Hilden refused to speak with Moore without a union representative despite the fact that one was not needed to place her on administrative leave. Hilden fled to the locker room and locked herself in the bathroom. Moore entreated Hilden to come out and speak with her, and when that plan failed, she asked the house director to come to the lab to speak with Hilden. Viewing all those facts in the light most favorable to the plaintiffs, as the Court must at this stage of the proceedings, it is not possible to detect an inference that the discipline was motivated -28- at all by complaints the plaintiffs made about the practice of running cultures on specimens sent to the laboratory in expired transport media. 2. Unsafe workplace complaint The events that resulted in Hilden’s violence in the workplace complaint all emerged from management’s efforts to place Hilden on administrative leave. Hilden alleged in that complaint that Moore was stalking her in violation of Michigan Compiled Laws § 750.411(h) and (i). The reported facts, from both Moore and Hilden, do not suggest that Moore was “stalking” Hilden, and the suggestion that she was doing so is bizarre. But the WPA protects an employee’s right to make a complaint, unless “the employee knows that the report is false.” Mich. Comp. Laws § 15.362. Hilden avers that “[she] subjectively, in [her] heart and mind . . . believed that [she] was being stalked and/or assaulted on [January 22, 2010].” Resp. to Mot. Summ. J., Ex. 14, Hilden Aff. ¶ 8. The Unsafe Workplace Complaint does not seem to contain any patently false allegations; it paints a relatively accurate version of the events of January 22, 2010. However, Hilden runs into trouble when one considers the fact that the Unsafe Workplace Complaint does not appear to describe any sort of threatening or harassing behavior. Her allegation seems slightly absurd when one considers that Hilden, when confronted in the PCR, chose to walk by Brooks and Moore and in front of Tewari to use the telephone to call Public Safety when she could have left the lab through the back door to use a different phone. Her telephone call and complaint appear to be more of a calculated, last-ditch effort to save her job and less the response of a frightened employee. But the Court cannot reach that conclusion, as obvious as it may be, without engaging in fact finding. Instead, the obstacle to Hilden’s success in resisting summary judgment on this count is establishing causation. Certainly, the second layoff notice cites Hilden’s complaint as a ground for -29- firing her. But the undisputed fact remains that she was already fired. In Shallal v. Catholic Social Services of Wayne County, the Michigan Supreme Court held that the plaintiff had failed to establish the necessary causal connection because “she knew that she was going to be fired before she confronted her supervisor; thus, she used the information she had about the defendant’s illegal activities as a guise to force the defendant to allow her to keep her job.” 455 Mich. at 615, 566 N.W.2d at 576-77. Similarly, in Wolcott v. Champion International Corp., 691 F. Supp. 1052 (W.D. Mich. 1987), the court granted summary judgment to the defendant where the plaintiff failed to make out prima facie case because the report was filed only after the plaintiff knew he was being fired. In this case, Hilden was apprised of her impending discipline; it was unusual for Moore and Tewari to be at work at 10:30 p.m, and Hilden’s fears were confirmed when Moore asked to speak with her before she started her shift. Hilden was initially discharged for discarding swabs and culture media. The second Notice of Layoff was the completion of a workplace grievance process that ran its course after Hilden’s initial termination. The Court finds, therefore, that the Hilden’s complaint about workplace harassment and the second layoff notice do not support her claimed WPA violation. The defendants are entitled to summary judgment on that count. C. Public policy violation claim Under Michigan law, contracts for an indefinite term of employment are presumed to be at will. Lytle v. Malady, 458 Mich. 153, 163-64, 579 N.W.2d 906, 910 (1998). Thus, an employee “may be terminated for any or for no reason.” Clifford v. Cactus Drilling Corp., 419 Mich. 356, -30- 363, 353 N.W.2d 469, 472 (1984) (Williams, C.J., dissenting). To temper the often harsh rule of “at-will” employment, Michigan courts “have identified specific grounds for termination as being repugnant to a clearly expressed public policy” such that “the employer’s absolute freedom to terminate employment is circumscribed.” Ibid; see also Edelberg v. Leco Corp., 236 Mich. App. 177, 180, 599 N.W.2d 785, 786 (1999); Wiskotoni v. Michigan National Bank-West, 716 F.2d 378, 382 (6th Cir. 1983). The Sixth Circuit explained in Wiskotoni that a public policy termination claim under Michigan law generally rested on one of three grounds: (1) explicit legislative statements prohibiting the discharge of employees who exercise a statutory right or perform a statutory duty, e.g., The Whistleblowers’ Protection Act, Mich. Comp. Laws § 15.362; (2) legislative statements of public policy that imply a cause of action for wrongful termination, e.g., refusal to violate a law in the course of employment; and (3) an implied public policy prohibition of a discharge in retaliation for an employee’s exercise of a legislatively conferred right, e.g., filing of workers’ compensation claims. Wiskotoni, 716 F.2d at 382 (citing Suchodolski v. Michigan Consolidated Gas Co., 412 Mich. 692, 694-95, 316 N.W.2d 710, 711 (1982 ; see also Kimmelman v. Heather Downs Mgmt. Ltd, 278 Mich. App. 569, 573, 753 N.W.2d 265, 268 (2008); Edelberg, 236 Mich. App. at 180, 599 N.W.2d at 786. Public policy claims are not sustainable where there is an “applicable statutory prohibition against discharge in retaliation for the conduct at issue.” Dudewicz v. Norris-Schmid, Inc., 443 Mich. 68, 80, 503 N.W.2d 645, 650 (1993), overruled on other grounds by Brown v. Mayor of Detroit, 478 Mich. 589, 734 N.W.2d 514 (2007). In fact, “[t]he WPA provides the exclusive remedy for . . . a retaliatory discharge” when the employee suffers retaliation for reporting or planning to report a suspected violation of a law, regulation, or rule to a public body. Kendall v. Integrated Interiors, Inc., No. 283494, 2009 WL 3321515, at *2 n.2 (Mich. Ct. App. Oct. 15, 2009) (citing -31- Dudewicz, 443 Mich. at 78-79, 503 N.W.2d at 649-50); see also Allen v. Charter County of Wayne, 192 F. App’x 347, 353 (6th Cir. 2006). Where the WPA is not applicable because, for instance, the employee does not complain to a public body and instead refuses a private employer’s direction to violate the law, see Morrison v. B. Braun Medical, Inc., No. 07-13567, 2008 WL 4287821 (E.D. Mich. Sept. 15, 2008), opinion vacated on reconsideration, 2009 WL 1163988 (E.D. Mich. Apr. 29, 2009), a public policy violation claim may proceed. Such is not the case here. In this case, the plaintiffs reported the suspected violation of a law, rule, or regulation to a public body, thereby triggering the WPA. A public policy claim is not sustainable when the WPA is applicable. Kendall, 2009 WL 3321515, at *2 n.2 (holding that “[t]he WPA . . . preempts common-law public policy claims arising from the same activity.” (citing Dudewicz, 443 Mich. at 78-79, 503 N.W.2d at 649-50 . D. Intentional infliction of emotional distress claim The Michigan Supreme Court has expressed doubt that the state recognizes the tort of intentional infliction of emotional distress. See Smith v. Calvary Christian Church, 462 Mich. 679, 686 n.7, 614 N.W.2d 590, 593 n.7 (2000) (noting that the court “ha[s] not been asked to, and do[es] not, consider whether the tort of intentional infliction of emotional distress exists in Michigan”). To the extent the tort is recognized in Michigan, “a plaintiff must prove the following elements: ‘(1) extreme and outrageous conduct, (2) intent or recklessness, (3) causation, and (4) severe emotional distress.’” Hayley v. Allstate Ins. Co., 262 Mich. App. 571, 577, 686 N.W.2d 273, 276 (2004) (quoting Graham v. Ford, 237 Mich. App. 670, 674, 604 N.W.2d 713, 716 (1999 . “Liability for the intentional infliction of emotional distress has been found only where the conduct complained of has been so outrageous in character, and so extreme in degree, as to go -32- beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community.” Graham, 237 Mich. App. at 674, 604 N.W.2d at 716; see also Brown v. Cassens Transport Co., 546 F.3d 347, 364 (6th Cir. 2008) (finding that fraudulent denial of worker’s compensation benefits did not rise to level of outrageousness required to recover for intentional infliction of emotional distress); Garretson v. City of Madison Heights, 407 F.3d 789, 799 (6th Cir. 2005). Although Michigan law does not allow for the recovery of emotional distress resulting from the breach of an employment contract, Valentine v. General American Credit, Inc., 420 Mich. 256, 263, 362 N.W.2d 628, 631 (1984), a plaintiff may recover for intentional infliction of emotional distress resulting from a retaliatory discharge, Phillips v. Butterball Farms Co., Inc., 448 Mich. 239, 241-42, 531 N.W.2d 144, 144-45 (1995). Nonetheless, the emotional distress experienced by the plaintiff must be severe. Roberts v. Auto-Owners Ins. Co., 422 Mich. 594, 608-09, 374 N.W.2d 905, 911 (1985) (“The law intervenes only where the distress inflicted is so severe that no reasonable man could be expected to endure it.” (quoting Restatement (Second) of Torts § 46, cmt. j . Although a physical manifestation of an emotional injury is not a sine qua non of recovery for intentional infliction of emotional distress, the plaintiff carries a heavier burden to show emotional injury in the absence of physical injury. Id. at 609, 374 N.W.2d at 911 (requiring “more in the way of outrage” in the absence of physical injury) (citation omitted). Perhaps in recognition of the axiom that “[c]omplete emotional tranquility is seldom attainable in this world,” a plaintiff is not entitled to recover damages for intentional infliction of emotional distress where she supplies “no evidence of grief, depression, disruption of life style, or of treatment for anxiety or depression.” Ibid. (quoting Restatement (Second) of Torts § 46, cmt. j). -33- The plaintiffs argue that it is outrageous to fire an employee for following the law and to chase an employee through the halls of Hurley Medical Center, shouting and yelling. The Court does not find that the behavior described by the plaintiff rises to the level of outrageousness required to establish a claim for intentional infliction of emotional distress. It was the plaintiff, after all, who refused to speak with her supervisor that evening, which provoked the efforts to engage in communication. Moore had a legitimate task to perform. The manner in which she undertook that task was not so “atrocious and utterly intolerable in a civilized community.” Graham, 237 Mich. App. at 674, 604 N.W.2d at 716. Moreover, the plaintiff has not shown that she suffered severe emotional distress. She has not offered any evidence — other than her bruised feelings — that she encountered a compensable emotional injury. The defendants are entitled to summary judgment on that claim, as well. III. The plaintiffs have not offered sufficient evidence to establish jury-submissible issues on all the elements of their respective claims. The defendants are entitled to judgement in their favor as a matter of law. Accordingly, it is ORDERED that the defendants’ motion for summary judgment [dkt. #17] is GRANTED. It is further ORDERED that the third amended complaint is DISMISSED WITH PREJUDICE. Date: December 7, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge -34- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 7, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -35-

=== KENYATTA BANTOM v. DTE ENERGY COMPANY ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION KENYATTA BANTOM, Plaintiff, v. DTE ENERGY COMPANY, Case Number 11-13470 Honorable David M. Lawson Defendant. ___________________________________________ / ORDER REMANDING CASE TO WAYNE COUNTY, MICHIGAN CIRCUIT COURT Plaintiff Kenyatta Bantom filed a lawsuit against defendant DTE Energy Company in the Wayne County, Michigan circuit court, alleging retaliatory discharge against public policy, negligent discharge, defamation, and intentional infliction of emotional distress. On August 10, 2011, the defendant removed the action to this Court alleging federal question jurisdiction under 28 U.S.C. § 1331. The complaint contains no federal cause of action, but the defendant contended that the plaintiff’s state law claims are completely preempted by the Labor Management Relations Act, 29 U.S.C. § 185, et seq., and therefore the federal court has exclusive jurisdiction over the action. Because the argument was unconvincing and implicated this Court’s subject matter jurisdiction, the Court ordered the defendant to show cause why the case should not be remanded to state court. The defendant filed its response to the show cause order on September 16, 2011. After reviewing the response, the Court remains convinced that it lacks subject matter jurisdiction. Therefore, the case will be remanded to state court. I. According to the complaint, the plaintiff was an eight-year employee of the defendant, which is a local residential electricity supplier. The plaintiff’s own electrical service was shut off for nonpayment of his electric bill in 2006. The plaintiff alleged that he paid his bill, but his service was not restored promptly, so he reconnected it himself. Apparently, the plaintiff came under investigation by his employer again in 2008, and he was fired for multiple reasons, including theft of “gas” and his act of restoring his own electrical service. The plaintiff’s state court complaint alleges claims for retaliatory discharge against public policy, negligent discharge, defamation, and intentional infliction of emotional distress. The defendant reads the complaint as alleging that the plaintiff was discharged without just cause when the defendant failed to investigate and prove the claims against him, and the defendant discharged him for engaging in union activity. The defendant says that what is really going on here is the plaintiff’s attempt to relitigate a union grievance that was not decided favorably toward him. The defendant explains that the plaintiff was represented by the Trades, Office Professional and Technical and Gas, Local 223 of the Utility Workers Union of America, and the terms and conditions of employment are set out in a collective bargaining agreement (CBA). All of the counts of the complaint arise from the plaintiff’s termination. Therefore, the defendant reasons, to succeed in his case, the plaintiff must rely on and ask the Court to interpret the CBA. However, the plaintiff never mentions in his complaint the union, the CBA, or any union activity. He does not identify any public policy that was violated by his termination. The defendant admits that the plaintiff does not specify what policies and procedures created his expectation of just cause employment. And although the defendant asserts, perhaps correctly, that the plaintiff cannot -2- win his case without relying on the CBA, the plaintiff never references that document or even mentions union activity or unfair labor practices in his complaint. II. As mentioned in the order to show cause, federal district courts are courts of limited jurisdiction, and the burden of establishing jurisdiction rests with the defendant, as the party removing the case and asserting federal jurisdiction. See, e.g., Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); Long v. Bando Mfg. of Am., Inc., 201 F.3d 754, 757 (6th Cir. 2000). “‘[A]ll doubts as to the propriety of removal are resolved in favor of remand.’” Jacada (Europe), Ltd. v. Int’l Mktg. Strategies, Inc., 401 F.3d 701, 704 (6th Cir. 2005) (quoting Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999 , abrogated on other grounds by Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008). Title 28, section 1441(a) of the United States Code permits defendants in civil actions to remove cases originally filed in state courts to federal district courts where the district court would have had original jurisdiction. In this case, the defendant contends that original federal jurisdiction exists under 28 U.S.C. § 1331 because the plaintiff’s claims “aris[e] under the Constitution, laws, or treaties of the United States.” However, federal courts use the “well-pleaded complaint” rule to determine “arising under” jurisdiction. Long, 201 F.3d at 758. A claim falls within this Court’s original jurisdiction under 28 U.S.C. § 1331 “only [in] those cases in which a well-pleaded Complaint establishes either that federal law creates the cause of action or that the plaintiff[’]s right to relief necessarily depends on resolution of a substantial question of federal law.” Thornton v. Southwest Detroit Hosp., 895 F.2d 1131, 1133 (6th Cir. 1990) (quoting Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. -3- 1, 27-28 (1983 . “[The well-pleaded complaint] rule provides that ‘federal jurisdiction exists only when a federal question is presented on the face of the plaintiff’s properly pleaded complaint.’” Loftis v. United Parcel Serv., Inc., 342 F.3d 509, 514 (6th Cir. 2003) (quoting Long, 201 F.3d at 758). “[T]he party who brings a suit is master to decide what law he will rely upon.” The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25 (1913). “Since the plaintiff is the ‘master of his complaint,’ the fact that a claim could be stated under federal law does not prevent him from stating it under state law only.” Eastman v. Marine Mechanical Corp., 438 F.3d 544, 550 (6th Cir. 2006) (citing Alexander v. Electronic Data Sys. Corp., 13 F.3d 940, 943 (6th Cir. 1994 . The plaintiff has not asserted a federal cause of action in his complaint. The defendant characterizes the complaint as asserting a claim under section 301 of the Labor Management Relations Act, over which federal courts have exclusive jurisdiction. See 29 U.S.C. § 185(a). The Sixth Circuit has explained: Generally, a state law claim cannot be “recharacterized” as a federal claim for the purpose of removal. [Metro. Life Ins. Co. v.] Taylor, 481 U.S. 58, 63 (1987). Similarly, “a case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption, even if the defense is anticipated in the plaintiff’s complaint, and even if both parties concede that the federal defense is the only question truly at issue.” Caterpillar, 482 U.S. at 393 (citing Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 12 (1983 . However, if an area of the law is “completely preempted,” then the state law claim is displaced by the federal cause of action, and the action is subject to removal. Taylor, 481 U.S. at 63-64; Warner v. Ford Motor Co., 46 F.3d 531, 534 (6th Cir. 1995) (en banc). The rationale undergirding this exception is that where federal preemption is so complete that conflicting state law not only must yield but is effectively extinguished, the only theory of recovery remaining is the federal claim, which takes the place of the state law claim recited in the complaint. See Beneficial Nat. Bank v. Anderson, 539 U.S. 1 (2003) (“When the federal statute completely pre-empts the state-law cause of action, a claim which comes within the scope of that cause of action, even if pleaded in terms of state law, is in reality based on federal law.”); Warner, 46 F.3d at 534. The complaint itself is therefore deemed to state a federal cause of action. -4- Loftis, 342 F.3d at 515. “Causes of action within the scope of section 301 are removable to federal court under the doctrine of complete preemption.” Brittingham v. General Motors Corp., 526 F.3d 272, 277 (6th Cir. 2008) (citing Caterpillar Inc. v. Williams, 482 U.S. 386, 394 (1987 . However, “not every dispute concerning employment, or tangentially involving a provision of a collective-bargaining agreement, is pre-empted by § 301 or other provisions of the federal labor law.” Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 211 (1985). “It is only ‘when resolution of a state-law claim is substantially dependent upon analysis of the terms of an agreement made between the parties in a labor contract, that [the] claim must either be treated as a § 301 claim . . . or dismissed as pre-empted by federal labor-contract law.’” Brittingham, 526 F.3d at 278 (quoting Allis-Chalmers Corp., at 471 U.S. at 220); see also Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 405-06 (1988) (holding that “if the resolution of a state-law claim depends upon the meaning of a collective-bargaining agreement, the application of state law . . . is pre-empted and federal labor-law principles — necessarily uniform throughout the Nation — must be employed to resolve the dispute”). A careful reading of the complaint in this case reveals that the plaintiff relies not at all on the CBA. At least he does not claim to do so. He does not suggest the source of his expectation of just- cause employment except for a cryptic reference to the “[d]efendant’s policies and procedures.” The defendant insists that the only source of such policies could be the CBA, an argument fortified, perhaps, by the allegations that the plaintiff “exercised his rights of free speech and freedom of association by speaking and meeting with other concerned individuals working for Defendant,” Compl. ¶ 27, which conceivably could reference union organizing activity. But a heavy dose of -5- imagination is required to extract from the complaint a claim of unfair labor activity or violation of the CBA. The defendant argues that the plaintiff cannot possibly prevail without relying on the CBA. That may be true, but the plaintiff has not done so in his complaint, and the Court cannot read into the complaint allegations that the plaintiff himself has declined to plead. It may come to pass that the plaintiff will see the need to amend his complaint to include allegations that define an unfair labor practice, or that require interpreting the CBA’s language. See Loftis, 342 F.3d at 515-16. Should that occur, the defendant may have grounds for removal of the action. For the present, however, when viewing the complaint as presently drafted, the Court cannot conclude that resolution of the state law claims asserted would be substantially dependent on the terms of a labor agreement between the parties. III. The complaint does not contain a federal cause of action, and none of the state law causes of action requires resolution of a substantial federal question. The complaint does not make reference to or require the interpretation of a collective bargaining agreement, nor does it otherwise invoke section 301 of the Labor Management Relations Act, and therefore it does not trigger complete preemption. There is no federal question jurisdiction, and therefore the Court has no subject matter jurisdiction. -6- Accordingly, it is ORDERED that the case is REMANDED to the Wayne County, Michigan circuit court. Dated: November 23, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on November 23, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -7-

=== CERTAIN UNDERWRITERS OF LLOYDS, LONDON v. US INDUSTRIAL SERVICES, LLC et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 10-14727 Honorable David M. Lawson CERTAIN UNDERWRITERS OF LLOYDS, LONDON, Plaintiff, v. US INDUSTRIAL SERVICES, LLC, MARIA KATTULA, ROBERT KATTULA, FIFTH THIRD MORTGAGE-MI LLC, FEDERAL NATIONAL MORTGAGE ASSOCIATION, UNITED STATES OF AMERICA, TAJ GRAPHICS ENTERPRISES, LLC, A.T.L. RESIDENTIAL, L.L.C., SAFARI CONSTRUCTION COMPANY, INC., ________________________________________/ Defendants. OPINION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT BY DEFENDANTS FIFTH THIRD MORTGAGE AND FEDERAL NATIONAL MORTGAGE ASSOCIATION AND DENYING MOTION FOR SUMMARY JUDGMENT BY DEFENDANT UNITED STATES OF AMERICA This case was commenced by plaintiff Certain Underwriters of Lloyds, London as an interpleader action, with Lloyds seeking to deposit in Court the proceeds of a hazard insurance policy on commercial real estate that was the subject of foreclosure proceedings at the time the covered loss was incurred. Lloyds asked the Court to determine which of several potential claimants were entitled to insurance proceeds from water damage that occurred at 211 Walnut Street, Suite 1, Rochester, Michigan. The property was owned by Maria Kattula and US Industrial Services, LLC. Fifth Third Mortgage Company held a mortgage on the property. The property was insured, and Fifth Third Mortgage was named as a loss payee in the policy. After the mortgage was recorded, the United States recorded a tax lien against all property of Maria Kattula and US Industrial Services, LLC. Maria Kattula and US Industrial Services, LLC defaulted on the mortgage, and Fifth Third Mortgage purchased the property at the foreclosure sale for less than the total amount of the debt. The day after purchasing the property, Fifth Third Mortgage transferred the property to Federal National Mortgage Association by quitclaim deed. About five months later, during the redemption period, water damage was discovered on the property. The claims of all the claimants save two have been resolved. Currently, Fifth Third Mortgage and Fannie Mae jointly claim the proceeds under both the mortgage and the insurance policy; the United States claims the proceeds under its tax lien. These two remaining groups filed cross motions for summary judgment. The Court heard oral argument on November 8, 2011 and now concludes that although Fifth Third cannot assume loss payee status as an insured because it did not have an interest in the property at the time of the loss, the assignment of rights to insurance proceeds in the mortgage contract both survives foreclosure and is deemed to predate the United States’s tax lien. Therefore, Fifth Third Mortgage and its successor in interest, Federal National Mortgage Association, are entitled to the insurance proceeds up to the unpaid loan balance. The Court will grant Fifth Third Mortgage’s and Federal National Mortgage Association’s motion for summary judgment and deny the United States’s motion for summary judgment. I. The following facts are not in dispute. Maria Kattula acquired commercial property located at 211 Walnut Street, Suite 1, Rochester, Michigan, on January 27, 2006. On the same day, Ms. Kattula granted a $315,000 mortgage to defendant Fifth Third Mortgage-MI, LLC as security for -2- a loan; that mortgage was assigned to defendant Fifth Third Mortgage Company on October 16, 2008 (“Fifth Third Mortgage”). Plaintiff Lloyd’s issued a commercial property hazard insurance policy covering the period between January 27, 2009 and January 27, 2010 to US Industrial Services, LLC and Maria Kattula. The insurance policy provided a $500,000 liability limit for property damage, subject to a $1,000 deductible, and a $42,000 limit for business income loss, including rental value. The policy named Fifth Third Mortgage as a loss payee. The Loss Payable Provision of the policy reads: C. LENDER’S LOSS PAYABLE 1. The Loss Payee shown in the Schedule or in the declarations is a creditor, including a mortgageholder or trustee, whose interest in Covered Property is established by such written instruments as: a. Warehouse receipts; b. A contract for deed; c. Bills of lading; d. Financing statements; or e. Mortgages, deeds of trust, or security agreements. 2. For Covered Property in which both you [the insured] and a Loss Payee have an insurable interest: a. We will pay for covered loss or damage to each Loss Payee in their order of precedence, as interests may appear. b. The Loss Payee has the right to receive loss payment even if the Loss Payee has started foreclosure or similar action on the Covered Property. c. If we deny your claim because of your acts or because you have failed to comply with the terms of the Coverage Part, the Loss Payee will still have the right to receive loss payment if the Loss Payee: (1) Pays any premium due under this Coverage Part at our request if you have failed to do so; (2) Submits a signed, sworn proof of loss within 60 days after receiving notice from us of your failure to do so; and (3) Has notified us of any change in ownership, occupancy, or substantial change in risk known to the Loss Payee. All of the terms of this Coverage Part will then apply directly to the Loss Payee. d. If we pay the Loss Payee for any loss or damage and deny payment to you because of your acts or because you have failed to comply with the terms of this Coverage Part: (1) The Loss Payee’s rights will be transferred to us to the extent of the amount we pay; and -3- (2) The Loss Payee’s rights to recover the full amount of the Loss Payee’s claim will not be impaired. At our option, we may pay to the Loss Payee the whole principal on the debt plus any accrued interest. In this event, you will pay your remaining debt to us. Def. Fifth Third’s Mot. for Summ. J., Ex. C. On February 4, 2008, a Notice of Federal Tax Lien against Robert and Maria Kattula was recorded, and on March 25, 2008, Notices of Federal Tax Lien against US Industrial Service, LLC and Maria Kattula as alter-egos, nominees, or transferees of Robert Kattula were recorded. As of June 22, 2009, the total amount claimed to be outstanding on the mortgage loan for the property was $340,521.61. The loan went into default, and Fifth Third Mortgage foreclosed on the mortgage and purchased the property at the sheriff’s sale on August 11, 2009 for $254,375. The next day, August 12, 2009, Fifth Third Mortgage conveyed the property to defendant Federal National Mortgage Association (“Fannie Mae”) by quitclaim deed. The sixth-month redemption period expired on February 11, 2010; Maria Kattula did not redeem the property during that period. On approximately January 4, 2010, about one month prior to the expiration of the statutory redemption period, the property suffered water damage. An insurance adjuster assigned by Lloyd’s recommended a payment of $84,311.61 for that damage, and the plaintiff agreed to tender that amount to court. After a construction lien was satisfied with the consent of all parties, $65,811.62 in insurance proceeds remain. Fifth Third Mortgage and Fannie Mae (collectively the “Fifth Third defendants”) and the United States have claimed entitlement to the insurance proceeds and have filed cross motions for summary judgment. II. A motion for summary judgment under Federal Rule of Civil Procedure 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all -4- reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics and Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 587 (1986 . Thus a factual dispute which “is merely colorable or is not significantly probative” will not defeat a motion for summary judgment which is properly supported. Kraft v. United States, 991 F.2d 292, 296 (6th Cir. 1993) (quoting Anderson, 477 U.S. at 249-50); see also Int’l Union, United Auto., Aerospace and Agr. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999). -5- Neither party suggests that there are material facts in dispute. Summary judgment under Rule 56, therefore, is a useful method of addressing an issue when the parties agree, as here, that there are no material facts in dispute and “the sole question at issue [is] a question of law.” United States v. Donovan, 348 F.3d 509, 511 (6th Cir. 2003); see also Wachovia Bank v. Watters, 431 F.3d 556, 559 (6th Cir. 2005); Progressive Corp. and Subsidiaries v. United States, 970 F.2d 188, 190-91 (6th Cir. 1992). The Fifth Third defendants argue first that the insurance policy names Fifth Third Mortgage as the loss payee, which, according to the policy terms, gives it the right to insurance proceeds as a result of damage that occurred after the foreclosure sale but before the redemption period expired. Second, the Fifth Third defendants argue that the mortgage contract governs the allocation of insurance proceeds and provides that rights to insurance proceeds after sale go to the lender. Third, the Fifth Third defendants argue that at the time of the damage to the property, the United States’s lien attached only to the property of the taxpayer, which consisted of nothing more than the right to redeem from foreclosure sale, and thus the United States was not entitled to insurance proceeds. The United States acknowledge that Fifth Third Mortgage was a loss payee to the insurance policy, but it insists that Fifth Third Mortgage’s claim as a loss payee did not survive the foreclosure sale or the conveyance to Fannie Mae by quitclaim deed. In making that point, the United States characterizes the loss payment provision as an “ordinary mortgage clause,” which, unlike a “standard mortgage clause,” does not provide protection to the mortgagee after a foreclosure sale. The United States also contends that because a mortgage is extinguished at the time of the foreclosure sale, any rights Fifth Third claims thereunder are a nullity as well. Finally, the United States argues that the tax lien attached to the insurance proceeds as well as the real property, and -6- because the insurers have a responsibility to pay the insureds, the tax lien attached to those funds and has priority over all other claims. A. Fifth Third defendants’ rights under the insurance policy The general rule is that federal law governs the priority of tax liens that compete with other claims to property, Aquilino v. United States, 363 U.S. 509, 513-14 (1960), but state law defines the nature of the property interest to which the lien attaches, United States v. Brosnan, 363 U.S. 237, 240 (1960). The Fifth Third defendants contend their interest in the insurance proceeds derives from the insurance contract itself, which is a question that must be resolved under Michigan law. In determining entitlement to insurance benefits, Michigan courts examine the language of the insurance policy and interpret it according to Michigan’s principles of contract construction. Singer v. American States Ins., 245 Mich. App. 370, 374, 631 N.W.2d 34, 37 (2001) (citing Michigan Millers Mutual Ins. Co. v. Bronson Plating Co., 445 Mich. 558, 567, 519 N.W.2d 864, 868 (1994 . “An insurance contract must be read as a whole and meaning given to all terms.” Ibid. (citing Auto Owners Ins. Co. v. Churchman, 440 Mich. 560, 566, 489 N.W.2d 431, 434 (1992 . “The language of the contract is to be given its ordinary, plain meaning and technical, constrained constructions should be avoided.” Ibid. (citing Bianchi v. Automobile Club of Michigan, 437 Mich. 65, 71, n.1, 467 N.W.2d 17, 20 n.1 (1991); Royce v. Citizens Ins. Co., 219 Mich. App. 537, 542, 557 N.W.2d 144, 147 (1996). There is no question that Fifth Third Mortgage is a loss payee on the hazard insurance policy that covered the premises. But there are two types of loss payable clauses in insurance policies that protect lienholders. Foremost Ins. Co. v. Allstate Ins. Co., 439 Mich. 378, 383, 486 N.W.2d 600, 602 (1992). The first, an ordinary loss payable clause, “directs the insurer to pay the proceeds of -7- the policy to the lienholder, as its interest may appear, before the insured receives payment on the policy.” Ibid. That type of clause does not create a contract between the lienholder and the insurer, and a breach of the insurance conditions by the insured (such as the failure to pay the premium, or failure to secure the premises after the loss) would prevent recovery by the lienholder. Ibid. The second type of loss payable clause, the standard mortgage clause, provides that the lienholder is not subject to the defenses available to the insurer against the insured. Id. at 384, 486 N.W.2d at 602-03. A loss payable clause has been found to be a standard mortgage clause when it furnishes protection beyond that provided by an ordinary mortgage clause; for example, when it provides protection even if the mortgagor fails to comply with policy conditions. Boyd v. General Motors Acceptance Corp., 162 Mich. App. 446, 457-58, 413 N.W.2d 683, 688 (1987), overruled on other grounds by Foremost Ins. Co., 439 Mich. at 381, 486 N.W.2d at 601; see also 3 Lee R. Russ, Couch on Insurance, § 65:8 (“[T]he so-called ‘standard’ or ‘union’ mortgage clause . . . provides that the mortgagee shall be protected against loss from any act or neglect of the mortgagor . . . .”). The United States argues that the loss payable provision in Lloyd’s insurance contract is an ordinary mortgage clause. The Court disagrees. One hallmark of a standard mortgage clause under Michigan law is that it provides greater protection to mortgagees than to mortgagors. Standard mortgage clauses typically state that a mortgagee can collect insurance proceeds even where a mortgagor cannot, such as in cases where damage is caused by the mortgagor’s acts or neglect. See Boyd, 162 Mich. App. at 457-58, 413 Mich. at 688. The Loss Payable provision in the Lloyd’s policy here plainly grants Fifth Third Mortgage greater protection than it provided to the mortgagors under the policy. The policy language, quoted above, states that the Loss Payee has a right to receive payment even if the insurer denies the mortgagor’s claim “because of [the mortgagor’s] acts -8- or because [the mortgagor] ha[s] failed to comply with the terms of the coverage part.” Def. Fifth Third’s Mot. for Summ. J., Ex. C. That term protects Fifth Third Mortgage even when the mortgagors could not recover under the policy. Therefore, Michigan courts would interpret the Loss Payable provision as a standard mortgage clause. Because the Loss Payable provision is a standard mortgage clause, and Fifth Third’s rights under the insurance policy are not dependent on the property owner’s rights thereunder, it follows that Fifth Third’s right to the insurance proceeds extended beyond the foreclosure sale. It is well- settled law in Michigan that a Loss Payable provision containing a standard mortgage clause constitutes a separate contract between the insurer and mortgagee that is not subject to most of the defenses an insurer might have against a mortgagor. Citizens State Bank of Clare v. State Mut. Rodded Fire Ins. Co. of Mich., 276 Mich. 62, 67, 267 N.W.2d 785, 787 (1936); Pink v. Smith, 281 Mich. 107, 111, 274 N.W. 727, 729 (1937); Booker T. Theater Co. v. Great Am. Ins. Co. of N.Y., 369 Mich. 583, 587-88, 120 N.W.2d 776, 777-78 (1963). “Thus, even in cases where the mortgagee . . . has become the fee owner of the insured property through foreclosure . . . the mortgagee . . . is generally held to be entitled to coverage under a policy’s standard mortgage clause.” Singer, 245 Mich. App. at 379-80, 631 N.W.2d at 40. That coverage generally “will not extend beyond the expiration of the mortgagor’s period of redemption.” Consolidated Mrtg. Corp. v. American Sec. Ins. Co., 69 Mich. App. 251, 259, 244 N.W.2d 434, 438 (1976). But Michigan courts “do not think it is an unfair burden upon the insurer to continue coverage at homeowner’s rates as long as there was a possibility that the mortgagor would redeem the property.” Id. at 257, 244 N.W.2d at 437. -9- It is quite clear that the water damage on the property in this case occurred before the mortgagor’s right of redemption expired, and therefore the Loss Payable provision still provided rights to the mortgagee. The wrinkle in this case derives from Fifth Third Mortgage’s conveyance of its rights in the property to Fannie Mae after the foreclosure sale but before the loss occurred. Fifth Third asserted at oral argument that the quitclaim deed was inconsequential because Fannie Mae did not acquire any rights under the quitclaim deed until the sheriff’s deed ripened into full title when the redemption period expired. It may be true that Fannie Mae’s right to fee title was inchoate while the redemption period was running, but it does not change the fact that the quitclaim deed was a conveyance that divested Fifth Third Mortgage of any rights in the property it did have at the time it tendered the deed. It is well-settled law in Michigan that a quitclaim deed “conveys a grantor’s complete interest or claim in certain real property . . . .” Michigan Dept. of Nat. Res. v. Carmody-Lahti Real Estate, Inc., 472 Mich. 359, 377-78, 699 N.W.2d 272, 283 (2005); see also Roddy v. Roddy, 342 Mich. 66, 69, 68 N.W.2d 762, 764 (1955); Doelle v. Read, 329 Mich. 655, 657, 45 N.W.2d 422, 423 (1951). Michigan courts have held that “if the mortgagor conveys real property to a stranger, a new contract of insurance must be negotiated or the insurer must consent to an assignment. It is clear, therefore, that failure on the part of the mortgagee to give notice to the insurer of a ‘change in ownership’ under such circumstances will render the insurance policy inoperative . . . [I]n construing the Standard Mortgage Clause, courts have generally held that a transfer of title to a ‘stranger’ without giving notice to the insurer will invalidate the policy.” Consolidated Mrtg. Corp., 69 Mich. App. at 256-577, 244 N.W.2d at 437. See also Ornatowski v. National Liberty Ins. Co. of Am., 290 Mich. 241, 246-67, 281 N.W. 449, 451 (1939). -10- More importantly, when Fifth Third quitclaimed its interest in the property to Fannie Mae, it no longer had an insurable interest in the property that would incur water damage five months later. Generally, in order to recover insurance proceeds, the claimant must have an insurable interest at the time of loss, and the existence of an insurable interest must be determined as of the date of loss. See Am. Jur. Insurance § 942. Moreover, the Loss Payable provision states that Lloyd’s “will pay for covered loss or damage to each Loss Payee in their order or precedence, as interests may appear.” Def. Fifth Third’s Mot. for Summ. J. Ex. C (emphasis added). As a general rule, the right of parties to insurance proceeds is fixed at the time of the loss. Booker T. Theater Co. v. Great Am. Ins. Co. of New York, 369 Mich. 583, 591, 120 N.W.2d 776, 779 (1963). When the mortgaged property was damaged by water, Fifth Third Mortgage did not hold any interest in the property; it had quitclaimed whatever interest it had to Fannie Mae. Because Fifth Third Mortgage did not have an interest in the property, and because an insurable interest must exist at the time of loss, Fifth Third Mortgage is not entitled to insurance proceeds under the Loss Payable provision. B. Fifth Third defendants’ rights under the mortgage The mortgage contained an assignment of certain rights to the mortgagee, including certain rights to insurance proceeds. To determine whether Fifth Third Mortgage is entitled to the insurance proceeds under the assignment of rights in the mortgage, the Court must address three questions. First, did Maria Kattula and US Industrial Services, LLC (the mortgagors) have an insurable interest in the property at the time of the water damage so that they would have been able to collect insurance proceeds, if they had not assigned those rights? Second, did the mortgage contract -11- between Fifth Third Mortgage and the mortgagors transfer that interest to Fifth Third? Third, does the government’s tax lien take priority over Fifth Third’s interest in insurance proceeds? 1. The mortgagors’ insurable interest Under Michigan law, a mortgagor of a property has an insurable interest in that property while foreclosure proceedings are underway. A mortgagee also has an insurable interest during the redemption period. Perkins v. Century Insurance Company, Limited, of Edinburgh, Scotland, 303 Mich. 679, 682, 7 N.W.2d 106, 107 (1942); cf. Consolidated Mrtg. Corp., 69 Mich. App. at 257, 244 N.W.2d at 437 (“We do not think it is an unfair burden upon the insurer to continue coverage at homeowner’s rates as long as there was a possibility that the mortgagor would redeem the property.”). The mortgagors had a right to redeem the property for six months after the date of the foreclosure sale. Mich. Comp. Laws § 125.1449j(4). The parties do not dispute that the damage occurred during the redemption period, while the mortgagors had a right to redeem the property. Therefore, under Michigan law, the mortgagors had an insurable interest in the property at the time the damage occurred. 2. Transfer of mortgagors’ interests in insurance proceeds Second, the Fifth Third defendants contend that the mortgage language quoted above explicitly states that in the event of a foreclosure, the mortgagors’ right to insurance proceeds are assigned to the mortgagee. The United States responds that even if the mortgage says that, the mortgage was extinguished by the foreclosure sale, the mortgage does not survive as a lien, and the government’s tax liens have priority over Fifth Third’s contract claim. Both parties cite Emmons -12- v. Lake States Insurance Company, 193 Mich. App. 460, 484 N.W.2d 712 (1992), in their discussion of whether the assignment of the insurance proceeds in the mortgage survived the foreclosure sale. In Emmons, the Michigan Court of Appeals examined an assignment clause that was similar in most respects as the one in Lloyd’s insurance policy. The mortgaged property in that case was damaged by fire before the foreclosure sale. The court found that the assignment clause “created an equitable assignment of a future right. In equity, a present assignment of money having a potential existence but not yet due will operate on the fund as soon as it is acquired.” Emmons, 193 Mich. App. at 464, 484 N.W.2d at 714. Significantly, the court held that “[t]he assignment was collateral security for the mortgage debt.” Ibid. The court found that “the assignment survived foreclosure” but “the debt did not.” Ibid. The court held that “the bank’s interest in the insurance proceeds vested at the time of the fire,” but because the bank had purchased the property at a foreclosure sale for an amount equal to the amount remaining on the mortgage, the bank’s interests in the insurance proceeds “expired upon satisfaction of the debt at the foreclosure sale.” Ibid. For the purpose of the present case, the key holding in Emmons is that the assignment in the mortgage of the insurance proceeds amounted to collateral security for the mortgage debt, and that assignment transcended the foreclosure sale. The point of distinction with the present case is that here, a portion of the debt — one that exceeds the amount of available insurance proceeds — remains after the foreclosure sale. The concern animating the holding in Emmons that the bank was not entitled to assigned insurance proceeds appears to be that allowing both assignment of insurance proceeds and a full-debt bid at the foreclosure sale would bestow on a mortgagee a double recovery. However, that concern is absent here: it is undisputed that Fifth Third purchased the property at the -13- foreclosure sale for $86,146.61 less than the total debt remaining on the property, and the insurance proceeds that remain total $65,811.82. The United States argues that the pronouncement in Emmons that the assignment survives the foreclosure sale is obiter dictum. The Court disagrees. That determination was necessary to the decision in the case. Moreover, the United States has not cited any contradictory authority. This Court believes that Michigan courts would hold that an assignment of an interest in the insurance proceeds contained in a mortgage would survive a foreclosure sale, and therefore Fifth Third is entitled to the insurance proceeds under the assignment clause in the mortgage, because the insurance proceeds are collateral security for the debt otherwise secured by the undamaged property, and the debt remains unpaid. That right in turn was assignable to Fannie Mae. The United States attempts to distinguish Emmons because the foreclosure sale in that case came after the fire loss. However, that court did not state that the bank’s interest must have vested prior to the sale in order for the assignment to survive foreclosure. Instead, it seems to suggest the opposite: that the assignment clause functions as collateral security on the debt that may be collected in the event that, as here, the debt was not satisfied at the foreclosure sale. And it bears repeating that the court specifically found that the assignment survived foreclosure. Emmons, 193 Mich. App. at 464, 484 N.W.2d at 714. Here, because the mortgagors had an insurable interest in the property at the time of the damage, the right to insurance proceeds was assigned to Fifth Third by the mortgage contract to act as collateral security for the debt. Because the foreclosure sale did not provide full satisfaction of the debt, the assignment in the mortgage survived the sale. Fifth Third, therefore, had a right to the insurance proceeds under the mortgage contract as long as the mortgagors had an insurable interest in the property. -14- 3. Priority of the tax lien The United States’s tax lien attached to all property of Maria Kattula and US Industrial Services, LLC, including property acquired after the attachment of the tax lien. 26 U.S.C. § 6321; Glass City Bank of Jeanette, Pennsylvania v. United States, 326 U.S. 265, 268-69 (1945). It is undisputed that the mortgage was recorded before the United States’s tax lien, and therefore Fifth Third’s security interest in the property had priority over the tax lien. United States By and Through I.R.S. v. McDermott, 507 U.S. 447, 449 (1993) (“Federal tax liens do not automatically have priority over all other liens. Absent provision to the contrary, priority for purposes of federal law is governed by the common law principle that ‘the first in time is the first in right.’” (internal citation omitted . The remaining question is whether the assignment of insurance proceeds predated the tax lien. The United States argues that the assignment is a contract right that did not arise until the loss occurred, and the tax lien preceded the loss. But that argument fails to recognize that the assignment of insurance proceeds served as collateral on the original debt. When viewed in that light, it is logical that the assignment occurred at the same time as the original security lien — represented by the mortgage — was recorded. Therefore, even though no loss had occurred yet, Fifth Third’s interest in the insurance proceeds has priority over the United States’s interest in the proceeds. That conclusion is consistent with Michigan statutory law as well. Michigan’s version of Article 9 of the Uniform Commercial Code suggests that the Fifth Third defendants have a right to insurance proceeds deriving from the mortgaged property. “The attachment of a security interest in collateral gives the secured party the right to proceeds provided by section 9315. . . .” Mich. Comp. Laws § 440.9203(6). The statute defines “proceeds” to include, “[t]o the extent of the value -15- of the collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of . . . damage to, the collateral.” Mich. Comp. Laws § 440.9102(lll)(iv). It is undisputed that Fifth Third had a security interest in the collateral — that is, the property — that attached prior to the United States’s tax lien. Warner v. Tarver, 158 Mich. App. 593, 405 N.W.2d 109 (1986), also supports that conclusion. In that case, the defendant made an insurance claim for damage to the property, which initially was denied by the insurance company; but Tarver, the owner of the insured business, hired an attorney who obtained a jury verdict in the his favor and against the insurance company. However, before Tarver collected the insurance proceeds, the Warners, plaintiffs in this case, filed an action to foreclose on a land contract and a secured note that they held on the defendant’s business property; they asserted rights they had in the insurance proceeds. Several other secured creditors also emerged to claim a share of the proceeds. Defendant Tarver’s attorney argued that he had an attorney’s lien that was superior to the other creditors. The court found that “the [plaintiff’s] security interests in the real property continue[d] in the insurance proceeds which result from the destruction of the real property.” Warner, 158 Mich. App. at 597, 405 N.W.2d at 111. The court found that under the general rule, the plaintiffs’ security interest was superior to the attorney’s lien because it was first in time. Id. at 598, 112. Similarly, in this case, the security interest in the property that eventually was damaged by water extended to the insurance proceeds on that property. Finally, as the Fifth Third defendants note, the purpose of insurance is to compensate an owner for losses to his property. The rule that an insurable interest must exist at the time of loss for the insurance contract to be effective is intended to guard against the moral hazard that arises when the beneficiary of an insurance policy has no incentive to prevent and guard against damage to the -16- covered property. In this case, Fannie Mae had an incentive to keep the property in good condition to preserve its resale value. If Fifth Third Mortgage had not transferred its interest in the property to Fannie Mae, it would have had a similar incentive. In fact, but for Fifth Third’s ill-timed transfer to Fannie Mae, it is beyond dispute that Fifth Third Mortgage would have been entitled to the insurance proceeds under both the mortgage and the Loss Payable provision. There likewise is no doubt that Maria Kattula and US Industrial Services, LLC would not have been entitled to those proceeds. By its tax lien, the United States would have an interest in the property of Maria Kattula and US Industrial Services, LLC, but that property does not include the insurance proceeds they assigned to the mortgagee when they first executed the mortgage. III. Although the Fifth Third defendants do not have rights to the proceeds stemming from the Loss Payable language in Lloyd’s insurance policy, the Fifth Third defendants, particularly Fannie Mae, are entitled to the insurance proceeds under the mortgage contract. Accordingly, it is ORDERED that the motion for summary judgment by defendants Fifth Third Mortgage and Federal National Mortgage Association [dkt. #29] is GRANTED. It is further ORDERED that the motion for summary judgment by defendant United States of America [dkt. #31] is DENIED. -17- It is further ORDERED that defendants Fifth Third Mortgage and Federal National Mortgage Association are entitled to the remaining funds deposited in the Court’s registry by plaintiff Certain Underwriters of Lloyds, London. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: November 10, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on November 10, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -18-

=== Laborers Pension Trust Fund-Detroit and Vicinity, et. al. v. Interior Exterior Specialists Company et.al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number: 04-74514 Honorable David M. Lawson LABORERS PENSION TRUST FUND- DETROIT AND VICINITY, LABORERS VACATION AND HOLIDAY TRUST FUND - DETROIT AND VICINITY, LABORERS METROPOLITAN DETROIT HEALTH AND WELFARE FUND, LABORERS ANNUITY FUND - DETROIT AND VICINITY, and MICHIGAN LABORERS’ TRAINING FUND, Plaintiffs, v. INTERIOR EXTERIOR SPECIALISTS COMPANY and LLAMAS GROUP CORP., Defendants, and TRUSTEES OF THE PAINTERS UNION DEPOSIT FUND, ________________________________________/ Intervenor. ORDER GRANTING IN PART JOINT MOTION SEEKING JUDICIAL DETERMINATION OF RIGHT TO HELD PAYMENT PURSUANT TO TEMPORARY AGREEMENT, MICHIGAN LAW, AND PARTIES’ TENTATIVE SETTLEMENT AGREEMENT This matter is before the Court on the plaintiffs’ and defendants’ joint motion seeking a judicial determination of their rights to a fund of money identified by the parties as the “Held Payment.” That fund was created under an agreement made by the plaintiffs and defendants to secure payment of a judgment for the plaintiffs that the defendants challenged on appeal. Intervenor Trustees of the Painters Union Deposit Fund (PUDF) obtained a judgment against the defendants in a separate matter and now claims a superior right to the Held Payment. PUDF filed a response in opposition to the joint motion, and the Court heard oral argument on September 12, 2011. The Court now finds that the plaintiffs have a superior right to the Held Payment, which has served as the functional equivalent of a supersedeas bond, and may apply the fund to satisfy their judgment in an amount to be determined by the Court or as agreed by the plaintiffs and defendants, as the case may be. PUDF then has the next priority to any amount remaining of the Held Payment, subject, however, to a reasonable attorney’s fee in favor of the Law Firm of Steven A. Wright, P.C., the attorney for the defendants, whose efforts generated the remainder amount through Wright’s semi- successful appeal. Finally, if any amount would remain thereafter, it would be applied to discharge the balance of Wright’s attorney’s charging lien that remains after the award of the reasonable attorney’s fee. I. Defendants Interior Exterior Specialists Company (IES) and The Llamas Group Corporation (TLG) appealed an adverse money judgment entered against them by this Court in favor of the plaintiffs, following a bench trial in 2008. The plaintiffs, multiemployer benefit plan administrators for the benefit of members of Local 334 of the Laborers International Union of North America, AFL-CIO, alleged in their complaint that the defendants were liable for unpaid fringe benefits and brought suit under section 515 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1145. Defendant IES had signed an opt-in agreement under a collective bargaining agreement with the Union Local, which the Court determined on summary judgment was binding on that defendant from at least April 6, 2000 through May 31, 2006. At trial, the Court found that defendant TLG was liable to the plaintiffs as the alter ego of IES. The Court also rejected IES’s -2- contention that it overpaid its contributions to the plaintiffs by approximately 10,000 man-hours and was entitled to credit for the overpayments. The Court entered judgment in favor of the plaintiffs in the amount of $167,501.34 in unpaid fringe-benefit contributions and $33,500.29 in liquidated damages — totaling $201,001.63. The Court entered a corrected opinion on October 2, 2008. The defendants timely appealed. During the pendency of the defendants’ appeal, the Court amended the judgment to award the plaintiffs attorney’s fees in the amount of $112,500, bringing the total award to $313,501.63. The defendants appealed the judgment to the Sixth Circuit but did not post a supersedeas bond. At the plaintiffs’ request, this Court entered an injunction preventing the defendants from transferring assets while the appeal proceeded. The plaintiffs and defendants thereafter made a formal agreement (The Temporary Agreement) whereby (1) the defendants paid cash over to the plaintiffs (which became the “Held Fund”) totaling $280,035.60, (2) the parties agreed to dissolve the injunction, and (3) the plaintiffs would have the right to the cash payment if the judgment was affirmed on appeal, but would refund all or part of the Held Fund as appropriate if the decision on appeal favored the defendants. The amount of the Held Fund represents the $201,001.63 judgment plus post-judgment interest from September 30, 2008, $112,500 in attorney’s fees, $20,000 as security for attorney’s fees that the plaintiffs may incur on appeal, less credit for $54,294.51 collected by the plaintiffs in partial satisfaction of the judgment. The Held Fund is in the custody of the Sachs Waldman, P.C. Client Trust Account, one of the law firms representing the plaintiffs. The Temporary Agreement was signed on January 15, 2009. In the meantime, on March 18, 2008, PUDF obtained a judgment of $186,781.62 against the defendants in an unrelated matter, Trustees of PUDF v. Interior/Exterior Specialist, Co., No. 05-70110, 2008 WL 724355 (E.D. Mich. -3- Mar. 18, 2008) (Roberts, J.). On February 10, 2009, those parties stipulated to an award of prejudgment interest to PUDF in the amount of $14,098.83, and on April 15, 2009, the parties stipulated to attorney’s fees award to PUDF in the amount of $100,000. On April 7, 2010, the court of appeals affirmed the district court’s judgment. On January 21, 2011, the court awarded PUDF appellate attorney’s fees in the amount of $49,042.50. PUDF has been trying to reach the Held Payment fund to satisfy its own judgment against the defendants. On November 16, 2009, PUDF served the first of several writs of garnishment on Sachs Waldman, PC; to date, PUDF has served 8 such writs upon that law firm. Sachs Waldman generally has denied any obligation under the writs because it believes the Held Payment is not the property of the defendants; instead, it is to be applied to satisfy the judgment entered in this case. On February 5, 2010, attorney Steven Wright and his law firm asserted an attorney’s lien in the amount of $86,508.59 against any and all proceeds, settlement funds, or other amounts that may be owed or become owed to IES and TLG, or any of their officers, subsidiaries, assigns, etc., for legal services rendered in this case. Then on September 8, 2010, the Sixth Circuit decided the appeal and held that this Court erred in concluding that IES remained bound by the labor agreements during the 2003-2006 time period, but otherwise found no error in the Court’s conclusions. The court of appeals held that IES successfully terminated its obligations to pay fringe benefits effective June 1, 2003. Under that holding, IES and TLG remained liable to the plaintiffs, but the court remanded the case to this Court to recalculate the damages owed to the plaintiffs based on the pre-2003 labor activity. The mandate issued on November 16, 2010. -4- On December 14, 2010, the plaintiffs filed a motion contending that recalculating the damages according to the court of appeals’s holding entitled them to a judgment in the amount of $309,441.15, which included $137,606.87 in unpaid benefits, $85,917.14 in interest, and $85,917.14 in double interest. The Court heard oral argument on the plaintiffs’ motion on February 25, 2011 and ordered supplemental briefing on the amount of contributions the Funds claimed were owed under the three Project Labor Agreements referenced in the motion for entry of judgment. The plaintiffs’ motion remains under advisement. In March 2011, the plaintiffs and defendants reached a tentative settlement agreement as to the amount owed after remand from the court of appeals. Although the precise terms of the agreement have not been disclosed to the Court, it appears that most of the Held Fund would be turned over to the plaintiffs and the balance would be paid to Steven Wright in satisfaction of his attorney’s lien. There is no question, however, that the proposed distributions would exhaust the Held Payment fund. On June 9, 2011, this Court granted PUDF’s motion to intervene so that it could argue its contention that it is entitled to the Held Payment and has first priority to it. The issue is framed by the plaintiffs’ and defendants’ joint motion to determine the right to the held payment, to which PUDF has responded. II. The plaintiffs and defendants jointly argue the Temporary Agreement transfers ownership of the Held Payment solely to the plaintiffs in the absence of an agreement or judicial determination to the contrary; therefore, the Held Payment is not property of the defendant to which PUDF’s writs of garnishment may attach. PUDF counters with the contention that the Temporary Agreement is -5- nothing more than a security agreement, and an invalid one at that; and once the court of appeals overturned this Court’s judgment, the plaintiffs no longer had a perfected security interest in the Held Payment. Therefore, PUDF reasons, PUDF obtained a priority interest in the Held Payment when it served its first writ of garnishment on Sachs Waldman, P.C. and became a lien creditor. PUDF believes that its superior position defeats the plaintiffs’ competing claim to the Held Payment and Steven Wright’s attorney’s lien. A. The Temporary Agreement The construction and characterization of the Temporary Agreement is a matter of contract law. Bonfiglio v. Harkema Assocs., Inc., 171 B.R. 245, 249 (E.D. Mich. 1994). State contract law provides the rules of decision. Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 372 (6th Cir. 1998). And the usual rules apply: the first objective is to “honor the intent of the parties,” Rasheed v. Chrysler Corp., 445 Mich. 109, 127 n.28, 517 N.W.2d 19, 29 n.28 (1994); the prime source of that intent is the plain language of the agreement, Wilkie v. Auto-Owners Ins. Co., 469 Mich. 41, 61, 664 N.W.2d 776, 787 (2003); and if the language is “clear and unambiguous,” the Court need look no further, Haywood v. Fowler, 190 Mich. App. 253, 258, 475 N.W.2d 458, 461 (1991). “‘Where the language of the writing is not ambiguous the construction is a question of law for the court, on a consideration of the entire instrument.’” In re Landwehr’s Estate, 286 Mich. 698, 702, 282 N.W. 873, 874 (1938) (quoting Griffin Mfg. Co. v. Mitshkun, 233 Mich. 640, 642, 207 N.W. 814, 816 (1926 . A contract is unambiguous if it “fairly admits of but one interpretation.” Allstate Ins. Co. v. Goldwater, 163 Mich. App. 646, 648-49, 415 N.W.2d 2, 4 (1987). Courts should not read an ambiguity into an agreement where none clearly exists. UAW-GM Human Res. Center -6- v. KSL Recreation Corp., 228 Mich. App. 486, 491, 579 N.W.2d 411, 414 (1998) (citing Smith v. Physicians Health Plan, Inc., 444 Mich. 743, 759, 514 N.W.2d 150, 163 (1994 . The language of the Temporary Agreement describes a clear arrangement to secure the plaintiffs’ right to collect their judgment, exchanging the court-ordered injunction for a fund that would satisfy the judgment when the appeals are finished. The recital specifically states: [I]t is the mutual desire and intention of the parties to this Agreement to have collection efforts on the Judgment ceased until the end of the 6th Circuit Appeal upon the terms and conditions contained in this Agreement, while at the same time providing Plaintiffs with adequate security to satisfy the total amount of the Amended Judgment plus costs and attorney fees incurred by Plaintiffs as consequence of Defendants’ 6th Circuit Appeal. Joint Mot., Ex. A, Temporary Agreement at 2 (emphasis added). Paragraph 1 then calls for the defendants to “wire transfer the sum of $280,035.60 in immediately available funds to Plaintiffs, c/o of their attorneys’ client trust account.” Ibid. Once the funds were received, the parties agreed to file a stipulation dissolving the injunction. Id. ¶ 2. But the wire transfer did not amount to a transfer of ownership of the funds. Instead, the Temporary Agreement stated: 3. Holding Payments Pending Appeal and Disposition Following Appeal. Plaintiffs agree to hold the payment received pursuant to paragraph 1 above (the “Held Payment”) in bank account(s) of their selection and at their sole and absolute discretion and not disburse the same to employees of Defendants until either a final settlement is reached among the Plaintiffs and Defendants or until the entry of a final judgment, order, mandate, decree, or further direction of the Court disposing of the Appeal taken in the 6th Circuit Appeal from the Judgment in this matter from which neither party has a right to appeal (the “Final Judgment”). Following entry of the Final Judgment, in the event (i) the Held Payment is not sufficient to satisfy same, Defendants shall, within ten (10) days of the Final Judgment’s entry, pay Plaintiffs any amounts that remain due and owing pursuant to the Final Judgment; or (ii) the Held Payment exceeds the amount due and owing Plaintiffs pursuant to the Final Judgment, Plaintiffs shall, within ten (10) days of the Final Judgment’s entry, refund to Defendants any excess amounts. Plaintiffs shall be entitled to retain any accrued interest earned on the Held Payment pursuant to the deposit of the Held Payment in the bank account(s) of their selection. Notwithstanding any refund that may be due Defendants following entry of the Final Judgment, and irrespective of the outcome -7- of all appellate proceedings, it is expressly agreed that no interest is to accrue in favor of Defendants or is otherwise payable to Defendants in connection with the Held Payment. Id. ¶ 3. The Agreement also required the defendants to prosecute their appeal diligently, id. ¶ 4, and the plaintiffs to forebear from collection activity, id. ¶ 5. The Agreement defined conditions of default, and allowed the plaintiffs access to the Held Payment if a default occurred. Id. ¶ 7. It is quite evident, therefore, that the parties intended the fund to provide security for the judgment in exchange for forbearance from collection efforts during the appeal, much like a supersedeas bond would provide. The agreement had the hallmarks of a security agreement, not a transfer of ownership. In an attempt to preempt this result, PUDF argues that the Temporary Agreement was not a valid security agreement because it did not evidence an intent to create a security interest on its face. There is no merit to that argument. First, courts are not limited to the four corners of a security agreement when determining whether it is valid. Roan v. Murray, 219 Mich. App. 562, 567, 556 N.W.2d 893, 896 (1996) (citing NBD-Sandusky Bank v. Ritter, 437 Mich. 354, 364-65, 471 N.W.2d 340 (1991 (“[A]lthough a signed writing describing the collateral is required, the other requirements of an ‘agreement’ under the UCC may be established by parol evidence of course of dealings, usage of trade, or course of performance.”). PUDF’s argument that the parties’ intent to create a security interest must be evident on the face of the document has no basis in Michigan law. Second, “[t]he necessary components of a security agreement under the UCC are minimal.” Roan, 219 Mich. App. at 565, 556 N.W.2d at 895. “Indeed, it is highly questionable whether a written security agreement needs to state any terms of the security agreement other than to sufficiently describe the collateral.” Id. at 567, 556 N.W.2d at 896. Third, the intent to “provid[e] Plainitffs -8- with adequate security” is obvious from the agreement. That language is contained in a recital, but the Temporary Agreement expressly states that the recitals are an “essential and integral part of th[e] Agreement.” Aside from using the words “security interest” in the Temporary Agreement, it is difficult to see how the parties could have made any clearer their intent to create a security interest. B. Order of PUDF’s Priority as Lien Creditor A secured creditor has rights to the collateral. However, under Michigan law, a security interest is subordinate to the rights of an individual who becomes a lien creditor before the security interest is perfected. Mich. Comp. Laws § 440.9317(1)(b). A “lien creditor” includes “[a] creditor that has acquired a lien on the property involved by attachment, levy, or the like.” Mich. Comp. Laws § 440.9102(zz)(i). “Michigan follows the general rule that a garnishment lien attaches upon service of the writ [of garnishment].” Michigan Tractor & Machinery Co. v. Elsey, 216 Mich. App 94, 97, 549 N.W.2d 27 (1996). PUDF, therefore, became a lien creditor on November 16, 2009 when it served its first writ of garnishment on Sachs Waldman, P.C. The question, then, is whether the plaintiffs had a valid and perfected security interest in the Held Payment before PUDF became a lien creditor. Once again, state law tells us what is a security interest and when it is perfected. United States v. Dishman Indep. Oil, Inc., 46 F.3d 523, 526 (6th Cir. 1995). A “security interest” is defined as “an interest in personal property or fixtures which secures payment or performance of an obligation.” Mich. Comp. Laws § 440.1201(37). “A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral,” Mich. Comp. Laws § 440.9203(1), and a security interest is enforceable against the debtor and third parties when the following conditions have been satisfied: “[v]alue has been given”; “[t]he debtor has rights in the -9- collateral or the power to transfer rights in the collateral to a secured party”; and “[t]he debtor has authenticated a security agreement that provides a description of the collateral.” Id. § 440.9203(2). A “security agreement” is “an agreement that creates or provides for a security interest.” Mich. Comp. Laws § 440.9102(ttt). A security interest in money is perfected by taking possession. Mich. Comp. Laws § 440.9313(1). There can be no question that the plaintiffs acquired a perfected security interest in the Held Payment when it took possession of the funds on January 16, 2009. Value was given in the form of forebearance from collection activities; the defendants had rights in the funds transferred to the custody of the trust account because they retained the right to recover them if the appeal went their way; and the defendants executed the Temporary Agreement, which this Court has deemed a security agreement. Perfection occurred when the plaintiffs’ attorneys took possession of the funds. All of that took place before PUDF became a lien creditor. PUDF argues, however, that if there was a perfected security interest in the Held Payment, it was extinguished when the Sixth Circuit reversed the Court’s judgment because the reversal nullified any obligation the defendants had to the plaintiffs. That argument is unconvincing. It is true that a security interest exists only as long as the underlying debt or obligation exists. In re Spaniak, 221 B.R. 732, 735 (Bankr. W.D. Mich. 1998). But PUDF’s premise — that the Sixth Circuit decision extinguished the defendants’ debt to the plaintiff — is faulty. PUDF cites a single case as support: Sumner v. General Motors Corp., 245 Mich. App. 653, 664, 633 N.W.2d 1 (2001), which states that a reversal voids the underlying judgment. And that general statement is true, as far as it goes. See Wheeler v. John Deere Co., 935 F.2d 1090 (10th Cir. 1991) (“A judgment reversed by a higher court is ‘without any validity, force or effect, and ought never to have existed.’” -10- (quoting Butler v. Eaton, 141 U.S. 240, 244 (1891); citing Leroy v. City of Houston, 906 F.2d 1068, 1076 (5th Cir. 1990) and Riha v. Int’l Tel. & Tel. Corp., 533 F.2d 1053, 1054 (8th Cir. 1976 ; Hargrave-Thomas v. Yukins, 450 F. Supp. 2d 711, 720-21 (E.D. Mich. 2006). But the Sixth Circuit’s decision was not a complete reversal. It left intact the finding of liability and remanded only for a recalculation of damages. The court of appeals stated: The district court held: (1) that IES had not properly withdrawn from the CBA in 2003, and therefore remained bound by the CBA until 2006; (2) that defendant The Llamas Group Corp. (“TLG”) was the alter ego of IES; (3) that IES/TLG owed the Funds $167,501.34 in unpaid fringe-benefit contributions and $33,500.29 in liquidated damages for the years 2000-2006; and (4) that IES/TLG were not entitled to reimbursement or an offset for alleged overpayments to the Funds. We hold that the district court erred in its conclusion that IES remained bound by the CBA during the 2003-2006 time period, but otherwise find no error in its conclusions. Accordingly, we affirm in part, reverse in part, and remand. Laborers Pension Trust Fund-Detroit & Vicinity v. Interior Exterior Specialists Contsr. Grp., Inc., 394 F. App’x 285, 286 (6th Cir. Sept. 8, 2010) (unpublished). There is no doubt that the defendants were and still are indebted to the plaintiffs for the unpaid fringe-benefit contributions from 2000 to 2003. The Temporary Agreement still provides security for the plaintiffs’ judgment in whatever amount it turns out to be. As mentioned earlier, the Temporary Agreement served as the functional equivalent of a supersedeas bond. The obligation under such bonds remains even after the judgment on appeal is reversed as to the amount of damages. See Beatrice Foods Co. v. New England Printing and Lithographing Co., 930 F.2d 1572 (Fed. Cir. 1991). In Beatrice Foods, the court held that a surety of a supersedeas bond posted to stay execution of a judgment pending appeal remained liable after the court of appeals affirmed the district court’s judgment of liability but remanded to the district court with instructions to recalculate damages. The supersedeas bond in that case, like the -11- Temporary Agreement here, required the principal to prosecute the appeal “to effect.” The court surveyed the case law and reasoned: If, after an appeal, there remains a question of whether any compensable harm was done, then the bond may be allowed to lapse. When the plaintiff has yet to prove any damages, it is unnecessary and unfair to ask the defendant to continue to provide a bond to ensure that money will be available should damages be proven. . . . Conversely, when an appellee has proven that damages are due, and the remand is merely to determine the proper quantum of injury, then it is not unreasonable that the bond remain effective during this recalculation period. Id. at 1576 (citing Tennessee Valley Auth. v. Atlas Mach. & Iron Works, Inc., 803 F.2d 794 (4th Cir. 1986); Rector v. Massachusetts Bonding & Ins. Co., 191 F.2d 329 (D.C. Cir. 1951); and Franklinville Realty Co. v. Arnold Constr. Co., 132 F.2d 828 (5th Cir. 1943 . Similarly, the Sixth Circuit’s decision in this case did not extinguish the defendants’ underlying obligation to the plaintiffs, even though it left the amount of their liability undecided for the time being. Michigan case law supports this conclusion. Roan v. Murray, 219 Mich. App. 562, 567, 556 N.W.2d 893, 896 (1996) (“A security agreement is not required to state the amount of the debt secured.”). A security agreement may create a security interest in the collateral based on an unspecified debt. In the present case, the Sixth Circuit’s decision affirmed the debt but left the amount undetermined. The Temporary Agreement actually considered the possibility that the extent of defendants’ obligation to the plaintiffs might be reduced by the outcome of the defendants’ appeal. The Court finds that the plaintiffs’ security interest in the Held Payment was perfected on January 16, 2009 and remains today. The plaintiffs’ interest in the fund is superior to PUDF’s interest, which did not arise until it became a lien creditor nine months later. -12- C. Attorney’s Lien As noted above, it appears that the plaintiffs and defendants have resolved the amount of damages now owed after remand from the court of appeals, and that amount leaves some of the Held Payment left over. PUDF argues that as a lien creditor, its rights are superior to those of Steven Wrights attorney’s lien, which did not attach until he filed his lien notice on February 5, 2010, almost three months after PUDF became a lien creditor. 1. Charging Lien Under Michigan law, [a]n attorneys’ lien can be one of two kinds: (1) a general, retaining, or possessory lien, or (2) a special, particular, or charging lien. A general or retaining lien is the right to retain possession of all documents, money, or other property of the client until the fee for services is paid. Kysor Industrial Corp. v. D.M. Liquidating Co., 11 Mich. App. 438, 444, 161 N.W.2d 452 (1968). The special or charging lien is an equitable right to have the fees and costs due for services secured out of the judgment or recovery in a particular suit. Id.; 3 Michigan Law & Practice, Attorneys & Counselors, § 161, pp. 486-487. The attorneys’ charging lien creates a lien on a judgment, settlement, or other money recovered as a result of the attorney’s services. Doxtader v. Sivertsen, 183 Mich. App. 812, 815, 455 N.W.2d 437 (1990). George v. Sandor M. Gelman, P.C., 201 Mich. App. 474, 477, 506 N.W.2d 583, 585 (1993). The attorney’s charging lien is a creature of the common law. Kysor, 11 Mich. App. at 445, 161 N.W.2d 452. It is well settled under Michigan law that attorney’s charging liens “automatically attach to funds or a money judgment recovered through the attorney’s services.” George, 201 Mich. App. at 477, 506 N.W.2d at 585. However, an attorney’s lien is subject to any rights in the property that are valid against the client at the time the lien attaches; that is, priority is determined by the first-in-time rule. Warner v. Tarver, 158 Mich. App. 593, 598, 405 N.W.2d 109, 112 (1986); see also Local 58, Int’l Bhd. of Elec. Workers v. G.T. Einstein Electric, Inc., 932 F. Supp. 974, 979 (E.D. Mich. 1996) (quoting Warner). -13- The plaintiffs and defendants argue that Wright’s attorney’s lien has priority over PUDF’s lien because it will be first in time when an amended judgment is entered or a settlement agreement is executed. They contend that Wright’s lien will attach at the moment an amended judgment is entered or a settlement reached so as to entitle the plaintiffs to the new amount of damages. PUDF argues that its lien is first in time because, even assuming that Wright’s attorney’s lien attaches upon a finalized settlement or judgment, no such final judgment or settlement has been entered, and PDUF already enjoys its status as a lien creditor. PUDF’s argument on that score must win the day. By the parties’ own admission, Wright’s lien will not attach until a final settlement or judgment is entered. Therefore, PUDF’s garnishment lien is first in time and has priority. 2. Equitable Lien However, Michigan law acknowledges an attorney’s right to recover fees from the fund created by the attorney’s labors. See Warner v. Tarver, 158 Mich. App. 593, 405 N.W.2d 109 (1986). Therefore, even if Wright’s lien is subordinate to PUDF’s lien, equity demands that Wright be awarded a reasonable attorney’s fee from the portion of the Held Payment to be refunded. In Warner, the Michigan Court of Appeals held that, although an attorney’s lien was subordinate to an earlier perfected security interest, the attorney was entitled to a reasonable attorney’s fee from the proceeds that resulted from the services he rendered. The court reasoned: Plaintiffs . . . were all aware of the substantial efforts of [the defendant] and [his attorney] to collect the insurance proceeds from [the defendant]’s insurer. They knew that any resulting judgment would directly inure to their benefit. They also should have known that [defense counsel] would look to any insurance proceeds he recovered for payment of his fees. Despite this knowledge[] plaintiffs . . . never offered or provided any assistance to [the defendant] or [defense counsel] in their efforts to obtain a judgment for the insurance proceeds. They stood by while [defense counsel] obtained a judgment, and then they declared that the fund had been created solely by them through the existence of their property. -14- However true the vendor’s assertion may be concerning the original creator or source of the fund, it is clear that the insurance proceeds to which their security interests attached were produced by the sole efforts of [defense counsel]. Without [defense counsel]’s efforts there would have been no insurance proceeds to which the land contract vendor’s security interests could attach. In this situation, it would be inequitable to allow the entire fund produced by the efforts of [defense counsel] to be applied toward the payment of the prior security interests and leave [defense counsel] to seek his fee solely from [the defendant]. Id. at 599-600, 405 N.W.2d at 112-13. The court required the secured parties to bear a pro rata share of the reasonable attorney’s fees for defense counsel’s services rendered in securing a judgment for the insurance proceeds. Id. at 601, 405 N.W.2d at 113. The same principle applies here. If not for Steven Wright’s work on appeal, the plaintiffs would be entitled to the entire Held Payment amount, and there would be no remainder at all. PUDF presumably was aware of Wright’s efforts to reverse the trial court judgment in the Sixth Circuit, and PUDF did nothing to assist Wright in those efforts. PUDF’s attempt to distinguish Warner by arguing that there is no judgment or settlement in the case is unconvincing. Credit for the existence of any refunded portion of the Held Payment belongs solely to Wright’s efforts. Therefore, equity demands that Steven Wright be awarded a reasonable attorney’s fee from the refunded portion of the Held Payment. The Court will allow Mr. Wright the opportunity to substantiate the amount of his fees. III. The Court finds that the plaintiffs’ security interest in the Held Payment is superior to PUDF’s interest as a lien creditor, and that, although Steven Wright’s attorney’s charging lien is subordinate to PUDF’s interest in the refunded portion of the Held Payment, Wright is entitled to reasonable a attorney’s fee to be paid from the refunded portion of the Held Payment. -15- Accordingly, it is ORDERED that the plaintiffs’ and defendants’ joint motion seeking judicial determination of right to “held payment” pursuant to a Temporary Agreement, Michigan law and the parties’ tentative settlement agreement [dkt. #248] is GRANTED IN PART. It is further ORDERED that the plaintiffs’ security interest in the Held Payment is superior to PUDF’s interest as a lien creditor. It is further ORDERED that upon execution of a settlement agreement or entry of final judgment, attorney Steven Wright shall be entitled to a reasonable attorney’s fee to be paid from the refunded portion of the Held Payment. It is further ORDERED that the Steven Wright must submit supporting documentation to substantiate the amount attorney’s fees claimed on or before November 15, 2011. If PUDF wishes to contest the amount claimed, it must file its papers in opposition on or before November 22, 2011. It is further ORDERED that the balance of the Held Payment that remains after distributions are made to the plaintiffs and Steven Wright, if any there be, shall be transferred to PUDF in partial satisfaction of its judgment in Case No. 05-70110, and if amounts remain thereafter, they shall be used to satisfy the balance of attorney Wright’s charging lien, and then be tendered to the defendants. Dated: November 2, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge -16- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on November 2, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -17-

=== First American Title Insurance Company v. Bryan Pazdzierz ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 11-10016 Bankr. Number 10-04116 Honorable David M. Lawson IN RE: BRYAN PAZDZIERZ, Debtor, ______________________________________/ FIRST AMERICAN TITLE INSURANCE COMPANY, Appellant, v. BRYAN PAZDZIERZ, ______________________________________/ Appellee. OPINION Appellant First American Title Insurance Company has appealed an order entered by the bankruptcy court granting summary judgment to debtor Bryan Pazdzierz in an adversary proceeding brought by First American to declare certain obligations nondischargeable under 11 U.S.C. § 523(a)(2). First American had furnished commitments to issue title insurance policies to lenders who eventually suffered extensive financial losses as a result of a fraudulent real estate scheme perpetrated by one Randy Saylor. As part of a settlement of the insurance coverage dispute between First American and its putative insured over losses incurred in those fraudulent transactions, the insured assigned its rights in the underlying promissory notes to First American. First American alleges that Pazdzierz, a borrower, made false representations to the lender when he procured his loans, and he otherwise was involved in Saylor’s fraudulent scheme. After Pazdzierz filed for bankruptcy, listing the note obligations among his debts, First American brought the present adversary proceeding to enforce the notes and declare the debts nondischargeable. The bankruptcy court determined that the claims that were assigned to First American sounded in fraud, which are not assignable under Michigan law; First American could not prove an essential element under section 523(a)(2)(B) to establish nondischargeability because it did not itself rely on fraudulent misrepresentations made by the debtor; and First American had no claim against Pazdzierz under a subrogation theory because the original lender’s covered loss was not attributable to Pazdzierz’s conduct. This Court finds that First American’s effort the enforce to promissory notes does not violate the rule that fraud claims are not assignable, First American may assert its assignor’s reliance on Pazdzierz’s misrepresentations to satisfy section 523(a)(2)(A) & (B)(iii), and First American was never subrogated to any claims against Pazdzierz. Therefore, the Court reverses the bankruptcy court’s order granting Pazdzierz’s motion for summary judgment. I. In its amended complaint, First American alleged that in October and November 2007, Brian Pazdzierz borrowed money from Commercial Loan Consultants and I F Key Holdings to purchase four carwash businesses in Detroit, Martin, and Grand Blanc, Michigan. Pazdzierz signed promissory notes for each of the loans, which were secured by real estate mortgages signed by Pazdzierz. The lenders immediately assigned the loans to Bayview Financial, L.L.C. following the closings. First American’s agent, Patriot Title Agency, issued commitments for policies of title insurance to each of the lenders; the mortgage policies were to be underwritten by First American. Patriot Title also arranged for First American to issue closing protection letters (CPLs) to the lenders -2- that indemnified the lenders and their assigns from any loss arising from the fraud or dishonesty of Patriot Title in handling funds. Unbeknownst to First American at the time, Patriot Title was owned by Randy Saylor. Pazdzierz worked for Saylor beginning in July 2007, providing security at Saylor’s nightclub and scouting commercial property offered for sale for another of Saylor’s businesses. Pazdzierz contends that Patriot Title, through Saylor, carried out an elaborate scheme to induce mortgage lenders, who believed they were lending funds to legitimate borrowers, to purchase property in exchange for payments on the notes and first lien mortgage rights on the real estate. Pazdzierz asserts that Saylor carried out this scheme by inducing banks to lend funds to applicants who, in many cases, should never have been approved by the lenders as borrowers. He further alleges that many of the loan applications were altered by Saylor to inflate the net worth of the applicants, and that after the loans were approved, the lenders, following Patriot Title’s instructions, would deposit the loan proceeds into Patriot Title’s escrow account, where they were to be held until closing. Pazdzierz alleges that Saylor withdrew the proceeds from the escrow accounts for his own personal use and neglected to record a number of the mortgages in the names of the lenders. The scheme involved thirty-four properties and caused a loss of over $10,000,000. Pazdzierz acknowledges that the four carwash-purchase loan documents bear his name, although he denies the authenticity of many of the loan documents. First American alleged in the adversary proceeding that Pazdzierz’s loan documents contained several false statements regarding his income and assets. It also alleged that at each loan closing, Pazdzierz executed a settlement statement that falsely represented that he had paid a -3- substantial sum of money at the time of the closing toward the down payment. First American alleged that the original lender relied on those false statements in making the loans. When First American learned of the fraudulent transactions, it contacted Patriot Title and demanded an audit of its files. However, when it arrived to conduct the audit in February of 2008, Patriot Title’s office was abandoned. First American then filed suit against Patriot Title, Randy Saylor, and former Patriot Title employees in the Oakland County, Michigan circuit court, alleging fraud. First American eventually obtained a default judgment against Saylor on February 6, 2009 for $10,172,840. Bayview Financial was unable to foreclose and take title to the mortgaged properties upon default because the mortgages were never recorded. Bayview therefore made a claim to First American pursuant to the commitments and CPLs for the title defects in the real estate that secured the loans. Although First American initially agreed to indemnify Bayview for its losses, it later recanted, citing Bayview’s failure to perform due diligence as to the borrower’s creditworthiness. First American specifically mentioned Pazdzierz in its correspondence with Bayview, noting that his loan application, which contained no information or tax returns, was indicative of the fact that Bayview failed to question information provided by him. Bayview then filed suit against First American for its failure to pay Bayview’s title policy claim. The parties ultimately entered into a confidential settlement whereby Bayview Financial assigned to the plaintiff 75% of its interest in the Notes in exchange for payment of an undisclosed sum of money. After Pazdzierz filed his Chapter 7 bankruptcy petition, First American commenced its adversary proceeding to contest the dischargeability of the debt memorialized by the four promissory -4- notes. Pazdzierz filed a motion to dismiss the complaint, which was denied by the bankruptcy court. Thereafter, Pazdzierz moved for summary judgment, arguing that arguing that under Michigan law, claims grounded upon fraud are non-assignable; First American was precluded from seeking a judgment against it due to Michigan’s prohibition against joint tort liability; and First American’s claims were barred by the doctrine of judicial estoppel. The bankruptcy court granted the motion on November 23, 2010, issuing an opinion from the bench. The court held that plaintiff First American could not satisfy all the elements of 11 U.S.C. § 523(b)(2)(B) because it could not show that the defendant debtor made any representations to First American, or that First American reasonably relied upon any representations made to it by the defendant debtor. The court rejected First American’s argument that the assignment allowed it to stand in the shoes of the original lenders and assert a right to enforce the promissory notes because it seems to have viewed the manner in which First American succeeded to that right as an assignment of a fraud claim, which is forbidden under Michigan law. The court also found significant the fact that the assignment of the notes resulted from a settlement of First American’s obligation to its insured that arose from the title commitments it furnished. That circumstance precluded a finding of detrimental reliance on any misrepresentation by Pazdzierz, the court believed, because the title commitments themselves were issued upon the representations of Saylor and Patriot Title, not Pazdzierz. The court did not address the other grounds of the defendant’s motion. First American then filed a motion for reconsideration because the bankruptcy court failed to consider whether the debt is non-dischargeable under the theory of subrogation. The court denied the motion on December 20, 2010, reasoning that because Bayview’s insured loss resulted from -5- defects in the title to the real estate securing the notes, First American’s subrogation rights were confined to pursuing the parties who caused the insured loss, namely Saylor and Patriot Title, who failed to record the mortgages. Moreover, the court found that First American’s liability under the title commitments did not arise from a fraud or misrepresentation by debtor Pazdzierz. The plaintiff timely appealed the order granting summary judgment. II. The bankruptcy court’s order granting the defendant’s motion for summary judgment and denying reconsideration terminated the adversary proceeding. District courts have jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy courts. 28 U.S.C. § 158(a)(1); Central States, S.E. & S.W. Area Pension Fund v. U.S. Truck Co. Holdings, Inc. (In re U.S. Truck Co. Holdings), 341 B.R. 596, 599 (E.D. Mich. 2006). “The bankruptcy court’s findings of fact are reviewed under the clear-error standard, and its conclusions of law are reviewed de novo.” B-Line, LLC v. Wingerter (In re Wingerter), 594 F.3d 931, 935-36 (6th Cir. 2010) (citing Behlke v. Eisen (In re Behlke), 358 F.3d 429, 433 (6th Cir. 2004 . Summary judgment is appropriate where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A trial is required only when “there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Anderson v. Liberty Lobby, Inc., , 250 (1986). Where the facts are mostly settled, and the question before the court is purely a legal one, the summary judgment procedure is well suited for resolution of the case. See Cincom Sys., Inc. v. Novelis Corp., 581 F.3d 431, 435 (6th Cir. 2009). -6- When addressing the adversary proceeding amended complaint, the bankruptcy court and the parties appear to have conflated the issues of whether First American’s claim is permitted by state law, and whether it is provided for under the statute. However, the inquires are necessarily distinct. Grogan v. Garner, 498 U.S. 279, 283-84 (1991) (holding that “[t]he validity of a creditor’s claim is determined by rules of state law[, but] the issue of nondischargeability [is] a matter of federal law governed by the terms of the Bankruptcy Code” (citations omitted A. Assignability of the Notes First American argues that the bankruptcy court erred when it found that the assignment of the notes violated the rule that claims for fraud cannot be assigned under Michigan law. The parties do not dispute the general rule of Michigan law set out in Jones v. Hicks, 358 Mich. 474, 100 N.W.2d 243 (1960), upon which the bankruptcy court relied, that “a right of action for fraud is personal and not assignable.” Id. at 482, 100 N.W. at 245 (quoting Cochran Timber Co. v. Fisher, 190 Mich. 478, 481, 157 N.W. 282, 283 (1916 . First American contends instead that its effort to enforce the promissory notes do not constitute an action for fraud, even though it alleges that the debtor made false statements to induce the lender to make the loans. The restriction on assignment of fraud claims under Michigan law “has no application to an assignment of something which is itself tangible . . . . In such case, the right to whatever remedy the assignor has follows the assignment.” Sweet v. Clay, 88 Mich. 1, 12, 49 N.W. 899, 901 (1891). The Michigan Supreme Court has explained that “the law will not encourage speculation in the naked right to complain of a fraud, but a clear distinction is made between an assignment of a naked right to complain of a fraud and the assignment of a liquidated claim or judgment in favor of a creditor.” Id. at 10, 49 N.W. at 900. For example, in an action by a creditor to set aside a fraudulent transfer, -7- the Michigan Supreme Court stated: “It is true, as a general proposition, that a distinct right of action for fraud is not assignable, but where the right to enforce a claim which is in itself assignable depends upon showing fraud incidentally the rule has no application.” Howd v. Breckenridge, 97 Mich. 65, 69, 56 N.W. 221, 222-23 (1893). First American’s claim against Pazdzierz in the bankruptcy court was based on unpaid promissory notes. A promissory note is a negotiable instrument, Mich. Comp. Laws § 440.3104(1), (5) (stating that “‘negotiable instrument’ means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if . . . [i]t is payable . . . to order at the time it is issued . . . [and] [i]t is payable . . . at a definite time”; “[a]n instrument is a ‘note’ if it is a promise”), that may be transferred to another, Mich. Comp. Laws § 440.3203(1). “Transfer of an instrument . . . vests in the transferee any right of the transferor to enforce the instrument . . . .” Mich. Comp. Laws § 440.3203(2). The notes evidenced a liquidated debt and had value in themselves. They constituted much more than “the naked right to complain of a fraud”; rather, they would support an independent cause of action apart from any allegation of fraud. The right to collect the notes plainly was assignable. “Under general contract law, rights can be assigned unless the assignment is clearly restricted. Burkhardt v. Bailey, 260 Mich. App. 636, 653, 680 N.W.2d 453, 462 (2004) (citing Calamari & Perillo, Contracts (3d ed), § 18-10, p. 735). There is no suggestion that the notes contained any restrictions on assignment. When an assignment is made, “[a]n assignee stands in the position of the assignor, possessing the same rights and being subject to the same defenses.” Ibid. (citing Nichols v. Lee, 10 Mich. 526, 528-29 (1862 . -8- This Court concludes that the four promissory notes upon which First American premised its claim against the debtor were assignable and enforceable under Michigan law by First American as assignee. B. Effect of Assignment under 11 U.S.C. § 523(a)(2)(B)(iii) Looking at the literal language of section 523(a)(2)(B), the bankruptcy court concluded that the assignee of a debt cannot assert a fraud perpetrated on the assignor as a ground to contest dischargeability. Section 523(a) states: (a) A discharge under section 727 . . . of this title does not discharge an individual debtor from any debt– . . . (2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by– (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition; [or] (B) use of a statement in writing– (i) that is materially false; (ii) respecting the debtor’s or an insider’s financial condition; (iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and (iv) that the debtor caused to be made or published with intent to deceive . . . . 11 U.S.C. § 523(a)(2). The plaintiff alleged in its amended complaint that Pazdzierz obtained credit (represented by the promissory notes) by the following false representations: (a) the amount of his monthly income and his bank deposits; (b) that he paid his own cash amounts toward the purchase price; and (c) that he actually intended to acquire and operate the carwash businesses. Am. Compl. ¶ 22(a)-(c). The first representation certainly amounts to a “statement respecting the debtor’s . . . financial condition,” and therefore the plaintiff must prove that it was in writing (which it allegedly was) and the four elements in section 523(a)(2)(B) were satisfied. The last two representations related to the debtor’s conduct at the loan closings, not his financial condition; therefore, the plaintiff could prove nondischargeability by satisfying section 523(a)(2)(A). -9- The bankruptcy court’s determination that the assignee of a debt cannot assert a fraud perpetrated on an assignor was based on the statutory language specifying that a materially false statement of financial condition must have been relied upon by “the creditor to whom the debtor is liable for such money, property, services, or credit.” 11 U.S.C. § 523(a)(2)(B)(iii). The court believed that subsection referred to the creditor who was challenging dischargeability, not the creditor who made the loan. That requirement may be a condition of subsection (B), but it imposes no limitation on subsection (A). Instead, the general rule applies that “[a]n assignee stands in the shoes of the assignor and acquires the same rights as the assignor possessed.” First of America Bank v. Thompson, 217 Mich. App. 581, 587, 552 N.W.2d 516, 520 (1996) (citing In re Forfeiture of $126,174, 191 Mich. App. 453, 456, 479 N.W.2d 8 (1991 ; see Professional Rehab. Assocs. v. State Farm Mut. Auto. Ins. Co., 228 Mich. App. 167, 177, 577 N.W.2d 909, 914 (1998); see also Sprint Commc’ns Co., L.P. v. APCC Servs., Inc., 554 U.S. 269, 285 (2008) (recognizing that “history and precedents . . . make clear that courts have long found ways to allow assignees to bring suit” and that “that there is a strong tradition specifically of suits by assignees for collection”). Under subsection (A), therefore, the plaintiff, as assignee, may recover by showing “justifiable reliance” on a false pretense or representation by the creditor who extended the credit. See Field v. Mans, 516 U.S. 59, 74-75 (1995); In re Dobek, 278 B.R. 496, 508 (Bankr. N.D. Ill. 2002) (holding that under section 523(a)(2)(A), “the timing of the fraud and the elements to prove fraud focus on the time when the lender . . . made the extension of credit to the Debtor,” and that the “assignee of the Agreement[] steps into the shoes of its assignor . . ., and the inquiry of whether a creditor justifiably relied on Debtor’s alleged misrepresentations is focused on the moment in time when that creditor extended the funds to Debtor”). The plaintiff should have been allowed to proceed under subsection (A). -10- Nor can the Court agree with the bankruptcy court’s rejection of the amended complaint on the ground that only the original creditor to whom the debtor submitted a false financial statement can sue for nondischargeability under subsection 523(a)(2)(B). The Seventh Circuit, addressing the same argument made by a debtor who contended that an assignee had no legal recourse against him, held, “That cannot be true: the very reason that the institution of assignment exists is to enable Creditor to transfer its rights against Debtor (Meyer) to Assignee (Federal Bank).” In re Meyer, 120 F.3d 66, 70 (7th Cir. 1997). This Court also must part company with the bankruptcy court’s disapproval of the Ninth Circuit’s reasoning in Boyajian v. New Falls Corporation (In re Boyajian), 564 F.3d 1088 (9th Cir. 2009), a case which held that an assignee stood in the shoes of the original creditor and could bring a claim under subsection 523(a)(2)(B). That court addressed the same question raised here: whether an assignee could satisfy section 523(a)(2)(B)(iii)’s requirement of “reasonable reliance” by the creditor to whom the debtor is liable. Id. at 1090 (“The question before us is whether the assignee of a debt must itself have relied on the materially false statement, or whether it is enough that the original creditor did so.”). Examining the language of subsection (B)(iii), requiring reliance by “the creditor to whom the debtor is liable for such money, property, services, or credit,” the court reasoned that “[t]he most natural reading of the word ‘is’ in subsection (iii) is simply that the debt is non-dischargeable if, at the time the money is obtained by the debtor, he or she used a materially false written statement that was intended to deceive.” Id. at 1091. In other words, detrimental reliance must have been made by the creditor who extended the credit, not necessarily the creditor who challenges dischargeability. -11- The Boyajian court also believed its interpretation of the statute was consistent with congressional intent. Congress was undoubtedly aware that under general principles of assignment law an assignee steps into the shoes of the assignor. Had Congress wished for assigned debts to be treated differently under § 523(a)(2)(B), it would have done more than rely on the word “is” in subsection (iii). In the absence of such specific language, we believe that Congress intended that the general law of assignment remain applicable. That is, assuming New Falls was indeed the recipient of a general assignment of the original judgment, it can stand in the shoes of its assignor and pursue a non-dischargeability action under § 523(a)(2)(B). Ibid. Finally, the court fortified its reasoning by observing that its construction of section 523(a)(2)(B) was consistent with the policy goals of the Bankruptcy Code, noting “the perversity of permitting dishonest debtors to receive a discharge through the fortuity that their creditor chose to assign the debt.” Id. at 1092. The Court finds that reasoning compelling. It is faithful to the structure and language of section 523(a)(2)(B), and it is consistent with the general policy of the Bankruptcy Code, which “limits the opportunity for a completely unencumbered new beginning to the honest but unfortunate debtor.” Grogan, 498 U.S. at 286-87 (quotation marks omitted). The Court holds, therefore, that a creditor in bankruptcy may satisfy the requirements of 11 U.S.C. § 523(a)(2)(B)(iii) by showing that the creditor to whom the debtor was initially “liable for such money, property, services, or credit reasonably relied” on a materially false written statement respecting the debtor’s financial condition when extending credit and creating the debt being challenged as nondischargeable. C. Subrogation In its motion for reconsideration, the plaintiff argued that it should be able to maintain its nondischargeability claim as subrogee of its insured, Bayview Financial. The bankruptcy court rejected that argument because Bayview’s loss arose from the impairment of its collateral, which -12- in turn resulted from Patriot Title’s failure to record the mortgages. The bankruptcy court found that Pazdzierz played no role in causing the title defect that the plaintiff insured, and therefore the principle of subrogation would not provide the plaintiff a claim against the debtor. This Court agrees. Under Michigan law, “[l]egal or equitable subrogation substitutes one person in place of another with reference to a lawful claim, demand or right so that he who is substituted succeeds to the rights of the other.” Commercial Union Ins. Co. v. Medical Protective Co., 136 Mich. App. 412, 419, 356 N.W.2d 648, 652 (1984); see also Steinmann v. Dillon, 258 Mich. App. 149, 154, 670 N.W.2d 249, 252 (2003) (subrogation is “[t]he principle under which an insurer that has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy” (emphasis added . It is well settled that “whether a right of subrogation arises by operation of law or by contract, the controlling general principles are the same: the subrogee, upon paying an obligation owed to the subrogor as the primary responsibility of a third party, is substituted in the place of the subrogor, thereby attaining the same and no greater rights to recover against the third party.” Citizens Ins. Co. of America v. American Cmty. Mut. Ins. Co., 197 Mich. App. 707, 709, 495 N.W.2d 798, 799 (1992) (emphasis added). First American’s liability to Bayview Financial arose solely from the title policy commitment First American underwrote. Bayview could contend that it was defrauded when Pazdzierz procured his loans by means of fraudulent statements, or by Patriot Title’s failure to record the mortgages. But First American did not insure Bayview against fraud. It insured the title to the mortgaged property against defects and encumbrances. First American never alleged in its amended complaint that Pazdzierz’s conduct caused a “loss covered by the policy.” Steinmann, 258 Mich. App. at 154, -13- 670 N.W.2d at 252. Therefore, First American cannot stand on subrogation as a viable theory of recovery against Pazdzierz. III. For these reasons, the judgment of the bankruptcy court is REVERSED, the order granting summary judgment to the defendant-debtor Bryan Pazdzierz is VACATED, and the case is REMANDED for further proceedings consistent with this opinion. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: October 24, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 24, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -14-

=== Bajraszewski v. Allstate Insurance Company ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JANIS BAJRASZEWSKI, Plaintiff, v. ALLSTATE INSURANCE COMPANY, _______________________________________/ Defendant . Case No. 11-10513 Honorable David M. Lawson OPINION AND ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT Plaintiff Janis Bajraszewski was injured severely in an automobile accident in 2002 and has been receiving no-fault insurance benefits from her insurer, defendant Allstate Insurance Company, since June 2004. The benefits included reimbursement for the cost of 24-hour attendant care, which mostly has been furnished by her husband and other family members. The defendant stopped paying attendant care reimbursement in August 2010, contending that it did not have the taxpayer identification numbers of the attendant care providers, which it was required to have in order to comply with federal tax reporting requirements. The plaintiff contends that Allstate has had her Social Security number and her attorney’s taxpayer identification number on file for several years, and because the attendant care providers are not seeking payment directly from Allstate, the absence of the attendant care provider’s taxpayer information should stand as no obstacle to reimbursement under the no-fault law. The parties were to file cross motions for summary judgment on this issue, but only the plaintiff has filed her motion. The defendant filed a response in opposition. The Court has reviewed the pleadings and motion papers and finds that the papers adequately set forth the relevant facts and law and oral argument will not aid in the disposition of the motion. Therefore, it is ORDERED that the motion be decided on the papers submitted. See E.D. Mich. LR 7.1(f)(2). The Court also finds that where a no-fault claimant seeks reimbursement for first-party attendant care benefits, and the no-fault insurer has no actual knowledge that the claimant does not intend to comply with federal tax withholding requirements, the insurer may not refuse to pay benefits on the basis that the claimant has not furnished the care provider’s taxpayer identification number. The record in this case does not support the defendant’s excuse for failing to reimburse the plaintiff for the cost of the incurred attendant care, and therefore the Court will grant the plaintiff’s motion for summary judgment. I. Under Michigan’s no-fault insurance law, a person injured in an automobile accident may claim personal injury protection (PIP) benefits from her own insurer by furnishing “reasonable proof of the fact and of the amount of loss sustained.” Mich. Comp. Laws § 500.3142(2). PIP benefits include the “reasonably necessary products, services and accommodations for an injured person’s care, recovery, or rehabilitation,” Mich. Comp. Laws § 500.3107(1)(a), and those, in turn, may include attendant care furnished by family members, Bonkowski v. Allstate Ins. Co., 281 Mich. App. 154, 164, 761 N.W.2d 784, 791 (2008) (citing Van Marter v. American Fidelity Fire Ins. Co., 114 Mich. App. 171, 178-181, 318 N.W.2d 679, 681-82 (1982); Visconti v. Detroit Auto. Inter-Ins Exch., 90 Mich. App. 477, 282 N.W.2d 360, 362-63 (1979). The plaintiff was a passenger in a car that was involved in an accident on July 27, 2002 near the intersection of Thirty-two Mile Road and Wolcott Road in Macomb County, Michigan. At the time of the accident, the plaintiff was insured by Allstate in accordance with Michigan’s no-fault insurance act, Mich. Comp. Laws § 500.3101 et seq. As a result of her injuries arising from that -2- accident, the plaintiff’s doctor has prescribed 24-hour attendant care services. The plaintiff’s husband is not employed by a home health care agency but provides the majority of the plaintiff’s home care. He, along with other family members and friends, has provided the plaintiff with attendant care services 24 hours a day, 7 days a week, for several years, and particularly since July 31, 2010. Following an arbitration agreement between the plaintiff and the defendant in June 2004, the defendant paid attendant care benefits to the plaintiff and her attorneys for over six years. However, the plaintiff alleges that beginning August 2010, the defendant stopped paying benefits and refused to reinstate them unless the plaintiff submitted the Social Security numbers of her attendant care providers. These facts are uncontested. On December 22, 2010 the plaintiff’s attorney, Sharon Milligan, spoke with the defendant’s claims adjuster, Earl McClendon, to question the apparent change in the defendant’s practice of paying the plaintiff’s attendant care benefits. According to the plaintiff, during that conversation McClendon told Milligan that the defendant would no longer make payments using the law firm’s taxpayer identification number. Instead, the defendant required either the plaintiff’s or her attendant care provider’s Social Security number. The defendant alleges that McClendon told Milligan that he could not issue payment without either the plaintiff’s Social Security number accompanied by proof that she had issued payment and appropriate 1099 forms, or the attendant care provider’s Social Security number. At Milligan’s request, McClendon wrote a letter memorializing the conversation on December 28, 2010. The letter tends to support Milligan’s version of the conversation; McClendon wrote that “the social security number for Janis Bajraszewski can be used -3- to issue[] the attendant care payment.” Pl.’s Mot. for Summary J. [dkt. #15], Ex. 2, Letter from Earl McClendon. The defendant has had the plaintiff’s Social Security number on file for several years. Apparently she did not furnish her care provider’s taxpayer identification information, and Allstate never reinstated the benefit payments. So the plaintiff filed her complaint and a motion to compel payment of benefits in state court on January 26, 2011. The defendant removed the case to this Court on the ground of diversity jurisdiction on February 2, 2011. On February 25, 2011, the Court denied the plaintiff’s motion to compel because the motion “essentially [sought] summary judgment on the main issue in the case” . . . but “presented no authority that support[ed] the relief requested.” Order Denying Pl.’s Mot. to Compel [dkt. #8]. During a Case Management Conference on March 23, 2011, the parties agreed that the matter could be decided on cross motions for summary judgment because no factual disputes existed and no discovery was required. See Case Management Order [dkt. #14] at 1. Thereafter, the plaintiff filed a motion for summary judgment on April 13, 2011. The defendant responded to that motion on April 27, 2011. The plaintiff replied on May 4, 2011. II. Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A trial is required only when “there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Anderson v. Liberty Lobby, Inc., , 250 (1986). Where the material facts are mostly settled, and the -4- question before the court is purely a legal one, the summary judgment procedure is well suited for resolution of the case. See Cincom Sys., Inc. v. Novelis Corp., 581 F.3d 431, 435 (6th Cir. 2009). The defendant justifies withholding PIP payments to reimburse the plaintiff for attendant care by arguing that the plaintiff has not furnished “reasonable proof of the fact and amount of loss sustained” under section 500.3142(2) where the submission does not include the care givers’ taxpayer identification number. The defendant reasons that care givers have a right under the no- fault act to demand direct payment from the insurance company for PIP benefits furnished to a covered person; the Internal Revenue Code requires third parties who make payments for such services to report the payment and furnish the recipient with a Form 1099; if the plaintiff insists on direct reimbursement, the tax code requires the insurer to have evidence that the plaintiff properly withheld taxes and furnished a 1099 to the care provider; and to the extent Michigan law is to the contrary, it is preempted by the federal tax code. The plaintiff argues that Allstate’s adjuster admitted in his letter to the plaintiff’s attorney that he could release payment if he had only the plaintiff’s Social Security number, and the defendant therefore is estopped from taking a different position in this case. A. Defendant’s admissions Whether the defendant’s claims adjuster’s letter amounts to a binding admission is irrelevant to the resolution of the issue at hand. The outcome of this motion does not depend on whether the defendant’s claims adjuster ever told the plaintiff’s attorney that the plaintiff’s Social Security number was sufficient to make payments. Although there are some factual disputes surrounding those issues, those facts are not material and therefore they do not preclude summary judgment. See Fed. R. Civ. P. 56(a); Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001) -5- (stating that a fact is “material” if its resolution affects the outcome of the lawsuit). Rather, the question is whether a no-fault claimant, to obtain reimbursement for the incurred cost of PIP benefits, must furnish the taxpayer information of the care provider to satisfy the obligation to provide “reasonable proof of the fact and amount of loss sustained.” That is purely a legal issue. B. Direct payment to care providers The defendant’s argument is fundamentally premised on the notion that it must pay PIP payments the attendant care provider rather than the plaintiff. The plaintiff, on the other hand, insists that the right to payment of PIP benefits belongs to the injured party, not those providing the care or treatment. Neither party is entirely correct. Michigan no-fault law provides that “[p]ersonal protection insurance benefits are payable to or for the benefit of an injured person.” Mich. Comp. Laws § 500.3112 (emphasis added). Michigan courts have determined that health care providers have an independent right of action against an insurer to enforce payment of expenses for PIP benefits. See Lakeland Neurocare Ctrs. v. State Farm Mut. Auto. Ins. Co., 250 Mich. App. 35, 39- 41, 645 N.W.2d 59, 61-62 (2002). In fact, “it is common practice for insurers to directly reimburse health care providers for services rendered to their insureds.” Id. at 39 (citing Mercy Mt. Clemens Corp. v. Auto Club Ins. Ass’n, 219 Mich. App. 46, 48, 555 N.W.2d 871, 871-72 (1996); McGill v. Auto. Ass’n of Mich., 207 Mich. App. 402, 404, 526 N.W.2d 12 (1994); Hicks v. Citizens Ins. Co. of Am., 204 Mich. App. 142, 145, 514 N.W.2d 511, 513 (1994 . Those court decisions, however, also preserve the insured’s right to collect PIP benefits directly and do not support the defendant’s assertion that the care provider has an exclusive right to PIP benefits. See McGill, 207 Mich. App. at 404, 526 N.W.2d at 13; Hicks, 204 Mich. App. at 145, 514 N.W.2d at 513. -6- The Internal Revenue Code contains no requirement that payment must be made directly to the insured’s care providers. To the contrary, the Internal Revenue Service has acknowledged that “[g]enerally, health, accident, and sickness insurance policies provide that the amounts payable thereunder are payable to the insured unless the insured assigns his rights to receive payments to those persons who supplied the medical services.” Internal Revenue Serv., Rev. Rul. 69-595 (1969) (made obsolete with respect to other principles by Internal Revenue Service, 2002-33 I.R.B. 341 (2002 . Allstate gives no sound reason why it wants or needs to pay the plaintiff’s care provider instead of the plaintiff. The Court concludes, therefore, that under both Michigan and federal law, both the insured and her care provider may be proper payees of no-fault PIP benefits. C. Federal tax reporting requirements The Internal Revenue Code does contain language that establishes reporting requirements by those who pay compensation to others. For instance, if an insurance company elected to make payments for attendant care directly to a care provider, then it would incur a reporting obligation. “All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations . . . of $600 or more in any taxable year . . . shall render a true and accurate return to the Secretary . . . setting forth the amount of such gains, profits, and income.” 26 U.S.C. § 6041(a). To comply with the requirements of section 6041(a), an insurance company must report any payments it makes directly to care providers on a Form 1099. Internal Revenue Serv., Rev. Rul. 69-595 (1969). The 1099 must include the taxpayer’s tax identification or Social Security number. 2011 Instructions for Form 1099-MISC, available at http://www.irs.gov/pub/irs-pdf/i1099msc.pdf. If the payor has a reporting -7- obligation, then the payee must give the payor her taxpayer information. 26 C.F.R. § 301.6109- 1(b)(1) (“A U.S. person whose [taxpayer identification] number must be included on a document filed by another person must give the taxpayer identifying number so required to the other person on request.”) Therefore, a care provider that is also a payee must provide the insurance company with its taxpayer identification number upon request so that the insurance company may file the necessary returns. However, there is no reason why an insurance company must take on this tax reporting burden in all cases because, as noted earlier, both Michigan and Federal law allow an insurance company to make payments directly to the insured. Section 6041(a) requires reporting of payments that constitute “gains, profits, and income.” 26 U.S.C. § 6041(a). But the payments that an injured person “receive[s] through accident or health insurance (or through an arrangement having the effect of accident or health insurance) for personal injuries or sickness” are not included in that person’s gross income. 26 U.S.C. § 104(a)(3). Therefore, when an insurance company makes payments directly to the insured person, it does not have to report those payments under 26 U.S.C. § 6041(a) because they do not constitute income. Absent a reporting obligation, the insured has no corresponding obligation to furnish taxpayer identification information. The Internal Revenue Code does require that “every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with . . . procedures prescribed by the Secretary.” 26 U.S.C. § 3402(a). An employer is a “person for whom an individual performs or performed any service, of whatever nature, as the employee of such person,” and who controls the payment of wages to the employee. 26 U.S.C. § 3401(d). Although wages do not include “remuneration paid . . . for domestic service in a private home,” 26 U.S.C. § 3401(a)(3), -8- if the services performed in a private home are not of a domestic nature, then the remuneration for them is not excepted. 26 C.F.R. § 31.3401(a)(3)-1(c). Compensation paid to family members is subject to income tax withholding if the services provided otherwise would constitute covered employment. See 26 C.F.R. § 31.3401(c)-1, (d)-1. Because attendant care is not “domestic” in nature, the insured is obligated to withhold taxes on wages paid to an attendant care provider, even if that provider is a family member rendering services in the insured’s home. 26 C.F.R. § 31.3401(a)(3)-1(c). However, when an insurance company pays benefits to the insured expressly for the purpose of the insured paying her attendant care provider, the insurance company has no reporting requirement because payments to the insured do not constitute income and the insurance company does not qualify as the care provider’s employer. 26 U.S.C. § 6041; 26 U.S.C. § 104(a)(3); 26 U.S.C. § 3401(d). The insurance company could be held liable if the insured does not properly withhold taxes on her attendant care provider’s wages, but only if the insurance company has “actual notice or knowledge (within the meaning of [26 U.S.C. §] 6323(i)(1 that such employer does not intend to or will not be able to make timely payment or deposit of the amounts of tax required . . . to be deducted and withheld by such employer from such wages.” 26 U.S.C. § 3505(a). But absent such actual knowledge, that potential and contingent liability does not require a PIP claimant to give the insurance company an attendant care provider’s tax identification number under 26 C.F.R. § 301.6109-1(b)(1), and certainly that information would not be necessary before benefits are paid to an insured person. -9- D. The plaintiff’s required submissions To recover medical expense reimbursement, a PIP claimant must prove that the charge for the medical service was reasonable, the expense was reasonably necessary for the claimant’s care or treatment, and the expense was actually incurred. Nasser v. Auto Club Ins. Ass’n, 435 Mich. 33, 50, 457 N.W.2d 637, 645 (1990); see also Shanafelt v. Allstate Ins. Co., 217 Mich. App. 625, 637, 552 N.W.2d 671, 676 (1996). To establish a right to payment, the claimant must present the insurance company with “reasonable proof of the fact and of the amount of loss sustained.” Mich. Comp. Laws § 500.3142. “Reasonable proof” has never been equated with the quantum of evidence necessary to satisfy a legal claim under section 3107(1). To the contrary, section 3142(1) “requires only reasonable proof of the amount of loss, not exact proof.” Williams v. AAA Mich., 250 Mich. App. 249, 267, 646 N.W.2d 476, 485 (2002). Of course, in addition to the fact of the loss, the claimant must submit reasonable proof of the amount as well. See Regents of Univ. of Mich. v. State Farm Mut. Ins. Co., 250 Mich. App. 719, 736, 650 N.W.2d 129, 138 (2002). In must be remembered, however, that “[t]he primary goal of the [Michigan] no-fault act is ‘to provide victims of motor vehicle accidents assured, adequate, and prompt reparation for certain economic losses.’” McCormick v. Carrier, 487 Mich. 180, 234, 795 N.W.2d 517, 547 (2010) (quoting Shavers v. Att’y Gen., 402 Mich. 554, 578-579, 267 N.W.2d 72, 77 (1978 . Under the Michigan no-fault system, automobile accident victims are entitled to prompt payment of certain personal injury protection benefits as soon as “the loss accrues.” Mich. Comp. Laws § 500.3142(1). “[T]he no-fault act may not be used by a no-fault insurer . . . as a weapon against rightful payees to -10- a payee’s unjustified economic detriment.” Lakeland Neurocare Ctrs., 250 Mich. App. at 43, 645 N.W.2d at 64. As part of showing “reasonable proof of the fact and of the amount of loss sustained,” the Michigan Supreme Court requires that an insured establish that it has incurred costs by showing “a legal or equitable obligation to pay.” Burris v. Allstate Ins. Co., 480 Mich. 1081, 1084, 745 N.W.2d 101, 104 (2008) (Corrigan, J., concurring). An insured may demonstrate such an obligation by showing it paid for costs out of pocket, signed a contract for products or services, or has some other obligation to pay for attendant care services. Ibid. (citing Proudfoot v. State Farm Mut. Ins. Co., 469 Mich. App. 476, 484, 673 N.W.2d 739, 744 (2003 . “Should the insured present a contract for products or services rather than a paid bill, the insurance company may, in order to protect itself, make its check payable to the insured and the contractor.” Proudfoot, 469 Mich. App. at 484 n.4, 673 N.W.2d at 744 n.4. Because family members that provide attendant care services should be treated the same as attendant care service workers, “the insured’s family members and friends, just like any other provider, must perform the services with a reasonable expectation of payment.” Id. at 1085. When an insured’s care providers cannot produce a record of their service, have not submitted a claim for compensation, and clearly state they did not expect payment, then the insured has not incurred any expense for its attendant care. Id. at 1082. However, to show reasonable proof of the amount of loss, Michigan courts have required only that the claimant submit “a letter and a statement” detailing expenses. See Williams, 250 Mich. App. at 267, 646 N.W.2d at 485; Regents of the Univ. of Mich., 250 Mich. App. at 737, 650 N.W.2d at 139. Therefore, the care provider’s affidavits and the plaintiff’s bills constitute reasonable proof of the fact and amount of loss the plaintiff sustained. -11- Because the plaintiff has established that she is a rightful payee of PIP benefits, the defendant must pay those benefits without unreasonable delay. Lakeland Neurocare Ctrs., 250 Mich. App. at 43, 645 N.W.2d at 64. When reasonable proof of the loss and the amount of the claimed benefit has been received, the insurance company has a duty to investigate on its own if it wishes to challenge the amount of benefits owed. Williams, 250 Mich. App. at 267, 646 N.W.2d at 485 (stating that if the insurance company, after receiving notification of the amount of loss, “had desired to challenge or investigate the amount [claimed], could have and should have conducted some investigation of its own during the thirty-day legislative grace period to establish a lesser amount of uncoordinated benefits owed”). As noted above, the defendant could be liable for withholding taxes if it knows that the plaintiff does not intend to withhold taxes from the care provider’s wages. But there is no evidence in the present record that the plaintiff has any intention to evade her tax responsibilities, much less knowledge of that possibility by Allstate. Even if the defendant did somehow incur this liability, it would not require the care provider’s tax identification number. See 26 U.S.C. § 3505. Therefore, the defendant’s allegation that it requires the defendant’s tax identification number before it can make PIP benefit payments in compliance with the Internal Revenue Code is unfounded. III. The parties have not disputed the fact that — except for taxpayer identification information — the plaintiff has submitted reasonable proof of the fact and amount of the attendant care expense incurred by the plaintiff since August 1, 2010. Because taxpayer identification information for the attendant care providers is not part of the information that constitutes such “reasonable proof,” the defendant’s failure to pay PIP benefits on time was not reasonable. Therefore, the plaintiff is -12- entitled to a judgment as a matter of law. However, the record does not contain information on the amount of damages, such as the cost of attendant care expenses incurred through the present date, whether there is a claim for penalty interest under Mich. Comp. Laws § 500.3142, and whether attorney’s fees are sought under Mich. Comp. Laws § 500.3148(1). Therefore, the Court will direct the plaintiff to file proof of the PIP costs submitted to Allstate and the amount of penalty interest, if any, claimed. If the plaintiff seeks attorney’s fees, she may do so after judgment is entered under Federal Rule of Civil Procedure 54(d)(2) and Local Rule 54.1. Accordingly, it is ORDERED that the plaintiff’s motion for summary judgment [dkt. #15] is GRANTED. It is further ORDERED that on or before November 3, 2011, the plaintiff must file proof of the attendant care costs submitted to Allstate and the amount of penalty interest, if any, claimed. If the defendant contests the amounts, it must file detailed objections on or before November 10, 2011. Dated: October 20, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 20, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -13-

=== J.D. Fuller v. Blaine Lafler ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION J.D. FULLER, v. BLAINE LAFLER, Petitioner, Respondent. ____________________________/ Case No. 08-12684 Honorable David M. Lawson OPINION AND ORDER DENYING PETITION FOR WRIT OF HABEAS CORPUS Petitioner J.D. Fuller, presently confined at the Michigan Department of Corrections’s Chippewa Correctional Facility in Kincheloe, Michigan, filed a petition for a writ of habeas corpus under 28 U.S.C. § 2254 to challenge his 2003 convictions of seven counts of first-degree criminal sexual conduct (CSC I) and two counts of second-degree criminal sexual conduct (CSC II), involving his granddaughters, who were age ten and six at the time of the incidents. He offers several reasons why his convictions and sentences are unconstitutional, including prosecutorial misconduct, insufficient evidence, improper admission of “other acts” evidence, ineffective assistance of trial and appellate counsel, and improper sentencing. But his main contention is that his right to confront his accuser guaranteed by the Sixth Amendment was abridged when he was not allowed to cross-examine his older granddaughter about her other sexual experiences to show where she might have acquired knowledge of the graphic sexual acts committed by the petitioner that she described in her testimony. The petitioner exhausted all of these claims in the state court either on direct appeal or post-conviction motion. The respondent contends that the petition was filed out of time, many of the claims are barred because the petitioner did not raise them first on direct appeal, and none of the claims has merit. The Court is unimpressed with the respondent’s procedural defenses, but it does believe that the convictions and sentences are constitutionally sound. Therefore, the Court will deny the petition. I. The criminal charges stem from incidents that occurred between January 2002 and May 2003. The petitioner was the senior pastor at a church in Ypsilanti, Michigan. The victims in this case were his granddaughters, SP, aged ten, and YH, aged six. They stayed in his home in Detroit for several days at a time while their mother worked. Three of the CSC I convictions and one of the CSC II convictions pertained to the younger granddaughter, YH, and involved incidents of digital penetration. The other four CSC I convictions and one CSC II conviction involve the older granddaughter, SP, and result from three incidents of fellatio and one incident of digital penetration. Because the petitioner’s claims include allegations of insufficient evidence and possible fabrication of information by one of the children, the trial evidence will be described in detail. The state’s allegations focused on activities that occurred in the petitioner’s home. Darlene Fuller, the petitioner’s wife, testified that the petitioner was the girls’ primary care-giver, picking them up from school, feeding them, washing their clothes, buying them clothes when they did not have adequate clothing, taking them to church, and participating in other activities while their mother worked. She said there were occasions when SP lied to get Mrs. Fuller in trouble, but she left it to the petitioner to handle the situation. Both girls and their brother often spent the night or the weekend at their home. Mrs. Fuller testified that from 1999 to 2001, the girls and their parents lived with them. Mrs. Fuller further testified that a nightstand on the petitioner’s side of the bed contained a drawer that held some body oil, K-Y jelly, body syrup, papers, and an old telephone. She said that sometime in 2002, she caught SP with the K-Y jelly. Mrs. Fuller used the body oil on herself and -2- the children when their skin was “ashy.” Mrs. Fuller testified that the only pornography in the house was a gag tape the couple received as a wedding gift that was kept in that same drawer. She also said that different types of body lotions were kept in the downstairs linen closet. Mrs. Fuller testified about a time when SP complained about itching; she had a small rash on her inner upper thighs. She said she showed SP how to apply ointment to the rash. Although YH did not have a rash, Mrs. Fuller said she insisted that ointment be put on her legs, too. Mrs. Fuller said the petitioner never applied the ointment to the girls. Mrs. Fuller also testified that the petitioner had old surgical scars on the outside of both upper thighs, which were not visible even if he wore shorts. The scars were the result of bilateral hip-replacement surgery. She said the petitioner had shown the scars to SP because she wanted to see them. The petitioner suffered pain from his hip surgery and at times walked with a cane and took medication to ease the pain. She testified that his surgery had a negative impact on their sex life. Jannetta Hephzibah, the girls’ mother and the petitioner’s biological daughter, testified that she needed child-care assistance because she worked late nights at her job; her mother kept her children during the week and the petitioner kept them on weekends. She said sometimes her brother also would watch them. Hephzibah testified that she felt comfortable leaving her children with the petitioner, and neither child ever told her that they felt uncomfortable around him. Hephzibah confirmed that she, her husband, and the children lived with the petitioner and his wife for about four months. -3- YH, the younger child, testified that she did not know how many times she spent the night at the petitioner’s house, but it was “a lot of times” when she was about five or six years old. She said both SP and her brother also spent the night. YH testified that the petitioner and his wife did fun things with her, but she said that when she was six years old, the petitioner did something to her that he should not have done. YH described an incident in the TV room when the petitioner got on the couch with her, pulled her onto his lap, put the covers over her, and put his hands into her pants. She said she could feel the petitioner’s hand moving around, touching her “private part,” which she defined as the “part” girls used to go to the bathroom. She said he did that to her more than three different times. YH testified that besides putting his hand on her private part, the petitioner sometimes put cream on his finger and then put it on her private part. She also testified that sometimes the petitioner put oil on a cotton ball and rubbed it around on her private part. She said those incidents also occurred in the TV room. YH testified that her sister and brother were in the room when the petitioner did those things to her. She said sometimes it happened during the day and other times it happened at night. YH also testified that the petitioner did the same thing to her “bottom” that he did to her “private.” She said he put his finger on her bottom and moved it around, but she was not sure which part of her bottom the petitioner’s finger touched. She said he did not make her do anything to his body. She never saw his private part and did not know if he had any scars. She never saw him without any clothes. YH said she never witnessed the petitioner doing anything to her brother. YH also said that after each incident, the petitioner told her that she could not tell anyone, and, if she did, then he would “whop” her. Even though she did not believe that he would “whop” -4- her, she did not tell anyone. The first person she told was her twelve-year-old cousin. The cousin told her to tell her mother. She said she and SP then told their mother about what the petitioner has done. YH further testified that their mother did not believe them at first, but “when we told her the rest of the story, she believed us.” Trial Tr., Sept. 16, 2003, at 231. The girls’ mother then took them to their grandmother’s house and the girls told the grandmother what happened. Their grandmother told their uncle. The petitioner then came over to the house and their mother told him what the girls said he did to them. When the petitioner heard the story, he denied it happened. YH said she also told the police, the doctor who examined her at the hospital, and to a lady at “Kid’s Talk” what happened. YH testified that she did not tell anyone right away because she was scared that “my mama was going to whop us because my grandfather is my mom’s father.” Trial Tr., Sept. 16, 2003, at 213-14. SP, the older child, testified that the petitioner once showed her a scarey vampire movie she had selected and a “black tape” he kept in his bedroom. She testified that on the “black tape” she saw naked people “doing nasty stuff,” such as taking off their clothes, kissing, and touching each other’s bodies and “making love” using their “private parts.” Trial Tr., Sept. 17, 2003, at 40-42. SP said that once, after seeing the movie, she screamed and her sister came upstairs. She said the petitioner took the movie out of the video player. The “vampire movie” was a “regular movie” with “parts we weren’t supposed to see” that was rated PG-13. Trial Tr., Sept. 17, 2003, at 44-45. SP further testified that when she was ten years old, the petitioner told her to get a white bottle with cherries from a drawer in the bedroom. After she brought the bottle back to him, he put some of it on his “private part” and “made” her “suck” it off. Trial Tr., Sept. 17, 2003, at 55-56. She said the petitioner would make noises and breathe “like he’s out of breath or something.” She -5- testified that the petitioner’s “private part” went into her mouth and sometimes white stuff that tasted sour and sweet came out of his “pee hole.” Trial Tr., Sept. 17, 2003, at 57-58. She said after it was over, the petitioner would tell her that he loved her and would put his private part back into his pants. SP testified that she went into the bathroom and spat the white stuff into the toilet and rinsed out her mouth. She testified that she had to put the petitioner’s private into her mouth “lots of times,” at least “more than three” times, and that “white stuff”came out “most of the time.” Trial Tr., Sept. 17, 2003, at 59-64. SP also testified that the petitioner used the “cherry stuff” some of the time, and other times he used lotion, baby oil, or body wash that was kept in the downstairs linen closet. She explained that when the petitioner used the body wash, he put it on his hands, put it on her private part, and started playing with it by putting his finger in it and “wiggling” it around. She said it hurt. She said that occurred while they both were lying on the couch in the den, and happened “mostly all the time,” or “more than three” times. Trial Tr., Sept. 17, 2003, at 64-67. SP also told the jury that the petitioner put oil on his “private part” and then put it inside “the back of me,” when they were upstairs in his bedroom. Trial Tr., Sept. 17, 2003, at 68-70. When she told him that it hurt, he told her that it was not supposed to feel good. She said that happened twice. She admitted that she did not tell police about the incident because “I was shy,” and that she did not tell the forensic interviewer because “I was scared she was going to cry.” Trial Tr., Sept. 17, 2003, at 70-71. When asked what made her decide to tell the Kid’s Talk forensic interviewer about the oral sex but not the anal sex, she testified, “I had to tell her something. If I didn’t tell her anything the situation would have never been dealt with.” Trial Tr., Sept. 17, 2003, at 71. -6- SP also described an incident in which the petitioner woke her up early in the morning after his wife had gone to work, took her into his bedroom, laid her on the bed, took off his robe, got into bed on top of her, “stuck his private part in mine,” and “kept going up and down.” Trial Tr., Sept. 17, 2003, at 76-77. There were other times when he would put her on top of him. She testified that it happened “a lot,” “more than ten times.” Trial Tr., Sept. 17, 2003, at 147. SP further testified that the petitioner made her touch his private part with her hand. She also testified about an incident occurring in the bathroom, where he played with her private part with his finger as he sat on the toilet. SP admitted that she had not told anyone about the incidents because “I wanted him to see how it felt when something bad happened to me and wanted him to know how it feels when somebody does something mean.” Trial Tr., Sept. 17, 2003, at 161. SP testified that she saw the petitioner’s scars “[b]ecause of what I was doing with him.” Trial Tr., Sept. 17, 2003, at 83. She demonstrated to the jurors that the scars ran from his upper hip to his lower hip and described them as “pinkish brown,” “squiggly lines,” and “some of them are straight.” Trial Tr., Sept. 17, 2003, at 84. SP testified that the petitioner told her that she could not tell anyone because she would get a “whopping.” She did not tell anyone after the first two times it happened. She did not tell her mother because she was scared she would get mad and cry. After it happened lots of times, she told her cousin, but then, because she was scared, told him that it really did not happen. She eventually told her cousin again and he told her to tell her mom, threatening to tell her mom himself if she did not. When she told her mom about what had happened, YH and her cousin were with her. There -7- was a family meeting at her grandmother’s house, where she had to tell everyone what had happened. When she told the petitioner, he acted surprised. SP also testified that she saw the petitioner stick his finger in YH’s private part while they were all in the den. According to her, both the petitioner and YH were lying on the couch: “I seen (sic) him put his finger in her private part and every time I’ll look, I’ll get mad and then he’ll tell me to come over and I told him don’t talk to me.” Trial Tr., Sept. 17, 2003, at 74. She testified that he did not do it to YH as much as he did it to her. She also said she saw the petitioner use the baby oil, rub it on his finger, and put it in YH’s private part. She said he did not stop when YH told him that it hurt. SP testified that was the only thing she saw the petitioner do to YH. The police executed a search warrant at the petitioner’s home and seized K-Y jelly, cherry lotion, and Neutrogena baby oil from the night stand in the bedroom. They also seized a bottle of raspberry bath gel, a bottle of Johnson bedtime lotion, and a bottle of Johnson baby wash from the downstairs linen closet, and a disposable camera. They were not looking for any movies and did not seize a pornographic tape. The petitioner called four witnesses who testified that they did not observe anything indicating that either of the girls was afraid of him when they saw him interacting with the girls and that he was a very truthful person. Garfield Johnson, Jr. M.D., an obstetrician and gynecologist who examined SP’s and YH’s medical records, also testified for the defense. The record recounted SP telling the examining physician that the petitioner had put his “private part” in her “private part.” However, the examination showed that her hymen was intact. There was no vaginal discharge or bleeding, tears, -8- or scarring, or any anal fissures. Dr. Johnson testified that he would expect to see a ruptured hymen, scarring, or tearing in the situation SP described to the examining physician. SP’s medical report stated that the petitioner had put his penis into her vagina on and off for at least one year, with the last episode being about eight or nine days before the examination. Dr. Johnson said that no cultures were done because there was no physical evidence of sexual abuse; there was no evidence of trauma, vaginal discharge, tears or scarring, and no evidence of trauma or scarring to the rectum. Dr. Johnson also testified that one would definitely expect to see a ruptured hymen, scarring, tearing, or fissures in the situation SP described. He further testified that one would see a ruptured hymen if there was digital penetration. Dr. Johnson stated that YH’s medical report indicated that her grandfather had been molesting her for about one year. She did not have bleeding but did have some painful urination. The last episode of sexual abuse was about ten days before the examination. The report indicated that there was no physical evidence of sexual abuse. No cultures were done. There was no scarring and the hymen was intact. The petitioner also testified in his defense. He said he was a pastor for 6-1/2 years and oversaw a youth program. To his knowledge, there had been no complaints about him. He said he was never married to Jannetta Hephzibah’s mother, and his contact with Jannetta was limited while he was dating his first wife, but increased after he got married. The petitioner testified that once Jannetta began dating her husband, she joined a religious cult and moved to the cult’s headquarters after her marriage, which put a strain on their relationship. Jannetta moved back to Michigan in late 1999 and stayed with him and his wife until late 2001. -9- During that time, he and his wife watched the children quite a few times. Jannetta then separated from her husband and moved back to Detroit with her children. She found a job and asked the petitioner to watch the children while she was at work. The petitioner testified that he told her that he could not do so because he had his hands full with his ministry. However, he later agreed to watch the children because the sitter Jannetta found did not work out. The petitioner further testified that Jannetta did not always send the children to his house with clean clothes, and on many occasions she sent them to his house with no changes of underwear, socks, or Sunday clothes, forcing him to buy them. The petitioner also testified that Jannetta was concerned that SP would not tell the truth about things and had “whipped” her when she would not admit the truth. The petitioner said he loved the girls as if they were his own. The petitioner also testified as to how he got the scars on his hips. He said his condition altered his walking gait, caused undue stress on his knees and back, and caused him constant pain. He said it also limited the positions he could be in when he had sex. The petitioner testified that he showed SP his scars after she had showed him her scar and asked to see his. YH and her brother were present. The petitioner testified that on May 10, 2003, Jannetta and her nephew appeared at his church as he was preparing to give his sermon and confronted him with SP’s and YH’s allegations. He said he was shocked and hurt and denied the allegations. He told Jannetta that he would go to her house after church “to get to the bottom of this,” but when he arrived at her house, no one was home. Trial Tr., Sept. 18, 2003, at 111-12. After learning that Jannetta was at her mother’s house, the petitioner testified that he went there. Jannetta and her mother appeared and confronted him with the girls’ allegations. -10- The petitioner testified that he immediately denied the allegations and asked to see the girls. After YH told what happened, the petitioner told them that what actually happened was that he applied ointment to a rash in her inner thighs. He said YH agreed with him. The petitioner said the rash did not go into her private parts and denied applying ointment to her private parts. After going through the same thing with SP, he suggested that if they really believed the allegations to take the girls to a doctor. The petitioner denied telling YH or SP to get the “motion lotion” out of the night stand drawer. He denied using cotton balls on either SP’s or YH’s private parts. He denied all of SP’s and YH’s allegations. He testified that the allegations hurt him, but they did not cause him to lose his pastoral position. Rather, he took a sabbatical to lessen the discourse within his church. The petitioner testified that he thought SP and YH had been influenced to make the allegations. The prosecution then called its sole rebuttal witness, Mary Randol. Randol testified that she shared two children in common with the petitioner, one of them being Jannetta Hephzibah. She said she had seen the petitioner ride a motorcycle and lift his leg to get onto it. She said there was never a time when the girls had a rash. She also testified about the day the girls confronted the petitioner about the allegations. She said the petitioner’s immediate reaction was “real calm.” Trial Tr., Sept. 22, 2003, at 23. He did not “jump up and down and protest.” Ibid. She said she finally asked him to “just say something.” Ibid. The petitioner asked her what she wanted him to say, and when she suggested that he say that he did not do it, he said he did not do it. She testified that when he was confronted with SP’s allegations, he “just sat there rocking his head,” did not object, and did not deny them. Trial Tr., Sept. 22, 2003, at 24. According to Randol, the petitioner eventually said he put cream on YH’s upper thigh because she had a rash and had no explanation for what he did to SP. -11- The jury deliberated for about two hours and convicted the petitioner of the criminal sexual conduct charges. His motion for a judgment notwithstanding the verdict was denied. He was sentenced to concurrent prison terms of seventeen to forty years the CSC I convictions and thirty months to fifteen years for the CSC II convictions. Following sentencing, the petitioner filed a direct appeal in the Michigan Court of Appeals, which affirmed his convictions on January 13, 2005. People v. Fuller, No. 251892, 2005 WL 77152 (Mich. Ct. App. Jan. 13, 2005). The Michigan Supreme Court denied his application for leave to appeal on August 30, 2005. People v. Fuller, 474 Mich. 855, 702 N.W.2d 580 (2005). On May 10, 2006, the petitioner filed a post-conviction motion for relief from judgment in the state trial court, which was denied. People v. Fuller, No. 03-006927-01 (Wayne Cnty. Cir. Ct. Feb. 14, 2007). The petitioner’s ensuing applications for leave to appeal were denied by the Michigan Court of Appeals and the Michigan Supreme Court. People v. Fuller, No. 279220 (Mich. Ct. App. Nov. 5, 2007); People v. Fuller, 480 Mich. 1187, 747 N.W.2d 277 (2008). The petitioner filed his habeas petition on June 23, 2008 raising the following claims: I. II. III. IV. Petitioner was denied his right under the Sixth Amendment to cross-examine the complainant about possible bias and motive. Petitioner was denied a fair trial when the prosecutor [(a)] argued that the defense expert witness was there for the purpose of misleading the jury (b) shifted the burden of proof (c) appealed to the jury[’s] civic duty and used inflammatory comments to draw sympathy from the jury. Petitioner was denied his right to effective assistance of counsel under the Sixth Amendment to the Constitution when counsel failed to object to the prosecutor[’s] line of questions and open and closing arguments. Petitioner was denied a fair trial where the prosecutor failed to give notice of other bad acts evidence and trial counsel was ineffective for failing to object. -12- V. VI. Petitioner[’s] convictions for first-degree CSC and second-degree CSC must be vacated because the prosecution failed to prove guilt beyond a reasonable doubt. Petitioner was denied a fair trial and due process was violated when the trial court allowed the prosecutor to admit new evidence in rebuttal. VII. Petitioner was denied his right under the Sixth Amendment to have a jury find other “behavior” found by the trial court to increase Petitioner[’s] sentence. VIII. Petitioner received ineffective assistance of counsel on appeal when counsel failed to raise three issues outlined in this petition/brief. Pet. at 19, 23, 27, 29, 36, 42, 45, 50. The respondent filed an answer in opposition to the petition II. A. The respondent initially argues that the petition was filed late and must be dismissed, reasoning that because the petitioner missed the date for filing a timely application in the Court of Appeals after his motion for relief from judgment was denied, the remaining state proceedings did not toll the habeas statute of limitations. The Court disagrees. The Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), amended 28 U.S.C. § 2244 to include a one-year period of limitations for habeas petitions brought by prisoners challenging state-court judgments. See Vroman v. Brigano, 346 F.3d 598, 601 (6th Cir. 2003). The one-year statute of limitations runs from the date on which the state court judgment became final by the conclusion of direct review or the expiration of the time for seeking such review. See 28 U.S.C. § 2244(d)(1)(A). A Michigan prisoner’s conviction becomes “final” when the ninety-day period to file a petition for writ of certiorari to the United States Supreme Court from the Michigan Supreme Court’s denial of his direct appeal expires. -13- See Jimenez v. Quarterman, 555 U.S. 113, 119 (2009); Sherwood v. Preslesnik, 579 F.3d 581, 585 (6th Cir. 2009); S. Ct. R. 13(1). In this case, the petitioner’s direct appeals concluded in the state courts when the Michigan Supreme Court denied his application for leave to appeal on August 30, 2005. The petitioner’s conviction therefore became final ninety-days later, on November 28, 2005. He then had until November 28, 2006 to file his habeas petition unless that deadline was tolled. Title 28, § 2244(d)(2) provides: “The time during which a properly filed application for State post-conviction or other collateral review with respect to the pertinent judgment or claim is pending shall not be counted toward any period of limitation under this subsection.” The petitioner filed a motion for post-conviction relief in the state trial court on May 10, 2006, 163 days after his conviction became final. The one-year statute of limitations was tolled until the Michigan Supreme Court denied his application for leave to appeal on April 28, 2008. See Lawrence v. Florida, 549 U.S. 327, 333 (2007) (holding that the one-year statute of limitations was not tolled during the pendency of petition for certiorari to the United States Supreme Court seeking review of denial of state post-conviction relief). At that point, the petitioner had 202 days left to file his habeas petition. The petitioner filed his habeas petition on June 23, 2008, within that time frame. But to toll the one-year habeas statute, a post-conviction motion must be “properly filed,” see 28 U.S.C. § 2244(d)(2), and the respondent contends that the petitioner’s application for leave to appeal the trial court’s denial of the post-conviction motion was not properly filed because it was not submitted within 21 days. However, the petitioner filed a delayed application within the time allowed by the state court rules. See Mich. Ct. R. 7.205(F). In Matthews v. Abramajtys, 319 F.3d 780 (6th Cir. 2003), the Sixth Circuit, applying Carey v. Saffold, 536 U.S. 214, 219-21 (2002) -14- (holding that the tolling provision in § 2244(d)(2) “cover[s] the time between a lower state court’s decision and the filing of a notice of appeal to a higher state court”), held that the gap between the trial court’s denial of a motion for relief from judgment under Michigan Court Rule 6.500 and the filing of a delayed application for leave to appeal in the court of appeals does not count against the one-year statute of limitations period. Matthews, 319 F.3d at 788; see also Spytma v. Howes, 313 F.3d 363 (6th Cir. 2002) (same). The respondent’s argument that the present petition is time barred must be rejected. B. The respondent also argues that the petitioner cannot proceed on several of his claims because he did not raise them on direct appeal, and the state’s own procedural rules under which relief was denied provide an adequate and independent state law ground for that decision, which is unreviewable by a federal court. That argument is known as “procedural default.” Under the procedural default doctrine, a federal habeas court will not review a question of federal law if the state court’s decision rests on a substantive or procedural state law ground that is independent of the federal question and is adequate to support the judgment. See Coleman v. Thompson, 501 U.S. 722, 729 (1991). However, “federal courts are not required to address a procedural-default issue before deciding against the petitioner on the merits.” Hudson v. Jones, 351 F.3d 212, 215 (6th Cir. 2003) (citing Lambrix v. Singletary, , 525 (1997 . Although ordinarily procedural-bar issues must be resolved first, “[j]udicial economy might counsel giving the [other] question priority, for example, if it were easily resolvable against the habeas petitioner, whereas the procedural-bar issue involved complicated issues of state law.” Lambrix, 520 U.S. at 525. In this case, the Court finds -15- that the interests of judicial economy are best served by addressing the merits of the petitioner’s claims. III. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the standard of review federal courts must apply when considering an application for a writ of habeas corpus raising constitutional claims, including claims of ineffective assistance of counsel. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) permits a federal court to issue the writ only if the state court decision on a federal issue “was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court,” or it amounted to “an unreasonable determination of the facts in light of the evidence presented in the State court proceeding.” 28 U.S.C. § 2254(d)(1)-(2); Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Under that review standard, mere error by the state court does not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) (internal quotes omitted . Additionally, this Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). -16- The Supreme Court has explained the proper application of the “contrary to” clause as follows: A state-court decision will certainly be contrary to [the Supreme Court’s] clearly established precedent if the state court applies a rule that contradicts the governing law set forth in our cases. . . . A state-court decision will also be contrary to this Court’s clearly established precedent if the state court confronts a set of facts that are materially indistinguishable from a decision of this Court and nevertheless arrives at a result different from [the Court’s] precedent. Williams, 529 U.S. at 405-06. The Supreme Court has held that a federal court should analyze a claim for habeas corpus relief under the “unreasonable application” clause of § 2254(d)(1) “when a state-court decision unreasonably applies the law of this Court to the facts of a prisoner’s case.” Id. at 409. The Court has explained that an unreasonable application of federal law is different from an incorrect application of federal law. Under that language, “a federal habeas court may grant the writ if the state court identifies the correct governing legal principle from [the Supreme] Court’s decisions but unreasonably applies that principle to the facts of the prisoner’s case.” Williams, 529 U.S. at 413. The Supreme Court has continued to emphasize the limited nature of this review. In its recent unanimous decision in Harrington v. Richter, --- U.S. ---, 131 S. Ct. 770 (2011), the Court reiterated that the AEDPA requires federal habeas courts to review state court decisions with “deference and latitude,” and “[a] state court’s determination that a claim lacks merit precludes habeas relief so long as ‘fairminded jurists could disagree’ on the correctness of the state court’s decision.” Id. at 785-86 (quoting Yarborough v. Alvarado, , 664 (2004 . The distinction between mere error and an objectively unreasonable application of Supreme Court precedent creates a substantially higher threshold for obtaining relief than de novo review. -17- The AEDPA thus imposes a highly deferential standard for evaluating state-court rulings, and demands that state-court decisions be “given the benefit of the doubt.” Renico v. Lett, --- U.S. ---, ---, 130 S. Ct. 1855, 1862 (2010) (finding that the state court’s rapid declaration of a mistrial on grounds of jury deadlock was not unreasonable even where “the jury only deliberated for four hours, its notes were arguably ambiguous, the trial judge’s initial question to the foreperson was imprecise, and the judge neither asked for elaboration of the foreperson’s answers nor took any other measures to confirm the foreperson’s prediction that a unanimous verdict would not be reached” (internal quotation marks and citations omitted ; see also Bray v. Andrews, 640 F.3d 731, 737-39 (6th Cir. 2011); Phillips v. Bradshaw, 607 F.3d 199, 205 (6th Cir. 2010); Murphy v. Ohio, 551 F.3d 485, 493-94 (6th Cir. 2009); Eady v. Morgan, 515 F.3d 587, 594-95 (6th Cir. 2008); Davis v. Coyle, 475 F.3d 761, 766-67 (6th Cir. 2007); King v. Bobby, 433 F.3d 483, 489 (6th Cir. 2006); Rockwell v. Yukins, 341 F.3d 507, 511 (6th Cir. 2003) (en banc). Moreover, habeas review is “limited to the record that was before the state court.” Cullen v. Pinholster, --- U.S. ---, 131 S. Ct. 1388, 1398 (2011). A. The petitioner argues that his right to cross-examine fully his older granddaughter, SP, was abridged when the trial court prevented his attorney from inquiring into her past sex acts. The alleged error implicates the Confrontation Clause, and the issue was discussed on the trial court record, but it was not raised on direct appeal. The state trial judge’s order denying the motion for post-conviction relief did not discuss the merits of the issue, and the trial judge’s ruling at trial did not include any reasoning for excluding the evidence, except, perhaps, to accept the prosecution’s argument. -18- Addressing the issue here is complicated further by the lack of a full discussion of the exact nature of the evidence the petitioner would have presented and his reason for offering it. The colloquy during the prosecutor’s motion to bar the questioning and an excerpt from the post- conviction appellate brief provide some information, however. During trial on September 15, 2003, the following exchange took place: MS. WEINGARDEN [the prosecutor]: And also, I don’t know that this is going to be a problem, but there was a different Defense Counsel at the preliminary examination than there are here today, and that Defense Counsel asked [SP], the oldest [sic] of the two complainants, about other sexual acts she was involved with other people. And that was clearly in violation of the Rape Shield Law. I would ask counsels not to bring that out. They have not given notice that they plan on bringing that out. I just want it on the record. MR. TOCO [defense counsel]: Judge, may I be heard? THE COURT: Yes. MR. TOCO: Judge, this is not going to Rape Shield but more to motive, definitely more probative than it is prejudicial. This a situation where we contend this is a young lady that has not only engaged in other sexual acts with other children. It’s a not situation where she has engaged with other adults, but also has a history of lying about those sexual acts, Judge. That goes to the heart of the motive in this case. And it’s improper for the Prosecutor to come in and say, well, we plead Rape Shield. If she had a 404(b) objection, she should have brought out at least 28 days before today’s trial, which she did not, Judge. Judge, we are going to touch on it very very briefly, but, Judge, that is at the heart of our defense, these other acts. MS. WEINGARDEN: Well, then counsel had an obligation to file notice under 404. It’s not my obligation to guess what they’re going to do. MR. TOCA: Judge, these are facts that she has known about since the exam. These are part of this young lady’s history. To say that they’re sexual acts I think is a little misleading. THE COURT: She probably should know, and you should know. I don’t. And I should have known. There should be something in front of me. I have no way of knowing this until now. -19- MR. TOCA: Judge, this is part of the Court record, part of the preliminary exam. And certainly -- THE COURT: Is there a motion before me? MR. TOCA: I think she just made a motion in limine, Judge. MS. WEINGARDEN: To prohibit Defense Counsel from asking the young girl about other sexual acts with other young people. MR. TOCA: Judge, one thing, these are not sexual acts. The situation where one occasion the young lady was found lying on top of another little boy. Hardly a sexual act. Another situation where she was found in bed lying with another little girl. Hardly a sexual act. Situation in school where little boys were asking about sexual things, but not a sexual act, Judge. And certainly again, these are part of the case. These are part of the facts in the case and goes to the heart of our defense that this young lady has engaged in other acts similar to the one that she is accusing my client of and lying about that. THE COURT: Anything further? MS. WEINGARDEN: I think it’s clearly Rape Shield prohibited. THE COURT: Well, the Court will not allow it. Let’s move on. Trial Tr., Sept. 15, 2003, at 4-7 (emphasis added). In the petitioner’s brief in support of delayed application for leave to appeal the denial of his motion for relief of judgment, he stated: In the instant case, the damage to the Defendant case cannot be overemphasized, considering this case came down to a credibility between the victim’s [sic] and the Defendant. The prosecutor repeatedly argued to the jury that the children were too knowledgeable about sex for their age and that the Defendant was the one who expose them to this. Defendant wanted to show motive as to why the children would lie, based on the fact the older child was caught engaged in sexual acts with other boys and had a history of lying whenever she was in trouble. The defense theory was that the older child had influence her little sister and was able to get her to lie for her whenever, she was in trouble. Had Defendant been allowed to cross-examine to show bias or motive to lie it probable would have effected the trial’s outcome. In short, the Confrontation Clause error cannot be deem harmless under either the Chapman or Brecht standard. -20- Brief in Supp. of Delayed Application for Leave to Appeal Denial of Mot. for Relief of Judgment at 20-21. As mentioned, it is not clear why the trial judge refused to allow the cross-examination. It is conceivable that he found that Michigan’s statute requiring advance notice of such evidence was violated. See Mich. Comp. Laws § 750.520j(2) (requiring 10 days notice of intent to offer evidence of other sexual conduct of victim in criminal sexual conduct case). However, the Supreme Court has held that Michigan’s notice-and-hearing requirement is not unconstitutional per se, and it “serves legitimate state interests in protecting against surprise, harassment, and undue delay. Failure to comply with this requirement may in some cases justify even the severe sanction of preclusion.” Michigan v. Lucas, 500 U.S. 145, 153 (1991); see also Taylor v. Illinois, 484 U.S. 400 (1988) (holding that the Sixth Amendment does not prohibit the preclusion of otherwise admissible evidence as a sanction for the violation of a reciprocal-discovery rule). The statute may be unconstitutional as applied, but only if its application trenches upon a defendant’s confrontation or due process rights. See Vasquez v. Jones, 496 F.3d 564, 573-74 (6th Cir. 2007); Boggs v. Collins, 226 F.3d 728, 636-37 (6th Cir. 2000). Those rights can be curtailed if the State has articulated “very substantial” interests served by the limitation on those rights. Vasquez, 496 F.3d at 573; see also Chambers v. Mississippi, 410 U.S. 284, 295 (1973) (holding that “the right to confront and to cross-examine is not absolute and may, in appropriate cases, bow to accommodate other legitimate interests in the criminal trial process”). That begs the question here. The Sixth Amendment guarantees a defendant the right to be confronted with the witnesses against him. U.S. Const. amend. VI. The right to confrontation includes the right to conduct reasonable cross-examination. Davis v. Alaska, 415 U.S. 308, 315-16 (1974) (holding that if cross- -21- examination aims to reveal the motive, bias or prejudice of a witness, it ought to be allowed). Cross-examination is the “principal means by which the believability of a witness and the truth of his testimony are tested.” Id. at 316. The exposure of a witness’ motivation for testifying is a proper and important function of the constitutionally protected right of cross-examination. Id. at 316-17. In analyzing whether an evidentiary restriction violated the Confrontation Clause, “the Supreme Court has ‘distinguished between a “general attack” on the credibility of a witness — in which the cross-examiner “intends to afford the jury a basis to infer that the witness’s character is such that he would be less likely than the average trustworthy citizen to be truthful in his testimony” — and a more particular attack on credibility “directed toward revealing possible biases, prejudices, or ulterior motives as they may relate directly to issues or personalities in the case at hand.”’” Lewis v. Wilkinson, 307 F.3d 413, 419 (6th Cir. 2002) (quoting Boggs, 226 F.3d at 736 (interpreting Davis and Delaware v. Van Arsdall, 475 U.S. 673, 681-84 (1986), as setting forth the clearly-established rule that “cross-examination as to bias, motive or prejudice is constitutionally protected, but cross-examination as to general credibility is not.”). It appears from the discussion at trial that the petitioner wanted to ask about SP’s past sexual encounters to show that SP had lied before when caught in sex acts with boys and girls, and she could persuade her sister, YH, to lie for her as well. And according to the appellate brief, he also wanted to blunt the prosecution’s anticipated argument that the children were too knowledgeable about sexual matters to have learned it anywhere but their activities with the petitioner. The petitioner’s motivation to ask those questions, perhaps, could be characterized as an attack on general credibility. The petitioner argues instead that the questions would have been designed to elicit information from SP about her specific responses to a given situation that -22- paralleled somewhat the circumstances alleged against the petitioner. That is not quite the picture presented by the evidence, however. SP was never “caught” in or accused of any sex acts with the petitioner. Rather, she revealed the conduct herself, first to her cousin and then to her mother, followed by statements of varying consistency to social workers and investigators. There does not appear to be a triggering event that stimulated a motive to lie, as there apparently was in her other encounters. Nor does the excluded evidence appear to support the suggestion that SP could persuade YH to lie about YH’s own sexual involvement with the petitioner. The evidence may have supported an inference that SP learned about the details of sexual behavior from a source other than the petitioner. However, that inference is equivocal, having a chicken-and-egg quality to it. It is conceivable that the jury also could have inferred that SP’s acts with children her own age was an outgrowth of the abuse inflicted on her by the petitioner. But the evidence could have shed light on SP’s tendency to lie about sexual conduct in a more general way that avoids the strictures of Lewis and Boggs. Because the evidence would have addressed SP’s tendency to lie about sexual situations, rather than her untruthfulness in general, the proposed questioning most likely would have implicated the Confrontation Clause. As note above, however, a State’s “very substantial” interests may justify limiting cross- examination in a way that is consistent with the Confrontation Clause. The Supreme Court has stated that Michigan’s rape shield statute “represents a valid legislative determination that rape victims deserve heightened protection against surprise, harassment, and unnecessary invasions of privacy.” Lucas, 500 U.S. at 150. The state court never articulated on the record a rationale that balanced those interests against the petitioner’s Confrontation Clause rights, but the absence of such reasoning does not dilute the degree of deference this Court must accord the state court’s ultimate -23- ruling. “Where a state court’s decision is unaccompanied by an explanation, the habeas petitioner’s burden still must be met by showing there was no reasonable basis for the state court to deny relief.” Harrington, 131 S. Ct. at 784. This Court cannot say that the state court unreasonably applied the Supreme Court’s Confrontation Clause jurisprudence by determining that the interests served by the rape shield statute substantially outweighed the petitioner’s interest in eliciting testimony that may have undermined one of the victim’s credibility. Even if that determination could be found to be unreasonable, the Confrontation Clause violation is subject to harmless-error analysis. Van Arsdall, 475 U.S. at 681-84. On habeas review, a court must assess harmlessness under the standard set forth in Brecht v. Abrahamson, 507 U.S. 619 (1993), regardless of whether the state appellate court recognized the error and reviewed it for harmlessness. Fry v. Pliler, 551 U.S. 112, 121-22 (2007); see also Vasquez, 496 F.3d at 574-75. Under that standard, habeas relief cannot be granted unless the constitutional error in the state criminal trial had a “substantial and injurious effect” on the result. Brecht, 507 U.S. at 638. In determining whether the restriction was harmless, a court must consider a number of factors, “includ[ing] the importance of the witness’ testimony in the prosecution’s case, whether the testimony was cumulative, the presence or absence of evidence corroborating or contradicting the testimony of the witness on material points, the extent of cross-examination otherwise permitted, and, of course, the overall strength of the prosecution’s case.’” Van Arsdall, 475 U.S. at 684. This Court does not find that the petitioner’s inability to cross-examine SP about her prior sexual acts adversely affected the outcome of the trial. Defense counsel never argued that SP had lied about the incidents, but even if she had, he did not show that she had a motive to lie about the petitioner’s conduct. The inference of untruthfulness to be drawn from the excluded evidence was -24- weak because the circumstances of the events were not parallel. The suggestion that the evidence would have provided an alternate source for the children’s experiences and information was plausible but equivocal. The Court cannot say that excluding the evidence had a “substantial and injurious effect” on the outcome of the trial. B. The petitioner next alleges that the prosecutor unfairly denigrated his expert medical witness by calling him a hired gun, shifted the burden of proof by asking why the petitioner had not called the actual treating physician, appealed to the civic duty of the jury, and used inflammatory comments to draw sympathy from the jury. It is well-established that prosecutors must “‘refrain from improper methods calculated to produce a wrongful conviction.’” United States v. Young, 470 U.S. 1, 7 (1985) (quoting Berger v. United States, 295 U.S. 78, 88 (1935 . However, “[c]laims of prosecutorial misconduct are reviewed deferentially on habeas review.” Millender v. Adams, 376 F.3d 520, 528 (6th Cir. 2004) (citing Bowling v. Parker, 344 F.3d 487, 512 (6th Cir. 2003 . Prosecutorial misconduct may warrant habeas corpus relief only if the misconduct “so infected the trial with unfairness as to make the resulting conviction a denial of due process.” Darden v. Wainwright, 477 U.S. 168, 181 (1986) (quoting Donnelly v. DeChristoforo, , 643 (1974 . “To constitute a denial of due process, the misconduct must be ‘so pronounced and persistent that it permeates the entire atmosphere of the trial.’” Byrd v. Collins, 209 F.3d 486, 529-30 (6th Cir. 2000) (quoting Pritchett v. Pitcher, 117 F.3d 959, 964 (6th Cir. 1997 . “The Court must examine ‘the fairness of the trial, not the culpability of the prosecutor.’” Pritchett, 117 F.3d at 964 (quoting Serra v. Michigan Dep’t of Corr., 4 F.3d 1348, 1355 (6th Cir. 1993 . -25- The Court first considers whether the prosecutor’s conduct or remarks were improper. Slagle v. Bagley, 457 F.3d 501, 515-16 (6th Cir. 2006). If they were, the Court then must decide whether the improper acts were so flagrant as to warrant relief. Id. at 516. The Sixth Circuit applies a four- factor test to any inappropriate prosecutorial conduct to determine whether it was flagrant: “(1) whether the evidence against the defendant was strong, (2) whether the conduct of the prosecution tended to mislead the jury or prejudice the defendant; (3) whether the conduct or remarks were isolated or extensive; and (4) whether the remarks were made deliberately or accidentally.” Id. (citation omitted). The petitioner first contends that the prosecutor shifted the burden of proof by questioning why the defendant did not call the children’s treating physician instead of the defense expert, whom she characterized as a hired gun. A prosecutor may not argue or imply that the burden of persuasion falls to a defendant to prove his innocence. See United States v. Clark, 982 F.2d 965, 968-69 (6th Cir. 1993). However, a prosecutor is entitled to point out the lack of evidence supporting defense theories. United States v. Forrest, 402 F.3d 678, 686 (6th Cir. 2005). In this case, the prosecutor’s argument that the petitioner had an obligation to call any witness was improper. However, it is unlikely that the argument shifted the burden of proof or deprived the petitioner of a fair trial because any prejudice that might have resulted from the comment was cured by the trial court’s lengthy instructions on the presumption of innocence and the proper burden of proof; the court told the jury in frank terms that the petitioner did not have to prove his innocence. See Scott v. Elo, 302 F.3d 598, 603-04 (6th Cir. 2002). Furthermore, the doctor who testified said he was not being paid for his time or services but that he was there because he had a “relationship” with the defense attorney’s law firm. The prosecutor was justified in -26- questioning the doctor’s impartiality, and the term “hired gun” was not so inflammatory that it affected the fairness of the trial. The petitioner next alleges that the prosecutor committed misconduct by appealing to the jurors to do their civic duty and draw sympathy from them during voir dire, her opening statement, and her closing argument. During opening statements, the prosecutor stated, “To the rest of you, what you are going to hear is some very graphic, disgusting testimony. That’s the best word I can use to describe it. And I need to know if you can stomach sitting here and hearing that.” Trial Tr., Sept. 15, 2003, at 29. The prosecutor also stated, “We’re here today because that man sexually assaulted his two young granddaughters. What you’re going to hear will disgust and sicken you, and for that I apologize.” Id. at 142. During closing argument, he stated, “Don’t apologize for your verdict. Don’t feel guilty for your verdict. You were sworn to take an oath to do the right thing, to do justice, and that’s what we ask you to do, find him guilty.” Trial Tr., Sept. 22, 2003, at 83. “‘Unless calculated to incite the passions and prejudices of the jurors, appeals to the jury to act as the community conscience are not per se impermissible.’” Byrd, 209 F.3d at 539 (quoting United States v. Solivan, 937 F.2d 1146, 1151 (6th Cir. 1991 . A prosecutor does not overstep the bounds of propriety by appealing to the jurors’ sense of justice. Bedford v. Collins, 567 F.3d 225, 234 (6th Cir. 2009). A prosecutor does not act improperly unless he or she “calls on the jury’s emotions and fears — rather than the evidence — to decide the case.” Johnson v. Bell, 525 F.3d 466, 484 (6th Cir. 2008). The petitioner has not shown that the prosecutor made the statements with the intention of inciting the passions or prejudices of the jurors. The prosecutor’s language was not inflammatory, and it does not appear to be intended to incite prejudice. The prosecutor’s use of ordinary -27- terminology, such as “shocking” or “ridiculous,” may have evoked sympathy for the complainants, but the prosecutor did not ask the jury to convict on that basis. Rather, because the testimony was that the petitioner digitally and anally penetrated his granddaughters and forced the older one to perform oral sex on him and to submit to anal sex, the prosecutor was justified in warning the jury that the testimony they would be hearing was upsetting. Indeed, such testimony likely would offend a normal person’s sensibilities, and the prosecutor’s warning to that effect was appropriate. It was not appropriate for the prosecutor to state “that man sexually assaulted his two young granddaughters,” since that statement implied personal knowledge on the prosecutor’s part. But that remark was not flagrant; more likely it was attributable to inexperience or a surfeit of enthusiasm. Moreover, the jury was properly instructed as to what they should and should not consider as evidence. The Court finds that the prosecutor’s conduct did not offend the Due Process Clause. C. The petitioner next argues that he received ineffective assistance of trial counsel because his attorney failed to object to the instances of prosecutorial misconduct discussed in the previous section. To show a violation of the Sixth Amendment right to effective assistance of counsel, a petitioner must demonstrate “that counsel’s performance was deficient” and “that the deficient performance prejudiced the defense.” Strickland v. Washington, 466 U.S. 668, 687 (1984); see also Towns v. Smith, 395 F.3d 251, 258 (6th Cir. 2005). The petitioner must show “that counsel made errors so serious that counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment.” Strickland, 466 U.S. at 687. Because the prosecutorial-misconduct claims lack merit, defense counsel was not ineffective by failing to object, and habeas relief is not warranted on the petitioner’s ineffective-assistance-of- -28- counsel claim based on the lack of objection to to the prosecutor’s statements during voir dire, opening statement, and closing argument. D. The petitioner next argues that the prosecutor engaged in misconduct by failing to provide notice of the intent to introduce evidence of other acts as required by Michigan state law. Those other acts, the petitioner explains, consist of the victims’ testimony about uncharged acts of sexual abuse. The violation of the State’s notice requirement will not warrant relief from this Court. See, e.g., Lewis v. Jeffers, 497 U.S. 764, 780 (1990) (holding that “federal habeas corpus relief does not lie for errors of state law”). On direct review applying a plain-error standard, the Michigan Court of Appeals concluded that the petitioner failed to show “that he would have offered rebuttal evidence or taken other effective action if the prosecutor had provided timely notice under MRE 404(b)(2).” Fuller, 2005 WL 77152, at *4. The Court of Appeals found that the absence of notice did not have any significant effect on the proceedings. Id. at 5. The petitioner has not shown that the prosecution’s failure to give the notice impaired his defense or otherwise rendered his trial fundamentally unfair. He is not entitled to habeas relief on this claim. E. In his fifth habeas claim, the petitioner argues that he received ineffective assistance of trial counsel because his attorney failed to object to the prosecutor’s failure to provide notice that she intended to introduce evidence of uncharged offenses, as stated above. Again, because the Court finds that the petitioner was not prejudiced by the prosecutor’s conduct — and thereby no prejudice -29- can flow from defense counsel’s conduct — the Court cannot find that the petitioner’s Sixth Amendment rights were violated when defense counsel did not object to the lack of notice. F. In his sixth claim, the petitioner contends that the prosecution presented insufficient evidence to prove his guilt beyond a reasonable doubt with respect to his three CSC I convictions involving YH because her testimony described only non-penetrative sexual contact, and with respect to his conviction for CSC II involving YH because the prosecutor could not establish an act of CSC II without identifying an act of sexual contact that did not involve penetration. The Michigan Court of Appeals addressed these issues and concluded that there was sufficient evidence presented on both categories of crimes: First-degree CSC involves acts of sexual penetration under the circumstances delineated by the statute, including acts with a person under thirteen years of age. MCL 750.520b(1)(a). MCL 750.520a(o) defines “sexual penetration” as “sexual intercourse, cunnilingus, fellatio, anal intercourse, or any other intrusion, however slight, of any part of a person’s body or of any object into the genital or anal openings of another person’s body, but emission of semen is not required.” The younger victim testified that defendant moved his hand around under her underpants while they sat on a couch under a blanket in defendant’s home. Although she did not use precise anatomical terms to describe these incidents, when asked what part of her body defendant touched, she replied, “my tutu,” “[m]y private part,” or “my private,” which she described as the part of her body that she used to urinate and that she wiped with tissue after urinating. Similarly, the older victim stated that she saw defendant stick his finger in the younger victim’s “private part.” The younger victim stated that the touching felt uncomfortable, it did not tickle, and that it hurt when “[h]e was doing it hard.” She estimated that it happened more than three times. The prosecutor asked the younger victim to put her hand on a table and demonstrate what defendant did with his hand. She stuck out her finger during the demonstration and stated that he moved his finger back and forth, hard, on her “private.” The testimony of both victims about defendant touching the younger victim, viewed most favorably to the prosecution, was sufficient to establish that penetration of the younger victim occurred. Although the younger victim used childish and unsophisticated terminology, she indicated that defendant touched the part of her body that she used to urinate. This testimony, together with the testimony describing -30- the amount of pressure defendant applied, allowed the jury to infer that defendant touched the younger victim between the labia. An intrusion into the labia constitutes penetration of the female genital opening under MCL 750.520a(o). People v. Bristol, 115 Mich. App 236, 238; 320 NW2d 229 (1981); see also People v. Legg, 197 Mich. App 131, 133; 494 NW2d 797 (1992) (the act of cunnilingus described by the complainant involved penetration because the complainant testified that the defendant touched the part of her body that she “[went] to the bathroom with”). Furthermore, her demonstration with her finger suggested that defendant prodded into her genital opening when he touched her. Consequently, a trier of fact could find from the younger victim’s testimony that defendant engaged in sexual penetration within the meaning of the statute. The younger victim also described incidents in which defendant used cotton balls to put cream or oil “inside” or “in” her private parts. She also stated that defendant put his finger “inside” her bottom, but when the prosecutor questioned her further, she did not know if he touched her anus or the cheeks of her buttocks. She admitted that she had not disclosed these incidents before trial. Defendant does not dispute that this testimony was sufficient to establish penetration, but he contends that these incidents were not the incidents for which he was charged because she did not reveal them before trial. . . . Defendant also claims that the evidence was insufficient to support his second-degree CSC conviction involving the younger victim because the prosecutor did not identify any specific acts of sexual contact that did not involve penetration. Second-degree CSC requires proof that the defendant intentionally touched the complainant’s intimate parts for purposes of sexual arousal or gratification. MCL 750.520c(1)(a); MCL 750.520a(n); People v. Lemons, 454 Mich. 234, 253; 562 NW2d 447 (1997). Second-degree CSC is a cognate lesser offense of first-degree CSC because the second-degree offense requires proof that the defendant acted with the intent to seek sexual arousal or gratification. Lemons, supra at 253-254. Consequently, it is possible to commit first-degree CSC without first committing second-degree CSC, but in most cases, second-degree CSC is a factually included offense within first-degree CSC. Id. at 524 n 29. Here, defendant does not claim that the prosecutor failed to prove the sexual arousal or gratification element of second-degree CSC. Rather, he contends that the prosecutor could not establish an act of second-degree CSC without identifying an act of sexual contact that did not involve penetration. However, the absence of penetration is not an element of second-degree CSC and, as our Supreme Court recognized in Lemons, supra at 254 n 29, second-degree CSC is a factually included offense within first-degree CSC if the arousal or gratification element is established. The younger victim testified that there were more than four incidents when defendant touched her inappropriately. Therefore, the jurors could have considered one of the -31- incidents as an act of second-degree CSC, while considering three other incidents as acts of first-degree CSC. Fuller, 2005 WL 77152, at *1-3. “[T]he Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged.” In re Winship, , 364 (1970). The critical inquiry on habeas review of the sufficiency of the evidence to support a criminal conviction is whether the record evidence could reasonably support a finding of guilt beyond a reasonable doubt. . . . [T]his inquiry does not require a court to “ask itself whether it believes that the evidence at the trial established guilt beyond a reasonable doubt.” Instead, the relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, , 318-19 (1979) (internal citation and footnote omitted) (emphasis in original). In the habeas context, “[t]he Jackson standard must be applied ‘with explicit reference to the substantive elements of the criminal offense as defined by state law.’” Brown v. Palmer, 441 F.3d 347, 351 (6th Cir. 2006) (quoting Jackson, 443 U.S. at 324 n.16). “A reviewing court does not reweigh the evidence or redetermine the credibility of the witnesses whose demeanor has been observed by the trial court.” Matthews, 319 F.3d at 788 (citing Marshall v. Lonberger, 459 U.S. 422, 434 (1983 . A habeas court must defer to the fact finder for its assessment of the credibility of witnesses. Id. at 788. Accordingly, “[t]he mere existence of sufficient evidence to convict . . . defeats a petitioner’s claim.” Id. at 788-89. The Court does not need to be convinced that the petitioner is actually guilty beyond a reasonable doubt. Walker v. Russell, 57 F.3d 472, 475 (6th Cir. 1995). -32- The only element in dispute on the CSC I charge involving YH is “sexual penetration,” which the Michigan legislature has defined as “sexual intercourse, cunnilingus, fellatio, anal intercourse, or any other intrusion, however slight, of any part of a person’s body or of any object into the genital or anal openings of another person’s body, but emission of semen is not required.” Mich. Comp. Laws § 750.520a(o). The Michigan Court of Appeals summarized and discussed thoroughly and accurately the trial testimony of YH and SP. There is no need to repeat that discussion; rather, it is sufficient to say that the record contained evidence from which the jury could conclude beyond a reasonable doubt that all the elements of each of the crime were proved. The state courts did not unreasonable apply the familiar Jackson standard. As to his conviction for CSC II involving YH, the petitioner alleges insufficient evidence because the prosecutor did not identify any specific acts of sexual contact that did not involve penetration. The elements of second-degree criminal sexual conduct, as charged in this case, are (1) sexual contact (2) with a person under thirteen years of age. See Mich. Comp. Laws § 750.520c(1)(a). “‘Sexual contact’ includes the intentional touching of the victim’s or actor’s intimate parts or the intentional touching of the clothing covering the immediate area of the victim’s or actor’s intimate parts, if that intentional touching can reasonably be construed as being for the purpose of sexual arousal or gratification, done for a sexual purpose, or in a sexual manner . . . .” Mich. Comp. Laws § 750.520a(q). The phrase “intimate parts” “includes the primary genital area, groin, inner thigh, buttock, or breast of a human being.” Mich. Comp. Laws § 750.520a(e). YH testified that there were more than four incidents when the petitioner touched her inappropriately. The jurors could have considered one of the incidents as an act of CSC II, while considering the three other incidents as acts of CSC I. Based upon that evidence, this Court finds -33- that a rational juror could have found both CSC I and CSC II involving the younger victim, YH, as the state courts define those elements of the crime. The Michigan Court of Appeals did not misapply the Jackson standard as to those crimes, either. G. The petitioner argues in his seventh habeas claim that the trial court erred when it allowed the prosecution to call Mary Randol as a rebuttal witness. He alleges that the admission of her rebuttal testimony violated his right to a fair trial. The petitioner raised that issue in the Michigan Court of Appeals on direct appeal as a violation of state law, not as a violation of his due process right under the Constitution. The petitioner, however, failed to raise the claim in the Michigan Supreme Court. Therefore, the respondent argues that the claim is unexhausted because it was not fairly presented to both state appellate courts. The exhaustion doctrine requires that a petitioner “fairly present” his federal constitutional claims to all levels of the state appellate system. Duncan v. Henry, 513 U.S. 364, 365-66 (1995). The Court agrees. The Court, however, has discretion to deny the petitioner’s unexhausted claim on its merits. 28 U.S.C. § 2254(b)(2). The Court concludes the petitioner’s claim is evidentiary in nature and is non-cognizable in this federal-habeas proceeding. See Slack v. Cason, 258 F. Supp. 2d 727, 733 (E.D. Mich. 2003). The Michigan Court of Appeals treated the argument as such and rejected it. Moreover, Randol’s testimony was properly admitted as rebuttal evidence to counter the petitioner’s own testimony and did not violate due process. See, e.g., Seymour v. Walker, 224 F.3d 542, 552 (6th Cir. 2000); White v. Withrow, No. 00-74231-DT, 2001 WL 902624, *7 (E.D. Mich. June 22, 2001) (petitioner’s due process right was not violated when the prosecution “split the proofs” by having a witness testify in rebuttal rather than case-in-chief). The petitioner has not -34- shown that the admission of Randol’s testimony violated any clearly established constitutional right or otherwise rendered his trial fundamentally unfair. Habeas relief is not warranted on this claim. H. The petitioner’s eighth claim for habeas relief focuses on the state court’s sentencing procedure. The petitioner contends that his sentence was increased based upon facts neither proven to a jury beyond a reasonable doubt nor admitted by him. The petitioner argues, therefore, that the trial court judge violated his Sixth Amendment right to a trial by jury by using facts to score his sentencing guidelines that had not been submitted to a jury and proven beyond a reasonable doubt or admitted to by the petitioner. The petitioner believes that Blakely v. Washington, 542 U.S. 296 (2004), and Apprendi v. New Jersey, 530 U.S. 466 (2000), support his position. However, the Sixth Circuit has held that Blakely does not apply to judicial fact-finding under Michigan’s indeterminate sentencing scheme. Montes v. Trombley, 599 F.3d 490, 497 (6th Cir. 2010); see also Chontos v. Berghuis, 585 F.3d 1000, 1002 (6th Cir. 2009) (“[The petitioner] argues that the Michigan trial judge violated Apprendi by finding facts that raised his minimum sentence. But Harris v. United States tells us that Apprendi’s rule does not apply to judicial fact finding that increases a minimum sentence so long as the sentence does not exceed the applicable statutory maximum.”). This Court is bound by those decisions. The petitioner is not entitled to habeas relief with respect to his sentencing claim. I. The petitioner’s final habeas claim alleges ineffective assistance of appellate counsel. The petitioner maintains that his appellate attorney was ineffective for not raising habeas claims one, two, three, and eight in his direct appeal from his conviction. The petitioner raised that issue in his -35- motion for relief from judgment in the trial court, which held that appellate counsel was not ineffective by failing to make meritless arguments. This Court agrees. The petitioner was not entitled to compel his appointed attorney to raise all nonfrivolous claims on appeal if counsel, as a matter of professional judgment, elected not to raise the claims. Jones v. Barnes, 463 U.S. 745, 751 (1983). In fact, “the process of winnowing out weaker arguments on appeal and focusing on those more likely to prevail . . . is the hallmark of effective appellate advocacy.” O’Sullivan v. Boerckel, 526 U.S. 838, 858 (1999) (quotation marks and citations omitted). The Court has reviewed and found no merit in the claims that the petitioner contends his appellate attorney should have raised on appeal. “[A]ppellate counsel cannot be ineffective for a failure to raise an issue that lacks merit,” Greer v. Mitchell, 264 F.3d 663, 676 (6th Cir. 2001), and there is no reasonable probability that, but for appellate counsel’s failure to raise the claims, the petitioner would have prevailed on appeal. Consequently, the petitioner’s right to competent counsel on appeal was not violated, and the state court’s adjudication of the petitioner’s claim was not contrary to or an unreasonable application of Strickland. IV. The Court concludes that the state court decision in this case was not contrary to federal law, an unreasonable application of federal law, or an unreasonable determination of the facts of the case. The petitioner has not established that he is presently in custody in violation of the Constitution of the United States. -36- Accordingly, it is ORDERED that the petition for writ of habeas corpus is DENIED. Dated: October 12, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 12, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -37-

=== GEORGE GERARD BURGER v. JOHN PRELESNIK ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION GEORGE GERARD BURGER, Petitioner, v. JOHN PRELESNIK, ________________________________________/ Respondent, Case Number 08-10085 Honorable David M. Lawson OPINION AND ORDER DENYING PETITION FOR WRIT OF HABEAS CORPUS Michigan prisoner George Gerard Burger challenges his convictions of armed robbery and fleeing from a police officer through a petition for a writ of habeas corpus filed under 28 U.S.C. § 2254 with the assistance of counsel. The robbery facts were archetypical: a lonely gas station clerk was confronted late at night by an unshaven man wearing a hat that partially concealed his face, who brandished a knife and announced, “This is a stick-up,” after which the perpetrator took money and fled the scene in a pickup truck. An Oakland County, Michigan circuit court judge managed to find something unique in the robber’s style and presentation, especially after learning that the petitioner had robbed a convenience store seven years earlier using the phrase, “This is a stickup.” The state judge admitted the evidence of the earlier robbery, ostensibly to prove the identity of the petitioner as the perpetrator of the present crime, despite the fact that he could not be credited with having coined the phrase or otherwise establishing this manner of heist as his brand. The petitioner contends that evidentiary error violated his constitutional rights by denying him a fair trial because the jury probably used the earlier robbery to find that he had a propensity to commit robberies, which led to the guilty verdict in this case. This Court cannot agree. Although the evidence ruling at the petitioner’s trial was obviously flawed, and most evidence codes consider propensity evidence to prove guilt anathema, there is no constitutional rule that bars the use of other-act evidence for such purpose, and therefore it cannot be said that the state’s evidentiary blunder denied the petitioner a fair trial under the Due Process Clause. The petitioner’s other claims — insufficient evidence and ineffective assistance of counsel — do not warrant relief, either. Therefore, the Court will deny the petition. I. At the petitioner’s jury trial, Steven Goble testified that he was working at a Mobil gas station on Highland Road (M-59) and Duck Lake Road in Highland, Michigan in the early morning hours of Easter Sunday, April 20, 2003. At around 4:00 a.m. he was watching television when a man walked in and announced, “This is a stick-up.” Goble thought the man was kidding — who wouldn’t, given the unoriginal announcement? — but he realized he was being robbed when the man tapped a knife on the counter. Goble described the perpetrator as an unshaven white male wearing a stocking cap pulled down over his eyebrows. The man appeared to be 40-to-50 years old. Goble was positioned behind the counter on a slight rise, and the man kept his head lowered and never looked directly him. Goble placed the money from the cash register on the counter; the man took it and left the station. Goble immediately called 9-1-1 and exited the station behind the perpetrator, who disappeared from view behind the gas pump. Goble then saw tail lights illuminate on a vehicle parked on Duck Lake Road. From the taillights alone, Goble identified the vehicle as a mid-1980's domestic small-sized pickup truck. At trial, Goble could not positively identify the knife offered in evidence by the prosecutor, and he acknowledged identifying other individuals as the perpetrator in both photo and corporeal lineups. When asked if the knife “look[ed] like the [one] that you saw that night?” Goble answered, -2- “It looks a lot like it. It looked a little bigger, but it looks like it.” However, when the prosecutor asked Goble, “I want you to take a look at this man right here [indicating the petitioner]. Does that look like the man who robbed you that night?” Goble responded, “Yes, it does.” But on cross-examination, Goble was asked if he was “sure” that the petitioner was the man who robbed him, and Goble responded, “A hundred percent sure? No, not the way he’s dressed and not clean shaven.” Goble conceded that he had previously described the knife as a hunting knife that had a black blade and multiple finger ridges on the handle. He did not mention a serrated edge or black thumb stud on the blade. The knife Goble identified at trial was a lock blade with a silver blade, a partially serrated edge, a black thumb stud on the blade for one-handed opening, and one ridge on the handle. Goble attempted to explain the difference between the description he gave to the police and the actual appearance of the knife as a result of how the perpetrator held the knife in his hand and because it was held in the shadow of the credit card keypad platform. Goble testified that despite these inconsistencies, the knife produced at trial “looks a lot like” the knife used by the perpetrator. Defense counsel then showed Goble the photograph array used in a pretrial identification procedure. Goble conceded that he identified subject #2 as the perpetrator whereas the petitioner was subject #4 in the array. Goble also testified on cross-examination that he identified a man other than the petitioner at a live lineup identification procedure. Goble explained on re-direct examination that the petitioner was clean-shaven at the live line up, and that after he identified a different man who was not clean-shaven, he told the detective that the petitioner would have been his second choice. -3- Deputy Steven Dooley testified that he and Deputy Potts were about 200 yards away from the Mobil station performing a building check when he received the dispatch concerning the robbery. He and Potts sprinted back to their patrol vehicles and headed north on Duck Lake Road. They passed the Mobil station within a couple of minutes of receiving the dispatch. Potts continued north on Duck Lake Road, and Dooley turned west onto Wardlow Road, which he described as a common route taken away from Duck Lake Road. There was no traffic at that time of night, and Dooley saw no taillights. As Dooley approached Milford Road, approximately five minutes after he passed the Mobil station, he saw a full-size pickup truck parked at the On-The-Go convenience store. He stopped for about two to three minutes to investigate and talked with the driver, whom he knew. While he was standing in the parking lot, he saw a Chevy S-10, a smaller pickup truck, driving west on Wardlow — the direction from which Dooley had come — and then turn north onto Milford Road. On cross- examination, Dooley conceded that if the S-10 was being driven by the perpetrator of the robbery and had traveled the shortest route, he should have passed him before reaching the On-The-Go. But Dooley saw no other vehicles until he reached the On-The-Go. Dooley returned to his vehicle and gave pursuit. Dooley stopped the S-10 on Milford Road and asked the driver to exit the vehicle. The petitioner was driving the vehicle. Dooley asked the petitioner if he could search the truck, but the petitioner refused. Dooley then asked the petitioner if he had been somewhere in the area of Duck Lake Road and M-59. The petitioner said, “I’m outta here,” jumped back into his truck, and sped away. -4- Dooley pursued the petitioner along several roads. During the pursuit Dooley could see that the petitioner was swerving back and forth and making furtive gestures in the passenger seat. Eventually the petitioner pulled off the road, stopped, and fled on foot into a woods. The petitioner managed to elude capture but was arrested a few days later at an apartment in Farmington, Michigan. Deputy John Macdonald testified that he responded to the scene where the petitioner fled on foot. He searched the S-10 and discovered the knife that was identified by Goble at trial. He also recovered a black jacket and found what he described as a crack pipe in the inside pocket. Detective Craig Cooper testified that he conducted the pretrial identification procedures. The petitioner was not in custody when the photographic lineup was conducted. Cooper explained that as a result, he was forced to use an old picture of the petitioner. Cooper claimed that the photograph of the man Goble chose looked more like the petitioner than the old picture of the petitioner did. Cooper also explained that when the petitioner was arrested, he was clean shaven. On cross- examination, Cooper conceded that he did not write in any of his reports that Goble told him that the petitioner would have been his second choice in the live lineup. Beside the evidence relating to the robbery itself, the prosecution also presented evidence that the petitioner committed an armed robbery of a gas station in 1996. At a pretrial hearing to determine the admissibility of this evidence, the prosecutor argued that although the petitioner's actions in the previous robbery were different from the actions of the robber in the instant case, those differences could be explained by the notion that a criminal will learn from his earlier mistakes that had then led to his apprehension and conviction. The prosecutor also pointed to the fact that in the 1996 case, the petitioner told the victim that this is a “stick up.” The prosecutor argued that the -5- perpetrator used the same term in the instant case instead of other common terms. Remarkably, the trial judge accepted the prosecution’s position that the term “stick up” was a unique term, and she ruled that the similar-acts evidence would be admitted to establish identity: “[T]he thing that I’m really taken by is, this is a stick up. That is so archaic, I think, and it shows a pattern. Those are unusual words to use, to me, in this day and age. . . .” The court further found, without analysis, that the probative value of the evidence was not substantially outweighed by the danger of unfair prejudice. As a result of that ruling, Balani Kandaswamy testified at trial that on December 15, 1996, at about 6:30 a.m. he was working at a Shell gas station at Farmington Road and Eight Mile Road when a white man came into the store while pulling on a ski mask. The man said that this is a “stick up,” and he had one hand in his pocket as though he had a gun. The man then grabbed all of the money in the cash register and ran out to a car parked near the gas pump. Kandaswamy testified that he called 9-1-1 and gave a description of that vehicle. Officer Matthew Parsons of the Farmington Hills Police Department testified that he received a broadcast that the armed robbery had just occurred, which described the escape vehicle as an older, rusty, blue car with a loud muffler. He observed such a vehicle at the intersection of Grand River and Pearl. When he ran the plate on that vehicle he discovered that the plate did not belong to it. The petitioner was the driver. Parsons testified that upon searching the petitioner he found a ski mask and $327 in cash in the petitioner’s pocket. The petitioner called one character witness, Raymond Blanchett, in his defense. Following arguments, instructions, and deliberations, the jury found the petitioner guilty of armed robbery, Mich. Comp. Laws 750.529, and third-degree fleeing and eluding, Mich. Comp. Laws 750.479a(3). -6- The petitioner was sentenced as a fourth-time habitual offender to a prison term of 15-to-40 years for robbery and three-to-10 years for fleeing and eluding. The petitioner made two arguments on direct appeal to the Michigan Court of Appeals: (1) the admission of evidence of the petitioner’s prior armed robbery under Michigan Rule of Evidence 404(b) was error; and (2) he was denied the effective assistance of trial counsel. The Court of Appeals affirmed the petitioner’s convictions in an unpublished opinion. People v. Burger, No. 251788, 2005 WL 624277 (Mich. Ct. App. Mar. 17, 2005). The petitioner asserted the argument that admission of the prior armed robbery evidence violated his due process right to a fair trial, but the appellate court found that the claim had been abandoned because his appellate counsel had failed to present any legal authority to support that theory. The petitioner then filed a timely application for leave to appeal in the Michigan Supreme Court and presented the same two issues, plus an argument that his rights under the Confrontation Clause were violated by his pre-trial examination. The petitioner filed a pro se application in which he also contended he had been denied the effective assistance of appellate counsel in the court of appeals when his lawyer failed to support a motion to remand with an affidavit in support of his claim of ineffective assistance of trial counsel. The Michigan Supreme Court denied the petitioner’s application for leave to appeal. People v. Burger, 474 Mich. 971, 707 N.W.2d 194 (2005). On August 29, 2006, the petitioner filed a motion for relief from judgment in the state trial court under Michigan Court Rules 6.500 et seq. The motion raised three claims: I. The admission of evidence of other crimes, wrongs or acts pursuant to Michigan Rule of Evidence 404(b) constituted a denial of due process. II. The petitioner was denied the effective assistance of appellate counsel because counsel failed to properly brief the admission of evidence of other crimes, wrongs or acts as a denial of due process. -7- III. The verdict of guilty based upon insufficient evidence constituted a denial of due process. The trial court denied the motion in an opinion and order dated September 28, 2006. The trial court recited the trial evidence and found that the petitioner was not entitled to relief under Michigan Court Rule 6.508(D) because he did not demonstrate that “but for the alleged error, [he] would have had a reasonably likely chance of acquittal.” Mich. Ct. R. 6.508(D)(3)(b)(i). The court found it unnecessary to address the “good cause” component of Michigan Court Rule 6.508(D)(3) for the failure to raise issues on direct appeal. The petitioner filed a delayed application for leave to appeal that decision in the Michigan Court of Appeals, which was denied “for lack of merit in the grounds presented.” People v. Burger, No. 275184 (Mich. Ct. App. May 30, 2007). The petitioner then filed an application for leave to appeal in the Michigan Supreme Court, which denied relief “because the defendant has failed to meet the burden of establishing entitlement to relief under MCR 6.508(D).” People v. Burger, 480 Mich. 921, 740 N.W.2d 275 (2007). The petitioner seeks a writ of habeas corpus from this Court on the following grounds: I. The admission of evidence of other crimes, wrongs or acts pursuant to Michigan Rule of Evidence 404(b) constituted a denial of due process. II. The petitioner was denied the effective assistance of appellate counsel because counsel failed to brief properly the admission of evidence of other crimes, wrongs or acts as a denial of due process. III. The petitioner was denied the effective assistance of trial and appellate counsel because: A. Trial counsel allowed the complainant to make an in court identification; B. Trial counsel failed to request a specific instruction on identification; and -8- C. In the Michigan Court of Appeals, appellate counsel failed to file an affidavit in support of the motion to remand for an evidentiary hearing on the issue of the ineffective assistance of trial counsel. IV. The verdict of guilty based upon insufficient evidence constituted a denial of due process. Ptn. at 2-3. The respondent filed an answer in opposition. II. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the standard of review federal courts must apply when considering an application for a writ of habeas corpus raising constitutional claims, including claims of ineffective assistance of counsel. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) permits a federal court to issue the writ only if the state court decision on a federal issue “was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court,” or it amounted to “an unreasonable determination of the facts in light of the evidence presented in the State court proceeding.” 28 U.S.C. § 2254(d)(1)-(2); Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Under that review standard, mere error by the state court does not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) (internal quotes omitted . Additionally, this Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also -9- West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). The Supreme Court has explained the proper application of the “contrary to” clause as follows: A state-court decision will certainly be contrary to [the Supreme Court’s] clearly established precedent if the state court applies a rule that contradicts the governing law set forth in our cases. . . . A state-court decision will also be contrary to this Court’s clearly established precedent if the state court confronts a set of facts that are materially indistinguishable from a decision of this Court and nevertheless arrives at a result different from [the Court’s] precedent. Williams, 529 U.S. at 405-06. The Supreme Court has held that a federal court should analyze a claim for habeas corpus relief under the “unreasonable application” clause of § 2254(d)(1) “when a state-court decision unreasonably applies the law of this Court to the facts of a prisoner’s case.” Id. at 409. The Court has explained that an unreasonable application of federal law is different from an incorrect application of federal law. Under that language, “a federal habeas court may grant the writ if the state court identifies the correct governing legal principle from [the Supreme] Court’s decisions but unreasonably applies that principle to the facts of the prisoner’s case.” Williams, 529 U.S. at 413. The Supreme Court has continued to emphasize the limited nature of this review. In its recent unanimous decision in Harrington v. Richter, --- U.S. ---, 131 S. Ct. 770 (2011), the Court reiterated that the AEDPA requires federal habeas courts to review state court decisions with “deference and latitude,” and “[a] state court’s determination that a claim lacks merit precludes habeas relief so long as ‘fairminded jurists could disagree’ on the correctness of the state court’s decision.” Id. at 785-86 (quoting Yarborough v. Alvarado, , 664 (2004 . -10- The distinction between mere error and an objectively unreasonable application of Supreme Court precedent creates a substantially higher threshold for obtaining relief than de novo review. The AEDPA thus imposes a highly deferential standard for evaluating state-court rulings, and demands that state-court decisions be “given the benefit of the doubt.” Renico v. Lett, --- U.S. ---, ---, 130 S. Ct. 1855, 1862 (2010) (finding that the state court’s rapid declaration of a mistrial on grounds of jury deadlock was not unreasonable even where “the jury only deliberated for four hours, its notes were arguably ambiguous, the trial judge’s initial question to the foreperson was imprecise, and the judge neither asked for elaboration of the foreperson’s answers nor took any other measures to confirm the foreperson’s prediction that a unanimous verdict would not be reached” (internal quotation marks and citations omitted ; see also Bray v. Andrews, 640 F.3d 731, 737-39 (6th Cir. 2011); Phillips v. Bradshaw, 607 F.3d 199, 205 (6th Cir. 2010); Murphy v. Ohio, 551 F.3d 485, 493-94 (6th Cir. 2009); Eady v. Morgan, 515 F.3d 587, 594-95 (6th Cir. 2008); Davis v. Coyle, 475 F.3d 761, 766-67 (6th Cir. 2007); King v. Bobby, 433 F.3d 483, 489 (6th Cir. 2006); Rockwell v. Yukins, 341 F.3d 507, 511 (6th Cir. 2003) (en banc). In this case, the state appellate courts did not address specifically the petitioner’s argument that admission of the other-acts evidence violated the Due Process Clause; instead, that court summarily denied the claim because it found that the petitioner’s appellate counsel had abandoned any federal aspect to it by not developing the argument in the appellate brief. Even though there was no reasoned discussion of the argument, a deferential review standard still is required. Last term, the Supreme Court held that “[s]ection 2254(d) applies even where there has been a summary denial [by the state courts].” Cullen v. Pinholster, --- U.S. ---, 131 S. Ct. 1388, 1402 (2011). As the Supreme Court views it, “a habeas court must determine what arguments or theories . . . could have -11- supporte[d] the state court’s decision; and then it must ask whether it is possible fairminded jurists could disagree that those arguments or theories are inconsistent with the holding in a prior decision of this Court.” Ibid. (quoting Richter, 131 S. Ct. at 786). Moreover, habeas review is “limited to the record that was before the state court.” Id. at 1398. A. The petitioner’s first claim is that he was denied his constitutional right to due process of law when the trial court allowed the introduction of evidence of his previous armed robbery. The respondent argues that the claim must fail because it cannot be supported by clearly established federal law as announced by the Supreme Court. State evidence law plainly states that proof of other criminal acts cannot be offered against a criminal defendant to show the defendant’s bad character or his propensity to commit the charged offense. See Mich. R. Evid. 404(b)(1) (stating that “[e]vidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith. . . .”). The Michigan Supreme Court once explained: The character evidence prohibition is deeply rooted in our jurisprudence. Far from being a mere technicality, the rule reflects and gives meaning to the central precept of our system of criminal justice, the presumption of innocence. Underlying the rule is the fear that a jury will convict the defendant inferentially on the basis of his bad character rather than because he is guilty beyond a reasonable doubt of the crime charged. Evidence of extrinsic bad acts thus carries the risk of prejudice, for it is antithetical to the precept that a defendant starts his life afresh when he stands before a jury. People v. Crawford, 458 Mich. 376, 383-84, 582 N.W.2d 785, 790 (1998) (internal citations and quotation marks omitted). To be admissible, evidence of prior crimes of the defendant must be offered for a non-character purpose that is relevant. People v. VanderVliet, 444 Mich. 52, 64, 508 N.W.2d 114, 121 (1993). -12- One such purpose may be to prove that the defendant is the perpetrator of the charged offense, based on unique characteristics common to that offense and other crimes the defendant has committed in the past. However, “when similar-acts evidence is offered to prove identity, [Michigan courts have] insist[ed] upon a showing of a high degree of similarity in the manner in which the crime in issue and the other crimes were committed.” People v. Golochowicz, 413 Mich. 298, 325, 319 N.W.2d 518, 528 (1982); see also People v. Goddard, 429 Mich. 505, 532, 418 N.W.2d 881, 893 (1988) (Boyle, J., dissenting) (comparing the more exacting requirements of other-acts evidence offered as proof of identity with more lenient requirements when proof of intent is involved); cf. People v. Mardlin, 487 Mich. 609, 622, 790 N.W.2d 607, 615-16 (2010). The Michigan Supreme Court laid down this rule concerning the use of evidence of other crimes committed by an accused as proof of identity: We regard the requirement to be a heavy burden upon the prosecution to show that the manner in which the crime charged and the other crimes were committed was marked with special characteristics so uncommon, peculiar and distinctive as to lead compellingly to the conclusion that all were the handiwork of the defendant because all bore his distinctive style or “touch”. Golochowicz, 413 Mich. at 325, 319 N.W.2d at 528. These principles are hardly unique to Michigan jurisprudence. The Sixth Circuit has recognized that other-act evidence as proof of identity is not relevant unless it is “of sufficient distinctive similarity” with the charges in the indictment to “create a pattern or modus operandi.” United States v. Perry, 438 F.3d 642, 648 (6th Cir. 2006); United States v. Mack, 258 F.3d 548, 554 (6th Cir. 2001) (stating that “standard conduct, although not particularly unusual by itself, may, in combination, present an unusual and distinctive pattern constituting a ‘signature’”). -13- In this case, the trial judge deemed the use of the phrase “This is a stickup” unique because it was “archaic.” The court of appeals agreed, finding that “[t]he trial court plausibly viewed the use of this phrase as rather unusual,” and when coupled with the fact that both robberies were “committed at a gas station/convenience store in the early morning by a white man whose face was partially covered by a hat, who was alone, and then escaped in a getaway vehicle parked near a gasoline pump,” the inference that the petitioner had struck again was irresistible. People v. Burger, 2005 WL 624277, at *1. That reasoning ought to have caused a judicial double-take. As the state courts laid out the facts of the two crimes, there could have been no better description of a generic robbery. The phrase “This is a stickup” in such context is no more unique than a fast-food counter clerk asking, “Do you want fires with that?” The “stickup” line is standard robbery parlance; in fact, a Westlaw search of federal and state court databases reveals the use of the phrase in 1,215 cases. The state court’s finding that the phrase “this is a stick up” establishes some sort of signature defies reason. The other features of the crimes — using a hat to cover the face, targeting a gas station or convenience store (the state courts apparently found some measure of equivalency in these retail establishments), using a vehicle to escape — do not distinguish them as “the handiwork of the defendant because all bore his distinctive style or ‘touch.’” The finding that evidence of the 1996 robbery was relevant to prove the identity of the robber in the present case is patently incorrect. The only conceivable use which the jury could make of that evidence was to establish the petitioner’s character as a robber. But the error, obvious though it may be, is still an error of state evidence law. It is well-settled that trial court errors in the application of state evidentiary law generally are not cognizable as grounds for federal habeas relief. See Estelle v. McGuire, , 67-68 (1991); -14- Serra v. Michigan Dep’t of Corr., 4 F.3d 1348, 1354 (6th Cir. 1993). Only when an evidentiary ruling is “so egregious that it results in a denial of fundamental fairness,” may it violate due process and warrant federal habeas relief. See Bugh v. Mitchell, 329 F.3d 496, 512 (6th Cir. 2003); see also Clemmons v. Sowders, 34 F.3d 352, 356 (6th Cir.1994). “[S]tate-court evidentiary rulings cannot rise to the level of due process violations unless they ‘offend[] some principle of justice so rooted in the traditions and conscience of our people as to be ranked as fundamental.’” Seymour v. Walker, 224 F.3d 542, 552 (6th Cir. 2000) (quoting Montana v. Egelhoff, 518 U.S. 37, 43 (1996 . As a matter of evidence law, the use of other-acts evidence to prove a character trait consistent with a defendant’s propensity to commit a crime is contrary to firmly established principles of Anglo-American jurisprudence. The ban on such evidence, which presently is found in Federal Rule of Evidence 404(a) and (b) (and in Michigan’s counterpart), has a distinguished historical pedigree. See, e.g., Harrison’s Trial, 12 How. St. Tr. 834, 864 (Old Bailey 1692) (Holt, C.J.) (excluding propensity evidence in a murder trial, remarking, “Hold, what are you doing now? Are you going to arraign his whole life? Away, away, that ought not to be; that is nothing to the matter”); Hampden’s Trial, 9 Cob. St. Tr. 1053, 1103 (K.B. 1684) (Withins, J.) (excluding evidence of prior forgeries from the trial of a man accused of forgery, explaining that the evidence would “rak[e] into men’s course of life, to pick up evidence that they cannot be prepared to answer to”); see also Boyd v. United States, 142 U.S. 450, 458 (1892) (finding that admission of prior crimes committed by defendants so prejudiced their trial as to require reversal); Rex v. Doaks, Quincy's Mass. Reports 90 (Mass. Super. Ct. 1763) (excluding evidence of former acts of lasciviousness from the trial of a defendant accused of keeping a bawdy house); see generally Louis M. Natali, Jr. & R. -15- Stephen Stigall, “Are You Going to Arraign His Whole Life?”: How Sexual Propensity Evidence Violates the Due Process Clause, 28 Loy. U. Chi. L.J. 1, 12-23 (1996). However, although the Supreme Court has found “no question that propensity would be an ‘improper basis’ for conviction,” Old Chief v. United States, , 182 (1997), it has declined to hold that similar “others-acts” evidence is so extremely unfair that its admission violates fundamental conceptions of justice. See Dowling v. United States, 493 U.S. 342, 352-53 (1990) (finding that the presentation of evidence of another robbery for which the defendant had previously been tried and acquitted did not violate fundamental conceptions of justice). Such matters are more appropriately addressed in codes of evidence and procedure than under the Due Process Clause. Id. at 352. Put more directly, “[t]here is no clearly established Supreme Court precedent which holds that a state violates due process by permitting propensity evidence in the form of other bad acts evidence.” Bugh v. Mitchell, 329 F.3d 496, 512 (6th Cir.2003); see also Fed. R. Evid. 413 and 414 (allowing such evidence in federal criminal trials involving sexual misconduct). And so, although the state courts badly fumbled a basic evidentiary ruling that likely prejudiced the petitioner, there is no “clearly established federal law” to which the state court’s decision could be “contrary” within the meaning of section 2254(d)(1). Therefore, the Court must deny the petitioner relief on this claim. B. The petitioner next argues that he was denied the effective assistance of appellate counsel because his appellate attorney failed to properly brief and argue the claim that the admission of the prior armed robbery constituted a denial of due process of law. The respondent argues that the claim -16- should be considered an attempt to excuse procedural default on his constitutional claim, and the petitioner’s appellate counsel was not ineffective. The right to the effective assistance of counsel includes the right to the effective assistance of appellate counsel. Evitts v. Lucey, 469 U.S. 387, 396 (1985). To prevail on a claim of ineffective assistance of appellate counsel, the petitioner must demonstrate that appellate counsel’s performance was deficient and that the deficient performance prejudiced the appeal. Strickland v. Washington, , 687 (1984). The Sixth Circuit has held that the determination of whether appellate counsel performed deficiently should be assessed in light of the following eleven factors: 1. Were the omitted issues “significant and obvious”? 2. Was there arguably contrary authority on the omitted issues? 3. Were the omitted issues clearly stronger than those presented? 4. Were the omitted issues objected to at trial? 5. Were the trial court’s rulings subject to deference on appeal? 6. Did appellate counsel testify in a collateral proceeding as to his appeal strategy and, if so, were the justifications reasonable? 7. What was appellate counsel’s level of experience and expertise? 8. Did the petitioner and appellate counsel meet and go over possible issues? 9. Is there evidence that counsel reviewed all the facts? 10. Were the omitted issues dealt with in other assignments of error? 11. Was the decision to omit an issue an unreasonable one which only an incompetent attorney would adopt? Mapes v. Coyle, 171 F.3d 408, 427-28 (6th Cir. 1999); see also Franklin v. Anderson, 434 F.3d 412, 429 (6th Cir. 2006). The Supreme Court has made clear that a criminal defendant has no constitutional right to demand that appellate counsel raise every possible colorable issue on appeal. See Jones v. Barnes, , 751 (1983). Strategic and tactical choices regarding which issues to pursue on appeal are “properly left to the sound professional judgment of counsel.” United States v. Perry, 908 F.2d 56, 59 (6th Cir. 1990). “‘[W]innowing out weaker arguments on appeal and focusing on’ those more -17- likely to prevail, far from being evidence of incompetence, is the hallmark of effective appellate advocacy.” Smith v. Murray, 477 U.S. 527, 536 (1986) (quoting Jones, 463 U.S. at 751-52). Appellate counsel thus need not raise every nonfrivolous issue, but he or she must exercise reasonable professional judgment. Joshua v. DeWitt, 341 F.3d 430, 441 (6th Cir. 2003) (citing Jones, 463 U.S. at 751-53). A petitioner is prejudiced by appellate counsel’s deficient performance if a reasonable probability exists that, but for counsel’s deficient performance, he would have prevailed on appeal. Riley v. Jones, 476 F. Supp. 2d 696, 709 (E.D. Mich. 2007); see also Meade v. Lavigne, 265 F. Supp. 2d 849, 870 (E.D. Mich. 2003) (appellate counsel may prejudice a defendant by omitting a “dead- bang winner,” an “issue . . . obvious from the trial record . . . which would have resulted in reversal on appeal”). The petitioner has not shown that failing to “federalize” the state evidentiary claim by characterizing it as a due process violation caused appellate counsel’s performance to fall outside the wide range of professionally competent assistance. Appellate counsel presented viable issues on direct appeal, including claims of insufficient evidence, ineffective assistance of trial counsel for not objecting to an in-court identification, and a violation of Michigan’s evidentiary rules. Furthermore, appellate counsel was not ineffective by failing to raise that claim because it could not have succeeded, as discussed above. See Willis v. Smith, 351 F.3d 741, 745 (6th Cir. 2003). The Court will therefore deny the petitioner’s requested habeas relief on these grounds. C. -18- The petitioner next argues that he was deprived of the effective assistance of trial counsel. The governing decision, of course, is Strickland v. Washington, (1984), in which the Supreme Court established a two-pronged test for determining if a criminal defendant was deprived of the effective assistance of counsel guaranteed by the Sixth Amendment. First, the petitioner must prove that counsel’s performance was deficient, which “requires showing that counsel made errors so serious that counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment.” Id. at 687. A habeas petitioner must identify acts that were “outside the wide range of professionally competent assistance.” Id. at 690. Second, the petitioner must show that counsel’s deficient performance prejudiced him. Prejudice is established by “showing that counsel’s errors were so serious as to deprive the defendant of a fair trial.” Id. at 687. He must show that “there is a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.” Id. at 694. On habeas review, deference to the state courts’ conclusions is required: “[t]he question ‘is not whether a federal court believes the state court’s determination’ under the Strickland standard ‘was incorrect but whether that determination was unreasonable—a substantially higher threshold.’” Knowles v. Mirzayance, 556 U.S. 111, ---, 129 S.Ct. 1411, 1420 (2009) (quoting Schriro v. Landrigan, 550 U.S. 465, 473 (2007 . Additionally, “because the Strickland standard is a general standard, a state court has even more latitude to reasonably determine that a defendant has not satisfied that standard.” Ibid. (citing Yarborough v. Alvarado, , 664 (2004 . The petitioner asserts that he was deprived of the effective assistance of counsel because his lawyer did not object to the victim making an in-court identification of the petitioner after he had -19- failed to identify him in two pretrial identification procedures, and counsel did not request a specific cautionary jury instruction regarding the in-court identification. The petitioner also argues that his appellate counsel failed to support his motion to remand with affidavits to support his claims of ineffective assistance of trial counsel. The Michigan Court of Appeals denied the petitioner’s claim on the merits: To establish a claim of ineffective assistance of counsel, a defendant must show (1) that counsel’s performance was deficient in that counsel made an error so serious that he failed to perform as the “counsel” guaranteed by the Sixth Amendment, and (2) a reasonable probability that, but for counsel’s error, there would have been a different result at the proceeding. People v. Carbin, 463 Mich. 590, 599-600; 623 NW2d 884 (2001). During Goble’s direct examination, he replied affirmatively when asked by the prosecutor whether defendant looked like “the man who robbed you that night.” Trial counsel did not object to this question or answer. But shortly thereafter, on cross-examination, trial counsel elicited that Goble was not sure that defendant was the person who robbed him. During Goble’s cross-examination, counsel also elicited that Goble at both a photographic and a corporeal lineup had identified someone else. Consequently, a strong presumption exists that counsel’s performance constituted sound trial strategy. Id. at 600. By allowing Goble to testify that defendant looked like the robber, trial counsel was able to highlight the fact that Goble had previously identified others as having committed the robbery. This certainly cast doubt on the credibility or accuracy of Goble’s recollection and identification of defendant. Accordingly, we conclude that trial counsel’s failure to object to the relevant question or answer was in the realm of reasonable trial strategy and was not deficient performance that constitutes ineffective assistance of counsel. Similarly, trial counsel’s failure to request an instruction on identification could reasonably be viewed as sound trial strategy because counsel could reasonably fear that such an instruction might leave the jury with the impression that they should conclude that Goble actually identified defendant as the robber when in fact he did not do so. Further, even if trial counsel’s performance were deficient in either or both of the ways defendant claims, we would still conclude that defendant has not established an ineffective assistance of counsel claim because there is no reasonable probability that had counsel performed differently in either regard, the jury would have reached a verdict given the strong evidence of guilt discussed above. Carbin, supra at 600. Burger, Slip Op. at 3-4. -20- This decision did not involve an objectively unreasonable application of the Strickland standard. First, the petitioner’s argument that the failure to identify a defendant in a pretrial procedure disqualifies subsequent in-court identification testimony finds no support in the law. The petitioner does not argue that the pretrial identification procedures were impermissibly suggestive; therefore, his lawyer did not err in failing to object to the in-court identification. Millender v. Adams, 376 F.3d 520, 525 (6th Cir. 2004). The victim's failure to identify the petitioner during the pretrial procedures bore on the credibility of his in-court identification, not its admissibility. Id. at 525 (citing United States v. Causey, 834 F.2d 1277, 1286 (6th Cir. 1987 . Moreover, defense counsel thoroughly challenged the victim’s identification of the petitioner as the perpetrator. He brought out all the facts surrounding the victim’s failure to identify the petitioner at the two pretrial identification procedures, and on cross-examination he was able to obtain a concession from the victim that he could not be entirely certain that the petitioner was the perpetrator. The petitioner’s claim that Michigan Criminal Jury Instruction 2d 7.8 should have been requested was likewise reasonably rejected by the Michigan Court of Appeals. The jury was instructed that in deciding whether to believe a witness’s testimony they should consider such things as “[w]as the witness able to see or hear clearly? How long was the witness watching or listening? Was anything else going on that might have distracted the witness? Did the witness seem to have a good memory?” Michigan Criminal Jury Instruction 2d 7.8 largely applies those general principles to identification testimony by asking the jury to consider such things as “how good a chance the witness had to see the offender at the time, how long the witness was watching, whether the witness had seen or known the offender before, how far away the witness was, whether the area was well-lighted, and the witness’s state of mind at that time.” Mich. Crim. Jury Inst. 2d 7.8(2). But it -21- also tells the jury that it “may use the identification testimony alone to convict the defendant, as long as you believe the testimony and you find that it proves beyond a reasonable doubt that the defendant was the person who committed the crime.” Mich. Crim. Jury Inst. 2d 7.8(4). Had the instruction been requested and read, the jury would have been told that the victim’s testimony alone might suffice to justify a guilty verdict. Because the general jury instructions covered the same ground without including that damaging suggestion, the court of appeals’s decision that defense counsel did not perform deficiently by not requesting this instruction was not objectively unreasonable. The petitioner has failed to demonstrate entitlement to habeas relief under § 2254(d) on this claim. The Court therefore finds that the petitioner’s third habeas claim is without merit. D. The petitioner’s fourth claim is that the evidence presented at trial was not sufficient to establish his identity as the perpetrator of the armed robbery. The respondent argues that this claim is procedurally defaulted because it was not presented to the state courts during his direct appeal, and the Michigan Supreme Court subsequently denied post-conviction relief on the claim under Michigan Court Rule 6.508(D). “[F]ederal courts are not required to address a procedural-default issue before deciding against the petitioner on the merits.” Hudson v. Jones, 351 F.3d 212, 215 (6th Cir.2003) (citing Lambrix v. Singletary, , 525 (1997 . “Judicial economy might counsel giving the [other] question priority, for example, if it were easily resolvable against the habeas petitioner, whereas the procedural-bar issue involved complicated issues of state law.” Lambrix, 520 U.S. at 525. In this case, the Court finds that the interests of judicial economy are best served by addressing the merits of the claim. -22- “[T]he Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged.” In re Winship, , 364 (1970). The critical inquiry on habeas review of the sufficiency of the evidence to support a criminal conviction is whether the record evidence could reasonably support a finding of guilt beyond a reasonable doubt. But this inquiry does not require a court to “ask itself whether it believes that the evidence at the trial established guilt beyond a reasonable doubt.” Instead, the relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, , 318-19 (1979) (internal citation and footnote omitted) (emphasis in original). A federal court may not reweigh the evidence or redetermine the credibility of the witnesses. Marshall v. Lonberger, 459 U.S. 422, 434 (1983). “It is the province of the factfinder to weigh the probative value of the evidence and resolve any conflicts in testimony.” Matthews v. Abramajtys, 319 F.3d 780, 788 (6th Cir. 2003) (citing Neal v. Morris, 972 F.2d 675, 679 (6th Cir. 1992 . A habeas court must defer to the fact finder for its assessment of the credibility of witnesses. Ibid. (citing Gall v. Parker, 231 F.3d 265, 286 (6th Cir. 2000) (superceded by statute on other grounds . The Court need not be convinced that the petitioner is actually guilty beyond a reasonable doubt. Walker v. Russell, 57 F.3d 472, 475 (6th Cir. 1995) (citing Neal, 972 F.2d at 677- 78). The sufficiency of evidence “standard must be applied with explicit reference to the substantive elements of the criminal offense as defined by state law,” Jackson, 443 U.S. at 324 n. 16, and through the framework of 28 U.S.C. § 2254(d), Martin v. Mitchell, 280 F.3d 594, 617 (6th Cir. 2002), requiring the Court to discuss the elements of the crimes charged. -23- Armed robbery under Michigan law is a statutory offense. See Mich. Comp. Laws § 750.529. The state courts construe this statute to define the elements of armed robbery as “(1) an assault, (2) a felonious taking of property from the victim's person or presence, and (3) the defendant must be armed with a weapon described in the statute.” People v. Johnson, 206 Mich. App. 122, 123, 520 N.W.2d 672, 673 (1994). The petitioner does not dispute that the armed robbery actually took place. Instead, the petitioner argues that he did not do it and the state did not prove that he did. The petitioner insists that the eyewitness’s identification was unreliable and the clothing description given by the complainant did not match clothing worn or possessed by the petitioner at the time he was stopped by the police. The Court finds that when viewed in the light most favorable to the prosecution, the evidence could convince a rational juror beyond a reasonable doubt that the petitioner was the man who committed the armed robbery. The victim failed to identify the petitioner at two pretrial identification procedures but testified at trial that the petitioner “looked like” the man who robbed him. The evidence suggested that the victim failed to identify the petitioner in the photo array because the photograph of the petitioner used in the array was several years old. The evidence also revealed that the victim’s failure to identify the petitioner at the line-up may have been due to him being was clean-shaven and the victim remembered the perpetrator as being unshaven. The victim identified the knife found in the petitioner’s truck as looking “a lot like” the knife used in the robbery. The description of the knife the victim gave to the police and the knife presented at trial differed in several respects. But viewed in the light most favorable to the -24- prosecution, the differences in description could have resulted from the manner in which the perpetrator held the knife and the fact that it was held in a shadowed area of the counter. The victim testified that the perpetrator drove away for the scene in a mid-1980s domestic small-sized pickup truck. The petitioner was driving a vehicle closely matching that description when he was pulled over. The victim testified that he was able to identify the type of vehicle from observing only the taillights, explaining that he was an automotive afficionado and from his work at the gas station had a lot of experience observing various motor vehicles. The petitioner was stopped on a road in the general vicinity of the gas station within minutes of the robbery and at a time of day where very few other vehicles were present. When the officer asked the petitioner if he had been at the intersection where the robbery occurred, the petitioner fled. Viewed in the light most favorable to the prosecution, a rational trier of fact could find the essential elements of armed robbery beyond a reasonable doubt. The petitioner therefore is not entitled to relief on this claim. III. The petitioner has not shown that the state court’s adjudication of those claims resulted in a decision that was either contrary to, or an unreasonable application of, any Supreme Court decision or an unreasonable determination of the facts. The petitioner has not established that he is presently in custody in violation of the Constitution or laws of the United States. Accordingly, it is ORDERED that the petition for writ of habeas corpus is DENIED. -25- It is further ORDERED that the petitioner’s motion to expedite the decision in this case [dkt. #11] is DENIED as moot. Dated: September 27, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on September 27, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -26-

=== Austin v. Redford Township Police Department ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION CHARLES FITZGERALD AUSTIN, Plaintiff, v. REDFORD TOWNSHIP POLICE DEPARTMENT, KEVIN G. RILEY, TIMOTHY L. PAULL, and JOHN M. MORGAN Case Number 08-13236 Honorable David M. Lawson Magistrate Judge Paul J. Komives __________________________________________/ Defendants. ORDER ADOPTING MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION, OVERRULING DEFENDANTS’ OBJECTIONS, GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT, AND CONTINUING ORDER OF REFERENCE FOR PRETRIAL PROCEEDINGS This case is before the Court on the defendants’ objections to a report filed by Magistrate Judge Paul J. Komives recommending that the defendants’ motions for summary judgment be granted in part and denied in part. The plaintiff filed a pro se complaint in this case alleging that the defendants used excessive force and engaged in ethnic intimidation when they used a Taser multiple times when they arrested the plaintiff after he sped through a construction zone in Redford Township and refused to stop his car when the police tried to pull him over. Pro bono counsel was appointed for the plaintiff, and the Court entered an order referring the case to Judge Komives to conduct all pretrial matters, after which the defendants filed their motion. Judge Komives filed his report on July 18, 2011. The defendants filed timely objections and the plaintiff filed a reply. After reviewing the submissions and conducting a de novo review of the motions, responses, report of the magistrate judge, and objections, the Court agrees with the recommended disposition of the motion. The matter will be referred again to the magistrate judge to ready it for trial. The magistrate judge summarized the facts and procedural history of the case, which need not be repeated here. The magistrate judge concluded that the plaintiff properly pleaded a Fourth Amendment excessive force claim against the individual defendants. Any doubt that the defendants were on notice of the plaintiff’s claim is put to rest by the fact that the defendants denied the allegations regarding each officer’s conduct; asserted a defense of qualified immunity, which is only applicable to claims against individuals; and engaged in extensive discovery on this issue. The magistrate judge concluded that there is a genuine issue of material fact with respect to whether defendant Riley’s initial deployment of the Taser was objectively reasonable. The magistrate judge also concluded that a jury could find that defendant Riley’s second (and potentially third) use of the Taser was unreasonable because the Taser was deployed after the plaintiff had fallen back into the car or was on the ground. He concluded that there is a genuine issue of material fact with respect to whether, and to what extent, the plaintiff was resisting or threatening the officers when defendant Riley deployed the Taser the second and potentially third time. The defendants argue that Paull’s use of the dog was reasonable because he saw the plaintiff begin to arise even after being stunned by the Taser, and because he was worried that the plaintiff was planning to retrieve the gun he had thrown out the window. The magistrate concluded that defendant Paull was not entitled to summary judgment because the video contradicted the defendants’ account of events, leaving a genuine issue of material fact as to whether, and to what extent, the plaintiff was resisting. See Vathekan v. Prince George’s Cnty., 154 F.3d 173, 178 (4th -2- Cir. 1998) (“An attack by an unreasonably deployed police dog in the course of a seizure is a Fourth Amendment excessive force violation.”). The record is clear that Austin was handcuffed and seated in the back of the police car when Morgan tasered him. The only justification for Morgan’s use of the Taser was Austin’s failure to place his feet in the car. The magistrate judge, citing Champion v. Outlook Nashville, Inc., 380 F.3d 893, 901 (6th Cir. 2004) and Kijowski v. City of Niles, 372 F. App’x 595, 600 (6th Cir. 2010) (“[A] stun gun inflicts a painful and frightening blow, which temporarily paralyzes the large muscles of the body, rendering the victim helpless. Absent some compelling justification — such as the potential escape of a dangerous criminal or the threat of immediate harm — the use of such a weapon on a non-resistant person is unreasonable.” (internal quotation marks and citations omitted , concluded that a reasonable jury could conclude that Morgan’s use of the Taser to obtain compliance with his order after Austin was subdued and handcuffed was not objectively reasonable. The magistrate judge recommended that the Court find that defendant Riley is entitled to summary judgment on qualified immunity grounds with respect to his initial deployment of the Taser because the law regarding use of a Taser to incapacitate a suspect who has not yet been subdued is insufficiently clear to have put defendant Riley on notice that his initial deployment of the Taser was unlawful. The magistrate noted that at the time of Austin’s arrest, only four courts of appeals had addressed the initial use of a Taser to subdue a resistant suspect, each of which found that it did not constitute excessive force. Report and Recommendation at 21 (citing Mattos v. Agarano, 590 F.3d 1082, 1090 (9th Cir. 2010) (discussing Draper v. Reynolds, 369 F.3d 1270, 1278 (11th Cir. 2004); Hinton, 997 F.2d at 781-82; Russo v. City of Cincinnati, 953 F.2d 1036, 1044-45 (6th Cir. 1992 ; Caldwell v. Moore, 968 F.2d 595, 600 (6th Cir. 1992 . The plaintiff does not -3- object to that part of the report. A party’s failure to file objections to the report and recommendation waives any further right to appeal. Smith v. Detroit Fed’n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987). Likewise, the failure to object to an unfavorable portion of the magistrate judge’s report releases the Court from its duty to independently review the issue. Thomas v. Arn, , 152 (1985). Therefore, the Court will adopt that part of the report. However, the magistrate judge recommend that the Court find that the defendants are not entitled to summary judgment on qualified immunity grounds with respect to Riley’s subsequent use of the Taser, defendant Paull’s use of the dog, or defendant Morgan’s use of the Taser because the evidence, viewed in the light most favorable to Austin, reveals that he posed no significant threat to the officers once he was on the ground, and the law regarding the use of force against a subdued suspect was clearly established. Report and Recommendation at 19-20 (citing Harris v. City of Circleville, 583 F.3d 356, 367 (6th Cir. 2009) (citing cases); see also Meirthew v. Amore, 417 F. App’x 494, 499 (6th Cir. 2011) (“[P]rior opinions clearly establish that it is unreasonable to use significant force on a restrained subject, even if some level of passive resistance is presented.”). The magistrate judge recommended that the Court construe the claim against the police department as one against the Redford Township because it is the real party in interest. Report and Recommendation at 22 n.6 (citing Haverstick Enterprises, Inc. v. Financial Federal Credit, Inc., 32 F.3d 989, 992 n.1 (6th Cir. 1994) (“A suit against a city police department in Michigan is one against the city itself, because the city is the real party in interest”). Nevertheless, the magistrate judge recommended that the Court find that the Redford Township Police Department is entitled to summary judgment on both the plaintiffs’ failure to train claim and his general policy and custom claim. With respect to his failure to train claim, the magistrate judge concluded that the plaintiff -4- failed to show a deliberate indifference because he has not pointed to similar incidents suggesting that the Township knew of and disregarded any inadequacies in their training program, nor does he point to any evidence suggesting the training was inadequate. The plaintiff’s only evidence — defendant Morgan’s statement in the police car that he deployed the Taser based on the plaintiff’s “[f]ailure to comply to verbal command, sir — my training. . . . I ask you, I told you, that’s all I need, thank you,” Mot. for Summ. J., Ex. 15, Morgan Video at 21:17:19-25 — shows, at most, that Morgan was inadequately trained or misunderstood his training. The magistrate judge also concluded that the plaintiff’s argument that the police department’s “Less than Lethal Use of Force Policy,” which authorizes the use of a Taser in certain circumstances, was the moving force behind the constitutional violation was meritless because the plaintiff pointed to nothing that showed the policy was in fact the moving force. The plaintiff has not objected to those parts of the report, and they will be adopted. Finally, the magistrate judge recommended granting the Township summary judgment with respect to the ethnic intimidation claim because the Township does not fall under the definition of “person” in the Michigan Penal Code. Michigan Compiled Laws § 750.147b(1), therefore, is inapplicable to the Township. The plaintiff did not object. However, the magistrate judge recommended denying the individual defendants summary judgment on that claim because: (1) Mich. Comp. Laws § 750.147b(3) provides for a civil cause of action; (2) there is a genuine issue of material fact with respect to whether any of the defendants’ actions were taken with the specific intent to harass or intimidate the plaintiff on the basis of his race; (3) the plaintiff has offered evidence that the individual defendants committed underlying criminal offenses, namely assault and battery and misconduct in office. -5- Objections to a report and recommendation are reviewed de novo. 28 U.S.C. § 636(b)(1). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller v. Currie, 50 F.3d 373, 380 (6th Cir. 1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). The defendants filed the following objections: 1. Officer Riley’s deployment of the Taser was objectively reasonable. 2. Defendant Paull’s use of the police dog was objectively reasonable. 3. Defendant Morgan’s use of the Taser was objectively reasonable. 4. Defendant Officer Riley is entitled to qualified immunity. 5. Defendant Officer Paull is entitled to qualified immunity. 6. Defendant Officer Morgan is entitled to qualified immunity. 7. Plaintiff has failed to establish a claim of ethnic intimidation against the individual defendants. A. Whether Riley’s deployment of Taser was objectively reasonable The defendants argue that the magistrate judge incorrectly weighed the severity of the plaintiff’s crime. Although he was initially pulled over for speeding, he fled, committing the more serious offense of fleeing and eluding a police officer. The defendants also argue that Officer Riley correctly saw the plaintiff as a threat because he raised an arm in an aggressive manner when defendant Riley approached and the plaintiff’s handgun was close by. The defendants argue that Riley’s repeated use of the Taser was justified because the plaintiff refused to comply with the -6- officer’s commands, had attempted to evade arrest, and demonstrated a willingness to use force when he reversed his vehicle causing it to strike Riley’s police car. The defendants’ arguments do not address the magistrate judge’s analysis. The magistrate judge recommended that Riley be denied summary judgment for his second and potentially third use of the Taser because Austin was arguably subdued and did not pose a safety or flight risk. The defendants’ arguments fail to dispute any of the magistrate judge’s conclusion in this regard. Therefore, the defendants’ first objection is overruled. B. Whether defendant Paull’s use of the police dog was objectively reasonable The defendants argue that the evidence shows that the plaintiff, a very large man, was within three or four feet of a handgun, and that the Taser had no effect on the plaintiff. Defendant Paull, they argue, perceived a threat to the safety of Officer Riley and deployed the police dog to subdue the plaintiff. The defendants’ argument might have merit if the defendants’ version of events was not blatantly contradicted by the video evidence. The video shows that Austin was not stepping forward toward defendant Riley or his handgun. Rather, he stood still, with his hands raised, and exchanged words with defendant Riley. The magistrate judge’s conclusion clearly is correct. Therefore, the defendants’ second objection is overruled. C. Whether defendant Morgan’s use of the Taser was objectively reasonable The defendants argue that the Court has addressed similar situations before and found the use of a Taser to be reasonable citing Alexander v. City of Shelby Twp., No. 07-14741, 2009 WL 3241974 (E.D. Mich. Oct. 8, 2009) (“Officer Wylie deployed the taser only after repeated requests were not obeyed and with the knowledge that Plaintiff had shown a belligerent attitude, threatening officers, following his arrest. Moreover, the parties do not dispute that Officer Wylie used the Taser -7- only once to force compliance and that the contact was not disabling as Plaintiff immediately climbed into the patrol car after being Tased. While it is clear that the gratuitous use of force on a suspect who has already been subdued and placed in handcuffs is unconstitutional, this is not such a case: the single use of a Taser cannot be compared to the repeated or prolonged uses of non-deadly force found gratuitous in other contexts.”); and DeVoe v. Rebant, No. 05-71863, 2006 WL 334297 (E.D. Mich. Feb. 13, 2006) (“Attempting to physically force Mr. DeVoe into the vehicle likely would have escalated the situation into a physical struggle in which Mr. DeVoe or the officers could have been seriously injured.”). The defendants argue that defendant Morgan can be heard on the audio from the officer’s in-car video telling the plaintiff to “stop resisting.” Morgan Video at 21:12:58. The Court will overrule the defendants’ objection because Alexander and DeVoe are not controlling authority, and even if they were, their application to the present case is questionable because the facts are very different. Unlike Alexander and DeVoe, where the tased individuals were belligerent and refused to enter the police car, the plaintiff was already seated in the police car. He was intoxicated and had just been tased twice and bitten by a police dog, and was not resisting. The magistrate correctly concluded that a jury could find that Morgan’s use of the Taser was objectively unreasonable. D. The qualified immunity objections The defendants’ fourth objection does not challenge the magistrate’s conclusion that the law concerning the use of Tasers on subdued suspects is clearly established. Rather, the defendants argue that defendant Riley could have made a reasonable mistake about his personal safety and the amount of force necessary in arresting the plaintiff. Because there is a genuine issue of material fact -8- as to whether the plaintiff posed a threat, granting defendant Riley qualified immunity is inappropriate. Bouggess v. Mattingly, 482 F.3d 886, 896 (6th Cir. 2007) (“When the legal question of immunity is completely dependent upon which view of the facts is accepted by the jury, the jury becomes the final arbiter of a claim of immunity.”). Therefore, the defendants’ fourth objection is overruled. The defendants’ fifth objection concerning defendant Paull’s use of a police dog also does not challenge the magistrate judge’s conclusion that the law concerning the use of a police dog on a subdued suspect is clearly established. The defendants only argue that defendant Paull may have made a reasonable mistake as to his personal safety and the amount of force necessary. The fact that defendant Paull may have violated a clearly established constitutional right necessarily means that defendant Paull is not entitled to qualified immunity. Therefore, the defendants’ fifth objection is overruled. In their sixth objection, the defendants argue that the law surrounding the use of force on handcuffed individuals who refuse to comply with officers’ commands to enter a police vehicle is not clearly established, and therefore, it would not have been clear to a reasonable officer that using a Taser to get the plaintiff to put his feet into the patrol car was unlawful. “For a right to be clearly established, ‘[t]he contours of the right must be sufficiently clear that a reasonable official would understand that what [she] is doing violates that right.’” Feathers v. Aey, 319 F.3d 843, 848 (6th Cir. 2003) (quoting Russo v. City of Cincinnati, 953 F.2d 1036, 1042 (6th Cir. 1992 ; see also Saucier v. Katz, , 202 (2001) (describing the Court’s inquiry as “whether it would be clear to a reasonable officer that his conduct was unlawful in the situation he confronted”); cf. Anderson v. Creighton, 483 U.S. 635, 640 (1987) (noting that the right must be -9- sufficiently particularized to allow a reasonable official to understand that she is violating the right). However, the Supreme Court has clarified that neither a decision of the Court nor an extreme level of factual specificity is necessary in every instance to give fair warning. See United States v. Lanier, 520 U.S. 259, 268, 271 (1997); see also Gould v. Symons, 275 F. Supp. 2d 843, 848 (E.D. Mich. 2003). The Supreme Court has observed that “officials can still be on notice that their conduct violates established law even in novel factual circumstances.” Hope v. Pelzer, 536 U.S. 730, 741 (2002). “The fact that the law may have been unclear, or even hotly disputed, at the margins does not afford state actors immunity from suit where their actions violate the heartland of the constitutional guarantee, as that guarantee was understood at the time of the violation.” Stemler v. City of Florence, 126 F.3d 856, 867 (6th Cir. 1997). “[T]he right to be free from excessive force is a clearly established Fourth Amendment right.” Champion v. Outlook Nashville, Inc., 380 F.3d 893, 902 (6th Cir. 2004). Additionally, it is clearly established that “a gratuitous use of force on a suspect that has already been subdued violates the Fourth Amendment.” Williams v. City of Taylor, No. 09-13891, 2011 WL 1869592, at *3 (E.D. Mich. May 16, 2011) (citing Roberts v. Manigold, 240 F. App’x. 675, 677 (6th Cir. June 14, 2007) (finding jury question where record supported a finding that plaintiff was “completely pinned” by a 225–pound officer, a former U of M football player, when the officer’s partner continued to Taser the plaintiff); Baker v. City of Hamilton, 471 F.3d 601, 607 (6th Cir. 2006 ; see also Kijowski v. City of Niles, 372 F. App’x 595, 599-600 (6th Cir. 2010) (deploying Taser on suspect who was not resisting is objectively unreasonable); Grawey v. Drury, 567 F.3d 302, 311 (6th Cir. 2009) (concluding use of pepper spray on compliant suspect who has not been told he is under arrest and -10- is not handcuffed is objectively unreasonable). The gratuitous or excessive use of a Taser violates a clearly established constitutional right. Landis v. Baker, 297 F. App’x 453, 463 (6th Cir. 2008). Defendant Morgan used his Taser on Austin roughly thirty seconds after giving Austin the first order to put his feet in the police car. The Court finds that both common sense and decency dictate that the continued application of physical force on a disoriented and unresisting subject, who has been subdued, handcuffed, and placed in a police car, without providing him adequate time to comply is clearly a violation of the suspect’s right to be free from excessive force. Therefore, the defendants’ sixth objection is overruled. E. Ethnic Intimidation Objection The defendants merely argue that the Michigan Legislature did not intend the ethnic intimidation statute to apply to situations where the police were enforcing the law in apprehending a criminal suspect. The defendants do not address the magistrate judge’s reasoning concerning the specific intent and underlying criminal act requirements. The defendants’ seventh objection, therefore, is overruled. III. The Court agrees with the magistrate judge and finds that his determination of the issues in the defendants’ motion was correct. Therefore, the Court will adopt the report and recommendation. Accordingly, it is ORDERED that the report and recommendation of the magistrate judge [dkt. # 40] is ADOPTED. It is further ORDERED that the defendants’ objections to the report and recommendation [dkt. # 41] are OVERRULED. -11- It is further ORDERED that the defendants’ motion for summary judgment [dkt. #30] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the plaintiff’s section 1983 and state law ethnic intimidation claims against Redford Township and the plaintiff’s section 1983 excessive force claim against defendant Riley based on Riley’s first use of a Taser are DISMISSED. The summary judgment motion is DENIED in all other respects. It is further ORDERED that the matter is referred to Magistrate Judge Paul J. Komives under the previous reference order [dkt. # 4] to ready the matter for trial, and to conduct a trial if the parties consent under 28 U.S.C. § 626(b)(1)(c). s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: September 30, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 3, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -12-

=== Murphy v. Lockhart, Birkett, Bowerson, Krajnik, Bearss, Werner, Berry, Bauman and Sherry ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 10-11676 Honorable David M. Lawson Magistrate Judge Michael J. Hluchaniuk Magistrate Judge Laurie J. Michelson TIMOTHY MURPHY, Plaintiff, v. SEAN LOCKHART, CFA Administrative Assistant, THOMAS BIRKETT, SMF Warden RAY BOWERSON, Resident Unit Manager, MICHAEL KRAJNIK, Resident Unit Manager, SARAH BEARSS, Assistant Resident Unit Supervisor, KENNETH WERNER, Assistant Resident Unit Supervisor, CHERYL BERRY, General Office Assistant/Mailroom Clerk, CATHERINE S. BAUMAN, LMF Warden, and JERI-ANN SHERRY, Regional Prison Administrator, _________________________________________/ Defendants. OPINION AND ORDER ADOPTING IN PART AND REJECTING IN PART MAGISTRATE JUDGE’S HLUCHANIUK’S REPORT AND RECOMMENDATION, ADOPTING MAGISTRATE JUDGE’S MICHELSON’S REPORT AND RECOMMENDATION, OVERRULING DEFENDANTS’ OBJECTIONS TO REPORT AND RECOMMENDATION, OVERRULING IN PART PLAINTIFF’S OBJECTIONS, GRANTING IN PART AND DENYING IN PART DEFENDANTS’ FIRST MOTION FOR SUMMARY JUDGMENT, DENYING DEFENDANT WERNER’S SECOND MOTION FOR SUMMARY JUDGMENT, AND CONTINUING ORDER OF REFERENCE The matter is before the Court on the objections by some of the defendants to a report filed by Magistrate Judge Michael J. Hluchaniuk on January 31, 2011 recommending that the defendants’ first motion for summary judgment be granted in part and denied in part. In addition, Magistrate Judge Laurie J. Michelson filed a report on July 29, 2011 recommending that defendant Kenneth Werner’s second motion for summary judgment be denied. Defendant Werner filed objections to that report. The Court entered a general order of reference to conduct all pretrial matters, after which the defendants filed their motions. After Judge Hluchaniuk filed his report, the case was reassigned to Magistrate Judge Michelson for docket efficiency. The defendants filed timely objections to Judge Hluchaniuk’s report, followed four days later with corrected objections. The plaintiff also filed timely objections. Defendant Werner filed timely objections to Judge Michelson’s report. The matter is before the Court for a de novo review. I. The plaintiff, a prisoner currently incarcerated at the Ionia Maximum Correctional Facility in Ionia, Michigan, filed the present action on April 26, 2010 seeking relief from violations of his rights secured by the First and Fourteenth Amendments to the United States Constitution and the Religious Land Use and Institutionalized Persons Act of 2000 under 42 U.S.C. § 1983 and the Michigan Constitution. The plaintiff alleges that the defendants retaliated against him in various ways for comments he made to a reporter and that appeared in an Esquire Magazine article discussing an elaborate escape the petitioner attempted from the Kinross Correctional Facility (“KCF”) in Kincheloe, Michigan. He also alleges that prison personnel at the Standish Correctional Facility refused to deliver certain mail to him, which he contends contains religious material. The plaintiff alleges that defendant Werner retaliated against him for a lawsuit the plaintiff filed several years ago against Werner’s co-prison worker. Finally, the plaintiff alleges that his continued confinement in administrative segregation without meaningful review violates his right to due process. The following facts, viewed in the light most favorable to the plaintiff as non-moving party, are revealed by the record. In March 2007, the plaintiff’s plan to escape from KCF was foiled when prison officials discovered the tunnel he and his cellmates had managed to dig from their cell to the -2- outer perimeter of KCF. On April 11, 2007, the plaintiff was found guilty of escape in a Michigan Department of Corrections (MDOC) formal major misconduct hearing and subsequently classified to administrative segregation status pursuant to MDOC Policy Directive (PD) 04.05.120(L)(3). The administrative segregation status did not include a provision that a classification change could be made only with the consent of the Regional Prison Administrator (RPA). In some cases, such permission is required, in which case the prisoner is considered to be under a “RPA hold” under PD 04.05.120(MMM). On May 2, 2007, Murphy was transferred to the Standish Maximum Correctional Facility (SMF) in Standish, Michigan, where five defendants were employed — defendants Thomas Birkett as warden; Kenneth Werner and Sarah Bearss as assistant resident unit supervisors; and Ray Bowerson and Michael Krajnik as resident unit managers. On May 14, 2007, defendant Werner, while completing the segregation behavior review form required by SMF Operating Procedure 04.05.120B, altered Murphy’s security classification to include an RPA hold. Under the hold, only the RPA could reclassify Murphy to the general prison population, whereas before, the Security Classification Committee (SCC) could reclassify Murphy as long as the warden concurred. When Murphy confronted defendant Werner about the change on February 22, 2008, defendant Werner stated, “[Another prison guard] told me all about you. I’ve made my decision; you need RPA approval. If you don’t like it, sue me.” Compl. ¶ 50. On October 18, 2007, reporter Brian Mockenhaupt contacted Murphy concerning his desire to write an article about Murphy’s failed escape from KCF for Esquire Magazine. Mockenhaupt had obtained permission from prison officials to interview Murphy. Murphy and Mockenhaupt communicated through letters and visits from October 2007 through May 2008. Esquire Magazine published Mockenhaupt’s article in its August 2008 issue. The article, which quotes Murphy at -3- length, discussed the security flaws at KCF, detailing the escape plan and revealing which prison staff Murphy manipulated and how he obtained and built the necessary tools to dig the tunnel. Needless to say, it did not portray the defendants in the most flattering light. In May 2008, Murphy was assigned to work as a porter, for which he was paid approximately $65 per week. Murphy’s copy of the August 2008 issue of Esquire Magazine arrived at SMF in the middle of July. On July 24, 2008, the prison issued a notice of package/mail rejection that stated the magazine violated PD 05.03.118(HH). The magazine was sent to Bearss’s office, where Murphy witnessed defendants Birkett, Bearss, and Krajnik read the article. On July 29, 2008, Murphy was called into Bearss’s office, where he was confronted by Birkett, Bearss, and Krajnik about his participation in the article. The three defendants apparently were upset: defendant Birkett informed Murphy that he “[would] remain in Ad-Seg for a long, long time because of it,” and Bearss suggested to Birkett that Murphy be fired from his work assignment. Compl. ¶¶ 59, 62. Murphy was terminated from his work assignment the following day. When confronted about the termination, Bearss told Murhpy, “You should have thought about it before you did that article.” Compl. ¶ 64. On August 22, 2008, defendant Bowerson held an administrative hearing on the prison’s decision to reject Murphy’s copy of Esquire. Murphy alleges that he was not offered an opportunity to be present at the hearing, to review the publication, or to provide a statement to be considered at the hearing. Bowerson affirmed the rejection of the August 2008 issue of Esquire. On August 22, 2008, defendant Berry issued a notice of package/mail rejection to prevent a copy of the book Codex Magica: Secret Signs, Mysterious Symbols, and Hidden Codes of the Illuminati because it violated PD 05.03.118(HH). The plaintiff claims this is a religious book that he ordered from the Power of -4- Prophecy Ministries. Defendant Bowerson upheld the rejection of Codex Magica in an administrative hearing held on September 25, 2008. On November 5, 2008, defendant Birkett asked defendant Lockhart to place Codex Magica on the Restricted Publications List. Lockhart upheld censorship of the book in a November 24, 2008 administrative hearing. On November 26, 2008, defendant Catherine Bauman, warden of the Alger Correctional Facility, emailed Jerri-Ann Sherry, MDOC RPA, and requested approval to place an RPA hold on Murphy and the other three attempted escapees mentioned in the Esquire article. During an interview with Sherry on January 21, 2009, the plaintiff asked her how long he would have to remain in administrative segregation, and she responded, “I don’t make deals. All I can tell you is that it’s too soon. You didn’t do yourself any favor with that magazine story.” Compl. ¶ 55. Murphy was transferred to Baraga Maximum Correctional Facility (AMF) on June 30, 2009, where he remained in administrative segregation. Subsequently, he was transferred to the Ionia Maximum Correctional Facility. Murphy filed grievances concerning the RPA hold, rejection of mail, and loss of his prison job. Some were rejected on procedural grounds for being late, as noted by Judge Hluchaniuk. The plaintiff filed his complaint in this case on April 26, 2010. The plaintiff brings a number of claims against the defendants. First, the plaintiff alleges a violation of his due process rights. To that effect, he alleges that MDOC policy 04.05.120 relating to administrative segregation is unconstitutional as applied because he has been subjected to the harsh conditions of segregation — which, the plaintiff asserts, have caused him to suffer severe depression, suicidal thoughts, extreme back pain, arthritis, stress, and cognitive impairment — for the last three years without any substantive review. Second, he brings a claim for First Amendment retaliation, alleging that -5- defendants Bauman and Sherry changed his security classification to include an RPA hold in response to his communication with the media. He brings an identical claim against defendant Werner, alleging that defendant Werner changed the plaintiff’s security classification to include an RPA hold to punish him for filing a grievance/lawsuit against prison guard Machulis, a fellow SMF worker. Third, the plaintiff brings a claim for First Amendment retaliation against defendants Birkett, Bearss, and Krajnik for terminating his employment as porter and laundry worker in the administrative segregation housing unit. Fourth, he contends that defendants Lockhart’s, Birkett’s, Bowerson’s, Berry’s, and Sherry’s role in rejecting two pieces of his mail — a copy of the Esquire magazine which features the article on his attempted escape and a copy of the religious book, Codex Magica — violated his rights to due process, free exercise of religion, free speech, and his rights under the RLUIPA, although in his objections to the Judge Hluchaniuk’s Report and Recommendation, the plaintiff concedes that his claims with respect to the Esquire magazine should be dismissed. On August 5, 2010, all defendants except Cheryl Berry filed a motion for summary judgment. In their motion they argue that (1) defendants Werner, Bauman, and Sherry are entitled to summary judgment based on the plaintiff’s failure to exhaust administrative remedies; (2) defendants Birkett, Bearss, and Krajnik are entitled to summary judgment on the plaintiff’s First Amendment retaliation claim on the grounds that they would have taken the same actions to remove the plaintiff from his prison job regardless of the plaintiff’s exercise of a protected activity; (3) defendants Birkett, Lockhart, and Bowerson are entitled to summary judgment on the plaintiff’s First Amendment claim because the restrictions placed on the plaintiff were reasonably related to legitimate penological interests; (4) the plaintiff’s official capacity claims are barred by the Eleventh -6- Amendment; and (5) as an apparent afterthought, the plaintiff’s individual capacity claims are barred by qualified immunity insofar as he has failed to demonstrate a violation of clearly established rights. Notably, the defendants did not move for summary judgement with respect to the plaintiff’s claim that his continued RPA-hold classification without substantive review violates his right to due process. On August 5, 2010, the same defendants filed a motion for protective order pursuant to Federal Rule of Civil Procedure 26, arguing that the prisoner’s discovery requests seek the production of documents related to claims that were not properly exhausted through the prison grievance process, as well as claims barred by immunity, and that discovery requested is therefore unduly burdensome and inconsistent with the Prison Litigation Reform Act’s goal of the early dismissal of non-cognizable claims. The next day, the magistrate judge entered orders requiring the plaintiff to respond to the motion for protective order and motion for summary judgment. On September 9, 2010, the plaintiff filed a motion to strike affidavits offered in support of the defendants’ motion for summary judgment, arguing that the affidavits violate Federal Rule of Civil Procedure 56(e) [now Rule 56(c)(4)] because they are not based on personal knowledge or set forth facts that would be inadmissible in evidence. The plaintiff then filed a motion for relief pursuant to Rule 56(f) [now Rule 56(d)] requesting the Court to delay ruling on the defendants’ motion for summary judgment until he has had the opportunity to pursue limited discovery. He then filed a response to the defendants’ motion for summary judgment. The defendants also filed responses to the plaintiff’s motions, as well as a reply to their motion for summary judgment. On January 31, 2011 the magistrate judge filed a report and recommendation, addressing the defendants’ motion to dismiss -7- and for protective order, and the plaintiff’s motions to strike and for relief pursuant to then-Rule 56(f). Judge Hluchaniuk recommended: (1) granting the motion for summary judgment based on failure to exhaust administrative remedies as to defendants Bauman and Sherry, and dismissing the claims against them with prejudice; (2) denying the motion for summary judgment based on failure to exhaust administrative remedies as to defendant Werner; (3) granting the motion for summary judgment on the First Amendment retaliation claims as to defendants Birkett, Bearss, and Krajnik because the plaintiff did not engage in protected conduct in speaking to the Esquire reporter; (4) granting the motion for summary judgment as to the mail processing and related constitutional and statutory claims as to all defendants; (5) dismissing all claims against the defendants in their official capacity; and (6) denying the defendants’ motion for summary judgment based on qualified immunity because they failed to develop the argument. Both the defendants and the plaintiff filed timely objections, and the plaintiff additionally filed a response to the defendants’ objections. On February 22, 2011, defendant Werner filed a second motion for summary judgment, although he never obtained permission to do so as required by E.D. Mich. LR 7.1(b)(2). In that motion, Werner argued that Murphy’s First Amendment retaliation claim against him should be dismissed because (1) an RPA hold does not equate to an adverse action; (2) Murphy cannot show a causal connection between his protected conduct — filing a lawsuit against Machulis, a fellow prison worker approximately 17 years ago — and any adverse action; and (3) even if adding a RPA hold constituted adverse action, Werner, as an Assistant Resident Unit Supervisor (ARUS), does not decide which prisoners in administrative segregation have RPA holds. The plaintiff responded -8- arguing that addition of a RPA hold constitutes adverse action and that he has presented evidence of a causal connection between the protected activity and the adverse action. Judge Michelson filed a report on July 29, 2011 recommending that the motion be denied. Defendant Werner filed timely objections, and the plaintiff has been trying to reply, although he says he has been hampered by his lack of access to legal materials. II. Objections to a report and recommendation are reviewed de novo. 28 U.S.C. § 636(b)(1). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller v. Currie, 50 F.3d 373, 380 (6th Cir. 1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). Courts generally will not consider arguments on review that were not raised before the magistrate judge. As the Sixth Circuit has explained in a similar circumstance: Petitioner did not raise this [new] claim in his initial § 2255 motion. Rather, it was first raised in his supplemental objections to the magistrate judge’s final Report and Recommendation. The magistrate thus never had the opportunity to consider this issue. Courts have held that while the Magistrate Judge Act, 28 U.S.C. § 631 et seq., permits de novo review by the district court if timely objections are filed, absent compelling reasons, it does not allow parties to raise at the district court stage new arguments or issues that were not presented to the magistrate. See United States v. Waters, 158 F.3d 933, 936 (6th Cir. 1998) (citing Marshall v. Chater, 75 F.3d 1421, 1426-27 (10th Cir. 1996) (“issues raised for the first time in objections to magistrate judge’s report and recommendation are deemed waived” ; see also Cupit v. Whitley, 28 F.3d 532, 535 (5th Cir. 1994); Paterson-Leitch Co., Inc. v. Massachusetts Mun. Wholesale Elec. Co., 840 F.2d 985, 990-91 (1st Cir. 1988); Anna Ready Mix, Inc. v. -9- N.E. Pierson Constr. Co., Inc., 747 F. Supp. 1299, 1302-03 (S.D. Ill. 1990). Hence, Petitioner’s failure to raise this claim before the magistrate constitutes waiver. Murr v. United States, 200 F.3d 895, 902 n.1 (6th Cir. 2000); see also Greenhow v. Sec’y of Health & Human Servs., 863 F.2d 633, 638-39 (9th Cir. 1988) (stating that the Magistrate Judges Act was not intended “to give litigants an opportunity to run one version of their case past the magistrate, then another past the district court”), rev’d on other grounds, United States v. Hardesty, 977 F.2d 1347 (9th Cir. 1992) (en banc); Jesselson v. Outlet Assocs. of Williamsburg, Ltd. P’ship, 784 F. Supp. 1223, 1228 (E.D. Va. 1991) (“A magistrate’s decision should not be disturbed on the basis of arguments not presented to him.”). This Court reviews an order by a magistrate judge on a non-dispositive matter to determine whether the decision is “clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A); see also Fed. R. Civ. P. 72(a) (stating that “[t]he district judge in the case must consider timely objections and modify or set aside any part of the [magistrate judge’s] order that is clearly erroneous or is contrary to law”); United States v. Curtis, 237 F.3d 598, 603 (6th Cir. 2001). A decision is “clearly erroneous” when, “although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed.” United States v. United States Gypsum Co., , 395 (1948). Where there are two plausible views, a decision cannot be “clearly erroneous.” Anderson v. City of Bessemer City, N. Car., , 573 (1985). A. Procedural motions Magistrate Judge Hluchaniuk filed a report on January 31, 2011 recommending that the plaintiff’s motion to strike defendants’ affidavits, the plaintiff’s motion for relief under Federal Rule of Civil Procedure 56(f) [now 56(d)], and the defendants’ motion for protective order be denied. -10- The defendants object to that recommendation arguing that the request to stay discovery should be granted because the plaintiff’s only remaining claim is that against defendant Werner, and none of the plaintiff’s requested discovery relates to this issue. The defendants’ objection is not well taken. Although a majority of the plaintiff’s requested discovery concerns claims that will be dismissed, the Court does not grant summary judgment on the First Amendment retaliation claims against defendants Birkett, Bearss, and Krajnik, and the plaintiff specifically seeks discovery to support his claim against defendant Werner. The plaintiff is entitled to that discovery, which may proceed according to a schedule to be established by the magistrate judge. B. First motion for summary judgment 1. Defendant Werner’s failure-to-exhaust argument With respect to the defendants’ motion for summary judgment, the magistrate judge recommends denying the motion for summary judgment based on failure to exhaust administrative remedies as to defendant Werner because there remains a genuine issue of material fact as to whether the plaintiff exhausted his administrative remedies. The defendants have not objected to that part of the report and recommendation and the time for doing so has passed. A party’s failure to file objections to the report and recommendation waives any further right to appeal. Smith v. Detroit Fed’n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987). Likewise, the failure to object to an unfavorable portion of the magistrate judge’s report releases the Court from its duty to independently review the issue. Thomas v. Arn, , 152 (1985). The Court will adopt that part of the recommendation. 2. Defendants Bauman’s and Sherry’s failure-to-exhaust argument -11- The magistrate judge recommends granting the motion for summary judgment based on failure to exhaust administrative remedies as to defendants Bauman and Sherry, and dismissing the claims against them with prejudice. The magistrate judge found that the plaintiff’s grievances against these defendants were rejected by the prison as untimely all the way through Step III. The magistrate notes that ordinarily, dismissal of claims based on a failure to exhaust administrative remedies is made without prejudice, but that dismissal with prejudice is appropriate where a claim has been properly rejected by the prison grievance system on procedural grounds. The plaintiff objects to that part of the recommendation, arguing that he properly and timely exhausted his administrative grievance as to defendants Bauman and Sherry because he did not learn about their acts of retaliation until he had access to an e-mail message in which they discussed the Esquire article. This Prison Litigation Reform Act’s (PLRA) exhaustion requirement, 42 U.S.C. § 1997e(a) (“No action shall be brought with respect to prison conditions under section 1983 . . . by a prisoner confined in any jail, prison, or other correctional facility until such administrative remedies as are available are exhausted.”), is mandatory and applies to all suits regarding prison conditions, regardless of the nature of the wrong or the type of relief sought. Porter v. Nussle, 534 U.S. 516, 524 (2002); Booth v. Churner, 532 U.S. 731, 741 (2001). “Exhaustion” under the PLRA means “proper exhaustion.” Woodford v. Ngo, 548 U.S. 81, 93 (2006). “Proper exhaustion” means “compliance with an agency’s deadlines and other critical procedural rules . . . .” Id. at 90. However, the Supreme Court has held that “failure to exhaust is an affirmative defense under the PLRA, and . . . inmates are not required to specially plead or demonstrate exhaustion in their -12- complaints.” Jones v. Bock, 549 U.S. 199, 216 (2007). This affirmative defense may serve as a basis for dismissal only if raised and proven by the defendants. Ibid. Since the Supreme Court decided Jones v. Bock, the Sixth Circuit has stated that courts ought not impose severe technical requirements on prisoners who comply with the spirit and purpose of the administrative exhaustion rules. “[I]t is sufficient for a court to find that a prisoner’s [grievance] gave prison officials fair notice of the alleged mistreatment or misconduct that forms the basis of the constitutional or statutory claim made against a defendant in a prisoner’s complaint.” Bell v. Konteh, 450 F.3d 651, 654 (6th Cir. 2006) (internal quotation marks and citation omitted). A fair indicator that the purpose of the grievance was fulfilled is the prison’s response to the inmate’s complaint. If the information in the grievance is too vague or imprecise, a response so indicating would tell the interested parties that more detail is necessary. However, when the prison officials address the merits of the prisoner’s complaint without even mentioning a problem identifying the object of the grievance, the administrative system has worked and the prison officials have had the “opportunity to correct [their] own mistakes.” Woodford, 548 U.S. at 89 (internal citation and quotation marks omitted). The record indicates that on October 9, 2009, the plaintiff submitted a Step I grievance premised upon retaliation by MDOC Officials Catherine Bauman . . . [and] Jeri Ann Sherry . . . in violation of [his] First and Fourteenth Amendment rights under the United States Constition, clearly established law and MDOC Policy directives, where they acted individually and/or collectively in placing an RPA hold on [him] as punishment for [his] cooperation with the August 2008 Esquire Magazine article . . . . Defs.’ Mot. for Summ. J., Ex. 4, Grievance LMF 09-10-3413-28e at 1. In his grievance, the plaintiff contends that it was not until September 28, 2009, when a FOIA copy was provided to him, that he discovered the e-mail exchange between Bauman and Sherry, dated November 26, 2008, in which -13- Bauman requested Sherry to place the plaintiff on an RPA hold. The plaintiff’s grievance alleges that the actions of Bauman and Sherry were clearly retaliatory to his exercise of his first amendment rights in participating in the Esquire Magazine article. The plaintiff’s Step I grievance was rejected by the prison officials as untimely. The rejection stated: This grievance is being rejected because the date of the incident you have listed is not within the time limits as providedin PD 03.02.130, for processing. Policy allows 7 business days from the date of the incident or the date the prisoner became aware of a grievable issue, to file a grievance. The grievant became aware of the RPA hold back in October of 2008 and could and should have grieved the RPA hold then. There is also no policy violation of when he was placed on RPA hold, as there is no time limit for placing a prisoner on this status. Grievance rejected according to policy. Id. at 4. The plaintiff filed a Step II grievance on November 2, 2009 in which he argued that his Step I grievance was timely, as it was filed within 7 days of discovering the factual basis for his complaint. The plaintiff asserted that although it is true he was aware of his RPA hold in 2008, he was not aware of the e-mail between Bauman and Sherry that indicates his RPA hold resulted from retaliation for his participation in the Esquire article. The prison rejected the plaintiff’s Step II grievance, noting, once again, that the plaintiff was aware of his RPA hold in 2008 and should have filed his grievance then. The prison did not address the plaintiff’s assertion that he was not aware of the retaliatory nature of the hold until late September 2009. The rejection is signed by Catherine Bauman. The plaintiff filed a Step III grievance on November 25, 2009, arguing that the prison had failed to address the merits of his two previously-filed grievances. The plaintiff also argued that pursuant to PD 03.02.130(U), which states that staff who are implicated in the substance of a -14- grievance shall not participate in any capacity in the grievance investigation, Catherine Bauman should not have been the respondent to his step II grievance. The prison rejected the plaintiff’s Step III grievance, stating that the responses he received at Steps I and II reflect that his issues “were in fact considered and appropriately investigated at the facility level,” and that as no additional information or basis for relief was submitted in his step III grievance, the step II decision rejecting his grievance would be upheld. Id. at 11. In recommending that summary judgment be granted to defendants Bauman and Sherry, the magistrate judge noted that the plaintiff has not offered any evidence to suggest that those rejections were improper and therefore failed to create a genuine issue of material fact. MDOC Policy Directive 03.02.130(P) states that before filing a written grievance, the prisoner,”within two business days,” must try to resolve the issue with an appropriate staff member. The plaintiff does not contest the prison’s assertion that he was aware of the RPA hold in October 2008. But his argument that he did not learn of the retaliation issue until late September 2009 suffers from at least two notable defects. First, the prison guidelines state that prisoners are entitled to file grievances regarding “grievable issues.” The e-mail between defendants Bauman and Sherry does not evidence retaliation or any other type of wrongdoing regarding the prisoner, and therefore it does not create a grievable issue entitling the plaintiff to have filed his grievance in the first place. The e-mail exchange between the defendants merely demonstrates that both considered the plaintiff’s attempted escape serious behavior warranting an RPA hold. The e-mail does not mention the Esquire article or in any way reflect a desire by the two to retaliate against the plaintiff for participating in its creation. That the e-mail exchange occurred after the article’s publication is not, without more, evidence of -15- retaliation. Assuming, arguendo, that both defendants had only become aware of the plaintiff’s attempted escape after reading the Esquire article, their desire to place him on an RPA hold could very reasonably have been based upon the plaintiff’s behavior itself and not a desire to punish him. This is exactly what the e-mail conveys. Because the email does not provide any new grounds by which the plaintiff was entitled to protest his RPA hold, the plaintiff’s grievances did not comply with PD 03.02.130’s time limit. Second, the plaintiff asserts facts that indicate he had reasons to suspect retaliation by defendant Sherry months before. The plaintiff contends that he spoke with her in January 2009. At that time, he asked her how long he would be required to remain in administrative segregation, to which the plaintiff alleges that she responded, “I don’t make deals. All I can tell you is that it’s too soon. You didn’t do yourself any favor with that magazine story.” Compl. ¶ 55. Therefore, as early as January 2009 the plaintiff had grounds to suspect that he was being held in administrative segregation under an RPA hold by defendant Sherry in retaliation for the article. The plaintiff delayed in filing a grievance against her until October 2009 — almost eleven months later. His grievance was untimely and failed to comply with the grievance procedures of the prison. The Court agrees, therefore, with the magistrate judge that the complaint against defendants Bauman and Sherry should be dismissed and overrules the plaintiff’s objection to that part of the recommendation. The plaintiff has not taken any issue with the recommendation that the dismissal should be with prejudice. The magistrate judge reasoned that because an untimely grievance cannot be revived, the matter is at an end and the dismissal of the claim should be with prejudice, citing Kikumura v. Osagie, 461 F.3d 1269, 1290 (10th Cir. 2006), overruled on other grounds by Robbins -16- v. Oklahoma, 519 F.3d 1242, 1247-48 (10th Cir. 2008). On the facts of the present case, the Court adopts that part of the recommendation as well. 3. Retaliation claim against defendants Birkett, Bearss, and Krajnik The magistrate judge recommends granting the motion for summary judgment on the First Amendment retaliation claims as to defendants Birkett, Bearss, and Krajnik because the speech cited by the plaintiff (his participation in the Esquire article) is not protected speech under the First Amendment. The plaintiff objects, arguing that these retaliation claims do not fail as a matter of law where (a) the defendants have not shown that they would have taken the same action absent the protected conduct and (b) the plaintiff’s communications with Esquire is protected conduct. The defendants do not argue that the plaintiff’s participation in the Esquire article was not a protected activity. Indeed, the defendants appear to concede that the activity was protected, stating that “prison officials authorized, cooperated and participated in the interviews forming the basis of the article for which Murphy claim[s] he is being punished.” Defs.’ Mot. for Summ. J. at 8. The defendants base their motion for summary judgment on the grounds that the plaintiff failed to exhaust his administrative remedies against two defendants (Bauman and Sherry), and that the plaintiff is unable to establish a nexus between his protected speech and the allegedly retaliatory acts of the other three defendants (Birkett, Bearss, and Krajnik). The magistrate judge’s discussion of the protected speech issue was made sua sponte. In the Sixth Circuit, a district court may sua sponte grant a motion for summary judgment on grounds not urged by the parties “so long as ‘the losing party was on notice that it had to come forward with all of its evidence [and had a] reasonable opportunity to respond to all the issues to be considered by the court.’” Bennett v. City of Eastpointe, 410 F.3d 810, 816 (6th Cir. 2005) (quoting Shelby Cnty. -17- Health Care Corp. v. S. Council of Indus. Workers Health & Welfare Trust Fund, 203 F.3d 926, 931 (6th Cir. 2000 ; see also Excel Energy, Inc. v. Cannelton Sales Co., 246 F. App’x 953, 959 (6th Cir. 2007) (citing Salehpour v. Univ. of Tenn., 159 F.3d 199, 204 (6th Cir. 1998 . The plaintiff was not afforded that opportunity in this case. Because the defendants’ legal strategy conceded that the plaintiff’s speech was protected, the plaintiff was effectively foreclosed from presenting legal arguments supporting the protected nature of his speech. Briefing of that point is not located elsewhere on the record. Therefore, the requirements of Bennett have not been met to justify the Court’s raising the issue of protected speech sua sponte. Moreover, the Court does not agree that the plaintiff’s statements in the Esquire article are unprotected speech under the First Amendment. The Supreme Court has stated that, “a prison inmate retains those First Amendment rights that are not inconsistent with his status as a prisoner or with the legitimate penological objectives of the corrections system.” Pell v. Procunier, 417 U.S. 817, 822 (1974); Smith v. Campbell, 250 F.3d 1032, 1036 (6th Cir. 2001). Those legitimate policies and goals include the maintenance of internal security within the facilities themselves. Pell, 417 U.S. at 822-23. The magistrate judge focused on the effect the plaintiff’s statement about his escape attempt might have within the prison system. However, the plaintiff did not direct his statements to fellow inmates. Rather, he spoke out on issues relating to prison security and was critical of the conduct of MDOC personnel, which resulted in his near-successful prison break. The defendants have never contended that the plaintiff’s statements in the Esquire article trenched upon “the legitimate penological objectives of the corrections system.” The defendants certainly could have restricted press access to the plaintiff concerning his attempted prison escape. See Pell, 417 U.S. at 834-35. Instead, MDOC officials facilitated that contact. To suggest that -18- prison officials could retaliate against the plaintiff for the criticism he leveled against them is not consistent with First Amendment principles. Prison security certainly is a matter of public concern. In Campbell v. Arkansas Department of Correction, 155 F.3d 950 (8th Cir. 1998), for instance, the former warden of a maximum security unit brought suit after he was demoted for the amount of press his unit was receiving and for speaking with the press about security issues. The court stated, “The proper functioning of a maximum security prison with death sentenced prisoners is a matter of significant concern to the larger community, as are the existence of corruption and dangerous working conditions in a prison and inmate access to tools, weapons, and flammable substances that could facilitate violence and escape.” Id. at 958. In Crawford-El v. Britton, 93 F.3d 813, 825-26 (D.C. Cir. 1996), vacated on other grounds by 523 U.S. 574, the court held that a prisoner’s criticism of the prison administration in communications with the press was protected by the First Amendment. In Mascetta v. Miranda, 957 F. Supp. 1346 (S.D.N.Y. 1997), the court held that a correction officer’s statement on lax prison security was protected speech because it rose to the level of public concern. And in Jordan v. Pugh, 504 F. Supp. 2d 1109 (D. Colo. 2007), the court found that allowing a prisoner to publish under a byline in the news media does not present a particular security risk based on the evidence in the record in that case. The question remains, however, whether the record demonstrates a fact question on the causation element of the plaintiff’s retaliation claim. In must be remembered that “retaliation ‘rarely can be supported with direct evidence of intent.’” Harbin-Bey v. Rutter, 420 F.3d 571, 580 (6th Cir. 2005) (quoting Murphy v. Lane, 833 F.2d 106, 108 (7th Cir. 1987 . That is why “[c]ircumstantial evidence, like the timing of events or the disparate treatment of similarly situated individuals, is -19- appropriate” to consider when determining whether a genuine issue of fact on that element of a First Amendment retaliation claim. Thaddeus-X v. Blatter, 175 F.3d 378, 399 (6th Cir. 1999) (en banc). In his complaint, the plaintiff sets forth the following facts surrounding the alleged retaliation by defendants Birkett, Bearss, and Krajnik. The plaintiff claims that in May 2008, he was given one of three “coveted” administrative segregation work assignments as a porter/painter/laundry worker. Compl. ¶ 56. This position would potentially have afforded him an earlier release from administrative segregation and paid a salary of $65 per month. The plaintiff alleges that in late July, he personally observed the three defendants and other SMF staff reading the Esquire article in defendant Bearss’s office. On July 29, he was summoned into defendant Bearss’s office, where he met with all three defendants. Defendant Birkett scolded the plaintiff for his participation in the article, telling the plaintiff that he made the department of corrections “look bad” and that he would stay in administrative segregation a long time because of it. That same day, defendant Bearss recommended to defendant Birkett that the plaintiff be terminated from his work assignment. The plaintiff was terminated the next day. On July 31, the plaintiff confronted defendant Bearss about his termination. Defendant Bearss told him that he should have “thought about it” before he “did that article,” and that “everyone agreed” to his termination. Compl. ¶ 64. The defendants argue that they had legitimate grounds to terminate the plaintiff from his position, and that they would have taken the same action regardless of the plaintiff’s protected speech. The defendants argue that the plaintiff’s work assignment became a 30-day conditional assignment following his first work evaluation on June 30, 2008, in which it was noted that the prisoner “continues to be out moving around during officer escorts after numerous warnings.” Defs.’ Mot. for Summ. J. at 8. The defendants contend that “[b]y the time [the plaintiff’s] monthly -20- work evaluation came around, [he] had been found in possession of contraband which was uncovered following a routine search.” Id. at 8-9. The plaintiff was terminated “due to security reasons,” Defs.’ Mot. for Summ J., Ex. 8-B, and the following comments were entered in his work assignment evaluation form: Prisoner Murphy was an excellent porter however during routine shakedown of prisoner Murphy’s cell and the unit laundry room his area of control several items were found that prisoner is not allowed to possess extra blankets, fan, garbage bags, pillow stuffing, etc. Prisoner is extreme escape risk and has violated his position of trust as unit porter by taking items while on assignment for his own personal use. Request termination. Ibid. The defendants argue that it was the plaintiff’s possession of contraband that motivated them to terminate the prisoner from his job assignment. The plaintiff responds that he was informed by defendant Bearss that the June 30, 2008 evaluation would not be placed in his prisoner file because it had been completed prematurely, contrary to the two-month initial review set forth in PD 05.01.100. The plaintiff also takes issue with the integrity of the evaluation. The plaintiff also asserts that the defendants’ reason for terminating his employment was pretextual as he was never issued any misconduct for contraband, a notice of intent, or a Contraband Removal Form. He contends this is because he was actually given permission to possess the items the work assignment evaluation lists as contraband. Pl.’s Resp. to Defs.’ Mot. for Summ. J., Ex. 2, Murphy Aff. ¶ 22. The plaintiff argues that “had the alleged contraband been defendants’ true reason for termination, it’s more likely than not that they would have documented the contraband, and would have terminated him weeks before — when the items alleged to be contraband were actually found.” Id. at 8. The Court believes that the plaintiff has come forward with sufficient facts from which the defendants’ retaliatory motives can be found, and a fact question exists whether the defendants’ -21- stated reasons for removing the plaintiff from his prison job were a pretext for retaliation. Therefore, the Court will deny the motion for summary judgment on the retaliation claim against defendants Birkett, Bearss, and Krajnik. 4. Mail Restriction Claims The magistrate judge recommends granting the motion for summary judgment as to the mail processing and related constitutional claims as to all defendants because the Esquire article constituted properly restricted material; the Codex Magica contained information on how to write letters in code and was therefore properly restricted material; the plaintiff fails to identify a substantial burden placed on the exercise of his religion; and the plaintiff fails to demonstrate that the available state procedures for redressing his denied access to the magazine and book were not adequate. The plaintiff concedes the point as to the Esquire article, but he objects, arguing that he has sufficiently pleaded that the defendants’ actions imposed a substantial burden on his religious practices and had stated individual free exercise, Religious Land Use and Institutionalized Persons Act (RLUIPA), free speech, and due process claims with respect to the censorship of his religious book Codex Magica. a. RLUIPA claim The Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA), 42 U.S.C. § 2000cc-1, “protects institutionalized persons who are unable freely to attend to their religious needs and are therefore dependent on the government’s permission and accommodation for exercise of their religion.” Cutter v. Wilkinson, 544 U.S. 709, 721 (2005). It achieves this goal by prohibiting the government from imposing a substantial burden on the religious exercise of a person residing in or confined to an institution . . . even if the burden results from a rule of general applicability, unless -22- the government demonstrates that imposition of the burden on that person is in furtherance of a compelling governmental interest[,] and is the least restrictive means of furthering that compelling governmental interest. 42 U.S.C. § 2000cc-1(a). “An action of a prison official ‘will be classified as a substantial burden when that action forced an individual to choose between following the precepts of [his] religion and forfeiting benefits or when the action in question placed substantial pressure on an adherent to modify his behavior and to violate his beliefs.’” Hayes v. Tennessee, 424 F. App’x 546, 554-55 (6th Cir. 2011) (quoting Barhite v. Caruso, 377 F. App’x 508, 511 (6th Cir. 2010 (internal quotation marks omitted); see also Adkins v. Kaspar, 393 F.3d 559, 569-70 (5th Cir. 2004) (holding that a regulation constituted a substantial burden “if it truly pressures the adherent to significantly modify his religious behavior and significantly violate his religious beliefs”). “However, ‘prison security is a compelling state interest’ and ‘deference is due to institutional officials’ expertise in this area.’” Hayes, 424 F. App’x at 554 (quoting Cutter, 544 U.S. at 725 n.13). The RLUIPA does not subjugate a correctional facility’s “need to maintain order and safety” to the “accommodation of religious observances.” Cutter, 544 U.S. at 722. If a plaintiff produces prima facie evidence to support a claim alleging a violation of the Free Exercise Clause or a violation of section 2000cc . . ., the government shall bear the burden of persuasion on any element of the claim, except that the plaintiff shall bear the burden of persuasion on whether the law (including a regulation) or government practice that is challenged by the claim substantially burdens the plaintiff’s exercise of religion. 42 U.S.C. § 2000cc-2. The defendants argue that the plaintiff does not have an absolute right to practice his religion in the manner he desires; rather, the Court must balance his right to freely exercise his religion against the state’s legitimate interest in operating its prisons, and that the plaintiff has alternate means of practicing his religion without possessing a book that contains information on how to write -23- letters in code. The plaintiff argues that the defendants did not identify a legitimate security concern served by censorship of the Codex Magica beyond a generalized reference to a security threat and a reference to written escape plans. Moreover, the defendants’ argument must fail, the plaintiff contends, because defendant Lockhart’s reason for placing the text on the Restricted Publications List — “Threat to order/security of institution; contains information on how to write letters in code,” Defs.’ Mot. for Summ. J., Ex. 13-B — differed from defendant Berry’s initial justification for rejecting the text and from defendant Bowerson’s reason for affirming, namely that the book was written in codes and symbols that prevented the staff from conducting an effective search. The magistrate judge concluded that the defendants were entitled to summary judgment because the plaintiff failed to identify any burden, let alone a substantial one, placed on his exercise of religion. The plaintiff objected, arguing that he has adequately alleged that censorship of his religious publication, Codex Magica, imposes a substantial burden on his religious exercise because he has been forced to forego education and knowledge central to his faith. He contends that possession of the Codex Magica is critical to the exercise of his religious belief because it would help him identify the secret satanic signs, symbols, and hidden codes used by politicians and entertainers so that he might educate himself and others to their danger. The magistrate judge reached a correct conclusion. The plaintiff has not been forced to choose between following the tenets of his religion and forfeiting benefits; nor did the mail rejection place substantial pressure on the plaintiff to modify his behavior and to violate his beliefs. Even if the mail rejection placed a substantial burden on the plaintiff, the rejection was justified by a legitimate penological interest in preventing texts containing instructions on how to write in code -24- from entering the prison. The plaintiff’s objection to dismissal of his RLUIPA claim is overruled and that part of the magistrate judge’s recommendation is adopted. b. Free exercise claim Although prisoners retain their First Amendment right to the free exercise of their religion. Cruz v. Beto, 405 U.S. 319, 322 n.2 (1972); Flagner v. Wilkinson, 241 F.3d 475, 481 (6th Cir. 2001), the “circumstances of prison life may require some restrictions on prisoners’ exercise of their religious beliefs,” Walker v. Mintzes, 771 F.2d 920, 929 (6th Cir. 1985). A court “must balance the prisoners’ constitutionally protected interest in the free exercise of their religious beliefs against the state’s legitimate interests in operating its prisons.” Ibid. “As maintaining security, order, and discipline are essential goals of a corrections system, prison officials are accorded wide latitude in the adoption and application of prison policies and procedures.” Hayes, 424 F. App’x at 550. “[B]ecause the problems of prisons in America are complex and intractable, and because courts are particularly ill equipped to deal with these problems, [the Supreme Court] generally ha[s] deferred to the judgments of prison officials in upholding these regulations against constitutional challenge.” Shaw v. Murphy, 532 U.S. 223, 229 (2001) (internal quotation marks and citations omitted). Prison regulations are valid if they are “reasonably related to legitimate penological interests.” Turner v. Safley, 482 U.S. 78, 89 (1987). The following four factors are relevant in the analysis: First, “there must be a ‘valid, rational connection’ between the prison regulation and the legitimate governmental interest put forward to justify it.” [Turner, 482 U.S. at 89] (quoting Block v. Rutherford, 468 U.S. 576, 586 (1984 . Second, the court must consider “whether there are alternative means of exercising the right that remain open to prison inmates.” Id. at 90. Third, the court should weigh the impact that the asserted constitutional right will have on the rights of prison guards and other inmates, as well as the allocation of prison resources. Id. Fourth, “the absence of ready alternatives is evidence of the reasonableness of a prison regulation.” -25- Hayes, 424 F. App’x at 549-50. Additionally, “[a] prisoner alleging that the actions of prison officials violate his religious beliefs must show that ‘the belief or practice asserted is religious in the person’s own scheme of things’ and is ‘sincerely held.’” Flagner, 241 F.3d at 481 (quoting Kent v. Johnson, 821 F.2d 1220, 1224 (6th Cir. 1987 . It is without question that a prison has a legitimate penological interest in limiting prisoners’ access to books that include instructions on how to write in code. The safety and security of other prisoners and the prison staff depend on it. The only way to protect this interest is to reject the Codex Magica. The Court overrules the plaintiff’s objection and adopts that part of the magistrate judge’s recommendation. c. Free speech claim The plaintiff’s complaint alleges that censorship of the Codex Magica violates his free speech right to hear information. Compl. ¶ 145. The defendants argue that such a right does not exist; the plaintiff has not alleged facts supporting a violation of the First Amendment Free Speech Clause; and the prison officials’ decision to reject the Codex Magica furthered a legitimate penological interest. Defs.’ Mot. for Summ. J. at 13. The plaintiff argues that the “right to hear” is no less protected than the right to speak and that the censorship of his religious publication violates his right to free speech because the censorship was not related to any legitimate penological concern. The magistrate judge did not address the plaintiff’s free speech claim in his Report and Recommendation. The First Amendment prohibits states from “abridging the freedom of speech.” U.S. Const. amend. I. “Mail is one medium of free speech, and the right to send and receive mail exists under the First Amendment.” Al-Amin v. Smith, 511 F.3d 1317, 1333 (11th Cir. 2008). A prisoner retains -26- only those First Amendment rights “that are not inconsistent with his status as a prisoner or with the legitimate penological objectives of the corrections system.” Pell, 417 U.S. at 822. As discussed above, the defendant prison officials had a legitimate penological objective in censoring the Codex Magica. The plaintiff’s free speech claim, therefore, must be dismissed. d. Due process claim The plaintiff argues that he is not required to plead and prove that available state procedures for redressing the wrong are not adequate because the prison’s censorship deprived him of a liberty interest, as opposed to a property interest. He contends that PD 05.03.118 is unconstitutional with respect to the censorship of the book Codex Magica. Prisoners have a liberty interest in receiving their mail. Stanley v. Vining, 602 F.3d 767, 769 (6th Cir. 2010). Even so, a due process claim will not stand where a prisoner has been denied his mail wrongfully when there is an adequate “state remedy provided to correct the deprivation.” Ibid. (citing Parratt v. Taylor, 451 U.S. 527, 538 (1981 . The magistrate judge was correct. The plaintiff has not shown a lack of adequate post- deprivation remedies with respect to the censorship of the Codex Magica. In fact, the magistrate judge described the extensive post-deprivation procedural protections afforded to all prisoners. The plaintiff also seeks leave to amend his complaint to allege an inadequate state procedure. The plaintiff’s request to amend will be denied, however, because it is clearly futile. As for the plaintiff’s constitutional challenge to the Prisoner Mail regulations, the prison, for the reasons discussed above, has a valid penological interest in restricting access to the Codex Magica; therefore, PD 05.03.118 cannot be unconstitutional as applied on the ground that it prevents the plaintiff’s access to it. The plaintiff’s objection is overruled and the Court adopts that part of the -27- magistrate judge’s report and recommendation. The defendants’ motion for summary judgment with respect to the plaintiff’s claims stemming from censorship of the Codex Magica is granted. 5. Official capacity claims The magistrate judge recommends dismissing all claims against the defendants in their official capacity because this amounts to a suit against the state, which is barred by the Eleventh Amendment unless the state has waived its sovereign immunity or consented to be sued in federal court, neither of which have occurred in this case. The plaintiff has not objected to that part of the report and recommendation and the time for doing so has passed. A party’s failure to file objections to the report and recommendation waives any further right to appeal. Smith, 829 F.2d at 1373. Likewise, the failure to object to an unfavorable portion of the magistrate judge’s report releases the Court from its duty to independently review the issue. Thomas, 474 U.S. at 152. The Court will adopt that part of the recommendation. 6. Qualified immunity The magistrate judge recommends denying the defendants’ motion for summary judgment based on qualified immunity, as the defendants have plead only a perfunctory qualified immunity defense, and therefore have not satisfied their burden of coming forward with specific facts or explanation of law sufficient to allow the Court to enter summary judgment in their favor. The defendants object to the magistrate’s conclusion that defendants Lockhart, Krajnik, Bearss, Birkett, and Bowerson are not entitled to a grant of qualified immunity on the grounds that the magistrate judge found they did not violate the plaintiff’s constitutional rights. The magistrate judge reached his conclusion based on the paucity of the defendants’ arguments; he refused to make their arguments for them. -28- The Court agrees with the magistrate judge. The defendants’ qualified immunity argument is found in a single paragraph at the end of their brief. They never developed the arguments, and the Court will not do so for them. Their objection based on the argument that the failure of the plaintiff to show a violation of a constitutional right makes little sense, since such a finding precludes relief to the plaintiff in all events. However, because the qualified immunity arguments were presented to the magistrate judge in name only, the Court must agree with his determination that it has not been established in this record. 7. Segregation claim The defendants’ motion for summary judgment does not address the plaintiff’s administrative-segregation due process claim. Therefore, it survives the motion. The claim will be construed only against defendant Jeri-Ann Sherry because, as Regional Prison Administrator, she is the only defendant capable of providing relief on this claim. C. Defendant Werner’s second motion for summary judgment Defendant Werner’s second motion for summary judgment was filed without leave of court. LR 7.1(b)(2) states: “A party must obtain leave of court to file more than one motion for summary judgment.” The failure to obtain such leave is fatal to the defendant’s second motion for summary judgment. The magistrate judge recommends that the defendant’s motion for summary judgment be denied. First, the magistrate judge noted that neither party disputed that Murphy’s decision to file a lawsuit against Machulis was protected conduct. Second, relying on Bell v. Johnson, 308 F.3d 594, 603 (6th Cir. 2002) (holding that an official action is adverse “only if it could deter a person of ordinary firmness from the exercise of -29- the right at stake” (internal quotation marks omitted , and Bey v. Luoma, No. 07-60, 2008 WL 4534427, at *6 (W.D. Mich. Sept. 30, 2008) (implicitly finding that in some circumstances a lengthy confinement to administrative segregation could constitute an adverse action), the magistrate concluded that there is a genuine issue of material fact as to whether Werner’s placement of a RPA hold on the plaintiff constitutes adverse action. The magistrate judge found support for her conclusion in the fact that only certain prison officials could place a prisoner on RPA hold. Third, the magistrate judge, after reviewing the circuit law on temporal proximity and causation, concluded that the plaintiff raised a genuine issue of material fact as to the causal element of his retaliation claim. The magistrate judge found good reason to believe that Werner’s “clerical mistake” argument was suggestive of motive and causation, especially given the fact that defendant Bauman, a Correctional Facilities Administration Deputy Director at the time, emailed defendant Sherry, a RPA at the time, to initiate putting a RPA hold on plaintiff via the proper procedures after defendant Werner had changed Murphy’s classification to include a RPA hold. The defendant has stated four objections: (1) the plaintiff has failed to set forth a valid First Amendment retaliation claim against defendant Werner; (2) defendant Werner did not have knowledge of the protected conduct; (3) defendant Werner did not have the authority to bring about the adverse action; and (4) defendant Werner is entitled to a grant of qualified immunity because the plaintiff has not set forth a valid First Amendment retaliation claim. The defendant’s objections merely restate the arguments he made in his summary judgment motion. Magistrate Judge Michelson’s report is well reasoned, supported by the facts in this case, and in accordance with the current law on First Amendment retaliation. The Court adopts the recommendation as its own decision. -30- III. The Court finds that Magistrate Judge Hluchaniuk correctly decided the exhaustion and censorship, and qualified immunity issues, and disagrees with the conclusions on the First Amendment retaliation claim. The defendant’s objections have no merit, and the plaintiff’s objections only partially so. The Court agrees with the report and recommendation of Magistrate Judge Michelson on defendant Werner’s second motion for summary judgment. Accordingly, it is ORDERED that the Magistrate Judge Hluchaniuk’s report and recommendation [dkt #54] is ADOPTED IN PART AND REJECTED IN PART. It is further ORDERED that the defendants’ objections to the magistrate judge’s report and recommendation [dkt #57] are OVERRULED. It is further ORDERED that the plaintiff’s objections to the magistrate judge’s report and recommendation [dkt #63] are OVERRULED IN PART. It is further ORDERED that the defendants’ first motion for summary judgment [dkt. #28] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the plaintiff’s claims against defendants Bauman and Sherry are DISMISSED WITH PREJUDICE. It is further ORDERED that the plaintiff’s mail processing claims as to the Esquire and Codex Magica publications, and the official capacity claims are DISMISSED WITH PREJUDICE. It is further ORDERED that the Magistrate Judge Michelson’s report and recommendation [dkt #78] is ADOPTED. -31- It is further ORDERED that defendant Werner’s objections to the magistrate judge’s report and recommendation [dkt #80] are OVERRULED. It is further ORDERED that defendant Werner’s second motion for summary judgment [dkt. #59] is DENIED. It is further ORDERED that the motions for protective order [dkt. #29], to strike affidavits [dkt. #39], and for relief under Federal Rule of Civil Procedure 56(f) [dkt. #41] are DENIED. It is further ORDERED that the matter is referred to Magistrate Judge Laurie J. Michelson under the previous reference order to ready the matter for trial, and to conduct a trial if the parties consent under 28 U.S.C. § 626(b)(1)(c). Dated: September 30, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on September 30, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -32-

=== Hertz v. Miller ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION SUSAN HERTZ, Individually and as Personal Representative of the Estate of Roger B. Hertz, Plaintiff, Case No. 07-14369 Honorable David M. Lawson v. SHELDON L. MILLER, SHELDON L. MILLER & ASSOCIATES, P.C., and LAW OFFICE OF SHELDON L. MILLER, Defendants. ________________________________________________/ ORDER DENYING PLAINTIFF’S MOTION TO FILE CERTAIN EXHIBITS UNDER SEAL The plaintiff in this case is the widow of Roger Hertz, in her individual capacity and as personal representative of the deceased’s estate. She has filed a complaint alleging legal malpractice against defendant Sheldon Miller and his law firms, contending that Miller mishandled a wrongful death action to recover damages for Roger Hertz’s death. After contentious and protracted pretrial proceedings, the Court ordered trial to begin on September 20, 2011. On Friday, September 16, 2011, the parties notified the Court that they had settled their case. Based on that representation, the Court cancelled the jury order. Because the settlement involved a decedent’s estate and minor children are among the beneficiaries, the Court directed plaintiff’s counsel to file promptly a motion to approve the settlement. A proper motion to approve the settlement has not been filed, although the plaintiff filed papers on September 20, 2011 stating that she anticipates that the parties will agree to drafts of settlement documents. The papers do not describe the settlement terms, except to say that the plaintiff’s minor children will be settlement beneficiaries. However, plaintiff’s counsel has filed a motion for permission to file under seal the exhibits to the anticipated motion. In support of the motion to seal, the plaintiff alleges that (1) the terms of the settlement are “confidential”; (2) the parties wish to keep the settlement terms confidential; (3) some of the beneficiaries to the settlement are minors; and (4) the plaintiff wants to keep from the public the settlement terms involving the minors. The Court is not able to discern from the motion any other grounds that might justify sealing the proposed motion exhibits. It is well established that this Court, as every other court, “has supervisory power over its own records and files.” Nixon v. Warner Communications Inc., 435 U.S. 589, 598 (1978). Such authority includes fashioning protective orders that limit access to certain court documents. See Fed. R. Civ. P. 26(c). But the district court’s power to seal records is subject to the “long-established legal tradition” of open access to court documents. Brown & Williamson Tobacco Corp. v. F.T.C., 710 F.2d 1165, 1177 (6th Cir. 1983). “[T]he courts of this country recognize a general right to inspect and copy public records and documents, including judicial records and documents.” Nixon, 435 U.S. at 597 (footnotes omitted); Brown & Williamson, 710 F.2d at 1180 (ordering Federal Trade Commission documents unsealed because “[t]he public has a strong interest in obtaining the information contained in the court record.”); see also In re Perrigo Co., 128 F.3d 430, 446 (6th Cir.1997) (Moore, J., concurring in part and dissenting in part) (declaring that “[s]ealing court records . . . is a drastic step, and only the most compelling reasons should ever justify non-disclosure of judicial records”). As the court of appeals explained in In re Knoxville News-Sentinel Co., Inc., 723 F.2d 470 (6th Cir. 1983), there is a “presumptive right” of public access to court records, which permits inspection and copying. The recognition of this right of access goes back to the Nineteenth Century, when, in Ex Parte Drawbraugh, 2 App. D.C. 404 (1894), the D.C. Circuit stated: “Any -2- attempt to maintain secrecy, as to the records of this court, would seem to be inconsistent with the common understanding of what belongs to a public court of record, to which all persons have the right of access.” Id. at 474 (citations omitted). In exercising its discretion to seal judicial records, the Court must balance the public’s common law right of access against the interests favoring nondisclosure. See Nixon, 435 U.S. at 599, 602 (stating that Court must consider “relevant facts and circumstances of the particular case”); Belo Broadcasting Corp. v.. Clark, 654 F.2d 423, 434 (5th Cir. 1981); see also Bank of Am. Nat'l Trust & Sav. Ass'n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 344 (3d Cir. 1986) (court has a duty to “balance the factors favoring secrecy against the common law presumption of access”); Newman v. Graddick, 696 F.2d 796, 803 (11th Cir. 1983) (“The historic presumption of access to judicial records must be considered in the balance of competing interests.”). “Only the most compelling reasons can justify non-disclosure of judicial records.” In re Knoxville News-Sentinel, 723 F.2d at 476. Certainly, the Court has the discretion to limit this access in extraordinary cases, such as when those seeking access intend to “gratify private spite or promote public scandal through the publication of the painful and sometimes disgusting details of a divorce case,” or use court “files to serve as reservoirs of libelous statements for press consumption, or as sources of business information that might harm a litigant’s competitive standing.” Nixon, 435 U.S. at 598. “Trial courts have always been afforded the power to seal their records when interests of privacy outweigh the public’s right to know. But . . . the decision as to when judicial records should be sealed is left to the sound discretion of the district court, subject to appellate review for abuse.” Knoxville News-Sentinel, 723 F.2d at 474. -3- It was observed in Tinman v. Blue Cross & Blue Shield of Michigan, 176 F. Supp. 2d 743 (E.D. Mich. 2001), that in order to have confidential information in a court record kept under seal, the movant must make a specific showing that disclosure of information would result in some sort of serious competitive or financial harm. Id. at 745. But the existence of a “confidentiality agreement between the parties does not bind the court in any way.” Brown & Williamson, 710 F.2d at 1180. “The mere fact that the production of records may lead to a litigant’s embarrassment, incrimination, or exposure to further litigation will not, without more, compel the court to seal its records.” Kamakana v. City and County of Honolulu, 447 F.3d 1172, 1179 (9th Cir. 2006). A showing of substantial personal or financial harm is a prerequisite to an order sealing a file. In this case, no such showing has been made. The only grounds offered in support of sealing the proposed settlement exhibits are the parties’ desire to keep them secret and the status of some settlement beneficiaries as minors. More is required to justify the “drastic step” of sealing the settlement documents. Accordingly, it is ORDERED that the motion to seal proposed exhibits to the motion to approve the settlement [dkt. #158] is DENIED. It is further ORDERED that the plaintiff must file her complete motion to approve the proposed settlement, together with supporting exhibits, on or before September 23, 2011. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: September 21, 2011 -4- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on September 21, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -5-

=== FREMONT REORGANIZING CORP v. RONNIE DUKE, et.al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION FREMONT REORGANIZING CORP., Plaintiff, v. Case Number 10-11923 Honorable David M. Lawson CHASE BANK GRANTING IN PART AND TO DISMISS BY REAL ESTATE ONE, INC., DENYING MOTION TO DISMISS BY BAKER DEFENDANTS, AND GRANTING RONNIE DUKE, RYAN ZUNDEL, BILL WELLS, WILLINEVAH RICHARDSON, ANTHONY PETERS, AMERICAN NATIONWIDE MORTGAGE CO., CBB, INC. d/b/a BRETLIN HOME MORTGAGE, OPINION AND ORDER FIRST ESCROW COMPANY, LLC, HARDCORE MOTOR SPORTS, LLC, HARDCORE RACING, INC. DENYING IN PART MOTIONS JS REALTY, LLC, LAWYERS ESCROW CO., LIBERTYTITLE AND ESCROW SERVICES, LLC, MOTORCITY FINANCIAL SERVICES, NATIONS TITLE OF OHIO, NORTH AMERICAN HOME FUNDING, INC., OWNER REALTY.COM, PREMIER MOTION TO DISMISS BY MORTGAGE FUNDING, INC., REAL ESTATE ONE, DEFENDANT JP MORGAN INC., ANDREW AUTY, TIMOTHY BAKER, MELISSA BASTIEN, HUSSEIN ABDUL-MAJID BAZZI a/k/a SAM BAZZI, SPECIALTY HOLDINGS, INC., ALI BAYDOUN, JAY BAYDOUN a/k/a JALAL BAYDOUN, CHEA BENNETT, MORGAN BEVENSEE, KEVIN BOS, LISA BOS, ROBERT BRIERLEY, BYRON DEES, SUSAN GENDERNALIK, HUGH BRADLEY JAMES, DAVID LARA, HAROLD LARSEN, DANNY LEY, PATRICK LLOYD, JOSE MARTINEZ, JOHN MAYER, KATHY MCCUTCHEON a/k/a KATHY SIZEMORE, APRIL MILLER, COLLETTE MILLITELLO, JOSEPH MILLITELLO, PAUL MORRIS, ADELBERT MOSS, BRYAN MURPHY, DANIELLE NAPPER, SUZANNE NICHOLAS, DANIEL PANKO, KATHLEEN POUNDS, LARRY RIDEOUT, RICARDO RODRIGUEZ, FRANK RAY SCHAFER, JR, JEFF SCHUCK, RACHEL SEMAN, MICHAEL SHILAKES, BRYAN STURGEON, JAMIE SWEENEY, RONALD TALASKI, JR., MITCHELL TOMCSIK, NICOLE TURCHECK, LINDA WAHLER, DONNA WALBROOK, PAUL WHITESIDE, JEREMY YALKIN, KASSEM ZREIK, FIDELITY NATIONAL TITLE INSURANCE CO., QUOTEMEARATE.COM, INC., APEX FINANCIAL GROUP, INCORPORATED, d/b/a AAPEX MORTGAGE CORP., DARLA APPLEBEE, ROBERT APPELBEY, ERIC BROAD, PATRICK DEGUISE, DONNA GALANTE, JOSEPH C. JOSEPH, RAYMOND LARA, JR., CHARRON MCDONALD, JACQUELINE NAPPER, PHILIP MCDONALD, BRUCE MORGAN, PAUL NICHOLS, CARLO PALMERI, RONALD WILSON, LARRY YOUNT, DESK TOP APPRAISAL LLC, KEYAPPRAISERS.COM LLC, and JP MORGAN CHASE BANK, ___________________________________________/ Defendants. OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS BY REAL ESTATE ONE, INC., DENYING MOTION TO DISMISS BY DEFENDANTS TIMOTHY BAKER, KEYAPPRAISERS.COM LLC, AND OWNERREALTY.COM , AND GRANTING MOTION TO DISMISS BY DEFENDANT JP MORGAN CHASE BANK Ronnie Duke, it is alleged, masterminded and executed a scheme between 2003 and 2007 to defraud banks and other mortgage lenders of money by creating phony real estate transactions and financing the sales and purchases using fraudulent loan documents. The plaintiff, Fremont Reorganizing Corporation, claims to be a victim of Duke’s scheme to the tune of over $20 million. Fremont has brought the present action against companies and individuals it believes joined in and helped perpetuate Duke’s scheme, alleging fraud, conversion, negligence, breaches of contract and fiduciary duties, conspiracy, and violations of the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. § 1961 et seq. (RICO). Presently before the Court are motions to dismiss by three groups of defendants who contend that Fremont has not pleaded valid causes of action against them: Real Estate One; Timothy Baker, KeyAppraisers.com LLC, and OwnerRealty.com (the Baker defendants); and JP Morgan Chase Bank. The Court heard oral argument on the motions on February 15, 2011. For the reasons discussed in detail below, the Court now finds that Real Estate -2- One’s motionS should be granted in part and denied in part, the Baker defendants’ motion should be denied, and Chase Bank’s motion should be granted. I. According to the amended complaint, which is quite detailed (148 pages with 544 numbered paragraphs), plaintiff Fremont Reorganizing Corporation is a California corporation that arose from the bankruptcy of its predecessor, Fremont Investment and Loan Corporation. The company originated subprime residential mortgage loans for sale on the secondary market. Fremont summarized the manner and means of Ronnie Duke’s fraudulent scheme in the amended complaint as follows: 75. In general, Duke’s mortgage fraud scheme worked as follows: Duke or someone at his direction would locate residential real properties for sale and arrange for a nominal or straw buyer to purchase a property and obtain a loan from a financial institution to finance the purchase. In some instances, the mortgage loan proceeds would be used to actually purchase the property in the name of the straw buyer [(“straw loans”)] . . . . In other instances, the mortgage loan proceeds were not used to purchase the property at all, but instead were stolen and used to enrich the participants in the scheme [(“ghost loans”)] . . . . In the case of both straw and ghost loans, Duke and others under his direction and control would create materially false and fraudulent documents in order to obtain mortgage loans, including but not limited to: loan applications, lease agreements, verifications of deposit, purchase agreements, warranty deeds, mortgages, and mortgage notes. First Am. Compl. ¶¶ 75-89. Fremont alleges that the straw loans were fraudulent because various defendants inflated the straw buyer’s income, asserted that the straw buyer would pay a portion of the down payment when such funds actually came from other loan proceeds, and falsely identified inflated bank accounts as belonging to the straw buyer. Id. ¶¶ 77-79. Duke and other defendants under his direction took control of the properties and rented them to third parties. Id. ¶ 80. In the case of ghost loans, no property transfer occurred and the various defendants fraudulently represented that the intended -3- buyer would use the property as either a rental investment or a primary residence; the named seller in those cases was either a straw buyer from another purchase or the actual owner who was unaware of the purported transfer. Id. ¶¶ 82-83. The plaintiff alleges that the statements about the transfer, rental income, inflated buyer’s income, and temporarily inflated bank account statements were all fraudulent. Id. ¶¶ 83, 85-86. Duke and his minions also allegedly used cashier’s checks to supply the down payment and subsequently cancelled the checks without transferring funds. Id. ¶ 84. The counterfeit warranty deeds purporting to transfer the properties were never filed with the county register of deeds. Id. ¶ 87. Various defendants also forged signatures on loan documents and failed to file them with the county register of deeds to secure the lender’s security interest in the property. Id. ¶ 88. This scheme involved the fraudulent use of the mail and wire systems to submit fraudulent documents to financial institutions and to transfer or cause to be transferred the plaintiff’s and other lenders’ funds. Id. ¶ 118. The amended complaint separately identifies each transfer by date, amount, accounts, and the defendants directly involved in wiring or mailing fraudulent documents. Ibid. None of the transactions directly involve Real Estate One, the Baker defendants, or Chase in those activities. Ibid. The amended complaint also alleges that various defendants laundered money — the proceeds obtained from the real estate transfers — through Duke’s different corporate entities. Id. ¶¶ 119-20. The amended complaint specifically identifies 59 fraudulent loans (17 straw loans and 42 ghost loans) associated with an equal number of real estate transactions. The amended complaint also identifies individuals and companies who played specific roles in the scheme that included property locator, recruiter, straw buyer, appraiser, document counterfeiter, loan processor, mortgage broker or loan officer, and closing or issuing agent. Id. ¶ 91. The plaintiff alleges that real estate agencies served as vehicles for identifying available -4- properties for use on the mortgage loan applications (defendants OwnerRealty.com LLC, Real Estate One, Inc., and JS Realty LLC), id. ¶¶ 13-14; mortgage brokers submitted fraudulent loan applications to the lenders (defendants Apex Financial Group, American Nationwide Mortgage Company, CBB Inc., North American Home Funding, Inc., Premier Mortgage Funding, Inc., and Quotemearate.com), id. ¶ 15; closing or issuing agents closed the real estate transactions (defendants First Escrow Company LLC, Lawyers Escrow Company, Liberty Title and Escrow Services, MotorCity Financial Services, and Nations Title of Ohio), id. ¶ 16; and various individuals worked for each of those organizations and assisted in the fraudulent scheme. See id. ¶¶ 10-66. Ronnie Duke, the lead perpetrator of this scheme, is alleged to have owned several defendant entities, including Hardcore Racing, Inc., Hardcore Motorsports, LLC, and Specialty Holdings, Inc. Id. ¶¶ 10-12. Of those, the main instrument through which Duke worked was Specialty Holdings, Inc., a business incorporated in Michigan around December 2001 that was created ostensibly to purchase residential properties, manage the properties, and rent them out. Id. ¶ 74. The plaintiff alleges that Specialty Holdings instead “operated as a vehicle to defraud mortgage lenders.” Id. ¶ 74, 122. The plaintiff also alleges the existence of a second enterprise, an association-in-fact comprised of “certain” of the individual defendants. Id. ¶ 122. The plaintiff alleges that Baker, by himself and through his companies, was involved in the scheme by submitting fraudulent purchase agreements for transactions involving at least six of the loans Fremont made. Id. ¶ 104. The plaintiff also alleges that Baker’s companies employed Michael Shilakes, who submitted false documentation on three loans. Ibid. Fremont alleges that Real Estate One employed two real estate agents who were deeply involved in the fraudulent scheme: Abdul- Majid Bazzi (a.k.a. Sam Bazzi) and Jamie Sweeney. See id. ¶¶ 13, 18-19, 57, 92, 95. Sweeney -5- allegedly located property or submitted fraudulent paperwork or both on the ghost loans listed in paragraphs 102(b), (c), (d), (e), (f), (g), (h), (j), (p), (q), (r), (s), and (pp). Id. ¶ 104. Bazzi did the same for the ghost loan identified in paragraph 102(k). Ibid. The plaintiff predicates Real Estate One’s liability in this case on the conduct of Sweeney and Bazzi. Sam Bazzi and several other individuals have entered guilty pleas to allegations related to their involvement in the scheme, with Bazzi pleading to one count of wire fraud in violation of 18 U.S.C. § 1343. The plaintiff also alleges that the defendant companies maintained bank accounts at several banks, which they used to receive the mortgage loan proceeds and launder those funds through different entities controlled by Duke, using mail and wire communications. Id. ¶¶ 116, 117, 120. The plaintiff alleges that after it received loan documents, it completed wire transfers of the mortgage loan funds into those bank accounts. Id. ¶¶ 101-102, 118. Defendant Chase was one of the depository banks in which Duke and his companies maintained approximately six accounts. Id. ¶ 521. Fremont alleges that it wire over $13 million into those accounts, which were used to convert and misdirect to funds to the use of the conspirators. Fremont alleges that the accounts were used to conceal the true nature of the proceeds and the transactions and to launder money. Id. ¶ 524. The plaintiff alleges that the accounts displayed unusual activity compared to typical such accounts, which should have put Chase on notice of nefarious activity. Id. ¶ 530. On May 12, 2010, the plaintiff filed its initial complaint against most of the present defendants, alleging violations of RICO as well as several other fraud-based and negligence state law claims. The RICO predicate acts were alleged to be mail and wire fraud and money laundering. On July 19, 2010, defendant Real Estate One filed a motion styled as a motion to dismiss and motion for summary judgment. On October 15, 2010, the plaintiff filed a motion for leave to amend its -6- complaint, seeking to add eighteen new defendants and four counts against existing defendants. The Court heard oral argument on that motion on November 8, 2010 and granted leave to file the amended complaint by November 15, 2010. The Court also ordered the plaintiff to “be mindful of and address the [] guidelines” from the Court’s RICO Case Management Statement, which requested specific details about the perpetrators, the predicate acts and their relation to a common scheme, the enterprise, the victims, the benefits received, and the harm suffered, in addition to several related items and requests for additional information about other claims in the case. Order [dkt. #72] at 2. The Court also dismissed without prejudice defendant Real Estate One’s motion to dismiss or for summary judgment to the extent it raised an argument about the applicable statute of limitations. On November 15, 2010, the plaintiff filed its first amended complaint, totaling nearly 150 pages and raising seventeen counts broken out by the involved defendant, with subcounts for different charges. The counts involved in the motions under consideration are counts 1, 11, 14, 15, 16, and 17. As concerns the moving defendants here, the first count alleges violations of RICO, 18 U.S.C. §§ 1962(c) & (d), common law fraud, civil conspiracy, and aiding and abetting fraud against all defendants except Chase, and the eleventh count alleges substantially similar claims against new defendants added in the first amended complaint, including KeyAppraisers.com LLC. Count one also alleges a violation of section 1962(a) against defendants Duke, Hardcore Racing, Hardcore Motorsports, Bill Wells, and Willinevah Richardson. Count fourteen alleges negligence and negligent misrepresentation against KeyAppraisers.com LLC and Timothy Baker. Count fifteen alleges negligence and negligent hiring and retention against OwnerRealty.com. Count sixteen alleges those same claims against Real Estate One. Count seventeen raises claims against JP Morgan Chase Bank of negligence and aiding and abetting breach of fiduciary duty. -7- On November 23, 2010, defendant Real Estate One filed a renewed motion to dismiss and then on December 3, 2010 moved to amend its motion to dismiss to attach the relevant documents. Defendants Timothy Baker, KeyAppraisers.com LLC, and OwnerRealty.com filed a motion to dismiss on December 14, 2010, and defendant JP Morgan Chase Bank did likewise on January 10, 2011. As mentioned, the Court heard oral argument on those motions plus defendant Real Estate One’s initial motion to dismiss on February 15, 2011. II. Defendants Real Estate One, Timothy Baker, KeyAppraisers.com LLC, OwnerRealty.com, and JP Morgan Chase Bank have moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6). Rule 12(b)(6) authorizes dismissal for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir.1993). Under Rule 12(b)(6), the complaint is viewed in the light most favorable to plaintiffs, the allegations in the complaint are accepted as true, and all reasonable inferences are drawn in favor of plaintiffs. Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Saglioccolo v. Eagle Ins. Co., 112 F.3d 226, 228 (6th Cir. 1997) (quoting Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995 . “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Columbia Natural Res., Inc., 58 F.3d at 1109; Tackett v. M & G Polymers, USA, L.L.C., 561 F.3d 478, 488 (6th Cir. 2009). -8- To survive a motion to dismiss, [a plaintiff] must plead ‘enough factual matter’ that, when taken as true, ‘state[s] a claim to relief that is plausible on its face.’ Bell Atl. Corp. v. Twombly, , 556, 570 (2007). Plausibility requires showing more than the ‘sheer possibility’ of relief but less than a ‘probab[le]’ entitlement to relief. Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1949 (2009). Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010). “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of ‘entitlement to relief.’” Ashcroft v. Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 557). Under the new regime ushered in by Twombly and Iqbal, pleaded facts must be accepted by the reviewing court but conclusions may not be unless they are plausibly supported by the pleaded facts. “[B]are assertions,” such as those that “amount to nothing more than a ‘formulaic recitation of the elements’” of a claim, can provide context to the factual allegations, but are insufficient to state a claim for relief and must be disregarded. Iqbal, 129 S. Ct. at 1951 (quoting Twombly, 550 U.S. at 555). However, as long as a court can “‘draw the reasonable inference that the defendant is liable for the misconduct alleged,’ a plaintiff’s claims must survive a motion to dismiss.” Fabian, 628 F.3d at 281 (quoting Iqbal, 129 S. Ct. at 1949). Consideration of a motion to dismiss under Rule 12(b)(6) is confined to the pleadings. Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008). Assessment of the facial sufficiency of the complaint ordinarily must be undertaken without resort to matters outside the pleadings. Wysocki v. Int’l Bus. Mach. Corp., 607 F.3d 1102, 1104 (6th Cir. 2010). However, “documents attached to the pleadings become part of the pleadings and may be considered on a motion to dismiss.” Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 335 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c ; see also Koubriti v. Convertino, 593 F.3d 459, 463 n.1 (6th Cir. 2010). Even -9- if a document is not attached to a complaint or answer, “when a document is referred to in the pleadings and is integral to the claims, it may be considered without converting a motion to dismiss into one for summary judgment.” Commercial Money Ctr., 508 F.3d at 335-36. Further, where the plaintiff does not refer directly to given documents in the pleadings, if those documents govern the plaintiff’s rights and are necessarily incorporated by reference then the motion need not be converted to one for summary judgment. Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir. 1997) (holding that plan documents could be incorporated without converting the motion to one for summary judgment even though the complaint referred only to the “plan” and not the accompanying documents). In addition, “a court may consider matters of public record in deciding a motion to dismiss without converting the motion to one for summary judgment.” Northville Downs v. Granholm, 622 F.3d 579, 565 (6th Cir. 2010) (citing Commercial Money Ctr., Inc., 508 F.3d at 336). A. Timothy Baker, KeyAppraisers.com LLC, and OwnerRealty.com Defendants Baker, KeyAppraisers.com LLC, and OwnerRealty.com move to dismiss the plaintiff’s first amended complaint on the ground that the plaintiff did not comply with the part of the Court’s November 9, 2010 order allowing the plaintiff to amend its complaint that addressed the specific RICO case statement guidelines. They argue that the failure to comply with the order justifies dismissal under Federal Rule of Civil Procedure 41(a). In a supplemental brief filed without leave of court, these defendants add the afterthought that Rule 12(b)(6) requires dismissal as well. The Baker defendants contend the amended complaint does not comply with the RICO case guidelines in the following particulars: • Paragraph 4 of the order required the plaintiff to list the victims and the amount of their injury. Although the plaintiff states that it lost in excess of $20 million, it does not specify other victims or which defendants caused the plaintiff’s injury. -10- • • • • • • Paragraphs 5(b) and 5(c) required the plaintiff to provide dates and descriptions of the predicate acts and plead fraud with particularity. The plaintiff identifies only the dates and amounts of loan transactions alleged to be involved in the wire and mail fraud counts and alleges the defendants’ participation in the enterprise’s affairs in paragraphs 118, 192, and 193, but fails to list specific dates, participants, and facts about each event. Paragraph 5(f) required a description of how the predicate act forms a pattern of racketeering activity. The Baker defendants argue that the plaintiff submitted conclusory statements that various defendants were engaged in a pattern of racketeering activity, but did not describe the nature of the alleged activity. Paragraph 5(g) required a description of the common plan and how the predicate acts formed that common plan. The Baker defendants argue the plaintiff has failed to allege how the “enterprise” it mentions was pursuing a common plan or how Baker fit into that plan; instead, the plaintiff has alleged only conclusory statements that do not identify in detail how the predicate acts related to each other or how the defendants participated in the common plan. Paragraph 8 required an explanation of how the alleged predicate acts differ from the standard operating activities of the defendants. The Baker defendants argue that the plaintiff has not indicated how the defendants’ legitimate activities differed from the illegal activity. Paragraph 9 required a description of benefits the alleged enterprise received from the alleged racketeering. The defendants assert that the plaintiff has not alleged what benefit the enterprise received. Paragraph 17 requiring a list of damages itemized by each defendant. The defendants argue that the plaintiff has not indicated the amount for which each defendant is allegedly liable. The Court finds no merit in the Baker defendants’ arguments. RICO’s civil remedy provision states that “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee . . . .” 18 U.S.C. § 1964(c). The plaintiff alleges violations of subsections 1962 (c) and (d) against the defendants who have filed motions to dismiss. Subsection 1962(c) makes it “unlawful for any person employed by or associated with any enterprise engaged in” activities affecting “interstate or foreign commerce . . . to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of -11- racketeering activity.” 18 U.S.C. § 1962(c). To state a claim under subsection 1962(c), the plaintiff must plead “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (footnote omitted); see also Moon v. Harrison Piping Supply, 465 F.3d 719, 723 (6th Cir. 2006). Similarly, subsection 1962(d) makes it “unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.” 18 U.S.C. § 1962(d). Under that provision, the plaintiff must “detail[] an agreement to jointly undertake specific actions illegalized by RICO,” other elements of a conspiracy claim, and the underlying RICO violations. Pik-Coal Co. v. Big Rivers Elec. Corp., 200 F.3d 884, 890 n.10 (6th Cir. 2000) (citing Craighead v. E.F. Hutton & Co., Inc., 899 F.2d 485, 495 (6th Cir. 1990 . RICO pleadings are to be liberally construed. Begala v. PNC Bank, 214 F.3d 776, 781 (6th Cir. 2000). However, under Rule 12(b)(6), as presently construed, the court does not accept legal conclusions unsupported by the pleaded facts. Lillard v. Shelby Cnty. Bd. of Educ., 76 F.3d 716, 726 (6th Cir. 1996). RICO defines an “enterprise” as “any individual, partnership, corporation, association, or other legal entity and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4); see also United States v. Turkette, 452 U.S. 576, 583 (1981) (defining an enterprise as a “group of persons associated together for a common purpose of engaging in a course of conduct”). To make out a claim under section 1962(c), the plaintiff must plead that “the ‘enterprise’ is the instrument through which illegal activity is conducted.” United States v. Chance, 306 F.3d 356, 371-72 (6th Cir. 2002) (citing Nat’l Org. for Women, Inc. v. Scheidler, 510 U.S. 249, 258 (1994 . To meet that requirement, the plaintiff must establish: 1) an ongoing organization with some sort of framework or superstructure for making and carrying out decisions; 2) that the members of the enterprise functioned -12- as a continuing unit with established duties; and 3) that the enterprise was separate and distinct from the pattern of racketeering activity in which it engaged. Id. at 372 (citing Frank v. D’Ambrosi, 4 F.3d 1378, 1386 (6th Cir. 1993 . Alternatively, the plaintiff may demonstrate the existence of an “association-in-fact enterprise” by showing: “1) that the associated persons formed an ongoing organization, formal or informal; 2) that they functioned as a continuing unit; and 3) that the organization was separate from the pattern of racketeering activity in which it was engaged.” VanDenBroeck v. CommonPoint Mortg. Co., 210 F.3d 696, 699 (6th Cir. 2000), abrogated on other grounds, Bridge v. Phoenix Bond & Indemn. Co., 553 U.S. 639 (2008). The allegations in the complaint must connect the defendants with the enterprise. Ray v. General Motors Acceptance Corp., No. 92-5043, 1995 WL 151852, at *2-3 (E.D.N.Y. Mar. 28, 1995). The plaintiff also must make out the underlying claim of wrongful or criminal conduct in order to establish that the defendants were engaged in an enterprise. See Vennittilli v. Primerica, Inc., 943 F. Supp. 793, 799 (E.D. Mich. 1996). To plead a pattern of racketeering activity, the plaintiff must allege at least two predicate acts, although that may not necessarily be sufficient. Brown v. Cassens Transp. Co., 546 F.3d 347, 354 (6th Cir. 2008) (citing H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 238-43 (1989 . When the predicate acts are based on fraud, Federal Rule of Civil Procedure 9(b)’s heightened pleading requirement applies. Id. at 356 n.4. At a minimum, the complaint alleging a RICO claim must state “the nature of the fraud [that] gives rise to the predicate offense.” Blount Fin. Servs., Inc. v. Walter E. Heller & Co., 819 F.2d 151, 152 (6th Cir. 1987). Under Rule 9(b), “[i]n alleging fraud or mistake a party must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). The plaintiff must “‘allege the time, place, and content of the alleged misrepresentation on which he or she relied; the fraudulent scheme; the fraudulent intent of [the -13- other party]; and the injury resulting from the fraud.’” Coffey v. Foamex L.P., 2 F.3d 157, 161-62 (6th Cir. 1993) (quoting Ballan v. Upjohn Co., 814 F. Supp. 1375, 1385 (W.D. Mich. 1992 ; see also Vild v. Visconsi, 956 F.2d 560, 567 (6th Cir. 1992); Bender v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir. 1984) (holding that as to each predicate act, the plaintiff must allege “the time, place and contents of the misrepresentation(s)”). Where a plaintiff makes only “loose references to mailings and telephone calls” to support its allegations of mail and wire fraud, but otherwise fails to identify the parties to these transactions, circuit courts have upheld the dismissal of the RICO claims under both Rule 9(b) and RICO itself. See Jepson Inc. v. Makita Corp., 34 F.3d 1321, 1328 (7th Cir. 1994) (“without an adequately detailed description of the predicate acts of mail and wire fraud, a complaint does not provide either the defendant or the court with sufficient information to determine whether or not a pattern of racketeering activity has been established.”); Vennittilli, 943 F. Supp. at 799 (discussing Jepson). The complaint also must identify the person making the alleged misrepresentations or involved in the alleged predicate acts. Jepson, 34 F.3d at 1328; Seattle-First Nat’l Bank v. Carlstedt, 800 F.2d 1008, 1011 (10th Cir. 1986); Vennittilli, 943 F. Supp. at 799. The plaintiff alleges predicate acts of mail fraud, wire fraud, and money laundering. A person commits mail fraud if he devises a scheme to defraud, executes the scheme using the mail or causing it to be used, and acts with the intent to defraud. 18 U.S.C. § 1341; United States v. Jones, 641 F.3d 706, 710 (6th Cir. 2011). Wire fraud requires similar proof, except that instead of alleging use of the mail to execute the scheme, the plaintiff must allege that the person used or caused to be used a wire communication in interstate commerce in furtherance of the scheme. 18 U.S.C. § 1341; United States v. Faulkenberry, 614 F.3d 573, 582 (6th Cir. 2010). Money laundering can be proved in a number of ways, but “concealment money laundering” can be made by alleging -14- that a defendant used proceeds of an illegal activity with knowledge that the funds were derived illegally, and engaged in a transaction designed to conceal the source, ownership or control of the funds.” 18 U.S.C. § 1956; United States v. Warshak, 631 F.3d 266, 319-20 (6th Cir. 2010). In the amended complaint, the plaintiff has pleaded the elements of a RICO claim and has complied with the Court’s RICO case management statement. The plaintiff alleged that Ronnie Duke and others operated Specialty Holdings, Inc., a legitimate corporation conducting business as an investment club, through a pattern of racketeering activities to perpetrate the mortgage fraud scheme. The plaintiff also has alleged that Duke functioned as the president, secretary, and treasurer of Specialty Holdings. The complaint alleges no further members of that enterprise, except to the extent it asserts that every individual defendant is “associated” with the enterprise, see Am. Compl. ¶¶ 123-191, but the titles ascribed to Duke demonstrate that he had established duties. The titles also suggest that the members functioned as a continuing unit. The plaintiff has alleged that the enterprise was separate from the pattern of racketeering activity by explaining that Specialty Holdings’s standard business operations involved managing and renting property. There is no allegation that Specialty Holdings was directly involved in any of the fraudulent activities or participated in the mail or wire fraud. Nor has the plaintiff alleged any involvement in money laundering, expressly excluding Specialty Holdings from the list of culpable participants in paragraph 120(c) of the amended complaint. Through these allegations, the plaintiff has maintained the distinction between the “enterprise” and the “person” conducting the affairs of the enterprise. See, e.g., Puckett v. Tennessee Eastman Co., 889 F.2d 1481, 1489 (6th Cir. 1989); Schofield v. First Commodity Corp. of Boston, 793 F.2d 28, 29–30 (1st Cir. 1986). -15- The plaintiff also alleged an association-in-fact comprised of various individuals operating as an enterprise to purchase real estate, through which the various defendants perpetuated the fraudulent scheme. The association-in-fact performed daily activities of buying, renting, and selling real estate, and the defendants conducted other fraudulent acts as part of the pattern of racketeering. The plaintiff alleged that several of the defendants had defined roles in that association, consisting of purchasing, renting, and selling real estate, locating property, drafting documents, obtaining straw buyers, and, ultimately, obtaining financing, all under the direction of defendant Ronnie Duke. See First Am. Compl. ¶¶ 74-89, 91-99. The plaintiff alleged that the association-in-fact functioned as a continuing unit as an enterprise apart from the pattern of wrongdoing. The amended complaint describes in great detail the predicate acts of wire fraud and money laundering that constituted the pattern of illegal activity through which the business of the enterprises was conducted, identifying the ghost loans and straw loans by date, borrower, and transaction, and defendant. Paragraphs 103 through 115 describe the activities that constituted wire fraud and list the transaction documents that were falsely drafted. The level of detail in the amended complaint satisfies Rule 9(b)’s particularity requirement. Paragraphs 117 through 120 describe the transactions that constituted money laundering. The amended complaint makes specific allegations of fraud against defendant Timothy Baker, alleging that he submitted false purchase agreements for transactions involving specific loans. See First Am. Compl. ¶ 104. The plaintiff also identifies transactions in which Baker and KeyAppraisers.com LLC prepared fraudulent appraisals. See First Am. Compl. ¶¶ 95, 193(u), 434, 455(q). The plaintiff also alleges that defendant OwnerRealty.com acted through its agents, one of whom was Baker. See First Am. Compl. ¶¶ 13(a), 104, 193(p), 195. -16- The amended complaint contains a list of the victims of the fraud, which included the plaintiff, and alleges the amount of its damages. The plaintiff alleges enterprise liability, so the RICO defendants are each alleged to be responsible for the plaintiff’s damages. The amended complaint alleges that the fraudulent scheme was executed using the United States Mail and interstate wire communications, and it alleges scienter against the Baker defendants, as well. See First Am. Compl. ¶¶ 118, 120. The Court finds that the plaintiff complied with its RICO case management statement, and the amended complaint states a cognizable RICO claim. Therefore, the Baker defendants’ motion to dismiss will be denied. B. Real Estate One, Inc. The claims against defendant Real Estate One include violation of RICO, civil conspiracy, fraud, negligent hiring and negligent retention. The crux of the plaintiff’s RICO, civil conspiracy, and fraud claims focuses on the conduct of Abdul-Majid Bazzi and Jamie Sweeney, whom the plaintiff alleges were Real Estate One employees and Real Estate One insists were independent contractors. Real Estate One argues that an employer cannot be held vicariously liable for the torts of independent contractors, citing Davis v. Mut. Life Ins. Co. of New York, 6 F.3d 367 (6th Cir. 1993). Real Estate One also argues that the fraud allegations are insufficient because, to aid or abet fraud, the plaintiff must allege that the accused defendant knew of the fraud, but the knowledge must be on the part of the corporate entity, not the individual actors. Finally, Real Estate One contends that the negligent hiring and supervision claims must be dismissed because there is no legal duty that flows from a real estate agent of the seller to the buyer’s lender, and the plaintiff failed to plead a physical injury. -17- 1. RICO liability In Davis v. Mutual Life Insurance Company of New York, the Sixth Circuit discussed the limitations on the imposition of vicarious liability under RICO as deriving from the requirement of distinctness. The court first reiterated “the relatively uncontroversial premise that, for purposes of section 1962(c), a corporation cannot be both the ‘enterprise’ and the ‘person’ conducting or participating in the affairs of that enterprise.” Davis, 6 F.3d at 377. The court then distinguished cases from other circuits disapproving of vicarious liability on the basis that the “master” in respondeat superior parlance, also was the “enterprise” under RICO, and the “servant” was the “person.” Imposing vicarious liability under those circumstances, the court believed, would trench upon the distinctness requirement. Id. at 378-79. But the court did not impose a general bar against vicarious liability under RICO, as Real Estate One advocates here. Instead, the Sixth Circuit announced a narrow holding: The rule to be drawn from these cases is that plaintiffs may not use RICO to impose liability vicariously on corporate “enterprises,” because to do so would violate the distinctness requirement. No such prohibition, however, prevents the imposition of liability vicariously on corporate “persons” on account of the acts of their agents, particularly where the corporation benefitted by those acts. Such a prohibition, if it existed, would prevent corporate persons from ever being found liable under RICO, since corporate principals may act only through their agents. Such a rule would be manifestly contrary to the intent of Congress, and we decline to adopt it. Id. at 379. The court upheld a verdict against a corporation based on its agent’s acts of conducting the affairs of another enterprise through a pattern of illegal activity, thereby imposing vicarious liability under RICO where doing so does not destroy the separation between the person and the enterprise and the plaintiff alleges benefit to the defendant from its agents’ actions. See also Gen. Motors Corp. v. Lopez de Arriortua, 948 F. Supp. 670, 682 n.9 (E.D. Mich. 1996). -18- The question, then, becomes whether the plaintiff has pleaded adequately an agency relationship between Real Estate One and its real estate agents, Sweeney and Bazzi. The Court believes it has. As noted earlier, the plaintiff alleged that Real Estate One employed these individuals. First Am. Compl. ¶¶ 13(b), 19, 92. The determination of an agency relationship and the scope of the agent’s actual, implied, or apparent authority is necessarily a fact-bound endeavor. St. Clair Intermediate Sch. Dist. v. Intermediate Educ. Ass’n/Mich. Educ. Ass’n, 458 Mich. 540, 557, 581 N.W.2d 707, 716 (1998) (quoting Saums v. Parfet, 270 Mich. 165, 170-71, 258 N.W. 235 (1935 . Under Michigan law, an employer is vicariously liable for “the wrongful acts of his servant committed while performing some duty within the scope of his employment, but is not vicariously liable for acts committed by its employees outside the scope of employment, because the employee is not acting for the employer or under the employer’s control.” Weinstein v. Siemens, 673 F. Supp. 2d 533, 542 (E.D. Mich. 2009) (internal citations and quotation marks omitted). Real Estate One’s protestations that Bazzi and Sweeney were independent contractors certainly may constitute a valid defense to the RICO claim, but it does not undermine the soundness of the pleading — the amended complaint — as considered against a Rule 12(b)(6) challenge. Last, in its earlier motion, Real Estate One argues that the plaintiff’s RICO claim was filed out of time. The defendant reasons that the complaint was not filed until 2010, all the transactions involving Bazzi and Sweeney closed by 2005, and the RICO statute of limitations is four years. See Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143, 152 (1987) (holding that civil RICO actions are subject to a four-year statute of limitations). The defendant further argues that the injury occurrence rule for when a cause of action accrues applies to civil RICO claims, as, according to the defendants, the Supreme Court will likely adopt this rule when it considers the issue. -19- However, the rule in the Sixth Circuit, at least for the present, is that the statute of limitations does not begin to run until “a party knew, or through exercise of reasonable diligence should have discovered, that the party was injured by a RICO violation.” Sims v. Ohio Cas. Ins. Co., 151 F. Appx. 433, 435 (6th Cir. 2005) (citing Rotella v. Wood, 528 U.S. 549, 553-55 (2000 ; see also Taylor Group v. ANR Storage Co., 24 F. Appx. 319, 325 (6th Cir. 2001) (“The limitations period for RICO claims accrues when a plaintiff knew or should have known of an injury.”) (citing Rotella, 528 U.S. at 554-55). The plaintiff alleges that it did not discover the fraudulent scheme until 2007. That allegation is sufficient to preclude dismissal at this stage of the proceedings on statute of limitations grounds. 2. Fraud & Civil Conspiracy It is not apparent from its motions that Real Estate One intended to challenge the plaintiff’s claims against it for fraud and civil conspiracy. However, in a reply brief, Real Estate One states that it equated those claims with the RICO allegations. The basis for its challenge to the fraud claims mirrors the attack on the RICO count: that Real Estate One should not be held accountable for the intentional torts of its employees. The defendant relies on a line of Michigan cases holding that an employer is not responsible for the violent sexual assaults of its employee absent notice that the employee has violent tendencies. See Hamed v. Wayne County, 490 Mich. 1, --- N.W.2d --- (2011); Brown v. Brown, 478 Mich. 545, 555, 739 N.W.2d 313 (2007). However, the general rule under Michigan law is that “a master is responsible for the wrongful acts of his servant committed while performing some duty within the scope of his employment” but “is not vicariously liable for acts committed by its employees outside the scope of employment, because the employee is not acting for the employer or under the -20- employer’s control.” McMullen v. Duddles, 405 F. Supp. 2d 826, 830 (W.D. Mich. 2005) (internal quotations and citations omitted); Rogers v. J.B. Hunt Transp., Inc., 466 Mich. 645, 650-51, 649 N.W.2d 23 (2002). The amended complaint alleges conduct by Sweeney and Bazzi that makes out the elements of common law fraud — (1) a material misrepresentation; (2) that was false; (3) knowledge of the falsity; (4) the intention that it should be acted upon by the plaintiff; (5) the plaintiff acted in reliance upon it; and (6) a consequential injury. Hi-Way Motor Co. v. Int’l Harvester Co., 398 Mich. 330, 336, 247 N.W.2d 813, 816 (1976). The amended complaint also contains allegations that Sweeney and Bazzi committed the fraudulent acts as real estate agents, and they received commissions that were shared with their employer. The acts of engaging in real estate transactions, albeit fraudulent ones, can fairly be said to be within the scope of Sweeney’s and Bazzi’s employment. The amended complaint states a fraud claim against their employer, Real Estate One. The same cannot be said of the civil conspiracy allegations. A civil conspiracy is “a combination of two or more persons, [who] by some concerted action, [agree] to accomplish a criminal or unlawful purpose, or to accomplish a lawful purpose by unlawful means.” Admiral Ins. Co. v. Columbia Cas. Ins. Co., 194 Mich. App. 300, 313, 486 N.W.2d 351 (1992); see also Ahlers v. Schebil, 188 F.3d 365, 374 (6th Cir. 1999); Kennedy v. R.W.C., Inc., 359 F. Supp. 2d 636, 643 (E.D. Mich. 2005); Advocacy Org. for Patients & Providers v. Auto Club Ins. Ass’n, 257 Mich. App. 365, 384, 670 N.W.2d 569 (2003). A conspiracy requires proof of an intentional agreement. See Temborius v. Slatkin, 157 Mich. App. 587, 599-600, 403 N.W.2d 821, 827-28 (1986); Kennedy, 359 F. Supp. 2d at 643. Under Michigan law, “[i]t is sufficient if the circumstances, acts and conduct of the parties establish an agreement in fact. Furthermore, conspiracy may be established by -21- circumstantial evidence and may be based on inference.” Ibid.; see also Wysong Corp. v. M.I. Indus., 412 F. Supp. 2d 612, 632 (E.D. Mich. 2005); cf. Robinson v. Township of Waterford, 883 F.2d 75, 79 (6th Cir. 1989) (“the question whether an agreement exists should not be taken from the jury in a civil conspiracy case so long as there is a possibility that the jury can infer from the circumstances [that the alleged conspirators] had a meeting of the minds and thus reached an understanding to achieve the conspiracy’s objectives.”). However, “[i]t is ‘well-settled that conspiracy claims must be pled with some degree of specificity and that vague and conclusory allegations unsupported by material facts will not be sufficient to state such a claim . . . .’” Gutierrez v. Lynch, 826 F.2d 1534, 1538 (6th Cir. 1987). Therefore, “pleading requirements governing civil conspiracies are relatively strict.” Fieger v. Cox, 524 F.3d 770, 776 (6th Cir. 2008); see also Flores v. Lenawee Cnty., No. 07-11288, 2008 WL 4601404, at *11 (E.D. Mich. Oct. 15, 2008). Furthermore, where the underlying tort is fraudulent in nature, courts have required that plaintiffs meet the heightened pleading requirements of Federal Rule of Civil Procedure 9(b) to withstand dismissal. See Tramontana v. May, No. 02-10234 & 02- 10012, 2004 WL 539065, at *7 (E.D. Mich. Mar. 16, 2004). The amended complaint presents the following allegations in favor of the civil conspiracy claim: 225. By [its] conduct alleged above, [ . . . ] Real Estate One, through [its] agents, conspired to acquire and gain control over mortgage loan proceeds while concealing the true nature of the loan transactions, participate in the laundering of the mortgage loan proceeds illegally obtained, engage in both straw and ghost loan transactions, and make misrepresentations about the conduct of themselves and others, upon which Fremont reasonably relied. 226. As a direct and proximate cause of the actions taken in furtherance of this conspiracy, Fremont was damaged in an amount not yet determined, but believed to be in excess of $20,000,000. -22- First Am. Compl. ¶¶ 225-226. These allegations do not satisfy the stringent pleading requirement. Reading the complaint liberally, the plaintiff has alleged a scheme whereby many actors worked together to obtain mortgage funds fraudulently and one can infer an agreement from this large-scale group effort. However, the plaintiff has not alleged any acts by Real Estate One, beyond its standard activities as a realtor, tending to show an agreement. Therefore, the Court will dismiss the conspiracy claim against Real Estate One. 3. Negligence Real Estate One argues that the amended complaint fails to state a claim of negilgence and negligent hiring or supervision because there is no duty that flows from a real estate agent of a seller to the buyer’s lender. If there is no duty, it says, there can be no negligence. There is only a duty on the part of the real estate agent to the person the agent represents. Referring to Henry v. The Dow Chem. Co., 473 Mich. 63, 701 N.W.2d 684 (2005), Real Estate One also contends that in order to plead a claim of negligent hiring or negligent supervision, the plaintiff must plead a physical injury. The plaintiff acknowledges that its negligence theory is a novel one, and there is no case law to support it. However, the plaintiff argues that under general Michigan law, one must look to the relationship of the parties to determine whether there is a duty. The plaintiff argues that there was a pre-existing relationship between Real Estate One and Fremont since Real Estate One knew that Fremont was the lender in each of the listed transactions. The plaintiff contends there was a moral responsibility to act fairly with respect to Fremont, and therefore the plaintiff believes we should recognize a cause of action that holds Real Estate One accountable for its failure to exercise due care to engage and monitor its sales agents. This Court’s task in such a case is to determine from “all -23- relevant data” what the state’s highest court would decide. See Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995) (quoting Bailey v. V. & O Press Co., 770 F.2d 601, 604 (6th Cir. 1985 . “Relevant data” includes the state’s intermediate appellate court decisions, ibid., as well as the state supreme court’s relevant dicta, “restatements of law, law review commentaries, and the ‘majority rule’ among other states.” Angelotta v. American Broad. Corp., 820 F.2d 806, 807 (6th Cir. 1987). “The threshold question in a negligence action is whether the defendant owed a duty to the plaintiff.” Fultz v. Union-Commerce Assoc., 470 Mich. 460, 463, 683 N.W.2d 587, 590 (2004). Absent a legal duty, there is no liability. Beaty v. Hertzberg & Golden, PC, 456 Mich. 247, 262, 571 N.W.2d 716, 723 (1997) (“It is axiomatic that there can be no tort liability unless defendants owed a duty to plaintiff.”). “Duty is essentially a question of whether the relationship between the actor and the injured person gives rise to any legal obligation on the actor’s part for the benefit of the injured person.” Moning v. Alfono, 400 Mich. 425, 438-39, 254 N.W.2d 759, 765 (1977). This relationship must be one that “the law or society views as sufficiently strong” to require action or prohibit inaction by another. Rakowski v. Sarb, 269 Mich. App. 619, 631, 713 N.W.2d 787 (2006) (quoting Samson v. Saginaw Professional Bldg., Inc., 393 Mich. 393, 406, 224 N.W.2d 843, 849 (1975 . Duties may be created by statute, ordinance, contract, common law, or public policy. Under Michigan law, the existence of a general duty is a question to be decided by the court. Simko v. Blake, 448 Mich. 648, 655, 532 N.W.2d 842, 846 (1995). Determining whether a legal duty ought to be imposed requires a court to balance the utility of the actor’s conduct and the magnitude of the risk involved. As the Michigan Supreme Court explained in Moning: -24- The balancing of the magnitude of the risk and the utility of the actor’s conduct requires a consideration by the court and jury of the societal interests involved. The issue of negligence may be removed from jury consideration if the court concludes that overriding considerations of public policy require that a particular view be adopted and applied in all cases. Id. at 450, 254 N.W.2d at 770 (footnote omitted). The factors that courts consider in striking that balance include “the foreseeability of the harm, the degree of certainty of injury, the closeness of connection between the conduct and injury, the moral blame attached to the conduct, the policy of preventing future harm, and the burdens and consequences of imposing a duty and the resulting liability for breach.” Babula v. Robertson, 212 Mich. App. 45, 49, 536 N.W.2d 834, 837 (1995) (citing Buczkowski v. McKay, 441 Mich. 96, 101, n.4, 490 N.W.2d 330 (1992 ; see also Dresser v. Cradle of Hope Adoption Center, Inc., 358 F. Supp. 2d 620, 639 (E.D. Mich. 2005); Rakowski, 269 Mich. App. at 629, 713 N.W.2d at 795. The essence of the plaintiff’s negligence claim is that Real Estate One carelessly submitted defective purchase agreements to support fourteen of the mortgage transactions the plaintiff approved. Under Michigan law, a real estate agent generally is the agent of the seller. Andrie v. Chrystal-Anderson & Associates Realtors, Inc., 187 Mich. App. 333, 335, 466 N.W.2d 393, 394 (1991) (“Real estate brokers and salesmen are the agents of the seller, their principal.” (citing McMullen v. Joldersma, 174 Mich. App. 207, 212, 435 N.W.2d 428 (1988); Minchella v. Fredericks, 138 Mich. App. 462, 467-468, 360 N.W.2d 896 (1984 . Because buyers and sellers frequently find themselves in a commercially competitive relationship with each other, the Michigan courts have declined to impose a duty of due care on a seller’s agent in favor of a buyer. Id. at 337, 466 N.W.2d 395 (reasoning that “[i]n negotiating a real estate sale, any relationship between the seller's agent and the potential buyer is a commercially antagonistic one, with each side working for -25- his best advantage and not for the benefit of the other”); Seit-Olsen v. Reliance Appraisals, LLC, 2006 WL 1113936 at *5 (Mich. App. April 27, 2006); Foglia v. Evola, 2001 WL 920084 at *4 (Mich. App. August 14, 2001). The plaintiff contends, however, that Real Estate One was the buyers’ agent in the fourteen transactions involving Bazzi or Sweeney, and therefore the agent owed a duty to its buyer’s — i.e., its principal’s — lender. The Court believes that such a distinction would make no difference to the Michigan courts. There is no question that the real estate agent owes a duty of care to its principal, whether that be the buyer or seller. However, that duty does not extend to everyone the buyer deals with during the transaction. The relationship between a buyer and his lender frequently “is a commercially antagonistic one,” since each side of that transaction is competing for terms favorable to his own interests. Finding a legal duty (other than those found in the rules prohibiting fraud) running from a buyer’s agent to the buyer’s lender would contradict the reasoning in Andrie, and likely would not be endorsed by the Michigan courts. This Court, therefore, declines to impose such a duty in this case. Because there is no legal duty of care owed by a real estate agent to a buyer’s lender to convey proper purchase documents in support of a mortgage request, there can be no negligence claim premised on such conduct, and Real Estate One’s motion to dismiss on that ground will be granted. Since there is no duty, the Court need not address the dubious argument premised on Henry v. The Dow Chem. Co., 473 Mich. 63, 701 N.W.2d 684 (2005), that an injury must be physical in nature to support a negligence claim. (Henry merely held that the injury required to support a claim of negligence must not be “derivative of a possible, future injury rather than an actual, present injury.” Id. at 78, 701 N.W.2d at 691.). -26- 4. Negligent Hiring The plaintiff also premises a claim against Real Estate One on their acts of hiring dishonest agents (Sweeney and Bazzi) and unleashing them upon the unsuspecting public without properly monitoring their activity. Another judge of this court has summarized the relevant governing law as follows: Michigan has never recognized a claim for negligent hiring by holding an employer liable for an employee’s acts resulting in economic injury or for any kind of fraudulent acts. While Michigan courts have recognized a cause of action for negligent hiring where an employee commits a foreseeable act of physical violence; see Bradley v. Stevens, 329 Mich. 556, 46 N.W.2d 382 (1951); Michigan has not extended the concept to include what is alleged in these cases. Accordingly, this court declines to extend negligent hiring to include economic injuries. Vennittilli v. Primerica, Inc., 943 F. Supp. 793, 797 (E.D. Mich. 1996). The Court is not persuaded by the plaintiff’s attempt to distinguish Vennittilli from the present facts. The Vennittilli court did not dismiss related negligent supervision claims based on allegations that the defendant’s employees sold the plaintiffs fraudulent investment contracts. The court found that the defendants’ ground for the motion — that the claim was superseded by the Michigan securities laws — did not bar the claims in that case, where no Michigan securities law claim was made. The court did not address the viability of the cause of action beyond that. However, this Court finds that where a real estate agency has no duty of care toward a buyer’s lender, there likewise can be no duty in favor of the lender properly to hire, train, or supervise the agent’s employees. Therefore, Real Estate One’s motion to dismiss all the negligence-based claims will be granted. C. JP Morgan Chase Bank -27- The plaintiff’s claims against Chase are found in count 17 of the first amended complaint, where the plaintiff alleges that Chase was negligent and aided and abetted the breach of a fiduciary duty. The plaintiff contends that the checking accounts some of the defendants opened at Chase displayed such unusual activity that Chase, which had a duty under federal regulations to “know their customer,” see 31 C.F.R. § 1020.220(a)-(c), should have detected fraudulent activity and interdicted it or warned the plaintiff. The plaintiff alleges that, assuming the bank complied with the federal requirements, it would have had actual knowledge of Ronnie Duke’s activities. The plaintiff says that Chase aided and abetted the fraudulent transactions by actually processing the transactions when they were drawn on the bank. 1. Negligence The plaintiff relies on Lerner v. Fleet Bank, 459 F.3d 273 (2d Cir. 2006), to support its claim that a bank owed a duty to make inquiry when it has notice that funds deposited in fiduciary accounts are being diverted. See id. at 287-88. Lerner, however, was decided under New York law. The Court finds that the general statement of Michigan law articulated by the court in El Camino Res,. Ltd. v. Huntington Nat’l Bank, 722 F. Supp. 2d 875 (W.D. Mich. 2010), governs the present case: “Michigan law, in accord with the universal rule in this country, holds that a bank’s relationship is with its customer and that the bank owes third parties no duty of care to monitor a customer’s activities.” Id. at 907 (citing Columbia Land Co. v. Empson, 305 Mich. 220, 229, 9 N.W.2d 452, 455 (1943); Portage Alum. Co. v. Kentwood Nat’l Bank, 106 Mich. App. 290, 296-97, 307 N.W.2d 761, 764-65 (1981 . The plaintiff’s negligence claim is based on the alleged duty of Chase to police the banking activities of Duke and his cohorts. But Michigan law recognizes no such duty. Even the Lerner -28- decision applying foreign law holds that the level of knowledge necessary to hold a bank accountable for the criminal conduct of its customers is greater than that required for a claim of negligence. See El Camino, 722 F. Supp. 2d at 907-08 (observing that “[t]he Second Circuit has recently reaffirmed that the appropriate showing of scienter for aiding-and-abetting liability is actual knowledge, and that proof that a bank ‘suspected fraudulent activity’ does not suffice” (citing Lerner, 459 F.3d at 292-93 . Therefore, the plaintiff’s negligence claim against Chase must fail. 2. Aiding and Abetting Breach of Fiduciary Duty The dimensions of an aiding and abetting claim were thoroughly explored by the court in El Camino, which this Court finds to be a useful template for adjudicating Chase’s motion. See El Camino, 722 F. Supp. 2d at 901-14. To begin, “the court must first determine the contours of the primary violation on which the secondary liability is alleged to be based.” Id. at 914 (quoting Kolbeck v. LIT Amer., Inc., 939 F. Supp. 240, 245 (S.D.N.Y.1996 . Under Michigan law, fiduciary duties arise from “the relation subsisting between two persons of such a character that each must repose trust and confidence in the other and must exercise a corresponding degree of fairness and good faith.” Portage Aluminum Co. v. Kentwood Nat’l Bank, 106 Mich. App. 290, 294, 307 N.W.2d 761 (1981). There are certain relationships that automatically yield a fiduciary obligation: “trustees to beneficiaries, guardians to wards, attorneys to clients, and doctors to patients.” Ibid. Beyond those, “whether there exists a confidential relationship apart from a well-defined fiduciary category is a question of fact.” Fassihi v. Sommers, Schwartz, Silver, Schwartz & Tyler, P.C, 107 Mich. App. 509, 515, 309 N.W.2d 645 (1981). In the Sixth Circuit, there is no rule that a specific relationship may never be the basis of fiduciary -29- obligations; rather, courts must look to the actual relationship between the parties. See ATC Distrib. Grp., Inc. v. Whatever It Takes Transmissions & Parts, Inc., 402 F.3d 700, 715 (6th Cir. 2005). The plaintiff alleges that it enjoyed a fiduciary relationship with the closing agents that maintained accounts with Chase: First Escrow, Lawyers Escrow, Liberty Title, and Nations Title. The plaintiff wired loan proceeds to those agents with the understanding that the funds would not be distributed until the loans were properly documented and secured. The plaintiff alleges that instead, the closing agents distributed funds based on fraudulent transactions. The amended complaint pleads a breach of fiduciary duty by the closing agents. Michigan law does recognize the prospect of liability by one who joins in a conspiracy or enterprise with another who breaches a fiduciary duty to third party. See In re Goldman Estate, 236 Mich. App. 517, 521-22, 601 N.W.2d 126, 129 (1999) (stating that “[t]hird parties that profit from a fiduciary’s breach can be liable under certain circumstances,” and “a third party that knowingly participated in the defendant’s misappropriation of trade secrets from his employer was liable for both actual damages and unjust enrichment damages” (quoting Hayes-Albion Corp. v. Kuberski, 421 Mich. 170, 187, 364 N.W.2d 609 (1984 . The Michigan Supreme Court has not recognized a cause of action for aiding and abetting the breach of a fiduciary duty; however, after an exhaustive analysis of Michigan law on the subject, the El Camino court concluded that the state supreme court would adopt rules for secondary liability consistent with section 876(b) of the Second Restatement of Torts. El Camino, 722 F. Supp. 2d at 897, 901. Section 876 reads as follows: For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he (a) does a tortious act in concert with the other or pursuant to a common design with him, or (b) knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself, or -30- (c) gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person. Restatement (Second) of Torts § 876 (1979). The aiding and abetting theory is reflected in Restatement section 876(b). Therefore, to avoid dismissal, the plaintiff must plead that the closing agents owed a duty to the plaintiff, the fiduciaries breached their duties, defendant Chase knew of the breach, and Chase provided the fiduciaries with substantial assistance. See Laethem Equip. Co. v. Deere & Co., No. 05-10113, 2007 WL 2433980, at *19 (E.D. Mich. Aug. 14, 2007); Prime Fin. Servs., LLC v. Vinton, 279 Mich. App. 245, 277, 761 N.W.2d 694, 714 (2008). With respect to the knowledge requirement, courts applying Michigan law have held that “the alleged abettor is required to have the same degree of scienter as the person committing the actual fraud.” Chase Bank v. Grant Thornton, No. 236237, 2003 WL 21350362, at *4 (Mich. Ct. App. June 10, 2003); see also Carson Fischer, PLC, 2005 WL 292343, at *6, rev’d on other grounds, 475 Mich. 851, 713 N.W.2d 265 (2006). Actual knowledge of the tort itself is necessary to impose liability on the alleged aider and abettor. El Camino, 722 F. Supp. 2d at 906-07, 910 (determining that the Michigan Supreme Court likely would adopt an actual knowledge requirement, based on Michigan case law construing “knowledge” in other contexts, concerning secondary liability, imposing obligations on banks, and other jurisdictions’ case law); see also Lerner v. Fleet Bank, N.A., 459 F.3d 273, 292-93 (2d Cir. 2006) (holding that a bank’s knowledge that its customer was engaged in improper conduct was not sufficient; instead, the plaintiff must show that bank officials “actually knew that the fraud was, in fact, occurring”). Alleging that the defendant “knew or should have known” of the illegal scheme is not sufficient. Carson Fischer, PLC, 2005 WL 292343, at *6, rev’d on other grounds, 475 Mich. 851, 713 N.W.2d 265 (2006). The El Camino -31- court concluded that the Michigan Supreme Court likely would not adopt a lesser scienter requirement, which was derived from federal securities cases that had been rejected by the United States Supreme Court, but pointed out that even that standard required knowledge of the specific wrongdoing. El Camino, 722 F. Supp. 2d at 910. The Restatement approach also requires the plaintiff to show that the alleged aider and abettor provided “substantial assistance or encouragement” to the tortfeasor. Restatement Torts 2d, § 876(b). “The plaintiff [must] show that the secondary party proximately caused the violation, or, in other words, that the encouragement or assistance was a substantial factor in causing the tort.’” Aetna Cas. & Sur. Co. v. Leahey Constr. Co., 219 F.3d 519, 537 (6th Cir. 2000) (quoting K & S P’ship v. Continental Bank, N.A., 952 F.2d 971, 979 (8th Cir. 1991 . Therefore, the plaintiff must demonstrate both but-for and proximate causation. See El Camino, 722 F. Supp. 2d at 910. In addition, the substantial assistance must “further the fraud itself, and not merely constitute general aid to the tortfeasor.” Id. at 910-11, 914. The El Camino court explained that “substantial assistance means something more than merely providing routine professional services that aid the tortfeasor in remaining in business, but do not proximately cause the plaintiff’s harm.” Id. at 911. “[A] bank does not aid and abet its customer’s wrongdoing merely by providing routine banking services to its customers.” Id. at 911 (citing Aetna Cas., 219 F.3d at 546 (discussing the extension of loans); see also Bane v. Sigmundr Exploration Corp., 848 F.2d 579, 582 (5th Cir.1988) (collecting cases); Rosner v. Bank of China, 528 F. Supp. 2d 419, 426-27 (S.D.N.Y. 2007) (discussing the general rule); Weiss v. Nat’l Westminster Bank, PLC, 453 F. Supp. 2d 609, 621-22 (E.D.N.Y.2006) (discussing the maintenance of a bank account, transfer of funds, and repeated wire transfers and declining to find substantial assistance ; cf. In re First Alliance Mortg. Co., 471 F.3d -32- 977, 995 (9th Cir. 2006) (“[O]rdinary business transactions a bank performs for a customer can satisfy the substantial assistance element . . . if the bank actually knew that those transactions were assisting the customer in committing a specific tort. Knowledge is the crucial element.” (internal citations and quotation marks omitted . A failure to act or a failure to warn the plaintiff of suspected questionable conduct does not constitute substantial assistance, unless the defendant owed the plaintiff an independent duty. Glidden Co. v. Jandernoa, 5 F. Supp. 2d 541, 556-57 (W.D. Mich. 1998) (“A bank cannot be held liable for aiding and abetting . . . breach of fiduciary duty merely on that basis that it knew that the party it was lending to was not being forthright in its dealings with others. Where . . . there are no allegations or evidence that the Banks themselves made any misrepresentations or took any actions to affirmatively hide their client’s misdeeds, there is no basis for holding the Banks liable for aiding and abetting . . . .”); El Camino, 722 F. Supp. 2d at 911-12, 914; Kolbeck v. LIT Am., Inc., 939 F. Supp. 240, 247 (S.D.N.Y. 1996) (“[A] failure to investigate, i.e., constructive knowledge, is not enough to support a claim for aiding and abetting a fiduciary absent the existence of a fiduciary duty running from defendant to plaintiff.”). Under Michigan law, then, to withstand Chase’s motion to dismiss, the plaintiff must allege in its amended complaint that (1) some person or entity breached a fiduciary owed to the plaintiff; (2) Chase actually knew of the breach; and (3) Chase gave the primary tortfeasor substantial assistance that proximately caused the plaintiff’s loss. El Camino, 722 F. Supp. 2d at 897; Restatement Torts 2d, § 876(b). The amended complaint contains the following allegations against Chase: 540. As closing or title agents, First Escrow, Lawyers Escrow, Liberty Title, and Nations Title owed fiduciary duties to Fremont. 541. Through the activity in the Chase Accounts described above, First Escrow, Lawyers Escrow, Liberty Title, and Nations Title breached their fiduciary duties to -33- Fremont and the other mortgage lenders by converting mortgage proceeds and laundering the proceeds for their own use and enjoyment. 542. Through the activity in the Chase Accounts described above, Chase knew that First Escrow, Lawyers Escrow, Liberty Title, and Nations Title were breaching their fiduciary duties to Fremont and other mortgage lenders. 543. By failing to recognize, detect, stop or refrain from participating in these transactions, or to prevent money laundering from taking place in the Chase Accounts, Chase substantially assisted First Escrow, Lawyers Escrow, Liberty Title, and Nations Title in breaching their fiduciary duties. 544. As a direct and proximate result of these breaches of fiduciary duty, Fremont was injured and suffered damages in an amount not yet determined, but believed to be in excess of $13,000,000. First Am. Compl. ¶¶ 540-544. The plaintiff has listed each of the three elements of an aiding and abetting claim, but it has alleged the scienter element only in conclusory fashion. “‘[A] legal conclusion couched as a factual allegation’ need not be accepted as true” when assessing a motion to dismiss under Rule 12(b)(6). Rondigo, L.L.C. v. Twp. of Richmond, 641 F.3d 673, 680 (6th Cir. 2011) (quoting Bell Atlantic Corp. v. Twombly, , 555 (2007 . Instead, Fremont must “plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937,1949 (2009). Fremont has alleged that several account transactions by the closing agents were “inconsistent with the type of activity in which an escrow company would be expected to engage and suggested a high probability of illegal conduct taking place in the Chase Accounts,” and that “[a]s a result, Chase had a duty to make reasonable inquiry to determine whether there was a reasonable explanation for these transactions.” First Am. Compl. ¶ 534. Those facts, however, do not support a “plausible” inference of actual knowledge. “A plaintiff falls short if she pleads facts ‘merely consistent with a defendant's liability’ or if the alleged facts do not ‘permit the court to infer more than the mere possibility of misconduct. . . .’” Albrecht v. Treon, 617 F.3d 890, 893 (6th Cir. 2010) (quoting Iqbal, 129 S.Ct. at 1949, 1950). -34- Moreover, Fremont has not alleged any affirmative action by Chase that provided substantial assistance to the closing agents’ breach of their fiduciary duties; the amended complaint alleges only a failure to act. A failure to act generally does not constitute substantial assistance. Glidden, 5 F. Supp. 2d at 556-57. The Court concludes, therefore, that the amended complaint fails to state a claim against Chase for aiding and abetting a breach of fiduciary duty. III. The Court finds that the plaintiff has stated valid claims in its first amended complaint against Timothy Baker, KeyAppraisers.com LLC, and OwnerRealty.com for violating RICO; and against Real Estate One for violating RICO and fraud. The amended complaint fails to state claims against Real Estate One for civil conspiracy, negligent hiring, or negligent retention. The amended complaint also fails to state claims against JP Morgan Chase. Accordingly, it is ORDERED that the motions to dismiss and amended motion to dismiss by defendant Real Estate One, Inc. [dkt. # 11, 83, 92] are GRANTED IN PART AND DENIED IN PART. The claims in the amended complaint against Real Estate One, Inc. for civil conspiracy, negligent hiring, or negligent retention are DISMISSED; and the motions are DENIED in all other respects. It is further ORDERED that the motion to dismiss by defendants Timothy Baker, KeyAppraisers.com LLC, and OwnerRealty.com [dkt. #108] is DENIED. -35- It is further ORDERED that the motion to dismiss by defendant JP Morgan Chase Bank [dkt. #127] is GRANTED. Count XVII of the amended complaint is DISMISSED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: September 12, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on September 12, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -36-

=== THELESTER MAHONE v. PIPEFITTERS LOCAL 636 FRINGE BENEFITS FUND ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION THELESTER MAHONE, Plaintiff, v. PIPEFITTERS LOCAL 636 FRINGE BENEFITS FUND, ______________________________________/ Defendant. Case Number 09-13621 Honorable David M. Lawson OPINION AND ORDER DENYING PLAINTIFF’S MOTION TO REVERSE DECISION OF PLAN ADMINISTRATOR, GRANTING IN PART DEFENDANT’S MOTION TO AFFIRM DECISION OF PLAN ADMINISTRATOR, AND DENYING DEFENDANT’S REQUEST FOR ATTORNEY’S FEES Plaintiff Thelester Mahone filed this action under section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B), alleging that the defendant wrongfully denied him deferred vesting pension benefits. The language of pension plan requires an applicant for such benefits to have accumulated a certain number of years of service with contributing employers. The plan provides an alternate method of accumulating the required vested service by working for at least a year for a contributing employer and then performing additional work for a qualifying but non-contributing employer. The plaintiff’s main challenge focuses on whether his employment with the Detroit Board of Education can be counted toward his vested service, either because that employer was a contributing employer or his work otherwise can be counted under the alternate language in the plan. The parties filed cross motions on the administrative record, and the Court heard oral argument on August 1, 2011. The Court concludes that the defendant’s determination that the school board was not a contributing employer, and its interpretation of the plan language to mean that the plaintiff’s employment with the board could not be counted as vested service, were neither arbitrary nor capricious. The Court finds no merit in the plaintiff’s additional arguments. Therefore, the Court will deny the plaintiff’s motion to reverse the plan administrator’s decision and grant the defendant’s motion to affirm the decision. The Court will not award attorney’s fees to the defendant. I. On January 10, 1978, the plaintiff, Thelester Mahone, joined Pipefitters Union Local 636 when he was 26 years old, and he remained an active member until 1996, when he was 45 years old. The union provided its members with pension benefits through the Pipefitters Local 636 Defined Benefit Pension Plan, in which the plaintiff participated. The plan is governed by ERISA. As a pipefitter, the Local directed Mahone to work for the Detroit Board of Education as a journeyman from January 10, 1978 through December 31, 1985. He says that he was not allowed to work for any other employers during that time. The plaintiff paid his union dues throughout that period and served as a union steward for several years. Around 1987, the plaintiff began working for a different employer and remained there until 1996. The employer is not identified in the record, but the parties agree that the employer did contribute to the pension plan on the plaintiff’s behalf. On December 31, 1996, the plaintiff ceased working in the trade and did not return to work with an employer covered by the Plan any time thereafter. In 2007, several years after he stopped working for a union-related employer, the plaintiff contacted his union representative to obtain information about his retirement benefits and received a copy of his benefit calculation form. In early January 2009, when he was 57 years old, the plaintiff -2- applied for deferred vested pension benefits under the Plan. His request was denied initially and after his administrative appeal. Under the terms of the Plan, a participant’s eligibility for pension benefits is determined in part by the number of years the participant has worked for a “contributing employer.” A contributing employer is one who employs workers within the jurisdiction of the union and who pays fringe benefits for those workers to the plan under a written agreement with the union. AR, Ex. A, 2008 Pension Plan, Art. 1. A participant is entitled to a normal pension if he stops working for a contributing employer after reaching age 65 and has then accumulated at least five years of vested service. AR, Ex. A, 2008 Pension Plan, Art. 4, § 4.1. However, the plan version in effect when the plaintiff last worked for a contributing employer also provided for a deferred vested pension benefit for “[a] Member who, at the time he incurs a Break in Continuous Service, has at least ten (10) years of Vesting Service.” AR, Ex. D, 1993 Pension Plan, Art. 4, § 4.6. The plan since has been amended to reduce the vesting period to five years, but, as the parties agree, the plaintiff cannot take advantage of that amendment because the plaintiff did not perform any qualifying work under the plan after January 1, 1998. The dispute in this case centers on the calculation of the number of years of Vesting Service accumulated by plaintiff Mahone at the time he incurred a break in service. The plan defines “Vesting Service” as “the time . . . for which the Employee is given credit for the purpose of determining his eligibility for a Normal and a Deferred Vested Pension Benefit.” AR, Ex. A, 2008 Pension Plan, Art. 2, § 2.2; AR, Ex. D, 1993 Pension Plan, Art. 2, § 2.2. The plan includes a schedule for calculating Vesting Service, but for this case it is sufficient to state that a participant earns one year of Vesting Service for each year after 1992 in which he worked at least 1,000 hours -3- for a contributing employer. Ibid. For work performed before January 1, 1993, the plan states that a participant is credited with Vesting Service acquired under the Pipefitters’ Local No. 636 Pension Plan in effect before then. AR, Ex. A, 2008 Pension Plan, Art. 2, § 2.1(a). Vesting service also can be earned for work performed for a non-contributing employer under certain conditions: After an Employee has acquired one or more years of Credited Service, he shall receive Vesting Service for each year or part year of service, in accordance with the schedule above, . . . performed for an Employer which is party to a Collective Bargaining Agreement with Pipefitters’ Local No. 636, even though the Employer was not obligated by the Collective Bargaining Agreement to make contributions on the Employee to the Pipefitters’ Local No. 636 Defined Benefit Pension Plan or its predecessor, Plumbers Local No. 98 and Pipefitters’ Local No. 636 Pension Fund, [in effect prior to January 1, 1993] . . . . This provision shall apply to Hours of Service performed while the Employee was a participant of Plumbers Local No. 98 and Pipefitters’ Local No. 636 Pension Fund (P&PPF) before January 1, 1993 . . . . AR, Ex. A, 2008 Pension Plan, Art. 2, § 2.2. Vesting Service also can be lost if, after January 1, 1993, “an Employee . . . incurs a Break in Continuous Service before he has met the requirements for pension benefits or for a deferred vested pension . . . .” AR, Ex. A, 2008 Pension Plan, Art. 2, § 2.3. The plan defines “Break in Continuous Service” as “the interruption of credited service which occurs with respect to any Participant who, after December 31, 1992, fails to earn at least 1/4 year of Credited Service during two consecutive Plan Years.” AR, Ex. A, 2008 Pension Plan, Art. 1. Forfeited Vesting Service can be restored if the participant resumes work for a contributing employer within a period of time generally measured by the number of years of Vesting Service previously accumulated. Ibid. In the plaintiff’s case, that amounted to 8-1/2 years. At some point in early January 2009, the plaintiff contacted the defendant and requested additional information about his available benefits. On January 8, 2009, the defendant sent the plaintiff a letter construing the request as an application for benefits. The letter explained that the -4- plaintiff had accrued 8.25 years of credited service and 8.5 years of vesting service by 1996, but since the plan required 10 years of credited service in order for the plaintiff’s benefits to become vested (unless he had worked for a covered employer after January 1, 1998), he was not eligible for benefits. As an alternative basis for denial, the defendant explained that the plaintiff had forfeited this vested time under the plan because he did not perform covered work between January 1, 1997 and June 30, 2005. The letter did not discuss the plaintiff’s employment with the Detroit Board of Education. It concluded by stating that “[y]ou may consider this a denial of a request to receive a pension benefit” and informing the plaintiff of his right to appeal. AR, Ex. F, Jan. 8, 2009 letter. The plaintiff appealed the decision through counsel on February 3, 2009 and challenged the defendant’s refusal to credit his work time with the Detroit Board of Education when calculating his years of Vested Service. He included a benefit calculation form he had received in 2007, which stated that his projected monthly retirement benefit he would “receive at the time of [his] retirement at Normal Retirement Age” on March 1, 2011 totaled $577.50, based on 8.25 credit years and 8.5 vesting years. He also attached the Union’s October 1984 seniority list as evidence of the plaintiff’s tenure. He did not present any evidence that the Detroit Board of Education was a contributing employer. On March 7, 2009, the plaintiff sent the defendant a second letter and attached his application for retirement benefits as of February 4, 2009, his 58th birthday. The defendant denied the appeal at a Board of Trustees Meeting on March 13, 2009. The defendant determined that the plaintiff had accrued 8.5 years of vesting service between 1987 and 1996, but he had stopped working in 1996 and forfeited his vested time by failing to accrue additional vested time before 2005. The defendant concluded that the plaintiff had not accumulated the 10 years of vested service required to become eligible for deferred vesting pension benefits. The -5- defendant also found that the plaintiff’s work for the Detroit Board of Education did not entitle him to Vesting Service because the Board was not a contributing employer, his work there did not occur after he had accumulated a year of Credited Service with a contributing employer, and he was not an “apprentice” while working there so section 2.1(f) of the plan did not apply to him. (Section 2.1(f) states: “Hours of Service earned while working for the Detroit Board of Education while the participant is an apprentice shall be used for purposes for computing Credited Service for such years.” AR, Ex. A, 2008 Pension Plan, Art. 2, § 2.1(f). The defendant notified the plaintiff of the appeal denial in a letter dated March 20, 2009. The plaintiff filed a complaint in this Court on September 14, 2009. On November 13, 2009, the defendant filed a motion to dismiss the complaint. The Court conditionally granted that motion on May 12, 2010 and dismissed the complaint without prejudice. The Court also allowed the plaintiff to file an amended complaint by May 31, 2010 or face a dismissal with prejudice. The plaintiff filed his amended complaint on May 28, 2010, alleging a single count under ERISA section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). Thereafter, the parties filed their cross motions on the administrative record. II. The plaintiff presents four arguments: (1) the defendant’s determination that the Detroit Board of Education was not a contributing employer is not supported by sufficient evidence and is arbitrary and capricious; (2) the defendant incorrectly interpreted plan section 2.2 when it determined that the plaintiff must have worked for a contributing employer before working for the Detroit Board of Education in order to earn Vested Service for his time with that employer; (3) the plaintiff is entitled to an evidentiary hearing on the issue of whether the defendant furnished the -6- complete administrative record when previous versions of the plan were not included; and (4) the plaintiff was a victim of discrimination when the Union Local assigned him to work for the Detroit Board of Education instead of a contributing employer. The defendant contends that its interpretation of plan language was reasonable, and its determination that the plaintiff is not entitled to benefits under the plan is correct. The parties agree that the applicable standard of review is the arbitrary and capricious standard of review. “The arbitrary or capricious standard is the least demanding form of judicial review of administrative action. When it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, that outcome is not arbitrary or capricious.” Davis v. Ky. Fin. Cos. Ret. Plan, 887 F.2d 689, 693 (6th Cir. 1989) (internal quotation marks and citations omitted). An administrator’s decision will be upheld under the arbitrary and capricious standard “if it is the result of a deliberate, principled reasoning process, and is rational in light of the plan’s provisions.” Cooper v. Life Ins. Co. of N. Am., 486 F.3d 157, 165 (6th Cir. 2007) (internal quotation marks and citations omitted). A decision reviewed under this standard must be upheld if it is supported by “substantial evidence.” Baker v. United Mine Workers of Am. Health & Ret. Funds, 929 F.2d 1140, 1144 (6th Cir. 1991). Substantial evidence to support an administrator’s decision exists if the evidence is “rational in light of the plan’s provisions.” See Smith v. Ameritech, 129 F.3d 857, 863 (6th Cir. 1997) (internal quotation marks and citation omitted). There is no dispute that without credit for the time worked for the Detroit Board of Education, the plaintiff would not have qualified for a deferred vesting pension at the time he ceased his union-related work in 1997. He needed ten years for his deferred pension rights to vest, and his work with the subsequent contributing employer amounted only to 8.5 years, which he earned -7- between 1987 and 1996. The plaintiff worked for the Board of Education between 1978 and 1985, and if his earning 9.25 years were added to and counted as vesting credit, he would satisfy comfortably the required minimum. The plaintiff contends that the defendant’s refusal to credit his Board of Education time was arbitrary and capricious for three reasons: (1) there is no proof in the record that the Board is not a contributing employer; (2) the defendant’s interpretation of plan section 2.2 is faulty because there is no requirement that the plaintiff must have worked for a contributing employer before working for the Detroit Board of Education in order to earn Vested Service for his time with the Board; and (3) because previous versions of the Pipefitters’ Local No. 636 Pension Plan in effect before January 1, 1993 are not in the record, there is nothing to say that the plaintiff’s work for the Board cannot be counted as Vesting Service. With respect to his first argument, the plaintiff is correct on one point: there is no evidence in the administrative record one way or the other whether the Detroit Board of Education contributed any pension payments for the plaintiff during his employment there. The plaintiff reasons that without such evidence, the defendant’s determination is arbitrary and capricious. It is true that a plan administrator’s decision must be based on “substantial evidence.” Cox v. Standard Ins. Co., 585 F.3d 295, 302 (6th Cir. 2009) (quoting DeLisle v. Sun Life Assur. Co. of Can., 558 F.3d 440, 444 (6th Cir. 2009 . However, the administrator’s decision in this case was that the plaintiff failed to establish a right to benefits. It is the person claiming benefits that bears the burden to prove that he is entitled to those benefits under the plan. See Ruttenberg v. U.S. Life Ins. Co. in City of New York, 413 F.3d 652, 663 (7th Cir. 2005) (holding that ERISA plaintiff seeking to enforce benefits under the policy bears burden of proving his entitlement to contract -8- benefits); Seiser v. UNUM Provident Corp., 135 F. App’x. 794, 797 (6th Cir. Apr. 22, 2005) (holding that plaintiff bore burden of proving eligibility for disability benefits under terms of policy); Abnathya v. Hoffmann-La Roche, Inc., 2 F.3d 40, 46 (3d Cir. 1993) (holding that plaintiff bore burden under plan to submit medical evidence to support eligibility for benefits); Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 985-86 (6th Cir. 1991) (rejecting argument that once disability benefits are conferred, burden of proof lies with the insurance company to prove that employee can return to former employment). Where the plan administrator denies benefits based on the lack of evidence, it is incumbent on the claimant to point to evidence in the record that contradicts such a finding and demonstrates that the decision, therefore, is arbitrary and capricious. See Anderson v. Cytec Indus., Inc., 619 F.3d 505, 512-13 (5th Cir. 2010) (holding that in a benefits denial action under 29 U.S.C. § 1132(a)(1)(B), the plaintiff “bore ‘the initial burden of demonstrating . . . that [the] denial of benefits under an ERISA plan [was] arbitrary and capricious’” (quoting Perdue v. Burger King Corp., 7 F.3d 1251, 1254 n.9 (5th Cir. 1993 . The plaintiff has not identified any evidence in the administrative record that suggests that the Detroit Board of Education contributed fringe benefits on the plaintiff’s behalf or otherwise qualified as a contributing employer within the meaning of the plan. The defendant’s conclusion that the Board was not a contributing employer was not arbitrary or capricious. In his second argument, the plaintiff contends that the defendant misinterpreted plan section 2.2 when it found that his work for the Detroit Board of Education would not count for vesting service because it preceded work for a contributing employer. As mentioned above, section 2.2 provides another way of accumulating vesting service for work performed for an employer that signed a collective bargaining agreement with Local 636, even though that employer was not obliged -9- to pay fringe benefits to Local 636’s pension plan. The critical language is found in the first clause of that provision: “After an Employee has acquired one or more years of Credited Service . . . .” AR, Ex. A, 2008 Pension Plan, Art. 2, § 2.2. The plaintiff maintains that the language creates a condition precedent, and once a worker has acquired a year of credited service, other work described in that section then can be counted toward vesting service regardless of when that work was performed. The defendant views the language as creating a temporal requirement, so that worked performed before the employee accumulates credited service does not count. The defendant reads “after” to mean “coming later in time.” The two competing interpretations are both plausible, which means that ambiguity can be found in the plan language. But that ambiguity does not spell victory for the plaintiff. The arbitrary and capricious standard of review requires the Court to defer to reasonable interpretations of plan language by the plan administrator. “Under the arbitrary-and-capricious standard, we must uphold the administrator’s decision ‘if [the administrator’s] interpretation of the Plan’s provisions is “reasonable.”’” Kovach v. Zurich American Ins. Co., 587 F.3d 323, 328 (6th Cir. 2009) (quoting Morrison v. Marsh & McLennan Cos., 439 F.3d 295, 300 (6th Cir. 2006 . The plaintiff concedes that he worked for a non-contributing employer first and had not accumulated a year of credited service at the time. Under section 2.2 as the defendant interpreted it, the plaintiff cannot count that time as vesting service. The defendant’s interpretation follows at least one accepted meaning of the language in the plan and is reasonable. The defendant’s conclusion that the plaintiff cannot use that section to count his work for the school board as vesting service is neither arbitrary nor capricious. -10- Moreover, the plaintiff concedes that he did not work for a contributing employer in the eight-and-a-half years immediately following his break in continuous services. Therefore, he forfeited the accumulated years under the plan. The defendant presented the forfeiture ground in its initial denial of benefits, and the plaintiff’s argument that the issue was not raised until the parties were before this Court is not borne out by the record. The plaintiff reasons that he is entitled to an evidentiary hearing because, he contends, the administrative record is incomplete. The missing item, according to the plaintiff, is a previous version of Local 636’s pension plan that is referenced in Article 2, section 2.1(a) of both the 1993 and current (2008) versions of the plan. That section states: Every participant of the Plan shall be credited with the credited and vesting service the participant acquired under P&PPF [Plumbers Local No. 98 and Pipefitters’ Local No. 636 Pension Plan in effect before January 1, 1993] so that, commencing January 1, 1993, the credited and vesting service of every participant will be comprised of the participant’s credited and vesting service under P&PPF plus all credited and vesting service acquired under the 636 DBPP [Pipefitters’ Local No. 636 Defined Benefit Pension Plan]. AR, Ex. A, 2008 Pension Plan, Art. 2, § 2.1(a). The plaintiff does not contend that he actually accumulated vesting service under those old plans; nor does he say that he was prevented from offering evidence at the administrative hearings on that point. He does not come forward with annual statements showing plan contributions made on his behalf. He merely says that the language of those old plans may show that he qualifies for vesting service from former employment. Under well-established Sixth Circuit law, when reviewing a pension plan administrator’s decision to deny benefits, the Court may consider only that evidence presented to the plan administrator at the time he made his decision. Smith, 129 F.3d at 863. The Court’s review is -11- limited to the administrative record. Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 615 (6th Cir. 1998). The Court “may consider evidence outside of the administrative record [] if that evidence is offered in support of a procedural challenge to the administrator’s decision, such as an alleged lack of due process afforded by the administrator or alleged bias on its part.” Wilkins, 150 F.3d at 619 (Gilman, Ryan, JJ., concurring). Certainly, a plan administrator’s refusal to consider evidence favorable to the claimant amounts to a denial of due process. Killian v. Healthsource Provident Adm’rs, Inc., 152 F.3d 514, 522 (6th Cir. 1998). But the plaintiff does not suggest that such a thing happened here. In fact, the plaintiff has not offered anything but his speculation that past plan documents might help his case. For the plaintiff to seek evidence beyond the administrative record, he must make a “threshold evidentiary showing” of the alleged procedural deficiencies and may not rely on mere speculation. Bennett v. UNUM Life Ins. Co. of Am., 321 F. Supp. 2d 925, 937 (E.D. Tenn. 2004). Because the plaintiff has not made such a showing here, he is not entitled to an evidentiary hearing. Finally, the plaintiff asks the Court to prevent the defendant from denying him vesting time during the period he worked for the Detroit Board of Education because the Union engaged in the discriminatory practice of staffing that employer predominantly with new African American employees, which precluded them from obtaining benefits for their work under the defendant’s interpretation of the current pension plan. There is authority supporting the proposition that a court may consider equitable arguments in a denial of benefits claim under ERISA section 502(a)(1)(B). See Bloemker v. Laborers’ Local 265 Pension Fund, 605 F.3d 436, 440-41 (6th Cir. 2010). However, the plaintiff’s contention here is misdirected. If a discriminatory practice existed at all, the perpetrator would have been Local 636, -12- not the present defendant. The plaintiff has presented no authority — and the Court has found none — that would allow the Court to reinterpret the provisions of the plan based on the actions of a third- party. Nor has the plaintiff provided any evidence suggesting that the present defendant may serve as a proxy for the Local 636 or that the defendant itself was involved in the work assignment decisions. To the extent that the plaintiff challenges Local 636’s staffing procedures, the appropriate vehicle for his suit would have been a race discrimination claim under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2. One last matter is the defendant’s request for attorney’s fees under 29 U.S.C. § 1132(g)(1). That provision states: “In any action under this subchapter (other than an action described in paragraph (2 by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.” “Courts in this Circuit consider five factors in deciding ERISA attorneys’ fees questions: ‘(1) the degree of the opposing party’s culpability or bad faith; (2) the opposing party’s ability to satisfy an award of attorneys’ fees; (3) the deterrent effect of an award on other persons under similar circumstances; (4) whether the party requesting fees sought to confer a common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA; and (5) the relative merits of the parties’ positions. Moore v. LaFayette Life Ins. Co., 458 F.3d 416, 445 (6th Cir. 2006) (quoting Sec’y of Dep’t of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985 . The Court finds that the plaintiff had a legitimate dispute over his entitlement to deferred vesting pension benefits under the plan. He did not bring this action in bad faith. The defendant has offered no evidence in the record regarding the plaintiff’s ability to satisfy an attorney’s fee award. The deterrent effect of a fee award would contravene public policy, which favors plan participants bringing legitimate disputes over the interpretation of pension plan language to the courts for -13- resolution. The party requesting fees — the plan — certainly is attempting to confer a common benefit on plan participants by deferring costs associated with litigation. However, the dispute in this case was a legitimate one, and although the Court finds against the plaintiff on the merits, the balance of the factors cuts against awarding fees. III. The Court finds that the defendant’s decision denying the plaintiff deferred vesting pension benefits was not arbitrary or capricious. The plaintiff has not established a right to pension benefits under the plan. The Court also finds that the applicable factors weigh against awarding attorney’s fees to the defendant. Accordingly, it is ORDERED that the plaintiff’s motion to reverse the decision of the plan administrator [dkt. #25] is DENIED. It is further ORDERED that the defendant’s motion to affirm the decision of the plan administrator [dkt. #26] is GRANTED IN PART. It is further ORDERED that the decision of the plan administrator denying deferred vesting pension benefits is AFFIRMED and the defendant’s request for attorney’s fees is DENIED. Dated: August 8, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge -14- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 8, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -15-

=== BARBARA L. CORWIN et. al v. LAWYERS TITLE INSURANCE CO., f.k.a. LANDAMERICA TRANSNATION TITLE INSURANCE CO., ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION BARBARA L. CORWIN, individually and on behalf of all others similarly situated, Plaintiff, Case Number 09-13897 Honorable David M. Lawson v. LAWYERS TITLE INSURANCE CO., f.k.a. LANDAMERICA TRANSNATION TITLE INSURANCE CO., _______________________________________/ Defendant. OPINION AND ORDER DENYING MOTION FOR CLASS CERTIFICATION AND SCHEDULING STATUS CONFERENCE This case is before the Court on a motion to certify a class. The plaintiff alleges that the defendant overcharged her when she purchased a title insurance policy as part of a transaction in which she sold her home to a bank to satisfy mortgage indebtedness. The overcharge occurred, she alleges, when the title company did not afford her a discounted rate that must be granted when the purchaser of a title policy provides evidence that she previously had purchased other title insurance on the subject property. Her cause of action is based on the equitable theory of unjust enrichment. She also seeks a declaratory judgment that certain practices commonly used by the defendants in determining the appropriate charge violate the rate manual. The Court heard oral argument on the plaintiff’s motion to certify the case as a class action on January 12, 2011, and the parties have filed several supplemental briefs since then. Although the Court found in a previous case that class treatment of unjust enrichment claims may be appropriate under similar circumstances, see Hoving v. Lawyers Title Ins. Co., 256 F.R.D. 555 (E.D. Mich. 2009), case law decided since that time convinces the Court now that class certification is not appropriate because individual analysis of each class member’s transaction is necessary to determine liability, the class action mechanism is not an efficient method for resolving this dispute, and the individual issues would predominate. Therefore, the Court will deny the motion to certify the class. I. The present case represents the third in a series of attempts by a class of customers to sue Lawyers Title Insurance Company for overcharging real estate sellers for owners’ and mortgagees’ title insurance policies by failing to apply discount rates that are prescribed in the rate manuals filed with state insurance commissioners. The plaintiff argues that based on certain amendments to the rate manuals the defendant filed with the Michigan insurance commissioner, the defendants engaged in an unlawful practice of demanding specific proof of prior title insurance policies before allowing customers the discounted rate. When the plaintiff sold her house in 2008, she procured a title insurance policy for the benefit of the purchaser from Transnation Title Insurance Company. At the time, Transnation and defendant Lawyers Title Insurance Company were separate companies that shared a corporate parent, LandAmerica Inc. In late 2008, the companies merged into a single entity and continued to do business as Lawyers Title Insurance Company. Michigan law requires title insurance companies to file with the state insurance commissioner manuals describing their schedule of premium rates. An insurer must charge its premiums according to the filed schedules. See Mich. Comp. Laws §§ 500.2406 & 550.2412. The rate manuals filed by both companies before the merger established a basic premium rate based on the amount of coverage sought for both owner’s and lender’s policies. Transnation’s rate manual -2- filed in 2003 stated that it would discount premiums when a title insurance policy already had been issued on the property; the discount rate declined with the age of the previous policy. The language in the rate manual stated that the discount applied “[w]hen an existing policy is presented,” presumably at the closing of the new sale or loan. Pl.’s Mot. Class Cert., Ex. 4, Rate Manual at 3. The rate manuals on file by both Lawyers Title and Transnation in 2008 when the plaintiff closed her transaction also allowed discounts from the basic rates when previous title insurance policies had been issued on the subject property. However, the language in the manuals differed in a way that the plaintiff contends is significant. The updated language reads: When there exists evidence that a prior [owner’s or loan] policy has been, or should have been issued, by any title insurer, a credit based upon the face amount of the prior policy will be given toward the purchase of a new policy . . . . Am. Compl., ¶ 30 (footnote omitted) & Ex. B, Transnation Rate Manual, § II.B; Resp. Br., App’x at A137, Lawyers Title Rate Manual, at II.B. The plaintiff argues that by eliminating the requirement that the prior policy be “presented,” the new rate manuals cast the burden on the title insurers to search for and determine if prior title insurance exists on the property for which a new policy will be issued. If prior insurance exists, then, the plaintiff reasons, the title insurers are obligated to charge the discounted rate for the new policy in accordance with the rate schedule in the manual. The plaintiff further argues that if the title insurer charges such customers the basic rate, it has unjustly enriched itself. The plaintiff alleges that the defendant engaged in a practice of requiring positive proof of prior insurance in the form of an actual policy or a prior closing document — a HUD-1 settlement statement — before the discount would be allowed. -3- Plaintiff Barbara Corwin’s individual claim arises from the January 31, 2008 short sale of her home in Ann Arbor, Michigan to her bank. At the time, she owed $310,250 on her mortgage, but the sale proceeds apparently fell $57,000 short of a full payoff. It further appears that she was able to walk away from the sale without any continuing debt owed to her bank. As part of the transaction, Ms. Corwin purchased an owner’s title insurance policy from Transnation through its agent, State Street Title Agency, Inc., in the face amount of $290,000. Corwin alleged that she did not have a copy of a prior policy or HUD-1 settlement statement at the time she purchased this policy from Transnation. The defendant contends that its agent ordered a title search report on Corwin’s property; and the report disclosed some documents in her chain of title that bore handwritten numerical notations on their face, which the defendant admits may be indicative of prior insurance policies on the property, although the notations may indicate something else, and local practices vary widely. The warranty deed that conveyed title to Corwin in 2003 included the designation “No Title Opinion Rendered.” The defendant says that State Street’s title search did not produce a prior policy and the plaintiff failed to disclose any information about a prior policy after multiple inquiries from State Street. At the closing, the State Street representative gave Ms. Corwin notices that alerted her to the possibility of a discounted rate on a title insurance policy where “there is evidence of the existence of a prior title insurance policy issued by any title insurance company.” Am. Compl., Ex. A, Notice. The form asked the seller to “[p]lease acknowledge your understanding of the above, even if no discount applies to your transaction, by signing below.” Ibid. Corwin signed the form. She was charged a premium of $1,295 for the owner’s title policy. She alleges, however, that she had a prior title insurance policy issued by First American Title Insurance Company in the coverage amount of -4- $305,000, which was issued on April 8, 2003 and recorded in her chain of title. According to the defendant’s rate manual, she should have received a discount of 10%. During discovery, another policy surfaced from Absolute Title, Inc., an independent Transnation agent according to the defendants, which insured a 2005 mortgage that had been discharged in 2006. The defendant states that Absolute Title never supplied the defendant’s predecessor any information identifying the property or its owner. The plaintiff filed a complaint on October 2, 2009 and an amended complaint on February 16, 2010 seeking relief for herself and a class of plaintiffs from the defendant’s alleged failure to apply the reissue credit. The amended complaint alleges that the defendant’s practice of requiring customers to present evidence of prior insurance is unlawful, and the title companies are obliged to search the chain of title and charge discounted rates if there is any evidence of prior insurance, regardless of what evidence the customer presents. The plaintiff alleges a theory of unjust enrichment and seeks damages and a declaratory judgment that her interpretation of the rate manual and the defendant’s obligations thereunder is correct. The plaintiff brings this action on behalf of herself and others similarly situated. Although her proposed class definition has been a work in progress, it has evolved into the following, as set forth in a supplemental brief: All Persons who purchased: (a) from October 2, 2003 to December 31, 2007, a Lawyers Title Insurance Corporation Owner’s, Leasehold or Loan title insurance policy for residential, or commercial properties under $1,000,000, insuring real property located in the State of Michigan, and were charged the Basic Rate; (b) from January 1, 2008 to present, a Lawyers Title Insurance Corporation Residential Title Insurance Policy for Owner’s Basic Coverage and/or Mortgage Basic Coverage insuring property located in the State of Michigan, and were charged the Basic Rate; or -5- (c) from January 1, 2008 to present, a Transnation Title Insurance Company Residential Title Insurance Policy for Owner’s Basic Coverage and/or Mortgage Basic Coverage insuring real property located in the State of Michigan, and were charged the Basic Rate. Pl.’s First Suppl. Br. at 1. The Court ordered discovery on the issue of class certification and directed the plaintiff to file the present motion. According the to parties, the available information indicates that in 2008 the defendant engaged in approximately 40,000 title insurance transactions and charged the discounted rate in about 82% of those cases. The basic rate was charged in the remaining 18% of the transactions. The plaintiff argues that the discovery materials reveal that the defendant systematically charged customers the basic premium rate instead of the discounted rate based on reissue credits. The plaintiff points to testimony from one of the defendant’s agents that the agents are required to follow the defendant’s rate manual, but that the defendant also requires “absolute evidence of a prior policy” as a “mandatory” requirement for a reissue credit. Pl.’s App’x [dkt. #38], Ex. 1, dep. of Sarah Sutton at 88-90, 102, 121, 129, 132-33. The defendant explains that the testimony did not represent a universal practice; rather, local practice varied widely among agents in Michigan and handwritten notes or numbers on recorded documents did not necessarily demonstrate that a prior policy had issued for the property. The plaintiff filed her motion to certify the class alleging that the defendant’s common practice of demanding strict proof of a prior title policy is common to all the claims of the absent class members and the requirements of Federal Rule of Civil Procedure 23 have been satisfied. The defendant opposes the motion on the ground that each class member will be required to prove that he was overcharged when assessed the basic rate, which will require proof that an earlier title policy on each relevant property had been issued, and therefore individual issues will predominate. The -6- defendant also argues that the plaintiff’s experience with her short sale is so unique and atypical that she could not act as a proper class representative even if class certification were appripriate. In its most recent term, the Supreme Court explained: II. The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only. In order to justify a departure from that rule, a class representative must be part of the class and possess the same interest and suffer the same injury as the class members. Rule 23(a) ensures that the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate. The Rule’s four requirements — numerosity, commonality, typicality, and adequate representation — effectively limit the class claims to those fairly encompassed by the named plaintiff’s claims. Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550 (2011) (quotation marks and citations omitted). According to Federal Rule of Civil Procedure 23, a matter may proceed as a class action in the name of representative parties if (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law and fact common to the class; (3) the claims and defenses of the representative parties are typical of the claims and defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613 (1997) (citing Fed. R. Civ. P. 23(a ; Olden v. LaFarge Corp., 203 F.R.D. 254, 268 (E.D. Mich. 2001), aff’d 383 F.3d 495 (6th Cir. 2004). A class must meet all of the above prerequisites plus one of those listed in Federal Rule of Civil Procedure 23(b) to be certified. Amchem Prods., Inc., 521 U.S. at 614; Sprague v. General Motors Corp., 133 F.3d 388, 397 (6th Cir. 1998). The movant bears the burden of establishing that all prerequisites for class certification are satisfied. Thompson v. County of Medina, 29 F.3d 238, 241 (6th Cir. 1994). -7- When reviewing a motion for class certification, the Court must conduct a “rigorous analysis” of the requirements of Rule 23. Sprague, 133 F.3d at 397 (quoting Geneneral Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 161 (1982 . The Court is not bound to accept the allegations on the face of the complaint as true, and should probe further into the facts where necessary to determine whether these requirements have been met. Wal-Mart, 131 S. Ct. at 2551-52; Weathers v. Peters Realty Corp., 499 F.2d 1197, 1200 (6th Cir. 1974) (“[O]rdinarily the determination should be predicated on more information than the pleadings will provide.”); see also Szabo v. Bridgeport Mach., Inc., 249 F.3d 672, 675 (7th Cir. 2001) (“The proposition that a district judge must accept all of the complaint’s allegations when deciding whether to certify a class cannot be found in Rule 23 and has nothing to recommend it.”). Rule 23 contains four prerequisites that the plaintiff must satisfy to be eligible for class action status: (1) the class [must be] so numerous that joinder of all members is impracticable; (2) there [must be] questions of law or fact common to the class; (3) the claims or defenses of the representative parties [must be] typical of the claims or defenses of the class; and (4) the representative parties [must be able to] fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a); see Amchem Prods., 521 U.S. at 613. These factors are known as the requirements of numerosity, commonality, typicality, and adequacy of representation. In addition to the four prerequisites in Fed. R. Civ. P. 23(a), the plaintiff must satisfy one of the subsections in Fed. R. Civ. P. 23(b). Amchem Prods., 521 U.S. at 614; Sprague, 133 F.3d at 397. The main thrust of the defendant’s argument against class certification is that the plaintiff’s claim cannot be common with absent class members who might allege they were overcharged because the determination requires an individual assessment of each of the respective real estate -8- transactions. Indeed, that argument was found persuasive in several appellate decisions denying class certification in title insurance premium overcharge cases, including one decided recently in the Sixth Circuit. See Randleman v. Fidelity Nat’l Title Ins. Co., --- F.3d ---, 2011 WL 1833198 (6th Cir. May 16, 2011); see also Benavides v. Chicago Title Ins. Co., 636 F.3d 699 (5th Cir. 2011); Mims v. Stewart Title Guar. Co., 590 F.3d 298 (5th Cir. 2009). Commonality can be satisfied when “there are questions of law or fact common to the class.” Fed. R. Civ. P. 23(a)(2). That provision does not mandate that all questions of law and fact raised in the complaint are common. Rather, “Rule 23(a) simply requires a common question of law or fact.” Bittinger v. Tecumseh Prods. Co., 123 F.3d 877, 884 (6th Cir. 1997). On the other hand, generalized or abstract commonality will not suffice. See Sprague, 133 F.3d at 397. “What we are looking for is a common issue the resolution of which will advance the litigation.” Ibid. The plaintiff has identified the following common questions: (a) whether Defendant was obligated to charge title insurance rates that do not exceed title insurance premium rates on file; (b) whether Defendant can require the policy purchaser to present evidence of a prior policy as requirement of entitlement to the reissue credit; (c) whether Defendant was required to give the reissue credit to every purchaser of an owners or lenders policy of title insurance, for which the Basic rate is charged, unless the Defendant can establish that the policy being purchased is the first title insurance policy issued on the property; (d) the construction of the Transnation and Lawyers Title Michigan rate manuals beginning January 1, 2008 to the present with respect to the application of the reissue credit; (e) the construction of the Lawyers Title Michigan rate manuals beginning October 6, 2003, to December 31, 2007, with respect to the application of the reissue credit; (f) whether Defendant was unjustly enriched by requiring purchasers of title policies for which the basic rate was applicable to present a prior title insurance policy or executed HUD-1 settlement statement as a condition to applying the reissue credit to their policy premium charge; (g) [whether] declaratory judgment is appropriate; and (h) whether Plaintiff and the members of the Class have sustained damages and, if so, what is the proper measure of those damages. -9- Mot. to Cert. Class at 2-3. Indeed, each absent class member would have to establish these points to recover, but they could be determined at once for all the class members without individualized proof, with the exception of item (f). However, the Supreme Court recently has made clear that the ability to articulate common questions does not by itself satisfy Rule 23(a)(2). “Th[e] language [of Rule 23(a)(2)] is easy to misread, since ‘[a]ny competently crafted class complaint literally raises common “questions.”’” Wal-Mart, 131 S. Ct. at 2551 (quoting Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97, 131-32 (2009 . Instead, the Court explained, “[the plaintiffs’] claims must depend upon a common contention . . . . That common contention, moreover, must be of such a nature that it is capable of classwide resolution — which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Ibid. Finishing the point, the Court quoted this language: “What matters to class certification . . . is not the raising of common ‘questions’ — even in droves — but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation. Dissimilarities within the proposed class are what have the potential to impede the generation of common answers.” Ibid. (quoting Nagareda, at 132). In this case, the plaintiff’s proposed class consists of all individuals who purchased title insurance during specified time periods and were charged the basic rate. No absent class member can recover under the unjust enrichment theory, however, unless he or she can establish that there was a previous title policy issued on the specific property in question. Such proof is uniquely individualized; it cannot be established on a classwide basis. Therefore, instead of liability being -10- established “in one stroke,” it would take an assessment of each transaction to determine if the absent class member qualified for the discount rate. Finding that the defendant failed to make a proper inquiry would not establish that the title company was unjustly enriched by charging the basic rate absent proof that the seller’s property was insured previously. In order to make that determination, each transaction would have to be examined. As a consequence, the plaintiff cannot satisfy the requirement of Rule 23(a)(2) because, although there are questions common to the absent class members and the plaintiff that must be decided before liability is established, the critical inquiry without which liability cannot attach requires individualized determination. In addition, before a class can be certified under Rule 23(b)(3), as the plaintiff proposes here, “(1) questions common to the class [must] predominate over questions affecting only individual members, and (2) class resolution [must be] superior to alternative methods for adjudicating the controversy.” In re Scrap Metal Antitrust Litig., 527 F.3d 517, 535 (6th Cir. 2008). “To meet the predominance requirement, a plaintiff must establish that issues subject to generalized proof and applicable to the class as a whole predominate over those issues that are subject to only individualized proof.” Randleman, 2011 WL 1833198, at *4 (citing Beattie v. CenturyTel, Inc., 511 F.3d 554, 564 (6th Cir. 2007 . Certainly, because of the small amounts of damages involved in each overcharged transaction, class treatment of the claims might otherwise be appropriate. However, “because the [plaintiff has] defined the class and presented [her] claim in a manner that requires substantial, individual inquiries,” Id. at *5, class issues cannot predominate when the resolution of those common issues in the plaintiff’s favor could not result in a finding of liability against the defendant on a classwide basis. Even if the class could be certified under Rule 23(b)(2) on the declaratory -11- judgment count, before the main form of relief sought — damages — could be awarded, individualized decisions on liability would have to be made on the unjust enrichment count. The Court concludes that the plaintiff has not satisfied the requirement of Rule 23(a)(2) or (b)(3). Therefore, the Court will deny the motion to certify the class. III. The plaintiff invoked the Court’s subject matter jurisdiction under 28 U.S.C. § 1332(d), which requires minimal diversity, but does require that “the matter in controversy exceeds the sum or value of $5,000,000.” 28 U.S.C. § 1332(d)(2). The plaintiff’s claim for relief in her unjust enrichment count comes nowhere near that amount. Nor does it approach the $75,000 threshold for conventional diversity cases. See 28 U.S.C. § 1332(a). However, once jurisdiction is invoked properly at the beginning of a case, subsequent developments, including the denial of class certification, will not automatically divest the Court of continuing subject matter jurisdiction over the case. See Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806-07 (7th Cir. 2010). The Court finds that the plaintiff has not satisfied all the requirements of Rule 23 for class IV. certification. Accordingly, it is ORDERED that the plaintiff’s motion to certify the action as a class action [dkt. #37] is DENIED. It is further ORDERED that counsel for the parties shall appear for a status conference on August 16, 2011 at 11:00 a.m. -12- Dated: August 1, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 1, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -13-

=== Muhammad v. Close ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION SHAKUR MUHAMMAD, Plaintiff, v. MARK CLOSE, ______________________________________ / Defendant. Case Number 98-10153 Honorable David M. Lawson ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND SETTING SCHEDULING CONFERENCE This prisoner civil rights case has had a long and contorted procedural history. Originally filed on June 2, 1998, it has traveled to the Supreme Court, Muhammad v. Close, 540 U.S. 749 (2004), via stops in the Sixth Circuit, and is now back before this Court for the third time. In his complaint, the plaintiff alleges that defendant Mark Close, a corrections officer employed by the Michigan Department of Corrections, retaliated against him for filing earlier lawsuits against Close; the complaint seeks damages under 42 U.S.C. § 1983. On December 17, 2001, this Court granted the defendant’s motion for summary judgment, finding that the plaintiff had not presented evidence creating a triable fact issue on whether his protected conduct was a cause of the adverse action. After several trips to the Sixth Circuit and one to the Supreme Court, the case was remanded to this Court to consider the summary judgment motion for the third time. After assigning pro bono counsel, the Court requested supplemental briefs and heard oral argument. The Court now finds that the record contains sufficient evidence of causation. The Court also rejects the defendant’s belated -1- claim of qualified immunity. Therefore, the Court will deny the defendant’s motion for summary judgment and schedule the matter for trial. I. Facts and Proceedings The essence of the case is this: the plaintiff alleges that in 1997, while he was a prisoner at the Standish Correctional Facility, Close wrongfully accused him of “Threatening Behavior,” the plaintiff was found guilty of “Insolence,” and he was sent to administrative segregation as retaliation for filing two lawsuits against Close. The Court previously summarized the facts in greater detail in its first order adopting the magistrate judge’s report and recommendation and granting summary judgment, and they are set forth here for convenience: This case arose from an incident on May 21, 1997 while the plaintiff was incarcerated at the Standish Maximum Correctional Facility (SMF). The plaintiff alleges that the defendant, a corrections officer at SMF, intentionally provoked the plaintiff and wrote a violation accusing the plaintiff of Threatening Behavior, a serious offense. Specifically, the plaintiff claims that he noticed the defendant staring at him through a dining room window, and that the plaintiff stared back. In response, the defendant allegedly stormed into the dining room, and the plaintiff then rose from his seat and approached the defendant. The plaintiff was then handcuffed and led away to a detention cell. The defendant subsequently initiated disciplinary proceedings against the plaintiff, charging him with Threatening Behavior, defined as threatening words or behavior expressing an intent to injure another. See Def.’s Mot. Summ. J., Ex. 2, MDOC P.D. 03.03 .105 at 2. Six days after the incident, a disciplinary hearing was held and the plaintiff was found not guilty of Threatening Behavior, but found guilty of the lesser charge of Insolence, defined as words, actions or other behavior intended to harass or cause alarm to an employee. See id. at 3. The plaintiff was punished with seven days of detention and thirty days of lost privileges. The plaintiff alleges that the provocation and write-up was in retaliation for two prior lawsuits filed by the plaintiff against the defendant. The plaintiff first filed suit against defendant Close in 1994; Close was granted summary judgment in 1995. The second suit was filed in February 1996 and dismissed in December 1996. Order Granting Mot. Summ. J., Dec. 17, 2001. -2- In that 2001 order, the Court set forth the applicable law, which the parties do not contest. A prisoner alleging retaliation for engaging in protected activity must show that (1) he engaged in protected activity; (2) an adverse action was taken against him that would defer a person of ordinary firmness from engaging in such activity; and (3) the adverse action was at least partly motivated by the protected activity. Thaddeus-X v. Blatter, 175 F.3d 378, 386-87 (6th Cir.1999) (en banc). Throughout the case, the parties mostly have agreed that the plaintiff engaged in protected activity when he filed his lawsuits, and the charge and prosecution for prison misconduct (threatening behavior) satisfied the adverse action element. On the causation element, however, the plaintiff had presented to the magistrate judge to whom the summary judgment motion was referred only evidence of temporal proximity between the lawsuit filings and Close’s write-up. The incident occurred about fifteen months after the plaintiff filed his second suit against Close and while the plaintiff still was involved in appeals on those suits. The Court held that the evidence was insufficient to create a triable fact on the element of causation. Order Granting Mot. Summ. J., Dec. 17, 2001. The plaintiff appealed that decision to the Sixth Circuit, which affirmed on different grounds and found that the plaintiff’s challenge to the prison disciplinary finding was barred by the rule in Heck v. Humphrey, 512 U.S. 477 (1994), because the prison disciplinary proceeding had not terminated in the plaintiff’s favor. Muhammad v. Close, 47 F. App’x 738 (6th Cir. Sept. 23, 2002). The Supreme Court reversed the Sixth Circuit’s misapplication of Heck v. Humphrey and remanded the case to that court “for consideration of the motion for summary judgment on the ground adopted by the District Court.” Muhammad v. Close, 540 U.S. at 755. -3- On remand, the Sixth Circuit addressed the sufficiency of evidence of causation and held that this Court should have addressed whether a late-filed affidavit from inmate Bruce Coxton — submitted with the plaintiff’s objections to the magistrate judge’s report and recommendation — should have been taken into account. The court of appeals held that “the Coxton affidavit appears to be precisely the type of evidence of causation that the district court thought was lacking.” Muhammad v. Close, 379 F.3d 413, 417 (6th Cir. 2004). The court of appeals declined to consider the defendant’s arguments that the affidavit was not notarized and not presented to the magistrate judge, stating that these arguments could be presented to the district court on remand. On the causation issue, the court of appeals noted that “temporal proximity alone may be ‘significant enough to constitute indirect evidence of a causal connection so as to create an inference of retaliatory motive.’” Id. at 417-18 (quoting DiCarlo v. Potter, 358 F.3d 408, 422 (6th Cir. 2004 . The court remanded with instructions to “determine whether the Coxton affidavit alone, Muhammad’s proof of temporal proximity alone, or both pieces of evidence together are sufficient to defeat Close’s motion for summary judgment.” Id. at 418. In an opinion and order dated June 27, 2008, this Court addressed those issues and again granted the defendant’s motion for summary judgment. The Court first found that “the fact that the affidavit of Mr. Coxton is not notarized does not preclude its consideration” because it “states that its contents were made ‘under penalty of perjury,’ and thus compl[ies] with the requirements of 28 U.S.C. § 1746.” Order Granting Mot. Summ. J. at 6 (Jun. 27, 2008). However, the Court considered it fatal that the plaintiff had failed to present this evidence to the magistrate judge who originally filed the report and recommendation on the motion for summary judgment. The Court determined that the Magistrate Judge Act, 28 U.S.C. § 631 et seq., although requiring de novo review in the -4- district court, “d[id] not allow parties to raise at the district court stage new arguments or issues that were not presented to the magistrate.” Id. at 7 (quoting Murr v. United States, 200 F.3d 895, 902 n.1 (6th Cir. 2000 . Therefore, the Court found that the Coxton affidavit could not be considered. Ibid. This Court also discussed the unsettled nature of the law in this Circuit on the issue of temporal proximity, noting that some cases have found that proof of a short time between the protected activity and the retaliatory act to be sufficient circumstantial evidence of causation if the adverse event was “acutely near in time,” DiCarlo, 358 F.3d at 421-22, while others have determined that temporal proximity is insufficient to establish causation without “other compelling evidence,” Imwalle v. Reliance Med. Prods., Inc. 515 F.3d 531, 550 (6th Cir. 2008) (internal quotation omitted). Nonetheless, the Court found that “the necessary level of proximity does not exist in this case,” because the alleged retaliatory act occurred fifteen months after the plaintiff filed his lawsuits, which was not “sufficiently close in time to the protected activity to give rise to an inference of causation.” Order Granting Mot. Summ. J., at 8-9 (June 27, 2008). Therefore, the Court again granted the motion for summary judgment. Not surprisingly, the plaintiff appealed that decision to the Sixth Circuit. The court of appeals vacated and remanded, first finding that the Magistrate Judge Act, 28 U.S.C. § 636(b)(1)(C), “grants district courts the discretion to ‘accept, reject, or modify, in whole or in part’ the findings or recommendations of the magistrate judge and to ‘receive further evidence or recommit the matter to the magistrate judge with instructions.” Muhammad v. Close, No. 08-1944, slip op. (6th Cir. Apr. 20, 2009). Sixth Circuit Order, Apr. 20, 2009. The Sixth Circuit determined that this Court did not actually exercise its discretion under the Magistrate Judge Act and relied on cases that were not -5- directly on point because they involved new legal claims, rather than new evidence. The court of appeals directed this Court to consider United States v. Howell, 231 F.3d 615, 621 (9th Cir. 2000), and Freeman v. Bexar, 142 F.3d 848, 850-53 (5th Cir. 1998), which acknowledge that district courts have discretion to consider evidence first presented in objections to a magistrate judge’s report. In addition, the Sixth Circuit also found problematic the fact that “[t]he district court’s order does not indicate that the court considered Muhammad’s period of absence” from SMT between the filing of his second lawsuit and the allegedly adverse action. For these reasons, the Sixth Circuit vacated the June 27, 2008 order granting summary judgment and remanded the case to this Court again on April 20, 2009. On remand, the Court appointed pro bono counsel for the plaintiff and ordered the parties to file supplemental briefs on the issues identified by the court of appeals. The defendant expressed a desire to raise a qualified immunity defense in these later stages of the case, so the Court directed that the supplemental briefs address the merits of that argument and whether the argument was timely at the summary judgment stage. The Court heard oral arguments on the motion for summary judgment on December 15, 2009. II. Discussion The standards for evaluating a motion for summary judgment are well known but bear repeating here. As the Sixth Circuit recently explained: Both claimants and parties defending against a claim may move for summary judgment “with or without supporting affidavits.” Fed. R. Civ. P. 56(a), (b). Such a motion presumes the absence of a genuine issue of material fact for trial. The court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The party bringing the summary judgment motion has the initial -6- burden of informing the district court of the basis for its motion and identifying portions of the record that demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). Once that occurs, the party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). Alexander v. CareSource, 576 F.3d 551, 557-58 (6th Cir. 2009). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. However, “[t]he submissions by a party opposing a motion for summary judgment need not themselves be in a form that is admissible at trial.” Alexander, 576 F.3d at 558 (citing Celotex Corp. v. Catrett, , 324 (1986) (“We do not mean that the nonmoving party must produce evidence in a form that would be admissible at trial in order to avoid summary judgment.” . Rather, “the party opposing summary judgment must show that she can make good on the promise of the pleadings by laying out enough evidence that will be admissible at trial to demonstrate that a genuine issue on a material fact exists, and that a trial is necessary.” Ibid. If the non-moving party, after sufficient opportunity for discovery, is unable to meet her burden of proof, summary judgment is clearly proper. Celotex Corp., 477 U.S. at 322-23. When “‘reviewing a summary judgment motion, credibility judgments and weighing of the evidence are prohibited. Rather, the evidence should be viewed in the light most favorable to the non-moving party. . . . Thus, the facts and any inferences that can be drawn from those facts[] must be viewed in the light most favorable to the non-moving party.’” Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 374 (6th Cir. 2009) (quoting Bennett v. City of Eastpointe, 410 F.3d 810, 817 (6th Cir. 2005) (citations omitted ; see also Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003) (“In -7- evaluating the evidence, [the district court] ‘draw[s] all reasonable inferences therefrom in a light most favorable to the non-moving party.’”) (quoting PDV Midwest Ref., LLC v. Armada Oil & Gas Co., 305 F.3d 498, 505 (6th Cir. 2002 . The issue again before the Court on summary judgment is whether a question of fact exists on the causation element of the plaintiff’s retaliation claim. To decide this issue, the Court must determine (1) whether it should consider the affidavit of Bruce Coxton (“Coxton affidavit”); (2) whether the plaintiff has presented sufficient evidence of causation, with or without the affidavit; and (3) whether the defendant may raise a qualified immunity defense at this summary judge stage, and if so whether that defense has merit. The Court will address these issues in turn. A. The Coxton affidavit Plaintiff’s counsel asserted at oral argument that the Sixth Circuit considered the affidavit to be a key piece of evidence and seemed to support the practice of considering later-submitted evidence in this situation. Based on the court of appeals’s opinion, the defendant conceded that this Court should consider the affidavit as part of the record. That affidavit reads as follows: I, Bruce Coxton, being first duly sworn deposes and says that the following statements are true and correct to the best of my knowledge, information, and belief: 1.) In or around May 1997, I did hear two correction officers having a discussion about prisoner Mease-X [the plaintiff] and they were clearly conspiring to cause him harm. 2.) I directly saw and heard officers M. Close and M. Glowicki standing approximately 3 feet from my cell door talking about how they were going to “get Mease-X ass.” 3.) I directly observed Close and Glowicki talking about how they had to “stop him from filing that appeal and get his ass out of here.” Glowicki responded to Close that “I should have killed the nigger when I had the chance.” 4.) I directly watched and overheard Close telling Glowicki how to set Mease-X up by placing a knife in his cell and than [sic] rush him and act like he accidently got killed while trying to resist them. 5.) I wrote a kite to the unit case manager Wendy Reetz and told her what I had seen and heard regarding the officers threat to kill Mease-X. -8- 6.) Case manager Reetz came to my cell and told me that if I did not minded [sic] my own business, I would be getting the same treatment. 7.) Subsequently, when I tried to access the Court of Appeals with my criminal case, Reetz withheld my pleadings beyond the time for which relief could be sought and denied me access to postage stating “that I should have minded my own business.[”] 8.) I was also retaliated against for reporting this matter to Reetz and this could have seriosly [sic] harmed Mease-X, maybe even his death as Close and Glowicki threatened. 9.) I attest that the foregoing is true and correct to the best of my knowledge, and make these statements under penalty of perjury. Pl.’s Obj. to R & R Ex. G, Coxton Aff. The Magistrate Judge Act, 28 U.S.C. § 636 et seq., requires a reviewing district court judge to “make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made. A judge of the court may accept, reject, or modify, in whole or in part, the findings or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1). The circuits currently are split on whether a district court is obligated to consider additional evidence presented after the magistrate judge has issued his or her report and recommendation. As the court of appeals noted, this Circuit has not directly considered this issue, although it has looked unfavorably on parties who raise new issues and arguments after the magistrate judge has issued a report to the district judge. See Muhammad v. Close, No. 08-1944, slip. op. (6th Cir. Apr. 20, 2009); see also Murr v. United States, 200 F.3d 895, 902 n.1 (6th Cir. 2000). Other circuits have found that the statute permits a district court to accept and consider additional evidence on its de novo review. Addressing an analogous issue, the Second Circuit found that prior versions of 28 U.S.C. § 636(b)(1) and Federal Rule of Civil Procedure 72(b) authorized district courts to accept supplemental evidence. Hynes v. Squillace, 143 F.3d 653, 656 (2d Cir. 1998) (citing Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure § 3070.2, at 378). The First, Fifth, and Ninth Circuits align -9- with the Second Circuit in permitting, but not requiring, a district court to consider evidence first filed with the party’s objections. See United States v. Howell, 231 F.3d 615, 621-22 (9th Cir. 2000); Freeman v. County of Bexar, 142 F.3d 848, 850-53 (5th Cir. 1998); Paterson-Leitch Co., Inc. v. Mass. Mun. Wholesale Elec. Co., 840 F.2d 985, 990-91 (1st Cir. 1988); see also Jones v. Blanas, 393 F.3d 918, 935 (9th Cir. 2004) (“[G]iven the circumstances under which this evidence was offered — a pro se plaintiff, ignorant of the law, offering crucial facts as soon as he understood what was necessary to prevent summary judgment against him — it would have been an abuse of discretion for the district court not to consider the evidence.”). The Fourth Circuit has gone a step further to require a reviewing district court to consider such evidence. United States v. George, 971 F.2d 1113, 1118 (4th Cir. 1992) (“The district court cannot artificially limit the scope of its review by resort to ordinary prudential rules, such as waiver, provided that proper objection to the magistrate’s proposed finding or conclusion has been made and the appellant’s right to de novo review by the district court thereby established.”). This Court concludes that the Sixth Circuit’s reference to Howell and Freeman in its recent opinion in this case signals its alignment with the First, Second, Fifth, and Ninth Circuits on this issue. The Court concludes, therefore, that district courts have discretion to consider evidence first presented after a magistrate judge files a report, provided the evidence is furnished by the time objections to the report and recommendation are due. Because the defendant concedes that the Court should consider the Coxton affidavit, the affidavit was submitted with the plaintiff’s timely objections to the magistrate judge’s report and recommendation, and there is no evidence that the delay in furnishing the affidavit was an abuse of the process, the Court believes it is appropriate to consider this affidavit when deciding the motion for summary judgment. -10- B. Causation As proof of causation, the plaintiff points to the fact the he was absent from SMT between filing his second lawsuit and the alleged adverse action. The plaintiff asserts, and the defendant does not dispute, that the analysis of the temporal lapse between the protected act and the alleged retaliation should focus on the time period when Close had the opportunity to retaliate, that is, when he had access to the plaintiff, which was approximately four months. For one of those months, the plaintiff says that he was housed in a “transition unit,” and for two of the remaining three, he was in administrative segregation. According to the plaintiff’s chronology, Close had access to the plaintiff only for a single month. The plaintiff also posits that his litigation was still quite active because he had filed an appeal that was not resolved until 1998. According to the plaintiff, the appeal and the alleged retaliatory act occurred simultaneously. Moreover, the Coxton affidavit provides substantial evidence of causation. As noted earlier, Coxton writes that he overheard corrections officers M. Close and M. Glowicki discuss “how they were going to ‘get Mease-X ass.’ . . . [and] ‘stop him from filing that appeal and get his ass out of here.’” Pl.’s Supp. Br., Ex. A, ¶¶ 2-3. The defendant argues that the affidavit provides little support for the plaintiff’s claim because it discusses an entirely unrelated event. But viewing the facts in the light most favorable to the plaintiff, the affidavit can be seen as direct evidence of causation. The reference to an appeal by prisoner Mease, the plaintiff’s given surname, could be interpreted as a discussion of the plaintiff’s pending appeal and how the guards could stop the case from proceeding further. According to the affidavit, the conversation occurred before the misconduct charge. The Court does not weigh the credibility of the affiant on summary judgment. It is plain to the Court, -11- however, that if take as true, a reasonable juror could find that Coxton’s evidence establishes causation. Moreover, period of time between the lawsuit filing and the incident in which the two men had contact — between one and four months — and the fact that the offending event occurred during one of the first interactions between the two men during that time, supports an inference of causation. Coupled with the Coxton affidavit, the plaintiff’s evidence is sufficient to withstand summary judgment on the issue of causation. C. Qualified immunity The defendant first raised the issue of qualified immunity in its supplemental brief in this Court after the latest remand. In English v. Dyke, 23 F.3d 1086 (6th Cir. 1994), the Sixth Circuit held that the failure to raise qualified immunity in one stage of the litigation can amount to a waiver of that defense, but only for that stage; the defendant may raise the qualified immunity issue again at a later stage in the proceedings. Id. at 1090. The defendant relies on that holding in its argument that the parties are at a new stage in the litigation. However, despite the passage of considerable time and the trek through the nation’s appellate courts, the case remains at the summary judgment stage: the Court continues to adjudicate the defendant’s motion for summary judgment filed February 6, 2001 [dkt. #73]. The defendant’s assertion of qualified immunity as a ground for summary judgment comes too late. Moreover, the facts, especially in light of the Coxton affidavit, dispel any notion of qualified immunity. At the summary judgment stage, “a defendant seeking qualified immunity must be willing to concede to the facts as alleged by the plaintiff and discuss only the legal issues raised by the case.” Pittman v. Cuyahoga Cnty. Dep’t of Children & Family Servs., 640 F.3d 716, 722-23 (6th -12- Cir. 2011) (quoting Sheets v. Mullins, 287 F.3d 581, 585 (6th Cir. 2002 . Qualified immunity is an affirmative defense that protects government actors performing discretionary functions from liability for civil damages when their conduct does “not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982). The purpose of this defense is to strike a balance that “accommodates the tension between permitting litigants to recover damages, which is often the only realistic avenue for vindication of constitutional guarantees, and the social costs of such suits, including the expenses of litigation, the diversion of official energy from pressing public issues, and the deterrence of able citizens from acceptance of public office.” Champion v. Outlook Nashville, Inc., 380 F.3d 893, 900 (6th Cir. 2004) (internal quotation marks and citation omitted). The defense is intended to protect state actors who must operate along the “hazy border” that divides acceptable from unreasonable conduct. Saucier v. Katz, , 206 (2001). Close’s conduct, as depicted by the Coxton affidavit, falls far to the wrong side of that line of demarcation. A prisoner’s right to file lawsuits and access the courts is a well-established and long- standing constitutional right. See, e.g., Bounds v. Smith, 430 U.S. 817, 821-24 (1977). Similarly, the prohibition against retaliating against prisoners for exercising their constitutional right of access to the courts is equally well established and predates the conduct alleged in the complaint. See, e.g., Gibbs v. Hopkins, 10 F.3d 373, 378 (6th Cir. 1993); Newsome v. Norris, 888 F.2d 371, 376-77 (6th Cir. 1989); see also Scott v. Churchill, 377 F.3d 565 (6th Cir. 2004) (discussing a case similar to the present one and the well-settled nature of the prohibition against retaliation); Bell v. Johnson, 308 F.3d 594, 612 (6th Cir. 2002) (same). The ineluctable conclusion is that a reasonable officer in the defendant’s position would have been on notice that an adverse action such as alleged here would -13- have violated the plaintiff’s clearly-established First Amendment rights. The qualified immunity defense does not support the defendant’s motion for summary judgment. IV. Conclusion This Court believes that it ought to consider the Coxton affidavit as part of the plaintiff’s submission in opposition to the defendant’s motion for summary judgment. That affidavit plus the other evidence in the record establish a material fact issue on the elements of the plaintiff’s First Amendment retaliation claim. In addition, the defendant’s claim of qualified immunity comes too late at this stage of the litigation, and the record does not support it. Accordingly, it is ORDERED that the defendant’s motion for summary judgment [dkt #73] is DENIED. It is further ORDERED that counsel for the parties appear before the Court on August 1, 2011 at 11:30 a.m. to discuss further case management deadlines and schedule the matter for trial. Dated: July 8, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 8, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -14-

=== Partlow v. Person ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION LADONNA PARTLOW as personal representative of the ESTATE OF FARRELL PARTLOW, Plaintiff, v. JULIE ANN PERSON. Defendant, ____________________________________________/ Case Number 11-11121 Honorable David M. Lawson OPINION AND ORDER GRANTING MOTION TO REMAND This matter is before the Court on the plaintiff’s motion to remand the case to the Wayne County, Michigan circuit court, where it was filed originally. The plaintiff brought an action to lay claim to the proceeds of a policy insurance on the life of Ferrell Partlow, issued by General Motors Corporation as an employee benefit. The insurer, Metropolitan Life Insurance Company (Met Life), agreed to pay the proceeds to defendant Julie Ann Person (formerly Partlow), the named beneficiary. The plaintiff’s complaint alleges that Ms. Person divorced the decedent and the judgment of divorce contains a waiver of his insurance benefits, and it seeks to require the defendant to pay those proceeds into the decedent’s estate. The defendant removed the case to this Court alleging that the plaintiff’s claims are preempted by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. The plaintiff argues in her motion to remand that her state law claim is not completely preempted, and this Court would not have original jurisdiction over the matter as pleaded in the complaint. The plaintiff also seeks attorney’s fees for the wrongful removal. The Court heard oral argument on the motion on June 27, 2011, after which the parties sought permission to file supplemental briefs, which the Court permitted. The Court now finds that the plaintiff’s claim is not completed preempted by federal law, and the Court does not have subject matter jurisdiction. Therefore, the Court will grant the motion to remand. However, the Court does not believe an award of attorney’s fees is warranted. I. The decedent, Farrell Partlow, was an employee of General Motors and participated in a life insurance benefits plan through his employer and administered by Met Life. The parties agree that the plan was governed by ERISA. The decedent was married to defendant Julie Ann Person until they divorced on May 30, 2003. At some point before their divorce, the decedent completed a beneficiary designation form naming Julie Ann Person as the primary beneficiary under the life insurance policy. There is no dispute that the form is the last known beneficiary designation form filed with either General Motors or Met Life, or that the form named the defendant as the proper beneficiary. The May 30, 2003 consent judgment contained Michigan’s statutory insurance clause, which states that “any right either party has to the proceeds or other benefits of policies or cont[r]acts of life insurance, endowments, or annuity upon the life of the other as a named beneficiary or by assignment during or in anticipation of marriage are extinguished unless provided for elsewhere in this judgment.” Am. Compl., Ex. A, Consent Judgment for Divorce at 4. In a later paragraph, the consent judgment also states that “each party shall immediately execute and deliver to the other party all documents necessary to carry out the terms of this judgment, and upon failure to do so, copy of this judgment may be recorded with the same effects as [though] said deed, conveyance or other document had been personally executed by the failing party.” Id. at 5. The decedent apparently never filed an updated beneficiary designation form with his employer or the plan administrator changing the beneficiary of his life insurance. -2- Despite their divorce, the defendant contends that she remained “very close friends” with the decedent, they dated for approximately four years, and considered re-marrying each other. She says that during two discussions during 2004 and 2005, the decedent expressed that he wanted her to remain as the beneficiary on his life insurance plan. On September 27, 2010, Farrell Partlow died. At some point shortly thereafter, the defendant alleges that Andrew Jay Thav, co-counsel for the plaintiff in the present matter, contacted her and instructed her to file a claim for the proceeds of the life insurance policy. There is no evidence of this communication in the record. Nonetheless, both the defendant and the plaintiff, who is the personal representative of the decedent’s estate, filed claims for the proceeds. On October 18, 2010, Met Life sent the parties a letter stating that the proceeds were payable to the defendant as the last named beneficiary. The plaintiff contends, however, that the defendant’s entitlement to the life insurance proceeds was terminated or waived by operation of the consent judgment of divorce and seeks to recover these funds from the defendant under state-law-based equitable remedies. The plaintiff filed a single count complaint in the Wayne County, Michigan circuit court on December 14, 2010, followed by an amended complaint on December 29, 2010, which contains no material changes. On December 14, 2010, the plaintiff also filed an ex parte motion for a temporary restraining order, preliminary injunction, and order to show cause. On December 15, 2010, a state circuit court judge entered a temporary restraining order that enjoined the defendant from dissipating the funds received from Met Life. That court converted its order to a preliminary injunction on January 7, 2011. The state court scheduled a second show cause hearing for January 28, 2011. There is no evidence in the record explaining what happened at that hearing. -3- The defendant contends that she did not receive service of the state court papers until February 25, 2011. By then, the state court had heard a summary judgment motion filed by the plaintiff and granted it from the bench. No order had entered, however, and before the court entered one, the defendant filed her notice of removal on March 17, 2011. In her removal notice, the defendant argues that the plaintiff’s claim was pre-empted by ERISA, and she alleges that this Court has federal question jurisdiction. On April 21, 2011, the plaintiff filed the present motion to remand the matter to state court based on a lack of subject matter jurisdiction. II. A. This case quite obviously involves a dispute over life insurance proceeds that come from an ERISA-governed plan. And the plaintiff seeks to enforce a statutory insurance provision in the judgment of divorce that plainly is preempted by ERISA. See Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001). But the plaintiff’s state court complaint does not include a claim against the plan administrator or otherwise seek benefits from the plan itself. It contains only a state law cause of action between citizens of the same state. Subject matter jurisdiction, therefore, is questionable. Federal district courts are courts of “limited jurisdiction,” and the burden of establishing subject matter jurisdiction rests with the defendant in this case as the party removing the case and asserting federal jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of Am., , 377 (1994). “Because lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts resolved in favor of remand.” Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996) (quoting Abels -4- v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985); see also Her Majesty The Queen In Right of the Province of Ontario v. City of Detroit, 874 F.2d 332, 339 (6th Cir. 1989); Jacada (Europe), Ltd. v. Int’l Mktg. Strategies, Inc., 401 F.3d 701, 704 (6th Cir. 2005) (citing Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999 , abrogated on other grounds by Hall St. Assocs., LLC v. Mattel, Inc., (2008). Section 1441(a) of Title 28 provides that “any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.” There is no suggestion that the parties to this action are citizens of different states, and therefore there can be no subject matter jurisdiction under 28 U.S.C. § 1332(a). However, federal courts have jurisdiction over actions “arising under the Constitution, laws, or treaties of the United States,” 28 U.S.C. § 1331, and such a case may be removed by the defendant if the complaint is based on federal law. See 28 U.S.C. § 1441(b). If a matter over which this Court lacks subject matter jurisdiction is removed to this Court, “the case shall be remanded. . . . The State court may thereupon proceed with such case.” 28 U.S.C. 1447(c). Federal courts “look to the complaint at the time of removal . . . and determine whether the action was properly removed in the first place.” Ahearn v. Charter Twp. of Bloomfield, 100 F.3d 451, 453 (6th Cir. 1996). Federal courts use the “well-pleaded complaint” rule to determine “arising under” jurisdiction. Long v. Bando Mfg. of Am., Inc., 201 F.3d 754, 758 (6th Cir. 2000). That rule provides that “‘federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.’” Ibid. (quoting Caterpillar Inc. v. Williams, 482 U.S. 386, -5- 392 (1987 . “[T]he party who brings the suit is master to decide what law he will rely upon.” The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25 (1913). General speaking, a case “arises under” federal law if the “cause[] of action [is] created by federal law, that is, where federal law provides a right to relief.” Eastman v. Marine Mech. Corp., 438 F.3d 544, 550 (6th Cir. 2006) (citations omitted); see also American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260 (1916) (holding that “[a] suit arises under the law that creates the cause of action”); see also Merrell Dow Pharm., Inc. v. Thompson, 478 U.S. 804, 808 (1986) (observing that the “‘vast majority’ of cases that come within [section 1331’s] grant of jurisdiction are covered by Justice Holmes’ statement [in American Well Works]”). Cases that are removed only on the basis of federal defenses — such as the defense of preemption — “even if the defense is anticipated in the plaintiff’s complaint, and even if both parties concede that the federal defense is the only question truly at issue,” do not satisfy the removal statute’s requirement. Michigan Dep’t of Treasury v. Michalec, 181 F. Supp. 2d 731, 734 (E.D. Mich. 2002) (quoting Caterpillar, 482 U.S. at 393). The doctrine of complete preemption, invoked in very limited circumstances, cf. Loftis v. United Parcel Serv., Inc., 342 F.3d 509, 515 (6th Cir. 2003), may result in an ersatz state law claim being deemed a federal cause of action and thus removable to federal court. The Sixth Circuit explained the concept and application of the doctrine of complete preemption in Loftis v. United Parcel Service, Inc. as follows: Generally, a state law claim cannot be “recharacterized” as a federal claim for the purpose of removal. [Metro. Life Ins. Co. v.] Taylor, 481 U.S. [958,] 63 [(1987)]. . . . However, if an area of the law is “completely preempted,” then the state law claim is displaced by the federal cause of action, and the action is subject to removal. Taylor, 481 U.S. at 63-64; Warner v. Ford Motor Co., 46 F.3d 531, 534 (6th Cir. 1995) (en banc). The rationale undergirding this exception is that where federal preemption is so complete that conflicting state law not only must yield but is effectively extinguished, the only theory of recovery remaining is the federal claim, -6- which takes the place of the state law claim recited in the complaint. See Beneficial Nat’l Bank v. Anderson, 539 U.S. 1[, 8] (2003) (“When the federal statute completely pre-empts the state-law cause of action, a claim which comes within the scope of that cause of action, even if pleaded in terms of state law, is in reality based on federal law.”); Warner, 46 F.3d at 534. The complaint itself is therefore deemed to state a federal cause of action. Loftis, 342 F.3d at 515. ERISA is one of the limited areas in which the concept of complete preemption applies. See Mikulski v. Centerior Energy Corp., 501 F.3d 555, 563-64 (6th Cir. 2007). But in the context of ERISA, complete preemption occurs only when the action “is equivalent to a civil enforcement action under 29 U.S.C. § 1132(a)(1)(B).” Michalec, 181 F. Supp. 2d at 735. The distinct between preemption and complete preemption must lead to this conclusion: it does not automatically follow that where a state rule of decision is preempted by federal law, a claim is removable under 28 U.S.C. § 1441(a). As mentioned above, a state claim is completely preempted, and thus removable under ERISA, if it is equivalent to an civil enforcement action under 29 U.S.C. § 1132(a)(1)(B). Wright v. Gen. Motors Corp., 262 F.3d 610, 614-15 (6th Cir. 2001); Ward v. Alt. Health Delivery Sys., Inc., 261 F.3d 624, 626-27 (6th Cir. 2001). Section 1132(a) states that “[a] civil action may be brought . . . (1) by a participant or beneficiary . . . (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). “[I]n order to come within the [complete preemption] exception a court must conclude that the common law or statutory claim under state law should be characterized as a superseding ERISA action ‘to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan’ . . . .” Peters v. Lincoln Elec. Co., 285 F.3d 456, 467 n.11 (6th Cir. 2002) (quoting Warner, 46 F.3d at 533-34). The Sixth -7- Circuit has suggested that these potentially preempted claims also must be brought by individuals who would be classified as participants or beneficiaries under section 1132 of ERISA; “[c]laims by anyone other than a ‘participant or beneficiary[]’ . . . fall outside the scope of ERISA’s civil enforcement section” and are not subject to complete preemption or jurisdiction in the district court. Mich. Affiliated Healthcare Sys., Inc. v. CC Sys. Corp. of Mich., 139 F.3d 546, 550 (6th Cir. 1998) (citing Alexander v. Elec. Data Sys. Corp., 13 F.3d 940, 946 (6th Cir. 1994); Taylor, 481 U.S. 58, 66 (1987 ; Zuniga v. Blue Cross & Blue Shield of Mich., 52 F.3d 1395, 1398-99 (6th Cir. 1995). “State causes of action not covered by § 1132(a)(1)(B) may still be subject to a preemption claim under § 1144(a) . . . because the state law at issue may ‘relate to’ a pension or employee benefit plan. But such actions are not subject to removal.” Warner, 46 F.3d at 535; see also Peters, 285 F.3d at 468 (noting that “claims that merely peripherally ‘relate to’ ERISA . . . do not create a federal cause of action”). “The fact that a defendant might ultimately prove that a plaintiff’s claims are pre-empted . . . does not establish that they are removable to federal court,” Caterpillar, 482 U.S. at 398; instead, that defense may be adjudicated in state court subject to review on certiorari by the United States Supreme Court, Warner, 46 F.3d at 535. The defendant argues that the plaintiff’s complaint is nothing more than a disguised claim for benefits under the General Motors plan, and therefore it falls within the scope of section 1132(a)(1)(B) as an action to recover benefits under the plan. The defendant contends that the plaintiff estate characterizes itself as a contingent beneficiary under the plan and stakes its claim to the benefits on that status. The text of the complaint, however, does not support that argument. Although there is language in the amended complaint stating that the plaintiff “seeks entitlement to, and payment of, certain life insurance benefits under a MetLife Plan,” Am. Compl. ¶ 5, the plaintiff -8- does not allege that she is a plan beneficiary or otherwise entitled to benefits under the plan, nor has she sued the plan administrator. In fact, she acknowledges that she sought benefits from Met Life and was turned down in favor of the defendant. The plaintiff’s lawsuit is addressed to the defendant as a recipient and owner of the life insurance proceeds, and she seeks payment of the funds now that they have been distributed by the plan beneficiary. The law recognizes a distinction between a plan administrator’s obligation to pay over benefits to a named plan beneficiary and that beneficiary’s entitlement to keep those funds thereafter. In Central States, S.E. & S.W. Areas Pension Fund v. Howell, 227 F.3d 672 (6th Cir. 2000), the Sixth Circuit held that ERISA preempted a provision in a divorce judgment directing how plan proceeds should be distributed, but ERISA did not insulate a fund generated by an employee welfare plan, once distributed, from legal or equitable claims by non-plan beneficiaries. Id. at 678- 79. In that case, the deceased husband changed the beneficiary designation on a life insurance policy issued as part of an ERISA welfare plan in violation of a state court injunction issued to preserve the status quo in a divorce case. The husband died while the divorce was pending, and the court of appeals held that ERISA required that the insurance policy proceeds be paid to the deceased’s children by a former marriage, whom the husband had designated in the beneficiary change form, despite the state court order not to do so. However, the Court then stated: [T]here is no precedent binding on this Court on the issue of whether, once the beneficiary is determined, ERISA preempts all causes of action and possible remedies based upon state law that might be traced to the ERISA plan proceeds. Id. at 678. The Court held that equitable claims relating to the parties competing for the fund, and not involving the plan administrator, are not preempted. Therefore, “once the benefits of an ERISA employee welfare benefit plan have been distributed according to the plan documents, ERISA does -9- not preempt the imposition of a constructive trust on those benefits.” Id. at 678-79. The Court concluded that the “district court has the discretion to impose a constructive trust upon those benefits in accordance with applicable state law if equity so requires.” Id. at 679. The Supreme Court’s decision in Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 129 S. Ct. 865 (2009), cited by the defendant in her supplemental brief, does not change that rule because the Court explicitly left the question open. 129 S. Ct. at 875 n.10 (“Despite our following answer to the question here, our conclusion that § 1056(d)(1) does not make a nullity of a waiver leaves open any questions about a waiver’s effect in circumstances in which it is consistent with plan documents. Nor do we express any view as to whether the Estate could have brought an action in state or federal court against Liv to obtain the benefits after they were distributed. Compare Boggs v. Boggs, 520 U.S. 833, 853 (1997) (‘If state law is not preempted, the diversion of retirement benefits will occur regardless of whether the interest in the pension plan is enforced against the plan or the recipient of the pension benefit’), with Sweebe v. Sweebe, 474 Mich. 151, 156-159, 712 N.W.2d 708, 712-713 (2006) (distinguishing Boggs and holding that ‘while a plan administrator must pay benefits to the named beneficiary as required by ERISA,’ after the benefits are distributed ‘the consensual terms of a prior contractual agreement may prevent the named beneficiary from retaining those proceeds’); Pardee v. Pardee, 2005 Ok Civ. App. 27, ¶¶ 20, 27, 112 P.3d 308, 313-314, 315-316 (2004) (distinguishing Boggs and holding that ERISA did not preempt enforcement of allocation of ERISA benefits in state-court divorce decree as ‘the pension plan funds were no longer entitled to ERISA protection once the plan funds were distributed’).”). In other contexts, post distribution actions against a fund subject to ERISA have been sustained as well. See Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 831-32 (1988) (holding that once -10- plan benefits have been paid to the beneficiary, ERISA does not prevent courts from subjecting the plan proceeds to a writ of garnishment). Nor does the Supreme Court’s decision in Aetna Health Inc. v. Davila, 542 U.S. 200 (2004), change the result. In that case, the plaintiffs sued an ERISA health care provider for failing to pay for certain prescription medications, but the suit was brought under Texas state law. The Court held that the state law’s enforcement scheme was intertwined with the scheme established by ERISA, and the plaintiffs’ right to benefits was dependent entirely on the plan. The Court held, therefore, that the claim ostensibly brought under Texas state law was completely preempted and the cases were removable to federal court. However, in discussing complete preemption, that Court stated that “if an individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B), and where there is no other independent legal duty that is implicated by a defendant’s actions, then the individual’s cause of action is completely pre-empted by ERISA § 502(a)(1)(B).” Id. at 210. In this case, the plaintiff alleges an independent legal duty against the defendant as recipient of funds to which, according to the plaintiff, the defendant waived entitlement. The other cases cited by the defendant in her supplemental brief all involved actions by or against the plan administrator in which various individuals competed for the funds. Those cases properly are characterized as actions for benefits under section 502(a)(1)(B). In the present case, the plaintiff does not claim an entitlement to the funds from the plan administrator, nor dies the estate contend it is a contingent beneficiary under the plan. The basis of the claim is that the defendant is not entitled to the funds because she agreed to waive her right to them in the consent judgment of divorce. In fact, the cause of action is characterized as a breach of contract. The defendant may argue, correctly, that such a state law claim is preempted by ERISA, Egelhoff, 532 -11- U.S. at 150 (holding that ERISA preempts a Washington statute providing that the designation of a spouse as the beneficiary of a nonprobate asset is revoked automatically upon divorce). But such an argument is a federal defense that will not support federal question jurisdiction. Other questions remain, as well. For instance, if the waiver provision in the state statute and the consent judgment of divorce disqualify the defendant from receiving the benefits, the plaintiff has not made a case for why the benefits should be paid to the estate. If the plaintiff were relying on plan language for that connection, this would be a different case. But the amended complaint is silent on that point. Based on the pleadings in their present state, the Court must find that the complaint does not arise under federal law, and the claim is not completely preempted. Therefore, the Court does not have subject matter jurisdiction, and the case must be remanded to state court. B. The plaintiff seeks costs and attorney’s fees against the plaintiff pursuant to 28 U.S.C. § 1447(c), which provides that “[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” An award of costs is discretionary with the Court and often turns on whether the removal lacked merit. Morris v. Bridgestone/Firestone, Inc., 985 F.2d 238, 240 (6th Cir. 1993). The Sixth Circuit has explained that section 1447(c) “gives district courts discretion to grant fees to the opposing party — they ‘may’ grant fees — if ‘the removing party lacked an objectively reasonable basis for seeking removal.’” Ohio ex rel. Skaggs v. Brunner, 629 F.3d 527, 530 (6th Cir. 2010) (quoting Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005 . That court also has stated that an award of fees or costs “is inappropriate where the defendant’s attempt to remove the action was ‘fairly supportable,’ or -12- where there has not been at least some finding of fault with the defendant’s decision to remove.” Warthman v. Genoa Twp. Bd. of Trs., 549 F.3d 1055, 1059-60 (6th Cir. 2008) (citation omitted). The Court finds that the defendant’s reading of the plaintiff’s amended complaint as seeking to recover benefits under the plan itself is a reasonable, although incorrect, view of that pleading. If that interpretation prevailed, then complete preemption would have applied and federal jurisdiction would have existed. Therefore, the Court believes that the defendant had an objectively reasonable basis for her conclusion that the amended complaint arose under federal law and subject matter jurisdiction could be found in this Court. The Court finds, therefore, that the plaintiff is not entitled to costs or attorney’s fees under 28 U.S.C. § 1447(c). III. The Court finds that subject matter jurisdiction is lacking. The Court also concludes that the plaintiff is not entitled to receive costs or attorney’s fees associated with her motion to remand. Accordingly, it is ORDERED that the plaintiff’s motion to remand [dkt. #15] is GRANTED. It is further ORDERED that the plaintiff’s request for costs and attorney’s fees is DENIED. -13- It is further ORDERED that this case is REMANDED to the Wayne County, Michigan circuit court. Dated: July 12, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 12, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -14-

=== Trans-Industries, Inc, Solon v. Allard ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION TRANS-INDUSTRIES, INC., Debtor, RICHARD A. SOLON, Appellant, v. DAVID W. ALLARD, Case Number 10-10401 Honorable David M. Lawson ____________________________________/ Appellee, ORDER DISMISSING APPEAL This matter is before the Court on an interlocutory appeal by defendant Richard Solon of an order entered by the bankruptcy court denying a motion to strike a jury demand in an adversary proceeding. The Trustee of debtor Trans-Industries, Inc. sued Solon and others, all of whom were officers or otherwise affiliated with the bankrupt company, alleging that the defendants mishandled the debtor’s employee benefit plan and caused damage to the plan beneficiaries. The complaint alleged breach of fiduciary duty under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq., and breach of contract under common law. The Trustee demanded a jury, and Solon moved to strike the jury demand. The appeal was argued in August 2010 and remains under advisement in this Court. However, on May 17, 2011, the Court received a letter from counsel for the Trustee informing the Court that the parties had stipulated to withdraw the jury demand, and the bankruptcy court had entered an order to that effect withdrawing the jury demand. The bankruptcy court’s order was made a part of the record in this Court. Withdrawal of the jury demand renders moot the issue before the Court and deprives the Court of appellate jurisdiction. The doctrine of mootness is an extension of the Constitution’s standing requirement and is part of the “irreducible constitutional minimum” necessary for a justiciable case or controversy under Article III. Lujan v. Defenders of Wildlife, , 560 (1992). “[A] federal court has a continuing duty to ensure that it adjudicates only genuine disputes between adverse parties,” Libertarian Party of Ohio v. Blackwell, 462 F.3d 579, 584 (6th Cir. 2006), and must question mootness at “every stage of a case,” McPherson v. Mich. High Sch. Athletic Ass’n, Inc., 119 F.3d 453, 458 (6th Cir. 1997) (en banc). “Mootness results when events occur during the pendency of a litigation which render the court unable to grant the requested relief.” Carras v. Williams, 807 F.2d 1286, 1289 (6th Cir. 1986); see also United States v. City of Detroit, 401 F.3d 448, 450-51 (6th Cir. 2005) (noting that “mootness generally depends on ‘whether the relief sought would, if granted, make a difference to the legal interests of the parties’” (quoting McPherson, 119 F.3d at 458 ; In re DSC, Ltd., 486 F.3d 940, 945 (6th Cir. 2007) (noting that a claim is moot “when it is factually, not legally, impossible to receive such relief” (internal citations and quotation marks omitted . “If ‘the issues presented are no longer live or the parties lack a legally cognizable interest in the outcome,’ then the case is moot and the court has no jurisdiction.” Libertarian Party of Ohio, 462 F.3d at 584 (quoting Los Angeles Cnty. v. Davis, 440 U.S. 625, 631 (1979 . “A federal court has no authority to render a decision upon moot questions or to declare rules of law that cannot affect the matter at issue.” Cleveland Branch, N.A.A.C.P. v. City of Parma, 263 F.3d 513, 530 (6th Cir. 2001) (citing Church of Scientology v. United States, 506 U.S. 9, 12 (1992 . -2- When a party resolves or abandons an issue raised on appeal, there is no live controversy left to adjudicate. See Remus Joint Venture v. McAnally, 116 F.3d 180, 185 (6th Cir. 1997) (“[O]ur decision that no Article III case or controversy exists rests on a simple fact: plaintiffs voluntarily have abandoned an argument that was necessary for them to prevail in this federal court action.”); Patriot Cinemas, Inc. v. General Cinema Corp., 834 F.2d 208, 215 (1st Cir. 1987) (“[W]e are presented with an appeal from the dismissal of a count which the plaintiff no longer wishes to litigate. Such an appeal does not present a live controversy.”). “‘The test for mootness “is whether the relief sought would, if granted, make a difference to the legal interests of the parties. . . .”’” McPherson, 119 F.3d at 458 (quoting Crane v. Indiana High Sch. Athletic Ass’n, 975 F.2d 1315, 1318 (7th Cir. 1992 . This Court is not able to render any meaningful relief to the appellant because he already has gained by agreement that which he seeks on appeal. Any opinion the Court would render on the propriety of the jury demand — since withdrawn — would be merely advisory. It has been observed generally that “voluntary cessation of a challenged practice does not moot a case.” Cooey v. Strickland, 588 F.3d 924, 926 (6th Cir. 2009) (quoting League of Women Voters of Ohio v. Brunner, 548 F.3d 463, 473 (6th Cir. 2008 . However, in this case, the jury demand was withdrawn by stipulation, effectuating a settlement of the legal issue. When mootness results from settlement, the Court must dismiss the appeal, although it does not necessarily vacate the lower court’s ruling. See Alvarez v. Smith, 558 U.S. ---, ---, 130 S. Ct. 576, 581-82 (citing U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S. 18, 21 (1994 . Withdrawal of the jury demand renders the present appeal moot, and neither party has standing to proceed with it. Lewis v. Cont’l Bank Corp., 494 U.S. 472, 477 (1990) (holding that the -3- standing requirement limits federal courts to addressing “only actual, ongoing cases or controversies”). The Court, therefore, has no subject matter jurisdiction to adjudicate the claim raised by the appellant. Accordingly, it is ORDERED that the appeal is DISMISSED as moot. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 24, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 24, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -4-

=== ELIZABETH SANDERS and JUDE BECKOWITZ v. ADRIENNE M. STANLEY, D.O. et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ELIZABETH SANDERS and JUDE BECKOWITZ, Plaintiffs, v. Case Number 09-14377 Honorable David M. Lawson ADRIENNE M. STANLEY, D.O., DR. JOSELYN PAIGE (a/k/a DR. JOSLIN-PAGE), BARBARA KOZLOFF, SERRA, JANE DOES 1-2, LATONYA BOOKS, ELLA M. BULLY- CUMMINGS, JOHN DOE 1-2, KEITH NORROD, and GREGORY STUPCYNSKI, ______________________________________/ Defendants. OPINION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT BY DEFENDANTS STANLEY AND JOSLIN-PAGE The plaintiffs in this case brought suit against defendants Adrienne Stanley and Judith Joslin- Page, both physicians at Botsford Hospital in Farmington Hills, Michigan for defamation, intentional infliction of emotional distress, invasion of privacy, and false imprisonment, alleging that the doctors falsely reported to the police that plaintiff Elizabeth Sanders had given birth and that she and co-plaintiff Jude Beckowitz had disposed of the fetus illegally. Other defendants are named in the action as well. Before the Court presently is a motion for summary judgment by defendants Stanley and Joslin-Page. They argue, among other things, that they are protected by common law immunity and the immunity provision in the Child Protection Act against civil liability for reporting the plaintiffs to the police. They also argue that the plaintiffs have not offered evidence to support the claim that Ms. Sanders was falsely imprisoned. After hearing argument from the parties in open court on April 26, 2011, the Court agrees. Therefore, the Court will grant the motion for summary judgment and dismiss the case against these two defendants. I. According to plaintiffs’ counsel, Elizabeth Sanders and Jude Beckowitz have led an alternative lifestyle and have lived “off the grid” for several years. In late June 2008, plaintiff Elizabeth Sanders suffered a miscarriage. She says that she did not know she was pregnant and passed a bloody mass one day in the bathroom. She did not seek immediate medical attention, but she continued to bleed. Mr. Beckowitz eventually convinced her to go to a hospital, and on July 1, 2008, he took Sanders to the emergency room at Botsford Hospital in Farmington Hills, Michigan. Sanders told emergency room personnel of her vaginal bleeding over the past 24 hours. Doctors examined her and concluded eventually that Sanders’s pregnancy had been over 28 weeks in development, that she possibly had given birth to a viable fetus, and that a live baby may be at risk somewhere needing help. The doctors notified the police. Soon thereafter, the media reported that Sanders and her partner, plaintiff Jude Beckowitz, had given birth and disposed of the baby in a dumpster. The plaintiffs were excoriated in the press, Beckowitz was arrested without a warrant, Sanders was kept in the hospital incognito, and when they both returned home their house was vandalized. Plaintiffs’ counsel acknowledges that the hospital physicians performed valuable service in their medical treatment of Elizabeth Sanders. The plaintiffs also contend that the doctors’ speculation about the term of Sanders’s pregnancy is not based on a proper level of competence, and their suggestion that she gave birth to a live baby, later disposed of, was exceedingly damaging to -2- her and her partner. As plaintiffs’ counsel contended at oral argument, the doctors saved her life and ruined her reputation. The record facts in this case tend to support those claims, although there is some dispute over details. When Sanders arrived in the emergency room, she was bleeding internally and exhibited symptoms of shock, including low blood pressure and tachycardia. Emergency room doctor Diane Paratore examined Sanders and indicated that her cervix, ovaries, and uterus appeared to be of “normal size.” Br. in Resp. to Botsford Mot. Summ. J. at 2 & Ex. 3, Dr. Paratore’s Report. Dr. J.P. Maganito, an obstetrical resident, noted some dilation in the cervix and concluded that the Sanders’ uterus was “approximately 8-10 weeks in size,” a guideline reference based on the size of the uterus during this period of a normal pregnancy. Id. at 2 & Ex. 4, Dr. Maganito’s Initial Exam Notes; Ex. 5, Discharge Summary; Botsford Mot. Summ. J., Ex. 1, Dep. of Stanley, at 74. Efforts in the emergency room to alleviate Sanders’ shock-related symptoms yielded little success. The resident contacted Dr. Stanley around 4:00 a.m. Stanley was at the hospital when called, and she arrived at the emergency room promptly. She attempted to take a history from Sanders, but Sanders’ responses to Stanley’s questions were vague or non-existent. Stanley said that Sanders did tell her that she had a menstrual cycle approximately 30 days earlier, had been bleeding for over a day, and had passed some internal matter at home within the past 24 hours. At the time, Dr. Stanley suggested that the continued bleeding could have been caused by the uterus’s inability to contract normally after Sanders’ incomplete miscarriage. The plaintiff’s expert, Dr. Jeffrey Wener, concluded that Sander’s uterus’s inability to contract normally would have prevented it from shrinking substantially after her miscarriage, and therefore Stanley’s opinion on the gestational term, which she reached by extrapolating from the size of the uterus she saw, was erroneous. -3- Dr. Stanley performed a “dilation and curettage” (D&C) that morning at 5:00 a.m. After placing the plaintiff under anesthesia, Stanley examined the plaintiff and found that her cervix was dilated and positioned at the vaginal opening in a manner atypical of an early miscarriage, her peritoneum was bulging also in a manner atypical of an early miscarriage, her uterus was enlarged to the size of a uterus equivalent to a 14-to-16 week pregnancy, and the tissue in her uterus appeared placental in nature. Medical records indicate that at some point after completing the procedure and exams, Sanders’ uterus had shrunk to a size equal to an 8-to-10 week pregnancy. Stanley testified at her deposition that a uterus typically shrinks to about 50% of its size immediately after birthing the fetus, and a 14-to-16-week uterus size at the time of the D&C was indicative of a pregnancy of approximately 28 to 32 weeks. She also testified that the age of viability generally is considered to be 24 weeks. The information she obtained during her exam and the subsequent procedure caused Stanley to suspect that Sanders had delivered a potentially viable fetus at home and had inaccurately recounted her most recent menstrual cycle. At approximately 6:00 a.m., Stanley attempted to update Beckowitz in person in the waiting room, but found that he had left; she called and left a message on his cell phone when he did not answer. After completing the surgery around 7:00 a.m., Stanley called the doctor replacing her, defendant Dr. Judith Joslin-Page, and explained her concerns. After Joslin-Page examined Sanders in the recovery area at 7:30 a.m., she made the same findings as Stanley, and both doctors expressed concerns about inconsistencies with the plaintiff’s reported history and the potential birth of a viable fetus. Joslin-Page contacted Beckowitz by phone after her examination and was able to reach him; she explained that Sanders was in critical condition and attempted to obtain more information about -4- her medical history. The plaintiffs contend that neither Stanley’s statements nor Sanders’ medical records indicate that the pregnancy went longer than 16 weeks or reached the point of viability. At 7:40 a.m., following her examination of and discussion with Stanley, Joslin-Page made the decision to contact the police. However, she first consulted with a doctor in the emergency room and confirmed the proper protocol for doing so. Around 9:30 that morning, Officer Craig Dersa and Sergeant John Regorrah from the Farmington Hills Police Department interviewed Joslin-Page and Stanley at the hospital. Joslin-Page described her findings following the postoperative exam. Stanley explained what she found during the D&C and opined that the plaintiffs could not have provided an accurate preoperative medical history. Thereafter, the accounts diverge as to what was said next. The Farmington Hills police report dated July 1, 2008 states that the doctors described the birth of a full-term infant. However, Stanley denied ever stating or hearing Joslin-Page say that Sanders had delivered a full term baby. In their deposition testimony describing their conversations with the police, the doctors gave different estimates of gestational periods of 20 to 24 weeks, “at least 24 weeks,” and 28 to 32 weeks. Joslin-Page explained that the doctors had provided the officers with extensive background medical information and the officers may have become confused by the different definitions, but that she believed her bottom-line concern — that a live baby may need help — had been communicated. A police report from later in the day on July 1 indicates that Officer Stacy Swanderski visited the hospital and learned that fetal matter would be sent for age testing, but Dr. Stanley denied any knowledge of this type of testing or the report. -5- Around July 2, officers from the Detroit Police Department interviewed Dr. Stanley and asked her to determine a more specific gestational age. Dr. Stanley informed the officers that “the baby was at least 24 weeks, was probably greater than 24 weeks . . . but short of . . . term.” Mot. Summ. J., Ex. A, dep. of Stanley, at 58, 109. The officers also spoke with Dr. Joslin-Page and requested more detailed information about the size of the fetus to aid in their search. Sanders suffered life-threatening complications from the July 1 surgery and remained unconscious until July 4, 2008. She initially was admitted to the hospital under the name Elizabeth Sanders, but during the time she was unconscious the medical records were changed to identify her as “Shannon Aldmen.” Stanley noticed the name change on her July 2 rounds visit and was told by someone in the risk management department that he made the change to protect Sanders. Stanley denied any involvement in or knowledge of the procedure for changing a patient’s name and did not mention the change to her patient. Sanders says that shortly after she awoke on July 4, a Farmington Hills police officer visited her; Sanders expressed confusion about the officer’s references to a baby and denied that a baby existed. Dr. Stanley examined Sanders on July 5, explained the events of the preceding days including her operative findings, and again asked Sanders to describe the mass she had passed at home. Sanders explained that the substance was about the size of her hand and that Beckowitz and she had “wrapped it up and put it in a bag and threw it in the dumpster.” Mot. Summ. J., Ex. A, dep. of Stanley, at 36. Sanders apparently told other medical personnel that she had flushed the discharge down the toilet. During her July 6 examination of Sanders, Stanley “explained to her that we still need to watch her because it wasn’t time for her to be discharged.” Id., Ex. A, dep. of Stanley, at 38. Sanders was not released from the hospital until July 8. Throughout Sanders’s hospital stay, -6- in response to questions from the media and other callers, Botsford Hospital denied that Sanders was an admitted patient. Sanders alleges that hospital personnel refused to allow her friends or family, including Beckowitz, to visit her while she was hospitalized. Beckowitz initially was turned away but was able to visit Sanders briefly on July 5, with security guards present. He updated Sanders on the events that had occurred while she was unconscious, including that he had been prevented from visiting her. Sanders acknowledged that her friend and employer, Pat Hopkinson, had visited her in the intensive care unit. As a result of the reports to police made by Drs. Stanley and Joslin-Page, during Sanders’s hospital stay, police officers interviewed Beckowitz, searched the plaintiffs’ home twice (without a search warrant), searched the homes of their friends and family members, reported the alleged birth and fetus disposal to the media, and arrested Beckowitz without a warrant, although he was released later without charges. A few days after Sanders was released from the hospital, the plaintiffs were subjected to several threatening events at their home, including shots fired at their house, threats from strangers in the middle of the night, and broken windows at their home and vehicle. They allege that the police were slow to respond and failed to investigate. The plaintiffs allege that they have suffered a variety of emotional injuries related to these incidents and attributed to the actions of the defendants, including humiliation, embarrassment, emotional distress, sleeplessness, anxiety, loss of income, and damage to their reputations. On November 6, 2010, the plaintiffs filed a complaint in this Court, which was later amended. After a motion to dismiss certain counts filed by defendants Stanley and Joslin-Page and -7- a stipulation to dismiss other counts, the following counts remain against these defendants in the third amended complaint: defamation (count I), intentional infliction of emotional distress (count II), invasion of privacy (count III), invasion of privacy – false light (count V), and false imprisonment as to plaintiff Elizabeth Sanders only (count VI). A variety of other claims remain against Detroit police officials, but they are not relevant to the motion presently before the Court. II. The plaintiffs’ claims against the doctor defendants fall into two categories: those that are based on the communications to police officers (defamation, intentional infliction of emotional distress, invasion of privacy, and invasion of privacy – false light); and those based on Sanders’s confinement in the hospital (false imprisonment). The defendants argue that the former must fail because the communication was privileged under the rule that statements made to the police regarding criminal activity are protected, and because Michigan’s Child Protection Act, Mich. Comp. Laws § 722.625, grants immunity to individuals reporting suspected child abuse and imposes a presumption of good faith on activities in compliance with the statute. As to the latter claim, they argue that the undisputed facts do not support a cause of action for false imprisonment because there is no proof that Stanley or Joslin-Page were responsible for assigning Sanders an alias or that the doctors prevented her from leaving the hospital, and both doctors testified without contradiction that they had no involvement with either activity. The plaintiffs dispute the defendants’ argument that an expansive privilege covers all communications to law enforcement personnel. They insist that there is a distinction between reporting false facts to instigate a police investigation (which is actionable) and providing honest, but ultimately incorrect, information to police who are investigating a crime (which is not). The -8- plaintiffs contend that the divergence of medical opinions in the record supports an inference that Stanley and Joslin-Page knew the information about the possibility of a viable birth was false, and the question of their immunity must be submitted to a jury. The plaintiffs also argue that the defendant doctors did not have a moral or legal duty to report the plaintiffs in this case. They contend that a fact issue prevents the Court from determining as a matter of law that the defendants had the “reasonable cause” necessary to trigger their reporting obligation under the Child Protection Act. On the false imprisonment claim, the plaintiffs do not address the argument that the two doctors had no hand in concealing plaintiff Sanders’s identity or interfering with visitation. Instead, they point to evidence that Beckowitz was prevented from visiting Sanders or forced to visit her with a security guard supervising, and that Sanders was aware of her confinement and alias from July 4 through her discharge. They counter the defendants’ argument that Sanders could have left the hospital at any time by observing that such termination of her treatment would have been against medical advice. Summary judgment is appropriate where “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A trial is required only when “there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Anderson v. Liberty Lobby, Inc., , 250 (1986). Where the facts are mostly settled, and the question before the court is purely a legal one, the summary judgment procedure is well suited for resolution of the case. See Cincom Sys., Inc. v. Novelis Corp., 581 F.3d 431, 435 (6th Cir. 2009). -9- The party bringing the summary judgment motion has the initial burden of informing the court of the basis for its motion and identifying portions of the record that demonstrate the absence of a genuine dispute over material facts. Fed. R. Civ. P. 56(c)(1)(A)&(B); Mt. Lebanon Pers. Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). If the party opposing the motion contends that facts are in dispute, he may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to meet his burden of proof, summary judgment is clearly proper. Celotex Corp. v. Catrett, , 322-23 (1986). At the summary judgment stage, “the evidence should be viewed in the light most favorable to the non-moving party[, and] the facts and any inferences that can be drawn from those facts[] must be viewed in the light most favorable to the non-moving party.’” Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 374 (6th Cir. 2009) (quoting Bennett v. City of Eastpointe, 410 F.3d 810, 817 (6th Cir. 2005) (citations omitted ; see also Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003) (“In evaluating the evidence, [the district court] ‘draw[s] all reasonable inferences therefrom in a light most favorable to the non-moving party.’”) (quoting PDV Midwest Ref., L.L.C. v. Armada Oil & Gas Co., 305 F.3d 498, 505 (6th Cir. 2002 . Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d -10- 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics & Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). A. Michigan law recognizes a privilege for communications to police officers about suspected criminal activity, but the nature of the privilege is far from clear. The defendants contend that the privilege is absolute, and there is language in the case law that gives some support to that view. For instance, in Hall v. Pizza Hut of America, Inc., 153 Mich. App. 609, 396 N.W.2d 809 (1986), the court reversed the denial of summary judgment to a restaurant employee who told police that she thought she recognized an individual in the restaurant who had robbed the store on a earlier occasion. The court held that the plaintiff’s claims based on those statements could not proceed because “information given to police officers regarding criminal activity is absolutely privileged.” Id. at 619, 396 N.W.2d at 813. The court cited Shinglemeyer v. Wright, 124 Mich. 230, 239-240, 82 N.W. 887, 890 (1900), for that proposition, but that case allowed for the possibility that “malicious” statements may be actionable, suggesting that the privilege is qualified, not absolute. The Hall court itself expressed uncertainty on that point, observing that “[e]ven if [the defendant’s] statements were not absolutely privileged, a qualified privilege extends to all communication,” and then concluding that “at least a qualified privilege protected [the defendant’s] statements.” Hall, 153 Mich. App. at 619, 396 N.W.2d at 813. In Smith v. Primco Mgmt. Corp., No. 193207, 1997 WL 33344476 (Mich. App. July 15, 1997), the court discussed its previous opinion in Hall and concluded that “the Court was not -11- entirely certain that the privilege was absolute.” Id. at *3. The Smith court concluded “that no more than a qualified privilege attaches to communications made to police officers concerning criminal activity.” Ibid. However, a year later, the court of appeals discussed the same cases and concluded that “statements made to the police regarding criminal activity are also entitled to an absolute privilege.” Brooks v. Owosso Public Schools, Nos. 188556 & 194424, 1998 WL 1991899, at *2 (Mich. App. Mar. 27, 1998). The court ultimately held: Because the statements of defendants . . . to [the o]fficer . . . regarding their suspicions that plaintiffs may have been responsible for the vandalism were absolutely privileged, we conclude that plaintiffs are unable to establish an unprivileged communication to a third party, which is an essential element of a defamation claim. Ibid. The Brooks court, however, relied entirely on Shinglemeyer and Hall, neither of which plainly supports an absolute privilege for all statements to police officers relating to criminal activity. This Court finds it unlikely that, based on the current precedent, the Michigan Supreme Court would find that intentionally false statements to police officers about an individual’s involvement in a crime are not actionable. See Bacon v. Mich. Cent. R. Co., 66 Mich. 166, 170, 33 N.W. 181, 183 (1887) (observing that the absolute privilege “rests upon the same necessity that requires the individual to surrender his personal rights, and to suffer loss for the benefit of the common welfare. Happily for the citizen, this class of privilege is restricted to narrow and well-defined limits”). Statements regarding suspected criminal activity made to the police are privileged, but the privilege is a qualified one. To overcome a qualified privilege, the plaintiffs must come forward with evidence that Drs. Stanley’s and Joslin-Page’s statements to the police were intentionally false or made with reckless -12- disregard for the truth. Hall, 153 Mich. App. at 620, 396 N.W.2d at 814; see also Prysak v. R.L. Polk Co., 193 Mich. App. 1, 15, 483 N.W.2d 629, 636 (1992) (citing Smith v. Fergan, 181 Mich. App. 594, 597, 450 N.W.2d 3, 5 (1989) (“A plaintiff may overcome a qualified privilege only by showing that the statement was uttered with actual malice, i.e., with knowledge of its falsity or reckless disregard of the truth.” . The only evidence offered by the plaintiffs on the issue of malice is the medical opinion of their expert obstetrician Dr. Jeffery Wener. He asserts that the medical reports provide no evidence that Sanders had given birth to a viable fetus. The plaintiffs also argue that there is no other evidence that supports the claim that Sanders gave birth to a live fetus. They reason that if a jury believes that Sanders’s pregnancy was nowhere near viability, they could infer that Stanley’s and Joslin-Page’s statements were made with malice. The Court finds that the plaintiffs ask too much of their evidence. The differences in the medical opinions in this case, even as profound as they may be, cannot support the inference that the doctors at Botsford Hospital, when expressing their concern that a live baby may be at risk and need help, made statements to the police with malice. There is no evidence that the doctors’ opinions that a viable fetus could have been delivered was intentionally false. Nor is there evidence that they were reckless in their statements. Even Dr. Wener testified that he did not believe there was any improper motive and instead believed the doctors simply made a mistake. Br. in Support of Mot. Summ. J., Ex. C, dep. of Wener, at 74-75. Based on the evidence, no reasonable jury could conclude otherwise. In addition, Michigan’s Child Protection Law mandates that “[a] physician . . . who has reasonable cause to suspect child abuse or neglect shall make immediately . . . an oral report . . . of -13- the suspected child abuse or neglect to the [Family Independence Agency].” Mich. Comp. Laws § 722.623(1)(a). The law also allows “any person . . . who has reasonable cause to suspect child abuse or neglect [to] report the matter or the [Family Independence Agency] or a law enforcement agency.” Mich. Comp. Laws § 722.624. The law includes an immunity provision that states, “[a] person acting in good faith who makes a report, cooperates in an investigation, or assists in any other requirement of this act is immune from civil or criminal liability that might otherwise be incurred by that action. A person making a report or assisting in any other requirement of this act is presumed to have acted in good faith.” Id. § 722.625; see also Warner v. Mitts, 211 Mich. App. 557, 559, 536 N.W.2d 564, 566 (1995). The statements by defendants Stanley and Joslin-Page to the police expressing concern over the possibility that Sanders gave birth to and perhaps abandoned a viable fetus plainly fall within the ambit of “suspected child neglect.” As noted, the immunity provision applies to statements made in good faith. The only evidence the plaintiffs offer to prove bad faith is opinion testimony that the doctors were way off on their estimate of the length of Sanders’s pregnancy. But the Michigan courts have held that where a physician files a report that is based on an “allegedly negligent diagnosis,” the plaintiff cannot avoid the statute’s grant of immunity as a matter of law. Awkerman by Awkerman v. Tri-Cnty. Orthopedic Group, P.C., 143 Mich. App. 722, 726-27, 373 N.W.2d 204, 206 (1985). The Court concludes, therefore, that the plaintiffs’ claims against Drs. Stanley and Joslin- Page that are based on their statements to the police cannot proceed as a matter of law. The Court will dismiss the counts of the amended complaint alleging defamation, intentional infliction of emotional distress, and invasion of privacy against those defendants. -14- B. In order to establish a claim of false imprisonment, plaintiff Sanders must prove that the defendants “(1) [committed] an act committed with the intention of confining another, (2) the act directly or indirectly results in such confinement, and (3) the person confined is conscious of his confinement.” Moore v. City of Detroit, 252 Mich. App. 384, 387, 652 N.W.2d 688 (2002) (quoting Adams v. Nat’l Bank of Detroit, 444 Mich. 329, 341, 508 N.W.2d 464 (1993 . Sanders acknowledges that she cannot maintain a false imprisonment action for her hospital confinement between July 1 and 4 because she was unconscious during that period. However, she maintains that the act of keeping her in the hospital under a pseudonym and preventing her friends from visiting her from July 4 until her discharge on July 8 amounted to false imprisonment. Perhaps it did, but the plaintiff has not shown that Drs. Stanley and Joslin-Page played any role in that activity. At most, the plaintiff has shown that these physicians were involved in the decision to keep Sanders for further treatment and monitoring, which was a medical decision that Sanders could have accepted or declined. There is no evidence that Sanders was in any physical condition to leave the hospital before she discharged. The undisputed evidence is that a Botsford Hospital risk management official made the decision to maintain Sanders under a false name. Stanley and Joslin-Page may have been aware of that action, but there is no evidence from which a jury could conclude that they were complicit in it. Both doctors testified that they had no involvement in assigning the plaintiff an alias, and their testimony is unrebutted. The Court concludes, therefore, that these defendants are entitled to judgment on the false imprisonment count as a matter of law. -15- III. The Court concludes that the statements made by defendants Adrienne Stanley and Judith Joslin-Page to the police concerning the plaintiff’s pregnancy, likely gestational term, and possibility of birthing a live baby were protected by qualified immunity. The Court finds that the plaintiffs have not come forward with evidence from which a jury could infer that those statements were made with malice. The Court also finds that the plaintiff has not offered evidence establishing the elements of false imprisonment against these defendants. Accordingly, it is ORDERED that the motion for summary judgment by defendants Adrienne Stanley and Judith Joslin-Page [dkt. #49] is GRANTED. It is further ORDERED that the amended complaint against defendants Adrienne Stanley and Judith Joslin-Page, only, is DISMISSED WITH PREJUDICE. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 13, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 13, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -16-

=== OCEANFIRST BANK v. HARTFORD FIRE INSURANCE COMPANY ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION OCEANFIRST BANK, Plaintiff, v. HARTFORD FIRE INSURANCE COMPANY, Defendant. _________________________________________/ Case Number 11-50051 Honorable David M. Lawson ORDER DENYING PLAINTIFF’S CORRECTED MOTION FOR ALTERNATE SERVICE Before the Court is a motion filed by the plaintiff, OceanFirst Bank, for alternate service of a subpoena on Kathleen M. Williams, a non-party, for her deposition and production of documents. The parties are engaged in litigation in the United States District Court for the District of New Jersey over the terms and conditions of an insurance policy issued by defendant Hartford to the plaintiff bank. It appears that the plaintiff contends that coverage exists for losses incurred in connection with a mortgage the bank issued to Ms. Williams, which is in default. The plaintiff wishes to take Ms. Williams’s deposition in the New Jersey lawsuit, but it has not been able to serve a subpoena on her. The plaintiff’s process server filed an affidavit stating that he went to Ms. Williams’s apartment on four different occasions. Twice there was a vehicle parked in the space reserved for the apartment and two other times the parking space was empty. The process server avers that on none of the occasions did anyone answer the door, and no one has contacted him, although he gives no reason why the apartment occupant would try to reach him. -1- Federal Rule of Civil Procedure 45(b)(1) states that “[s]erving a subpoena requires delivering a copy to the named person and, if the subpoena requires that person’s attendance, tendering the fees for 1 day’s attendance and the mileage allowed by law.” Fed. R. Civ. P. 45(b)(1). The Sixth Circuit has not addressed whether Rule 45 requires personal service; however, the Fifth, Ninth, and D.C. Circuits have held that personal service is required. Robertson v. Dennis (In re Dennis), 330 F.3d 696, 704 (5th Cir. 2003) (“[T]he rule indicates that proper service requires not only personal delivery of the subpoena, but also tendering of the witness fee and a reasonable mileage allowance.”); Chima v. United States Dep’t of Defense, 23 F. App’x 721, 724 (9th Cir. 2001) (unpublished) (concluding that district court did not err when it failed to compel individuals, who were recipients of subpoenas from the plaintiff, to comply with subpoenas and attend trial, where subpoenas were served by mail rather than personal service); FTC v. Compagnie De Saint- Gobain-Pont-A-Mousson, 636 F.2d 1300, 1312-13 (D.C. Cir. 1980). The majority of lower courts also have held that Rule 45 requires personal service. Heilman v. Lyons, No. 09-cv-2721, 2011 WL 94541, *1 (E.D. Cal. Jan. 11, 2011) (Newman, Mag. J.); Mahar v. US Xpress, Inc., No. 06-cv-1297, 2010 WL 4365885, *1 (N.D.N.Y. Oct. 28, 2010); Nunn v. State Farm Mut. Auto. Ins. Co., No. 3:08-cv-1486, 2010 WL 4258859, *1 (N.D. Tex. Oct. 21, 2010); Taylor v. Countrywide Home Loans, No. 08-13258, 2009 WL 1913417, at *5 (E.D. Mich. June 30, 2009) (Hluchaniuk, Mag. J.); McClendon v. TelOhio Credit Union, Inc., No. 2:05-CV-1160, 2006 WL 2380601, at *2 (S.D. Ohio Aug. 14, 2006) (Kemp, Mag. J.); Hall v. Sullivan, 229 F.R.D. 501, 502 (D. Md. 2005) (Grimm, Mag. J.) (recognizing that a majority of courts requires personal service of subpoenas under Rule 45). “The longstanding interpretation of Rule 45 has been that personal service of subpoenas is required.” 9A Charles A. Wright & Arthur R. Miller, Federal Practice and -2- Procedure § 2454, at 397 (3d ed. 2008); see also 5A Jeremy C. Moore et al., Moore’s Federal Practice ¶ 45.06, at 45-49 (1994). There is no consensus on that point, however. A number of courts “have permitted service by certified mail and other means if the method of service is made in a manner designed to reasonably insure actual receipt of the subpoena by the witness.” Franklin v. State Farm Fire & Cas. Co., 2009 WL 3152993, at *1-2 (E.D. Mich. 2009) (Majzoub, Mag. J.) (citing Halawani v. Wolfenbarger, No. 07-15483, 2008 WL 5188813, at *3 (E.D. Mich. Dec.10, 2008) (service of a subpoena by certified mail may assure proper delivery) and Cartier v. Geneve Collections, Inc., No. CV 2007-0201, 2008 WL 552855, at *1 (E.D.N.Y. Feb. 27, 2008) (alternative service is authorized under Rule 45 if it is designed to reasonably insure the actual receipt of the subpoena by the witness ; see also Powell v. Time Warner Cable, Inc., No. 09-00600, 2010 WL 5464895, at *3 (S.D. Ohio Dec. 30, 2010) (Preston Deavers, Mag. J.); King v. Crown Plastering Corp., 170 F.R.D. 355, 356 (E.D.N.Y. 1997); Hinds v. Bodie, No. 84 CV 4450, 1988 WL 33123, *1 (E.D.N.Y. Mar. 22, 1988); First Nationwide Bank v. Shur (In re Shur), 184 B.R. 640, 642 (Bankr. E.D.N.Y. 1995). “Courts that have sanctioned alternative means of service under Rule 45 often have done so only after the party requesting the accommodation diligently attempted to effectuate personal service.” Franklin, 2009 WL 3152993, at *2. There is some justification for interpreting Rule 45 to allow service of a subpoena by alternate means. The text of the rule does not unequivocally require delivery by hand-to-hand exchange; instead, service “requires delivering a copy” of the subpoena to the witness. The method of delivery is not specified. When hand-to-hand delivery is required, the rules generally indicate that requirement by designating “personal” service. See, e.g., Fed. R. Civ. P. 4(e)(2)(A) (specifying -3- that a summons may be served on an individual in the United States by “delivering a copy of the summons and of the complaint to the individual personally” (emphasis added ; Fed. R. Civ. P. 4(f)(2)(C)(i) (same with respect to serving an individual in a foreign country); see also Doe v. Hersemann, 155 F.R.D. 630, 631 (N.D. Ind. 1994) (“If ‘delivering . . . to such person,’ as stated in Rule 45(b)(1), required personal, in-hand service, then ‘personally’ in Rule 4(e)(1) would be pure surplusage.”). The Court is persuaded by and adopts the reasoning of the courts that interpret Rule 45 to allow service of a subpoena by alternate means once the party seeking evidence demonstrates an inability to effectuate service after a diligent effort. The alternate means must be reasonably calculated to achieve actual delivery. Cf. Mullane v. Central Hanover Bank & Trust Co., , 314 (1950). Mailing by first-class mail to the actual address of the intended recipient generally will suffice, see Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 799 (1983), especially when the mailing is accompanied by posting at the known address of the prospective witness. In this case, however, the plaintiff has failed to demonstrate that there was a diligent attempt to personally serve the subpoena on Kathleen M. Williams. The plaintiff attached a copy of an expired Michigan driver’s license of Ms. Williams indicating an address at an apartment in Ypsilanti, Michigan, but there is no evidence (such as a postal verification) suggesting that it is Ms. Williams’s current address. The process server stated in his affidavit that he went to the apartment on four different days during one week in November 2010. On two days a vehicle was parked in the spot reserved for the designated apartment, but there is no information connecting the vehicle to the prospective witness. On the other days the parking spot was empty. The process server says no one answered the door on any of the occasions, and he says no one has attempted to contact him. -4- However, there is no evidence that anyone was in the apartment on any of those days or that the process server left his own contact information, should someone have wanted to make the effort to call him. The information furnished by the plaintiff is not only inadequate to show diligence, it also fails to demonstrate that mailing and posting the subpoena to the apartment in Ypsilanti will result in actual delivery of the subpoena to Ms. Williams. The Court believes that such a showing cannot be made without some evidence that the apartment is Ms. Williams’s current residence. Until such a showing is made, the plaintiff’s request to serve the subpoena by the alternate means it proposes must be denied. Accordingly, it is ORDERED that the plaintiff’s motion for alternate service of a subpoena [dkt. # 3] is DENIED. Dated: May 2, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 2, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -5-

=== DAVID McCLOY v. CORRECTION MEDICAL SERVICES, et.al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION DAVID McCLOY, Plaintiff, v. Case No. 07-13839 Honorable David M. Lawson Magistrate Judge Michael J. Hluchaniuk CORRECTION MEDICAL SERVICES, LAFLER, RIVARD, WASHINGTON, DOVE, PATTON, AMY BURTON, DIANE TEMPLE, WILKENSON, TROMBLEY, THOMPSON, MORRIS, PEUTRICH, and CHAPELO, Defendant. __________________________________________/ ORDER ADOPTING MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION IN PART, OVERRULING PLAINTIFF’S OBJECTIONS TO REPORT AND RECOMMENDATION, GRANTING THE DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT, AND DISMISSING COMPLAINT WITHOUT PREJUDICE The matter is before the Court on the plaintiff’s objections to a report filed by Magistrate Judge Michael J. Hluchaniuk recommending that motions to dismiss or for summary judgment filed by all the defendants be granted. The Court entered a general order of reference to conduct all pretrial matters, after which the defendants filed their motion. Judge Hluchaniuk filed a report in April 2010 recommending that the motions be granted, but the Court vacated that report and recommendation after pro bono counsel was appointed to represent the plaintiff. Plaintiff’s counsel filed a response to the defendants’ dispositive motions, and on January 21, 2011, Judge Hluchianuk filed an amended report recommending again that the motions be granted because the plaintiff failed to exhaust his administrative remedies within the prison system. He also recommended that the case against several of the defendants be dismissed with prejudice. The plaintiff filed timely objections, and the matter is before the Court for a de novo review. The plaintiff filed his complaint in this Court under 42 U.S.C. § 1983 alleging several violations of his constitutional rights by employees of Correction Medical Services (CMS) and the Michigan Department of Corrections during the plaintiff’s incarceration as a Michigan prisoner. The complaint is rather difficult to follow, but it appears that the plaintiff alleges that he is a diabetic, and he believes that he has been denied medical care for that condition, disciplined improperly for violation of prison rules, and his legal materials have been taken from him. Defendants CMS and Amy Burton (the CMS defendants) filed a motion to dismiss for failure to exhaust or to state a claim upon which relief can be granted. The remaining defendants (the State defendants) filed a motion for summary judgment based on the same grounds and also arguing that they are entitled to qualified immunity. The magistrate judge converted the CMS defendants’ motion to dismiss to one for summary judgment because the parties relied on materials outside the pleadings. After reviewing the motion papers, the magistrate judge’s report, the plaintiff’s objections, and the defendants’ responses, the Court concludes that no material fact dispute exists as to the exhaustion of remedies affirmative defense and the defendants are entitled to dismissal of the complaint as a matter of law. The Court disagrees with the magistrate judge’s conclusion that the dismissal of the defendants (except Wilkinson and Temple) should be with prejudice. Therefore, the court will dismiss the complaint without prejudice. -2- I. David McCloy is an inmate in the custody of the Michigan Department of Corrections (MDOC). Presently, he is confined at the Duane Waters Hospital in the Reception and Guidance Center (RGC) at Jackson, Michigan. During the pendency of this litigation and at the times described in his complaint, the plaintiff has been housed at St. Louis Correctional Facility (SLF) in St. Louis, Michigan; the Earnest C. Brooks Correctional Facility (LRF) in Muskegon Heights, Michigan; the Carson City Correctional Facility (DRF) in Carson City, Michigan, which has since been consolidated with the Boyer Road Correctional Facility (OTF); and the Saginaw Correctional Facility (SRF) in Freeland, Michigan. Compl. at 1; Suppl. Resp. to Mot. to Dismiss at 1. The plaintiff is an insulin-dependent diabetic who has managed his condition independently for several years, including during certain periods of his incarceration. At some point during his confinement, however, prison officials took control of his insulin and diabetes care regimen. The plaintiff filed dozens of grievances in the prisons’ grievance systems concerning the diabetes-related medical care he received from the defendants, and addressed other subjects as well. In this Court, he complains that prison officials and staff provided him with incorrect insulin dosages or otherwise bungled his medical care, treated him poorly or incorrectly when he entered hypoglycemic states, and ignored, hid, or failed to respond adequately to his grievances concerning this care. Judge Hluchaniuk thoroughly described the grievances that the plaintiff filed at the several institutions where he resided over the years. The parties have not objected to that factual summary, and the Court adopts and incorporates it here. Judge Hluchaniuk also accurately set forth the procedural law that governs the motions filed by the defendants. The parties have not objected to that statement or the magistrate judge’s recommendation that the CMS defendants’ motion be -3- converted to a summary judgment motion under Federal Rule of Civil Procedure 56. The Court likewise adopts that part of the report and recommendation. In his report, Judge Hluchaniuk concluded that all but three of the grievances the plaintiff submitted were rejected by the MDOC for failure to comply with the grievance process described in MDOC Policy Directive 03.02.130. The magistrate judge found that the plaintiff had not offered any evidence that rejection of these non-compliant grievances was improper or contrary to the MDOC’s grievance policy. Because no fact issue existed, the magistrate judge suggested that the defendants satisfied their burden of proving that the plaintiff failed to exhaust his administrative remedies at all the institutions except LRF. The magistrate judge distinguished Wyatt v. Leonard, 193 F.3d 876 (6th Cir. 1999), cited by the plaintiff for the idea that some non-compliant grievances satisfy the exhaustion requirement when they are sufficient to convey notice of the plaintiff’s complaint. He explained that Wyatt addressed the non-jurisdictional nature of the exhaustion rule, but it did not hold that compliance with the exhaustion requirement was not mandatory. The magistrate judge also found that the plaintiff did not offer evidence that prison officials prevented him from complying with the grievance requirement. Finally, the magistrate judge recommended that the claims based on grievances rejected on procedural grounds should be dismissed with prejudice, citing Kikumura v. Osagie, 461 F.3d 1269, 1290 (10th Cir. 2006), overruled on other grounds, Robbins v. Okla., 519 F.3d 1242, 1247-48 (10th Cir. 2008). He reasoned that a grievance rejected for untimeliness no longer is a curable flaw, so the underlying claim should not be able to be revived, since the benefits of the grievance procedure — allowing the prison to address internally legitimate inmate complaints — cannot be met. -4- However, the magistrate judge concluded that none of the rejected grievances involved the claims against defendants Temple and Wilkinson; therefore, the complaint against them should be dismissed without prejudice. The plaintiff filed four specific objections to the report and recommendation. First, he reasserts the argument that in Wyatt, the Sixth Circuit endorsed a sort of substantial compliance standard where grievances that do not comply with prison rules can satisfy the exhaustion requirement if they provide notice to prison officials of the prisoner’s complaint. The plaintiff argues that his medical conditions are severe, and therefore he should not have to begin anew to pursue complaints about bad medical treatment. For reasons discussed in detail below, that objection will be overruled. Second, the plaintiff takes issue with the magistrate judge’s finding that he offered no evidence to support his argument that the defendants prevented him from complying with the grievance procedure. The plaintiff argues that Federal Rule of Civil Procedure 56 allows the Court to consider the pleadings when ruling on a motion for summary judgment, and the plaintiff’s amended complaint furnishes proof that creates a fact issue on that point. He points to allegations that some grievances were hidden or unanswered by prison officials. He also contends that the magistrate judge failed to consider a copy of a grievance alleging that the defendants provided improper insulin amounts when the plaintiff was in a hypoglcemic state, which the plaintiff produced from his personal files and attached as an exhibit to his supplemental responses. The defendants state that they have no record of this grievance, and the plaintiff argues that his copy substantiates his contention that the defendants hid, ignored, or refused to answer some of his grievances. The plaintiff also asserts that he has presented evidence of bias in the grievance -5- procedure through the defendants’ failure to answer certain grievances, the written responses the plaintiff received to other grievances, the confiscation of his athletic shoes for which he had a prescription, and the defendants’ actions preventing him from wearing another pair of athletic shoes in certain areas of the prison. The argument conflicts with the well-established procedural law of summary judgments. “Rule 56(e)(2) leaves no doubt about the obligation of a summary judgment opponent to make [his] case with a showing of facts that can be established by evidence that will be admissible at trial. . . . In fact, ‘[t]he failure to present any evidence to counter a well-supported motion for summary judgment alone is grounds for granting the motion.’ Rule 56(e) identifies affidavits, depositions, and answers to interrogatories as appropriate items that may be used to support or oppose summary judgment.” Alexander v. CareSource, 576 F.3d 551, 558 (6th Cir. 2009) (quoting Everson v. Leis, 556 F.3d 484, 496 (6th Cir. 2009 . In responding to a motion for summary judgment, the non-moving party cannot rest merely on the pleadings alone. Anderson v. Liberty Lobby, Inc., , 248 (1986). Instead, the non-moving party has an obligation to present “significant probative evidence” to show that “there is [more than] some metaphysical doubt as to the material facts.” Moore v. Philip Morris Cos., 8 F.3d 335, 340 (6th Cir. 1993). Third, the plaintiff objects to the statement at page 17 of the report and recommendation that the plaintiff failed to establish a genuine issue of material fact as to the exhaustion issue and the defendants were entitled to summary judgment. For the reasons outlined below, the court disagrees. Fourth, the plaintiff challenges the magistrate judge’s refusal to consider other arguments after recommending dismissal, referring to his argument that he substantially complied and that compliance was impracticable or futile. However, the plaintiff has not offered evidence on that -6- point. For instance, the copy of the grievance he attached to his supplemental responses does not establish that the grievance actually was filed. II. Objections to a report and recommendation are reviewed de novo. “A judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made. A judge of the court may accept, reject, or modify, in whole or in part, the findings or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1). The parties’ failure to file objections to the report and recommendation waives any further right to appeal. Smith v. Detroit Fed’n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987). Likewise, the failure to object to the Magistrate Judge’s report releases the Court from its duty to independently review the motion. Thomas v. Arn, , 149 (1985). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller v. Currie, 50 F.3d 373, 380 (6th Cir. 1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). The Prison Litigation Reform Act of 1996 (PLRA) provides: “No action shall be brought with respect to prison conditions under section 1983 . . . by a prisoner confined in any jail, prison, or other correctional facility until such administrative remedies as are available are exhausted.” 42 U.S.C. § 1997e(a). This exhaustion requirement is mandatory and applies to all suits regarding prison conditions, regardless of the nature of the wrong or the type of relief sought. Porter v. -7- Nussle, 534 U.S. 516, 524 (2002); Booth v. Churner, 532 U.S. 731, 741 (2001). “Exhaustion” under the PLRA means “proper exhaustion.” Woodford v. Ngo, , 93 (2006). “Proper exhaustion” means “compliance with an agency’s deadlines and other critical procedural rules . . . .” Id. at 90. The Supreme Court has held that “failure to exhaust is an affirmative defense under the PLRA, and . . . inmates are not required to specially plead or demonstrate exhaustion in their complaints.” Jones v. Bock, , 216 (2007). This affirmative defense may serve as a basis for dismissal only if properly raised and proven by the defendants. Ibid. Since the Supreme Court decided Jones v. Bock, the Sixth Circuit has stated that courts ought not impose severe technical requirements on prisoners who comply with the spirit and purpose of the administrative exhaustion rules. “[I]t is sufficient for a court to find that a prisoner’s [grievance] gave prison officials fair notice of the alleged mistreatment or misconduct that forms the basis of the constitutional or statutory claim made against a defendant in a prisoner’s complaint.” Bell v. Konteh, 450 F.3d 651, 654 (6th Cir. 2006) (internal quotation marks and citation omitted). A fair indicator that the purpose of the grievance was fulfilled is the prison’s response to the inmate’s complaint. If the information in the grievance is too vague or imprecise, a response so indicating would tell the interested parties that more detail is necessary. However, when the prison officials address the merits of the prisoner’s complaint without mentioning a problem identifying the object of the grievance, the administrative system has worked and the prison officials have had the “opportunity to correct [their] own mistakes.” Woodford, 548 U.S. at 89 (internal citation and quotation marks omitted). -8- Although the MDOC’s policy requires a grievance to include specific names, those requirements are relaxed when the purpose of the grievance has been achieved. “This relaxed standard is consistent with the general practice of liberally construing pro se prisoners’ filings.” Bell, 450 F.3d at 654 (quoting Spencer, 449 F.3d at 725). The Sixth Circuit has been quite explicit on this point. See Reed-Bey v. Pramstaller, 603 F.3d 322 (6th Cir. 2010). In Reed-Bey, the defendants challenged on exhaustion grounds the complaint of a prisoner who “pursued his grievance through all three levels of prison review, yet he failed to identify the ‘names of all those involved’ in the grievance, as the prison’s grievance procedures require.” Id. at 323. The court held that “[b]ecause the Michigan Department of Corrections opted to dismiss his grievance on the merits rather than invoke its procedural bar, Reed-Bey exhausted his claim.” Ibid. The court reasoned as follows: When prison officials decline to enforce their own procedural requirements and opt to consider otherwise-defaulted claims on the merits, so as a general rule will we . . . . Enforcing internal prison rules even when prison officials do not and even when they proceed to address a grievance on the merits takes Woodford one step too far. It would do more than ensure that prison officials get the first shot at correcting their own mistakes; it would give their merits-based grievance denials undeserved insulation from federal judicial review. Id. at 325, 326. The evidence in the record in this case shows that the plaintiff filed 19 grievances within the three-year period preceding his complaint in this Court. Of these, 14 were rejected initially or on appeal for violations of procedural rules: LRF 2005-12-1537-12c (untimely on appeal at Step III); LRF 2006-05-568-28a (duplicative); LRF 0-27a (nongrievable issue); LRF 0-28b (vague); LRF 2006-05-650-28b (vague, failure to identify staff member(s) responsible); LRF 0-28c (multiple -9- issues, failure to identify staff member(s) responsible); LRF 0-12z (filed at the incorrect step); LRF 2006-05-569-28a (duplicative); DRF 2006-10-1080-28c (unclear, multiple issues); DRF 2007-001- 48-28d (inappropriate language); DRF 2007-01-49-28b (demeaning to staff, vague); DRF 2007-01- 99-27a (nongrievable issue); DRF 2007-01-100-27a (nongrievable issue); DRF 2007-05-2178-28d (demeaning to staff, unnecessary language). None of these grievances can support exhaustion. Instead, they demonstrate that prison officials did enforce the procedural rules against the plaintiff and did inform him of the deficiencies in his grievances. The Supreme Court approved that practice in Woodford v. Ngo. See 548 U.S. at 89-90 (noting that the plaintiff should be required to comply with the prison’s procedural rules, and a response indicating that a grievance was vague or imprecise is a sufficient response). The plaintiff’s failure to correct the identified deficiencies demonstrates a failure to exhaust the administrative remedies available to him. The plaintiff cannot show compliance with the PLRA based on these grievances. Two other grievances were rejected for procedural reasons, but a reference to the merits of the claims was included at some point during the process. Those grievances are LRF 2006-02-160- 28a (nongrievable issue grieved against non-parties), and LRF 2006-01-30-27a (non-grievable issue grieved against non-parties). When viewed in the light most favorable to the plaintiff, these grievances create a fact issue on exhaustion. However, even if the claims were fully exhausted in the prison administrative system, these grievances do not save the amended complaint from the exhaustion defense because they address issues outside the scope of the amended complaint and allege harms by individuals who are not parties to this case. It also appears that the prison addressed the merits of the following grievances: LRF 2006- 03-378-12i (request for roommate); LRF 2006-03-484-07a (headphones issue); LRF 2006-05-649- -10- 28d (footlocker). These issues were exhausted through the prison administrative system, but once again, the plaintiff does not mention the headphones claim or his request for a roommate in his amended complaint. He does allege that defendants Lafler and Washington improperly denied him a footlocker and, based on grievance 2006-05-649-28d, he may be able to show that he exhausted this claim. But the remaining allegations in his amended complaint detail the denial of medical care and alleged mistreatment on the ward for which the plaintiff has not completely exhausted his administrative remedies. As to the remaining defendants — CMS, Burton, Diane Temple, Wilkenson, Trombley, Thomson, Morris, Peutrich, Chapelo, Rivard, Dove, and Patton — summary judgment will be granted because the exhaustion affirmative defense has been established as a matter of law. Although the plaintiff can avoid summary judgment on exhaustion grounds on his footlocker claim against defendants Lafler and Washington, there is another reason why that claim cannot proceed. These defendants argued that the plaintiff failed to state a claim and qualified immunity in their motion for summary judgment. The plaintiff has made no arguments in any of his papers before the Court or in any of his grievances that he has a constitutional right to a footlocker or that his constitutional rights were somehow abridged when his request was refused. Therefore, he has failed to state a claim for which relief may be granted under 42 U.S.C. § 1983. There remains the question whether dismissal of the unexhausted claims should be with or without prejudice. The magistrate judge was persuaded by the Tenth Circuit’s argument in Kikumura v. Osagie that “a claim that has been properly rejected by the prison grievance system on procedural grounds should be dismissed from the plaintiff’s complaint with prejudice.” 461 F.3d at 1290. That court reasoned that “[o]nce a prison formally denies an inmate’s grievance for -11- untimeliness, and either the inmate does not challenge the basis for that decision or the court upholds the decision, the inmate’s failure to exhaust is no longer a temporary, curable, procedural flaw.” Ibid. (quotation marks omitted). The Court respectfully suggests that reasoning is flawed and cannot accept it for several reasons. First, the rule in the Sixth Circuit is that “[a] dismissal under § 1997e should be without prejudice.” Boyd v. Corrs. Corp. of Am., 380 F.3d 989, 994 (6th Cir. 2006) (citing Knuckles El v. Toombs, 215 F.3d 640 (6th Cir. 2000 ; see also Bell v. Konteh, 450 F.3d 651, 654 (6th Cir. 2006); Brown v. Toombs, 139 F.3d 1102, 1104 (6th Cir. 1998). Adopting the magistrate judge’s recommendation to dismiss some of the plaintiff’s unexhausted claims would violate that precedent. Second, failure to exhaust administrative remedies is an affirmative defense that the defendant must raise properly. Jones v. Bock, , 216 (2007). If a defendant fails to raise the defense at the proper time, it may be waived. Dismissing an unexhausted claim with prejudice would bar the claim in future cases and permit defendants to avoid the procedural requirements for raising that defense. Third, dismissing claims with prejudice assumes that a prison would always enforce its procedural rules for late-filed grievances and never address the merits. The Sixth Circuit’s decision in Reed-Bey v. Pramstaller, 603 F.3d 322, 325-26 (6th Cir. 2010), demonstrates the fallacy of that reasoning. If a prison did address the merits of a late-filed grievance, an earlier dismissal with prejudice of the claim by a court would countenance “undeserved insulation from federal judicial review.” Id. at 326; see also Roberson v. Martens, No. 09-861, 2010 WL 3779544, at *7 (W.D. Mich. Aug. 25, 2010). -12- Finally, in order to conclude that a procedural defense would forever bar the plaintiff’s claim, the Court must foresee the context in which the claim might be raised again, for example, when the plaintiff files a second case based on the same set of facts. It is impossible for the Court to predict what will happen in a future case. Without the benefit of future factual development, the Court’s opinion would be advisory in nature. Cf. Arnett v. Myers, 281 F.3d 552, 562 (6th Cir. 2002) (citing Adcock v. Firestone Tire & Rubber Co., 822 F.2d 623, 627 (6th Cir. 1987 ; see also VanWulfen v. Montmorency Cnty., 345 F. Supp. 2d 730, 741 (E.D. Mich. Nov. 10, 2004) (discussing advisory opinions and the ripeness doctrine). The Court concludes, therefore, that although the defendants prevail on their affirmative defense of failure to exhaust available administrative remedies, that victory must lead to a dismissal of the amended complaint without prejudice. III. The Court agrees with the magistrate judge that the motion to dismiss by the CMS defendants should be treated as a motion for summary judgment under Rule 56. The Court also agrees that the plaintiff has not raised a material fact question on the affirmative defense of failure to exhaust administrative remedies and the defendants are entitled to dismissal as a matter of law. However, the dismissal must be without prejudice. Accordingly, it is ORDERED that the magistrate judge’s amended report and recommendation [dkt #185] is ADOPTED IN PART. It is further ORDERED that the plantiff’s objections to the magistrate judge’s report and recommendation [dkt #186] are OVERRULED. -13- It is further ORDERED that the defendants’ motions to dismiss or for summary judgment [dkt #137, 138] are GRANTED. It is further ORDERED that the amended complaint is DISMISSED WITHOUT PREJUDICE. Dated: March 31, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 31, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -14-

=== TODD D. DENNIS v. COMMISSIONER OF SOCIAL SECURITY ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION TODD D. DENNIS, Plaintiff, v. COMMISSIONER OF SOCIAL SECURITY, __________________________________________/ Defendant. Case Number 10-10099 Honorable David M. Lawson Magistrate Judge Virginia M. Morgan OPINION AND ORDER REJECTING MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION, GRANTING IN PART PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT, DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT, AND REMANDING TO COMMISSIONER FOR FURTHER CONSIDERATION The plaintiff, a school custodian, was 35 years old when he injured his right shoulder at work in 2006. The injury required three surgeries to repair (plus an additional procedure, according to the plaintiff’s attorney), and the plaintiff contends that he still has not recovered. The Social Security Administration denied him disability benefits, and on January 1, 2010 he filed the present action seeking review of the Commissioner’s decision denying his claim for a period of disability and disability insurance benefits (DIB) under Title II of the Social Security Act. The case was referred to United States Magistrate Judge Virginia M. Morgan pursuant to 28 U.S.C. § 636(b)(1)(B) and E.D. Mich. LR 72.1(b)(3). Thereafter, the plaintiff filed a motion for summary judgment to reverse the decision of the Commissioner and the defendant filed a motion for summary judgment requesting affirmance of the decision of the Commissioner. Magistrate Judge Morgan filed a report on October 13, 2010 recommending that the plaintiff’s motion for summary judgment be denied, the defendant’s motion for summary judgment be granted, and the plaintiff’s complaint be dismissed. The plaintiff filed timely objections to the recommendation and the defendant filed a response. The Court finds that the administrative law judge (ALJ) did not discuss, and therefore there is no way to know if he considered, important evidence bearing on the plaintiff’s disability. Therefore, the case must be remanded for further consideration. I. As mentioned, the plaintiff was working as a school custodian when, on July 12, 2006, he lost control of a floor buffer that “flung [him] to the ground on [his] shoulder.” Tr. 113. He sought medical treatment and eventually was diagnosed following an imaging study with a tear of the superior labrum, the cuff of cartilage that deepens the shoulder socket. Dr. David Janda, an orthopedic surgeon, performed laproscopic surgery to repair the tear on October 26, 2006. Recovery was more difficult than anticipated. The plaintiff described continuous pain. When the plaintiff did not improve, Dr. Janda referred him to a pain clinic, which the plaintiff visited just once before his worker’s compensation carrier interceded and sent him to Dr. Steve Geiringer, a physical medicine specialist. He began treatment with Dr. Geiringer on May 16, 2007. Dr. Geiringer treated the plaintiff through the spring of 2008. The plaintiff attempted to return to work in July 2007 but was unable to sustain working due to shoulder pain. The plaintiff returned to Dr. Janda, who performed a second surgery on the right shoulder on October 3, 2007 to repair a partial labral tear. Physical therapy followed, but the results were not satisfactory and perhaps aggravated the plaintiff’s pain. The plaintiff’s worker’s compensation insurer then sent him to Dr. Jack Lennox for a consultation. Dr. Lennox examined the plaintiff one time and made recommendations on the plaintiff’s capacity to work. He also opined that no further surgery was warranted, but his prediction turned out to be flawed. -2- In July 2008, the plaintiff began to see a pain management specialist, once the workers compensation insurer authorized that course of treatment. When no improvement to the plaintiff’s pain eventuated, the insurer sent him to another surgeon, Dr. Laith Farjo, who performed a third surgery on December 2, 2008 to again repair the torn labrum. Dr. Farjo’s post-surgery notes describes the plaintiff’s pain as severe. The plaintiff argues that his pain prevents him from working, and his condition is not improved. He mentioned in his objections to the magistrate judge’s report that he has had a fourth surgery on his shoulder, but that is not part of the record in this case. The plaintiff, now forty years old, filed his application for DIB and a period of disability on November 19, 2007 when he was thirty-six. He completed high school but did not attend college, and he was employed as a custodian in a school for the eight years immediately preceding his injury. He previously was employed a degreaser at a mechanical plant from April 1996 to June 1998 and a lumberman from 1993 through 1996. The plaintiff stopped working as of the date of his injury, but returned to work for six days in August 2007 following his second shoulder surgery, when he reinjured his shoulder and has not returned to work since. The plaintiff’s application for disability insurance benefits was denied initially on December 7, 2007, and he made a timely request for an administrative hearing. On February 10, 2009, he appeared before ALJ Daniel G. Heely when he was thirty-eight years old. ALJ Heely filed a decision on June 15, 2009 in which he found that the plaintiff was not disabled The ALJ reached that conclusion by applying the five-step sequential analysis prescribed by the Secretary in 20 C.F.R. § 404.1520. The ALJ found that the plaintiff had not engaged in substantial gainful activity since July 12, 2006, the alleged onset date (step one); the plaintiff’s status following his right shoulder -3- surgeries was considered a “severe” impairment “severe” under the Social Security Act (step two); this impairment alone or in combination did not meet or equal a listing in the regulations (step three); and the plaintiff was unable to perform any past relevant work, which was found to be unskilled and required medium to heavy exertion (step four). In applying the fifth step, the ALJ concluded that the plaintiff had the residual functional capacity to perform a wide range of light work. The ALJ found that the plaintiff would be able to sit, stand, or walk for 6 hours out of an 8 hour workday; could lift or carry 20 pounds on occasion and 10 pounds frequently; and was limited to work requiring only occasional balancing. However, the ALJ found that the plaintiff would be precluded from climbing, crawling, or reaching above the shoulder level with his right arm. A vocational expert testified that the plaintiff would be able to perform the requirements of representative occupations such as office helper, production assembler, and ticket seller, which exist in the Michigan economy. Based on these finding and using the Medical Vocational Guidelines found at 20 C.F.R. Pt. 404, Subpt. P, App. 2 § 201.21 as a framework, the ALJ concluded that the plaintiff was not disabled within the meaning of the Social Security Act. Following the decision by the ALJ, the plaintiff appealed to the Appeals Council, which denied the plaintiff’s request for review on November 24, 2009. II. The Court has reviewed the file, the report and recommendation, the plaintiff’s objections, and the defendant’s responses thereto and has made a de novo review of the administrative record in light of the parties’ submissions. In his motion for summary judgment, the plaintiff argued that ALJ failed in his duty to review all the evidence submitted because the ALJ failed to consider or even mention two of the plaintiff’s treating doctors, one of whom, Dr. Farjo, actually performed a -4- third shoulder surgery; the ALJ mischaracterized the opinion of another treating physician, Dr. Janda, construing the absence of a work restriction as a release to return to work; and the ALJ improperly divided a continuous period of disability into discrete parts so that the plaintiff would meet the temporal requirements of the statutory disability definition. After addressing each of these arguments, the magistrate judge determined that the ALJ’s oversight in failing to mention Dr. Farjo was not erroneous because the ALJ is not required to discuss all the evidence in the record and the non-disability decision was supported by substantial evidence in the whole record. The plaintiff first objects to the magistrate judge’s finding that the ALJ’s failure to mention the plaintiff’s third surgery or treatment by Dr. Farjo does not constitute reversible error. The plaintiff argues that this evidence is important and notes that the Sixth Circuit has found reversible error where the ALJ failed to mention a treating physician in the decision. See Blakely v. Comm’r of Soc. Sec., 581 F.3d 399, 409 (6th Cir. 2009). Second, the plaintiff objects to the magistrate judge’s conclusion that the ALJ properly evaluated treatment furnished by Dr. Geiringer, because the plaintiff believes that a passing reference to this treating doctor’s records without using mentioning him by name is insufficient to allow the magistrate judge to conclude that the ALJ read and considered the evidence submitted by Dr. Geiringer. Third, the plaintiff objects to the magistrate judge’s failure to make any finding on the debilitating effect of the plaintiff’s pain and argues that the magistrate judge should have applied the two-part test in Felisky v. Bowen, 35 F.3d 1027, 1038-39 (6th Cir. 1994). Fourth, the plaintiff objects to the magistrate judge’s finding that the ALJ did not err by failing to discuss Dr. Janda’s recommendation that the plaintiff file for Social Security Disability benefits because Social Security Rule 96-5p requires the ALJ to at least consider this opinion. Fifth, the plaintiff argues that the magistrate judge erred when she concluded that the -5- ALJ’s determination that the plaintiff was not disabled for a continuous 12-month period was supported by substantial evidence. Sixth, the plaintiff objects to the magistrate judge’s finding that substantial evidence in the record as a whole supports the ALJ’s decision to deny benefits and argues that the ALJ ignored most of the substantial evidence from Dr. Janda and Dr. Farjo that supported granting benefits. All parties agree with the magistrate judge that the plaintiff has the burden of proving disability in order to qualify for social security disability benefits, and that “disability” is defined as the “inability to engage in any substantial gainful activity” due to a “physical or mental impairment” that could cause death or might reasonably be expected to last continuously for at least twelve months. See 42 U.S.C. § 423(d)(1)(A). Of course, a person is not disabled merely because his or her limitation prevents the person from performing previous work, if that person can perform other “substantial gainful work which exists in the national economy.” 42 U.S.C. § 423(d)(2)(A). The parties also accept the rule that the authority of this Court to review administrative decisions of the Commissioner is limited to deciding whether the proper legal standards were used and “whether there is substantial evidence in the record to support the findings.” Wright v. Massanari, 321 F.3d 611, 614 (6th Cir. 2003) (quoting Duncan v. Sec’y of Health & Human Servs., 801 F.2d 847, 851 (6th Cir. 1986 . The plaintiff takes issue with the application of this rule, however, arguing that the ALJ culled from the record only that evidence which favored a determination of no disability, violating the familiar instruction that a decision cannot be based on a single piece of evidence in disregard of other pertinent evidence that exists in the record, see Hephner v. Matthews, 574 F.2d 359, 362 (6th Cir. 1978), and that “the substantiality of evidence must take into account -6- whatever in the record fairly detracts from its weight,” Garner v. Heckler, 745 F.2d 383, 388 (6th Cir. 1984) (internal citations and quotation marks omitted). It perhaps is difficult to accept the idea that a previously healthy 38-year-old male who injures a single extremity — in this case, a shoulder — is unable to work at any job that exists in substantial numbers in the national economy. However, the plaintiff testified that intractable shoulder pain prevents him from performing any substantial gainful activity. Subjective complaints of pain may be sufficient to support a claim of disability. See Glass v. Sec’y of Health, Educ. & Welfare, 517 F.2d 224, 225 (6th Cir. 1975). However, Congress has stated that “there must be medical signs and findings, established by medically acceptable or clinical or laboratory diagnostic techniques, which show the existence of a medical impairment that results from anatomical, physiological, or psychological abnormalities which could reasonably be expected to produce the pain.” 42 U.S.C. § 423(d)(5)(A). The plaintiff’s treating doctors have confirmed the existence of a medical condition that can cause the pain the plaintiff has described. They also have taken him off work, although it is not entirely clear that the restriction applies to all work or just his former work. Dr. Geiringer, for example, stated in August that he could not predict the plaintiff’s capacity for work, but it was likely he could not return to his old job. Tr. 163. He also ordered the plaintiff on August 22, 2007 not to return to work until he had an orthopedic evaluation. Tr. 168. Previous orders would have permitted the plaintiff to return to work with restrictions in June or July that year. Tr. 176, 179, 182. Dr. Farjo also restricted the plaintiff from working following the surgery in December 2008. Tr. 322, 325, 329. -7- The Sixth Circuit has discussed the analytical framework for evaluating subjective complaints of pain: First, we examine whether there is objective medical evidence of an underlying medical condition. If there is, we then examine: (1) whether objective medical evidence confirms the severity of the alleged pain arising from the condition; or (2) whether the objectively established medical condition is of such a severity that it can reasonably be expected to produce the alleged disabling pain. Duncan v. Sec’y of Health & Human Servs., 801 F.2d 847, 853 (6th Cir. 1986). Once the existence of a pain-producing condition is found, the ALJ must determine the intensity and persistence of the pain. Under 20 C.F.R. § 404.1529, the ALJ must consider several factors, including the objective medical evidence, the activity which precipitates or aggravates the plaintiff’s symptoms, the plaintiff’s daily activities, the intensity and duration of his symptoms, and medications, treatment and other means to relieve the symptoms. See 20 C.F.R. § 404.1529(c). The longitudinal picture of the plaintiff’s course in this case is that he suffered a relatively routine injury, he underwent conventional surgery to repair it, which usually results in a good outcome, but he did not get better. The ALJ found that the plaintiff’s complaints of intense pain and the limitations it caused him were not fully credible. But a determination of that nature calls for consideration of all the evidence on the point. See Rogers v. Comm’r of Social Sec., 486 F.3d 234, 248 (6th Cir. 2007) (explaining that Social Security Ruling 96-7p also requires the ALJ explain his credibility determinations in his decision such that it “must be sufficiently specific to make clear to the individual and to any subsequent reviewers the weight the adjudicator gave to the individual’s statements and the reasons for that weight”); see also Hurst v. Sec’y of Health & Human Servs., 753 F.2d 517, 519 (6th Cir. 1985) (“In the absence of an explicit and reasoned rejection of an entire line of evidence, the remaining evidence is ‘substantial’ only when considered in isolation. It is more -8- than merely ‘helpful’ for the ALJ to articulate reasons . . . for crediting or rejecting particular sources of evidence. It is absolutely essential for meaningful appellate review.” (quoting Zblewski v. Schweiker, 732 F.2d 75, 78 (7th Cir. 1984 . The magistrate judge stated that the ALJ is not required to discuss or comment on all the evidence in the record, citing Walker v. Secretary of Health & Human Services, 884 F.2d 241, 245 (6th Cir. 1989). Walker does not say exactly that; it stands for the slightly different proposition that in making a substantiality of evidence assessment, a reviewing court may consider all the evidence in the administrative record, even if the ALJ does not mention it. However, the job of the ALJ is to consider all the medical evidence submitted to it. See 20 C.F.R. § 404.1527(d) (“[W]e will evaluate every medical opinion we receive.”). When the ALJ fails to mention a treating source by name or even acknowledge that the plaintiff underwent a relevant medical procedure, the Court has no way of determining whether proper consideration was given to the relevant factors in deciding the disability question. There are several reasons why that failure is problematic in this case. First, the evaluation and treatment provided by Drs. Geiringer and Farjo are part of the “objective medical evidence” the ALJ must consider when assessing the intensity and persistence of the plaintiff’s pain symptoms. Second, both physicians are treating sources who recommended that the plaintiff not return to work. Their opinions conflict with other evidence in the record, including the opinion of Dr. Lennox. However, the ALJ is required to give reasons for disregarding the opinions of the treating sources. Wilson v. Comm’r of Social Sec., 378 F.3d 541, 544 (6th Cir. 2004) (holding that “pursuant to [20 C.F.R. § 404.1527(d)(2)], a decision denying benefits ‘must contain specific reasons for the weight given to the treating source’s medical opinion, supported by the evidence in the case record, and must be -9- sufficiently specific to make clear to any subsequent reviewers the weight the adjudicator gave to the treating source’s medical opinion and the reasons for that weight.’” (quoting Soc. Sec. Rul. 96-2p, 1996 WL 374188, at *5 (1996 . In Blakley v. Commissioner of Social Security, 581 F.3d 399 (6th Cir. 2009), the court of appeals, referring to the requirement to give reasons for discounting a treating physician’s opinion, explained that “the reason-giving requirement exists to ‘ensur[e] that each denied claimant receives fair process.’” Id. at 407 (quoting Rogers, 486 F.3d at 243). That requirement applies with equal force when the ALJ ignores an entire line of medical treatment that has a direct bearing on the injury mechanism alleged to cause disabling pain. The Blakley court also held that “the ALJ’s failure to follow the Agency’s procedural rule does not qualify as harmless error where we cannot engage in ‘meaningful review’ of the ALJ’s decision.” Id. at 409. The same holds true in this case. The Court does not quarrel with the magistrate judge’s suggestion that the ALJ could have arrived at the result he reached based on the evidence he described in his decision. However, the Court believes that an incomplete analysis of the material evidence presented to the ALJ requires that the case be reconsidered. III. After a de novo review of the entire record and the materials submitted by the parties, the Court respectfully concludes that the magistrate judge did not properly review the administrative record and applied the correct law in reaching her conclusion. The Court has considered the plaintiff’s objections to the report and finds the first one to have merit. Accordingly, it is ORDERED that the magistrate judge’s report and recommendation [dkt #12] is REJECTED. -10- It is further ORDERED that the plaintiff’s objections [dkt #13] are SUSTAINED. It is further ORDERED that the plaintiff’s motion for summary judgment [dkt #8] is GRANTED IN PART. It is further ORDERED that the defendant’s motion for summary judgment [dkt #11] is DENIED. It is further ORDERED that the findings of the Commissioner are REVERSED and the case is REMANDED to the Commissioner for further consideration. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 29, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 29, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -11-

=== Robert Allen King v. COMMISSIONER OF SOCIAL SECURITY ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ROBERT ALLEN KING, Plaintiff, v. COMMISSIONER OF SOCIAL SECURITY, __________________________________________/ Defendant. Case Number 09-14851 Honorable David M. Lawson OPINION AND ORDER ADOPTING IN PART AND REJECTING IN PART MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION, GRANTING IN PART PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT, DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT, AND REMANDING TO COMMISSIONER FOR FURTHER CONSIDERATION The plaintiff filed the present action on December 14, 2009 seeking review of the Commissioner’s decision denying the plaintiff’s claim for a period of disability and disability insurance benefits (DIB) under Title II of the Social Security Act. The case was referred to United States Magistrate Judge Virginia M. Morgan pursuant to 28 U.S.C. § 636(b)(1)(B) and E.D. Mich. LR 72.1(b)(3). Thereafter, the plaintiff filed a motion for summary judgment to reverse the decision of the Commissioner and the defendant filed a motion for summary judgment to affirm the decision of the Commissioner. Magistrate Judge Morgan filed a report on September 29, 2010 recommending that the plaintiff’s motion for summary judgment be denied, the defendant’s motion for summary judgment be granted, the decision of the Commissioner be affirmed, and the plaintiff’s complaint be dismissed. The plaintiff filed timely objections to the recommendation. This matter is now before the Court. The Court has reviewed the file, the report and recommendation, and the plaintiff’s objections and has made a de novo review of the administrative record in light of the parties’ submissions. In his objections, the plaintiff contends that magistrate judge improperly credited the Administrative Law Judge’s (ALJ) findings when they were not supported by substantial evidence in the record. The plaintiff argues that the magistrate judge’s conclusion that the ALJ was not required to afford any weight to the Veterans’ Affairs Agency’s determination is erroneous, and the finding that the ALJ properly discredited the plaintiff’s and his treating doctors’ opinions was not supported by the record or the existing applicable law. The plaintiff also argues that the ALJ’s reasons for discounting the plaintiff’s credibility have no record support. The plaintiff contends that the ALJ’s hypothetical question to the vocational expert did not include a proper description of all the plaintiff’s limitations and therefore the witness’s response did not furnish substantial evidence that the plaintiff could engage in substantial gainful employment. The plaintiff also argues that the evidence in the plaintiff’s medical records indicates that he suffered from pain, stiffness, and swelling in his hands and would not be capable of performing the functions of a sorter, packager, or assembler, as the vocational expert suggested. The plaintiff, who is now fifty-one years old, filed his application for DIB and a period of disability on January 30, 2007 when he was forty-seven. He completed one year of college and military training and later worked as a platoon sergeant and tank commander in the United States Army from April 4, 1981 through April 30, 2002. Thereafter, he worked for a waste management company doing disposal work from 2002 to 2004, and then in construction before he discontinued working in June 2006. The record shows that the plaintiff suffered from diabetes, high blood pressure, high cholesterol, arthritis, osteoporosis, depression, physical pain and fatigue, and had experienced a mild heart attack. The plaintiff first began experiencing symptoms of rheumatoid arthritis in early February 2000, when he was diagnosed with that disease. He continued to work -2- until June 1, 2006. His medical history since 2000 is one of conservative treatment with medication and regular appointments and tests with treating specialists. The plaintiff’s application for disability insurance benefits was denied initially. The plaintiff made a timely request for an administrative hearing. On April 16, 2009, he appeared before ALJ Patricia S. McKay when he was forty-nine years old. ALJ McKay filed a decision on May 20, 2009 in which she found that the plaintiff was not disabled. The ALJ reached that conclusion by applying the five-step sequential analysis prescribed by the Secretary in 20 C.F.R. § 404.1520. The ALJ found that the plaintiff had not engaged in substantial gainful activity since June 1, 2006, the alleged onset date (step one); the plaintiff suffered from rheumatoid arthritis, mild peripheral neuropathy, lumbar degenerative disc disease with osteoporosis, obesity, and depression, impairments that are considered “severe” under the Social Security Act, plus several impairments that were not considered severe (step two); none of these impairments alone or in combination met or equaled a listing in the regulations (step three); and the plaintiff was unable to perform any past relevant work, which was found to be semi-skilled and required medium exertion (step four). In applying the fifth step, the ALJ concluded that the plaintiff had the residual functional capacity to perform light work. The ALJ found that the plaintiff would be able to climb stairs, crouch, crawl, kneel, stoop, bend, or balance for up to one-third of an eight hour work day; and could use his lower extremities for foot controls or upper extremities for reaching, gripping, grasping, fingering, or feeling for up to six hours in an eight hour work day. The ALJ also concluded that he should have a sit/stand option, could do routine and repetitive tasks, and should not be closely supervised, but should avoid production line work. A vocational expert testified that the plaintiff would be able to perform the requirements of representative occupations such as sorting, -3- packaging, and assembly, for which there exist 5,500 jobs in the southeastern Michigan region. Based on these finding and using the Medical Vocational Guidelines found at 20 C.F.R. Pt. 404, Subpt. P, App. 2, § 201.28 as a framework, the ALJ concluded that the plaintiff was not disabled within the meaning of the Social Security Act. Following the decision by the ALJ, the plaintiff appealed to the Appeals Council, which denied the plaintiff’s request for review on November 5, 2009. The plaintiff has the burden to prove that he is disabled and therefore entitled to benefits. Boyes v. Sec’y of Health & Human Servs., 46 F.3d 510, 512 (6th Cir. 1994); Abbott v. Sullivan, 905 F.2d 918, 923 (6th Cir. 1990). Under 42 U.S.C. § 423(d)(1)(A)-(2)(A), a person is disabled if he is unable “to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment” and the impairment is so severe that the person “is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy.” Further, “[a] ‘physical or mental impairment’ is an impairment that results from anatomical, physiological, or psychological abnormalities which are demonstrable by medically acceptable clinical and laboratory diagnostic techniques.” 42 U.S.C. § 423(d)(3). To determine disability, the Commissioner has prescribed the five-step process noted above and set forth in 20 C.F.R. § 404.1520. However, if the plaintiff has satisfied his burden through the first four steps of the analytical process, the burden shifts to the Commissioner to establish that the plaintiff possesses the residual functional capacity to perform other substantial gainful activity. Varley v. Sec’y of Health & Human Servs., 820 F.2d 777, 779 (6th Cir. 1987); see also Allen v. -4- Califano, 613 F.2d 139, 145 (6th Cir. 1980). “To meet this burden, there must be a finding supported by substantial evidence that plaintiff has the vocational qualifications to perform specific jobs.” Varley, 820 F.2d at 779 (internal quotation marks, alterations, and citations omitted). The Court’s task in reviewing a Social Security disability determination is a limited one. The ALJ’s findings are conclusive if they are supported by substantial evidence, according to 42 U.S.C. § 405(g). Consequently, the Court’s review is confined to determining whether the correct legal standard was applied, and whether the findings are supported by substantial evidence on the whole record. See Wright v. Massanari, 321 F.3d 611, 614-15 (6th Cir. 2003). “‘Substantial evidence’ means ‘more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’” Kirk v. Sec’y of Health & Human Servs., 667 F.2d 524, 535 (6th Cir. 1981) (quoting Richardson v. Perales, 402 U.S. 389, 401 (1971 . This Court may not base its decision on a single piece of evidence and disregard other pertinent evidence when evaluating whether substantial evidence exists in the record. Hephner v. Mathews, 574 F.2d 359, 362 (6th Cir. 1978). Thus, where the Commissioner’s decision is supported by substantial evidence, it must be upheld even if the record might support a contrary conclusion. Smith v. Sec’y of Health & Human Servs., 893 F.2d 106, 108 (6th Cir. 1989). The Sixth Circuit has stated that the role of the Court “is not to resolve conflicting evidence in the record or to examine the credibility of the claimant’s testimony.” Wright, 321 F.3d at 614. Therefore, the Court “may not try the case de novo, nor resolve conflicts in evidence, nor decide questions of credibility.” Garner v. Heckler, 745 F.2d 383, 387 (6th Cir. 1984). The Court has reviewed the record and is satisfied that the magistrate judge properly disposed of the issues raised by the plaintiff in his appeal, save one: the ALJ’s lack of consideration -5- of the determination by the Department of Veterans Affairs (VA) that the plaintiff has a 100% permanent disability. The magistrate judge thoroughly discussed the other issues and concluded that the ALJ’s credibility determinations, refusal to accept the opinions of treating sources, consideration of the plaintiff’s mental impairment, and hypothetical question to the vocational expert were supported by substantial evidence. The Court comes to the same conclusion on these points and adopts the magistrate judge’s discussion of them. However, the Court finds significant the fact that the VA determined that the plaintiff was totally and permanently disabled. See Tr. 138. The record is not very well developed on this point. However, it appears that the ALJ gave this evidence no consideration at all, except to cite the regulation that states that another agency’s disability determination does not bind the Commissioner. See 20 C.F.R. § 404.1504 (“[A] determination made by another agency that you are disabled or blind is not binding on us.”). The Sixth Circuit has observed that disability decisions of other governmental agencies should be taken into account. See Harris v. Heckler, 756 F.2d 431, 434 (6th Cir. 1985) (reversing the Commissioner’s denial of benefits decision and noting that “[i]t does seem somewhat strange that, in view of the allowance of Black Lung and Workers’ Compensation benefits to Harold by those other responsible agencies, the Secretary would have the audacity to claim here that Harold was not disabled and could perform sedentary work of some kind and that he was not, therefore, entitled to Social Security benefits”). That court, however, has not addressed the question as to the weight the Commissioner must give to the disability determinations of the VA. In reversing a denial of benefits decision, the court in Stewart v. Heckler, 730 F.2d 1065 (6th Cir. 1984), mentioned the fact that the VA found the plaintiff totally disabled, but it did not address the evidentiary -6- significance of that fact. Id. at 1068. However, no Sixth Circuit case has discussed the evidentiary value of such decisions or the weight that should be accorded them. The plaintiff has observed, correctly, that most other circuits have recognized evidentiary value in disability determinations by the VA and required the Commissioner at least to discuss and give reasons for discounting them. In McCartey v. Massanari, 298 F.3d 1072 (9th Cir. 2002), the Ninth Circuit adopted the majority rule “that although a VA rating of disability does not necessarily compel the SSA to reach an identical result . . . , the ALJ must consider the VA’s finding in reaching his decision.” Id. at 1076. The court noted that nine other circuits follow that rule, citing the following cases: Chambliss v. Massanari, 269 F.3d 520, 522 (5th Cir. 2001) (per curiam) (VA disability rating generally is entitled to “great weight” and “must be considered by the ALJ”); Morrison v. Apfel, 146 F.3d 625, 628 (8th Cir. 1998) (holding that “findings of disability by other federal agencies . . . are entitled to some weight and must be considered in the ALJ’s decision”); Baca v. Dep’t of Health & Human Servs., 5 F.3d 476, 480 (10th Cir. 1993) (“Although findings by other agencies are not binding on the Secretary, they are entitled to weight and must be considered.” (quoting Fowler v. Califano, 596 F.2d 600, 603 (3d Cir. 1979 ; Davel v. Sullivan, 902 F.2d 559, 560 n.1 (7th Cir. 1990) (noting that VA’s decision is “entitled to some weight” and should be considered by ALJ); Kane v. Heckler, 776 F.2d 1130, 1135 (3d Cir. 1985) (asserting that VA determination is entitled to “substantial weight”); Brady v. Heckler, 724 F.2d 914, 921 (11th Cir. 1984) (per curiam) (noting that VA rating is entitled to”great weight”); DeLoatche v. Heckler, 715 F.2d 148, 150 n.1 (4th Cir. 1983) (same); Hankerson v. Harris, 636 F.2d 893, 896-97 (2d Cir. 1980) (holding that VA rating entitled to “some weight”); Fowler, 596 F.2d at 603 (same). The McCartey -7- court included the Sixth Circuit in its count, citing Harris v. Heckler, but Harris does not support the proposition or represent a definitive statement in this circuit on this point. The majority of circuits plainly requires some consideration by the Commissioner of VA disability determinations. The circuits differ on the weight that must be given, ranging from “substantial weight,” Kane, 776 F.2d at 1135, to “great weight,” Brady, 724 F.2d at 921, to “some weight,” Hankerson, 636 F.2d at 896-97. However, the VA’s decision is simply another fact that the ALJ must take into account when considering all the evidence. There may be good reason for a different outcome, such as an incongruity in the disability standards of the respective agencies, or the presentation of new or different evidence to one but not the other tribunal. The Court finds that the better approach is the one articulated by the Fifth Circuit in Chambliss v. Massanari: While this is true in most cases, the relative weight to be given this type of evidence will vary depending upon the factual circumstances of each case. Since the regulations for disability status differ between the SSA and the VA, ALJs need not give “great weight” to a VA disability determination if they adequately explain the valid reasons for not doing so. Chambliss, 269 F.3d at 522. That reasoning closely approximates the Sixth Circuit’s general rule as to the manner ALJs must consider the evidence presented to them. See Hurst v. Sec’y of Health & Human Servs., 753 F.2d 517, 519 (6th Cir. 1985) (“In the absence of an explicit and reasoned rejection of an entire line of evidence, the remaining evidence is ‘substantial’ only when considered in isolation. It is more than merely ‘helpful’ for the ALJ to articulate reasons . . . for crediting or rejecting particular sources of evidence. It is absolutely essential for meaningful appellate review.” (quoting Zblewski v. Schweiker, 732 F.2d 75, 78 (7th Cir. 1984 . -8- The ALJ wrote in her decision that she “does consider” the VA’s determination, but she did not explain whether she accorded any weigh to it, and if not why not. As mentioned above, there may be good reasons for disregarding the determination, but the Court on review is left to speculate on the ALJ’s rationale in the absence of any meaningful discussion of the evidence. It has been written that “ [a] foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.” Ralph Waldo Emerson, “Self Reliance” in Essays: First Series (1841). However, for governments that must make decisions on the rights of individuals, a wise consistency may be a virtue. Distinguishing between the two is not always an easy task. It is an impossible task when the decision maker has not provided a clue to her reasoning or a justification for inconsistent results. The record on the VA’s disability determination has not been developed, and the Court cannot determine that substantial evidence supports the ALJ’s determination. That leaves the question whether further fact-finding is required, for “[i]f a court determines that substantial evidence does not support the Secretary’s decision, the court can reverse the decision and immediately award benefits only if all essential factual issues have been resolved and the record adequately establishes a plaintiff’s entitlement to benefits.” Faucher v. Sec’y of Health & Human Servs., 17 F.3d 171, 176 (6th Cir. 1994). For the reasons cited above and in the magistrate judge’s report, the Court does not find that factual issues are settled or that the plaintiff has established his entitlement to benefits. The case must be remanded for further consideration of the evidence in light of a better-developed record of the VA disability determination. After a de novo review of the entire record and the materials submitted by the parties, the Court concludes that the magistrate judge properly reviewed the administrative record and applied -9- the correct law in reaching her conclusion, except on the issue of the ALJ’s treatment of evidence of the VA’s disability determination. The Court has considered all of the plaintiff’s objections to the report and finds the objection on that sole ground to have merit. Accordingly, it is ORDERED that the magistrate judge’s report and recommendation [dkt #11] is ADOPTED IN PART AND REJECTED IN PART. It is further ORDERED that the plaintiff’s objection [dkt #12] to the part of the report dealing with the issue of evidence of the VA’s disability determination is SUSTAINED and the balance of the objections are OVERRULED. It is further ORDERED that the plaintiff’s motion for summary judgment [dkt #9] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the defendant’s motion for summary judgment [dkt #10] is DENIED. It is further ORDERED that the findings of the Commissioner are REVERSED and the case is REMANDED to the Commissioner for further consideration. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 28, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 28, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -10-

=== United States of America v. STACEY HOGAN GIANOPLOS et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, Case No. 08-11564 Hon. David M. Lawson OPINION AND ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND GRANTING IN PART AND DENYING IN PART GOVERNMENT’S MOTION FOR DISCOVERY OR TO STAY PROCEEDINGS v. FOUR HUNDRED SIXTY THREE THOUSAND FOUR HUNDRED NINETY SEVEN DOLLARS AND SEVENTY TWO CENTS ($463,497.72) IN U.S. CURRENCY FROM BEST BANK ACCOUNT # XXX2677, NINETEEN THOUSAND NINE HUNDRED THIRTY SIX DOLLARS AND SEVENTY SEVEN CENTS ($19,936.77) IN U.S. CURRENCY FROM BEST BANK ACCOUNT # XXX8558, ONE HUNDRED ONE THOUSAND FIVE HUNDRED EIGHTY THREE DOLLARS AND NINETY EIGHT CENTS ($101,583.98) IN U.S. CURRENCY FROM COUNTRYWIDE BANK ACCOUNT # XXX5890, NINETEEN THOUSAND NINE HUNDRED EIGHTY SEVEN DOLLARS AND SEVEN CENTS ($19,987.07) IN U.S. CURRENCY FROM COMERICA BANK ACCOUNT # XXX0766, BEST BUY BANK ACCOUNT # 259207438, ONE HUNDRED ONE THOUSAND SEVEN HUNDRED AND THREE DOLLARS AND TEN CENTS ($101,703.10) IN U.S. CURRENCY FROM COUNTRYWIDE BANK ACCOUNT # XXX5890, NINETEEN THOUSAND NINE HUNDRED TWELVE DOLLARS AND SEVEN CENTS ($19,912.07) IN U.S. CURRENCY FROM COMERICA BANK ACCOUNT # XXX0766, FIFTY ONE THOUSAND THREE HUNDRED SEVENTEEN DOLLARS AND SIX CENTS ($51,317.06) IN U.S. DOLLARS FROM COUNTRYWIDE BANK ACCOUNT # XXX7528, and SAFESCRIPT PHARMACY # 19, LLC, Defendants, and STACEY HOGAN GIANOPLOS, RONALD G. CARSON, and H.D. SMITH WHOLESALE DRUG COMPANY, INC., _________________________________________/ Claimants. OPINION AND ORDER DENYING H.D. SMITH’S AMENDED MOTION FOR PARTIAL SUMMARY JUDGMENT, RONALD G. CARSON’S MOTION FOR JUDGMENT ON THE PLEADINGS OR SUMMARY JUDGMENT, AND STACEY HOGAN GIANOPLOS’S MOTION FOR JUDGMENT ON THE PLEADINGS OR SUMMARY JUDGMENT, GRANTING IN PART AND DENYING IN PART GOVERNMENT’S MOTION FOR PROTECTIVE ORDER OR TO STAY PROCEEDINGS, ESTABLISHING DISCOVERY DEADLINE, AND ORDERING STATUS CONFERENCE The government commenced this asset forfeiture case against cash in bank accounts allegedly connected to the Safescript Pharmacy in Farmington Hills, Michigan, contending that it was proceeds from the illegal sale of controlled substances by pharmacy employees. The three claimants — Stacey Hogan Gianoplos, Ronald G. Carson, and H.D. Smith Wholesale Drug Company — contend that some of the money is not connected to the pharmacy operations, and all of them are innocent owners. They have filed motions for summary judgment, which were argued several months ago and have been pending for some time. Although some of the pharmacy employees have been prosecuted, the government sought additional time to develop a criminal case against others, and it argued that allowing the present matter to proceed would interfere with its intentions. No additional indictments have been forthcoming, however, and this matter must proceed. Fact issues that are apparent from the record in the case preclude summary judgment; therefore, the claimants’ motions must be denied. The matter will be scheduled for trial. The Court will set a date to complete discovery, and grant in part the government’s motion for a protective order. -2- -3- I. Facts A. The criminal activity This in rem civil forfeiture proceeding is directed against five bank account defendants, totaling approximately $650,000.00. The case was filed on April 11, 2008. The FBI seized the funds two days earlier, on April 9, 2008. Previously, on May 10, 2007, Drug Enforcement Administration (DEA) agents executed search warrants at the Safescript Pharmacy in Farmington Hills, Michigan. The search of the pharmacy yielded 18 prescriptions on prescription pads of one Dr. Djamali, who, when questioned about the pads, denied ever writing or signing those prescriptions. The pads contained an unassigned DEA number and the signature and contact information that were not Dr. Djamali’s. Investigation revealed that the prescriptions were presented by one George Scott, who would come to the pharmacy three times per week, sometimes twice a day, posing as an employee of a group home, and present various prescriptions for OxyContin or Methadone that were filled by Safescript’s pharmacist Richard Riozzi. On January 29, 2009, Riozzi was indicted, along with four other individuals — Sohrab Shafinia, D.O., Stuart Stein, Randell McDaniel, and Gerald Richards — on charges of distributing, controlled substances, including the Schedule II drug OxyContin. The government alleged that Stein, McDaniel, and Richards paid Dr. Shafinia from $100 to $300 per occasion for prescribing a mixture of drugs containing OxyContin (the mixture that would later become known as the “Shafinia Cocktail”) without examining or sometimes even seeing the patients. George Scott (who was charged with conspiracy to distribute controlled substance in a separate indictment) would then present these prescriptions to Richard Riozzi at the Safescript Pharmacy, and Riozzi would fill them without the patients being present. Riozzi was paid around $400 per occasion. -4- Shafinia, Stein, Riozzi, McDaniel, and Scott eventually pleaded guilty to one or more counts of their respective indictments. B. Allegations regarding Safescript, Gianoplos, and Carson The Safescript Pharmacy in Farmington Hills is owned by Safescript Pharmacy # 19, LLC. Stacey Gianoplos is the resident agent. She is also the wife of Ronald G. Carson, the resident agent of Safescript Pharmacies of Michigan, LLC, which is now defunct. The government alleges that the seized assets belong either to Safescript Pharmacy, Gianoplos, or Carson and constitute or are derived from proceeds traceable to illegal distribution of controlled substances in violation of 21 U.S.C. § 841; use of a fictitious registration number in the distribution of controlled substances in violation of 21 U.S.C. § 843; or money laundering in violation of 18 U.S.C. § 1956. Therefore, the government reasons, the assets are forfeitable under 21 U.S.C. § 881(a)(6) and 18 U.S.C. § 981(a)(1)(A). The government makes the following specific allegations with respect to each of the defendant accounts: (1) BestBank account ending in 2677 ($463,497.72) — Safescript’s interest-bearing money market account (and its predecessor account ending in 0160, in the names of Safescript Pharmacy, Gianoplos, and Carson, closed on August 21, 2007). The government alleges that of the $703,210 deposited into this account, at least $400,000 represents proceeds from illegal sales of controlled substances. As one example of the account’s tie to illegal proceeds, the government contends that this account absorbed part of the cash Safescript earned in the illegal sale of controlled substances on May 9 and 11, 2007. The deposits of cash from fraudulent prescriptions continued into the account after the predecessor account was closed. During this same period, Scott paid cash for -5- illegal prescriptions. For example, on May 9 and May 11, 2007, Scott purchased 28 illegal prescriptions for approximately $39,200. On May 12, 2007, a cash deposit of $19,500 was made to Account Number *0160. Bank records show similar transactions occurring frequently between February and May 2007. The Michigan Automated Prescription Service (MAPS) data shows that on 29 separate days, approximately 333 prescriptions were filled using unassigned DEA number BD9374911; the government attributes the frequency to Scott’s presentation fraudulent prescriptions filled by Riozzi. “Scott paid approximately $1,400 for each prescription or approximately $466,200 for 333 prescriptions.” Am. Compl. ¶ 9(m). Safescript Pharmacy BestBank Account Number *0160 records show cash deposits made on or near the day of each transaction involving illegal prescriptions. “In total, the cash deposited into the accounts amounts to $330,910.” Ibid. During that same three month time period, Safescript’s money market account number *2677 received cash deposits totaling $51,150. (2) BestBank account ending in 8558 ($19,936.77) — Safescript’s checking account out of which payroll is paid. The government alleges that this account “received high dollar transfers from Best Bank Account Number *0160. Since August 2007, this account received between 33% and 95% of its funds from transfers from Safescript Pharmacy BestBank Account Number *0160 and Safescript Pharmacy BestBank Account Number *2677. The use of proceeds in the payroll account . . . , funded with [proceeds from unlawful drug sales], constitutes transactions involved in money laundering intended to promote the continued violations of the Controlled Substances Act.” Am. Compl. ¶ 9(n). -6- (3) Countrywide Bank account ending in 5890 ($101,703.10) — Carson’s interest-bearing savings account. The government alleges: “Investigation reveals that there was an internet transfer of $100,000.00 from Best Bank Account Number *2677 to BestBank Account Number *8558. On October 16, 2007, a check made payable to Ronald G. Carson for $100,000.00 from BestBank Account Number *8558 was endorsed by Carson and deposited into BestBank Account Number *7438 on October 16, 2007. On or about October 19, 2007, Carson transferred $100,000.00 via wire transfer from BestBank Account Number *7438 to Countrywide Bank Account Number *5890. These transactions involved [illegal drug sales] proceeds and were intended to disguise and conceal the true nature and source of the [illegal drug sales] proceeds, and thus constituted money laundering.” Am. Compl. ¶ 9(o). (4) Comerica Bank account ending in 0766 ($19,912.07) — Carson’s personal checking account. The government alleges: “Comerica Bank Account Number *0766 received deposits made payable to Carson amounting to $62,197.39 from BestBank Account Number *8558. The memo section indicates that the deposits were paychecks. However, Carson is not an employee of Safescript Pharmacy. He is married to Gianoplos, the owner of Safescript Pharmacy. In addition, Carson loaned $95,100.00 from this Comerica account and deposited $53,940.00 in interest and loan payments from Safescript Pharmacy into this account. These transactions involved [fraudulent drug sales] proceeds and were intended to disguise and conceal the true nature and source of the [fraudulent drug sales] proceeds, and thus constituted money laundering.” Am. Compl. ¶ 9(p). (5) Countrywide Bank account ending in 7528 ($51,400.63) – Gianoplos and Carson’s joint savings account. The government alleges with respect to this account: “CountryWide Bank Account Number *7528 was opened on July 19, 2006 in the names of Carson and Gianoplos. -7- Between July, 2006, and November, 2007, $41,250.00 was deposited via wire transfer into this account from Comerica Bank Account Number *0766. Some or all of these deposits constitute transactions involving fraudulent prescription sales proceeds involved in money laundering, to disguise their true nature and origin. . . .” Am. Compl. ¶ 9(q). The government has offered evidence through declarations by FBI analysts Patricia Rossiter and Wendy M. Freeman in support of its contention that at least some of the proceeds from unlawful drug sales went into Carson’s bank accounts. Rossiter’s declaration states: Prior to completing the seizure affidavit, SA Rossiter identified, through investigation, review, and analysis, fraudulent prescriptions filled at Safescript Pharmacy # 19 LLC. At least some of the fraudulent prescriptions were paid in cash. During review and analysis with FBI Financial Analyst (FA) Wendy M. Freeman, SA Rossiter and FA Freeman identified cash deposits into one or more of the above accounts subsequent to the fraudulent prescription activity. Pl.’s Resp. to Carson’s Mot. for Summ. J., Ex. 1, Rossiter Decl. ¶ 3. Freeman avers that she traced the proceeds from illegal activities through each of the accounts, including the three that belong to Carson. Pl.’s Resp. to Carson’s Mot. for Summ. J., Ex. 2, Freeman Decl. ¶ 3. C. Allegations regarding H.D. Smith During the period from July 2004 to April 2008, Safescript Pharmacy # 19 purchased its pharmaceuticals and supplies from H.D. Smith Wholesale Drug Company, a national wholesaler of pharmaceuticals. On June 16, 2006, Safescript # 19 entered into an agreement with H.D. Smith granting it a security interest in all of Safescript’s collateral, wherever located. The agreement secured all of Safescript’s obligations to H.D. Smith, “including but not limited to, any balances owed for goods . . . sold on credit by Secured Party to Debtor” and “all other amounts now or in the future owed by Debtor to Secured Party.” H.D. Smith’s Am. Mot. for Partial Summ. J., Ex. A, Sec. Agreement ¶¶ 1.1, ¶ 1.2(ii), 1.2(v). H.D. Smith perfected its security interest by filing a financing -8- statement (UCC-1 form) with the Michigan Secretary of State on June 21, 2006, and an amendment (UCC-3 form) on April 16, 2008. The security agreement included an acceleration clause under which H.D. Smith could accelerate the balance of all Safescript’s outstanding obligations in the event of default. Upon default, Safescript also became liable for costs and attorney’s fees. Safescript’s indebtedness accrues interest at 18% annually from May 31, 2008. When Safescript failed to pay for the drugs, H.D. Smith exercised its rights under agreement and presently is owed $544,322.29. As a distributor of controlled substances in schedule I or II, H.D. Smith must report suspicious orders to the DEA. It appears that H.D. Smith “red-flagged” Safescript’s orders twice, but rescinded both alerts based on its failure to consider the business model of the pharmacy. Daniel Roberts, H.D. Smith sales representative assigned the Safescript account, disclaimed knowledge of any suspicious activity, attributing the increase in drug sales to Safescript’s decision to switch main providers, interruption in the supply of these drugs from other providers, and the niche market for the pharmacy surrounded by as many as ten pain clinics. In his affidavit, Roberts averred that Safescript’s orders of drugs in the Oxy family were consistent with past usage by Safescript, and he actually expected an increase in sales to Safescript in the Spring of 2007. See H.D. Smith’s Am. Mot. for Partial Summ. J., Ex. G, Daniel Roberts Aff. ¶¶ 12-16. Carson and Gianoplos likewise deny any knowledge of the wrongdoing. The claimants rely on the innocent owner defense and ask the Court to sustain their claim to the funds. The United States alleges that H.D. Smith, Carson, and Gianopolos were at least willfully blind to the wrongdoing, and fact issues preclude summary judgment in favor of the claimants as a matter of law. In support, the government relies on the affidavit of DEA investigator James -9- Rafalski, who averred that during the period from January 2006 to April 2008, H.D. Smith shipped to Safescript # 19 nearly ten times the amount of OxyContin and Oxycodone that it shipped to its next largest purchaser of these drugs serviced by H.D. Smith’s Springfield, Illinois distribution center. See Pl.’s Br. in Resp. to H.D. Smith’s Am. Mot. for Partial Summ. J., Ex. B, Rafalski Decl. ¶ 9 (orders for Safescript – 255,660 units; orders for next highest purchaser – 27,500); see also Pl.’s Br. in Resp. to H.D. Smith’s Am. Mot. for Partial Summ. J., Ex. H, Suppl. Clarifying Decl. of Rafalski ¶ 5; Pl.’s Resp. to H.D. Smith’s Mot. for Summ. J., Ex. F, Decl. of June E. Howard ¶ 6. The plaintiff summarized the orders of oxycodone 80 mg in January through August 2006 as follows: Month January 2006 February 2006 March 2006 April 2006 May 2006 June 2006 July 2006 August 2006 Tablets 1,800 2,000 3,700 1,000 1,800 2,600 3,900 5,400 Pl.’s Br. in Resp. to H.D. Smith’s Am. Mot. for Partial Summ. J., Ex. B, Rafalski Decl. ¶ 6. Another increase in sales of OxyContin occurred in March-May of 2007, summarized as follows: -10- Month January 2007 February 2007 March 2007 April 2007 May 2007 June 2007 July 2007 August 2007 September 2007 October 2007 November 2007 December 2007 Tablets 1,400 2,400 17,600 24,400 18,200 12,600 13,200 13,200 15,000 16,800 14,400 16,400 Id. ¶ 8. In March and April of 2006 and in November of 2007, H.D. Smith filed a Suspicious Order Analysis Report to the DEA for orders from Safescript Pharmacy # 19, but each time proceeded to ship the orders to Safescript. See id. ¶¶ 5, 6, 8. During a scheduled regulatory investigation of H.D. Smith conducted by the DEA investigators from the Chicago Field Division in August and September 2006, the DEA questioned the effectiveness of H.D. Smith’s suspicious order system “due [to] the human element and the potential for error caused by employee turnover.” Id. ¶ 7; see also id., Ex. E, Decl. of Scott M. Garriott ¶ 4; id., Ex F, Decl. of June E. Howard. -11- D. Proceedings The present action was filed by the government on April 11, 2008. An amended complaint was filed May 2, 2008. Ronald Carson and Stacey Gianoplos filed their answer and notice of claim on May 23, 2008. Shortly thereafter, the government filed a motion to stay proceedings on May 29, 2008. H.D. Smith filed its notice of claim on June 26, 2008. On January 28, 2009, H.D. Smith filed its motion for summary judgment, followed by an amended motion for summary judgment on March 19, 2009. On March 31, 2009, the Court entered an order staying discovery until June 1, 2009. The government moved to extend the stay on May 29, 2009. The Court entered an order denying a further stay on June 26, 2009. Meanwhile, Carson filed a motion for summary judgment on June 11, 2009, and Gianoplos followed suit on June 30, 2009. Finally, the government filed a motion for a protective order on October 8, 2009 to block the claimants from taking depositions of government agents and asking questions about an ongoing criminal investigation. The government has maintained all along that it was pursuing others in connection with the illegal sales of prescription drugs at the Safescript Pharmacy, and more indictments were imminent. The case has lain dormant for several months. No additional indictments have been forthcoming. II. Dispositive motions H.D. Smith argues in its motion for summary judgment that, as the only creditor with a perfected security interest, it has a superior right to the collateral when compared to rights of the United States or other claimants; and it is entitled to the collateral because of a default in payment by Safescript and the operation of the acceleration clause in the security agreement. H.D. Smith also argues that it is an innocent owner under the Civil Asset Forfeiture Reform Act of 2005 (“CAFRA”), 18 U.S.C. § 983 et seq., because it did not have actual knowledge of wrongdoing. According to -12- H.D. Smith, the owners of Safescript acknowledged that funds seized by the United States had been set aside pending the wire transfer to H.D. Smith to pay down Safescript’s secured indebtedness. Carson and Gianoplos style their motions as motions for summary judgment or for judgment on the pleadings. Although they take issue with the amount of indebtedness owed to H.D. Smith, they agree that as the secured creditor, H.D. Smith has a superior right to the funds. Carson also argues that he is an innocent owner under the Civil Asset Forfeiture Reform Act. He contends that the government has not provided any factual allegations that he and Gianoplos engaged in money laundering or that the funds in the following three accounts were traceable to illegal activity: 1. Comerica Bank *0766 ($19,912.07) — Carson’s personal checking account; 2. Countrywide Bank *5890 ($101,703.10) — Carson’s interest-bearing savings account; 3. Countrywide *7528 ($51,400.63) — savings account Carson maintained with his wife Stacey Gianoplos. Carson explains that any transfers that occurred between his and Gianoplos’s accounts were done on advice of BestBank in order to maximize interest and reduce fees and the risk of loss from employee theft, embezzlement, or identity theft. He attached a letter from a banker in support of that argument. He also points to alternate sources for the funds in those accounts, and he maintains that he performed services for Safescript Pharmacy for which he was paid. Stacey Gianoplos also moved for summary judgment or judgment on the pleadings with respect to the following accounts: 1. BestBank account ending in 8558 ($19,912.07) — Safescript’s checking account; 2. BestBank account ending in 2677 ($463,497.72) — Safescript’s interest- bearing Money Market account; 3. Countrywide account ending in 7528 ($51,400.63) — Gianoplos and Carson’s joint account that is also subject to Carson’s motion. -13- She likewise asserts an innocent owner defense and disclaims all knowledge of Richard Riozzi’s illegal scheme. She also alleges that George Scott, who filled the prescriptions, actively concealed his illegal activity from her. She furnished a declaration in support of her arguments. A. Motion standard A motion for judgment on the pleadings or for summary judgment under Federal Rule of Civil Procedure 12(c) generally is reviewed under the standards that govern motions brought under Rule 12(b)(6). See Fed. R. Civ. P. 12(c); Vickers v. Fairfield Med. Ctr., 453 F.3d 757, 761 (6th Cir. 2006); Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 511-12 (6th Cir. 2001). All parties have attached to their motion papers affidavits and documentary evidence that are not part of the pleadings. Because the parties have had notice and an opportunity to present their materials in support of their positions, the Court can and does convert the claimants’ motions to summary judgment motions under Rule 56. See Fed. R. Civ. P. 12(d) (stating that “[i]f, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.”); Hayes v. Equitable Energy Res. Co., 266 F.3d 560, 571 (6th Cir. 2001) (stating that Rule 12(b) “empowers a district court to grant summary judgment sua sponte where the court is presented with materials outside the pleadings. . . . depend[ing] on the facts and circumstances of each case”). A motion for summary judgment under Federal Rule of Civil Procedure 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 -14- (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics & Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Mich. Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). Thus a factual dispute which “is merely colorable or is not significantly probative” will not defeat a motion for summary judgment which is properly supported. Kraft v. United States, 991 F.2d 292, 296 (6th Cir. 1993); see also Int’l Union, United Auto., Aerospace & Agric. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record which demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Pers. Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). The party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must -15- make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp., 477 U.S. at 322-23. In a defensive motion for summary judgment, the party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). “[T]he party opposing the summary judgment motion must ‘do more than simply show that there is some “metaphysical doubt as to the material facts.”’” Highland Capital, Inc. v. Franklin Nat’l Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir. 1994), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 586 (1986 . “Thus, the mere existence of a scintilla of evidence in support of the [opposing party]’s position will be insufficient; there must be evidence on which the jury could reasonably find for the [opposing party].” Ibid. (quoting Anderson, 477 U.S. at 252) (internal quotation marks omitted). When the moving party also bears the ultimate burden of persuasion, the movant’s affidavits and other evidence not only must show the absence of a material fact issue, they also must carry that burden. Vance v. Latimer, 648 F. Supp. 2d 914, 919 (E.D. Mich. 2009); see also Stat-Tech Liquidating Trust v. Fenster, 981 F. Supp. 1325, 1335 (D. Colo. 1997) (stating that where “the -16- crucial issue is one on which the movant will bear the ultimate burden of proof at trial, summary judgment can be entered only if the movant submits evidentiary materials to establish all of the elements of the claim or defense”); Resolution Trust Corp. v. Gill, 960 F.2d 336, 340 (3d Cir. 1992). In his commentary on affirmative motions for summary judgment, Judge William Schwarzer explains: When the moving party bears the burden of persuasion on the issue at trial, its showing must sustain that burden as well as demonstrate the absence of a genuine dispute. Thus, it must satisfy both the initial burden of production on the summary judgment motion — by showing that no genuine dispute exists as to any material fact — and the ultimate burden of persuasion on the claim–by showing that it would be entitled to a directed verdict at trial. William W. Schwarzer, et al., The Analysis and Decision of Summary Judgment Motions, , 477-78 (1992) (footnote omitted). B. Proof Requirements under CAFRA Under the Controlled Substances Act, 21 U.S.C. § 801 et seq., the United States may claim by forfeiture “[a]ll moneys, negotiable instruments, securities, or other things of value furnished or intended to be furnished by any person in exchange for a controlled substance or listed chemical in violation of [Title II of the Act], all proceeds traceable to such an exchange, and all moneys, negotiable instruments, and securities used or intended to be used to facilitate any violation of [Title II of the Act].” 21 U.S.C. § 881(a)(6). Also subject to forfeiture is “[a]ny property . . . involved in a transaction or attempted transaction in violation of section 1956 . . . of this title [(laundering of monetary instruments)], or any property traceable to such property.” 18 U.S.C. § 981(a)(1)(A). The laundering of monetary instruments includes promotional money laundering, 18 U.S.C. § 1956(a)(1)(A)(i), and money laundering to disguise and conceal, 18 U.S.C. § 1956(a)(1)(B)(i). -17- Under the Civil Asset Forfeiture Reform Act (CAFRA), “the burden of proof is on the Government to establish, by a preponderance of the evidence, that the property is subject to forfeiture.” 18 U.S.C. § 983(c)(1). CAFRA imposes a higher burden of proof on the government than previously existed. Under the old standard, a showing of probable cause sufficed, and the claimant was required to prove non-forfeitability by a preponderance of evidence. United States v. Real Prop. in Section 9, 241 F.3d 796, 797 (6th Cir. 2001) (citing 19 U.S.C. § 1615 (1984 . The new standard was introduced to “level[] the playing field between the government and persons whose property has been seized” by raising “the government’s burden of proof in civil forfeiture actions to the burden normally borne by the plaintiff in a civil case — preponderance of the evidence.” Id. at 799. In addition, if the government alleges forfeitability based on a facilitation theory, “the Government [must] establish that there was a substantial connection between the property and the offense.” 18 U.S.C. § 983(c)(3). “The burden of showing something by a preponderance of the evidence, the most common standard in the civil law, simply requires the trier of fact to believe that the existence of a fact is more probable than its nonexistence before [he] may find in favor of the party who has the burden to persuade the [jury] of the fact’s existence.” Concrete Pipe and Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., , 622 (1993) (quoting In re Winship, , 371-72 (1970) (Harlan, J., concurring (quotation marks omitted). “That the burden is on the government does not change the fact that, if the government meets its burden, it will prevail unless the claimants introduce evidence to support their case.” United States v. $174,206.00 in U.S. Currency, 320 F.3d 658, 662 (6th Cir. 2003). -18- “The government can acquire through forfeiture no greater interest than that held by the defendant at the time the criminal acts were committed.” United States v. Jones, 502 F.3d 388, 392 (6th Cir. 2007). A perfected security interest in a business’s assets may take priority over the government’s claim to assets through forfeiture. C. Innocent Owner Defense “An innocent owner’s interest in property shall not be forfeited under any civil forfeiture statute.” 18 U.S.C. § 983(d)(1). “With respect to a property interest in existence at the time the illegal conduct giving rise to forfeiture took place,” an “innocent owner” is “an owner who — (i) did not know of the conduct giving rise to forfeiture; or (ii) upon learning of the conduct giving rise to the forfeiture, did all that reasonably could be expected under the circumstances to terminate such use of the property.” 18 U.S.C. § 983(d)(2)(A). “With respect to a property interest acquired after the conduct giving rise to forfeiture has taken place,” an “innocent owner” includes one “who, at the time that person acquired the interest in the property — did not know and was reasonably without cause to believe that the property was subject to forfeiture.” 18 U.S.C. § 983(d)(3)(A)(ii). “The claimant shall have the burden of proving that the claimant is an innocent owner by a preponderance of the evidence.” 18 U.S.C. § 983(d)(1); see also United States v. Lots 12, 13, 14, & 15, 869 F.2d 942, 948 (6th Cir. 1989). One court, parsing the statute, has observed that proof an innocent owner is “one who either lacks knowledge of the illicit activities giving rise to the forfeiture, or who has knowledge of the activity but has evinced his lack of consent by affirmatively attempting to stop it.” United States v. One 1988 Checolet 410 Turbo Prop Aircraft, 282 F. Supp. 2d 1379, 1382 (S.D. Fla. 2003) (emphasis added). Most courts require actual, rather than constructive, knowledge of the -19- wrongdoing to rule out the defense. See United States v. $4,255,000 in U.S. Currency, 762 F.2d 895, 906 (11th Cir. 1985) (holding that, under 21 U.S.C. § 881(a)(6), the application of the innocent owner defense “turns on the claimant’s actual knowledge, not constructive knowledge”); United States v. $10,694.00 in U.S. Currency, 828 F.2d 233, 234-35 (4th Cir. 1987), overruled on other grounds by United States v. Walker, 889 F.2d 1317 (4th Cir. 1989 (stating that “§ 881(a)(6) envisions an actual knowledge inquiry”); United States v. Real Property at 2659 Roundhill Drive, 283 F.3d 1146, 1152 n.8 (9th Cir. 2002) (requiring actual knowledge); United States v. $175,260.00 in U.S. Currency, 741 F. Supp. 45, 48 (E.D.N.Y. 1990) (same); but see United States v. Real Property Located at 10936 Oak Run Circle, 9 F.3d 74, 76 (9th Cir. 1993) (leaning towards a constructive-knowledge approach and holding that “innocence is incompatible with knowledge that puts the owner on notice that he should inquire further”). However, actual knowledge can be proven by circumstantial evidence. See One 1988 Checolet 410 Turbo Prop Aircraft, 282 F. Supp. 2d at 1383 (noting that a property owner “may not ‘turn a blind eye’ toward [evidence of drug involvement] and still claim ‘innocent owner’ status under CAFRA”). One modification CAFRA made to the civil forfeiture law’s statutory text was the elimination of a specific reference to “willful blindness.” Compare 21 U.S.C. § 881(a)(4)(C) (1996) (establishing an innocent owner defense for an owner who could show that the underlying act was committed “without [his] knowledge, consent, or willful blindness” (emphasis added with 18 U.S.C. § 983(d)(2)-(3). That has led courts to question whether the concept of willful blindness still exists in forfeiture cases. See One 1988 Checolet 410 Turbo Prop Aircraft, 282 F. Supp. 2d at 1382 (“It is unclear whether ‘wilful blindness’ of a property owner still operates as a facet of or equivalent to actual knowledge for purposes of defeating ‘innocent owner’ status under CAFRA.”). The Court -20- believes it does. As a general proposition, “a defendant’s knowledge of a fact may be inferred from willful blindness to the existence of the fact.” United States v. Prince, 214 F.3d 740, 761 (6th Cir. 2000). Moreover, the courts that have considered the question have concluded that CAFRA did not eliminate willful blindness from the innocent owner analysis. See, e.g., One 1988 Checolet 410 Turbo Prop Aircraft, 282 F. Supp. 2d at 1382-83; cf. United States v. 2001 Honda Accord Ex VIN # 1HGCG22561A035829, 245 F. Supp. 2d 602, 611 & n.8 (M.D. Pa. 2003) (noting that the innocent owner defense under CAFRA does not have a provision expressly mentioning willful blindness, but nevertheless applying pre-CAFRA willful blindness standard). D. Discussion 1. H.D. Smith H.D. Smith does not take issue with the fact that the accounts belonging to Safescript are subject to forfeiture. Rather, it claims that it has established that it is an innocent owner as a matter of law. As noted earlier, the claimant has the burden of proving that proposition. The Court finds that the government has come forward with sufficient facts to preclude summary judgment on that affirmative defense. The government bases its allegation that H.D. Smith was willfully blind to Safescript’s unlawful activities on two lines of evidence: (a) the lax attitude of Daniel Roberts, a sales representative dealing with Safescript, in monitoring the pharmacy’s orders; and (b) the irregularities in Safescript’s orders of controlled substances and H.D. Smith’s failure to report excessive purchases of such substances. The first line of argument is without merit. Daniel Roberts, H.D. Smith’s sales representative who was solely responsible for Safescript’s account, consistently denied having actual -21- knowledge or subjective suspicion of any nefarious activity at Safescript. Although he conceded that he did not specifically monitor the sales of controlled substances to Safescript, he explained that he did not consider it his task to do so. Therefore, he did not know about the spike in Safescript’s orders of oxycodone around February 2007 or March 2007. And to the extent the government alleges he should have been alarmed by sizeable orders from Safescript from the beginning, Roberts’s explanation — that he deemed the orders legitimate given the proximity of several pain clinics — is plausible. At most, Roberts might have been negligent in failing to inquire into Safescript’s distribution of Schedule II and III drugs. However, a showing of negligence is not sufficient to support a finding of willful blindness. See United States v. Hoffman, 918 F.2d 44, 46- 47 (6th Cir. 1990). However, as a distributor of controlled substances, H.D. Smith was subject to the reporting and monitoring requirements of the Comprehensive Drug Abuse Prevention and Control Act of 1970, 21 U.S.C. § 801 et seq. Under that Act, entities and individuals who manufacture, distribute, or dispense controlled substances must register with the Attorney General. 21 U.S.C. §§ 822-23. All registrants must maintain inventory records for the attorney general’s inspection. 21 U.S.C. § 827(b). The Attorney General has delegated authority to grant, deny, revoke, or suspend registration to the DEA Administrator. 28 C.F.R. § 0.100(b). In addition, the Act requires manufacturers and distributors of controlled substances to “make periodic reports to the Attorney General of every sale, delivery or other disposal by him of any controlled substance.” 21 U.S.C. § 827(d)(1). Those reports must include notification of suspicious orders of controlled substances, which requires manufacturers and distributors to monitor drug ordering traffic. The registrant shall design and operate a system to disclose to the registrant suspicious orders of controlled substances. The registrant shall inform the Field -22- Division Office of the Administration in his area of suspicious orders when discovered by the registrant. Suspicious orders include orders of unusual size, orders deviating substantially from a normal pattern, and orders of unusual frequency. 21 C.F.R. § 1301.74(b). The reported information is collected in the Automation of Reports and Consolidated Orders System (ARCOS), which is a database that houses controlled substance activity as reported by DEA-registered manufacturers and distributors. Pl.’s Br. in Resp. to H.D. Smith’s Am. Mot. for Partial Summ. J.. Ex. F, Decl. of June Howard at ¶ 2. ARCOS data can be used to verify sales of unusually large amounts of controlled substances. Ibid. According to the declaration of DEA diversion investigator Kyle Wright, the DEA reminded the Director of Corporate Security at Safescript, George Euson, of the company’s responsibilities under the Act during briefings on January 4, 2006 and October 10, 2007. The meetings were apparently conducted at the behest of H.D. Smith itself, after the company became concerned with the DEA’s recent administrative actions against other drug distributors. The meetings included discussion of suspicious orders of three sample customers, whose sales of controlled substances were not consistent with legitimate pharmaceutical practices. Yet, when H.D. Smith saw several spikes in Safescript’s orders of controlled substances, it did not report all of them to the DEA as instructed. As noted earlier, spikes occurred in Safescript’s purchases of oxycodone 80 mg in January through August 2006, and in sales of oxycontin in March through May 2007. Although H.D. Smith filed a Suspicious Order Analysis Report in March and April 2006 and then again in November 2007, it did not file similar reports for other spikes in July or August 2006, April 2007, or other months when Safescript’s orders of controlled substances increased dramatically. There was no explanation for spikes during these months, as with other periods when -23- another distributor may have lost a patent, compelling Safescript to buy all of its controlled substances from H.D. Smith. In addition, even in the months when H.D. Smith did file its reports, it nevertheless proceeded to ship the orders to Safescript, contrary to the established protocol. See Pl.’s Br. in Resp. to H.D. Smith’s Am. Mot. for Partial Summ. J.. Ex. B, Rafalski Decl. ¶¶ 5, 6, 8. Moreover, during the period from January 2006 to April 2008, H.D. Smith shipped to Safescript #19 nearly ten times the amount of OxyContin and Oxycodone that it shipped to its next largest purchaser of these drugs serviced by H.D. Smith’s Springfield, Illinois distribution center. See id. ¶ 9; see also id., Ex. H, Suppl. Clarifying Decl. of Rafalski ¶ 5; id., Ex. F, Decl. of June E. Howard ¶ 6. Yet, these numbers did not seem to alarm the distributor. Based on this information, the Court cannot conclude as a matter of law that H.D. Smith was not willfully blind to unlawful activity at Safescript. Therefore, the Court cannot conclude as a matter of law that H.D. Smith has sustained its burden of proof on this defense. 2. Gianoplos and Safescript Accounts Best Bank account numbers *8558 containing $19,936.77 (Safescript’s payroll account) and*2677 containing $463,497.72 were seized from Gianoplos and Safescript. Gianoplos submits she “never observed any illegal activity at or involving Safescript.” Gianoplos’s Mot. for Summ. J., Ex. 2, Gianoplos Decl. ¶ 13. This declaration is contradicted by Riozzi’s statements at his guilty plea hearing and FBI Agent White’s sealed affidavit. White’s affidavit, however, contains only hearsay statements and cannot be used by the government to defeat a summary judgment motion. See Fed. R. Civ. P. 56(c)(4) (“An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.”). -24- However, at his plea hearing, Riozzi stated that he had “reason to believe that the owners or people who had ownership interest in the pharmacy knew or had reason to believe that what [he] was doing . . . was illegal behavior,” and that “members of management” were “usually present when the transactions, particularly the cash transactions were occurring.” Pl.’s Resp to Carson’s and Gianoplos’s Renewed Mot. for Summ. J., Ex. 1, Tr. Riozzi Plea Hr’g, at 17-19. The question becomes one of credibility between Gianoplos and Riozzi that must be resolved by the fact finder; therefore, there is a genuine issue of material fact as to whether Gianoplos was willfully blind to the drug diversions by Riozzi and those that worked with him. Gianoplos and Safescript are not entitled to summary judgment on account numbers *8558 or *2677. 3. Carson’s Accounts Countrywide Bank account number *5890 containing $101,703.10 (Carson’s savings account), Comerica Bank account number *0766 containing $19,912.07 (Carson’s checking account), and Countrywide Bank account number *7528 containing $51,317.06 (Gianoplos and Carson’s joint savings account) were seized from Carson. He contends that his savings account was “opened . . . to earn higher interest rates. [He] had learned of its 5.4% interest rate, higher than the rates offered by BestBank or anywhere else [he] could find. The account also did not have the restrictions on withdrawals, nor did it charge for transfers.” Carson’s and Gianoplos’s Renewed Mot. for Summ. J., Ex. 3, Carson Decl. ¶ 11. Likewise, Carson alleges that the $100,000 check he received on October 16, 2007 was a payment to [him] on the unpaid balance of the loan [he] gave [his] wife to help her start her business[. She] transferred funds from the BestBank account number *2677[, Safescript’s money market account] into the Safescript operating account in order to make that payment to [him] by check, following the very same procedure Safescript used for every other trade debt it serviced. Furthermore, to avoid taking the already opened CountryWide Savings Link account beyond the $100,000.00 -25- maximum insurable limit, [he] deposited the funds into a second CountryWide Savings link in [his] own name to indicate separate and distinct ownership for a new and separate $100,000.00 to come within the limit then insured by the FDIC. On the advice of [his] bankers, [he] always tried to avoid having more than $100,000.00 in any single account as anything above that (at the time) would not be insured by the FDIC. Id. ¶¶ 12-13. Carson also contends that he is an employee of Safescript “as evidenced by his 2006 and 2007 W-2s, previously filed as exhibits by Claimants in their Answer to the Amended Complaint.” Carson’s and Gianoplos’s Renewed Mot. for Summ. J. ¶ 12. However, as noted earlier, the government has furnished declarations by analysts Rossiter and Freeman showing that deposits into Carson’s accounts were made after some of the fraudulent drug transactions, and the agents traced the proceeds from illegal activities through each of the accounts, including the three that belong to Carson. These declarations are sufficient to create fact issues that preclude summary judgment in favor of Carson. A trial is required to resolve the dispute. III. Motion or Protective order The government has filed a motion for a protective order to prevent the claimants from taking the depositions of the investigating agents and analysts and to resist the production of certain documents. The motion was provoked by a discovery request from Carson and Gianoplos for the following documents: 1. 2. 3. 4. All Rule 11 plea bargain agreements; All cooperation agreements; All statements written or oral of each individual who has plead[ed] guilty or made statements in the ongoing criminal cases Nos. 09-cr- 20039 and 09-cr-20021. All documents, including but not limited to, correspondence reflecting any other agreements between the government and individuals. -26- 5. Copies of all oral and written statements made to or in the presence of any law enforcement officer, by or between the aforementioned individuals and any other person, or intercepted or overheard conversation to anyone, containing any and all information regarding the subject matter of the two criminal prosecutions referred to above. Pl’s Mot. for Protective Order [dkt #111], Ex. 1, Req. for Prod. at 1-2. The documents were to be produced before the scheduled depositions of Patricia Rossiter and James Rafalski. In the same motion, the government also renewed its request to stay the proceedings. The documents requested by the claimants were directed at eight individuals indicted in the two related cases that were pending in this district before Judge Cook, including George Scott, Dr. Sohrab Shafinia, Richard Riozzi, Stuart Stein, Randell McDaniel, and Gerald Richards, as well as unnamed co-conspirators in the two criminal cases. None of these individuals is a party in this civil forfeiture case, although many if not all of them likely will be witnesses. The government argues that the plea bargain and cooperation agreements that the claimants requested for individuals indicted in the two criminal cases are under seal, the document requests for witness statements are improper because they would include grand jury evidence, and the balance of the requests would reveal information in the ongoing criminal investigation of Stacey Gianoplos and thereby impede the progress of the criminal investigation and impinge on Rafalski’s and Rossiter’s law enforcement privileges. The government also argues that the documents in groups 4 and 5 are not related to the ongoing civil forfeiture case. The Court has already elaborated on the standards for stay of forfeiture proceedings under 18 U.S.C. § 981(g), and the governing rules need not be repeated here. See Opinion & Order Granting in Part Gov’t’s Mot. to Stay Proceedings [dkt. # 59]; see also Order Denying the Pl.’s Mot. to Extend the Stay of Civil Forfeiture Proceedings [dkt. # 86]. It is enough to note that CAFRA -27- authorizes a district court to stay proceedings “whenever a court determines that civil discovery will adversely affect the ability of the United States to investigate or prosecute a related criminal case.” United States v. GAF Financial Servs., Inc., 335 F. Supp. 2d 1371, 1373 (S.D. Fla. 2004); see also 18 U.S.C. § 981(g)(1) (“Upon the motion of the United States, the court shall stay the civil forfeiture proceeding if the court determines that civil discovery will adversely affect the ability of the Government to conduct a related criminal investigation or the prosecution of a related criminal case.”). Section 981 also allows the Court to enter a protective order, but “[i]n no case . . . shall the court impose a protective order as an alternative to a stay if the effect of such protective order would be to allow one party to pursue discovery while the other party is substantially unable to do so.” 18 U.S.C. § 981(g)(3). The government has not presented any evidence that litigating the present matter and allowing discovery will interfere with an ongoing investigation or prosecution. The criminal cases against the defendants involved in the illegal drug diversions all are terminated by judgments or dismissals. The government has had its evidence of Stacy Gianoplos’s involvement in the transactions for more than two years. The declarations cataloging the documentary evidence were filed in 2008 and 2009. Agent Alexander White filed a declaration under seal in which he described the debriefing of some of the criminal defendants in the now-closed cases, and that information has been available to the government for at least two years. If the government had a provable criminal case against Stacy Gianoplos or anyone else involved in the Safescripts transactions, it could have made a presentation to a grand jury by now. In all events, however, countenancing further delay and tying up substantial amounts of seized cash cannot be justified by the information furnished by the government to date. This case must proceed. -28- That does not mean, however, that the claimants are entitled to all the discovery they seek. Based on the government’s representation, the Rule 11 plea agreements were placed under seal by Judge Cook. To unseal these materials, the claimants would have to petition Judge Cook, who is presiding over both of these cases to modify the terms of the sealing order. Cf. Meyer Goldberg, Inc. v. Fisher Foods, Inc., 823 F.2d 159 (6th Cir. 1987) (endorsing the practice of intervening in the underlying case for the purpose of modifying a sealing order). In addition, the document requests are broad enough to encompass testimony by witnesses before the grand jury. Grand jury testimony is not subject to discovery. Fed. R. Crim. P. 6(e)(2)(B); see also In re Grand Jury Subpoenas, 454 F.3d 511, 521 (6th Cir. 2006) (“Grand jury secrecy is . . . a strong command . . . .”).; FDIC v. Ernst & Whinney, 921 F.2d 83, 86 (6th Cir. 1990) (holding that “[t]he sanctity of the grand jury as a means of criminal investigation” is paramount even if the discovery of grand jury materials is being sought in a civil case). “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense — including the existence, description, nature, custody, condition, and location of any documents or other tangible things and the identity and location of persons who know of any discoverable matter.” Fed. R. Civ. P. 26(b). The scope of discovery under the Federal Rules of Civil Procedure is “quite broad.” Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 402 (6th Cir. 1998). It is “broader than that permitted at trial. The test is whether the line of interrogation is reasonably calculated to lead to the discovery of admissible evidence.” Mellon v. Cooper-Jarrett, Inc., 424 F.2d 499, 501 (6th Cir. 1970). Even though all material obtained through discovery may not be offered or admitted at trial, “[m]utual knowledge of all the relevant facts . . . is essential to proper litigation.” Hickman v. Taylor, 329 U.S. 495, 507-08 (1947). -29- The government invokes a“law enforcement investigatory privilege.” This privilege exists where there is (1) “a formal claim of privilege by the head of the department having control over the requested information”; (2) an assertion of privilege is “based on actual personal consideration by that official”; and (3) “the information for which the privilege is claimed [is] specified, with an explanation why it properly falls within the scope of the privilege.” In re Sealed Case, 856 F.2d 268, 271 (D.C. Cir. 1988). The privilege can apply to lesser-positioned officials such as the head of the appropriate regional division of the FDIC’s supervisory personnel, head of the U.S. Army Criminal Investigation Command, FBI general counsel, or inspector general. See Landry v. FDIC, 204 F.3d 1125, 1135 (D.C. Cir. 2000) (citations omitted). It has also been applied to prohibit disclosure of FBI agents’ names and FBI’s internal operating protocols. Puerto Rico v. United States, 490 F.3d 50, 70-71 (1st Cir. 2007). The law enforcement investigatory privilege applies with greater force to a request by a party in a civil suit to obtain materials from the government’s criminal investigation. Dellwood Farms, Inc. v. Cargill, Inc., 128 F.3d 1122, 1124 (7th Cir. 1997). “The burden of establishing the existence of the privilege rests with the party asserting it.” United States v. Dakota, 197 F.3d 821, 825 (6th Cir. 1999) (citing In re Grand Jury Investigation No. 83-2-35, 723 F.2d 447, 450 (6th Cir. 1983 . The government’s justification for refusing discovery parallels its request to stay the proceedings altogether. As noted above, that justification is unpersuasive. In their motion papers, all parties have identified their respective discovery needs, and it is apparent that more time will be needed to ready the case for trial. But not much. Depositions of some of the actors have been taken already, and the government apparently completed its -30- investigation sufficiently to maintain successful prosecutions in two separate cases. The Court will allow a limited time to complete discovery. IV. Conclusion The Court concludes that fact questions preclude summary judgment for the claimants. There is no basis to stay the proceedings any further. The government’s motion for a protective order will be granted in part and denied in part. The parties must complete discovery. A trial date will be scheduled following a status conference. Accordingly, it is ORDERED that H.D. Smith’s amended motion for partial summary judgment [dkt # 54], Ronald G. Carson’s motion for judgment on the pleadings or summary judgment [dkt. # 80], and Stacey Hogan Gianoplos’s motion for judgment on the pleadings or summary judgment [dkt. # 88], and Carson’s and Gianoplos’s renewed motion for summary judgment [dkt. #121] are DENIED. It is further ORDERED that the government’s motion for protective order or, in the alternative, for entry of stay [dkt. # 111] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the claimants may not obtain sealed documents in the criminal cases before Judge Cook in this district until they move successfully to unseal those documents; and the claimants may not obtain witness testimony presented to the grand jury. The government’s motion is denied in all other respects. It is further ORDERED that the parties shall complete discovery by May 31, 2011. It is further ORDERED that counsel for the parties appear before the Court on April 20, 2011 at 2:30 p.m. to discuss further case management deadlines and schedule the matter for trial. s/David M. Lawson -31- Dated: March 24, 2011 DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 24, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -32-

=== City of Detroit v. Comcast of Detroit, Inc., f/k/a Comcast Cablevision of Detroit, Inc. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION CITY OF DETROIT, v. Plaintiff, Case Number 10-12427 Honorable David M. Lawson COMCAST OF DETROIT, INC., f/k/a Comcast Cablevision of Detroit, Inc., __________________________________________/ Defendant. OPINION AND ORDER DENYING DEFENDANT’S MOTION TO DISMISS In industries that have both a national presence and a significant local impact, like the cable television industry, which is the subject of the present case, regulators are presented with the difficult task of reconciling interests of uniformity with those of the local community. The natural tension that arises from these competing concerns is created by the need to address local issues that may be unique among individual communities, while avoiding a balkanized system of rules that make compliance by national or regional companies difficult or worse. Congress attempted to strike that balance when enacting the 1984 Cable Communications Policy Act, 47 U.S.C. § 521 et seq. (the Cable Act), which, among other things, regulates the procedure for cable television providers to obtain, modify, and renew franchises from local governmental units. In 2007, the State of Michigan promulgated the Michigan Uniform Video Services Local Franchise Act, Mich. Comp. Laws § 484.3301 et seq., which established a uniform franchise agreement that local municipalities must use with their cable service providers. The Michigan law substantially curtails the authority of local governments to require cable providers to furnish certain services as part of the grant of a franchise. In the present case, the City of Detroit has filed a complaint against Comcast of Detroit, the cable provider for Detroit residents, alleging the following: (1) the state statute conflicts with and therefore is preempted by the federal law, which requires a franchisee to furnish a certain level of basic cable services; (2) Comcast refuses to negotiate with the City to renew its cable franchise and has unilaterally modified the prior franchise agreement to eliminate provisions required under the federal statutes but not the state law; (3) and the Michigan law is unconstitutional to the extent it allows Comcast to ignore the requirements of the Cable Communications Policy Act and the City’s insistence that its cable franchise provide federally-mandated services. The City asks for a declaration that the Michigan law is unconstitutional, Comcast has violated federal law by not renewing its franchise agreement according to the federal statutory procedure, and Comcast is bound by a prior, expired franchise agreement; an order requiring specific performance by Comcast of the prior franchise agreement; and damages for failing to provide the services required under the franchise agreement. The City alleges that this Court has subject matter jurisdiction under 28 U.S.C. § 1331 because the case arises under federal law. Comcast has filed a motion to dismiss, alleging that the complaint does not state a claim and raises no substantial federal question because the Cable Act does not create a private right of action. The Court heard oral argument on the motion on December 1, 2010. The Court finds that the City alleges preemption under the Supremacy Clause of the Constitution and rights arising under the franchise agreement that the City can enforce. These claims raise a substantial federal question. Because the complaint states a cause of action that “aris[es] under the Constitution, laws, or treaties of the United States,” 28 U.S.C. § 1331, the Court has subject matter jurisdiction, and the defendant’s motion to dismiss must be denied. -2- I. According to the complaint, in the early 1980s, plaintiff City of Detroit issued a request for proposals for a cable system to service residents in the city of Detroit, Michigan. Ultimately, the City selected Barden Cablevision of Detroit from the submissions and held public hearings on its proposal. The City Council adopted Ordinance No. 560-H, through which the City entered into a Cable Communications Service Franchise Agreement with Barden. The record does not provide the date of this agreement, but the plaintiff alleges that the agreement “was later amended and restated in 1985.” Compl. ¶ 14. Sometime thereafter, Comcast assumed that franchise. Under the franchise, Comcast is required to provide non-discriminatory services to Detroit residents, provide PEG channel access and facilities and “I-Net” communications network services for the City government, and comply with customer service laws and regulations. The franchise expired on February 28, 2007. Pursuant to section 546 of the Cable Act, the City and Comcast commenced negotiations to renew the franchise at some point before it expired. Comcast and the City never reached an agreement. Instead, Comcast has declared that the franchise was renewed by operation of a state law enacted in 2007 after the renewal negotiations were underway, known as the Uniform Video Services Local Franchise Act (the “Michigan Act”), Mich. Comp. Laws § 484.3301 et seq. The Michigan Act required the Michigan Public Service Commission to “establish[] the standardized form for the uniform video service local franchise agreement to be used by each franchising entity in this state.” Mich. Comp. Laws § 484.3302(1) (emphasis added). Local units of government are prohibited by the Michigan Act from using any other franchise agreement form or demanding fees or services that are not included in the standard form. Mich. Comp. Laws § -3- 484.3303(8); see also Mich. Comp. Laws § 484.3305(3) (“On the effective date of this act, any provisions of an existing franchise that are inconsistent with or in addition to the provisions of a uniform video service local franchise agreement are unreasonable and unenforceable by the franchising entity.”). The Michigan Act also prescribed the procedure for entering into and renewing franchise agreements between cable operators and local government units. First, the cable operator must submit the proposed uniform franchise agreement to the local government unit. Within fifteen days, the government unit must inform the cable operator if the form is complete. When the form is complete, the government unit has thirty days to approve the agreement. Mich. Comp. Laws § 484.3303(2)-(3). If the government unit does not approve the proposed agreement within that time period, “the franchise agreement shall be considered complete and . . . approved.” Mich. Comp. Laws § 484.3303(3). The City alleges that once the Michigan Act went into effect, Comcast refused to continue franchise negotiations. Instead, Comcast submitted the uniform franchise form to the City on February 28, 2007. According to the City, the proposed uniform agreement lacked key provisions in the existing franchise agreement (which were at the heart of the renewal negotiations) concerning consumer protections, anti-discrimination, and public, educational, and government (PEG) channels, all of which allegedly are required under the federal Cable Act. On March 16, 2007, the City approved the uniform franchise agreement subject to additional terms mandating fees for PEG channels. However, on April 23, 2007, Comcast sent the City a letter rejecting the franchise as approved and asserted that the uniform franchise agreement was in effect under the terms of the Michigan Act. Comcast continued to provide services to the City under the terms of that agreement, -4- even though the City asserts that it never approved the franchise and Comcast’s previous franchise had expired by its own terms on February 28, 2007. The 1985 franchise agreement contained several terms favorable to the City. It required Comcast to provide free hook-ups (“drops”) and service to municipal and school buildings; maintain a network to facilitate communications among City buildings; furnish additional PEG channels and at least three PEG studios, plus mobile units, staff, and equipment; make payments to the Public Benefit Corporation to support PEG channels; and provide free transmission lines for the City’s PEG channels. Comcast terminated many of these features when it declared the uniform agreement to be in effect and governing its relationship with the City of Detroit. The City characterizes Comcast as a “holdover tenant,” and as such the City believes that Comcast should be bound by the terms of the original 1985 franchise agreement. Compl. ¶ 45. Where the Michigan Act stands as an obstacle to enforcing those terms, the City argues that it is preempted by the Cable Act, which itself establishes minimum service levels and prescribes a procedure for entering and renewing cable franchises. The City’s complaint states four counts: in Count I, the City alleges that Comcast violated the Cable Act by failing to follow its procedures for renewing the franchise, contends that Comcast is holding over, and seeks a declaration that Comcast is bound by the 1985 franchise agreement. The City also asks that provisions of the Michigan Act that are inconsistent with the Cable Act be declared preempted. In Count II, the City alleges that Comcast refuses to fulfil the terms of the 1985 agreement, and the parts of the Michigan Act that nullify those terms are preempted by federal law. The City alleges that Comcast’s refusal has caused it damages, which it seeks in addition to specific performance of the 1985 agreement. In Count III, the City identifies several requirements that the -5- Cable Act imposes on cable operators, which the City contends it has the authority to enforce as a “franchising authority,” but which the Michigan Acts prevents it from enforcing. The City asks for a declaration that the Cable Act preempts the Michigan Act in those instances. Finally, Count IV alleges that the Michigan Act violates a provision of the state constitution that vests the authority in local units of government to regulate and control public spaces and transact business with public utilities for their use. II. The defendant bases its motion to dismiss on Federal Rule of Civil Procedure 12(b)(6), arguing that the City’s complaint fails to state a claim upon which relief can be granted. The argument, as the Court understands it, is that (1) the Cable Act does not create an express or implied private right of action in favor of a franchising authority under federal law; and (2) because both local and state governments are included in the definition of “franchising authority” under the Cable Act, and the City derives its authority to govern from the State, Congress could not have authorized local government units to challenge state law against the requirements of the Cable Act. The motion grounds perhaps suggest that the Court does not have subject matter jurisdiction over the claims brought in the complaint, although the defendant has not asserted a frank jurisdictional challenge. The Sixth Circuit has warned that attacks on the merits should not be confounded with jurisdictional challenges and has admonished courts to be more exacting when addressing challenges that are phrased as an attack on jurisdiction. Primax Recoveries, Inc. v. Gunter, 433 F.3d 515, 518-19 (6th Cir. 2006) (“Clarity would be facilitated . . . if courts and litigants used the label ‘jurisdictional’ not for claim-processing rules, but only for prescriptions delineating the classes of cases (subject-matter jurisdiction) and the persons (personal jurisdiction) falling within -6- a court’s adjudicatory authority.” (quoting Eberhart v. United States, 546 U.S. 12, 16 (2005) (per curiam), and citing Kontrick v. Ryan, 540 U.S. 443, 453 (2004 . Nonetheless, the Court also is mindful of Supreme Court precedent holding that federal question jurisdiction under 28 U.S.C. § 1331 will not be found when the federal statute invoked by a plaintiff does not create a private right of action. See Merrell Dow Pharm., Inc. v. Thompson, , 814 (1986) (holding that “the congressional determination that there should be no federal remedy for the violation of [a] federal statute is tantamount to a congressional conclusion that the presence of a claimed violation of the statute as an element of a state cause of action is insufficiently ‘substantial’ to confer federal-question jurisdiction”); see also Care Choices HMO v. Engstrom, 330 F.3d 786, 788 (6th Cir. 2003). In determining whether the plaintiff has stated a claim, therefore, the Court also must decide subject matter jurisdiction. The Court has an independent duty to determine its power and authority to proceed “[b]ecause lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile.” Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996); see also Her Majesty the Queen in Right of the Province of Ontario, 874 F.2d 332, 339 (6th Cir. 1989); Douglas v. E.G. Baldwin & Assocs., Inc., 150 F.3d 604, 607 (6th Cir. 1998) (reiterating that “[q]uite aside from whether the parties raise jurisdictional issues themselves — or even attempt to consent or agree to federal jurisdiction — federal courts have an independent obligation to investigate and police the boundaries of their own jurisdiction”). Rule 12(b)(6) authorizes dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). When deciding a motion -7- under that Rule, “[t]he court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief.” Cline v. Rogers, 87 F.3d 176, 179 (6th Cir. 1996). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Columbia Nat’l Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Ibid. “To survive a motion to dismiss, [a plaintiff] must plead ‘enough factual matter’ that, when taken as true, ‘state[s] a claim to relief that is plausible on its face.’ Bell Atl. Corp. v. Twombly, , 556, 570 (2007). Plausibility requires showing more than the ‘sheer possibility’ of relief but less than a ‘probab[le]’ entitlement to relief. Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1949 (2009).” Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010). The main thrust of the plaintiff’s complaint is that the only viable franchise agreement is the 1985 agreement, which the defendant has breached in a number of ways by not providing certain cable services to the City and its residents, and therefore the City is entitled to specific performance and damages. To support that argument, the City contends that (1) the Cable Act sets forth the procedures for cable operators to renew franchise agreements, which Comcast spurned in favor of the inconsistent procedure prescribed by the Michigan Act; (2) the Cable Act sets forth the services a cable operator must provide when performing under a franchise agreement with a franchising authority; (3) to the extent that the Michigan Act authorizes renewal procedures and mandatory service levels that conflict with the Cable Act, they are preempted by the Cable Act under the -8- authority of the Supremacy Clause; and (4) to the extent that the Michigan Act interferes with the City’s authority to regulate Comcast as a public utility, the Act violates the Michigan constitution. The defendant views the City’s complaint as an effort to enforce provisions of the Cable Act, which the defendant believes is not viable because the Cable Act does not confer a right of action on a franchise authority to enforce its terms against a cable operator. But the defendant’s argument misses the mark. The Cable Act, specifically 47 U.S.C. § 531(c) (“A franchising authority may enforce any requirement in any franchise regarding the providing or use of such channel capacity.”), confers explicit authority on a franchising authority to enforce PEG channel requirements in an existing franchise agreement. See City of Dearborn v. Comcast of Mich. III, Inc., No. 08-10156, 2008 WL 4534167, at *5 (E.D. Mich. Oct. 3, 2008) (citing Denver Area Educ. Telecommc’ns Consortium, Inc. v. FCC, 518 U.S. 727, 789 (1996) (“[§ 531(b)] authorize[s] local franchise authorities to require cable operators to set aside channel capacity for PEG [channel] access when seeking new franchises or renewal of old ones” (Kennedy, J., concurring and dissenting ; Goldberg v. Cablevision Sys. Corp., 261 F.3d 318, 320-21 (2d Cir. 2001) (a franchising authority can “enforce any requirement in any franchise [agreement] regarding the providing or use of [PEG] channel capacity”) (citation omitted ; Time Warner Entm’t Co., L.P. v. FCC, 93 F.3d 957, 972 (D.C. Cir. 1996) (franchising authorities may mandate PEG channel access as a franchise condition); Time Warner Cable of N.Y. v. City of New York, 943 F. Supp. 1357, 1367 (S.D.N.Y. 1996) (“The [1984 Act gave] . . . a franchising authority the power to require an operator to provide PEG channels” . Section 552 contains similar language concerning customer service requirements. 47 U.S.C. § 552(a) (“A franchising authority may establish and enforce . . . customer service requirements of the -9- cable operator . . . .”). Comcast’s argument that these sections are merely savings clauses finds no support in the statutory text or legislative history, and Comcast has cited none. But the City’s complaint does not purport to seek enforcement of the Cable Act itself. As the plaintiff explained, “[t]he City of Detroit filed this lawsuit to enforce a federally mandated cable franchise between it and Comcast.” Pl.’s Br. in Resp. to Mot. Dismiss at 1 (emphasis added). The City has a common law right to enforce a franchise agreement against a public utility for breach of a franchise agreement. See City of Detroit v. Detroit United Rwy., 215 Mich. 401, 184 N.W. 516 (1921); see also City of Niles v. Michigan Gas & Elec. Co., 273 Mich. 255, 262, 262 N.W. 900, 902 (1935). At its most basic level, the City’s complaint pleads a claim of breach of contract and therefore states a viable cause of action. A more fundamental question is whether this Court has subject matter jurisdiction over such a claim. As the basis of jurisdiction, the City has invoked 28 U.S.C. § 1331, which authorizes the Court to adjudicate “all civil actions arising under the Constitution, laws, or treaties of the United States.” “A complaint arises under federal law if it: (1) states a federal cause of action; (2) includes state-law claims that necessarily depend on a substantial and disputed federal issue; (3) raises state-law claims that are completely preempted by federal law; or (4) artfully pleads state-law claims that amount to federal-law claims in disguise.” Ohio ex rel. Skaggs v. Brunner, 629 F.3d 527, 530 (6th Cir. 2010) (citing Mikulski v. Centerior Energy Corp., 501 F.3d 555, 560 (6th Cir. 2007) (en banc). The last two categories do not come into play and need not be considered. As for the first, it is well recognized that “[a] suit arises under the law that creates the cause of action.” American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260 (1916). The City maintains that because -10- sections 531(c) and 552(a) of the Cable Act allow franchise authorities to “enforce” PEG and customer service provisions of franchise agreements, the Cable Act creates the present cause of action. However, as noted above, the City already had the right to enforce contracts with public utility providers even before the Cable Act was enacted. To say that the Cable Act “created” the cause of action stated in the complaint says too much, since the purpose of the Cable Act was to bring order to the “deliberately structured dualism” that characterized the regulatory atmosphere in the industry at the time. Alliance for Cmty. Media v. FCC, 529 F.3d 763, 767-68 (6th Cir. 2008) (quoting American Civil Liberties Union v. FCC, 523 F.2d 1344 (9th Cir. 1975). A state law claim may still arise under federal law, however, “even though Congress has not created a private right of action, if the vindication of a right under state law depends on the validity, construction, or effect of federal law.” Mikulski v. Centerior Energy Corp., 501 F.3d 555, 565 (6th Cir. 2007) (en banc) (citing Franchise Tax Bd. v. Constr. Laborers Vacation Trust, , 9 (1983 . “[I]t takes more than a federal element to open the ‘arising under’ door” to the federal courthouse. Id. at 568 (citing Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 701 (2006 . “‘[A]rising under’ jurisdiction for state-law claims based on an interpretation of federal law can be found in section 1331 only when there is ‘not only a contested federal issue, but a substantial one’; and ‘federal jurisdiction is consistent with congressional judgment about the sound division of labor between state and federal courts governing the application of § 1331.’” Eastman v. Marine Mech. Corp., 438 F.3d 544, 552 (6th Cir. 2006) (quoting Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 313-14 (2005 . “A ‘substantial’ federal question involves the interpretation of a federal statute that actually is in dispute in the litigation and is so important that it ‘sensibly belongs in federal court.’” -11- Eastman, 438 F.3d at 552 (quoting Grable & Sons, 545 U.S. at 319). The Sixth Circuit looks to the following factors “in assessing this point: (1) whether a federal agency is involved; (2) whether the federal question is important; (3) whether a decision on the federal question will resolve the parties’ dispute; and (4) how many other cases a decision on the issue in this case will resolve.” Brunner, 549 F.3d at 476 (citing Mikulski, 501 F.3d at 570). In seeking to enforce the 1985 agreement against Comcast as a holdover tenant, the City refuses to recognize Comcast’s current franchise because the manner in which it was obtained violated the Cable Act. In addition, the City contends in its complaint that the current franchise agreement allows Comcast to avoid responsibilities required of it by the Cable Act. There is no federal agency involved, although the issues touch on areas administered by the Federal Communications Commission. The federal questions raised by the City’s complaint are important. In fact, they strike at the heart of the Cable Act’s purpose, which is to “establish a national policy concerning cable communications; . . . establish franchise procedures and standards which encourage the growth and development of cable systems and which assure that cable systems are responsive to the needs and interests of the local community; . . . establish guidelines for the exercise of Federal, state, and local authority with respect to the regulation of cable systems; . . . and establish an orderly process for franchise renewal which protects cable operators against unfair denials of renewal . . . .” 47 U.S.C. § 521(1), (2), (3), & (5). When Congress enacted the Cable Act in 1985 to add Title VI to the Communications Act of 1934, there existed an “illdefined [sic] . . . state of regulatory uncertainty” created by the overlapping authority held by the FCC and local municipalities. Alliance for Cmty. Media, 529 F.3d at 767-68. The amending legislation “preserv[ed] the critical role of municipal governments in the -12- franchise process . . . while affirming the FCC’s exclusive jurisdiction over cable service, and overall facilities which relate to such service.” Id. at 768 (quoting City of New York v. FCC, 814 F.2d 720, 723 (D.C. Cir. 1987 . The Act, together with the Cable Television Consumer Protection and Competition Act, Pub. L. No. 102-385, 106 Stat. 1460, passed in 1992, establishes a minimum level of services, PEG channel access, consumer protections, and anti-discrimination requirements that franchising authorities must include in their franchise agreements with cable operators. See Time Warner Entm’t Co., L.P. v. FCC, 93 F.3d 957, 966 (D.C. Cir. 1996). The national legislation establishes a floor and permits local franchising authorities to negotiate with cable operators for higher levels of service, and it prohibits laws and practices that descend below those levels. See 47 U.S.C. § 556(c) (stating that “any provision of law of any State, political subdivision, or agency thereof, or franchising authority, or any provision of any franchise granted by such authority, which is inconsistent with this chapter shall be deemed to be preempted and superseded”). The City alleges that the Michigan Act authorizes — in fact, mandates — franchise agreements with cable operators that countenance service levels below the federal requirements. In other words, the City contends that state law has upset the allocation of responsibility for regulating cable services that the Cable Act assiduously attempted to balance. The City insists that the Michigan Act is expressly preempted by the Cable Act, see 47 U.S.C. § 556(c), and the preemptive language in the statute is enforceable through the Supremacy Clause. The Supremacy Clause itself furnishes a basis for federal question jurisdiction. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n.14 (1983) (“A plaintiff who seeks injunctive relief from state regulation, on the ground that such regulation is pre-empted by a federal statute which, by virtue of the Supremacy Clause of the Constitution, must prevail, thus presents a federal question which the federal courts -13- have jurisdiction under 28 U.S.C. § 1331 to resolve.”). Moreover, the features of the basic service requirements mandated by Congress is a federal question that ought to be adjudicated in a federal forum. Resolution of the federal question — what the Cable Act requires and how the Michigan Act measures up to it — is necessary to determine the parties’ dispute. If the Court determines that the Michigan Act simply puts a finer point on the manner in which cable operators can fulfill the federal requirements, then Comcast will be able to argue that it has complied with the present franchise. If the Michigan Act authorizes a federally unacceptable level of services, the City will be able to demand performance and, perhaps, damages. Answering these questions also may resolve other disputes by local units of government with their incumbent cable service providers. The Court concludes that the complaint raises a substantial, contested federal issue. The Court also must assess whether the exercise of jurisdiction would upset the balance of federal and state responsibilities set forth in the statute. In Mikulski, the Sixth Circuit determined that the balance would be upset by exercising jurisdiction over a fraud claim made by a shareholder who alleged that management overstated earnings by accounting for expenses in a way not allowed by the Internal Revenue Code. The court found that allowing federal jurisdiction would “open[] the federal courts to an undesirable quantity of litigation” by opening the federal courts “to any dispute over the meaning or effect of virtually any provision in the entire federal tax code.” Mikulski, 501 F.3d at 573. In Eastman, the court found no federal jurisdiction over a wrongful discharge claim in which the plaintiff alleged that his firing violated public policy when he blew the whistle on his employer for violating federal contractor regulations. No substantial federal question was found in part because the “balance [of judicial labor in employment cases between state and federal courts] -14- would be upset drastically if state public policy claims could be converted into federal actions by the simple expedient of referencing federal law as the source of that public policy.” Eastman, 438 F.3d at 553. The Court does not find that concern to be a serious one here. The issue presented is a narrow one: does the level of service authorized by the Michigan Act meet the requirements Congress established in the Cable Act. The dispute is confined to the relationship between a local government — a franchising authority — and an incumbent cable operator. Instead, the Court views the present case as similar to the dispute in Grable & Sons, where the Supreme Court saw little danger in accepting jurisdiction of the state title dispute in that case because it would “portend only a microscopic effect on the federal-state division of labor.” Grable & Sons, 545 U.S. at 315. The Court finds that the complaint raises a substantial federal question and subject matter jurisdiction exists under 28 U.S.C. § 1331. The question remains whether the Michigan Act in fact authorizes cable operators to provide substandard levels of service in violation of federal law. Comcast argues that federal law recognizes that States may be franchising authorities the same as municipalities, federal law does not authorize interference with the relationship between a State and its political subdivisions, it has complied with the state statute, which controls, and the City has no grounds to complain about service levels. That all may be true, but the argument ignores the federal proscription against any franchising authority allowing cable operators to furnish less than the basic level of services, imposing a non-uniform rate structure, or otherwise discriminating in providing services. The response to the argument must be the same as when Comcast advanced it in another case in this Court: if state law allows what federal -15- prohibits, “it matters not whether the franchising authority is the state and/or a municipality; the law is preempted.” City of Dearborn v. Comcast of Mich. III, Inc., 2008 WL 4534167, at *6. The parties have not addressed in their motion papers the particulars of the Michigan Act and how it might contravene federal law. That question must await another day. For now, however, the Court finds that the complaint states a claim for which relief may be granted over which this Court has subject matter jurisdiction. III. The Court finds that the complaint states a claim for breach of a franchise agreement, which is a recognized claim. The claim involves a substantial federal question. The Court expresses no opinion on the merits. However, dismissal under Federal Rule of Civil Procedure 12(b)(6) is not called for at this time. Accordingly, it is ORDERED that the defendant’s motion to dismiss [dkt #5] is DENIED. It is further ORDERED that counsel for the parties appear before the Court on April 18, 2011 at 10:00 a.m. to discuss further case management deadlines. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 18, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 18, 2011. s/Susan K. Pinkowski SUSAN K. PINKOWSKI -16-

=== Tax Increment Finance Authority and City of Dearborn Heights v. Liberty Mutual Insurance Company and Project Control Systems, Inc. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION TAX INCREMENT FINANCE AUTHORITY, and CITY OF DEARBORN HEIGHTS, Plaintiffs, Case Number 10-14078 Honorable David M. Lawson v. LIBERTY MUTUAL INSURANCE COMPANY and PROJECT CONTROL SYSTEMS, INC., __________________________________________/ Defendants. OPINION AND ORDER GRANTING PLAINTIFFS’ MOTION TO REMAND The plaintiffs filed suit against Project Control Systems and Liberty Mutual Insurance Company in Wayne County Circuit Court alleging several state law causes of action that arose from the construction of the City of Dearborn Heights’s new Justice Center. Liberty Mutual removed the case to federal court on the basis of diversity jurisdiction, arguing that the fraudulent joinder of Project Control Systems, a dissolved Michigan corporation, did not defeat complete diversity. The plaintiffs argue that the Court cannot rely on Liberty Mutual’s speculation about the status of Project Control Systems’s corporate wind-up, and Michigan law allows suits to be maintained against dissolved corporations. The Court heard oral argument on March 17, 2011. After due consideration, the Court finds that as the removing party, Liberty Mutual has the burden of establishing subject matter jurisdiction, which it has not sustained. Therefore, the Court will grant the plaintiffs’ motion to remand and remand the case to the Wayne County Circuit Court. I. According to the complaint and the motion papers, in July 2001, Tax Increment Finance Authority of the City of Dearborn Heights (TIFA) and Project Control Systems, Inc. (PCSI) entered into a contract in which PCSI was to construct a new police and court facility, now known as the Dearborn Heights Justice Centner, in Dearborn Heights, Michigan. Liberty Mutual Insurance Co. issued a payment bond and a performance bond, each in the amount of $14,950,000, on behalf of PCSI for the benefit of the City of Dearborn Heights. In October 2003, the City’s police department, the Twentieth District Court, and TIFA moved into the Justice Center. PCSI was automatically dissolved on July 15, 2009 for failure to file its annual report and pay the annual fee pursuant to Michigan Compiled Laws § 450.1922. The plaintiffs filed suit against PCSI and Liberty Mutual on September 7, 2010 in the Wayne County, Michigan circuit court alleging that PCSI did not build the following portions of the Justice Center in accordance with the agreed upon specifications and design: the standing seam metal roof and roof membrane; the skylight system; the heating, ventilation, and cooling system; the exterior lighting for the building; and the parking lot. The complaint also alleges that the plaintiffs, after seeing the results of a forensic investigation of the building, concluded that PCSI failed to fulfill all undertakings, covenants, terms, conditions, and agreements under the contract. On April 27, 2010, the City of Dearborn Heights adopted a resolution declaring PCSI in default and requiring Liberty Mutual to meet its obligations as surety for the project. TIFA adopted a similar resolution on May 19, 2010. The plaintiffs’ four-count complaint alleges breach of contract against PCSI (Count 1); negligence against PCSI (Count 2); breach of warranty against PCSI (Count 3); and a surety claim under the performance bond against Liberty Mutual (Count 4). -2- Liberty Mutual was served with the plaintiffs’ complaint on September 14, 2010. PCSI was served on September 22, 2010 by service upon a corporate officer, its vice-president, Michael Cowley, in accordance with Michigan Court Rule 2.105(D)(1). Proof of service of the summons and complaint upon PCSI was filed in Wayne County on October 8, 2010. Liberty Mutual filed a notice of removal on October 12, 2010 asserting jurisdiction based diversity of citizenship. The Court ordered Liberty Mutual to show cause why the case should not be remanded for want of jurisdiction on November 3, 2010. On November 5, 2010, the plaintiffs filed the motion to remand that is currently before the Court. In a related case, Liberty Mutual v. PCSI, No. 10-10102, Liberty Mutual brought suit against PCSI, Assem Sheikh, and Nada Sheikh. In its complaint, Liberty Mutual alleges that PCSI is a former Michigan corporation. II. The federal district courts are courts of limited jurisdiction, and the burden of establishing jurisdiction rests with the defendant, as the party removing the case and asserting federal jurisdiction. See, e.g., Kokkonen v. Guardian Life Ins. Co. of Am., , 377 (1994). “‘[A]ll doubts as to the propriety of removal are resolved in favor of remand.’” Jacada (Europe), Ltd. v. Int’l Mktg. Strategies, Inc., 401 F.3d 701, 704 (6th Cir. 2005) (quoting Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999 , abrogated on other grounds by Hall St. Assocs., L.L.C. v. Mattel, Inc., (2008). Title 28, section 1441(a) of the United States Code permits defendants in civil actions to remove cases originally filed in state courts to federal district courts where the district court would have had original jurisdiction. Cases may be removed under federal question jurisdiction or on the -3- basis of diversity of citizenship. 28 U.S.C. § 1441(a). The plaintiffs have not alleged a federal cause of action in their complaint; therefore, removal is proper only if this Court would have had original jurisdiction based on diversity of citizenship. It is axiomatic that federal diversity jurisdiction exists only when “no plaintiff and no defendant are citizens of the same state.” Jerome-Duncan, Inc. v. Auto-By-Tel, L.L.C., 176 F.3d 904, 907 (6th Cir. 1999) (citing United States Fidelity & Guar. Co. v. Thomas Solvent Co., 955 F.2d 1085, 1089 (6th Cir. 1992 . Therefore, complete diversity of citizenship must exist “both at the time that the case is commenced and at the time that the notice of removal is filed.” Ibid. (citing Easley v. Pettibone, 990 F.2d 905, 908 (6th Cir. 1993 . In this case, the plaintiffs, both are public bodies located in Wayne County, Michigan. One argument they make in support of the motion to remand is that Liberty Mutual’s notice of removal fails to recite facts sufficient to establish the location of its “nerve center,” so the Court cannot decide whether the parties have complete diversity. See Hertz Corp. v. Friend, --- U.S. ---, ---, 130 S. Ct. 1181, 1186 (2010) (“[T]he phrase ‘principal place of business’ refers to the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities. . . . We believe that the ‘nerve center’ will typically be found at a corporation’s headquarters.”). However, Liberty Mutual has disarmed that argument by showing that its principal place of business is in Massachusetts. If Liberty Mutual were the only defendant, complete diversity would exist. PCSI, however, is a Michigan corporation, albeit a dissolved one. Its presence in the case destroys complete diversity. Liberty Mutual responds that because PCSI is defunct, it is not a party against which a suit can be maintained, and including that entity in the case amounts to fraudulent joinder. -4- The doctrine of fraudulent joinder indeed does constitute an exception to the complete diversity rule. “When a non-diverse party has been joined as a defendant, then in the absence of a substantial federal question the removing defendant may avoid remand only by demonstrating that the non-diverse party was fraudulently joined.” Jerome-Duncan, 176 F.3d at 907 (quoting Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir. 1992 . Establishing that joinder of a party is “fraudulent” requires no proof of the plaintiff's actual motive. Ibid.; see also 16 Moore's Fed. Prac. § 107.14[2][c] (noting that “[t]he term ‘fraudulent joinder’ is a bit misleading because it requires neither a showing of fraud nor joinder in one sense”). Rather, the thrust of the inquiry is “whether [the plaintiff] had at least a colorable cause of action against [the non-diverse defendant] in the Michigan state courts.” Jerome-Duncan, 176 F.3d at 907 (citing Alexander v. Elec. Data Sys. Corp., 13 F.3d 940, 949 (6th Cir. 1994 . Federal courts look to state law to determine whether a plaintiff states “a colorable cause of action” against the non-diverse defendant. Ibid. Liberty Mutual does not contend that the plaintiffs have not brought valid claims under Michigan law or that the facts alleged constitute colorable claims; rather, Liberty Mutual asserts that the plaintiffs cannot sue PCSI because it is a “dead” corporation — it has been dissolved and finished winding up its affairs. Under Michigan law, a dissolved corporation continues to function as if it still existed, retaining the ability to “sue and be sued in its corporate name . . . as if dissolution had not occurred.” Mich. Comp. Laws § 450.1834. But once a corporation finishes winding up its affairs, the corporation “loses the powers enumerated in [Mich. Comp. Laws §] 450.1833 and 450.1834, including the power to sue and be sued.” Flint Cold Storage v. Dep’t of Treasury, 285 Mich. App. 483, 498, 776 N.W.2d 387, 396 (2009); see also BASF Corp. v. Central Transp., Inc., 830 F. Supp. 1011, 1012-13 (E.D. Mich. 1993). -5- Corporations are allowed a reasonable time to wind up their affairs. Flint, 285 Mich. App. at 497, 776 N.W.2d at 395. Liberty Mutual argues that the “reasonable time” has expired. It contends that PCSI has no assets to distribute, based on an affidavit of Michael Bramhall, Liberty Mutual’s surety counsel, who averred on information and belief that Federal Insurance Company, another surety company, obtained a default judgment against PCSI on May 22, 2006, in the amount of $2,750,000, and has yet to collect because Project Control Systems has no assets. He also averred that although Liberty Mutual named PCSI as a defendant in the indemnity lawsuit arising from PCSI’s failures, Liberty Mutual has not served PCSI, choosing instead to pursue the individual indemnitors, Assem Sheikh and Nada Sheikh, in Qatar. Liberty Mutual also offered the affidavit of Michael Cowley, PCSI’s vice president, who averred that PCSI had no choice but to wind up its affairs once Federal Insurance Company obtained a $2,750,000 judgment against Project Control Systems; Project Control Systems is completely out of business; and all of its assets have been distributed. There is little in the way of Michigan case law that provides guidance in deciding what constitutes a reasonable time for a corporation to wind up its affairs. In Flint Cold Storage, the Michigan Court of Appeals held that a 32-year winding up period was not reasonable. A now- repealed section of Michigan’s General Corporation Act established a bright line of three years. See Mich. Comp. Laws § 450.75 (1931); see also Flint Cold Storage, 285 Mich. App. at 496, 776 N.W.2d at 394-95 (“Under Michigan’s former General Corporation Act (GCA), a dissolved corporation had only three years after its date of dissolution for the winding up of corporate affairs.”) PCSI was dissolved on July 15, 2009, and Liberty Mutual filed a notice of removal on October 12, 2010. At the time of removal, Project Control Systems had been dissolved for approximately one -6- year and three months — no where near the three decades deemed unreasonable by the Flint Court. Based on the passage of time alone, the Court cannot find that a “reasonable time” for PCSI to wind up its affairs has elapsed. Under Michigan Compiled Laws § 450.1833, a dissolved corporation has a reasonable time to “(a) collect its assets; (b) sell or otherwise transfer, with or without security, assets which are not to be distributed in kind to its shareholders; (c) pay its debts and other liabilities; and (d) do all other acts incident to liquidation of its business and affairs.” If a corporation still has assets within a reasonable time after dissolution, it has not finished its winding up process, and, therefore, may be sued. The affidavits furnished by Liberty Mutual suggest the possibility that PCSI has completed that process. On closer examination, however, Mr. Bramhall’s knowledge of PCSI’s assets is speculative and does little to resolve any doubt about the Court’s jurisdiction. It may be true that Federal Insurance Company has an unsatisfied judgment against PCSI, but that does not necessarily mean that PCSI has no assets secreted, particularly when its principals have fled the country to the Middle East. Mr. Cowley’s affidavit states that PCSI has disposed of all its assets, including bank accounts, personal property, and real property. But there is authority in this district that suggests imprudence at relying on a corporate officer’s assertions to establish that all of a corporation’s assets have been distributed. See BASF Corp., 830 F. Supp. at 1013. Liberty Mutual has not submitted any records indicating the closure of PCSI’s bank accounts, distributions made to shareholders, or correspondence between the corporation and its shareholders. Liberty Mutual asks the Court to make the determination that the often long and complex process of winding up a corporation’s affairs is complete based solely on Mr. Cowley’s affidavit. -7- In addition, Mr. Cowley’s execution of two tolling agreements on behalf of PCSI in November 2008 and March 2010 raises additional questions. There is authority that suggests that a corporation that recognizes a potential outstanding claim has not finished winding up its affairs. United States v. Adams Building Co., 531 F.2d 342 (6th Cir. 1976). For these reasons, the Court finds that doubts remain as to whether PCSI is a defunct corporation that is “dead and buried.” See BASF Corp., 830 F. Supp. at 1013 n.1. “Because lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts resolved in favor of remand.” Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996) (quoting Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985 ; see also Her Majesty the Queen in Right of the Province of Ontario v. City of Detroit, 874 F.2d 332, 339 (6th Cir. 1989). The Court so concludes. III. Defendant Liberty Mutual Insurance Company has the burden of establishing the grounds for federal jurisdiction because it removed the case from state court. On the face of the complaint, complete diversity does not exist because Michigan citizens are among the plaintiffs and the defendants, and the plaintiffs have stated a claim against the Michigan defendant that is cognizable under state law. Liberty Mutual has not established to the Court’s satisfaction that the Michigan defendant, although a dissolved corporation, has wound up its affairs; and a reasonable time for it to do so has not elapsed. Therefore, the fraudulent joinder doctrine will not excuse a violation of the complete diversity rule. Accordingly, it is ORDERED that the plaintiffs’ motion to remand [dkt #9] is GRANTED. -8- It is further ORDERED that the case is REMANDED to the Wayne County, Michigan circuit court. Dated: March 18, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 18, 2011. s/Susan K. Pinkowski SUSAN K. PINKOWSKI -9-

=== CURTIS PARKS v. MILLICENT WARREN ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION CURTIS PARKS, Petitioner, v. MILLICENT WARREN, ________________________________________/ Respondent. Case Number 05-10036 Honorable David M. Lawson Magistrate Judge Charles E. Binder OPINION AND ORDER REJECTING MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION, OVERRULING RESPONDENT’S OBJECTIONS, AND DENYING PETITION FOR WRIT OF HABEAS CORPUS This case is before the Court once again on objections to a report and recommendation filed by Magistrate Judge Charles E. Binder. Petitioner Curtis Parks filed a petition for writ of habeas corpus challenging his convictions of three counts of first-degree criminal sexual conduct in the Kent County, Michigan circuit court in October 2001. The petition raised four issues for resolution: minorities were systematically excluded from the jury array, which resulted in the denial of a fair cross section of the community on the petitioner’s trial jury; the state prosecutor abused the jury selection process by using his peremptory challenges to exclude African Americans from the jury; the petitioner’s trial counsel was ineffective for failing to mount a timely objection to the prosecutor’s conduct; and the petitioner was denied a fair trial when the state court allowed the prosecutor to introduce a mug shot in evidence. Judge Binder originally recommended denying the petition, and over the petitioner’s objections, the Court adopted the report as to all but the jury array issue. As to that issue, the Court referred the matter back to Judge Binder to conduct an evidentiary hearing. Judge Binder consolidated this case with another habeas case that raised a similar challenge and held a joint hearing. Thereafter, Judge Binder issued a report recommending that the petitioner’s “claim[] that [he] was denied [his] Sixth Amendment rights to a fair and impartial jury drawn from a fair cross-section of the community be allowed to proceed because [the petitioner has] established a prima facie case.” R&R at 1 Jan. 15, 2010). The respondent filed objections. I. The facts of the case have been discussed by the magistrate judge and this Court in prior filings. The essence of the case is a charge of sexual assault by the petitioner. The victim claims that the petitioner penetrated her three times against her will, and the petitioner asserted that the sexual encounter was consensual in exchange for money. A Kent County jury rejected the petitioner’s version and convicted him. The petitioner was sentenced on November 29, 2001 to a prison term of fifteen to forty years. At the state trial, the petitioner did not object to the jury array. While the case was pending on direct appeal, a report surfaced that a computer error by the Kent County jury department resulted in the exclusion from jury service of Zip Code sections of the county that corresponded to the highest concentration of African Americans in the population. The petitioner moved in the state court of appeals to remand the case to develop a factual record. It does not appear that the court of appeals ruled on that motion; instead that court declined to reach the issue of under-representation of minorities because the petitioner did not raise the issue in the trial court, and his attorney stated that he was satisfied with the jury when asked if he desired to exercise further peremptory challenges. In its prior opinion, this Court rejected the respondent’s contention that review of the fair cross-section issue was barred because an adequate and independent state ground supported the state court judgment. The Court found cause for departing from the state procedural rule, explaining: -2- The petitioner could not have known of Kent County’s computer deviation at or before the time of jury selection. County officials did not even know about it, having discovered it several months after the petitioner’s trial. “A habeas petitioner shows ‘cause’ where he demonstrates that he failed to raise a constitutional issue because it was ‘reasonably unknown to him’ at the time.” Fautenberry v. Mitchell, 515 F.3d 614, 629 (6th Cir. 2008) (quoting Amadeo v. Zant, 486 U.S. 214, 222 (1988 ; see also Jamison v. Collins, 291 F.3d 380, 388 (6th Cir. 2002) (“Cause is shown when the factual basis of the claim was ‘reasonably unknown’ to the defendant’s counsel.”). The petitioner has established cause. Parks v. Warren, 574 F. Supp. 2d 737, 744 (E.D. Mich. 2008). After finding that prejudice was presumed, the Court referred the matter for an evidentiary hearing and ordered that counsel be appointed for the petitioner. II. In the single issue that remains in the habeas petition, the petitioner contends that African Americans were systematically excluded from the jury venire from which his trial jury was selected in the Kent County circuit court. From the evidence presented to Judge Binder at the evidentiary hearing, it appears that the petitioner is correct. After appointing counsel from the Flint, Michigan Federal Defender Office, Judge Binder held an evidentiary hearing on October 26, 2009, during which he heard the testimony of only one witness – Wayne Bentley, a Grand Rapids Public Schools teacher who since 1998 has been a member of the Kent County Jury Commission, which oversees the Kent County jury processes. In addition, Judge Binder received several exhibits, including: (a) the November 14, 2007 deposition testimony of Kent County circuit court case management manager Terry Holtrop, which was taken in a different habeas case; (b) a Kent County Jury Management System Report dated August 1, 2002 describing the computer error; (c) a report by expert witness Paul L. Stephenson, III, Ph.D. prepared -3- for a case in the Kent County Circuit Court, People v. Bryant, No. 01-08625; and (d) a report prepared by the petitioner’s expert witness Edward Rothman, Ph.D. See dkts. # 46, 51. Wayne Bentley testified that for ten years, he sent students from his government class to the Kent County circuit court to “go into the jury assembly room and count the minorities in the pool.” Evid. Hr’g Tr. [dkt. # 48], at 15. “[F]or the better part of ten years, at least once a month we counted minority jurors every day for that month, and we did it right on through 2003.” Ibid. Bentley described several irregularities in the Kent County jury system, but the one that has direct relevance to the petitioner’s October 2001 trial had its origin in the summer of 2001. Bentley testified that is when he noticed the absence of African Americans from jury venires. That prompted Bentley to file a FOIA request asking for addresses of all jurors summoned for a potential pool. After he received and analyzed the response, he learned that minority representation for the residents from the 49507 Zip Code area, which is the second largest population zip code, and has ninety percent African- American population, was “8.4 standard deviations below the norm,” while representation of residents from the 49343 zip code, which is a predominantly white suburb of Rockford, was “4.7 standard deviations above the norm.” Id. at 27, 36. Ultimately, a computer error was found to be the culprit. Terry Holtrop, a case management manager from the Kent County, testified that after Bentley raised his concerns during Kent County Jury Commission meetings, the issue “came to a head” in September 2001, after Bentley became “very vocal about it.” Evid. Hr’g Ex. 1 [dkt. # 46] (Holtrop dep.) at 9. Holtrop described the computer error as follows: My understanding is that a programmer, not intentionally, pulled — only pulled jurors from basically two zip codes, I believe, instead of the entire county. So that resulted in most of the jurors being summoned from an area that is considered mostly white. -4- Id. at 21. Holtrop explained that out of approximately 450,000 residents in the county, the program selected only 118,000, id. at 21-22, as a result of which “not only were the jurors geographically skewed, but they tended to be ethnically skewed as well.” Id. at 23. On August 1, 2002, Kent County IT department issued a report, which contained the most exhaustive explanation of the computer error. The report explained: Beginning in 2001, Kent County Information Technology (KCIT) began a project, using County IT staff, to move this entire process of updating and loading the State File into an Oracle database. The reasons behind this move were 1) cost cutting – to eliminate the annual payment to ACS for this effort and 2) timeliness – in that we were dealing with a vendor at a remote location and there was a significant lead-time requirement in getting an updated State File returned to Kent County so that it was available in jury p[ools]. The net effect of this incorrect parameter is that the Jury Management System performed a random selection against the first 118,169 prospective jurors on the file. It has been determined that in the initial set-up of the Oracle database to accommodate the driver’s license and State ID data from the State File, an error was made in one parameter. Whether this was a programming error, the carry-over of a setting that existed within the Sybase database, misinterpreting instructions, or simply human error, that is now almost impossible to determine. The parameter that was entered within the database was 118,169. What should have been inserted within this setting was the total number of records in the State File, or 453,981 in 2001. The net effect of this incorrect parameter is that the Jury Management System performed a random selection against the first 118,169 prospective jurors on the file. The percentage of jurors selected per Zip Code was proportional to the Zip Code composition of the first 118,169 records — but not Kent County as a whole. . . . The next logical question being, why then did the jury p[ool] from Zip Code 49341 jump so dramatically for 2001, from an average of 3.8% up to 10.24% . . . and why did the jury p[ools] from Zip Code 49507 decline from an average of 8.56% to 2.13%? The answer being that in 1998 . . . the State File did not come in random order, but rather in Zip Code order. . . lowest numbers to highest numbers. In subsequent years, new prospective jurors (either based on age or having moved to the County) were added to the end of the dataset. Existing prospective jurors (those that were on the file the previous year) would simply have address information updated based on what the State provided. Their position in the dataset would not change. Therefore, the first 118,169 records of the dataset have a high percent of the lower numbered zip codes. As is indicated on the map included in this packet, all the -5- Zip Codes with the lower numbers are located outside of the Grand Rapids metro area. . . . In 2001, the process of changing databases from the Jury Management System . . . was the genesis behind a mistake that was made in the database configuration. An incorrect parameter “told” the jury selection software that the total available pool size was only 118,169 individuals, when in fact it was much larger. The random selection process on the 118,169 records was proportionately correct for that pool size, but not the County in total. For the time period of April 2001 to July 2002, the number of jurors pulled from Zip Codes that began with 493. . . was larger than normal, on a proportional basis. Report: Kent County Jury Management System, Aug. 1, 2002 [dkt. # 46], at 3-4. According to Holtrop, once the problem was corrected in mid-2002, there was a discernible increase in minority participation. Id. at 52; see also Jury Management Study Kent County, Michigan, Rev. July 1, 2003, Ex. 6 to Holtrop dep., Evid. Hr’g [dkt. # 46], at 9 (“The problem has been recognized and has been resolved. Panels selected after August 2002 should not have the zip code bias.”). After the problem was eliminated, the “Black representation went from 2.89% to 4.9% of the respondents.” Jury Management Study Kent County, Michigan., Ex. 6 to Holtrop dep., at 16. The record in this case contains reports by two expert witnesses. The first report is by Paul L. Stephenson III, Ph.D., which was made for Kent County Circuit Court Judge Dennis Kolenda in the case of People v. Bryant, Kent County Docket No. 01-08625-FJ, and covers only January 2002, the month of Bryant’s jury selection. Citing the 2000 United States Census data, Dr. Stephenson determined that 8.2 percent of the Kent County population of 18 years and older is Black or African American, either alone or in combination with one or more other races. Paul L. Stephenson III, Ph.D., A Statistical Analysis regarding the Potential Systematic Exclusion of Black or African Americans in the Jury Pools for the Kent County Circuit Court in Jan. of 2002, Evid. Hr’g Ex. 2 [dkt. # 46]. Out of 45 potential jurors who were selected for the venire in Bryant’s case, only one -6- was Black or African American. Stephenson concluded that “there is a 6.03 percent difference between the percentage of eligible Black and African Americans in Kent County and the actual percentage in the venire.” Id. at 45. Comparing this disparity to the population as a whole, Stephenson found that the venire for Bryant’s trial had 73.1 percent fewer Black or African American members than could have been expected in Kent County. Dr. Stephenson opined that “there is essentially no chance of acquiring the results we obtained if the selection process for potential jurors is unbiased,” and “all the areas in Kent County with zip codes less than or equal to 49504 were underrepresented.” Id. at 47-48. However, despite concluding that “systematic bias did exist in the selection of individuals summoned for jury duty during the first three months of 2002, . . .[which] would have inevitably led to the under representation of Black or African Americans in the terms during this period of time,” id. at 49, Dr. Stephenson opined that since the venire in People v. Bryant contained at least one Black or African American potential juror, “there is insufficient evidence to conclude that the venire in this case was significantly biased.” Id. at 49. The petitioner’s expert witness, Dr. Edward B. Rothman of the University of Michigan, calculated the difference in the number of African Americans in the population and those in the jury pools from April 2001 through August 2002 to be 3.45 percent, which translated into a 42 percent decrease in the likelihood that African Americans would be found in the jury pool during that time period compared with what their census population suggests it should be. Report of Dr. Edward Rothman, Ex. to Evid. Hr’g [dkt. # 51], at 1-2. Dr. Rothman noted a “sharp change from April 2001 through August 2002" in the number of African Americans on the jury roll, and another change after August 2002. Id. at 7; see also id. at 9 (“The average estimated proportion of African Americans -7- or Hispanics has decreased substantially from the January 1998 through March 2001 time period to the April 2001 through August 2002 time period. The difference is statistically significant. . . .”). III. The respondent objected to the magistrate judge’s report and recommendation on three grounds. First, she attempted to revive the procedural default argument, on which the Court already ruled. Second, the respondent discussed the statistical evidence and contended that it did not establish significant under-representation of minorities. Third, she takes issue with the magistrate judge’s conclusion that the exclusion of minorities from the petitioner’s jury venire was systematic. Objections to a report and recommendation are reviewed de novo. 28 U.S.C. § 636(b)(1). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller v. Currie, 50 F.3d 373, 380 (6th Cir.1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the standard of review federal courts must apply when considering applications for a writ of habeas corpus raising constitutional claims. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) permits a federal court to issue the writ only if the state court decision on a federal issue “was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court,” or it amounted to “an unreasonable -8- determination of the facts in light of the evidence presented in the State court proceeding.” 28 U.S.C. § 2254(d)(1)-(2); Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Under that review standard, mere error by the state court does not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) (internal quotes omitted . Additionally, this Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). This narrow standard of review does not apply when the state court does not address a constitutional claim on the merits. The Sixth Circuit recently stated that a “state court may have various reasons for denying an application for leave to appeal ‘for lack of merit in the grounds presented,’” but a federal court cannot “discern from that language alone whether that decision was based on the merits of the case.” Dorn v. Lafler, 601 F.3d 439, 443 (6th Cir. 2010). Where the federal court is unable to “conclude that it was an ‘adjudication on the merits’ pursuant to 28 U.S.C. § 2254(d),” as here, de novo review is appropriate. Ibid. The approach espoused by Dorn was called into doubt by Harrington v. Richter, --- U.S. ---, 131 S. Ct. 770 (2011), which held that “§ 2254(d) does not require a state court to give reasons before its decision can be deemed to have been ‘adjudicated on the merits.’” 131 S. Ct. at 785. The Supreme Court stated that when a claim is presented for adjudication to a state court, there is a presumption “that the state court adjudicated -9- the claim on the merits in the absence of any indication or state-law procedural principles to the contrary.” Id. at 784-85. “The presumption may be overcome when there is reason to think some other explanation for the state court’s decision is more likely.” Id. at 785. Regardless of the continued validity of Dorn v. Lafler, the presumption has been overcome in this case. The state court expressly declined to reach the merits of the fair representation claim due to lack of objection to the venire in the trial court. When a state court declines to address the merits of an issue, this Court conducts an independent review. Harris v. Stovall, 212 F.3d 940, 943 (6th Cir. 2000). The deferential standard of review prescribed by the AEDPA does not apply because “[t]his statute by its own terms is applicable only to habeas claims that were adjudicated on the merits in State court . . . . Where, as here, the state court did not assess the merits of a claim properly raised in a habeas petition . . . questions of law and mixed questions of law and fact [are reviewed] de novo.” Maples v. Stegall, 340 F.3d 433, 436 (6th Cir. 2003) (quotations and citations omitted). This Court’s review of the petitioner’s claims are “not circumscribed by a state court conclusion” because none of the state courts issued a reasoned opinion on the issues. Wiggins, 539 U.S. at 534; see also Maldonado v. Wilson, 416 F.3d 470, 476 (6th Cir. 2005). The petitioner’s main argument is that he was denied his right to a proper jury as guaranteed by the Sixth Amendment. That amendment “secures to criminal defendants the right to be tried by an impartial jury drawn from sources reflecting a fair cross section of the community.” Berghuis v. Smith, --- U.S. ---, ---, 130 S. Ct. 1382, 1387 (2010) (citing Taylor v. Louisiana, (1975). In order to establish a prima facie violation of the fair cross section requirement, the petitioner must prove three elements: “(1) that the group alleged to have been excluded is a ‘distinctive group’ in the community; (2) that the representation of that group in venires from which -10- juries are selected is not fair and reasonable in relation to the number of such persons in the community; and (3) that the underrepresentation is due to the systematic exclusion of the group in the jury selection process.” Duren v. Missouri, 439 U.S. 357, 364 (1979). If the petitioner makes out a prima facie violation, the burden shifts to the State to show a “significant state interest [that is] manifestly and primarily advanced by those aspects of the jury-selection systems, such as exemption criteria, that result in the disproportionate exclusion of a distinctive group.” Id. at 367- 68. Throughout this case, the parties have agreed that African Americans comprise a “distinctive group” in Kent County, satisfying the first element of a prima facie violation. The respondent takes issue with the finding that exclusion of African Americans from the jury pool was “systematic.” That element was the focus of the Supreme Court’s decision in Berghuis v. Smith, which also dealt with an underrepresentation claim originating in Kent County. In Smith, however, the underrepresentation resulted from the now-discarded practice of allocating jurors from a county-wide pool to the county’s local district courts first, and then assigning the remainder to the circuit court. That practice, known as “siphoning,” tended to deplete the minority members in the jury pool before it reached the circuit court. The Michigan Supreme Court found that the defendant had not shown that underrepresentation was due to systematic exclusion because his evidence “did not show ‘how the alleged siphoning of African American jurors to district courts affected the circuit court jury pool.’” Smith, 130 S. Ct. at 1391 (quoting People v. Smith, 463 Mich. 199, 205, 615 N.W.2d 1, 3 (2000 . Applying the AEDPA’s deferential standard of review, the Supreme Court held that the Sixth Circuit erred in ordering habeas relief because Smith, in fact, did not show that the siphoning practice adversely affected minority jury participation. See id. at 1394 -11- (“Although the record established that some officials and others in Kent County believed that the assignment order created racial disparities, and the County reversed the order in response, supra, at 1389-1390, the belief was not substantiated by Smith’s evidence.”). Smith offered in evidence only that when the siphoning practice was discontinued, the comparative underrepresentation of minorities declined from 18% to 15.1%. The evidence in this case is different. First, the statistical evidence in the present case is compelling. The comparative disparity — which measures the unlikelihood of minorities participating on jury service compared to the percentage of minorities in the general popuilation — was substantial: 42 percent (according to Dr. Rothman’s report) and 73.1 percent (according to Dr. Stephenson’s report for January 2002). See United States v. Rogers, 73 F.3d 774, 777 (8th Cir. 1996) (finding comparative disparity of over 30 percent to meet the underrepresentation prong of the Duren test where African Americans comprised only 1.87 percent of the jury-eligible population). Second, there is evidence that exclusion of the African American population from Kent County juries lasted for several months and became noticeable to an ordinary observer. Wayne Bentley testified that during the summer of 2001, he noticed the absence of African American jurors from jury venires and would rarely see a jury venire that contained three percent of African- American members. Other jury commissioners likewise commented on the lack of minority jurors in the pools continuing into 2002. Dr. Rothman’s report captures the dip in the presence of African American jurors in the Kent County jury pools from April 2001 through July 2002 in the following table: -12- Rothman Rep. at 7. As demonstrated, Dr. Rothman noted “a sharp [decrease] from April 2001 through August 2002” in the number of African Americans on jury venires, and a return to pre-computer-error percentages in August 2002 after the defect was corrected. Third, the finding of systematic exclusion of minorities from Kent County juries for the relevant period was endorsed by the state. See People v. Bryant, No. 280073, --- N.W.2d ---, 2010 WL 2836119 (Mich. Ct. App. July 20, 2010). Just this term, the Supreme Court has reiterated that “the basic structure of federal habeas jurisdiction [is] designed to confirm that state courts are the principal forum for asserting constitutional challenges to state convictions.” Harrington, 131 S. Ct. at 787. That fundamental tenet is not upset when a federal court aligns itself with a state court finding on the same issue presented for adjudication. In Bryant, the Michigan Court of Appeals found Kent County’s system of selecting prospective jurors cause underrepresentation of minorities because of the computer error discussed above. Commenting on the comparative disparity, that -13- court stated: “Seventy-three and one tenth percent is a significant comparative disparity and is sufficient to demonstrate that the representation of African-Americans in the venire for defendant's trial was unfair and unreasonable.” Bryant, 2010 WL 2836119 at *4. The court then held: We find that the underrepresentation in this case was the result of the system by which juries in Kent County were selected because jurors from zip codes with small minority populations were routinely over selected and jurors from zip codes with large minority populations were routinely under selected because of a glitch or problem with the computer program that selected jurors. Because of this problem with the computer program, underrepresentation was inherent in the jury-selection process utilized in Kent County during the time that the computer glitch existed. Id. at *5-6. The respondent also challenges the magistrate judge’s determination that the statistical evidence established significant under-representation of minorities. The respondent did not address the impact of the Supreme Court’s decision in Berghuis v. Smith on this case, having filed her objections before the decision came down and not bothering to supplement the State’s filings after the case was decided. Instead, she cited United States v. Buchanan, 213 F.3d 302, 310 (6th Cir. 2000), for the proposition that an absolute disparity of 1.72 percent and comparative disparity of 37.54 percent are insufficient to prove underrepresentation. In Smith, the Court discussed the various statistical tests that have been used to measure underrepresentation, noting that each was “imperfect.” Smith, 130 S. Ct. at 1393. And the Court refused to “take sides today on the method . . . by which underrepresentation is appropriately measured.” Id. at 1393-94. The Court did not criticize the state supreme court’s “case-by-case approach” in which “the results of all the tests [should be considered].” Id. at 1393 (quoting Smith, 463 Mich at 204, 615 N.W.2d at 3). The magistrate judge in this case heard evidence of the absolute disparity and the comparative disparity tests, and also evaluated the results of the standard deviation test, the binomial test, and the Chi- -14- square-goodness-of-fit test. He concluded that the statistical evidence taken as a whole as presented by Drs. Stephenson and Rothman was compelling and established underrepresentation. To the extent that the finding addresses the statistical evidence, the Court agrees. The respondent also asks the Court to revisit its holding that the claim is not barred by the doctrine of procedural default. She cites cases from the Western District upholding that procedural defense in cases raising the underrepresentation issue arising from Kent County during the appropriate time. Burros v. Curtin, No. 1:05cv701, 2009 WL 736066 (W.D. Mich. Mar. 31, 2009); Wellborn v. Berghuis, No. 1:05-CV-346, 2009 WL 891708 (W.D. Mich. Mar. 31, 2009); Davis v. Jones, No. 1:04-cv-294, 2007 WL 2873041 (W.D. Mich. Sept. 26, 2007). The common theme of those cases is that the petitioner could not establish cause for not raising an objection to the jury venire at the time of trial because in each case, the petitioner was confronted by an all-white jury (or a final jury with one minority member); and although the cause (a computer error) may not have been apparent, the result should have piqued his awareness of the issue. Without accepting the soundness of that rationale, those cases can be distinguished here because the petitioner’s jury venire included significantly more minority members than in the three cases cited above. The rationale expressed by the magistrate judge in Burros, which is representative of the three cases, is that the lack of knowledge of a computer error could not amount to “cause” for failure to object at trial, since “[s]imply seeing an array when the deficiency is apparent provides adequate notice,” and the petitioner and his trial counsel “were placed on notice of the basis of his claim as soon as they viewed the jury array.” Burros, 2009 WL 736066 at *9. However, with the small minority population in Kent County at the outset, and with all-white juries commonplace, the absence of minority jurors (or in Burros’s case, a trial jury with one minority member) can hardly serve notice -15- of a “defect” in the jury selection procedure, which also eluded county officials for a significant period of time. The defect was too subtle to detect by any reasonable means, and the petitioner’s conduct amply rebuts any suggestion that he was attempting to bypass deliberately the state courts in seeking adjudication of this issue. See Amadeo v. Zant, , 223-26 (1988). In all events, the time for seeking reconsideration has long past, see E.D. Mich. LR 7.1(h)(1) (establishing a 14-day deadline for reconsideration motions), and the respondent has not shown that the Court’s initial determination was erroneous. Ironically, however, it is that very point that compels the Court to deny the petition on this claim. The state appellate court record in this case includes affidavits filed by the petitioner in support of a motion to remand his case to the trial court to develop a record on his jury composition claims. See dkt. no. 16-3 at 22-28. It also includes U.S. Census data for Kent County during the relevant period. The four affidavits establish that the petitioner was tried by an all-white jury. But they also show that four African Americans were included in the jury venire, although they were removed from the trial jury by the State’s peremptory challenges. In the jury venire of 45 people, the affidavits demonstrate that the minority composition of the petitioner’s jury venire was 8.89%. According to the census data, Kent County’s total population of 574,375 people included 51,287 African Americans. Remarkably, the minority percentage of the Kent County population was 8.93%. Therefore, the racial composition of the petitioner’s jury venire reflected almost exactly the proportion of minorities in the community. The respondent never brought these facts to the Court’s attention at any stage of the proceedings. The Court believes that the facts are dispositive of the underrepresentation issue in this case. The Sixth Amendment requires “the selection of a petit jury from a representative cross -16- section of the community . . . ,” Taylor, 419 U.S. at 528, nothing more. The Supreme Court has consistently maintained that the States have “much leeway” in the application of that requirement. Id. at 537-38; see also Smith, 130 S. Ct. at 1389. A system that consistently produces jury venires that underrepresent distinctive groups in the community falls outside that generous territory. But even with a flawed system, if in a given case “it may be fairly said that the jury lists or panels are representative of the community,” Taylor, 419 U.S. at 528, the Sixth Amendment fair representation requirement is satisfied. And in no case is it “require[d] that petit juries actually chosen must mirror the community and reflect the various distinctive groups in the population.” Ibid. Statistical evidence certainly is a valid means of proving that a jury selection system is fatally flawed. See Duren, 439 U.S. at 364-65 (holding that “[t]he second prong of the prima facie case was established by petitioner’s statistical presentation”). And as noted above, the statistical evidence is compelling in this case. But when the inference commanded by the statistics is rebutted conclusively by the hard evidence on the ground, the statistical inference cannot prevail. As it turns out in this case, Kent County’s flawed system yielded a constitutionally acceptable result, perhaps by happenstance, but an acceptable result nonetheless. The second element of Duren’s test requires that a criminal defendant claiming a fair cross-section violation to prove that “the representation of that group in venires from which juries are selected is not fair and reasonable in relation to the number of such persons in the community.” Id. at 364. The evidence in the state court record does not permit that finding. IV. The Court cannot disagree with the thorough analysis found in Magistrate Judge Binder’s report and recommendation. He studiously discussed the statistical evidence presented at the -17- evidentiary hearing and drew sound conclusions from the facts presented. The respondent’s objections to the report lack merit. The Court is puzzled by the respondent’s failure to include in its briefing or presentation the compelling evidence from the state court record on file that is so crucial to the proper determination of the fair cross-section issue. Had the respondent come forward with that evidence the time and expense of the hearing in this case may have been avoided. Nonetheless, that evidence requires a finding that the petitioner was not denied a jury chosen from a pool that represents a fair cross-section of the community in which his trial took place. Accordingly, it is ORDERED that the magistrate judge’s report and recommendation [dkt. #57] is REJECTED. It is further ORDERED that the respondent’s objections to the report and recommendation [dkt #58] are OVERRULED. It is further ORDERED that the petition for writ of habeas corpus is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 28, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 28, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -18-

=== ANTONIO GARCIA-DORANTES v. MILLICENT WARREN ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ANTONIO GARCIA-DORANTES, Petitioner, v. MILLICENT WARREN, ________________________________________/ Respondent. Case Number 05-10172 Honorable David M. Lawson Magistrate Judge Charles E. Binder OPINION AND ORDER DENYING IN PART PETITION FOR WRIT OF HABEAS CORPUS, AND REFERRING MATTER TO MAGISTRATE JUDGE FOR APPOINTMENT OF COUNSEL AND AN EVIDENTIARY HEARING ON REMAINING HABEAS CLAIM Petitioner Antonio Garcia-Dorantes, presently confined at the Thumb Correctional Facility in Lapeer, Michigan, has filed a pro se petition for writ of habeas corpus pursuant to 28 U.S.C. § 2254 challenging his convictions and sentences for second-degree murder and assault with intent to do great bodily harm less than murder. His amended petition contains seven claims, including improper admission of his pretrial statements, which he says were involuntary and taken in violation of Miranda v. Arizona; violation of his rights under the Confrontation Clause; denial of a fair trial due to prosecutorial misconduct; ineffective assistance of trial and appellate counsel; denial of due process and equal protection rights were infringed through a systematic exclusion of minority jurors in Kent county; and violation his Sixth Amendment right to a jury trial when the judge calculated his sentencing guidelines on the basis judge-found facts. Some of these claims are barred because of an independent state procedural rule with which the petitioner did not comply, and others lack merit. But the claim that minorities were systematically excluded from the petitioner’s jury venire, thereby denying him a jury selected from a fair cross-section of the community, cannot be decided without an evidentiary hearing. Therefore, the Court will deny the petition in part and refer the remaining issue to the magistrate judge for appointment of counsel and an evidentiary hearing. I. The petitioner was involved in a fight and stabbed two people, one fatally, in Grand Rapids, Michigan in the early morning hours of October 22, 2000. He was charged with open murder and assault with intent to do great bodily harm. Before trial, his attorney filed a motion to suppress statements the petitioner made while in custody, which was denied. Following a jury trial, he was convicted of second-degree murder and of assault with intent to do great bodily harm less than murder. He was sentenced to concurrent prison terms of fifteen to fifty years for murder and five to ten years for assault. Jose Gomez, the homicide victim, died from a single stab wound to his upper chest, just beneath his collar bone. The medical examiner determined that Mr. Gomez had been intoxicated at the time of the fight, with a blood alcohol level of .31 percent. Although the medical examiner testified that most persons would be comatose with a blood alcohol level above .30 percent, he could not discount the possibility that Gomez could have attacked someone in a fight situation if he was a habitual drinker. Manuel Garcia was the assault victim. He worked for Gomez. The two men had been drinking that night until about 4:00 a.m. They arrived at Gomez’s house with a third companion, Gonzalo Toledo. When they drove up, the petitioner’s truck was parked across the street. The petitioner testified that he thought the men were part of a gang and that they had tried to force him off the road during an earlier encounter that night. -2- The petitioner was standing outside of his truck. Gomez got out of Garcia’s truck and walked toward him, stating that he “did not want any problems”; he told the petitioner that he should leave or he would call the police. Garcia and Toledo then got out of Garcia’s truck and approached the petitioner. Two other persons had also exited the petitioner’s truck. Garcia testified that when Gomez asked the men to leave, the petitioner replied “And if I don’t want to?” and punched Gomez in the face. Gomez fell down, got up again and “threw himself” at the petitioner. Garcia acknowledged that he did not see which man started the fight. As Garcia attempted to break the fight up, he felt a cramp in his leg and later learned that he had been stabbed in the buttock. Garcia was also stabbed in the back of his neck. Garcia testified that the petitioner then threatened him with a bottle. Toledo testified that Gomez asked him to call the police. As Toledo did so, one of the petitioner’s friends hit him in the head with a bottle. Toledo then heard Gomez say, “Let’s go.” Toledo observed petitioner get into his truck and leave the area, squealing his tires as he left. Gomez, Garcia, and Toledo got into Garcia’s truck. Once inside, Garcia noticed that Gomez was very bloody. Garcia drove Gomez to the hospital. The petitioner and his companions had left the area already. While driving Gomez to the hospital, Garcia passed the petitioner’s truck when it stopped at a stop sign. When Garcia stopped at a red light, the petitioner drove up and crashed into the rear of Garcia’s truck. Garcia continued driving but claimed that the petitioner crashed into his pickup truck two more times. Garcia drove to Gomez’s brother’s house, where they called the police and an ambulance. Police responded to a dispatch of a shooting to an address on Rose Street. Upon arrival, emergency medical personnel informed the police that it had actually been a stabbing and Gomez -3- had died. Officers then received a dispatch for a “hit and run” and went to the petitioner’s house. The police were informed that the petitioner had been involved in a hit and run accident. They noticed damage to the front of the petitioner’s vehicle. They arrested the petitioner and his friend named Christian Diaz. Police Officer John Riley testified that he interviewed the petitioner in the early morning hours of October 22, 2000. Riley ascertained that the petitioner spoke very little English. Riley testified that he was “pretty fluent” in Spanish, and he read the petitioner his Miranda rights in Spanish. Thereafter, the petitioner made two verbal statements. In his first statement, he blamed his wife for the truck crash and resulting damage. Later that afternoon, he made a second statement in which he admitted to having been involved in a fight. The petitioner told the police that he thought that Gomez and his friends were “gangbangers” who had threatened him earlier. Detective Gregory Griffin was present when both statements were made. He testified that although he found no evidence that any of the persons involved in this altercation were gang members, he could not rule out that Gomez was a gang member. The petitioner testified on his own behalf at trial, explaining that he was celebrating his daughter’s birthday on October 21, 2000. He and his friends later left the party to go to his girlfriend’s house, with whom he was having an extramarital affair. The petitioner parked in front of the house and went to the door. When there was no answer, he returned to his truck. It was then that he saw Garcia’s truck arrive. The petitioner claimed that Garcia had tried to ram him with his truck earlier that day and had tried to run the petitioner off the road. He thought Gomez, Garcia, and Toledo were gang members. According to the petitioner, a person from the victim’s truck provoked the fight. When others joined in, he became scared and pulled a knife, thrusting it once as a person -4- lunged at him. That man left and his friends followed. The petitioner claimed that when he went to drive away, the men pulled their truck in front of him and “locked” their brakes, causing the petitioner’s vehicle to collide with their truck. The petitioner went home and told his wife about the accident. He said his wife volunteered to tell the police that she had been driving because the petitioner was intoxicated at the time. The petitioner denied intending to harm anyone. The petitioner’s common-law wife, Anayeli Castellanos, testified that the petitioner woke her in the early morning hours of October 22, 2000 and informed her that someone had crashed into his truck. The petitioner demanded that she call the police to report the incident. The police arrived and arrested the petitioner. Castellanos admitted that she suggested that the petitioner inform the police that she had been driving because petitioner appeared scared and had been drinking. After conviction and sentence, the petitioner filed a direct appeal in the Michigan Court of Appeals raising the following issues: I. The Prosecutor’s comments and argument, individually and cumulatively, constituted misconduct which deprived Mr. Garcia-Dorantes of his state and federal constitutional rights to due process of law and a fair trial. II. Defendant-appellant was denied a fair trial by jury, in violation of his state and federal constitutional rights, where the Kent County system suffered a “glitch,” excluding or underrepresenting minorities from the prospective jury panel. III. Mr. Garcia-Dorantes is entitled to proper sentence credit, where an apparent mathematical error was not noticed at sentencing by the lower court, prosecutor or defense counsel. In a late-filed pro se brief, the petitioner added the following argument: Defendant-appellant[’s] United States constitutional Sixth Amendment right to effective assistance of counsel was violated due to counsel failure to request a suppression hearing and motion that the statement be suppress due to defendant illegal arrest from which the statement was obtained. -5- The court of appeals found no error, but it did “remand for correction of defendant’s judgment of sentence to properly reflect defendant’s jail credit.” People v. Garcia-Dorantes, No. 239306, 2003 WL 22416511 (Mich. Ct. App. Oct. 23, 2003). The petitioner filed an application for leave to appeal in the state supreme court in which he raised yet another issue: Did the trial court abuse its discretion when it change[d] the criteria’s [sic] for probable cause to arrest set by the United States Supreme Court, and the Michigan Court of Appeals violating the defendant’s appellant Fourth Amendment United States constitutional right to be free from illegal search and seizures The application included his other appellate issues as well. The Michigan Supreme Court denied the application because it was “not persuaded that the questions presented should be reviewed.” People v. Garcia-Dorantes, 470 Mich. 865, 680 N.W.2d 897 (2004) (table). The petitioner then filed a petition for writ of habeas corpus in this Court on July 12, 2005. However, he asked that the petition be held in abeyance so he could return to state court to pursue post-conviction relief. The Court obliged, and the petitioner’s motion filed in the state trial court raised the following arguments: I. The defendant’s custodial statements to the police while the defendant was intoxicated and the authorities willful and unreasonable decision not to warn the defendant that he was under arrest rendered the Miranda waiver constitutionally invalid. II. The defendant’s Sixth Amendment rights [under the] Confrontation Clause were violated when the trial court allowed the prosecution to introduce accomplice’s custodial testimonial statements, despite defense counsel’s objections arguing such testimony was not subjected to cross-examination requirements. III. The trial court’s reasons for departure from the recommended sentencing range was clearly erroneous. Further this court’s findings as reasons for sentencing violated the defendant’s [rights under the] Fifth, Sixth, and Fourteenth Amendments to the United States Constitution. -6- IV. The defendant’s Sixth Amendment right to the effective assistance of appellate counsel were violated thus satisfying the “cause” requirement to MCR 6.500, where his appellate counsel failed to raise the issues herein this motion. The Kent County Circuit Court found that the petitioner’s fourth claim was without merit and held it could not grant relief on the first three because they could have been raised, but were not, on direct appeal. People v. Garcia-Dorantes, No. 00-11664-FC (Kent Cnty. Cir. Ct. Nov. 10, 2005). In the same order, the trial court denied the petitioner’s motion for an evidentiary hearing, although it is not apparent on this record why he asked for one. The Michigan Court of Appeals denied the petitioner’s application for leave to appeal “for failure to meet the burden of establishing entitlement to relief under MCR 6.508(D),” People v. Garcia-Dorantes, No. 269176 (Mich. Ct. App. Oct. 11, 2006), and the Michigan Supreme Court followed suit, People v. Garcia-Dorantes, 477 Mich. 1005, 726 N.W.2d 41 (2007) (table). On February 15, 2007, this Court ordered the case reopened and allowed the petitioner to file an amended habeas petition, which he did. The petitioner now seeks the issuance of a writ of habeas corpus on the following grounds: I. II. III. The petitioner’s custodial statements to the police acquired while the petitioner was intoxicated and the authorities’ willful and unreasonable decision not to warn the petitioner that he was under arrest rendered the Miranda waiver unconstitutionally invalid. The petitioner’s Sixth Amendment rights [under] the Confrontation Clause were violated when the trial court allowed the prosecution to introduce [an] accomplice’s custodial testimonial statements, despite defense counsel’s objections arguing such testimony was not subjected to cross-examination requirements. The petitioner’s state and federal due process rights to a fair trial were violated through flagrant prosecutorial misconduct by: (1) eliciting testimonial statements from its officers about alleged testimonial statements [of witnesses] given to them by material witnesses, (2) introducing testimonial statements of witnesses it never intended to produce for -7- confrontation requirements, (3) withholding of evidence, (4) vouching for its witnesses while calling the defendant a liar, and (5) introducing the petitioner’s custodial statements in violation of Miranda and [his] Fifth Amendment rights. IV. The petitioner was constructively denied the effective assistance of counsel where his trial attorney failed to: (1) investigate matters mitigating to the case, (2) failed to object to the prosecution’s flagrant misconduct, (3) failed to object to the improper jury selection when systematic exclusion of other qualified groups was evident, (4) failed to employ all the legal devices to submit the prosecution’s case to meaningful testing, and (5) failed to follow up on exculpatory information given to him by the petitioner proving he was innocent of the alleged crime [of] which he was convicted. V. The petitioner’s Sixth Amendment right to the effective assistance of appellate counsel was violated where the appellate counsel failed to raise the issues raised herein in spite of the petitioner’s explicit request; and when there is a dead-bang winning issue that would have warranted relief had the direct appeal be[en] timely perfected, the lawyer acts in a professionally unreasonable manner and the defendant is prejudiced. VI. The petitioner was denied due process and equal protection . . . by the systematic exclusion of qualified minority groups from prospective jury panels. VII. The trial court’s reasons for departure from the recommended sentencing range was clearly erroneous, and the court’s reasons for departure for the sentence violated the petitioner’s Sixth and Fourteenth Amendments to the United States Constitution. Therefore, Michigan’s presumptive sentencing system is unconstitutional. Am. Habeas Pet. at 18, 26, 37, 44, 52, 55, 59. II. The respondent argues that this Court may not reach many of the petitioner’s arguments because he failed to preserve them by following established state procedures, which constitute an adequate and independent state law ground on which the state court properly denied relief. That defense is known as the doctrine of procedure default. A procedural default is “a critical failure to comply with state procedural law.” Trest v. Cain, , 89 (1997). Such a default may occur -8- if the state prisoner fails to present an issue to a state appellate court at his only opportunity to do so, Rust v. Zent, 17 F.3d 155, 160 (6th Cir. 1994), or if he fails to comply with a state procedural rule that required him to have done something at trial to preserve his claimed error for appellate review, e.g., make a contemporaneous objection or file a motion for a directed verdict. See Simpson v. Sparkman, 94 F.3d 199, 202-03 (6th Cir. 1996). Procedural default will bar consideration of the merits of a federal claim if the state rule is actually enforced and is an adequate and independent ground for the state court’s decision. Coleman v. Thompson, , 750 (1991); Monzo v. Edwards, 281 F.3d 568, 575-76 (6th Cir. 2002). The respondent’s argument is directed to all the issues the petitioner sought to preserve through his post-conviction motion and some of the grounds for alleging ineffective assistance of counsel and prosecutorial misconduct that were not mentioned on direct appeal. The argument has merit as to some of the petitioner’s grounds for relief because they were never raised in the state courts. On direct appeal, the petitioner raised a claim of prosecutorial misconduct involving the prosecutor’s use of the term “victims” to refer to his complaining witnesses, and the prosecutor’s comment that if the jury failed to convict the petitioner, “it certainly would be an insult to the life of Jose Gomez.” The petitioner did not raise any additional prosecutorial misconduct claims on direct appeal or in his post-conviction motion. The habeas petition contains additional arguments, such as the prosecutor referring to the petitioner as a liar, repeated references to Christian Diaz, introduction of the petitioner’s wife’s tape-recorded statement to the police, and the prosecutor’s failure to turn certain evidence over to the petitioner until trial. The only ineffective assistance of trial counsel claim the petitioner made on direct appeal is that his attorney did not move to suppress the petitioner’s statements as the fruit of an illegal arrest -9- until mid-trial. In his habeas petition, the petitioner adds these arguments: his lawyer failed to investigate matters that would have mitigated his conduct, object to the prosecutor’s alleged misconduct, object to the alleged systematic exclusion of minority group members from his jury, obtain a crash expert, investigate whether the complainants and their companions actually were members of a gang, obtain sworn testimony of the petitioner’s co-defendant Christian Diaz, and challenge Officer Riley’s fluency in Spanish. He also raised ineffective assistance of appellate counsel, which, unlike these other arguments, was included in his post-conviction motion. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), govern this case. The AEDPA requires habeas petitioners to exhaust their state court remedies before seeking federal habeas relief by fairly presenting the substance of each federal constitutional claim in state court. 28 U.S.C. § 2254(b)(1)(A), (c). “Exhaustion” means that a prisoner must “‘fairly present[]’ his claim to the state courts by citing a provision of the Constitution, federal decisions using constitutional analysis, or state decisions employing constitutional analysis in similar fact patterns.’” Carter v. Bell, 218 F.3d 581, 607 (6th Cir. 2000) (quoting Hannah v. Conley, 49 F.3d 1193, 1196 (6th Cir. 1995 . The doctrine of exhaustion requires that a prosecutorial misconduct claim be presented to the state courts under the same theory as the prosecutorial misconduct claim being raised in the habeas petition. Williams v. Bagley, 380 F.3d 932, 969 (6th Cir. 2004). Similarly, a habeas petitioner is required to present to the state courts “the same specific claims of ineffective assistance [of counsel] made out in the habeas petition.” Wyldes v. Hundley, 69 F.3d 247, 253 (8th Cir. 1995) (quoting Tippitt v. Lockhart, 903 F.2d 552, 554 (8th Cir. 1990 ; see also Caver v. Straub, 349 F.3d 340, 346-47 (6th Cir. 2003) (citing Pillette v. Foltz, 824 F.2d 494, 497 (6th Cir. 1987 . The petitioner has failed to -10- present, and therefore to exhaust, the prosecutorial misconduct and ineffective assistance of counsel claims recited above. The exhaustion requirements of 28 U.S.C. § 2254(b)(1)(A) and (c) do not bar review of claims where a petitioner no longer has state remedies available to him. Rust v. Zent, 17 F.3d 155, 160 (6th Cir. 1994) (holding that failure exhaust bars review only when the state still provides a remedy to exhaust). The petitioner already filed a post-conviction motion, and in the absence of a retroactive change in the law or newly discovered evidence (neither applies here), he has no further state remedies available to him. Mich. Ct. R. 6.502(G)(2); see Mohn v. Bock, 208 F. Supp. 2d 796, 800-01 (E.D. Mich. 2002). But “[t]he disappearance of state procedural remedies which evaporate with time will not completely excuse a prisoner’s failure to avail himself of them . . . .” Mohn, 208 F. Supp. 2d at 801. Instead, the Court must apply the procedural default rules to those claims. “The Court may review a prisoner’s procedurally defaulted claims on the merits only if he shows cause for not raising his claims at all levels of state court review and prejudice, or that he is actually innocent of the crimes for which he was convicted.” Ibid. (citing Gray v. Netherland, 518 U.S. 152, 162 (1996), and Hannah, 49 F.3d at 1195-96, 1196 n.3); see also Coleman, 501 U.S. at 750-51; Murray v. Carrier, 477 U.S. 478, 496 (1986). The petitioner has neither alleged nor established cause to excuse his procedural default on these claims. When cause has not been shown, the Court need not consider whether actual prejudice has been demonstrated. See, e.g., Smith v. Murray, , 533 (1986); Long v. McKeen, 722 F.2d 286, 289 (6th Cir. 1983). Nor has the petitioner shown actual innocence. See Schlup v. Delo, 513 U.S. 298, 321 (1995) (holding that the “miscarriage of justice” exception to the procedural default rule should apply only to cases where there is a likelihood of convicting a person who is actually innocent). “‘[A]ctual innocence’ -11- means factual innocence, not mere legal insufficiency.” Bousley v. United States, 523 U.S. 614, 623 (1998). “To be credible, [a claim of actual innocence] requires [the] petitioner to support his allegations of constitutional error with new reliable evidence — whether it be exculpatory scientific evidence, trustworthy eyewitness accounts, or critical physical evidence — that was not presented at trial.” Schlup, 513 U.S. at 324. The petitioner has not done so here. In fact, the petitioner has pointed to no new evidence that the jury was not given. Therefore, his procedural default will not be excused on this ground. The unexhausted portions of petitioner’s third and fourth claims (prosecutorial misconduct and ineffective assistance of counsel) are barred by procedural default and do not warrant habeas relief. The respondent also contends that the procedural default bars consideration of the petitioner’s minority juror underrepresentation claim. That issue was raised on direct appeal, but the state court of appeals deemed the claim forfeited because the petitioner did interpose an objection to the jury venire in the trial court. Assuming without deciding that the state’s rule requiring an objection to the jury array prior to the jury being sworn is a firmly-established state procedural rule that is regularly followed, Warner v. United States, 975 F.2d 1207, 1213-14 (6th Cir. 1992), the Court believes that there may be a basis to find both cause and prejudice that excuse his failure to abide by that rule. “A habeas petitioner shows ‘cause’ where he demonstrates that he failed to raise a constitutional issue because it was ‘reasonably unknown to him’ at the time.” Fautenberry v. Mitchell, 515 F.3d 614, 629 (6th Cir. 2008) (quoting Amadeo v. Zant, , 222 (1988 ; see also Jamison v. Collins, 291 F.3d 380, 388 (6th Cir. 2002) (“Cause is shown when the factual basis of the claim was ‘reasonably unknown’ to the defendant’s counsel.”). The underrepresentation -12- claim in this case is based on a computer error in the program that selected citizens for jury service. The computer system had inadvertently excluded nearly 75% of the county’s 454,000 eligible jurors from potential jury pools since the spring of 2001. During this time period, the majority of jurors selected came from the suburbs of Grand Rapids, which racially is overwhelmingly white, to the exclusion of many minority citizens from Grand Rapids proper. According to a July 30, 2002 article in The Grand Rapids Press: W. David Boehm, director of the county’s computer technology department, explained that with only one quarter of the names and addresses to choose from, the computer automatically selected a correct proportion of jurors from each of the county’s zip codes. Then, when the computer noticed the need for hundreds more jurors, it started selecting again from the top of the list - the lowest numbered zip codes that happen to serve the county’s outlying areas. Filling out the needed number, the computer usually stopped at zip code 49505 and never again reached zip codes that cover the county’s most dense population areas The result: more jurors than required were summoned from places such as Rockford and Cannon Township while fewer jurors than expected were summoned from inner- city Grand Rapids. Walker, Kentwood and parts of Wyoming also were under- represented. “We clearly screwed up in that data entry but didn’t know it,” Boehm said. Parks v. Warren, 574 F. Supp. 2d 737, 740-41 (E.D. Mich. 2008) (quoting Doug Guthrie & Kyla King, “Kent Admits Glitch in Jury Selection,” The Grand Rapids Press (July 30, 2002 . This “glitch” has been discussed in other state appellate decisions, see, e.g., People v. Bryant, No. 241442, 2004 WL 513664, at *4 (Mich. Ct. App. Mar. 16, 2004); People v. Perdue, No. 242940, 2004 WL 257256, at *2 (Mich. Ct. App. Feb. 12, 2004); People v. Barnes, No. 244590, 2004 WL 1121901, at *2 (Mich. Ct. App. Jan. 15, 2004), and the State does not appear to take issue with these facts. The Michigan Court of Appeals has ordered a new trial in a case where the jury was selected -13- under this defective system. See People v. Bryant, No. 280073, --- N.W.2d ---, 2010 WL 2836119, at *5-6 (Mich. Ct. App. July 20, 2010) (“We find that the underrepresentation in this case was the result of the system by which juries in Kent County were selected because jurors from zip codes with small minority populations were routinely over selected and jurors from zip codes with large minority populations were routinely under selected because of a glitch or problem with the computer program that selected jurors. Because of this problem with the computer program, underrepresentation was inherent in the jury-selection process utilized in Kent County during the time that the computer glitch existed.”). In another habeas case arising from a Kent County trial that took place during the same period, this Court found cause for departing from the state procedural rule, explaining: The petitioner could not have known of Kent County’s computer deviation at or before the time of jury selection. County officials did not even know about it, having discovered it several months after the petitioner’s trial. “A habeas petitioner shows ‘cause’ where he demonstrates that he failed to raise a constitutional issue because it was ‘reasonably unknown to him’ at the time.” Fautenberry v. Mitchell, 515 F.3d 614, 629 (6th Cir. 2008) (quoting Amadeo v. Zant, , 222 (1988 ; see also Jamison v. Collins, 291 F.3d 380, 388 (6th Cir. 2002) (“Cause is shown when the factual basis of the claim was ‘reasonably unknown’ to the defendant’s counsel.”). The petitioner has established cause. Parks, 574 F. Supp. 2d at 744. Other courts have not subscribed to that rationale. See Burros v. Curtin, No. 1:05cv701, 2009 WL 736066 (W.D. Mich. Mar. 18, 2009); Wellborn v. Berghuis, No. 1:05-CV-346, 2009 WL 891708 (W.D. Mich. Mar. 31, 2009); Davis v. Jones, No. 1:04-cv-294, 2007 WL 2873041 (W.D. Mich. Sept. 26, 2007). The common theme of those cases is that the petitioner could not establish cause for not raising an objection to the jury venire at the time of trial because in each case, the petitioner was confronted by an all-white jury (or a final jury with one minority member); and -14- although the cause (a computer error) may not have been apparent, the result should have piqued his awareness of the issue. The record in this case is not adequate either to apply or reject that rationale. Neither the respondent nor the petitioner has furnished information about the racial or ethnic composition of the jury venire or the petitioner’s trial jury. Therefore, the Court cannot assess whether the petitioner should have been on notice of the defect, or whether it in fact resulted in actual underrepresentation. An evidentiary hearing will be required to settle those issues. Under the federal habeas statute, an evidentiary hearing on a habeas claim may be held if a petitioner is able to establish “a factual predicate [for his claim] that could not have been previously discovered through the exercise of due diligence.” 28 U.S.C. § 2254(e)(2)(A)(ii), (B); see also Sawyer v. Hofbauer, 299 F.3d 605, 610 (6th Cir. 2002) (stating that an evidentiary hearing may be held when the petitioner “alleges sufficient grounds for release, relevant facts are in dispute, and the state courts did not hold a full and fair evidentiary hearing”) (internal quotation marks omitted). The respondent also has alleged that consideration of other arguments is barred by the procedural default rule. However, “federal courts are not required to address a procedural-default issue before deciding against the petitioner on the merits.” Hudson v. Jones, 351 F.3d 212, 215 (6th Cir. 2003) (citing Lambrix v. Singletary, , 525 (1997 . The cause and prejudice inquiry for the procedural default merges with an analysis of the merits of many of the petitioner’s remaining claims; therefore, the Court will proceed to the merits. In addition, the petitioner could not have procedurally defaulted his ineffective assistance of appellate counsel claim because state post-conviction review was the first opportunity that he had to raise this claim. See Hicks v. Straub, 377 F.3d 538, 558 n.17 (6th Cir. 2004). III. -15- The AEDPA “circumscribe[d]” the standard of review federal courts must apply when considering applications for a writ of habeas corpus raising constitutional claims. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) permits a federal court to issue the writ only if the state court decision on a federal issue “was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court,” or it amounted to “an unreasonable determination of the facts in light of the evidence presented in the State court proceeding.” 28 U.S.C. § 2254(d)(1)-(2); Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Under that review standard, mere error by the state court does not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) (internal quotes omitted . Additionally, this Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). A. In the undefaulted portion of his prosecutorial misconduct claim, the petitioner contends that the prosecutor committed misconduct by repeatedly referring to the complaining witnesses as -16- “victims” in his opening statement, and by arguing to the jury in closing argument that an acquittal would be an “insult to the life of Jose Gomez.” “Claims of prosecutorial misconduct are reviewed deferentially on habeas review.” Millender v. Adams, 376 F.3d 520, 528 (6th Cir. 2004) (citing Bowling v. Parker, 344 F.3d 487, 512 (6th Cir. 2003 . Prosecutorial misconduct will form the basis for a new trial and habeas relief only if the alleged misconduct “‘so infected the trial with unfairness as to make the resulting conviction a denial of due process.’” Darden v. Wainwright, 477 U.S. 168, 181 (1986) (quoting Donnelly v. DeChristoforo, , 643 (1974 . “To constitute a denial of due process, the misconduct must be ‘so pronounced and persistent that it permeates the entire atmosphere of the trial.’” Byrd v. Collins, 209 F.3d 486, 529-30 (6th Cir. 2000) (quoting Pritchett v. Pitcher, 117 F.3d 959, 964 (6th Cir. 1997 . The first question to consider is whether the prosecutor’s conduct or remarks were improper. Slagle v. Bagley, 457 F.3d 501, 515-16 (6th Cir. 2006). The determination whether the trial was fundamentally unfair is “made by evaluating the totality of the circumstances surrounding each individual case,” Angel v. Overberg, 682 F.2d 605, 608 (6th Cir. 1982), considering four factors: “(1) the likelihood that the remarks would mislead the jury or prejudice the accused, (2) whether the remarks were isolated or extensive, (3) whether the remarks were deliberately or accidentally presented to the jury, and (4) whether other evidence against the defendant was substantial.” Bowling, 344 F.3d at 512-13. The Court must focus on “‘the fairness of the trial, not the culpability of the prosecutor.’” Pritchett, 117 F.3d at 964 (quoting Serra v. Mich. Dep’t of Corr., 4 F.3d 1348, 1355 (6th Cir. 1993 . The petitioner argues that by repeatedly referring to the complainants as “victims,” the prosecutor unfairly invoked sympathy for them. In rejecting a similar claim, the Sixth Circuit has -17- noted that “[t]he U.S. Supreme Court has held that there is no per se bar to the introduction of victim impact evidence and argument,” even in the context of a non-capital case. Byrd v. Collins, 209 F.3d 486, 532 (6th Cir. 2000) (citing Payne v. Tennessee, 501 U.S. 808, 827 (1991 . The state court of appeals found no reversible error in the comments, and noted that the trial judge had instructed the jury that it was not to let sympathy or prejudice influence their decision. Trial Tr., Sept. 10, 2001, at 56. That determination was not contrary to, nor did it unreasonably apply, Supreme Court precedent. See Millender v. Adams, 187 F. Supp. 2d 852, 875-76 (E.D. Mich. 2002); Welch v. Burke, 49 F. Supp. 2d 992, 1006 (E.D. Mich. 1999). The petitioner is not entitled to habeas relief on his third claim. B. In the undefaulted portion of his fourth claim, the petitioner contends that he was deprived of effective assistance of trial counsel because his counsel failed to move until mid-trial to suppress his post-arrest statements on the grounds that they were a fruit of an illegal arrest. To establish the ineffective assistance of counsel, the petitioner must show that counsel’s errors were so serious that “counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment;” and counsel’s deficient performance prejudiced the defense. Strickland v. Washington, , 687 (1984). An attorney’s performance is deficient if “counsel’s representation fell below an objective standard of reasonableness.” Id. at 688. “Judicial scrutiny of counsel’s performance must be highly deferential.” Id. at 689. The Supreme Court has “declined to articulate specific guidelines for appropriate attorney conduct and instead [has] emphasized that ‘[t]he proper measure of attorney performance remains simply reasonableness under prevailing professional norms.’” Wiggins, 539 U.S. at 521 (quoting Strickland, 466 U.S. at 688). -18- An attorney’s deficient performance is prejudicial if “counsel’s errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable.” Strickland, 466 U.S. at 687. The petitioner must show “a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.” Id. at 694. Unless the petitioner demonstrates both deficient performance and prejudice, “it cannot be said that the conviction [or sentence] . . . resulted from a breakdown in the adversary process that renders the result unreliable.” Id. at 687. The Michigan Court of Appeals rejected the petitioner’s claim on direct appeal based on the simple premise that raising the issue of the allegedly improper arrest mid-trial did not deprive the petitioner of a merits review of the argument. The trial court conducted an evidentiary hearing outside the presence of the jury, in which the court heard testimony and oral argument from counsel. At the conclusion of the hearing, the trial court determined that there was probable cause to arrest the petitioner, and therefore his arrest was not illegal. That holding reasonably applies Strickland. Even if trial counsel’s tardy challenge to the arrest and ensuing statement amounted to defective performance, which is doubtful, no prejudice ensued. The petitioner is not entitled to habeas relief on this claim. C. Next, the petitioner argues he did not knowingly or intelligently waive his constitutional rights prior to making his statement to the police, and his statements were involuntary. The state trial court held a pretrial evidentiary hearing on these claims on August 27 and 28, 2001. Prior to -19- taking testimony, the trial court heard a portion of a tape recording of the petitioner’s second interrogation. On this tape, Grand Rapids Police Detective Gregory Griffin informed the petitioner that the police wanted to talk to him a second time. Officer John Riley began reading petitioner his rights. The petitioner appears to have interjected that he remembered these rights from a session earlier that day. The petitioner testified at the hearing that he did not remember the morning of his arrest very well because he was intoxicated. He further stated that he had not slept the night before and did not understand his constitutional rights as they were told to him. The petitioner also stated that he was not given food or water while in police custody, nor was he able to sleep. The petitioner maintained that he did not speak any English and testified that if he knew that he did not have to speak to the police, he would not have done so. Detective Griffin testified that he and Officer Riley spoke to the petitioner in the morning of October 22, 2000. Detective Griffin identified Officer Riley as the person who was speaking Spanish to the petitioner on the tape recording of the interrogation, and Griffin testified that Riley read the Miranda advice-of-rights card to the petitioner in Spanish. Riley asked the petitioner if he understood his constitutional rights and had the petitioner sign the advice-of-rights card. Griffin testified that the first interview with the petitioner was conducted at about 10:32 a.m. and the second at 2:40 p.m. Griffin denied that the petitioner was deprived of food or water during his time in police custody. Griffin testified that the police normally offer coffee and water to suspects throughout the day, and that there are restroom facilities in the detention area, which the petitioner never asked to use. During cross-examination, the petitioner himself admitted that he never asked for any food or water while in police custody. -20- Detective Griffin testified that when he and Riley went to speak with the petitioner for the second time, they reminded the petitioner of his Miranda rights. Griffin indicated that the petitioner never expressed a desire to speak with an attorney. Griffin testified that the petitioner did not appear to have any difficulty understanding Riley’s questions or answering them. Officer Riley also testified at the hearing and verified the Griffin’s testimony. When Griffin told the petitioner that the police were investigating an incident that they wanted to talk to him about, Riley translated Griffin’s comments into Spanish for the petitioner. Riley also denied that the petitioner appeared intoxicated. He asserted that the petitioner was “stone cold sober,” Evid. Hr’g Tr., Aug. 28, 2001, at 10, and he did not smell any alcohol on the petitioner. The trial court denied the petitioner’s motion to suppress his statements, finding that the petitioner had been given his Miranda warnings prior to the first interview at 10:32 a.m. The trial court found that the required information was read from an advice-of-rights card in English but translated verbatim into Spanish by Riley. The trial court found that the petitioner affirmatively waived his rights. The judge acknowledged that the petitioner was not advised of all of his constitutional rights prior to making the second statement, but found that giving the Miranda rights at 10:32 that morning was sufficient to apprise the petitioner of his constitutional rights during interrogation the second time that day. The trial court further found the petitioner’s confession was voluntary. It noted that the questioning was not prolonged. The first interview was at 10:32 a.m., and the second at 2:40 p.m. The court found that there was no evidence that the petitioner was intoxicated at the time of the interview, and nothing on the tape recordings of the interviews suggested that the petitioner was -21- intoxicated. There was no evidence that the petitioner had been abused or threatened. He was offered water and other beverages while at the police station. The police did not intentionally deprive the petitioner of sleep and did not arrest and question him in the early morning hours. This Court presumes the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West, 73 F.3d at 84 (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). A habeas petitioner must rebut this presumption with clear and convincing evidence. Warren v. Smith, 161 F.3d 358, 360-61 (6th Cir. 1998); see also 28 U.S.C. § 2254(e)(1). Factual conclusions regarding voluntariness of the petitioner’s statement to police, such as whether the police engaged in intimidation tactics, are also entitled to the presumption of correctness accorded to state court findings of fact. Miller v. Fenton, 474 U.S. 104, 112 (1985). Likewise, the question whether a defendant understood his or her Miranda rights is subject to the presumption. As noted above, the petitioner renews his challenge to the admissibility of his statements on two bases: that his Miranda rights were not given to him properly, and his statements were not voluntary. Under federal law, a confession obtained during custodial interrogation may be deemed unconstitutional on at least two grounds: that the confession was involuntary, see Jackson v. Denno, 378 U.S. 368, 376-77 (1964); Colorado v. Connelly, 479 U.S. 157, 163-65 (1986), and that the detainee was not advised of his rights under Miranda v. Arizona. See Dickerson v. United States, 530 U.S. 428, 440 (2000). 1. -22- Well-established tenets of constitutional law provide that “the prosecution may not use statements, whether exculpatory or inculpatory, stemming from custodial interrogation of the defendant unless it demonstrates the use of procedural safeguards . . . [that] inform [an] accused person[] that . . . he has a right to remain silent, that any statement he does make may be used as evidence against him, and that he has a right to the presence of an attorney, either retained or appointed.” Miranda v. Arizona, 384 U.S. 436, 444 (1966). A defendant’s waiver of his Miranda rights is considered valid if it is voluntary, knowing, and intelligent. Id. at 444, 475. The petitioner’s primary contention is that he did not knowingly or intelligently waive his Fifth Amendment rights or voluntarily speak with the police because he was intoxicated. The state trial judge resolved that issue against the petitioner. Despite the petitioner’s testimony to the contrary, there is evidence in the record that supports that finding, and the resolution of that fact issue is not unreasonable. Where the trial court was required to decide between two differing accounts of events and credited one version of events over the other, the denial of the petitioner’s motion to suppress his confession does not warrant federal habeas relief. See DePew v. Anderson, 311 F.3d 742, 753 (6th Cir. 2002). The petitioner further contends that he did not knowingly waive his Miranda rights because at the time of the interview he did not understand English. “Although language barriers may inhibit a suspect’s ability to knowingly and intelligently waive his Miranda rights, when a defendant is advised of his rights in his native tongue and claims to understand such rights, a valid waiver may be effectuated.” United States v. Hernandez, 913 F.2d 1506, 1510 (10th Cir. 1990); see also United States v. Alaouie, No. 90-1970, 1991 WL 144479, at *4 (6th Cir. Aug. 1, 1991) (“A language barrier is a factor to consider when determining the validity of a waiver. The determination is not difficult -23- when the suspect is advised of his rights in a language that he understands.” (citations omitted . The translation of a suspect’s Miranda rights into his native language need not be a perfect one, as long as the defendant understands that he does not need to speak to police and any statement he makes may be used against him in a court of law. United States v. Gonzales, 749 F.2d 1329, 1335 (9th Cir. 1984) (waiver valid where the defendant appeared to understand the Miranda warnings administered by the officer in broken English). Officer Riley testified that he was “pretty fluent” in Spanish and that he read the petitioner his Miranda rights in that language. The trial court found the petitioner understood his rights after Riley so advised him and he voluntarily agreed to waive them. That finding likewise is supported by evidence in the record and is a reasonable interpretation of the facts. The petitioner has presented no evidence to rebut this factual finding. The petitioner contends further that the second statement that he made in the afternoon should have been suppressed because the police did not re-advise him of his Miranda rights. “‘[T]he courts have generally rejected a per se rule as to when a suspect must be readvised of his rights after the passage of time or a change in questioners.’” United States v. Weekley, 130 F.3d 747, 751 (6th Cir. 1997) (quoting United States v. Andaverde, 64 F.3d 1305, 1312 (9th Cir. 1995 . “In fact, a number of circuits have ruled that re-warning is not required simply because time has elapsed.” Ibid. In the present case, the petitioner was advised of his Miranda rights during his first interview at 10:32 a.m. He was again questioned by the police some four hours later. Before the second interview, the police began to advise petitioner of his Miranda rights again, but he stated that he remembered these rights. The four-hour interval between the two interviews did not render the -24- petitioner’s waiver of his rights from the first interview invalid. See Stumes v. Solem, 752 F.2d 317, 320 (8th Cir. 1985) (five-hour interval between the first and the second interview did not invalidate the suspect’s waiver given before the first interview). 2. The Fifth Amendment privilege against compulsory self-incrimination bars the admission of involuntary confessions. See Colorado v. Connelly, 479 U.S. 157, 163-64 (1986). A confession is considered involuntary if (1) the police extorted the confession by means of coercive activity; (2) the coercion in question was sufficient to overbear the will of the accused; and (3) the will of the accused was in fact overborne “because of the coercive police activity in question.” McCall v. Dutton, 863 F.2d 454, 459 (6th Cir. 1988). The ultimate question is “whether, under the totality of the circumstances, the challenged confession was obtained in a manner compatible with the requirements of the Constitution.” Miller, 474 U.S. at 112. Factors to consider include the presence or absence of police coercion (a “crucial element”), length of interrogation, location of interrogation, continuity of interrogation, the suspect’s maturity and education, the suspect’s physical condition and mental health, and whether the suspect was advised of his or her Miranda rights. Withrow v. Williams, 507 U.S. 680, 693-94 (1993). Without coercive police activity, however, a confession should not be deemed involuntary. Connelly, 479 U.S. at 167 (stating that “coercive police activity is a necessary predicate to the finding that a confession is not ‘voluntary’ within the meaning of the Due Process Clause”). A confession coerced by threats, violence, promises, or improper influence is not voluntary. Bram v. United States, 168 U.S. 532, 542-43 (1897); see Lynumn v. Illinois, 372 U.S. 528, 534 (1963). “An admission is deemed to be coerced when the conduct of law enforcement officials is -25- such as to overbear the accused’s will to resist.” Ledbetter v. Edwards, 35 F.3d 1062, 1067 (6th Cir. 1994) (citing Beckwith v. United States, 425 U.S. 341, 347-48 (1976 . The petitioner does not allege or show that the police engaged in any coercive activity. He mentions that he had not received any food or water during his police custody. However, he admitted at the evidentiary hearing that he did not ask for food or water while in police custody. The officers testified that the petitioner was offered beverages to drink. The trial court further found that the petitioner had been offered something to drink while at the police station. Moreover, the mere fact that the petitioner did not eat any breakfast would not in and of itself render his subsequent waiver of his rights to be involuntary, in the absence of any indication that he had not eaten dinner the night before. See Wernert v. Arn, 819 F.2d 613, 616 (6th Cir. 1987) (finding that a defendant’s concerns about her child, lack of sleep, ingestion of alcohol and drugs are not enough to invalidate the Miranda waiver). Because there is no evidence that the petitioner was still intoxicated at the time that he spoke with the police and because the petitioner has not furnished any evidence of police coercion, he cannot show that his confession should have been suppressed merely because he claimed that he had drank alcohol the night before his arrest. See Abela v. Martin, 380 F.3d 915, 928 (6th Cir. 2004) (holding that, in the absence of evidence of contemporaneous intoxication, the suspect’s drinking on the night before the interrogation does not make a confession involuntary). The petitioner has not established that his conviction was obtained with statements that were involuntary or obtained in violation of the interrogations rules of Miranda v. Arizona. He is not entitled to habeas relief based on these arguments. D. -26- Next, the petitioner contends that the state court violated the Confrontation Clause when it allowed the prosecutor to introduce certain out-of-court statements. At the time of the petitioner’s trial, the governing constitutional rule had been established by the Supreme Court in Ohio v. Roberts, 448 U.S. 56, 66 (1980). For the purposes of section 2254(d)(1), the phrase “clearly established federal law” refers to the governing legal principles set forth by the United States Supreme Court at the time that the state court renders its decision. Lockyer v. Andrade, 538 U.S. 63, 71-72 (2003). The Court rejected the Roberts rule, however, in Crawford v. Washington, (2004). Crawford was decided while the petitioner’s case was pending on direct appeal, and therefore it applies to the present habeas petition as the “clearly established Federal law, as determined by the Supreme Court of the United States.” 28 U.S.C. § 2254(d)(1). See Onifer v. Tyszkiewicz, 255 F.3d 313, 317-18 (6th Cir. 2001) (holding that“[u]nder [the] AEDPA . . . [a court’s] inquiry is limited to an examination of the legal landscape as it would have appeared to the Michigan state courts in light of Supreme Court precedent at the time [the petitioner’s] conviction became final”). The petitioner’s primary contention is that the prosecution introduced several out-of-court statements made by his accomplice, Christian Diaz, without Diaz being present for cross- examination. Diaz was deported from the country before trial. The out-of-court statements were elicited during the testimony of Rafael Diaz, Christian Diaz’s father. In Bruton v. United States, 391 U.S. 123, 126 (1968), the Supreme Court held that the admission of a nontestifying accomplice’s confession at a joint trial violated the petitioner’s right of confrontation even when the jury is instructed that the co-defendant’s confession could not be used to determine the petitioner’s guilt or innocence. The Court held that the prejudice that may -27- result from an accomplice’s confession “cannot be dispelled by cross-examination if the co-defendant does not take the stand. Limiting instructions to the jury may not in fact erase the prejudice.” Id. at 132 (internal quotation marks and citations omitted). However, the Supreme Court has also held that “[t]he Confrontation Clause is not violated by the admission of a nontestifying codefendant’s confession with a proper limiting instruction when . . . the confession is redacted to eliminate not only the defendant’s name, but any reference to his or her existence.” Richardson v. Marsh, 481 U.S. 200, 211 (1987). No Bruton violation occurs where the statement does not expressly implicate the defendant in the charged offense and is not “powerfully incriminating” on its face. Id. at 208; see also Vincent v. Parke, 942 F.2d 989, 991 (6th Cir. 1991) (“As Bruton and subsequent cases make clear, e.g., Richardson, 481 U.S. at 208 . . . , the extrajudicial statement must clearly implicate the defendant in order for there to be a violation of that defendant's sixth amendment right to confront adverse witnesses.”). The Sixth Circuit has made clear that Bruton does not bar the use of a redacted co-defendant’s confession “even if the codefendant’s confession becomes incriminating when linked with other evidence adduced at trial.” United States v. DiCarlantonio, 870 F.2d 1058, 1062 (6th Cir. 1989). A review of Rafael Diaz’s testimony amply demonstrates that no constitutional violation occurred. Mr. Diaz never related any statement made by Christian or anyone else. None of the testimony is attributed to Christian Diaz, and Rafael Diaz never incriminated the petitioner or even mentioned him by name. Therefore, the petitioner has failed to show that Rafael Diaz’s testimony implicated his Confrontation Clause rights. The petitioner further claims that the prosecution attempted to impeach him with the contents of Christian Diaz’s custodial statement to the police. The record does not support that argument, -28- either. Although the prosecutor asked the petitioner on cross-examination about facts she apparently garnered from Diaz’s police statement, the prosecutor never mentioned to the jury the source of those facts. Nor were the contents of the statement themselves admitted into evidence. The petitioner could have denied the facts that the prosecutor gained from Diaz’s statement or, as he did here, claimed a lack of memory. It was not immediately obvious to the jury that the prosecutor derived the facts used for questioning from Diaz’s post-arrest testimony. Under these circumstances, the prosecution’s use of the information from Diaz’s post-arrest statement while cross-examining the petitioner did not violate the petitioner’s right to confront the witnesses against him. The petitioner also argues that his confrontation rights were violated when the prosecutor asked him if he observed Diaz fighting with one of the victims during the altercation. The prosecutor’s actual question was what the petitioner personally observed during the fight. A witness’s testimony about his personal observations of an event is not an out-of-court statement and, thus, is not “hearsay.” United States v. Bursey, 85 F.3d 293, 296 (7th Cir. 1996). Therefore, the prosecution’s questions to the petitioner about his personal observations during the fight did not violate his rights under the Confrontation Clause. The petitioner is not entitled to habeas relief on his second claim. E. The petitioner contends that the trial court improperly departed from the recommended sentencing range under the Michigan Sentencing Guidelines. It is well established that “federal habeas corpus relief does not lie for errors of state law.” Estelle v. McGuire, , 67 (1991) (quoting Lewis v. Jeffers, , 780 (1990 . The petitioner’s argument that the trial court erred in applying the state sentencing guidelines raises an issue of state law only. It does not -29- implicate any federal rights. “A federal court may not issue the writ on the basis of a perceived error of state law,” Pulley v. Harris, , 41 (1984), and a claim that the trial improperly departed from the state sentencing guidelines is not cognizable on habeas corpus review. The petitioner also contends that the trial court judge violated his Sixth Amendment right to a trial by jury by using factors to score his sentencing guidelines which had not been submitted to a jury and proven beyond a reasonable doubt or admitted to by the petitioner. The petitioner believes that Blakely v. Washington, (2004), and Apprendi v. New Jersey, , 490 (2000), support his position. However, the claim that Michigan’s sentencing guideline system, wherein judge-found facts are used to establish the minimum sentence of an indeterminate sentence, violates the Sixth Amendment has been foreclosed by the Sixth Circuit’s decision in Chontos v. Berghuis, 585 F.3d 1000, 1002 (6th Cir. 2009). This Court is bound by that decision. F. Because the Court concluded that the petitioner’s first, second, and seventh claims are without merit, the petitioner is unable to show that the appellate counsel’s failure to raise these claims on his appeal of right was deficient. Therefore, the petitioner cannot establish that he was denied effective assistance of appellate counsel and is not entitled to relief on his fifth claim. See Coleman v. Metrish, 476 F. Supp. 2d 721, 733 (E.D. Mich. 2007). IV. The Court concludes that the majority of the petitioner’s claims do not support his request for habeas corpus relief. However, an evidentiary hearing is required to resolve the claim that the petitioner was deprived of his right under the Sixth Amendment to a trial by a jury chosen from a -30- fair cross-section of the community. Counsel will be appointed for the petitioner to assist in the presentation of that claim. Magistrate Judge Charles E. Binder, to whom this matter is referred, has conducted hearings on other cases arising from prosecutions during the period when jury panels were selected using the defective system that resulted in the exclusion of population segments in Kent County that contained the highest concentration of minority citizens. The magistrate judge may incorporate the evidence from those hearings, with the consent of the parties. The parties also are well advised to provide evidence, if they are able, of the composition of the petitioner’s jury venire and the final trial jury. After the hearing, the magistrate judge should file a report and recommendation on the remaining issue raised in the habeas petition, that is, whether the petitioner’s Sixth Amendment right to a jury drawn from a fair cross-section of the community was violated in this case. Accordingly, it is ORDERED that claims one, two, three, four, five, and seven in the petition for a writ of habeas corpus are DENIED. It is further ORDERED that the matter is referred to Magistrate Judge Charles E. Binder to appoint counsel for the petitioner, to conduct an evidentiary hearing on the issues raised in claim six of the petition, and to prepare a report and recommendation. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 8, 2011 -31- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 8, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -32-

=== HARRY O. LUTZ and PAULA G. LUTZ v. STEWART MICHIGAN TITLE et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case No. 10-12513 Honorable David M. Lawson HARRY O. LUTZ and PAULA G. LUTZ, Plaintiff, v. STEWART MICHIGAN TITLE, THE MORTGAGE EXCHANGE, INC., MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., and ONEWEST, Defendants. _________________________________________/ OPINION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT BY DEFENDANT ONEWEST BANK, FSB The plaintiffs, now acting pro se since their lawyers withdrew from the case in October 2010, filed the present action against the servicer and current assignee of the mortgage on their home, alleging that they committed a number of statutory and common law violations, seeking damages and equitable relief. The defendants removed the case to federal court, and on September 7, 2010 the current note holder, OneWest Bank, FSB, filed a motion for summary judgment. Defendant Stewart Title Agency filed a paper stating that it joined in part of OneWest’s motion, but it did not include a brief or other explanation as to how the arguments applied to it. The plaintiffs have not responded to the motion. However, the Court has reviewed the motion papers and finds that the relevant law and facts have been set forth and that oral argument will not aid in the disposition of the motion. Accordingly, it is ORDERED that the motion be decided on the papers submitted. See E.D. Mich. LR 7.1(e)(2). Of the several issues raised by OneWest, the Court finds one dispositive. The original lender from whom the plaintiffs obtained their mortgage loan was declared a failed institution and its liabilities were assumed by the Federal Deposit Insurance Corporation (FDIC), which acted as a conservator until a sale of the bank’s assets could be achieved. The plaintiffs were obliged to pursue their claims against their lender through the FDIC’s administrative procedures, which the plaintiffs failed to do. The failure to exhaust these administrative remedies requires dismissal of the complaint in this Court against OneWest Bank. Therefore, the motion for summary judgment will be granted on that ground. I. Plaintiffs Harry and Paula Lutz are residents of the City of Plymouth. On March 15, 2004, they closed a mortgage loan with IndyMac in the amount of $750,000 to purchase property located at 45920 Tournament Drive, Northville, Michigan. The terms called for a 30-year repayment period beginning May 1, 2004 and an adjustable rate mortgage (ARM) with fixed payments for one year. The loan contained a negative amortization feature under which the outstanding principal balance could increase up to 110% of the original loan value for the first five years. That feature allowed for the initial $750,000 loan to increase to $825,000. The initial interest rate was set at 1.25%; however, the loan contained a margin rate of 3.45%, which would cause the actual initial interest rate to be 4.675%. The plaintiffs believe this interest rate to be higher than the industry standard for residential loans. According to the terms of the contract, the interest rate could be changed annually and had a cap of 8.95%. The plaintiffs’ initial monthly payment was $2,499.39. The plaintiffs allege in their complaint that after five years, the monthly payment increased to $6,719.55. However, the Truth in Lending Disclosure Statement attached to the plaintiffs’ complaint shows the monthly payment increase would only be to $4,245.48. The plaintiffs contend that the Truth in Lending Disclosure -2- was inaccurate because it “disclosed an adjusted payment of only the fully indexed rate, rather than the highest possible rate on a variable rate transaction.” Compl. at ¶ 30. Due to the negative amortization clause, the outstanding balance increased to $803,989.36. The plaintiffs allege that the defendant knew or should have known that they would never be able to repay the mortgage loan, and the resulting transaction in effect was a “short-term lease, until the payments became so unaffordable that the borrowers would be forced into foreclosure and bankruptcy.” Id. ¶¶ 22-23. The plaintiffs further allege that the defendant packaged a loan which “contained . . . an excessive ‘kick-back’ to the mortgage broker.” Id. ¶ 24. Defendant Mortgage Exchange, Inc. was paid 2.56% of the loan amount in fees, including a mortgage broker compensation of $18,750 from IndyMac. Additionally, the plaintiffs allege that the loan included a prepayment penalty, which was not disclosed and exceeded the rate permitted by Michigan Compiled Laws § 438.31c(2)(c). The prepayment penalty was effective for the first three years, so if the borrower made a full or partial payment that totaled more than twenty percent of the original principal amount in any twelve month period, the borrower is subject to a prepayment penalty of six months advanced interest on the amount prepaid in excess of twenty percent of the original principal amount. The plaintiffs allege that the defendant concealed the loan’s terms during the loan origination, which resulted in the plaintiffs losing their home. The plaintiffs further allege that the defendant did not use the proper methods to determine the plaintiffs ability to repay the home loan. The plaintiffs believe that they would never have been approved for this loan if the defendant had used an appropriate approval process. The approval of the loan was based on the loan-to-value (LTV) ratio of 75%. At the time of the loan origination, the plaintiffs were approved based upon their stated income and a medium- -3- to-high-risk credit rating. Their debt-to-income ratio (DTI) was as high as 55.45%. The plaintiffs believe that their high DTI exceeded customary underwriting standards. On March 6, 2009, the plaintiffs sold the property in a short sale for $580,000, which essentially extinguished the indebtedness created by the March 2004 mortgage. The plaintiffs filed their complaint in state court seeking rescission of the loan on May 18, 2010, over fourteen months after selling their property. In their five-count complaint, the plaintiffs allege a violation of Michigan’s anti-accelerating interest rate law, Mich. Comp. Laws § 438.31c et seq., (count I); violation of the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq. (count II); violation of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq. (count III); negligence (count IV); and unjust enrichment (count V). The plaintiffs seek rescission of the mortgage and a return of all amounts paid, plus interest. With its motion for summary judgment, OneWest attached exhibits establishing the chain of events that led to its acquisition of the assets of IndyMac Bank, FSB including the plaintiffs’ mortgage note. It is undisputed that a little more than four years after the plaintiffs signed their home loan papers, IndyMac Bank, FSB was declared a failed financial institution and subsequently closed by the Office of Thrift Supervision (OTS) in July of 2008. OTS appointed the FDIC as conservator for IndyMac Bank, FSB. All the assets of IndyMac Bank, FSB were transferred to IndyMac Federal Bank, FSB (IndyMac Federal) as the assuming institution. The liabilities of IndyMac Bank, FSB remained with the FDIC when the assets were transferred to IndyMac Federal. -4- On March 19, 2009, the FDIC completed the sale of IndyMac Federal Bank, FSB to defendant OneWest. OneWest was a newly-formed federal savings bank organized by IMB HoldCo LLC. All deposits of IndyMac Federal Bank, FSB then were transferred to OneWest Bank, FSB. There is no evidence, however, that the FDIC passed along IndyMac’s liabilities to OneWest, which typically are not conveyed. Cf. West Park Assocs. v. Butterfield Sav. & Loan Ass’n, 60 F.3d 1452, 1458-59 (9th Cir. 1995). II. In its summary judgment motion, OneWest states the uncontestable fact that the plaintiffs’ claims based on the origination of the mortgage loan arose prior to the sale of assets to that defendant. After IndyMac Bank failed, it was the FDIC to whom the plaintiffs must look for relief on their claims against their lender, since the FDIC was appointed the receiver for IndyMac Bank. Therefore, OneWest asserts, the plaintiffs are required to follow the procedures prescribed for claims against the FDIC in order to pursue their grievances against their original lender. A motion for summary judgment under Federal Rule of Civil Procedure 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). -5- A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000) (quoting Anderson, 477 U.S. at 248). An issue is “genuine” if a “reasonable jury could return a verdict for the non-moving party.” Henson v. Nat’l Aeronautics & Space Admin., 14 F.3d 1143, 1148 (6th Cir.1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Mich. Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). Thus a factual dispute which “is merely colorable or is not significantly probative” will not defeat a motion for summary judgment which is properly supported. Kraft v. United States, 991 F.2d 292, 296 (6th Cir. 1993); see also Int'l Union, United Auto., Aerospace & Agric. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record which demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Pers. Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). The party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing -6- “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp., 477 U.S. at 322-23. In a defensive motion for summary judgment, the party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). “[T]he party opposing the summary judgment motion must ‘do more than simply show that there is some “metaphysical doubt as to the material facts.”’” Highland Capital, Inc. v. Franklin Nat'l Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir. 1994), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 586 (1986 . “Thus, the mere existence of a scintilla of evidence in support of the [opposing party]’s position will be insufficient; there must be evidence on which the jury could reasonably find for the [opposing party].” Ibid. (quoting Anderson, 477 U.S. at 252) (internal quotation marks omitted). The Financial Institution’s Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1821 et seq., “was enacted during the savings and loan insolvency crisis to enable the FDIC and the Resolution Trust Company (RTC) to efficiently and expeditiously wind up the affairs of hundreds of failed financial institutions.” In re Lewis, 398 F.3d 735, 739 (6th Cir. 2005) (citing Freeman v. FDIC, 56 F.3d 1394, 1398 (D.C. Cir. 1995 . The Act “grants the FDIC, as receiver, broad powers to determine claims asserted against failed banks.” Henderson v. Bank of New England, 986 F.2d 319, 320 (9th Cir. 1993) (citing 12 U.S.C. § 1821(d)(3)(A . Among the -7- procedures for determining such claims, FIRREA “establishes an administrative process for handling claims made against the assets of a failed bank that has been placed under receivership.” Lewis, 398 F.3d at 739. The claims-handling procedure can be found at 12 U.S.C. § 1821(d)(3)-(13). The FDIC must give notice to creditors to file claims by a specified date. 12 U.S.C. § 1821(d)(3)(B). After a claim is filed, the FDIC has 180 days to allow or disallow the claim. 12 U.S.C. § 1821(d)(5)(A). If the claim is disallowed or has not been ruled on after 180 days, then the claimant may seek administrative review or file and action in the district court within 60 days. 12 U.S.C. § 1821(d)(6)(A). If the claimant fails to seek administrative or judicial review, then the “claimant shall have no further rights or remedies with respect to such claim.” 12 U.S.C. § 1821(d)(6)(B). To ensure that claimants resort to the administrative process, “Congress placed jurisdictional limits on the power of the federal courts to review matters involving failed savings and loans under FIRREA.” Brady Dev. Co. V. Resolution Trust Co., 14 F.3d 998, 1003 (4th Cir. 1994); see also Vill. of Oakwood v. State Bank & Trust Co., 539 F.3d 373, 386 (6th Cir. 2008). FIRREA contains an express limitation on judicial review: Except as otherwise provided in this subsection, no court shall have jurisdiction over — (i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the Corporation has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver; or (ii) any claim relating to any act or omission of such institution or the Corporation as receiver. 12 U.S.C. § 1821(d)(13)(D). This provision “expressly bars courts from hearing ‘any claim or action for payment from’ or ‘action seeking a determination of rights with respect to’ the assets of a failed bank held by the FDIC as receiver, unless the administrative claims process is exhausted.” -8- Freeman v. FDIC, 56 F.3d 1394, 1400 (D.C. Cir. 1995) (quoting 12 U.S.C. § 1821(d)(13)(D . In Village of Oakwood, the Sixth Circuit interpreted 12 U.S.C. § 1821(d)(13)(D) as imposing a statutory exhaustion requirement rather than an absolute bar to jurisdiction. But the provision “precludes a court from acquiring jurisdiction after the receiver is appointed,” unless the claim has been disallowed by the receiver. Lewis, 398 F.3d at 744. As the Freeman court stated: Our sister courts have broadly applied the § 1821(d) jurisdictional bar to all manner of “claims” and “actions seeking a determination of rights with respect to” the assets of failed banks, whether those claims and actions are by debtors, creditors, or others. See, e.g. Lloyd v. FDIC, 22 F.3d [335,] 337 [(1st Cir. 1994)] (suit by debtor seeking equitable reformation or cancellation of mortgage agreement to prevent foreclosure is a “determination of rights with respects to an asset” subject to § 1821(d)(13)(D) jurisdictional bar); Henderson v. Bank of New England, 986 F.2d [319,] 321 [9th Cir. 1993)] (claims by unsuccessful credit card applicant for monetary damages and discovery of derogatory credit information are subject to § 1821(d)(13)(D) jurisdictional bar); Meliezer v. Resolution Trust Corp., 952 F.2d [879,] 883 [(5th Cir. 1992)] (mortgagor’s claim that failed institution was negligent in allowing mortgagor to assume insufficient insurance is subject to § 1821(d)(13)(D) jurisdictional bar). Freeman, 56 F.3d at 1401. Here, the plaintiffs’ claims “relat[e] to any act or omission of [the] institution” for which the FDIC has been appointed receiver. All of the claims in the complaint arise from the origination or execution of the mortgage loan by IndyMac Bank, FSB. The note and mortgage on the property was an “asset[] of [a] depository institution for which the Corporation has been appointed receiver.” 12 U.S.C. § 1821(d)(13)(D)(i). The claims all relate to an “act or omission” of IndyMac Bank, FSB, an institution for which the FDIC had been appointed receiver. As noted above, the plaintiffs sold the property in a short sale on March 6, 2009. The sale extinguished the indebtedness created by the March 2004 mortgage with IndyBank, FSB. Almost two weeks later, OneWest purchased IndyMac Federal Bank, FSB’s assets, but there is no evidence -9- that any liabilities in connection with the discharged mortgage were transferred as part of the transaction. Based on the present record, it appears that any bank liability arising from the origination or execution of the mortgage loan remains with the FDIC, and the plaintiffs’ remedy lies against that entity. As a consequence, section 1821(d)(13)(D)’s limitation on judicial review applies. In all events, the plaintiffs have no claim against defendant OneWest. III. Defendant OneWest argues that the complaint against it should be dismissed because the plaintiffs have not exhausted administrative remedies. Such a dismissal would be without prejudice to the plaintiffs’ right to pursue their claims against the correct entity in the proper forum. Defendant Stewart Title Agency’s “joinder” in the motion does not articulate how the arguments made by OneWest apply to the claims against it or describe its involvement in the transaction. Stewart Title has no formal dispositive motion pending in this case. The Court finds that the claims against OneWest, however, must be dismissed. Accordingly, it is ORDERED that the motion for summary judgment by defendant OneWest Bank, FSB [dkt. #12] is GRANTED. It is further ordered that the complaint is DISMISSED without prejudice as to defendant OneWest Bank, FSB, only. Dated: March 4, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge -10- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 4, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -11-

=== Ralph E. Smith, Jr. v. Michigan Department of Corrections, et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 10-12539 Honorable David M. Lawson RALPH E. SMITH, JR., Plaintiff, v. MICHIGAN DEPARTMENT OF CORRECTIONS, RICHARD JENKINS, MIKE SULSKI, DOUGLAS KELLEY, ELVIS ROGERS, JON CLARK, GARY RUDOLPH, WILL RILEY, SHERRY BURT, JOE LAIER, LEO GAJEWSKI, and JIMMY WATERS, _________________________________________/ Defendants. OPINION AND ORDER GRANTING IN PART DEFENDANTS’ MOTION TO DISMISS Plaintiff Ralph Smith, Jr. was fired from his job as a prison guard. He was reinstated later, but he lost his back pay, seniority, and benefits. He has filed the present action against the Michigan Department of Corrections (MDOC) and some of its employees alleging that they denied him certain pre-termination procedures in violation of the Fifth and Fourteenth Amendments, their actions constitute retaliation in violation of the First Amendment and Title VII of the Civil Rights Act of 1964, and their conduct violates state law. The defendants filed a motion to dismiss, arguing that the procedural due process claim fails as a matter of law and the other claims are barred by both sovereign and governmental immunity. The Court heard oral argument on February 18, 2011, at which time the plaintiff conceded that some of his claims must be dismissed. The Court now finds that the complaint states a claim for deprivation of rights under the Fourteenth Amendment, but the claims against the MDOC and some of the state law claims must be dismissed. Therefore, the Court will grant in part and deny in part the defendants’ motion to dismiss. I. Although the incidents in this case are tinged with racial overtones, the plaintiff has not alleged race discrimination. Instead, he alleges in his complaint that the MDOC, Warden Sherry Burt, and corrections officials Will Riley, Gary Rudolph, and Jon Clark, deprived him of his procedural rights before terminating him in violation of the Due Process Clauses of the Fifth and Fourteenth Amendments; Burt and the MDOC discriminated against him on the basis of his gender in violation of the Elliott-Larsen Civil Rights Act (ELCRA), Mich. Comp. Laws § 37.2102; Clark, Burt, Riley, Rudolph, and corrections employees Richard Jenkins, Mike Sulski, Douglas Kelley, Elvis Rogers, Joe Laier, and Leo Gajewski tortiously interfered with his business expectancy; the MDOC, Jenkins, Sulski, Rogers, Clark, Laier, Kelley, and Gajewski conspired to file false reports of the incident that precipitated the termination; the MDOC, Riley, Rudolph, and Burt retaliated against him when he filed his administrative complaint; and Rudolph, Riley, and Burt were negligent in failing to train him on new systems when his employment was reinstated. According to the complaint, here is what happened. Ralph Smith began his employment with the MDOC on March 5, 1989 at the Southern Michigan Correctional Facility at Jackson, Michigan. He asserts that his employment record demonstrates his satisfactory or above-expectations performance throughout the first twenty years of his employment. In November 2007, the MDOC closed down JMF. Smith and several other officers were reassigned to the Parnall Correctional Facility, also in Jackson. Smith held the job of Resident Unit Manager. In early December, Smith suffered a ruptured Achilles tendon for which he was scheduled to receive surgery on December 30, 2008. In the interim, he was stationed in the key bunker, where keys for different units of the prison are stored on numbered hooks. When a corrections officer -2- removes a key for use in the prison, the key is tracked with the officer’s key tag, which is placed on the empty hook. On December 27, 2008, Corrections Officer Richard Jenkins approached Smith in the bunker to return a set of keys, identifying the key hook on which his tag had been placed. Smith mistakenly removed the key tag from the incorrect hook. Jenkins reacted to this innocent mistake by yelling “No! God damn it! I need the tag off of key #28 not #56. What are you? A fucking stupid idiot or something! You didn’t check the fucking keys!” Compl. at ¶ 30. Jenkins threw the keys he was returning through the return slot in a way that hit Smith’s hand. As he walked away, Smith overheard Jenkins call him a “stupid nigger.” Id. ¶ 32. Smith did not respond to these comments, but remarked to Corrections Officer Douglas Kelley, who witnessed the event and questioned Jenkins’s conduct, that he would ask Jenkins about the interaction later. The following day, Smith approached Jenkins after roll call at approximately 1:18 p.m. Smith asked about the previous day’s incident and apparently expressed his displeasure with Jenkins’ behavior. Jenkins responded that “the best thing for you to do is return back to the bubble, sit down and pass out some more fucking keys!” Id. ¶ 35. Jenkins knocked into Smith, who fell off- balance and impacted his injured foot into the ground, which caused a fracture of one of the bones in his foot and further damage to some cartilage. Jenkins followed Smith into the building where he was stationed, shouting “go back to your fucking assignment” and “I know how to fix you!” Id. ¶ 37. The plaintiff asserts that he intended to report the incident as soon as possible, but was unable to do so before Jenkins filed a countervailing report against him. At 3:35 p.m. that same day, Lieutenant Jon Clark approached Smith in the key bunker, instructed him to collect his belongings, and brought him to Deputy Warden Will Riley’s office. Riley informed Smith that the MDOC was beginning an investigation into the incident between him -3- and Jenkins, he was being placed on a Stop Order, and he would not be permitted to return to work until the investigation was complete. Smith says that Riley did not give him additional information about the charges against him, but did state his belief that Smith was the aggressor and had shoved Jenkins. The plaintiff explained that his injury prevented him from being the aggressor, but Riley did not want to hear his explanation. He asked to make a statement or file a complaint against Jenkins, but Riley denied his request. Before surrendering his state identification card and being escorted from the premises, Smith was given the opportunity to speak briefly with his union representative. On December 30, 2008, Smith filed a complaint against Clark with the MDOC’s internal equal employment opportunity (EEO) department, alleging that Clark denied him the opportunity to make a statement, file a complaint, or present his account of the incident before Clark took disciplinary action against him. The plaintiff believes that the complaint fulfilled the requirement that he seek recourse through the administrative process prior to filing a case with this court. The plaintiff also underwent surgery on his Achilles tendon on the same day. On January 9, 2009, Smith received a letter from the MDOC confirming his suspension as of December 28, 2008 and explaining that the suspension would be converted to Administrative Leave after 7 days. The MDOC never converted his employment status or refused to honor his Administrative Leave; instead, Smith was forced to exhaust his allowable leave time and lose his accumulated seniority. On January 12, 2009, Smith filed another complaint with the MDOC’s EEO department, this time against Jenkins. The MDOC’s written policies set forth a detailed procedure for processing such complaints. For instance, department procedure requires the EEO administrator to review the -4- complaint and conduct further investigation within 45 days. The complainant and accused employee have a right to make a statement. The assigned investigator is required to compile an investigation packet that includes the information and statements gathered during his investigation. Then the EEO administrator and a management representative decide whether to file charges. At that point, the complainant must be notified in writing of the status of his complaint. Smith alleges that the MDOC failed to follow these policy guidelines by failing to commence timely investigations of his complaints and failing to provide him with written notice of MDOC actions on his complaint or on the allegations against him. Captain Gary Rudolph was assigned to serve as the investigator of the case against Smith. On January 26, 2009, Smith met with Rudolph to complete his statement for the packet. Rudolph asked Smith questions and recorded his responses. Rudolph provided Smith with a typed copy of the responses following the interview, although he did not allow him to review the notes prior to typing. He told Smith to call him after 9:00 that night to make any changes. Smith called Rudolph at 9:30 p.m. with edits but was unable to reach him, and Rudolph never called Smith back. Instead, Rudolph forwarded the unedited responses with the investigation packet to Warden Sherry Burt without Smith’s approval or required signature on the document. Smith received a copy of the packet on February 21, 2009 and learned that a disciplinary conference was scheduled for February 25, 2009. Smith contacted his union representative on February 23 to discuss the unapproved documents and the conference. When Smith appeared for the conference on February 25, Warden Burt informed him that the conference had been cancelled. She said that a representative from the union had instructed MDOC personnel not to hold the conference due to potential violations of Smith’s rights. Smith -5- contends that this cancellation violated MDOC policy, which required the agreement of both parties before cancellation. Rudolph was present at the cancelled conference and asked Smith to sign the unedited report detailing his responses. Smith refused and Burt set a deadline of March 4, 2009 for the completed report. Smith made corrections to the report and signed off on the corrected report on that date. However, when he received an updated disciplinary packet for the rescheduled hearing, Smith found that his statement had not been updated to reflect his changes. He also discovered that his signatures did not match on different pages in the packet and that several of the changes he had approved had not been made. The rescheduled disciplinary conference took place on March 18, 2009. Smith attended and gave testimony. He was notified of the results of his hearing on April 3, 2009 via regular mail, but he contends that violated MDOC policy, which requires notification within ten business days by certified mail. On April 10, 2009, Smith received a second letter from the MDOC terminating his employment effective April 7, 2009. Smith alleges that several of the officers who witnessed the events gave false statements that the plaintiff was at fault for instigating the incident, and in doing so violated several MDOC policies. He also alleges that the defendants violated his due process rights by failing to act as neutral investigators, in some cases refusing to investigate at all, producing incorrect reports, relying on inaccurate reports to terminate him, and failing to punish Caucasian employees for similar incidents. He points to one incident during the summer of 2008, when Caucasian officers on the day shift left urine in the soap dispenser in the staff restroom on the A and B Prisoner Housing Unit. Smith says that the officers responsible were not disciplined; instead, the soap dispensers were removed. -6- Smith appealed his termination through the grievance process and ultimately was reinstated in September 2009. However, the MDOC failed to repay his lost wages or reinstate the seniority, leave time, and other benefits he had lost during his suspension and termination. The MDOC began investigating Smith’s complaint against Jenkins following his reinstatement pursuant to a directive from the MDOC’s EEO department. Although Smith was reinstated in September 2009, he was unable to work due to the injuries he sustained on December 28, 2008. He had surgery for these injuries in October 2009 and ultimately returned to work on January 4, 2010. He was not allowed to return to his former position as a Resident Unit Officer for one month and remained assigned to the key bunker in the interim. While he was off the job, the prison implemented a new computerized prisoner counting system that Resident Unit Officers were required to use. Smith alleges that he received no training on this system, nor was he provided with a password to use the system. When Smith returned to his position as a Resident Unit Officer in early February, he still did not receive training or a computer password. But when a count error occurred on February 17, 2010 under the plaintiff’s and a co- worker’s watch, both employees were punished; Smith received a three-day suspension. Smith remains employed by the MDOC, but he is unsatisfied with how he was treated. He filed his complaint in this Court on June 27, 2010. The defendants responded with their motion to dismiss. II. In their motion to dismiss, the defendants advance two main arguments. First, they say that the plaintiff has not stated a viable claim under the Fifth or Fourteenth Amendments because the Fifth Amendment does not apply to the States, the Fourteenth Amendment cannot be pled as a stand- -7- alone violation, and the pleaded allegations do not support the plaintiff’s argument that he received inadequate process prior to his termination. Second, the defendants contend that the Court has no subject matter jurisdiction over the claims because of various immunity doctrines. In his written response and at oral argument, the plaintiff agreed that the Eleventh Amendment bars his claims against the MDOC; only the Fourteenth Amendment, not the Fifth, applies to the state actors; there are no factual allegations pleaded against defendant Waters; and he cannot support his gender discrimination claim under the Elliott-Larsen Civil Rights Act, Mich. Comp. Laws § 37.2102. Therefore, the Court will dismiss the case against the MDOC and Jimmy Waters, the claims in count 1 of the complaint based on the Fifth Amendment, and count 2 of the complaint alleging gender discrimination under state law. The defendant contends the Fourteenth Amendment procedural due process claim must be dismissed under Federal Rule of Civil Procedure 12(b)(6). That rule permits dismissal of a complaint for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). When deciding a motion under that rule, “[t]he court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief.” Cline v. Rogers, 87 F.3d 176, 179 (6th Cir. 1996). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Columbia Nat’l Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Ibid. “To survive a -8- motion to dismiss, [a plaintiff] must plead ‘enough factual matter’ that, when taken as true, ‘state[s] a claim to relief that is plausible on its face.’ Bell Atl. Corp. v. Twombly, , 556, 570 (2007). Plausibility requires showing more than the ‘sheer possibility’ of relief but less than a ‘probab[le]’ entitlement to relief. Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1949 (2009).” Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010). Under the new regime ushered in by Twombly and Iqbal, pleaded facts must be accepted by the reviewing court but conclusions need not be unless they are plausibly supported by the pleaded facts. “[B]are assertions,” such as those that “amount to nothing more than a ‘formulaic recitation of the elements’” of a claim, can provide context to the factual allegations, but are insufficient to state a claim for relief and must be disregarded. Iqbal, 129 S. Ct. at 1951 (quoting Twombly, 550 U.S. at 555). However, as long as a court can “‘draw the reasonable inference that the defendant is liable for the misconduct alleged,’ a plaintiff’s claims must survive a motion to dismiss.” Fabian, 628 F.3d at 281 (quoting Iqbal, 129 S. Ct. at 1949). A. The Fourteenth Amendment does not contain specific language creating a private right of action, but it is well-settled that the rights created thereunder can be enforced through 42 U.S.C. § 1983. See Engquist v. Oregon Dep’t of Agric., 553 U.S. 591, 611 (2008) (reiterating that “§ 1983 provides a cause of action for all citizens injured by an abridgment of [the] protections” found in the “Due Process Clauses of the Fourteenth Amendment, and other provisions of the Federal Constitution”). Although the complaint does not reference section 1983, that omission is not fatal to the plaintiff’s case at the pleading stage. See Majeske v. Bay City Bd. of Educ., 177 F. Supp. 2d 666, 670-71 (E.D. Mich. 2001) (holding that the failure to cite section 1983 in the complaint did not -9- prevent the court from determining that it pleaded a violation of that statute where “the complaint claimed a violation of federal rights, which necessarily must be presented under 42 U.S.C. § 1983); see also Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168 (1993) (reaffirming that only notice pleading is required in actions under 42 U.S.C. § 1983). “To state a claim for relief under 42 U.S.C. § 1983, a plaintiff must allege a violation of a right secured by the federal Constitution or laws and must show that the violation was committed by a person acting under color of state law.” Flanory v. Bonn, 604 F.3d 249, 253 (6th Cir. 2010) (citing West v. Atkins, 487 U.S. 42, 48 (1988 . There is no dispute in this case that the defendants are state actors. The defendants insist, however, that the plaintiff cannot show a deprivation of his procedural rights because, according to the allegations of the complaint itself, the plaintiff was afforded sufficient process before he was fired when he was interviewed for the investigation packet, allowed to make corrections to the packet, attended a disciplinary conference with his union representative at which he gave testimony, and successfully appealed the termination decision. The plaintiff counters by pointing out that the defendants did not adhere to the established departmental procedures for imposing employee discipline, denied him the opportunity to present his version before he was suspended and ultimately fired, and allowed misinformation that poisoned the proceedings through the formal hearing stage. A procedural due process violation is pleaded adequately if the plaintiff plausibly alleges that (1) he has a life, liberty, or property interest protected by the Constitution; (2) he was deprived of that interest by a state actor; and (3) he was not afforded timely and adequate process under law. Waeschle v. Dragovic, 576 F.3d 539, 544 (6th Cir. 2009). The defendants concede that the plaintiff -10- has stated the first two elements. The defect in the complaint, they contend, lies in the failure to allege that the defendants deprived the plaintiff of adequate process before terminating him. “The right to procedural due process requires that when a State seeks to terminate a protected interest . . . it must afford notice and opportunity for hearing appropriate to the nature of the case.” Club Italia Soccer & Sports Org., Inc. v. Charter Twp. of Shelby, Mich., 470 F.3d 286, 296 (6th Cir. 2006) (citing Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 570 (1972) (internal quotation marks and alterations omitted . “In the context of employment rights, the Supreme Court has explained that ‘the root requirement of the Due Process clause’ is ‘that an individual be given the opportunity for a hearing before he is deprived of any significant property interest.’ Acknowledging ‘the severity of depriving a person of the means of livelihood[,]’ the Court has noted that ‘[w]hile a fired worker may find employment elsewhere, doing so will take some time and is likely to be burdened by the questionable circumstances under which he left his previous job.’” Mitchell v. Fankhauser, 375 F.3d 477, 480 (6th Cir. 2004) (quoting Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 542-43 (1985 . Public employees with a property interest in their jobs generally must have a hearing before termination and afterward. Pucci v. Nineteenth Dist. Ct., 628 F.3d 752, 766-67 (6th Cir. 2010) (“‘For a public employee with a property interest in continued employment, due process includes a pre-termination opportunity to respond, coupled with post-termination administrative procedures.’” (quoting Silberstein v. Cityof Dayton, 440 F.3d 306, 315 (6th Cir. 2006 . Perfunctory pre-termination procedures usually demand a more exacting post-termination hearing. Carter v. Western Reserve Psychiatric Habilitation Ctr., 767 F.2d 270, 273 (6th Cir. 1985) (per curiam). -11- The Sixth Circuit has observed that “[p]re-termination hearings ‘need not be elaborate.’” Mitchell, 375 F.3d at 480 (quoting Loudermill, 470 U.S. at 545). Nonetheless, “[t]he tenured public employee is entitled to oral or written notice of the charges against him, an explanation of the employer’s evidence, and an opportunity to present his side of the story.” Loudermill, 470 U.S. at 546; see also Mathews v. Eldridge, 424 U.S. 319, 333 (1976) (noting that the fundamental requirement of procedural due process is that an individual be given an opportunity to be heard at a meaningful time and in a meaningful manner). Pre-termination hearings have been described as an “initial check against mistaken decisions.” Loudermill, 470 U.S. at 545. “Post-termination hearings, on the other hand, ‘serve to ferret out bias, pretext, deception and corruption by the employer in discharging the employee.’” Mitchell, 375 F.3d at 480 (quoting Duchesne v. Williams, 849 F.2d 1004, 1008 (6th Cir. 1988 . The defendant argues that the plaintiff’s Fourteenth Amendment claim must fail because the complaint clearly indicates that the plaintiff had an opportunity to present a report detailing his side of the incident, received notice of both hearing dates, attended both hearings and was represented by his union representative at the second hearing, and had an opportunity to provide testimony. However, the plaintiff also alleges that he was denied a true or meaningful opportunity to be heard because the defendants did not provide him with a neutral interviewer, altered his statements, submitted inaccurate statements to the disciplinary board that were attributed to him, and failed to provide him sufficient notice of his hearing dates or their cancellations. The plaintiff acknowledges that he had an opportunity to provide testimony at the hearing. However, he contends that the inaccurate statements in the packet attributed to him predisposed the disciplinary board to discredit his testimony at the hearing. -12- The complaint alleges, therefore, that the opportunity to be heard was a mere formalism, and his constitutional right in effect was taken away from him. The Court concludes that the complaint alleges that the plaintiff was denied his procedural rights. In addition, the plaintiff has alleged that the post-deprivation process was not sufficient because, although he was reinstated, the plaintiff was never compensated for lost wages, leave time, or seniority and remains injured. The Court finds that count 1 of the complaint states a claim. B. In Count 5 of the complaint, the plaintiff alleges that defendants Rudolph, Riley, and Burt retaliated against him for filing an internal EEO complaint. The acts of retaliation alleged in the complaint are that Rudolph “entered a false report,” Compl. ¶¶ 134-35, and these three defendants “did not process or follow up on the Plaintiff's EEO complaints for over 9 months,” Compl. ¶¶ 136- 37. The complaint itself indicates that the alleged retaliation is unlawful because the firing violates public policy. The defendants argue in their motion that the claim amounts to an intentional tort under state law subject to governmental immunity. The plaintiff responded that the claim was meant to allege violations of the First Amendment and Title VII. At oral argument, the defendants contended that even under those theories, the claim is not viable. The governing law in the Sixth Circuit that applies to claims of retaliation for exercising First Amendment rights was set forth by the Sixth Circuit in Thaddeus-X v. Blatter, 175 F.3d 378, 394 (6th Cir. 1999) (en banc): A retaliation claim essentially entails three elements: (1) the plaintiff engaged in protected conduct; (2) an adverse action was taken against the plaintiff that would deter a person of ordinary firmness from continuing to engage in that conduct; and (3) there is a causal connection between elements one and two — that is, the adverse action was motivated at least in part by the plaintiff’s protected conduct. -13- Filing a complaint with the MDOC’s EEO office can be viewed as an act of seeking redress from the government, and as such can be considered protected conduct to satisfy the first element of the claim. See Niswander v. Cincinnati Ins. Co., 529 F.3d 714, 721 (6th Cir. 2008); Johnson v. Univ. of Cincinnati, 215 F.3d 561, 578-79, 781-81 (6th Cir. 2000); Fox v. Eagle Distrib. Co., Inc., 510 F.3d 587, 591-92 (6th Cir. 2007). It is unclear how delaying adjudication of a complaint can amount to adverse action for filing that complaint. Delaying adjudication in effect is non-action, so the delay itself will not satisfy the second element. However, the Sixth Circuit has held that making false statements with the intent to interfere with a person’s employment can constitute adverse action in a First Amendment retaliation case. See Paige v. Coyner, 614 F.3d 273, 281 (6th Cir. 2010) (observing that “[l]osing one’s job and accompanying benefits is certainly severe enough to deter a person of ordinary firmness from speaking at public meetings”). The plaintiff also has alleged that the false statements were provoked by his filing, which is plausible since there would be no other reason to file statements except to address the internal proceedings involving the incident. The Court finds that the complaint states a claim for retaliation in violation of the First Amendment. Under the First Amendment, governmental immunity is not an available defense. See Pucci, 628 F.3d at 768-69. The Title VII claim is problematic. Certainly, Title VII prohibits an employer from retaliating against an employee for making a charge. See 42 U.S.C. § 2000e-3(a). But Title VII contains procedural requirements that must be followed before a lawsuit can be brought. “Plaintiffs must typically file a timely discrimination charge with the EEOC in order to bring a Title VII lawsuit.” Amini v. Oberlin Coll., 259 F.3d 493, 498 (6th Cir. 2001) (citing Alexander v. Local 496, Laborers’ Int’l Union of N. Am., 177 F.3d 394, 407 (6th Cir. 1999 ; see also 42 U.S.C. § 2000e-5. -14- The plaintiff admits that he never availed himself of the administrative procedures under Title VII by filing a charge with the Equal Employment Opportunity Commission (EEOC). He resorted only to the internal EEO procedure prescribed by the MDOC. When an aggrieved employee fails to mention retaliation in an EEOC filing, courts will excuse that omission when the retaliation occurred after the charge was made to the EEOC. See Strouss v. Michigan Dept. of Corrections, 250 F.3d 336, 342 (6th Cir. 2001). However, when the retaliation is known to the employee when the EEOC filing is made (or should have been made), the employee must exhaust that remedy before filing suit. Ibid.; see also Spengler v. Worthington Cyclinders, 615 F.3d 481, 489 n.3 (6th Cir. 2010). Because the plaintiff made no EEOC filing, he may not pursue a Title VII retaliation claim in this Court. C. The defendants also argue that the plaintiff’s state law claims are barred by governmental immunity. Those claims include tortious interference, conspiracy, and negligence. Michigan’s Governmental Tort Liability Act states generally that employees of state agencies are immune from tort liability while in the course of employment and when “engaged in the exercise or discharge of a governmental function” under certain conditions. Mich. Comp. Laws § 691.1407(2). “A ‘[g]overnmental function’ is an activity that is expressly or impliedly mandated or authorized by constitution, statute, local charter or ordinance, or other law.” State Farm Fire & Cas. Co. v. Corby Energy Servs., Inc., 271 Mich. App. 480, 483, 722 N.W.2d 906, 909 (2006) (citing Mich. Comp. Laws § 691.1401(f); see also Tryc v. Mich. Veterans’ Facility, 451 Mich. 129, 134, 545 N.W.2d 642 (1996). The governmental immunity statute includes a savings provision that states that the legislation “does not alter the law of intentional torts as it existed before July 7, 1986.” Mich. Comp. Laws § 691.1407(3). That reference was meant to preserve the rules of governmental -15- immunity for intentional torts set out in Ross v. Consumers Power Co. (On Rehearing), 420 Mich. 567, 363 N.W.2d 641 (1984). See Odom v. Wayne Cnty., 482 Mich. 459, 461-62, 468, 760 N.W.2d 217, 218, 221 (2008). Parsing Ross, the Michigan Supreme Court outlined three elements state employees must establish to avail themselves of the governmental immunity defense: (a) The acts were undertaken during the course of employment and the employee was acting, or reasonably believed that he was acting, within the scope of his authority, (b) the acts were undertaken in good faith, or were not undertaken with malice, and (c) the acts were discretionary, as opposed to ministerial. Id. at 479-80, 760 N.W.2d at 228; see also id. at 470-71, 760 N.W.2d at 222-23 (discussing the statutory requirements of the governmental immunity act). As noted earlier, the complaint alleges the following tort counts against the following defendants: tortious interference with business expectancies through a concert of action by Jenkins, Sulski, Kelley, Rogers, Clark, Burt, Riley, Rudolph, Laier, and Gajewski; conspiracy to provide false reports by the MDOC, Jenkins, Sulski, Rogers, Clark, Laier, Kelley, and Gajewski; and negligence for failure to train by Rudolph, Riley, and Burt. The parties do not dispute that tortious interference is an intentional tort and is governed by the Ross framework. The plaintiff concedes that the defendants have met the first element of this defense but argues that their actions were not taken in good faith and were ministerial in nature. The Michigan Supreme Court described “[i]n a nutshell” the difference between discretionary acts and ministerial acts: “the former involves significant decision-making, while the latter involves the execution of a decision and might entail some minor decision-making.” Ross, 420 Mich. at 634-35, 363 N.W.2d at 668. -16- The defendants state in a conclusory fashion that they performed their job functions in good faith and suggest that the plaintiff merely dislikes the result of their actions and has failed to demonstrate bad faith. But the burden on this element falls to the defendants. Odom, 482 Mich. at 479, 760 N.W.2d at 227-28 (holding that “the burden continues to fall on the governmental employee to raise and prove his entitlement to immunity as an affirmative defense”). The plaintiff has alleged in the complaint that the defendants collaborated to make the same false statements against the plaintiff and attempted to conceal the plaintiff’s side of the story. The defendants have not met their burden of demonstrating good faith at the pleading stage of the case. In addition, although the decision to engage in an investigation is discretionary, the act of carrying out the investigation is ministerial. See Ross, 420 Mich. at 635, 363 N.W.2d at 668. Based on the allegations in the complaint, it appears that at least some of the investigators or witnesses, that is, defendants Jenkins, Sulski, Kelley, Rogers, Rudolph, Laier, and Gajewski, were carrying out decisions made by others, and therefore would not be entitled to governmental immunity. That may not be the case for defendants Clark, Riley, Burt, and Rudolph. Nonetheless, at the pleading stage, the governmental immunity defense is not developed sufficiently to permit summary dismissal of the tortious interference count. The parties likewise do not dispute that conspiracy is an intentional tort and is governed by the Ross framework. The plaintiff again concedes that the defendants have met the first element of this defense, but argues that the defendants’ actions were not taken in good faith and were ministerial in nature. The plaintiff has directed this count against Jenkins, Sulski, Rogers, Clark, Laier, Kelley, and Gajewski, and relies on the same factual basis as the tortious interference count at least as to defendant Clark. The same result obtains: there are sufficient allegations in the -17- complaint to require the defendants to establish evidence of their good faith, so dismissal at this stage based on the governmental immunity defense is not warranted. A different standard applies to the negligence count, in which the plaintiff alleges fault against defendants Rudolph, Riley, and Burt for failure to train the plaintiff on new systems when he returned to work. State employees are immune from most negligent torts unless their conduct rises to the level of gross negligence. Mich. Comp. Laws § 691.1407(2)(c). “Gross negligence” means conduct so reckless as to demonstrate a substantial lack of concern for whether an injury results.” Id. at § 691.1407(7)(a). The plaintiff has cited no case law supporting the idea that the failure to train an employee on a computer program amounts to gross negligence. He has pointed out that MDOC policy requires administrators and supervisors to notify staff members of new policy directives, provide hard copies, and obtain staff signatures verifying that the staff member has had the opportunity to read the policy. Compl. ¶ 82 & Ex. C, Policy Directive 01.04.110, at ¶¶ S-U. The policy cited by the plaintiff does not mention training, although providing training no doubt would be prudent. The plaintiff argues that the failure to train equals gross negligence because it was highly likely that he would be disciplined following a counting error, the defendants acted were aware of those consequences, and they acted without regard to the employment harm the plaintiff would suffer. The Court disagrees. The failure to provide training for a new computer system under the circumstances alleged by the plaintiff does not imply “reckless disregard of the consequences as affecting the life or property of another.” McKeever v. Golfsbury Speedway, Inc., 57 Mich. App. 59, 62, 225 N.W.2d 184, 186 (1974) (quoting Denman v. Johnston, 85 Mich. 387, 396, 48 N.W. 565, 567 (1891 . Certainly an untrained employee may make a mistake, but that would not lead -18- inevitably to discipline or loss of privileges or property. The Court fails to see how this allegation rises beyond ordinary negligence. Therefore, governmental immunity bars this state law claim. III. The Court finds that the Eleventh Amendment bars the claims in the complaint against the MDOC, the plaintiff has not pleaded any factual allegations against defendant Waters, the plaintiff cannot support his gender discrimination claim under the Elliott-Larsen Civil Rights Act, Mich. Comp. Laws § 37.2102, he has not stated a claim against state officials under the Fifth Amendment, he has not alleged a viable retaliation claim under Title VII of the Civil Rights Act of 1964, and his negligence claim is barred by state governmental immunity. Accordingly, it is ORDERED that the defendants’ motion to dismiss [dkt. # 17] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the complaint is DISMISSED against defendants Michigan Department of Corrections and Jimmy Waters ONLY. It is further ORDERED that the Fifth Amendment claim in Count 1, all claims in Counts 2 and 6, and the retaliation claim based on Title VII of the Civil Rights Act of 1964 in Count 5 of the complaint are DISMISSED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 23, 2011 -19- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 23, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -20-

=== United States of America v. Gordon H. Porath and Georgina M. Porath ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff and counter-defendant, v. GORDON H. PORATH and GEORGINA M. PORATH, Defendants and counter-plaintiffs. ____________________________________/ Case Number 08-10166 Honorable David M. Lawson OPINION AND ORDER DENYING MOTION FOR JURY TRIAL AND DETERMINATION FOLLOWING TRIAL BY THE COURT WITHOUT A JURY The United States has filed a complaint against defendants Gordon and Georgina Porath to foreclose a tax lien on the Poraths’ house in Brighton, Michigan, currently titled in Mrs. Porath’s name. An assessment was made against defendant Gordon Porath on October 28, 1991 for unpaid income and Social Security taxes withheld from Mr. Porath’s company. The government contends that in 1991, Mr. Porath transferred his interest in the house to his spouse in order to avoid his tax obligations to the Internal Revenue Service (IRS). The government claims that despite the formalities of the title transfer, a tax lien attached to half of Mrs. Porath’s interest in the house either because she acted as Mr. Porath’s nominee, or because Mr. Porath’s 1991 transfer to Mrs. Porath may be set aside under the Michigan Fraudulent Conveyance Act. The Poraths, on the other hand, contend that the transfer occurred in 1987 by virtue of a hand-written postnuptial agreement they both signed, and therefore, the government’s contentions are without merit. The defendants filed a motion for a jury trial. The Court verbally denied that motion, promising a written opinion to follow, and the case proceeded to trial before the Court sitting without a jury. Trial began on April 7, 2009, and the proofs concluded the same day. The Court heard the testimony of three witnesses (one by video deposition) and received 16 exhibits. The parties filed post-trial briefs and proposed findings. The following constitutes the Court’s ruling on the motion for jury trial and its findings of fact under Federal Rule of Civil Procedure 52(a)(1), followed by its application of the governing law. I. Background The case stems from an assessment made against Gordon Porath as a result of the failure of the U.S. Computer Corporation to remit to the IRS income and Social Security taxes that had been withheld from the wages of its employees under the Federal Insurance Contributions Act (FICA). Gordon Porath was the majority shareholder of the U.S. Computer Corporation and learned about the unpaid tax withholding before the corporation ceased operating in July 1989. On February 5, 1990, Gordon Porath was interviewed by IRS revenue officer Anthony Cipparone as part of Cipparone’s trust fund recovery penalty investigation. On October 28, 1991, the IRS assessed unpaid taxes and penalties of $66,932.66 against the U.S. Computer Corporation for failing to pay employee income taxes for the last three quarters of 1988 and for the first two quarters of 1989. The IRS sought to hold Dominic Morinelli, a co-owner of U.S. Computer Corporation, and Gordon Porath jointly liable as “responsible parties” under 26 U.S.C. § 6672, and on March 17, 1994, a judge of this Court entered a judgment against Gordon in the amount of $66,932.66. Morinelli v. United States, No. 92-73941 (E.D. Mich. Mar. 17, 1994). A Notice of Federal Tax Lien on the Brighton property was recorded in Livingston County, Michigan against Gordon on August 21, 1995 and against Georgina on June 1, 2004. The government seeks to collect the judgment amount by foreclosing on the house in Brighton that once -2- belonged to the Poraths as husband and wife, but has since been transferred into sole ownership of Georgina Porath. In an attempt to fight the government’s collection effort, Georgina Porath filed an action to quiet title in this Court on September 21, 2007. In turn, the government filed the present foreclosure action on January 11, 2008, naming both Georgina and Gordon Porath as defendants. Georgina dismissed her quiet title action voluntarily and filed it as a compulsory counterclaim in the present action. The parties filed cross motions for summary judgment, which the Court denied because of unresolved fact issues surrounding the purported transfer of the property to Georgina in 1987. The Court scheduled the case for trial. II. Motion for Jury Trial The defendants sought a jury trial in their answer to the complaint and by motion filed on March 17, 2009. The Seventh Amendment to the United States Constitution states: “In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved . . . .” For nearly two centuries, the Supreme Court has construed the “Suits at common law” phrase to mean “suits in which legal rights were to be ascertained and determined, in contradistinction to those where equitable rights alone were recognized, and equitable remedies were administered.” Parsons v. Bedford, 28 U.S. (3 Pet.) 433, 447 (1830). The right to a jury trial does not extend to litigants filing claims seeking equitable relief. Tull v. United States, 481 U.S. 412, 417-18 (1987). The same right to trial by jury is preserved in Rule 38(a) of the Federal Rules of Civil Procedure, which declares that “[t]he right of trial by jury as declared by the Seventh Amendment -3- to the Constitution — or as given by a federal statute — is preserved to the parties inviolate.” Fed. R. Civ. P. 38(a). To ascertain one’s eligibility for jury trial, courts analyze whether the action would be addressed in courts of law or courts of equity in 18th Century England before the merger of law and equity; whether the relief sought by the plaintiff in the case is legal or equitable in nature; and “the practical abilities and limitations of juries.” Ross v. Bernhard, 396 U.S. 531, 533, 538 n.10 (1970). “[W]here equitable and legal claims are joined in the same action, there is a right to jury trial on the legal claims which must not be infringed either by trying the legal issues as incidental to the equitable ones or by a court trial of a common issue existing between the claims. The Seventh Amendment question depends on the nature of the issue to be tried rather than the character of the overall action.” Id. at 537-38; see also Tull, 481 U.S. at 417-18 (“First, we compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity. Second, we examine the remedy sought and determine whether it is legal or equitable in nature.”). In the present case, the plaintiff seeks to foreclose a lien, and the defendants seek to quiet title in real property. It is beyond dispute that these actions have their historical origins in courts of equity. Damsky v. Zavatt, 289 F.2d 46, 53 (2d Cir. 1961) (observing that “[f]oreclosure of the mortgagor’s equity of redemption was an established head of equity jurisdiction well before 1791”) (citing How v. Vigures, 1 Rep. Ch. 32, 21 E.R. 499 (1923), and Emanuel College v. Evans, 1 Rep. Ch. 18, 21 E.R. 494 (1625 ; Sackett v. Atyeo, 217 Mich. App. 676, 680, 552 N.W.2d 536, 538 (1996) (“Actions to quiet title are equitable in nature . . . .”). If there were a claim by the government for a money judgment for unpaid taxes against either of the defendants, a jury trial would be in order. Damsky, 289 F.2d at 48-53; see also United States v. Anderson, 584 F.2d 369, -4- 373 (10th Cir. 1978); United States v. McMahan, 569 F.2d 889, 892 (5th Cir. 1978) (holding that the defendant, who was alleged by the United States to be responsible for collection of taxes under sections 6671(b) and 6672 of Title 26, has the right to demand jury trial even where the government in the same action seeks equitable relief from the defendant’s wife and others to set aside conveyances and to foreclose its lien against property formerly owned by him and subsequently conveyed to others); cf. Farmers-Peoples Bank v. United States, 477 F.2d 752, 756 (6th Cir. 1973) (calling “well-reasoned” the Second Circuit opinion in Damsky, in which the court held that a defendant in an in personam action to recover federal income taxes was entitled to trial by jury). No such remedy is sought in this case, however. Nonetheless, the defendants contend that what the government seeks at its base is to set aside a fraudulent conveyance, and the Supreme Court in Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989), held that the Seventh Amendment requires a jury trial in such actions. Not necessarily, however. In Granfinanciera, a trustee in bankruptcy sued a third party to recover a specific sum of money, which the trustee contended had been paid over to the defendant by the debtor within a year of the bankruptcy proceedings. The lower courts held that no jury trial was allowed because suits to set aside fraudulent conveyances were equitable in nature, the action to set aside the fraudulent transfer was a core bankruptcy proceeding to which no right to a jury trial attached, and bankruptcy proceedings historically were equitable in nature. The Supreme Court took a different view. It cited 18th-Century English cases demonstrating that suits to set aside fraudulent transfers were often bought in law courts, and concluded “that courts of equity had concurrent jurisdiction with courts of law over fraudulent conveyance actions.” Id. at 43. Where the relief “sought [was] the recovery of a fixed sum of money without the need for an accounting or other equitable relief,” id. at 45-46, -5- as in the case then before the Court, the Court determined that the action was at law and the right to a jury trial applied. Historically, the Court found, suits to recover money or chattels were treated differently than suits involving title to real property. In drawing that distinction, the Court quoted the following treatise: “[W]hether the trustee’s suit should be at law or in equity is to be judged by the same standards that are applied to any other owner of property which is wrongfully withheld. If the subject matter is a chattel, and is still in the grantee’s possession, an action in trover or replevin would be the trustee’s remedy; and if the fraudulent transfer was of cash, the trustee’s action would be for money had and received. Such actions at law are as available to the trustee to-day as they were in the English courts of long ago. If, on the other hand, the subject matter is land or an intangible, or the trustee needs equitable aid for an accounting or the like, he may invoke the equitable process, and that also is beyond dispute.” Id. at 44 (quoting 1 G. Glenn, Fraudulent Conveyances and Preferences § 98, pp. 183-184 (rev. ed. 1940) (footnotes in original omitted; emphasis added . The quoted language is illuminating, and it serves to distinguish this case from the general proposition the defendants urge. The Court held that the Seventh Amendment requires a jury trial when the action is to set aside the fraudulent conveyance of a specific sum of money. The Court did not hold that an action to set aside the fraudulent conveyance of land, traditionally heard by courts of equity, see Hobbs v. Hull, 1 Cox 445, 29 Eng. Rep. 1242 (Ch. 1788) (cited in Granfinanciera, 492 U.S. at 45-46), entitles the parties to a jury trial. Since Granfinanciera was decided, some courts have held that suits to set aside fraudulent transfers, even of real property, trigger the Seventh Amendment right to a jury trial. In re Pasquariello, 16 F.3d 525, 530 n.9 (3d Cir. 1994) (citing In re Stoecker, 117 B.R. 342 (N.D. Ill. 1990 ; In re Lee Way Holding Co., 115 B.R. 586 (S.D. Ohio 1990), rev'd on other grounds, 956 F.2d 1164 (6th Cir. 1992); In re Southeast Connectors, Inc., 113 B.R. 85 (S.D. Fla. 1990); Michaels -6- v. Lomax (In re Skil-Aire Corp.), 142 B.R. 692 (Bankr. D.N.J. 1992); Beeline Eng’g & Constr. Inc. v. Monek, 139 B.R. 1025 (Bankr. S.D. Fla. 1992); In re Roberts, 126 B.R. 678 (Bankr. W.D. Pa. 1991 ; see also In re. C.J. Rogers, Inc., 212 B.R. 265, 275 (E.D. Mich. 1997) (characterizing Granfinanciera as holding that “a person who has not submitted a claim against a bankruptcy estate has a right to a jury trial when the trustee sues him or her in bankruptcy to recover a fraudulent conveyance.”). But the actions here are to foreclose a lien on and quiet title in land. In Granfinanciera, the Court, quoting Tull v. United States, directed lower courts first to compare the present action to those brought in English courts before the merger of the courts of law and equity, and then “examine the remedy sought and determine whether it is legal or equitable in nature.” Granfinanciera, 492 U.S. at 42. The Court instructed that “[t]he second stage of this analysis is more important than the first.” Ibid. The remedies sought in this case are foreclosure and the quieting of title. They are quintessentially equitable in nature. See Rozelle v. Conn. Gen. Life Ins. Co., 471 F.2d 29 (10th Cir. 1972) (finding no right to jury trial in a foreclosure proceeding); Damsky, 289 F.2d at 53 (finding that “foreclosure through decree of sale, provided for United States tax liens by I.R.C. § 7403, is sufficiently akin to the historic equity practice to preclude successful contention for a right to jury trial with respect to the ascertainment of the amount of the tax lien as against taxpayer’s property and enforcement of the lien by sale.”); United States v. McHan, 345 F.3d 262, 275-76 (4th Cir. 2003) (observing that a forfeiture action to take land as substitute property “would be most analogous to an equitable petition to quiet title to the forfeited property for which no jury was traditionally available”); Humble Oil & Refining Co. v. Sun Oil Co., 191 F.2d 705, 713- 14 (5th Cir. 1951) (holding that a suit to establish title to and recover possession of oil and gas leasehold interest in land, to remove clouds from title, and to enjoin interference with use of property -7- was not a common-law action of ejectment, or one in nature of ejectment, but was a suit of an equitable nature to quiet title, and aid of a jury was discretionary); Harlan v. Sparks, 125 F.2d 502, 506-07 (10th Cir. 1942) (holding that an action to quiet title to an interest in New Mexico land, where there was no ouster, and possession was not sought, was essentially an action in equity, and denial of the defendants’ demand for trial by jury was proper). The Court concludes, therefore, that the Seventh Amendment does not entitle the parties to a jury trial. III. Evidence and Conclusions of Fact Georgina Porath and Lee Gates testified in person at trial. Gordon Porath testified via video deposition taken on April 1, 2009. Portions of Gordon Porath’s discovery deposition taken on June 12, 2008 also were offered in evidence. The plaintiff offered fourteen exhibits and the defendants offered two exhibits. (Defendants’ Exhibit 16 is the same document as Plaintiff’s Exhibit 3.). The Court received these exhibits. Based on this evidence, the Court finds the following facts. Gordon Porath, born in 1920, attended the University of Michigan and then Wayne State University. He and Georgina Porath were married in 1942. Gordon served in World War II as an officer in the Army, and the couple resided together since sometime in 1945. The Poraths characterize themselves as folks of the “old school” philosophy under which husband and wife own everything jointly, even though the wife stays at home and the husband does the work. The Poraths are now nearing their nineties, and one of their three children is suffering from cerebral palsy and is totally disabled. Since 1967, the couple resided in a home located at 11000 East Grand River Avenue in Brighton, Michigan. That residence was Georgina’s childhood home, and the couple purchased it on August 19, 1967 for $35,000. They paid cash; no mortgage ever -8- encumbered this property. Prior to January 8, 1991, the record title to this residence was in the name of Gordon and Georgina Porath as tenants by the entireties. Gordon Porath was involved in several successful business ventures with companies that made machine tooling. He also was involved in commodities trading. In the late 1970s or early 1980s, he entered into the fashion business and co-owned a company known as Midwest Boutiques, which operated a chain of maternity fashion stores known as Lady Madonna Fashions, eventually expanding across the country with 25 stores. His partner, Lee Gates, was in charge of purchasing product, and he handled the business end by negotiating leases, franchise agreements, and other contracts. Around 1982, Gordon Porath turned his attention to the computer business and began U.S. Computer Corporation as a Michigan corporation, with a related Illinois corporation. Dominic Morinelli was brought in to run that part of the business. By 1987, the popularity of the Lady Madonna stores was on the wane, and both Gordon Porath and Lee Gates were trying to find a new niche for themselves. Lee decided to open a smaller-scale maternity clothing store; Gordon decided to buy out the U.S. Computer Corporation and devote his attention to the computer business. Ms. Gates verified many of these details. The Poraths both testified that Georgina was against Gordon embarking on a new business venture at age 67 because of the financial risk involved. Gordon testified that he had loaned money to Midwest Boutiques, and the amount was the same as that company had loaned to U.S. Computers. The break-up arrangement was that Lee Gates would leave with the fashion business, and Gordon Porath would receive 51% of U.S. Computers with Dominic Morinelli receiving the other 49%. See Pl.’s Ex 4. However, Gordon and Georgina discussed the working capital needs of this new venture, and Georgia was against it. -9- At the time, Gordon and Georgina owned their house free and clear, they had a joint money market account worth about $208,000, and they each had their separate assets. Gordon testified that he owned a money market account worth $4,000, an IRA worth $13,000, and the business inventory, which he valued at about $213,000. Georgina also had an IRA worth $13,000, and two other money market accounts in her separate name worth $5,000 and $13,000, respectively. They had no personal debt. Georgina had stopped working outside the home when the couple’s children were born. The oldest of their three children suffers from cerebral palsy and requires a great deal of care, which Georgina furnished. At the time, Georgina also was providing care for her ailing mother. Georgina was steadfastly opposed to placing their home at risk through Gordon’s proposed new venture. Nevertheless, Gordon made an agreement with Georgina to divide their joint assets, with Georgina taking the right to the house in exchange for allowing Gordon to loan money to U.S. Computer Corporation. They entered into a handwritten postnuptial agreement in the form of a letter that divided their assets. The letter, dated July 9, 1987, stated: As of July 31, 1987, I will discharge the debt owed to me by Midwest Boutiques, Inc. in exchange for Midwest Boutiques, Inc. assigning its loan receivable from U.S. Computer Corporation to me and 100% of the outstanding shares of capital stock in U.S. Computer Corporation to me. At the same time with the assignment, I will acquire 100% of the outstanding shares of capital stock of U.S. Computer-Chicago, Inc. Next, I will distribute 49% of the outstanding shares of stock in U.S. Computer Corporation to Dominic Morinelli to fulfill an oral promise made by me to Dominic Morinelli. The remaining 51% of the outstanding shares of stock in U.S. Computer Corporation, I will issue to myself. We both recognize this move [to acquire U.S. Computer Corporation] carries a high risk; and, further, you have stated your opposition to the venture. To use your words, “At our age, I am not going to stand by and watch 45 years of stress and toil go down the drain.” -10- We agree that for your protection (and mine), whenever you desire you may transfer to yourself any and all assets that we hold jointly. This right includes, but is not limited to, transferring to your name the property at 11000 East Grand River, Brighton, Michigan, its buildings and contents and all and any bank accounts, securities, security accounts, and money market accounts, which we agree is fair consideration for your share of the assets we have accumulated. Defs.’ Ex. 15. This letter is signed by Gordon and Georgina Porath only; it was not witnessed or acknowledged by a notary public. Gordon drafted the letter himself without consulting an attorney. The document was never recorded with the county register of deeds. The Poraths testified that they established the value of their home by doubling the state equalized value noted on their property tax bill, which gave them a value for the property of $74,220. They valued their household furnishings at $50,000, and they ascribed a total value to the Brighton property of approximately $125,000. Following the spirit of the letter, from June 27, 1987 through July 31, 1987, Georgina wrote four checks, numbered consecutively 123 through 126, for the total sum of $65,000; the checks were drawn from the couple’s joint cash money management account with Merill Lynch (which at that time had a balance of $208,000 accumulated through the years from other businesses Gordon owned) and made payable to the U.S. Computer Corporation. See Pl.’s Ex 3; Def.s’ Ex. 16. The account at Merrill Lynch remained in their joint names. The money in the account came from the sale of Mr. Porath’s other businesses, including one titled Century Detroit, which had earned Mr. Porath about $500,000. The business of U.S. Computer Corporation was a failure, and it closed its doors in 1989. Gordon testified at his April 1, 1993 deposition in the previous tax collection case that he learned that the business owed unpaid federal taxes in late 1988 or early 1989, but he did not believe that he was responsible for them. In a letter to revenue officer Valerie Oatley dated June 28, 2004, -11- Gordon wrote that he first became aware of the corporation’s tax liability in November 1991 when he received a notice of intent to levy. See Pl.’s Ex. 10. It was not until January 1991 that formal measures were taken to transfer the record interest of Gordon Porath in the house at 11000 East Grand River Avenue to Georgina Porath. Gordon testified that he took that action on advice from a business partner named Carl. Gordon explained that he and his wife had been trading commodities out of their house, and he believed he should register its proper ownership. He contacted attorney Robert Litt, who drafted the deed. Gordon signed a quit claim deed conveying his interest in the property to Georgina on January 25, 1991. The deed was recorded on January 31, 1991. See Pl.’s Ex 1. The deed recites a nominal consideration of one dollar and claims a transfer tax exemption under state law as an instrument where the value of consideration is less than $100. See Mich. Comp. Laws § 207.505(a). Georgina acknowledged that she had not seen the quit claim deed until her deposition in this case held on May 29, 2008. Despite the language in the July 1987 letter — “whenever you desire you may transfer to yourself any and all assets that we hold jointly” — Georgina insists that she intended to be the sole owner of the house from the moment she signed that letter. Both Gordon and Georgina acknowledge, however, that they took no formal action to transfer title to the property until January 1991. In addition, in the June 28, 2004 letter to revenue officer Valerie Oatley, Gordon wrote: “Late in December, 1990, Georgina M. Porath exercised her option as provided in the July 9, 1987 agreement and directed that, where applicable, the house, cars, etc. be legally recorded in her name free and clear.” Pl.’s Ex. 10. Georgina claims that she did not know about her husband’s troubles with the IRS until this Court entered a judgment against him in 2004. -12- Now the Poraths’ only income comes from their Social Security benefits. Georgina Porath receives about $600 per month, and Gordon Porath receives about $1600 per month. Throughout all of this, Gordon remained domiciled in the home at 11000 East Grand River Avenue. Only Georgina owns a checking account, although both the Poraths’ Social Security checks are direct- deposited into her account. Gordon does not have any signatory authority with regard to this account, and Georgina pays bills, taxes, and other household expenses using her account and gives whatever remains to Gordon for his personal needs. Gordon Porath has no assets in his name; even the car the couple uses is titled in Georgina’s name, although she bought it with the funds drawn from the Comerica Bank account funded in part by Gordon’s monthly Social Security check. Because Gordon is not a signatory on Georgina’s account, it is only through Georgina that he has access to his Social Security income. Based on the language of the July 1987 letter (Defs.’ Ex. 15) and the statements of Gordon Porath, the Court concludes that the defendants intended at that time to convey the right to receive Gordon Porath’s undivided one-half interest in the Brighton home to Georgina Porath. Consideration for that agreement was given in the form of permission by Georgina to allow Gordon to use a portion of their joint assets in his computer business venture. However, that right was not exercised until the deed (Pl.’s Ex 1) was executed on January 25, 1991 and recorded with the Livingston County, Michigan register of deeds on January 31, 1991, after Gordon’s business had failed and he had become liable for unpaid employment taxes. In December 1991, Gordon wrote a letter to the IRS acknowledging the Notice of Intent to Levy dated November 18, 1991. At the time of the letter, Gordon professed to be insolvent. He wrote that he lost his life’s savings in the failed business. He stated, “My last resource was a -13- lifetime IRA which was withdrawn for living expenses a year and a half ago. Now I have nothing — absolutely no assets — no cash — no property — no car — no securities — no bank account. My only income is my social security check of $962.00.” Pl.’s Ex 2. As noted earlier, the responsibility for the tax trust fund liability was the subject of a lawsuit involving the government, Dominic Morinelli, and Gordon Porath. A separate judgment was entered against Gordon in favor of the government in the amount of $66,932.66 on March 17, 1994. It does not appear that the judgment has been satisfied. IV. Conclusions of Law This is a case to foreclose a federal tax lien that has attached to real property, and a counterclaim to quiet title to that property. The Court has jurisdiction on the foreclosure claim under 28 U.S.C. §§ 1340, 1345, and 26 U.S.C. § 7402(a). The Court has jurisdiction over the counterclaim under 28 U.S.C. § 2410(a). A point not in dispute in this case is Georgina Porath’s right to her undivided one-half interest in the Grand River Avenue property. The government does not contend that she is personally responsible for Gordon Porath’s individual tax liability. Instead, the government argues that the other half of the property interest is subject to foreclosure because the transfer of it by Gordon ought to be set aside, or it was a sham and Georgina holds that half as Gordon’s nominee. A. Statute of Limitations The defendants first argue that the government’s suit is out of time because the tax was assessed against Gordon on October 28, 1991 and this lawsuit was not filed until January 11, 2008. They point to 26 U.S.C. § 6502(a), which establishes a ten-year statute of limitations on actions to -14- collect assessed taxes. Section 6502(a)(1) does state that a civil action to collect a tax must be commenced “within 10 years after the assessment of the tax.” But the statute also provides: If a timely proceeding in court for the collection of a tax is commenced, the period during which such tax may be collected by levy shall be extended and shall not expire until the liability for the tax (or a judgment against the taxpayer arising from such liability) is satisfied or becomes unenforceable. 26 U.S.C. § 6502(a). Section 6321 of the Internal Revenue Code creates a statutory lien against all property and rights to property belonging to a delinquent tax payer. Redondo Const. Corp. v. United States, 157 F.3d 1060, 1062-63 (6th Cir. 1998). The tax lien extends to a person’s property if the “person liable to pay any tax neglects or refuses to pay the same after demand.” 26 U.S.C. § 6321. The lien imposed by this statues arises at the time of the assessment and continues “until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time.” 26 U.S.C. § 6322. “A lien becomes unenforceable by lapse of time upon expiration of the [ten-year] statute of limitations for collection, but if the government brings suit within [ten] years from assessment and receives a judgment in its favor, the life of the lien is extended indefinitely.” Markham v. Fay, 74 F.3d 1347, 1353 (1st Cir. 1996). Therefore, “[t]here is no time limit whatsoever on an action against the taxpayer to enforce a timely levy or judgment obtained in a timely filed court proceeding.” United States v. Weintraub, 613 F.2d 612, 620-21 (6th Cir. 1979). Once liability has been established, there is no time limitation in section 6502 for enforcement actions. Id. at 621 n.30 (listing cases in which foreclosure suits filed after the ten-year period were not considered time- barred); United States v. Overman, 424 F.2d 1142, 1147 (9th Cir. 1970) (holding that once the -15- judgment against a taxpayer is secured within the applicable statute of limitations, the life of the lien is endless); Hector v. United States, 255 F.2d 84, 86 (5th Cir. 1958) (same). In this case, the initial assessment against Gordon Porath was made on October 28, 1991, and the notice of assessment and demand for its payment were sent to Mr. Porath within five days of the assessment. A lien on Mr. Porath’s property arose at the time of the assessment on October 28, 1991. When Mr. Porath refused to make a payment, the government sued him in the Eastern District of Michigan. On March 17, 1994, this Court entered a money judgment for the United States, finding Gordon Porath responsible for the unpaid trust fund taxes. The time limit for enforcing that lien is extended indefinitely. The present action, commenced on January 11, 2008, therefore is timely. B. Quiet Title Action In Michigan a quiet title action is a statutory cause of action. Michigan Compiled Laws § 600.2932(1) states that “[a]ny person, whether he is in possession of the land in question or not, who claims any right in, title to, equitable title to, interest in, or right to possession of land, may bring an action in the circuit courts against any other person who claims or might claim any interest inconsistent with the interest claimed by the plaintiff.” This statute “codifie[s] actions to quiet title and authorize[s] suits to determine competing parties’ respective interests in land.” Republic Bank v. Modular One L.L.C., 232 Mich. App. 444, 448, 591 N.W.2d 335, 337 (1998), overruled on other grounds by, Stokes v. Millen Roofing Co., 466 Mich. 660, 649 N.W.2d 371 (2002). The parties seeking to establish clear title have the burden of proof in a quiet title action, and they must make out a prima facie case that they have title to the disputed land. Beulah Hoagland Appleton Qualified Pers. Residence Trust v. Emmet Cnty. Rd. Comm’n, 236 Mich. App. 546, 550, 600 N.W.2d 698, 700 -16- (1999) (citing Stinebaugh v. Bristol, 132 Mich. App. 311, 316, 347 N.W.2d 219 (1984 . If the plaintiffs establish a prima facie case, the burden of proof shifts to the contestant to establish superior right or title to the property. Beulah, 236 Mich. App. at 550, 600 N.W.2d at 700 (citing Boekeloo v. Kuschinski, 117 Mich. App. 619, 629, 324 N.W.2d 104 (1982 . An action to quiet title is equitable in nature. Ibid. If a defendant fails in its proof and “the plaintiff established his title to the lands, the defendant shall be ordered to release to the plaintiff all claims thereto.” Mich. Comp. Laws § 600.2932(3). 1. 1987 Letter Georgina Porath claims title to the Brighton property through the letter agreement drafted in the summer of 1987. The parties disagree as to the effect of the July 9, 1987 letter on the ownership of the Brighton property. The plaintiff argues that the letter was ineffective to achieve an actual transfer of Gordon Porath’s interest in land at that time. The defendants insist that their intent was to effectuate an immediate transfer of Gordon’s interest in the property to Georgina. The law does not favor the defendants’ position and the facts suggest otherwise as well. “In order to transfer an interest in realty the grantor owning such interest with intent to so do must execute an instrument sufficient to meet the requirements of Lex situs of the realty.” Michigan State Highway Comm’n v. Sandberg, 12 Mich. App. 475, 481, 163 N.W.2d 276, 278-79 (1968) (quoting 6 Thompson, Real Property, p. 1, § 2935). The property in this case is located in Livingston County, Michigan, and Michigan law applies in this case. See United States v. Nat’l Bank of Commerce, 472 U.S. 713, 722 (1985). The applicable statute states that “[c]onveyances of lands, or of any estate or interest therein, may be made by deed, signed and sealed by the person from whom the estate or interest is intended to pass, being of lawful age, or by his lawful agent or -17- attorney, and acknowledged or proved and recorded as directed in this chapter, without any other act or ceremony whatever.” Mich. Comp. Laws § 565.1. “The elements of an instrument of conveyance are a grantor, a grantee, a thing conveyed, consideration stated, words of grant, signature, acknowledgment, delivery, acceptance and recording.” Sandberg, 12 Mich. App. at 481, 163 N.W.2d at 279 (quoting 7 Callaghan’s Michigan Civil Jurisprudence, § 9, p. 3). In order to transfer an interest in real property, “it is essential that a written instrument contain at least language manifesting an intention on the part of a grantor to transfer such interest in property.” Id. at 481, 163 N.W.2d at 278. And “[t]here must be specific words of conveyance to pass an interest in land.” Id. at 481, 163 N.W.2d at 279 (citing Zemon v. Netzorg, 247 Mich. 563, 565, 226 N.W. 242, 242 (1929 . To be enforceable, a contract for the transfer of real property must contain the essential elements of any contract: a description of the parties and the property, consideration, terms, and time of performance, all expressed “with sufficient certainty and definiteness.” MacRitchie v. Plumb, 70 Mich. App. 242, 245, 245 N.W.2d 582, 584-85 (1976). A person relying on a deed must prove by preponderance of evidence that the deed was delivered to the grantee and it reflected the grantor’s present and unconditional intention to convey his interest in the property. See Havens v. Schoen, 108 Mich. App. 758, 760-61, 310 N.W.2d 870, 871 (1981). Valid delivery may be achieved even if the deed is not recorded. Schmidt v. Jennings, 359 Mich. 376, 383, 102 N.W.2d 589, 593-94 (1960). In determining whether the grantor has the present intention to transfer title to property, a court may look to subsequent acts by the grantor. Haasjes v. Woldring, 10 Mich. App. 100, 102, 158 N.W.2d 777, 778 (1968) (holding that where grandparent-grantors continued living at and paying for the property after the alleged transfer, and -18- where the deed was not placed beyond the grantor’s control, a valid transfer had not been effectuated). This Court has held in the past that the absence of certain formalities such as acknowledgment and recording are not fatal to a finding of an intent to transfer property. See Sumpter v. United States, 302 F. Supp. 2d 707, 721-23 (E.D. Mich. 2004) (Lawson, J.). Nevertheless, Michigan law is clear that in order to effectuate a conveyance of land, the grantor “must have intended to presently and unconditionally convey the interest and must have delivered the property to [the grantee].” In re Estate of Barkman, No. 212811, 2000 WL 33522375, at *2 (Mich. Ct. App. March 10, 2000) (citing Havens v. Schoen, 108 Mich. App 758, 761, 310 N.W.2d 870, 871 (1981), and Energetics, Ltd v. Whitmill, 442 Mich. 38, 53, 497 N.W.2d 497, 505 (1993). The defendants have not met their burden of establishing title through the letter dated July 9, 1987. The language in the letter is far from unconditional and it does not bespeak of a present intent to transfer the Brighton property. To the contrary, the letter indicates Gordon’s permission to Georgina to transfer the listed assets (which include the house) “whenever you desire.” These are not words of a grant, and the instrument was not effective to convey the real property to Georgina at that time. The Court believes that Gordon’s later characterization of the July 1987 agreement is most accurate. He called it an “option,” which Georgina exercised in December 1990. See Pl.’s Ex. 10. Until that option was exercised and a deed was executed, Gordon retained his interest in the property. 2. 1991 Deed The quit claim deed signed on January 25, 1991 and recorded on January 31, 1991 satisfied all the formal requirements for the transfer of Gordon’s interest in the property to Georgina. The -19- government argues that the deed is ineffective because there was no consideration given. That argument is beside the point. As long as the deed is executed and delivered, the transfer of the property is effective irrespective of the amount of consideration. Deeds are valid absent consideration when transferring property among family members or intended as gifts. Straith v. Straith, 355 Mich. 267, 276-77, 93 N.W.2d 893, 898 (1959); Daane v. Lovell, 83 Mich. App. 282, 292, 293, 268 N.W.2d 377, 382 (1978). The deed is sufficient to establish Georgina Porath’s title to the “other half” of the property. C. Foreclosure Action: United States’s Interest Via Tax Lien Since the plaintiffs have made out a prima facie case, the burden shifts to the United States to prove the superiority of its interest in the property by virtue of its tax lien or otherwise. As noted earlier, a federal tax lien arises when unpaid taxes are assessed and continues until the resulting liability is either satisfied or becomes unenforceable due to the expiration of the statute of limitations. See 26 U.S.C. §§ 6321-6322; 26 C.F.R. § 301.6321-1. The lien attaches to all property and property rights that the taxpayer then holds or subsequently acquires. Ibid. Once a tax lien attaches to property, it remains with the property despite subsequent transfers unless the property is sold to a bona fide purchaser for value before the notice of lien is filed. State law governs the determination of the nature of the legal interest that the taxpayer has in the property to which the lien attaches. Nat’l Bank of Commerce, 472 U.S. at 722; Aquilino v. United States, 363 U.S. 509, 513 (1960). Once the court determines the nature of the legal interest conferred by state law, the consequences are governed by federal law. Nat’l Bank of Commerce, 472 U.S. at 727; United States v. Rodgers, 461 U.S. 677, 683 (1983). -20- A tax lien does not attach to property that a taxpayer has transferred previously and that no longer belongs to him. However, when a taxpayer has fraudulently disposed of property prior to the establishment of a federal tax lien, the United States is entitled to rely upon the State’s fraudulent conveyance laws where the property is located to determine whether the taxpayer has an interest in the property. See e.g., Comm’r v. Stern, 357 U.S. 39, 45-47 (1958); United States v. Fernon, 640 F.2d 609, 611-12 (5th Cir. 1981); United States v. Kaplan, 277 F.2d 405, 408 (5th Cir. 1960). Thus, courts may look beyond nominal title to determine whether a taxpayer has retained an interest in the property. Similarly, where property is placed in the name of another as the taxpayer’s alter ego or nominee, the lien attaches to the property. See e.g. G.M. Leasing Corp. v. United States, 429 U.S. 338, 350-51 (1977); Lemaster v. United States, 891 F.2d 115, 119 (6th Cir. 1989). Therefore, the United States can enforce a taxpayer’s liability for taxes against property held for him by his nominee. Ibid; see also Porta-John of America, Inc. v. United States, 4 F. Supp. 2d 688, 689 (E.D. Mich. 1998). 1. Fraudulent Conveyance The governing statutory law of fraudulent conveyances in Michigan at the time of the real estate transfer in this case was Michigan Compiled Laws § 566.14, which defines constructive fraud, and Michigan Compiled Laws § 566.17, which defines actual fraud. These provisions were repealed in 1998 when Michigan adopted the Uniform Fraudulent Transfer Act, but the changes in the definitions of these terms are largely immaterial. See Mich. Comp. Laws §§ 566.34-.35; In re Hurtado, 342 F.3d 528, 532 n.1 (6th Cir. 2003). -21- Under section 566.14, a transfer of property “by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation incurred without a fair consideration.” Mich. Comp. Laws § 566.14 (1998). A transfer of property can also be fraudulent to the transferor’s creditors if it is made “with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors.” Mich. Comp. Laws § 566.17 (1998). Actual intent to hinder, delay, or defraud may be difficult to prove by direct evidence. Consequently, courts generally rely on the traditional “badges of fraud” to establish fraudulent intent. See United States v. Leggett, 292 F.2d 423, 426 (6th Cir. 1961); United States v. Rode, 749 F. Supp. 1483, 1493 (W.D. Mich. 1990), aff’d 943 F.2d 53 (6th Cir. 1991) (unpublished). The “badges of fraud” have been found to include “inadequacy of consideration, secret or hurried transactions not in the usual mode of doing business, and the use of dummies or fictitious parties.” Leggett, 292 F.2d at 427. Reservation of benefits, control or dominion of the property by the debtor, insolvency of the debtor, and pendency or threat of litigation at the time of the transfer are other badges of fraud. In re Otis & Edwards, P.C., 115 B.R. 900, 913 (Bankr. E.D. Mich. 1990). “A concurrence of several badges of fraud will always make out a strong case.” Leggett, 292 F.2d at 427 (quoting Timmer v. Pietrzyk, 272 Mich. 238, 242, 261 N.W. 313, 314 (1935 . Transactions between family members affecting the rights of creditors are generally subjected to close scrutiny. Kelley v. Thomas Solvent Co., 722 F. Supp. 1492, 1499 (W.D. Mich. 1989) (citing Linke v. Goodrich, 30 Mich. App. 228, 186 N.W.2d 5 (1971 ; Bentley v. Caille, 289 Mich. 74, 286 N.W. 163 (1939). These badges of fraud plus others identified by courts are now enumerated in the current Michigan statute. See Mich. Comp. Laws § 566.34(2) (listing as factors “[t]he transfer or -22- obligation was to an insider”; “[t]he debtor retain[ing] possession or control of the property transferred after the transfer”; concealment of the transfer or obligation; actual or threatened litigation “[b]efore the transfer was made or obligation was incurred”; “[t]he transfer was of substantially all of the debtor’s assets”; “[t]he debtor absconded”; “[t]he debtor removed or concealed assets”; “[t]he debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred”; “[t]he transfer occurred shortly before or shortly after a substantial debt was incurred”; and “[t]he debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.”) When a conveyance or transfer of property is fraudulent as to a creditor, that creditor may “[h]ave the conveyance set aside or obligation annulled to the extent necessary to satisfy his claim,” or he may “[d]isregard the conveyance and attach or levy execution upon the property conveyed.” Mich. Comp. Laws § 566.19 (1998). The government contends that the conveyance of the Brighton property is fraudulent based on at least three separate statutory provisions. Under section 566.14, “every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration.” Mich. Comp. Laws § 566.14; see Foodland Distributors v. Al-Naimi, 220 Mich. App. 453, 477, 559 N.W.2d 379, 389 (1996). A person is insolvent within the meaning of the act “when the present fair salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured.” Mich. Comp. Laws § 566.12. Under section 566.16, “[e]very conveyance made and every obligation incurred without fair consideration when the person making the conveyance or entering into the -23- obligation intends or believes that he will incur debts beyond his ability to pay as they mature, is fraudulent as to both present and future creditors.” Mich. Comp. Laws § 566.16; see Foodland Distributors, 220 Mich. App. at 478, 559 N.W.2d at 389-90. Finally, under section 566.17, “[e]very conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.” Mich. Comp. Laws § 566.17; see also Foodland Distributors, 220 Mich. App. at 478, 559 N.W.2d at 390. Under the first two sections, the government must show that Gordon Porath did not receive fair consideration for the transfer of his interest in the Brighton property. It argues that the defendants should be bound by the recital on the deed that consideration was one dollar, and the legend that the transfer was exempt from transfer tax under Michigan Compiled Laws § 207.505(a), which exempts “instruments where the value of the consideration is less than $100.00.” That argument is not persuasive. It is not unusual to recite nominal consideration in quit claim deeds transferring interests in property, especially among joint tenants. “While the consideration expressed in a written instrument is prima facie to be taken as the actual consideration, the rule is well settled by abundant authority that parol evidence is admissible to show that the true consideration was greater than or different from that expressed.” Stotts v. Stotts, 198 Mich. 605, 617, 165 N.W. 761, 765 (1917). The evidence demonstrates that the transfer of Gordon’s interest in the defendants’ joint assets was part of his arrangement with Georgina to allow him to pursue a new business venture and allow her to remain secure in the marital home. The government also argues that payment by means of the checks written from the defendants’ joint money market account to U.S. Computers did not represent separate consideration -24- from Georgina herself. That argument is based on the following premises: Gordon wrote the checks, which he had a right to do as a joint account holder; Georgina had separate accounts of her own, which she did not use to reflect payment for Gordon’s interest in their joint assets; and Georgina generally did not manage the joint money market account. The government urges the Court to draw the inference that the checks totaling $65,000 really represent a joint investment by the Poraths in U.S. Computer Corporation. That argument does not withstand the other evidence in the case. There can be no question that Georgina was strongly opposed to Gordon embarking on another business venture at age 67 and placing their savings and their property at risk. To suggest that Georgina would have joined in that venture flies in the face of the uncontradicted evidence of her expressed and documented opposition. Moreover, within three weeks of the July 9, 1987 agreement, Gordon loaned $65,000 from their joint account to U.S. Computer Corporation. As the Court understands the Poraths’ agreement, Gordon was willing to put his assets at risk, but Georgina was not willing to act in kind. And the letter agreement of July 9, 1987 was intended to allow Georgina to put the parties joint assets in her name, beyond the reach of Gordon’s creditors and future creditors. Based on the uncontested evidence of the valuation of the Poraths’ joint assets at the time, $65,000 represented fair consideration for the privilege of making that transfer. Moreover, the agreement did not render Gordon insolvent in 1987 as he was embarking on his new venture, since he had assets of his own, and he still had an interest in his remaining half of the joint assets, which he apparently intended to spend on his business venture. The Court concludes, therefore, that the government has not proved that Gordon Porath’s transfer of his interest in the Brighton property in January 1991 was “made . . . without a fair -25- consideration,” and therefore it has not established a fraudulent conveyance within the meaning of Michigan Compiled Laws § 566.14 or § 566.16. The question remains whether the January 1991 transfer of Gordon’s interest in the Brighton property ran afoul of Michigan Compiled Laws § 566.17. That statute is violated if the transfer was made with the actual intent “to hinder, delay, or defraud either present or future creditors.” Mich. Comp. Laws § 566.17. Although there is little evidence of an intent to hinder creditors when the agreement was made in July 1987, circumstances for the Poraths had changed dramatically by 1991. In the 1987 agreement, Gordon agreed with Georgina as follows: “whenever you desire you may transfer to yourself any and all assets that we hold jointly.” That statement is somewhat illusory, at least as to the real estate, because Georgina could not transfer the house to herself without Gordon’s cooperation by signing a deed. And there was no apparent need to effectuate a transfer of the house at the time. It served no practical purpose. Gordon continued to live in the house, and the it appears that the Poraths’ day-to-day affairs remained as before the agreement was signed. Gordon did not actually transfer that interest until he had suffered his reversal of fortunes, at a time that he was, by his own admission, insolvent. Gordon testified that he sought to effectuate the transfer of his interest in December 1990 when he got advice from “Carl,” his former partner, to “register” the house to avoid complications with operating a commodities trading business from his home. He explained that both he and his wife had their own trading accounts, and they conducted a trading business by plotting commodity trades on a computer. That justification is unconvincing. The legalities of operating a business from a residence do not depend on the name of the record title holder, and according to Gordon’s explanation, Georgina was trading in commodities on her own account as well. On the other hand, -26- Gordon testified that he was aware of the tax liability resulting from U.S. Computers’s failure to remit FICA payments, and it was a major concern to him. He had been interviewed on February 5, 1990 by an IRS revenue officer as part of a trust fund recovery penalty investigation. According to Gordon’s letter to the IRS of December 9, 1991 (Pl.’s Ex. 2), he had dissipated the last of his personal assets in the summer of 1990. On this record, it is difficult to find a plausible explanation for Gordon transferring his interest in the Brighton property in January 1991 other than to place it beyond the reach of creditors, most notably the IRS. The Court concludes that the transfer of Gordon’s interest in the Brighton property in January 1991 was for the purpose of hindering the collection of the tax obligation by the IRS, and therefore the transfer violated Michigan Compiled Laws § 566.17. 2. Nominee Status The government also contends that the transfer was a sham and Georgina held Gordon’s one- half interest in the Brighton property as his nominee. In collecting tax liability, the United States can proceed not only against the taxpayer himself, but also against the taxpayer’s nominee, instrumentality, or alter ego. See Lemaster, 891 F.2d at 119 & n.3 (holding that it is proper for the United States to collect tax debts from assets held by the taxpayer’s nominee). “A ‘nominee’ is a person or entity who holds legal title to property that in truth belongs to another who exercises control over and realizes the benefit of it.” Sumpter, 302 F. Supp. 2d at 720. “Nominee status is determined by the degree to which a party exercises control over an entity and its assets.” United States v. Bell, 27 F. Supp. 2d 1191, 1195 (E.D. Cal. 1998) (citing Shades Ridge Holding Co., Inc. v. United States, 888 F.2d 725, 729 (11th Cir. 1989 . -27- A court presented with a nominee claim “attempts to discern whether a taxpayer has engaged in a sort of legal fiction, for federal tax purposes, by placing legal title to property in the hands of another while, in actuality, retaining all or some of the benefits of being the true owner.” In re Richards, 231 B.R. 571, 578 (E.D. Pa. 1999). Another judge of this Court has succinctly summarized the six factors considered by courts in determining the claim: (1) whether inadequate or no consideration was paid by the nominee; (2) whether the property was placed in the nominee’s name in anticipation of a lawsuit or other liability while the transferor remains in control of the property; (3) whether there is a close relationship between the nominee and the transferor; (4) whether they failed to record the conveyance; (5) whether the transferor retains possession; and (6) whether the transferor continues to enjoy the benefits of the transferred property. Porta-John of America Inc., 4 F. Supp. 2d at 701 (citing LiButti v. United States, 968 F. Supp. 71, 76 (N.D.N.Y. 1997), and Towe Antique Ford Foundation v. IRS, 791 F. Supp. 1450, 1454 (D. Mont. 1992), aff’d, 999 F.2d 1387 (9th Cir. 1993 ; see also LiButti v. United States, 107 F.3d 110, 119-120 (2d Cir. 1997). In Spotts v. United States, 429 F.3d 248 (6th Cir. 2005), the Sixth Circuit stated that not all six factors are equally pertinent in every case, especially “in the context of a home purchase by a married couple because even if the home is only titled in one name, both ordinarily act as true owners.” Id. at 253 n.2. The court explained that “several of the factors used by courts will provide the same answer for every marital relationship in this context, thus providing little utility in distinguishing tax shams from legitimate titling decisions between spouses.” Ibid. Although placing legal title to property in one’s spouse’s name where the spouse exercises no independent ownership rights may make the spouse a nominee, “it is frequently difficult to determine whether a wife has taken legal title as the nominee of her husband or whether she received the title in her own right as a gift.” 2 Mertens Law of Fed. Income Taxation § 17:21 (2009). -28- The defendants testified that they intended the transfer of Gordon’s interest in the Brighton property to be an actual transfer, and the evidence supports their position. As noted earlier, the transfer was pursuant to the earlier agreement, which itself was supported by adequate consideration. It is true that Gordon continued to live in the home and enjoy its benefits, paid no rent, and was not restricted to any particular rooms in the dwelling. However, one would expect such living arrangements between spouses. The defendants intended that title would pass to Georgina in her own right. The transaction in January 1991 may have been “fraudulent” within the meaning of Michigan Compiled Laws § 566.17, but it was not a sham. The government has not established that Georgina held Gordon’s interest in the marital premises as a nominee. V. Conclusion Under Michigan law, when a conveyance is fraudulent it may be set aside as to a creditor “to the extent necessary to satisfy his claim,” or the creditor may “[d]isregard the conveyance and attach or levy execution upon the property conveyed.” Mich. Comp. Laws § 566.19 (1998). Consequently, the United States may look to Gordon Porath’s interest in one-half of the Brighton property to satisfy its claim for unpaid taxes, although it may not invade Georgina’s pre-existing share of the property. See United States v. Craft, 535 U.S. 274, 288, (2002) (holding that a federal tax lien attaches to the delinquent taxpayer’s interest in property held by the taxpayer and an innocent spouse by the entireties under 26 U.S.C. § 6321); United States v. Rodgers, 461 U.S. 677, 689-94 (1983) (holding that although 26 U.S.C. § 6321 allowed the government to force a sale of jointly held homestead property to satisfy the tax obligation of one of the joint tenants, the government must take steps to compensate the nondelinquent spouse for her interest in the property); United States v. Certain Real -29- Property Located at 2525 Leroy Lane, West Bloomfield, Mich., 910 F.2d 343, 349 (6th Cir. 1990) (acknowledging that the government could prosecute a forfeiture proceeding against property held by the entireties but providing that it would have a lien on the property only to the extent of the value of the wrongdoer’s interest). In this case, however, the government has taken the position that as long as the Poraths maintain the property, keep it insured, and pay the real estate taxes, the United States will not enforce a judgment of foreclosure while either Gordon or Georgina is living there. The Court finds that the transfer of Gordon’s undivided one-half interest in the property located at 11000 East Grand River, Brighton, Michigan on January 25, 1991 was for the purpose of hindering the collection of a debt in violation of Michigan Compiled Laws § 566.17; therefore, the government may disregard the conveyance and levy on that property at the appropriate time, consistent with its forbearance agreement. Accordingly, it is ORDERED that the defendants’ motion for a jury trial [dkt. #36] is DENIED. It is further ORDERED that the defendants take nothing on their counterclaim, which is DISMISSED WITH PREJUDICE. It is further ORDERED that judgment will enter in favor of the United States determining that a valid federal tax lien attaches to the interest of Gordon Porath in property commonly known as 11000 East Grand River, Brighton, Livingston County, Michigan. The United States may enforce its lien by foreclosure upon the termination of occupancy by Gordon Porath and Georgina Porath, or upon a default in the payment of property taxes on the premises, or the failure to maintain casualty insurance on the premises. -30- s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 3, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 3, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -31-

=== UNITED STATES SECURITIES AND EXCHANGE COMMISSION v. JOHN J. BRAVATA, et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Plaintiff, Case No. 09-12950 Honorable David M. Lawson v. JOHN J. BRAVATA, RICHARD J. TRABULSY, ANTONIO M. BRAVATA, BBC EQUITIES, LLC, BRAVATA FINANCIAL GROUP, LLC, and SHARI A. BRAVATA, ___________________________________________/ Defendants. OPINION AND ORDER CONTINUING PRELIMINARY INJUNCTION, ASSET FREEZE ORDER, AND APPOINTMENT OF RECEIVER, AND GRANTING MISCELLANEOUS RELIEF The Security and Exchange Commission commenced this action on July 26, 2009 alleging that the defendants had engaged in the unauthorized sale of securities, and that the securities it offered for sale were part of a fraudulent scheme in which earlier investors were paid “returns” from new investments remitted by subsequent investors. That type of investment structure is commonly known as a pyramid or Ponzi scheme. The complaint alleges that the defendants’ actions violated several provision of the Securities Act of 1933, the Securities Exchange Act of 1934, and various regulations promulgated under that legislation. With the complaint, the plaintiff filed an emergency motion for a temporary restraining order, to freeze the defendants’ assets, and for the appointment of a receiver. The Court entered a temporary restraining order and continued the order as an order of preliminary injunction with the consent of the parties at a hearing on August 4, 2009. Following the August 4, 2009 hearing, the parties reached an agreement that a Receiver should be appointed to handle limited operational and business matters of the institutional defendants, subject to modification of the scope of the Receiver’s duties and responsibilities following an evidentiary hearing. The Court held an evidentiary hearing, taking testimony from ten witnesses on October 21, 22, and 30, 2009 and January 14, 2010. The parties were given time to file post hearing briefs and proposed findings of fact and conclusions of law. The focus of the hearing was whether the preliminary injunction and receivership should continue, and whether certain aspects of the preliminary orders — most notably, the asset freeze order — should be modified or dissolved. In addition to the merits of the plaintiff’s contentions as described in the complaint, the defendants made specific objections to freezing certain assets that, they argue, were acquired by funds other than investments by the investors in BBC Equities, LLC and Bravata Financial Group, LLC. Those assets include the following: (1) non-party bank accounts consisting of (a) Comerica Bank Account No. XXXXXXXX684 held jointly by Richard Trabulsy and his grandmother Lily Trabusly; and (b) Comerica Bank Account No. XXXXXX9556 held jointly in the name of Antonio Bravata and his grandmother, Dylite Adams; (2) certain frozen assets consisting of (a) all assets that were accumulated prior to the date that BBC Equities received and accepted its first subscription agreements for the sale of limited liability membership units (approximately October 2006, rather than May-June 2006 as alleged in the complaint); and (b) assets that were acquired during the time that BBC offered and sold limited liability membership units, but either have no net asset value, are the subject of monthly installment payments required to avoid forfeiture of those assets and, assets that could be unfrozen and used to enable the Bravata defendants to retain experienced securities -2- counsel and present a defense to the charges raised in the SEC Complaint, which include (i) a 1995 Ferrari purchased by John J. Bravata in June 2006; (ii) three Additional Vehicles used and paid for by John Bravata: John J. Bravata’s 2005 Cadillac STS, Richard Trabulsy’s 2006 Chevrolet Corvette, and Lily Trabulsy’s 2007 Cadillac Escalade; (iii) insurance policies on John J. Bravata’s life; and (iv) the balance of the retainer John Bravata paid to his bankruptcy counsel. The Court entered an order on August 21, 2009 denying the defendants’ request to unfreeze those assets, subject to the outcome of the evidentiary hearing. For the reasons outlined below, the Court concludes that the plaintiff has demonstrated a likelihood of success on the merits of their claims; other pertinent factors favor the continuation of the preliminary injunction; the disputed assets likely were acquired from investor funds accumulated since the inception on May 1, 2006 of what came to be known as BBC Equities, LLC; the asset freeze order should continue in force; and the receivership should continue with the Receiver’s duties remaining as described in the original order. The following constitutes the Court’s findings of fact under Federal Rule of Civil Procedure 52(a)(2), followed by its application of the governing law. I. Summary of Testimony at Evidentiary Hearing The plaintiff contends that BBC Equities was formed on May 1, 2006 and began receiving funds from putative investors on May 22, 2006. Bravata Financial Group was formed in January 2003. The plaintiff also contends that between May 22, 2006 and June 30, 2009, the defendants received $55.2 million from approximately 440 investors. The plaintiff maintains that at the end of 2008, BBC Equities had a negative net worth, with reported assets of $146,493,312 and liabilities of $158,005,354. By the end of June 2009, BBC Equities had available cash of $131,316. -3- The defendants argue that no investment in BBC Equities occurred until October 2006; they complied with regulations governing the offering of investment opportunities to “qualified investors”; although the company was on tenuous financial footings in the late spring of 2009, it had reached a settlement with the Michigan Office of Financial and Insurance Regulation concerning a cease and desist order that agency had issued in March 2009; and the company was on the brink of securing substantial funding that would have allowed it to fund rescission agreements with many of its investors. The following is a summary of the testimony of the witnesses presented by the parties at the evidentiary hearing. Luz Aguilar Luz Aguilar testified that she is the senior staff accountant at the Chicago office of the SEC who had the primary involvement with the examination of the defendants’ books and records. After describing her qualifications, job responsibilities, and involvement in the case, she testified that BBC Equities is an “entity . . . created to offer shares in investment in real estate,” and Bravata Financial Group was “an entity that was used to market and sell the BBC Equities shares” as well as “insurance products.” Evid. Hr’g Tr., Vol. II, Oct. 22, 2009 [dkt. # 136], at 158. John Bravata and Richard Trabulsy were co-founders of these entities; John Bravata was their chairman and Richard Trabulsy was their vice-chairman. Both Bravata and Trabulsy had signatory authority over two corporate defendants’ accounts. In the course of her work on the matter, Aguilar analyzed about 70 accounts, focusing on accounts for the two corporate defendants and bank records of the individual defendants. She put all of the transactions into an Excel spread sheet and sorted the transactions into different categories. -4- The documents covered a period from May 2006 to sometime in April 2009, with some documents ranging into June 2009 or even later. Aguilar did not find evidence of any certificates of deposits held by BBC Equities or Bravata Financial Group other than the $300,000 and $113,000 CDs mentioned in the Receiver’s October 19, 2009 report. Next, Aguilar authenticated SEC Exhibit 14, entitled Summary of Investor Funds, which she compiled based on various company records. She confirmed that during the time period between May 22, 2006 and June 30, 2009, BBC Equities raised approximately $55 million from investors and paid around $12.5 million back to investors, some in the form of cash interest payments and others as withdrawals of their principal investments. Through her, the government introduced the list of approximately 440 BBC Equities investors as SEC Exhibit 15. Exhibit 15 referenced individuals who invested in BBC Equities prior to April 30, 2009, but Aguilar said her review of bank records disclosed other investors who invested in BBC Equities after that date. Aguilar testified that before June 2008, BBC Equities’ securities were sold by BBC Equities’s employees. But beginning June 2008, all the sales were done by Bravata Financial Group’s employees. Prior to June 2008, BBC Equities paid its salespersons approximately $2.1 million for selling BBC Equities’s securities. SEC Exhibit 17, entitled BBC Equities, LLC, Comerica Bank No. 1851841765, Sources and Uses Statement, listed approximately $7.6 million for Bravata Financial Group as “the monies that went from BBC Equities’ account to Bravata Financial Group’s account . . . [p]resumably to reimburse Bravata Financial Group for expenses incurred in the selling of BBC Equities’ shares.” Id. at 174. Aguilar authenticated SEC Exhibit 19, which showed that in 2006, 2007, and 2008, Bravata Financial Group earned $356,958, $143,052, and $214,593 in insurance sales, respectively; Exhibit 20, which summarized transactions in Bravata -5- Financial Group’s bank account; and Exhibit 21, entitled Summary of Funds to Defendants and Relief Defendants, May 1, 2006 through June 30, 2009. She explained that the line item on Exhibit 21 identified as BBC Management, Inc. represented BBC Management, Inc.’s payment of payroll for the BBC Equities’ employees beginning in August 2007. Aguilar prepared SEC Exhibit 22 entitled Detail of Transactions for John and Shari Bravata, which summarized the transactions in John and Shari Bravata’s bank accounts between May 19, 2006 and June 16, 2006. It disclosed that as of May 19, 2006, the balance in the account was $198.18; on May 22, 2006, there was a wire-in transaction of $100,000 from Roman Kuzma; and on June 9, 2006, there were two wire-in transactions from Roman Kuzma of $69,985 and $230,000. Aguilar also prepared SEC Exhibit 23 (Bravata Financial Group, Comerica Bk Acct. # 1851841021, May 1, 2006 through April 30, 2009, Summary of transactions) and Exhibit 24 (Flow of Funds, John J. Bravata – Comerica Bk, May 19, 2006 through June 16, 2006). She explained that by tracing the movement of funds through the business and personal accounts, and applying the first- in-first-out accounting rule used by John Bravata, Bravata “used the monies from Mr. Kuzma’s investment and Ms. Lilly Trabulsy’s investment” to purchase his Ferrari in June 2006, and he could not have afforded the Ferrari without the money received from Roman Kuzma and Lilly Trabulsy. Id. at 184-85. She testified that a New York Life commission check in the amount of $60,000 was deposited and cleared the account on June 16, 2006, whereas the $90,268 price for Ferrari was paid in two transactions on June 13 and 16, 2009. Aguilar also prepared SEC Exhibit 26 (Bravata, John & Shari, Comerica Bank – May 1, 2006 through April 30, 2009, and SCHWAB Accts – September 1, 2008 through May 29, 2009), which showed that among other expenses, the Bravatas spent $87,000 on jewelry from September -6- 2006 to December 2007; $50,000 for a boat in February 2008; $27,500 for hunting vacations in Canada and Russia; and paid a part of a $46,566 down payment on a $500,000 catamaran in early 2009. In addition, the exhibit reflects that John Bravata spent a total of $35,144 in car payments directly from the accounts of BBC Equities and BBC Management. Referring to SEC Exhibit 27 (John J. Bravata, attachment to response dated April 17, 2009 to request for production of documents dated April 6, 2009), Aguilar testified that the Bravatas spent approximately $717,000 on the construction of a house on Hilton Road in Brighton titled in their names, and all of this money came from BBC Equities. She also testified that a BBC-Equities- related entity entered into a lease with an option to purchase property in Bonita Springs, Florida on December 2, 2006 and exercised that option to purchase it for $6 million on January 18, 2008. She said this rental property was never used to produce income for the companies. Referring to SEC Exhibit 21, Aguilar testified that John Bravata used a company credit card to pay for artwork, anti- age group therapy, jewelry, upgrades to cars, among other purchases, and never reimbursed BBC Equities for these purchases. Aguilar testified further that together, John and Shari Bravata used a little bit over $5.1 million of BBC Equities’s funds for their own benefit over the course of the BBC Equities offering. In addition, Antonio Bravata received a total of $107,848.87 in BBC Equities’ or related companies’ checks. Referring to SEC Exhibit 29 (Antonio Bravata, Comerica Bk # 6820490487, April 10, 2006 through April 6, 2009, Sources and Uses Statement), Aguilar stated that Antonio Bravata paid for the houses and cars listed on that exhibit “[m]ostly from the monies he received from BBC Equities, Bravata Financial Group and his father, John Bravata. There were also some deposits of $127,000 from other entities. They appeared to be commissions for insurance sales.” Id. at 193. -7- Next, Aguilar testified that she could not locate any record of the four books that John Bravata claimed on the company’s Internet site that he authored. Explaining SEC Exhibit 31 (List of BBC Equity LLC Investors after April 1, 2009), Aguilar testified that during the period from April 1, 2009 through June 30, 2009, BBC Equities received $4,255,343.73 in investor funds. Aguilar acknowledged that she never looked at the corporate defendants’ QuickBooks records and never requested an interview with Melissa Traver, BBC Equities’ chief financial officer. When challenged on the question when BBC Equities began its offering of securities, Aguilar explained that she based her estimation on the first deposit of investor funds into John and Shari Bravata’s personal account, even though the first deposit of investor funds into the BBC Equities’ bank account did not occur until September 6, 2006. She also admitted on cross-examination that she did not know for sure whether the entire $7.6 million that was transferred from BBC Equities to Bravata Financial Group constituted an investor funds transfer, whether Kuzma’s transfers to Bravata’s personal accounts constituted an investment in BBC, or what the purpose of the other transfers from the Bravata Financial Group into John Bravata’s personal account might have been. Aguilar also conceded that she never made a compilation of Bravata’s income other than from BBC Equities. She conceded that, for example, in reference to SEC Exhibit 26, she could not explain the origin of approximately $560,000 worth of check deposits or $127,000 in cash deposits. Robert DeFauw The SEC called Robert DeFauw, a BBC Equities investor, who testified that he first heard about BBC Equities in the summer of 2006 through a coworker at Metaldyne, whose wife worked -8- for John Bravata. DeFauw then attended the BBC Equities’s presentation at the Ritz Carlton Hotel in Dearborn, during which John Bravata described the BBC Equities’s investment program, stated that the firm invested in real estate, and used the term “angel investor” to represent that “[a]s an initial investor your money is protected and that all subsequent investors would have to lose all their money first before an angel investor would lose any of his.” Id. at 113. According to DeFauw, Bravata stated during the meeting that “the returns were eight percent for a one-year investment, ten percent for three and twelve percent on five years,” and they were “guaranteed.” Ibid. DeFauw recalls that Bravata said that BBC would pay the returns from buying and selling real estate investments. Bravata did not say anything about other investors’ funds being used to make interest payments or about investment funds being used to pay his salary or cover his personal expenses; nor did he disclose that the money would be used to pay commissions or finder’s fees on the investments. Id. at 113-14. DeFauw also remembers that Mr. Bravata showed attendees a PowerPoint presentation that the SEC introduced into evidence as Exhibit 2A. The presentation represented guaranteed returns and no management salaries. DeFauw characterized the presentation as a sales effort by John Bravata. He disputed the suggestion that the meeting was confined to an educational purpose of informing attendees about investing in real estate. He estimated that about twenty to thirty people attended the meeting at the Ritz Carlton. Later, DeFauw met with John Bravata at BBC’s Brighton office; the meeting was arranged by his co-worker’s wife. During this meeting, DeFauw recalls Bravata stating that “outside of the guaranteed . . . ten percent per year, if he didn’t double my money, he wasn’t doing his job.” Id. at 117. In reliance on Bravata’s representations, DeFauw invested $50,000 on September 22, 2006 at -9- ten percent for three years. DeFauw denied receiving a private placement memorandum from BBC Equities until the SEC provided him with a copy. The last time DeFauw received interest was for the first quarter of 2009. John J. Bravata Plaintiff SEC called defendant John J. Bravata as an adverse witness at the evidentiary hearing. Mr. Bravata frequently invoked his Fifth Amendment privilege against self-incrimination in response to many of the questions. Mr. Bravata admitted to recognizing some pages of SEC Exhibit 2 entitled “Bravata Real Estate Empire.” SEC counsel was particularly concerned with page 16 of the exhibit entitled “Guaranteed Return,” which discussed ten percent annual guaranteed return of money. However, Bravata never admitted to authoring this document. Evid. Hr’g Tr., Vol. I, Oct. 16, 2009 [dkt. # 135], at 20-21. When questioned about promising investors that their prospective returns would be guaranteed by virtue of Comerica Bank’s certificates of deposit, Bravata invoked his Fifth Amendment privilege. Bravata stated, however, that he did not doubt the accuracy of BBC Equities’s December 31, 2007 financial statement stating that as of the time of the report, BBC Equities only held one certificate of deposit in the amount of $300,000. Id. at 22-25. Bravata admitted that BBC Equities “paid a lot of money to BBC Management,” id. at 27, although when asked if he had promised not to take a salary unless BBC Equities did well, he invoked the Fifth Amendment. He said the he did not tell prospective investors that BBC Equities depended on its continued receipt of cash from investors to operate. Bravata admitted receiving a salary “for a couple of months in 2009,” id. at 30, but invoked the Fifth Amendment when asked whether he received a salary regardless of whether he made a -10- profit for BBC Equities’s investors. He acknowledged that BBC raised approximately $48,544,441 from investors as of April 25, 2009 while spending $20,669,944 on real estate transaction. He admitted that he was building an 18,000 square foot house on Hilton Road in Brighton that included a gym, a library, and a theater, but he invoked the Fifth Amendment when asked whether the investors’ money went toward construction of his house in Brighton. Concerning the financial health of BBC Equities, Bravata stated, “We were definitely struggling when a cease and desist order came in from the State of Michigan. We were dealing with that, and quite honestly, I think the actions of the SEC and what you have done has destroyed this company unilaterally . . . .” Id. at 42. But he admitted that before the SEC brought its action, he retained a bankruptcy attorney to explore prospects of getting bankruptcy protections for both himself and BBC Equities. Similarly, Bravata reaffirmed figures contained in SEC Exhibit 5 that, as of June 10, 2009, BBC Equities had at most $1,480,877 in liquid funds. Examining BBC Equities’ profit and loss statement for January through May 2009, Bravata admitted that the company’s total income for January was around $86,000 and total expenses amounted to over $1,287,000. Total figures for January through May 2009 were $552,219.13 for income and $5,953,912.64 for expenses. When asked about the recorded management fees of roughly $1.6 million for the months of January through May 2009, Bravata acknowledged that this category would have included his salary, which he might have taken “for a couple of the early months, January, February . . . I believe in April that I stopped taking income, but I may have . . . stopped taking income earlier than that.” Id. at 56. He also confirmed that in the fall of 2008, BBC Equities notified the Huntington Bank that it could not pay on some of its loans and the value of some of the mortgaged properties was less than the amount of the loans secured by those properties. -11- Finally, Bravata agreed that some of BBC Equities’s properties were encumbered beyond their values. Antonio Bravata Antonio Bravata, John Bravata’s twenty-one-year-old son, admitted to being a sales agent for Bravata Financial Group. When asked about being a sales agent for BBC Equities or any activities in the capacity of BBC Equities’s sales agent, Antonio Bravata initially invoked his Fifth Amendment privilege against self-incrimination. When confronted with the checks issued to him from BBC Equities, however, Antonio Bravata acknowledged that he received compensation from BBC Equities when investors he met with made investments in BBC Equities. He again invoked the Fifth Amendment when confronted with SEC Exhibit 8, Finder’s Fees – 2007 and 2008, which reported that Antonio Bravata earned $198,858.80 in finder’s fees, and SEC Exhibit 9, which verified that the BBC Equities reported to the government that in 2006 it paid Antonio $110,555.48. Antonio Bravata acknowledged publishing a book entitled The Wealth Creator: Let’s Make Millions. Of particular interest was the “life plan” that he says he achieved: within three years, he accomplished his dreams of owning a million dollar house, a slick sports car, and a vacation home, among other things. SEC Exhibit 11, at BBC 06124-06125. Antonio Bravata admitted that he purchased his house at 372 Lenox Lane for $340,000, owned a vacation home at 7621 Elmbrooke Way in Brighton, and acquired a 360 F1 Ferrari sometime before October 4, 2009. Shari Bravata Shari testified that the only source of her income from May 2006 through July 2009 was her husband, John Bravata. Shari testified that she and her husband resided at 9354 Amherst Drive in Brighton, Michigan and used a beachfront home located at 26868 Hickory Boulevard in Bonita -12- Springs, Florida. She also testified that in January 2008, she and her husband bought property at 8485 Hilton Road in Brighton. Shari Bravata testified that on August 15, 2008, her husband bought a Mazerati Quatro and admitted she drove it almost exclusively; and she ultimately acknowledged that the title to the vehicle was in her name. Shari Bravata recalled that in March 2007, her husband purchased for her a diamond- encrusted gold Rolex watch, which, according to the invoice (Gov’t Exhibit 12), cost $19,680. In November 2007, she received a two-karate diamond ring as a ten-year wedding anniversary gift, which, according to the invoice, cost $34,896. She also testified that earlier that year her husband bought her a white gold and diamond butterfly ring. Next, Shari Bravata testified that she was issued a BBC Equities corporate credit card. She understood that “everything that I put on the card was paid for out of John’s paycheck,” but she admitted that she has never seen John Bravata pay the bills personally. She readily admitted that nothing she charged on the card was for BBC Equities business, and that she used the card to cover expenses of a March 2008 trip to New York to watch Broadway shows, to fly at least twelve of her friends and family members from Detroit to Orlando for a Disney cruise in March 2008, to fly herself and her children to a vacation home in Bonita Springs in June 2008, and to pay to see the play The Little Mermaid in New York in October 2008. Roman Kuzma Roman Kuzma was the source of the funds that the SEC contends were the first invested in BBC Equities in May 2006. Kuzma was called as a witness by the defendants and stated he met John Bravata through his son Todd, who worked for Bravata at some time. Kuzma said he became interested in investing with Bravata, developed a personal friendship with him and his mother, and -13- decided to go fifty-fifty on the investment in the Brighton office building for BBC Equities. Kuzma testified that before the May 2006 investment in BBC Equities, he and John Bravata invested together in two other real estate transactions as half-owners. When shown copies of wire transfers into accounts of various Bravata Holdings (Defs.’ Ex. 102), Kuzma confirmed that “[t]hese were all intended . . . for us to renovate the two buildings,” one in Brighton and another one in Ferndale. Evid. Hr’g Tr., Vol. II, Oct. 22, 2009 [dkt. # 136], at 279, 282. Kuzma denied that these investments went in BBC Equities and denied any intent to invest into BBC. However, under questioning by plaintiff’s counsel, he acknowledged entering into a settlement agreement with John Bravata in which Kuzma received 3,000,000 shares of the Class A membership interests in BBC Equities in exchange for the advances he had made aggregating $890,000. Kuzma testified that he kept track of the amounts that Bravata owed him from the original advances in a note dated November 2, 2006, which was introduced into evidence as Defendants’ Exhibit 106. However, the settlement agreement recites that Kuzma rejected a proposal to treat his advances as personal loans to Bravata and elected a transfer of 3,000,000 Class A shares from Bravata instead. He acknowledged that at some point, he accepted Bravata’s invitation to “move the two buildings into Bravata Financial,” id. at 288, although he could not remember the exact date, and he consented to assignment of the real estate to BBC Equities. Kuzma also testified that he was aware that John Bravata bought a Ferrari, but he did not have any reason to believe John Bravata purchased the vehicle with his money. James Deakin James Deakin testified that he met John Bravata in early July 2006. He testified that he attended the same seminar at the Ritz Carlton hotel that Mr. DeFauw attended, which he viewed as -14- a seminar with a broad educational bent. Unlike DeFauw, however, Deakin did not recall seeing a page of the presentation referencing guaranteed returns or hearing John Bravata guarantee the returns. Deakin recalls being contacted by a Ms. Francis following the seminar and making an investment in March 2007 after receiving the Private Placement Memorandum (PPM). Finally, although Deakin remembers John Bravata’s references to “angel investors,” he understood this term to mean “providing monies to startup companies or entities, seed money.” Id. at 315. He denied hearing any references to guaranteed investments, and he did not understand his investments into the company to be guaranteed. He did recall Bravata describing his philosophy of “safety first, returns second,” as well as his representation that “he doesn’t make money unless he makes money for the BBC Equities’ investors,” during subsequent seminars that he attended in January or February of 2007. Id. at 320-21. John Sellers During various periods of time, John Sellers served as counsel for BBC Equities, John Bravata, and Bravata Financial Group. He became BBC Equities’s general counsel in October 2007. Sellers recalled that BBC Equities was originally known as Bravata Holdings 10. The company’s organizational articles were filed in May 2006, and following Sellers’s engagement those articles were amended In February 2007 to change the name to BBC Equities, to authorize different classes of securities, and describe the relative rights and priorities of those classes of securities. He had not been informed that BBC Equities had any investors at the time. He had to rely on information about the company provided by John Bravata and the people working for him. Sellers testified that he had previous experience with security offerings that were exempt from the registration requirements. -15- Sellers said he understood that the BBC Equities offering that was reflected in the PPM that he prepared was limited to accredited investors. Sellers prepared the PPM while a partner at a private law firm, and for the six months before he joined the BBC Equities as a general counsel he continued to advise BBC Equities on real estate transactions and was engaged to “prepare an update and prepare a new private placement memorandum for BBC.” Id. at 346. He completed the second PPM dated April 17, 2008 while working in house. In that PPM, Sellers disclosed that the issuer could apply proceeds from investor funds to pay distributions and redemptions to other investors. Sellers explained that it was his intention to set out in the PPM that only accredited investors were able to subscribe to the offering. Sellers also testified that he approved many other investor materials apart from the PPM, although he asserted the attorney-client privilege when asked it he prepared a brochure entitled “Fun Facts.” It was also his responsibility during his in-house counsel tenure to manage the company’s compliance with various regulations. At the same time, Sellers asserted that he did not have authority to make a final decision whether to offer a proposal to investors, and he stated that “compliance-type issues would be generally run by me or the company’s chief — or Bravata’s chief compliance officer.” Id. at 364-65. Sellers confirmed that he was never present during Bravata’s meetings with prospective investors and did not know that Bravata told investors that their returns would be guaranteed. When questioned further, Sellers testified that he would be concerned if he learned that the free lunch seminars ended with a sales pitch for BBC Equities because of Regulation D restrictions. Sellers admitted that during his employment with BBC, he did not have access to the company’s financial information, including information about how much BBC was paying John Bravata, how much -16- money the company was making from investments, and what the company’s debts and expenses were. Finally, Sellers testified that, had he known that less than half of investor proceeds would be used for real estate investments, he would have put that disclosure in a PPM. Sellers did not know that BBC Equities had more than 35 unaccredited investors. Sellers separated from BBC Equities on June 12, 2009. He acknowledged participating in the discussion of a rescission offer with the State of Michigan around that time. Melissa Traver Melissa Traver testified that she was employed as BBC Equities’ Chief Financial Officer from November 1, 2007 through the end of July 2009. She recalls using QuickBooks and maintaining discrete QuickBooks folders for BBC Equities and Bravata Financial Group. She also testified that “BBC wasn’t formed until September of 2006, so any offering — you know, any of the investments that came in, it was after that. I believe September 19 [of 2006] was the actual formation of BBC Equities.” Evid. Hr’g Tr., Vol. III, Oct. 30, 2009 [dkt. # 137], at 398. The first bank account in BBC Equities’s name was opened in August 2006, and the first activity in this account took place in September 2006. Nonetheless, Traver saw Kuzma as “a main investor in the company” who “kind of took ownership over some of [the properties] and, you know, collected money from the parking lots and that kind of thing . . . .” Id. at 400. Traver testified that neither Michigan Office of Financial and Insurance Regulation nor the SEC asked her to provide the QuickBooks data she kept, and she was not invited for an interview by either. Traver opined that without QuickBooks, the SEC could not examine the company’s operations adequately. However, Traver acknowledged that she refused to speak to SEC representatives and that she was represented by the same attorney as the defendants. -17- Concerning the company American Express cards, Traver testified that when the company would receive the AmEx bill, Bravata’s and Trabulsy’s assistants would itemize the charges as business or personal and Traver would pay the bill. However, Traver would keep track of the personal expenses under a loan account ledger for Mr. Bravata and Mr. Trabulsy. Traver clarified that the five cards under the BBC Equities’ name were obtained on the strength of Mr. Bravata’s or Mr. Trabulsy’s credit, and the bill actually came in the name of Richard Trabulsy. Traver authenticated defendants’ Exhibit 13-A, which contained the breakdown of Richard Trabulsy’s, Shari Bravata’s, and John Bravata’s respective personal expenses. Traver said that the same records itemizing personal expenses were produced to the SEC in response to its request for production. Traver disagreed with Luz Aguilar’s assertion that no personal expenses that were charged on the company credit card were reimbursed, pointing to a page of Exhibit 13-A, which she said contained Trabulsy’s monthly breakdown, showing a “check number and amount for the personal charges that he paid back to the company.” Id. at 412-13. According to Traver, Bravata and Trabulsy overpaid the company for credit card charges, and BBC entities actually owed John “just over $200,000.” Id. at 414. Traver recalled that the company owed Trabulsy as well, although she could not recall precisely how much. When pressed on that point, Traver explained that if one were to set off these “loans” for personal expenses against Bravata’s and Trabulsy’s salary, the setoff would actually favor Bravata and Trabulsy. However, Traver ultimately acknowledged that only BBC Management paid John Bravata a salary; the loans were interest-free; and although both Bravata and Trabulsy would occasionally make payments towards these loans, neither has done so since April 25, 2009. -18- Traver testified that she never got the feeling the company was involved in a Ponzi scheme, but she was aware that the PPM authorized the company to pay initial investors from the proceeds received from subsequent investors. Travor testified that she was in charge of paying for the educational seminars organized by Bravata Financial Group. She also testified that the Bravata Financial Group ceased paying for the seminars in September 2008 because “they just weren’t bringing the business that we thought they would bring in. It was just way too much of an expense.” Id. at 422-23. The Kalamazoo office of the company continued holding the seminars until November 2008 because “they had just basically opened and we were trying to get them up and running.” Id. at 423. Traver explained that John Bravata was not a typical presenter at these seminars; those seminars were primarily a responsibility of six designated employees within the company. Id. at 424. Travor also testified that beginning June 1, 2008, Bravata Financial Group hired sales agents, including Antonio Bravata, on a salary basis. She said John Bravata receives a salary from BBC from January of 2008 until February 2009. She clarified that John Bravata was paid by BBC Management. John Bravata received some pay in 2007 from Bravata Financial Group until February 2009. Traver was privy to other sources of Bravata’s income: an interest in Strategic Breakthroughs and RGR Group. She also saw John Bravata’s W-2, which reflected some life insurance commission income. In April 2008, Trabulsy and Bravata hired Chief Executive Officer Brian Moran to run the day-to-day operations of the company, and in September 2008, fund manager Richard Surveski. Surveski was paid $60,000 each month and Moran “in the neighborhood of $250,000 to $300,000 a year.” Id. at 430. The legal department of the company included Mr. Sellers, two legal assistants, -19- and two other lawyers. The company had independent information technology, human resources, and accounting departments, and a real estate advisory team. The company was managed by a six- person board. When the Michigan Office of Financial and Insurance Regulation commenced investigation into the company, Bravata Financial Group hired a chief compliance officer, Bruce Coleman. Although Traver was not sure about the dates of Coleman’s employment, she recalled that near the time Coleman joined the company, the board decided to acquire a broker-dealer in Chicago. On April 27, 2009, an affiliated company named Strategic Institutional Consulting Group was approved by the SEC to be a registered investment advisor. After the Michigan Office of Financial and Insurance Regulation issued a cease and desist order to BBC Equities on April 1, 2009, Traver said the investor funds that were received after the cease and desist order were “either, one, not in the State of Michigan, . . . or two, they were already in process at the time that the cease order started, so they were just in the processing and we were just waiting for the transfer to come in or that kind of thing.” Id. at 434-35. Traver testified further that all qualified investor funds went through a third-party company, Equity Trust in Ohio. Traver remembers that in June 2009, John Bravata instructed the staff of all his companies not to conduct any further offerings. She believed that a rescission offer that was part of the settlement agreement with the Office of Financial and Insurance Regulation was to be made to the investors. When asked how the company would be able to fund the offer, Traver explained: At the end of July, I believe it was the 23rd of July, Mr. Bravata had acquired 40 million dollars in assets that we were going to use to back a letter of credit. That money was going to be used to purchase the broker-dealer in Chicago that I mentioned. It was going to be used to liquidate those people that had requested. It was going to be money put into an escrow and have some working capital money left. -20- Id. at 441. Traver testified further that apart from the $40 million deal, “[w]e had another deal going with Huntington Bank regarding our Timberstone portfolio,” and this deal was worth about $75 million. Id. at 443. Traver’s information about these potential funding sources appears to be other than first- hand, however. She testified in response to questions by the SEC that she did not know details about the $40 million of assets sufficient to back the letter of credit. She believed there was some sort of agreement, but did not know whether the agreement was oral or written; she just heard about the arrangement during the board meetings. Although she was BBC’s CFO, she was not privy to the details about the assets BBC Equities would be given to back the line of credit; she just believed that “some assets were going to be used that belonged to this broker-dealer in Chicago to put up a letter of credit that BBC Equities could be the beneficiary of.” Id. at 463. Traver testified that on July 23, 2009, there came into existence some sort of agreement under which BBC Equities would be gifted assets sufficient to obtain a $40 million letter of credit, but she did not know whether BBC received the assets, what kind of assets these were, which bank would have issued the letter of credit, or the name of the broker-dealer in Chicago. When asked about the “75 million dollar deal,” Traver explained that Huntington was willing to refinance BBC Equities’s loans at a reasonable value and give BBC a $75 million loan. However, she did not know any details about the loan, who rescinded the deal, how far it had progressed, or whether it was reduced to writing. She only heard others talk about it. No documentation was presented at the hearing to support either of these putative funding sources. Traver described Phoenix Venture Capital as “a new fund that we were trying to get up and running that would invest in not only real estate, but several other things.” Id. at 443. Under the -21- rescission offer with Office of Financial and Insurance Regulation, investors in BBC Equities could roll their investments from BBC Equities to Phoenix Venture. Traver testified that the Bonita Springs, Florida property was acquired by BBC Equities as a rental property, and it was used “some by John personally and his family,” as well as by “investors, . . . for charity purposes, . . . [and] for business meetings,” and even for hosting families from the military. Id. at 447-48. Although the property was listed for sale, it never sold. As for the Hilton Road property in Brighton, Traver testified that BBC loaned money at ten percent to John Bravata to build his house because Bravata could not obtain credit in his own name. According to Traver, the ledger for this loan was separate from all other ledgers. However, Traver admitted she did not know whether the ten-percent loan agreement between Bravata and BBC Equities was ever formalized or whether BBC started paying the money prior to entering an agreement. Traver acknowledged that BBC Equities was losing money on an operational basis. The profit and loss statement she prepared (SEC Exhibit 6) disclosed that in January 2009, revenue was slightly over $86,000 but expenses exceeded $1.2 million. From January through May 2009, income was $552,219 and expenses were $5.4 million. When questioned about SEC Exhibit 78 (Investor Dollar Expenditure Analysis, From May 1, 2006 to [end of April 2006]), Traver acknowledged that BBC Equities received just under $50 million in investor proceeds. The exhibit also confirmed that $762,586 of investor proceeds were used to finance the Bravatas’ new house construction. When asked about the $3.4 million that BBC Equities lent to affiliated entities, Traver explained that the recipient was Bravata Financial Group; BBC Equities was loaning money to Bravata Financial at zero-percent interest because Bravata -22- Financial was “in a huge expansion period.” Id. at 488-89. In addition, BBC was paying Bravata Financial a flat-rate engagement fee of $4.7 million, which came directly from investors’ proceeds. Traver explained that the fee paid for “[Bravata FInancial Group’s] sales force . . . selling BBC Equities.” Id. at 498. In addition, the investors paid over $5.8 million in salaries and compensation, plus $816,000 in professional fees. As one might predict, Bravata Financial did not repay a penny of its loan from BBC. Traver also confirmed that BBC Equities “loaned” about $805,000 to management in connection with their use of AmEx cards, and clarified that this figure is distinct from the loan for building the Hilton Road property. She also testified that those amounts were net of any payments the individual defendants made to repay their private expenses. With respect to the charges made on individual defendants’ AmEx accounts, Traver stated that on at least one occasion, John Bravata wrote a check to BBC Equities to reimburse for Shari’s charges on the card, but she acknowledged that she did not check whether it was done more than once. James Bravata James Bravata, John Bravata’s younger brother, testified that he started working as an agent for Bravata Financial Group on May 1, 2008, but was never an officer, director, or member of Bravata Financial Group or BBC Equities. Immediately before joining Bravata Financial Group, James had an agency of his own. He had little interaction with his brother John and only offered a “handful of clients” to BBC Equities. Id. at 547-48. He described his financial arrangement as a sales agent, which included a $20,000 advance typically given to agents for seminar activity “so that I could continue doing long-term care and estate planning workshops, which are life insurance type products.” Id. at 552. Quarterly compensation was based on production in the previous quarter. -23- In July 2008, James was offered the position of managing partner of the southeast Michigan office, which he occupied until October of 2008. On January 1, 2009, James left Bravata Financial Group and joined BBC Equities as the Director of Operations for the BBC’s Trust Department. He gave a confusing description of his duties as the Director of Operations, which had something to do with processing applications and communicating with custodial companies, such as Equity Trust and Pensco Trust, and putting internal control measures in place. James said he was involved in the discussions concerning acquiring a broker dealer. He testified that a company called National Financial Services was a “shell broker-dealer,” which was “sort of like a turnkey that would be able to jump right into.” Id. at 563. In addition, he stated that John Bravata “had a relationship with an up and going broker-dealer out in Chicago and they made out an arrangement to purchase that broker-dealer,” although this arrangement collapsed when the SEC filed its action. Ibid. James Bravata then clarified Phoenix Venture Capital’s role in BBC Equities’s business. He stated that BBC Equities stopped raising funds around June 1, 2009, so “all the funds that we had received, this was the new company that received new subscriptions.” Id. at 571. He testified further that Phoenix Venture Capital issued a PPM prepared by outside counsel. James Bravata explained that he distributed PPMs to each general office of BBC Equities, and the managing partners of these offices (and their administrative assistants) kept a log of the distributed PPMs. Id. at 576-77. James testified that he had set up the intranet system through which each agent could get the relevant information about each sale of BBC securities from the Compliance Department. He blamed his predecessor, Katie Witkowski, for not documenting -24- properly the receipt of some PPMs in the past. He conceded, however, that he did not know whether, at any time prior to 2009, individual investors received PPMs from BBC Equities. James Bravata also admitted that he was never privy to the financial situation of the company, apart from the investments that he saw coming in. Nor did he know whether BBC Equities or Bravata Financial Group had enough money to purchase a broker dealer in the summer of 2009. He revealed that his salary was $225,000 per year when he was a managing partner at Bravata Financial Group, and dropped to $150,000 until the second pay period of March. James also stated that prior to joining the BBC Equities, he did offer BBC Equities’ investments to his clients at Bravata & Associates II (his own insurance agency) and received an eight-percent finder’s fee without disclosing that fact to the buyers. Exhibits The parties offered multiple exhibits in the form of documentary evidence. In addition, both parties offered digital evidence: the defendants presented their Exhibit 143, which is a recording of a conference call by John Bravata to investors on June 18, 2009; and the SEC offered its Exhibit 1, which is a video recording of a presentation by Antonio Bravata, and another by John Bravata in January 2008. In Exhibit 143, John Bravata conducts a conference call with unidentified investors. He refers to the Private Placement Memoranda, states that BBC Equities’s customers did not lose money in 2008, represents that he stepped down from running BBC Equities’s day-to-day operations when Richard Surveski was hired for that role, and explains that he wants his company to sell funds on “a broker-dealer platform.” Bravata is heard saying that the money investors had paid in to date was used to “build out the infrastructure” of the company. He says that the future of the company -25- depends on getting new investors into the company. He discusses the investigation by the Michigan Office of Financial and Insurance Regulation. He also introduced a new venture capital fund, BBC Capital, which he distinguished from BBC Equities, the latter of which he characterized as a real estate fund. He insisted that there is no better time to invest in real estate, and stated he was going after commercial and multifamily developments, anticipating $1.4 billion in new investment and $9 million annually in fee income. He also promised to pay money back to investors who wanted to “liquidate” their investments in BBC Equities. He mentions that investors always get their money and all their interest earned if they stay with BBC for at least a year. As for BBC Capital Fund, he states that he anticipates offering investments in three classes earning 12%, 10%, and 8% returns. He then asks for referrals. As mentioned above, SEC Exhibit 1 is a compact disc containing three videos. One of them if a video recording of John Bravata making a “free lunch” presentation in January 2008. At the presentation, he makes reference to a promotional package, which he instructs the participants to study at home. He then compares the performance of mutual funds to real estate investments in “down years.” Bravata explained that his two cardinal rules for investing are to protect principal dollars, and maximize return without jeopardizing principal dollars. He then stated that BBC Equities guarantees principal dollars that are invested into that fund, which are backed by certificates of deposit at the “Comerica Trust Company.” He said his fund pays a “fixed guaranteed rate of 12%” paid quarterly. He said the fund’s portfolio included no single-family homes, but there were vacation properties. He said there were no fees for investing and no penalty for withdrawing from the fund. He explained that the fund buys commercial real estate, paying ten to twenty percent and financing the balance; and all the properties leased had high rates of return. John Bravata -26- represented that he was paid only from the profits of the company and only after the investors are paid their returns. II. Factual Findings Based on the evidence presented, the Court finds that defendants John J. Bravata and Richard Trabulsy operated the corporate entities, BBC Equities, LLC and Bravata Financial Group, LLC. BBC Equities and Bravata Financial solicited contributions from individuals, representing that the funds would be invested and specific returns would be realized. Between May 22, 2006 and April 30, 2009 approximately 440 individual investors transferred to BBC Equities and Bravata Financial funds totaling $52,943,630. None of the defendants was a registered securities broker or dealer at the time. The records of the corporate defendants reveal that the returns paid out to (or reinvested for) earlier investors came not from proceeds earned by the companies’ investments, but rather from funds contributed by later investors. The records also show that the investors’ money was used by the defendant to purchase several personal luxury items. A. Inception Date The Court concludes that the transfers by Roman Kuzma and Lily Trabulsy into the personal bank accounts of John and Shari Bravata and the account of Bravata Financial represent the initial investments in BBC Equities. BBC Equities’s promotional materials represent that the “inception date” of the BBC Equities offering was May 1, 2006. John Bravata founded BBC Equities on that same date, although at the time BBC Equities was known as Bravata Holdings X, LLC. On May 19, 2006, John and Shari Bravata’s primary bank account had a balance of $198.18. On May 22, 2006, Roman Kuzma wired $100,000 to the Bravatas’ primary bank account, and he wired an -27- additional $299,985 to the Bravatas’ bank account on June 9, 2006. On June 8, 2006, Bravata Financial’s bank account had a balance of $9,440.27. The next day, Lily Trabulsy (Richard Trabulsy’s grandmother) paid $210,000, which was deposited into Bravata Financial’s bank account. After receiving Lily Trabulsy’s $210,000 deposit, Bravata Financial transferred $120,000 to John Bravata’s primary checking account and issued Richard Trabulsy a $45,000 check with the notation “commissions.” John Barvata argues that investor Kuzma did not subscribe to the units offered and sold by BBC Equities in June 2006. Kuzma states that he entered into a partnership with John Bravata to purchase two distressed commercial properties in Brighton and Ferndale, Michigan for potential resale, and he loaned Bravata funds to establish a financial services business. However, Kuzma testified that he could not remember the specific dates of interactions with Bravata in the 2005-2007 time frame, and that he gave Bravata money during that period to invest in real estate. In a settlement agreement that Kuzma entered with Bravata and BBC Equities in August 2008, Kuzma asserted that he was entitled to receive 3,000,000 Class A shares of BBC Equities securities as a result of Kuzma’s advancing Bravata $890,000 for “real estate interests.” Kuzma, Bravata, and BBC Equities agreed that “the funds [Kuzma] advanced were on account of his interests in [BBC- Equities-related] entities and not loans to Bravata.” SEC Ex. 75, p. 1. Therefore, Kuzma’s advances can be considered as nothing other than the initial investment in BBC Equities. Bravata contends that he paid for the 1995 Ferrari from a $119,000 commission check that he earned during his employment at New York Life Insurance Company. He maintains that the check was deposited into his personal account on June 9, 2006. The record shows, however, that the Kuzma funds were wired to the account earlier, when the account balance was less than $200. -28- Luz Aguilar testified that the New York Life commission check was in the amount of $60,000 and cleared the account on June 16, 2006. On June 13, 2006, Bravata wrote the Cauley Ferrari dealership a $5,000 check for a down payment on a $90,288 Ferrari sports car, and on June 16, 2006, Bravata issued an $85,268.40 cashier’s check to Cauley Ferrari to complete the purchase of his Ferrari. Without the money he received from Kuzma and Lily Trabulsy, Bravata did not have enough money to purchase the Ferrari. Kuzma testified that he was unaware that Bravata purchased the Ferrari using Kuzma’s money. B. Fraudulent Nature of the Investment Scheme The defendants maintain that they made several disclosures to prospective investors that countermanded some of the statements made at the presentation seminars. In fact, the first private placement memorandum disclosed the possibility that new investors may help pay distributions to old investors. It stated that the Company has not derived sufficient income from its investments for quarterly distribution payments, and all quarterly payments of the preferred distribution had been paid from the proceeds received from other investors. It also disclosed that there was no guaranty that the “Preferred Distribution” or any redemption amounts would be paid when due. The PPM also stated that “given the early stage of the Company’s development, the start-up and operating expenses incurred and other factors, the Company would have insufficient resources to fully redeem all currently outstanding Class C shares” in the case of liquidation. SEC Ex. 38, p. 25. The PPM continued to state that no assurances could be given that acquisitions of real estate or real-estate- related investments made with the proceeds of its offering would produce a return on investment or generate any operating cash flow, and that the Company would use investor funds from “this” -29- offering to pay the Preferred Distributions or redemption amounts to the holders of interests until the Company showed a profit from its operations (which it never did). However, the evidence also demonstrates that many of the early investors did not receive a PPM. At least 150 investors never received a PPM before investing. See SEC Ex. 39. BBC Equities did not distribute the first PPM until February 2007, and even then it was distributed only to certain prospective investors. From May 22, 2006 through February 6, 2007, a total of 15 BBC Equities investors wrote checks or sent wires totaling at least $3,274,073 to the defendants’ bank accounts in exchange for Class A and C membership interests in BBC Equities securities. Before February 2007, John Bravata and Antonio Bravata gave presentations to prospective BBC Equities investors at “free lunch” seminars held in restaurants, which likely is not the environment one would frequent when seeking “qualified investors.” John Bravata told prospective investors his first rules of investing, noted above. He represented that those rules — maximizing return without imperiling principal — were the guiding philosophies of BBC Equities. He told prospective investors that BBC Equities secured their principal investments, which were guaranteed by certificates of deposit being held at Comerica Bank. In fact, the value of BBC Equities’s certificates of deposit never exceeded $413,000. Neither John nor Antonio Bravata told prospective investors before the PPM was constructed that BBC Equities’s continued viability depended on a continuing flow of investor proceeds. John Bravata did tell the prospects that if BBC Equities’s investors did not make money, then he did not make money. He explained that no manager at BBC Equities received a salary; they only got paid if BBC Equities made a profit. The evidence, however, shows that John Bravata did receive a salary and paid himself from investor proceeds regardless of whether BBC Equities earned a profit. The salary -30- was paid through BBC Management, which in turn received payment from BBC Equities. Also before the PPM was constructed and distributed, John and Antonio Bravata both told prospective investors that BBC Equities guaranteed the returns on their investments and that BBC Equities offered 12% guaranteed returns. Robert DeFauw, an Ann Arbor resident and executive at an automotive parts manufacturer, was one of the attendees at a presentation given by John Bravata at the Ritz Carlton in Dearborn in the summer of 2006. He testified that John Bravata told approximately 20 to 30 prospective investors that BBC Equities would use investor money to invest in real estate, and that as “angel investors,” these prospective investors’ money would be protected and they could only lose their money if all subsequent investors lost their money first. John Bravata made representations to the group consistent with those described above. James Deakin testified that he did not remember John Bravata making a sales pitch or guaranteeing investment returns at the Ritz Carlton presentation, and he says that he received a PPM in March 2007. He remembers a reference to “angel investors,” but he construed that term differently than Mr. DeFauw. Mr. Deakin’s lack of memory of representations described by Mr. DeFauw does not contradict DeFauw’s testimony, nor does it establish that John Bravata did not make such representations. The absence of evidence is not evidence of absence. In addition, SEC Exhibit 1 shows John Bravata making representations similar to those described by Mr. DeFauw. DeFauw met with John Bravata in BBC Equities’s Brighton office in September 2006. At that meeting, Bravata told DeFauw that, in addition to guaranteeing DeFauw 10% annual interest payments, if Bravata did not double DeFauw’s money, Bravata “wasn’t doing his job.” Evid. Hr’g Tr., Vol. II, Oct. 22, 2009 [dkt. # 136], at 114. DeFauw invested $50,000 in BBC Equities on -31- September 22, 2006. He made his investment decision based solely on the representations he received from Bravata and did not see a BBC Equities PPM until one was shown to him by the SEC staff in mid-2009. The Court concludes that the PPM does not provide cover for the misrepresentations made by the defendants to prospective investors. Moreover, the PPMs did not reflect the full story of how investor funds were applied. When the first PPM was used between February 2007 and April 2008, BBC Equities solicited and received approximately $21.2 million from 136 investors. That PPM offered Class B membership interests in BBC Equities that were entitled to share pro rata with the holders of the Class A interests in profit distributions that would be declared by Bravata and Trabulsy; and Class C membership interests, which yielded annual dividends of 8%, 10%, or 12%, redeemable on December 31, 2007, December 31, 2009, and December 31, 2011, respectively. It capped offering expenses and organizational costs associated with the offering (which included commissions and finder’s fees) at $800,000. A second PPM was used between April 2008 and June 30, 2009, during which the defendants raised approximately $30.6 million from 369 investors. The second PPM offered Class D membership interests in BBC Equities yielding 8% annual priority distributions. It represented that going forward John Bravata and Richard Trabulsy would receive no finder’s fees for the investments they sold to BBC Equities’s investors. The Second PPM reported that Bravata and Trabulsy originally contributed eight properties to BBC Equities by BBC Equities and later acquired 28 additional real estate properties cumulatively valued at approximately $43 million, with only $34 million in mortgage debt. That suggests that about $9 million of the $21.2 million raised through the first PPM actually was directed toward the avowed purpose of the enterprise: investing in real estate. The second PPM was silent -32- on that point. The Second PPM represented that as of February 28, 2008, BBC Equities had a net asset value of $11,294,718, with total assets of $46,670,615 and total liabilities of $35,375,897. In fact, however, BBC Equities’s own outside auditor reported that as of December 31, 2007, BBC Equities had total assets of $40,603,738 and total liabilities of $46,453,032. C. Use of Funds Of the $55 million raised from investors, BBC Equities spent approximately $20.7 million on real estate purchases to acquire 71 real estate investment properties. According to the Receiver, the majority of those properties are encumbered well beyond their reasonable value and presently are worthless. The records also indicate that BBC Equities paid out approximately $12.5 million to the earlier investors who did not elect a reinvestment option for their interest payments. As of June 30, 2009, BBC Equities paid BBC Management approximately $6,082,628; and it paid at least $2.1 million in purported commissions or “finder’s fees” to BBC Equities’ unregistered brokers for selling BBC Equities securities, including $386,521 to John Bravata and $216,045 to Richard Trabulsy. BBC Equities also entered into an agreement with Bravata Financial Group to fund its operating expenses, and through April 30, 2009 it had transferred $7,225,062 from its bank account to Bravata Financial’s bank account. Luz Aguilar testified that over the relevant period, John Bravata had outside income from sources other than the investment companies of approximately of $687,000 dollars, and Antonio Bravata earned at least $127,000 from his outside insurance sales. However, it appears that Bravata Financial earned less than $715,000 from selling life insurance. The records indicate that from May 2006 through May 2009, BBC Equities transferred $821,632, BBC Management transferred $250,634, and Bravata Financial transferred $1,324,087 -33- to John and Shari Bravata’s primary personal bank account. The SEC has compiled a list of the items purchased by John and Shari Bravata and Antonio Bravata that includes luxury automobiles, jewelry, boats (along with Richard Trabulsy), trips, artwork, and construction of a lavish home in Brighton, Michigan. The SEC also contends that a putative investment in vacation property located in Bonita Springs, Florida in fact never generated income and was used by the Bravatas as a personal vacation residence. The defendants contend the Florida home was used for charity events and business meetings and produced income, but the Court has not found convincing proof of that claim. The records also document the Bravatas lavish use of corporate credit cards for personal purchases. Melissa Traver testified that the business practice was for the card user to identify personal items, and a loan account would be established for those items. However, there is no evidence that the “loans” were repaid, and the purchases remained the obligation of the companies. Moreover, the amount of expenditures made by the Bravatas and Mr. Trabulsy during the period exceeded the amounts that they earned from outside income. D. Essential Failure of BBC Equities Defendant John Bravata founded BBC Equities, he maintained, on two cardinal principles: first, protection of principal dollars; and second, maximizing returns without violating the first principle. It is fair to say that hundreds of investors found that philosophy attractive and entrusted Bravata with their money. But less than half of investors’ money was used to purchase real estate — the main investment vehicle of BBC Equities as represented in presentations and the PPMs — and the real estate that was purchased was highly leveraged and risky. BBC Equities never was profitable, its operating expenses annually exceeded its revenue, and its net worth was increasingly negative in each of the three years of its existence. It is apparent that the only hope investors had -34- of recovering their investments, not to mention realizing a return, was the recruitment of fresh money from new investors. It also appears that neither John Bravata nor BBC Equities were meeting their financial obligations. On July 8, 2009, the Internal Revenue Service levied on a life insurance policy owned by John Bravata and held by Minnesota Life because of Bravata’s unpaid taxes in excess of $178,000. Also on July 8, 2009, the Huntington National Bank obtained a $4.18 million judgment against BBC Equities and Richard Trabulsy in the United States District Court for the Northern District of Ohio as a result of a defaulted promissory note relating to one of BBC Equities’s investment properties. On July 16, 2009, the Huntington National Bank filed an action in a court in this District alleging that John Bravata also was liable as a guarantor on the same defaulted promissory note. Before the present lawsuit was filed, John Bravata had paid a retainer to bankruptcy counsel. John Bravata did not deny that he promised investors that their prospective returns would be guaranteed by certificates of deposit in Comerica Bank or that he would not to take a salary unless BBC Equities did well. Instead, he invoked the Fifth Amendment as to those questions. He did testify that he did not tell prospective investors that BBC Equities depended on its continued receipt of cash from investors to operate, although that statement shows up in the PPMs, and Bravata is heard making that statement in a conference call to BBC Equities investors on June 18, 2009. As disclosed by Defendants’ Exhibit 143, on that conference call John Bravata said that the future of BBC Equities required “getting new investors into the company.” He did not disclose to investors BBC Equities’s ominous financial condition, instead asserting that “I am still very bullish on real estate.” Def.s’ Ex. 143. During that call, Bravata announced that BBC Equities was starting -35- a new venture capital fund called BBC Capital, which eventually became known as Phoenix Venture Capital, LLC. John Bravata began distributing a Phoenix PPM on July 16, 2009. That PPM describes Phoenix as a “holding company” which holds “interests in companies that are engaged in providing insurance products and financial services, construction management and business coaching and consulting.” Ex. 64 at 6. Bravata was attempting to raise up to $200 million from the sale of “Class C shares” of Phoenix securities. The PPM also makes reference to the possibility of acquiring an unnamed real estate subsidiary and a broker-dealer. Both Melissa Traver and James Bravata made reference to the later transaction during their testimony. However, no first-hand information was presented at the hearing, there was no documentation presented that might hint at the possibility of such a transaction, and the likelihood of BBC Equities having the wherewithal to consummate such transactions in the spring or summer of 2009 is extremely remote. Rather, the evidence points to the ineluctable conclusion that Phoenix Venture Capital was another effort by the defendants to perpetuate the investment pyramid by gathering more investors to support the promises made to earlier investors. The Phoenix PPM suggests that the company may invest in industries including cable broadcasting, interactive media, oil and gas development, and pharmaceuticals. However, it also represents that Phoenix investor funds would be used to “retire[] existing debt encumbering real estate owned by our subsidiaries,” but fails to disclose that BBC Equities is the subsidiary or that BBC Equities’s debts exceeded $128 million. By mid-July 2009, some BBC Equities investors had begun converting their BBC Equities securities to Phoenix shares. The SEC stepped in and filed its complaint in this case on July 26, 2009. -36- III. Conclusions of Law A. Preliminary Injunction A district court may enter a preliminary injunction in civil enforcement proceedings commenced by the SEC if “it determine[s] that defendants had violated and were likely to continue to violate securities laws unless enjoined.” SEC v. Prof’l Assocs., 731 F.2d 349, 353 (6th Cir. 1984) (citing SEC v. Mgmt. Dynamics, Inc., 515 F.2d 801 (2d Cir. 1975). Those criteria does not track precisely the standard that applies in other injunctive proceedings. See McPherson v. Michigan High Sch. Athletic Ass’n, Inc., 119 F.3d 453, 459 (6th Cir. 1997) (en banc) (describing the factors as “(1) whether the movant has a ‘strong’ likelihood of success on the merits; (2) whether the movant would otherwise suffer irreparable injury; (3) whether issuance of a preliminary injunction would cause substantial harm to others; and (4) whether the public interest would be served by issuance of a preliminary injunction”). One Circuit adheres to the latter requirements, even in SEC enforcement proceedings. See SEC v. Fife, 311 F.3d 1, 8 (1st Cir. 2002). However, in Management Dynamics, Inc., the court explained that SEC enforcement actions are not “governed by criteria identical to those which apply in private injunction suits.” Mgmt. Dynamics, Inc., 515 F.2d at 808. Rather, “[u]nlike private actions, which are rooted wholly in the equity jurisdiction of the federal court, SEC suits for injunctions are ‘creatures of statute.’ [Therefore], ‘[p]roof of irreparable injury or the inadequacy of other remedies as in the usual suit for injunction’ is not required.” Ibid. (quoting III L. Loss, Securities Regulation 1979 (1961, Supp.1969 . The court continued: And, as we said in SEC v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1102 (2d Cir. 1972), “in deciding whether to grant injunctive relief, a district court is called -37- upon to assess all those considerations of fairness that have been the traditional concern of equity courts.” But the statutory imprimatur given SEC enforcement proceedings is sufficient to obviate the need for a finding of irreparable injury at least where the statutory prerequisite the likelihood of future violation of the securities laws has been clearly demonstrated. Id. at 808; accord SEC v. Mize, 615 F.2d 1046, 1051 (5th Cir. 1980) (“The SEC is authorized to seek injunctive relief whenever it appears that a person is engaged in or ‘about to engage in’ acts or practices which constitute a violation of the federal securities laws. Section 20(b) of the Securities Act of 1933, 15 U.S.C. s 77t(b); section 21(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78u(d). The district court is required to grant the requested injunction ‘upon a proper showing’ by the SEC. Id. To satisfy the ‘proper showing’ requirement in a case where current violations are not alleged, the SEC must establish that there is a reasonable likelihood that the defendant, if not enjoined, will engage in future violations of the securities laws.); SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1168 (D.C. Cir. 1978) (“Where, as here, the SEC is not attempting to halt an ongoing violation, ‘the ultimate test is whether the defendant's past conduct indicates . . . that there is a reasonable likelihood of further violation(s) in the future.’ (quoting SEC v. Commonwealth Chemical Sec., Inc., 574 F.2d 90, 99-100 (2d Cir. 1978 . Although the Sixth Circuit has not specifically subscribed to that view, it has indicated its approval of the concept. See EEOC v. Anchor Hocking Corp., 666 F.2d 1037, 1041 n.4 (6th Cir. 1981) (holding that § 706(f)(2) of Title VII of the Civil Rights Act of 1964 did not create its own standard for granting of preliminary injunctions, and noting that “[t]he language of 706(f)(2) is in contrast with a number of other federal statutes authorizing government agencies to seek injunctive relief, which do appear to limit the district court's discretion as to whether the injunction should issue. See, e.g., 7 U.S.C. § 13a-1; 15 U.S.C. § 78u(d) (‘upon a proper showing (of a violation of the -38- statute or a regulation), a permanent or temporary injunction shall be issued’ . . . .’)”). Moreover, the Supreme Court in Aaron v. SEC, 446 U.S. 680 (1980), seems to support that view as well. In that case, the Court held: Sections 20(b) and 21(d) provide that the Commission may seek injunctive relief whenever it appears that a person “is engaged or [is] about to engage in any acts or practices” constituting a violation of the 1933 or 1934 Acts or regulations promulgated thereunder and that, “upon a proper showing,” a district court shall grant the injunction. The elements of “a proper showing” thus include, at a minimum, proof that a person is engaged in or is about to engage in a substantive violation of either one of the Acts or of the regulations promulgated thereunder. Accordingly, when scienter is an element of the substantive violation sought to be enjoined, it must be proved before an injunction may issue. But with respect to those provisions such as § 17(a)(2) and § 17(a)(3), which may be violated even in the absence of scienter, nothing on the face of § 20(b) or § 21(d) purports to impose an independent requirement of scienter. And there is nothing in the legislative history of either provision to suggest a contrary legislative intent. This is not to say, however, that scienter has no bearing at all on whether a district court should enjoin a person violating or about to violate § 17(a)(2) or § 17(a)(3). In cases where the Commission is seeking to enjoin a person “about to engage in any acts or practices which . . . will constitute” a violation of those provisions, the Commission must establish a sufficient evidentiary predicate to show that such future violation may occur. See SEC v. Commonwealth Chemical Sec., Inc., 574 F.2d 90, 98-100 (2d Cir. 1978) (Friendly, J.); 3 L. Loss, Securities Regulation at 1976. An important factor in this regard is the degree of intentional wrongdoing evident in a defendant's past conduct. See SEC v. Wills, 472 F.Supp. 1250, 1273-1275 (D.C. 1978). Moreover, as the Commission recognizes, a district court may consider scienter or lack of it as one of the aggravating or mitigating factors to be taken into account in exercising its equitable discretion in deciding whether or not to grant injunctive relief. And the proper exercise of equitable discretion is necessary to ensure a “nice adjustment and reconciliation between the public interest and private needs.” Hecht Co. v. Bowles, 321 U.S. 321, 329 (1944). Id. at , 700-01 (emphasis added). In the context of an SEC enforcement action, therefore, courts have interpreted the test to require the demonstration of both a prima facie case of past violations and a reasonable likelihood or propensity to engage in future violations. See SEC v. Unifund SAL, 910 F.2d 1028, 1037 (2d Cir. -39- 1990); SEC v. Cavanagh, 155 F.3d 129, 132 (2d Cir. 1998). Some additional factors a district court may consider in deciding whether an injunction is proper are (1) the likelihood of future violations; (2) the degree of scienter involved; (3) the sincerity of the defendant’s assurances against future violations; (4) the isolated or recurrent nature of the infraction; (5) the defendant’s recognition of the wrongful nature of his conduct; and (6) the likelihood, because of the defendant’s professional occupation, that future violations might occur. SEC v. Universal Major Indus. Corp., 546 F.2d 1044, 1048 (2d Cir. 1976). Quite naturally, the defendant’s past behavior is relevant to show that he may violate the securities laws in the future. Prof’l Assocs., 731 F.2d at 357-58 (citing SEC v. Washington Cnty. Util. Dist., 676 F.2d 218, 227 (6th Cir. 1982 . And “[a]s the frequency and magnitude of the past violations increase, the strength of the inference also increases.” Washington County Utility District, 676 F.2d at 227. 1. Merits The SEC has alleged that the defendants violated the securities laws in three respects: the anti-fraud provisions of the federal securities laws; the registration requirements for the securities; and the registration requirements for broker-dealers. The evidence in this case demonstrates a likelihood that the SEC will prove violations in each of these areas in a trial on the merits. There is, therefore, a substantial likelihood of success on the merits. a. Anti-Fraud Laws Federal law provides: It shall be unlawful for any person in the offer or sale of any securities or any the security-based swap agreement Gramm-Leach-Bliley Act) by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly (1) to employ any device, scheme, or artifice to defraud, or in section 206B of (as defined -40- (2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser. 15 U.S.C. § 77q(a). It is also unlawful [t]o use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement the Gramm-Leach-Bliley Act), any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. in section 206B of (as defined 15 U.S.C. § 78j(b). “To establish violations of these anti-fraud provisions, the SEC must show that the defendants engaged in (1) misrepresentations or omissions of material facts (2) made in connection with the offer, sale or purchase of securities (3) with scienter on the part of the defendants.” SEC v. George, 426 F.3d 786, 792 (6th Cir. 2005) (citing Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976 . A fact is “material” if a “reasonable shareholder” would consider it important in making an investment decision or “there [is] a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.” Basic Inc. v. Levinson, 485 U.S. 224, 231-232 (1988) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976 . First, as noted above, the defendants told the initial investors that their investments would be used to purchase real estate, the investments would be secured by certificates of deposit, the returns of 12% were guaranteed, and neither John nor Antonio Bravata would be paid unless the investors were paid first. It is true that some of the money went toward the purchase or real estate, but the rest of these statements were false. As to the use of the money, information that less than -41- half of the investments would be used to buy real estate, with the balance going toward administrative expenses (which included the lavish personal items enjoyed by the individual defendants), would have altered the “total mix” of data any reasonable investor would want to know before making a decision to invest in BBC Equities. In both the first and second PPMs, the defendants failed to depict the true financial condition of the company, particularly the inevitability that the only way investors would see a return or recovery of principal was if new investors paid money into the company. There was no disclosure of the true manner in which the funds were used, and certainly no representation that less than half the money invested actually went to the acquisition of assets. There can be little doubt that if the complete story were told, any reasonable investor would have had a different picture of the company, which likely would have altered his or her investment decision. Therefore, the evidence has established misrepresentations that were material. Second, there is little question that the various classes of membership interests in BBC Equities the defendants sold to investors were “securities” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, which include “investment contract[s]” among the definition of “security.” 15 U.S.C. § 77b(a)(1). An investment contract is “an investment of money in a common enterprise with profits to come solely from the efforts of others.” SEC v. Edwards, 540 U.S. 389, 393 (2004) (quoting SEC v. W.J. Howey Co., 328 U.S. 293, 301 (1946 . Third, the scienter that must be shown is “a mental state embracing intent to deceive, manipulate, or defraud.” Ernst & Ernst, 425 U.S. at 193 n.12. Certainly, the actual intent to deceive satisfies this requirement. In addition, “for statements of present or historical fact, the state of mind required is recklessness.” Miller v. Champion Enters. Inc., 346 F.3d 660, 672 (6th Cir. 2003). Recklessness amounts to “highly unreasonable conduct which is an extreme departure from the -42- standards of ordinary care. Although the danger need not be actually known, it must at least be so obvious that any reasonable man would have known of it.” Mansbach v. Prescott, Ball & Turben, 598 F.2d 1017, 1025 (6th Cir. 1979). The intent to deceive and defraud is well demonstrated by the record in this case. From the outset, the individual defendants handled the money entrusted to them in a manner that was antipodal to their professed creed of protecting principal investment and eschewing compensation until they made good on their pledge to investors. Their professed philosophy was “I don’t get paid until you get paid,” but in practice their approach was “Eat dessert first.” They used the initial influx of cash to make purchases of luxury items for themselves, and their use of funds on behalf of investors was to purchase highly leveraged properties that proved to be of little worth. It was plain, as John Bravata acknowledged, that the future of the business depended on persuading more people to invest. He was in the process of obtaining money from other people by way of his Phoenix Venture Capital offering — which itself failed to paint a true picture of the shaky foundations of the BBC companies — when the lawsuit was filed. The evidence shows an initial and continuing actual intent to defraud. The plaintiff has offered substantial evidence of the requisite scienter. The Court finds that the SEC has offered substantial proof of violations of the anti-fraud statutes and regulations. b. Securities Registration Provisions Under the Securities Act of 1933, it is unlawful for any person to sell or offer or attempt to sell any security “[u]nless a registration statement is in effect as to [such] security.” 15 U.S.C. § 77e(a); see also 15 U.S.C. § 77e(c) (“It shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce -43- or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, unless a registration statement has been filed as to such security . . . .”). The “essential purpose” of this legislation is “to protect investors by requiring publication of certain information concerning securities before [they are] offered for sale.” A.C. Frost & Co. v. Coeur D’Alene Mines Corp., 312 U.S. 38, 40 (1941). The SEC establishes a prima facie violation of these sections when it shows that (1) no registration was in effect as to a given security; (2) the defendant offered or sold the security; and (3) the offer or sale was accomplished through interstate commerce. SEC v. Cont'l Tobacco Co. of South Carolina, 463 F.2d 137, 155 (5th Cir. 1972). Once the plaintiff establishes a prima facie case, the burden shifts to the defendants to establish that an exemption to the registration requirement applies. See SEC v. Ralston Purina Co., 346 U.S. 119, 126 (1953) (“Keeping in mind the broadly remedial purposes of federal securities legislation, imposition of the burden of proof on an issuer who would plead the exemption seems to us fair and reasonable.” (quoting Schlemmer v. Buffalo, Rochester & Pittsburgh Ry. Co., 205 U.S. 1, 10 (1907 . The defendants do not argue that any exemption applies. Instead, they contend that “none of the Bravata Defendants should be found to have engaged in the regularity and scope of activities that compel a finding that they acted as unregistered broker dealers.” Defs.’ Proposed Findings at 63. That argument is untenable. A “broker,” is defined as “any person engaged in the business of effecting transactions in securities for the accounts of others.” 15 U.S.C. § 78c(a)(4)(A). The Sixth Circuit has identified several factors that point to a finding that a person fits this definition, which include “regular participation in securities transactions, employment with the issuer of the securities, payment by commission as opposed to salary, history of selling the securities of other issuers, -44- involvement in advice to investors and active recruitment of investors.” George, 426 F.3d at 797. Of these factors, the only one not supported by the evidence is that the individual defendants had a history of selling securities of issuers other than BBC Equities. The evidence in this case is clear: the defendants offered and sold BBC Equities securities to over 440 investors in various states using the Internet, the United States mails, and other forms of interstate commerce, and neither the securities nor the offerings were registered with the SEC. c. Broker Dealer Registration Requirements In addition to registering the security or offering, a seller acting as a broker dealer must be registered with the SEC as well. Id. at 792 (“Section 15(a)(1) of the Exchange Act . . . makes it ‘unlawful for any broker or dealer . . . to make use of the mails or any means or instrumentality of interstate commerce to effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security . . . unless such broker or dealer is registered [with the Commission].” (quoting 15 U.S.C. § 78o(a)(1 . There is no dispute that none of the defendants were so registered. It likewise is clear that both BBC Equities and Bravata Financial paid their employees and sales agents commissions or “finder’s fees” of at least 8% for selling BBC Equities investments. The individual defendants (save Shari Bravata) were among those receiving these commissions, and they all solicited investors to purchase securities even though they were not registered with the SEC. The Court finds from the evidence that the defendants violated the anti-fraud and registration provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. -45- 2. Other Factors As noted above, other factors may come into play when injunctive relief is sought, such as irreparable harm, potential harm to others, and the public interest. However, section 20(b) of the Securities Act, 15 U.S.C. § 77t(b), and section 21(d) of the Exchange Act, 15 U.S.C. § 78u(d), authorize the SEC to bring an action for a permanent or preliminary injunction and temporary restraining order enjoining conduct that violates the provisions of the Securities and Exchange Acts, respectively. Section 20(b) of the Securities Act reads: Whenever it shall appear to the Commission that any person is engaged or about to engage in any acts or practices which constitute or will constitute a violation of the provisions of this subchapter, . . . the Commission may, in its discretion, bring an action in any district court of the United States, or United States court of any Territory, to enjoin such acts or practices, and upon a proper showing, a permanent or temporary injunction or restraining order shall be granted without bond. 15 U.S.C. § 77t(b) (emphasis added). Section 21(d) of the Exchange Act similarly reads: Whenever it shall appear to the Commission that any person is engaged or is about to engage in acts or practices constituting a violation of any provision of this chapter, the rules or regulations thereunder . . . , it may in its discretion bring an action in the proper district court of the United States, the United States District Court for the District of Columbia, or the United States courts of any territory or other place subject to the jurisdiction of the United States, to enjoin such acts or practices, and upon a proper showing a permanent or temporary injunction or restraining order shall be granted without bond. 15 U.S.C. § 78u(d)(1) (emphasis added). The use of the word “shall” indicates Congress’s clear preference for preliminary injunction relief where a credible allegation of a violation is made. See EEOC v. Anchor Hocking Corp., 666 F.2d 1037, 1041 n.4 (6th Cir. 1981). In fact, “the SEC is entitled to a preliminary injunction when it establishes . . . (1) a prima facie case of previous violations of federal securities laws, and (2) a reasonable likelihood that the wrong will be repeated.” SEC v. Unique Fin. Concepts, Inc., 196 F.3d -46- 1195, 1199 (11th Cir. 1999) (citing SEC v. Mgmt. Dynamics, Inc., 515 F.2d 801, 806-07 (2d Cir. 1975); SEC v. Manor Nursing Ctrs., Inc., 458 F.2d 1082, 1100 (2d Cir. 1972 . Although the SEC need not prove risk of irreparable injury or unavailability of remedies at law, “[l]ike any litigant, the Commission should be obliged to make a more persuasive showing of its entitlement to a preliminary injunction the more onerous are the burdens of the injunction it seeks.” SEC v. Unifund SAL, 910 F.2d 1028, 1035, 1039 (2d Cir. 1990). The Court finds that the plaintiff has done so here with respect to its request for an order enjoining further activity by the defendants and the need to freeze assets. There is strong evidence that the defendants were engaged in a scheme to solicit investments from members of the public, that they used false and misleading statements to achieve their goals, and they were about to embark on further fraudulent activity with a new offering. The balance of the relative harms favors the issuance of an injunction. And the public interest is served by an order that restrains the defendants from committing a public fraud. B. Receivership The district court has the “broad powers and wide discretion” when “fashioning relief in an equity receivership proceeding.” SEC v. Basic Energy & Affiliated Res., Inc., 273 F.3d 657, 668 (6th Cir. 2001) (quoting SEC v. Elliott, 953 F.2d 1560, 1566 (11th Cir. 1992), rev’d in part, 998 F.2d 922 (11th Cir. 1993). Those powers include the remedy of disgorgement. SEC v. Blavin, 760 F.2d 706, 713 (6th Cir. 1985) (“Once the Commission has established that a defendant has violated the securities laws, the district court possesses the equitable power to grant disgorgement . . . .”). “The receiver’s role, and the district court’s purpose in the appointment, is to safeguard the disputed assets, administer the property as suitable, and to assist the district court in achieving a final, -47- equitable distribution of the assets if necessary.” Liberte Capital Grp., LLC v. Capwill, 462 F.3d 543, 551 (6th Cir. 2006) (citing 13 Moore’s Federal Practice ¶¶ 66.02-.03 (3d ed.1999 . The Receiver in this case has engaged in extensive efforts to identify and locate assets of the Receivership Entities, determine which, if any, of the assets have value, and take appropriate steps to preserve those assets. To the extent that assets can be traced to investor-derived funds, the Receiver has been empowered to take possession and preserve those as well. Based on the findings recited earlier, the Court concludes that the Receivership should continue and the Receiver’s powers and authority should not be diminished. C. Asset Freeze In general terms, courts should not issue a preliminary injunction freezing assets where no preexisting lien or equitable interest had been claimed. Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Ind., 527 U.S. 308, 333 (1999). However, the rule in Grupo Mexicano does not apply to equitable remedies employed to preserve the status quo in actions arising under the Securities Act, where the Commission seeks disgorgement of ill-gotten gains and not merely money damages. See, e.g., United States ex rel. Rahman v. Oncology Assocs., P.C., 198 F.3d 489, 498 (4th Cir. 1999); SEC v. ETS Payphones, Inc., 408 F.3d 727, 735 (11th Cir. 2005); SEC v. Cavanagh, 445 F.3d 105, 116-17 (2d Cir. 2006); Newby v. Enron Corp., 188 F. Supp. 2d 684, 708-09 (S.D. Tex. 2002); SEC v. Lauer, 445 F. Supp. 2d 1362, 1367 (S.D. Fla. 2006); cf. Charlesbank Equity Fund II v. Blinds to Go, Inc., 370 F.3d 151, 159 (1st Cir. 2004) (assuming, without deciding, that the court had the authority to grant the relief requested). In Deckert v. Independence Shares Corp., 311 U.S. 282 (1940), the Supreme Court authorized an injunction freezing assets to preserve the status quo in an action brought under the -48- Securities Act where the SEC alleged that the defendants were guilty of fraudulent misrepresentations and concealment in the sale of securities purchased by the plaintiffs and requested rescission and restitution. The Deckert court recognized that the district court has authority to enter a preliminary injunction freezing assets and mandating the status quo “in aid of the recovery sought by [a] bill” to rescind a fraudulent sale and to obtain the restitution of the amounts paid. 311 U.S. at 289. “[W]hen the plaintiff creditor asserts a cognizable claim to specific assets of the defendant or seeks a remedy involving those assets, a court may in the interim invoke equity to preserve the status quo pending judgment where the legal remedy might prove inadequate and the preliminary relief furthers the court’s ability to grant the final relief requested.” Oncology Assocs., 198 F.3d at 496. Since disgorgement is an equitable remedy, see United States v. Universal Mgmt. Servs., Inc., 191 F.3d 750, 760 (6th Cir. 1999), the asset-freeze provision contained in this Court’s order is appropriate. Asset freeze orders are justified when the Court finds sufficient evidence of a threat that an individual will dissipate the assets. Newby, 188 F. Supp. 2d at 707-08. That showing has been made. The defendants have argued that certain specific assets should be unfrozen because they were not acquired with investor funds, including the bank accounts of Lily Trabusly and Dylite Adams, certain automobiles — most notably a 1995 Ferrari purchased by John J. Bravata in June 2006 — interests in insurance policies, and the balance of the retainer John Bravata paid to his bankruptcy counsel. “To persuade a court to unfreeze assets, the defendant must establish that the funds he seeks to release are untainted and that there are sufficient funds to satisfy any disgorgement remedy that might be ordered in the event a violation is established at trial.” SEC v. Stein, No. 07 Civ. 3125, 2009 WL 1181061, at *1 (S.D.N.Y. Apr. 30, 2009) (Lynch, J.) (citing SEC v. Roor, No. 99 Civ. -49- 3372, 1999 WL 553823, at *3 (S.D.N.Y. July 29, 1999). The defendants plainly have not met that burden here. The records indicate that the bank accounts contain proceeds from BBC Equities distributions that derived from subsequent investors. The assets of John Bravata, including the Ferrari, also were acquired with tainted funds. The amount paid to bankruptcy counsel came from BBC Equities. Moreover, the defendants have failed to establish by any measure the proposition that they would be able to satisfy a disgorgement order if one is issued. IV. Conclusion The Court finds that the plaintiff has demonstrated a substantial likelihood that it will succeed on the merits of its claims against the defendants, and other pertinent factors favor the continuation of the preliminary injunction, asset freeze order, and receivership now in place. Accordingly, it is ORDERED that the plaintiff’s motion for preliminary injunction [dkt. #9] is GRANTED. It is further ORDERED that the plaintiff’s motion for order to show cause and preliminary injunction [dkt. #90] is DISMISSED as moot. It is further ORDERED that the Receiver’s motion to compel John Bravata to turn over title to the 1995 Ferrari automobile and appear for examination to locate and secure the asset [dkt. #89] is GRANTED. Defendant John Bravata must turn over to the Receiver the title to the vehicle on or before the close of business on January 31, 2011. The Receiver may schedule an examination under oath of defendant John Bravata if necessary to locate the asset in due course. -50- It is further ORDERED that the Order for preliminary injunction and freezing assets [dkt. #34] and the Order appointing the Receiver [dkt. #54] are CONTINUED in full force and effect. Dated: January 31, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 31, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -51-

=== UNITED STATES SECURITIES AND EXCHANGE COMMISSION v. JOHN J. BRAVATA, et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Plaintiff, Case No. 09-12950 Honorable David M. Lawson v. JOHN J. BRAVATA, RICHARD J. TRABULSY, ANTONIO M. BRAVATA, BBC EQUITIES, LLC, BRAVATA FINANCIAL GROUP, LLC, and SHARI A. BRAVATA, ___________________________________________/ Defendants. ORDER MODIFYING OPINION AND ORDER CONTINUING PRELIMINARY INJUNCTION, ASSET FREEZE ORDER, AND APPOINTMENT OF RECEIVER, AND GRANTING MISCELLANEOUS RELIEF On January 31, 2011, the Court entered an opinion and order continuing preliminary injunction, asset freeze order, and appointment of receiver, and granting miscellaneous relief. The opinion and order required John Bravata to turn over title to the 1995 Ferrari on or before the close of business on January 31, 2011. The Court intended to provide Mr. Bravata with one week to complete this task. Accordingly, it is ORDERED that John Bravata must turn over to the Receiver the title to the 1995 Ferrari on or before the close of business on February 7, 2011. Dated: January 31, 2011 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 31, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -2-

=== THE MASON AND DIXON LINES, INC., UNIVERSAL AM-CAN, LTD., and MASON DIXON INTERMODAL, INC. v. KIRK T. STEUDLE and TED B. WAHBY, et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION THE MASON AND DIXON LINES, INC., UNIVERSAL AM-CAN, LTD., and MASON DIXON INTERMODAL, INC. Plaintiffs, v. KIRK T. STEUDLE and TED B. WAHBY, Defendants. and E.L. HOLLINGSWORTH & CO., doing business as CHIEFTAIN CONTRACT SERVICES, CHURCHILL TRANSPORTATION INC., SUPERIOR GLOBAL, INC., and RUSH TRUCKING COMPANY Intervenor Plaintiffs, v. KIRK T. STEUDLE, TED B. WAHBY, and DETROIT INTERNATIONAL BRIDGE CO., ______________________________________/ Defendants. Case Number 10-12285 Honorable David M. Lawson OPINION AND ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS, DENYING MOTIONS AND EMERGENCY MOTIONS FOR PRELIMINARY INJUNCTION, DISMISSING AMENDED AND INTERVENOR COMPLAINTS, AND DENYING OTHER MOTIONS AS MOOT The plaintiffs and intervening plaintiffs are all common carrier companies operating tractor trailers transporting goods domestically and internationally. They allege that they regularly use the Ambassador Bridge (the Bridge) to make the passage from the United States to Canada. They have filed a complaint against officials of the Michigan Department of Transportation (MDOT) in their official capacities alleging that MDOT has denied them access to the Bridge via recently constructed but not yet opened access ramps that would provide a convenient route to the Bridge from certain interstate highways. The plaintiffs contend that the defendants’ actions (or, more accurately, inaction) violate several federal statutes and the Commerce and Supremacy Clauses of the Constitution. The complaint also contains a nuisance count under state law. The defendants have filed a motion to dismiss, arguing that the Court lacks subject matter jurisdiction because the federal statutes on which the plaintiffs rely do not provide a private right of action; the complaint fails to state valid claims; the action is barred by the Eleventh Amendment; and the Court should abstain from hearing this case in deference to a pending state court action between MDOT and the private owner of the Bridge. The Court heard oral argument from the parties in open court on November 29, 2010. The Court finds that at least one of the federal claims asserted by the plaintiffs may be asserted as a private right of action, but the state has made no order, regulation, or action that has the force of law that is preempted by the Constitution or federal law; therefore the plaintiffs claims over which this Court has subject matter jurisdiction are meritless. The Court declines to exercise supplemental jurisdiction over the remaining state law claim. Therefore, the defendants’ motion to dismiss will be granted. I. Facts At the root of the present controversy is a dispute between MDOT and the Detroit International Bridge Company (DIBC) over the construction of access facilities from Interstate I-75 and I-96 highways to the Bridge, which is located in southwest Detroit, Michigan. The construction project is known as the Gateway Project. MDOT and DIBC entered into a contract in 2004 to divide the responsibilities for constructing various parts of the project. MDOT filed a lawsuit in state court -2- alleging that it completed its part of the project, but DIBC has failed to perform its part of the construction, and in some cases has built permanent structures in the way of easements to landlocked parcels belonging to third parties. According to the state court’s opinion ordering specific performance, DIBC has yet to construct a dedicated ramp to 23rd Street, a local thoroughfare; it built toll booths in the way of the easement, and other facilities in the way of a proposed four-lane access road; and it has not built a proper access road to a welcome center on 21st Street. In addition, DIBC “failed to construct a two lane truck road, an access easement, safeguard gate system, and access drive and gate as required by the agreement.” Mot. Dismiss, Ex. 1, MDOT v. DIBC, No. 09-015581- CK, Opinion and Order at 6 (Wayne Cnty. Cir. Ct., Feb. 1, 2010 at 6. The state court found that these facts were not in dispute. Apparently, MDOT has completed its part of the project, including access ramps from the interstate highways to the Bridge property, but it has refused to open the ramps until DIBC finishes its work. Although the Bridge is a major route of international travel, it is privately owned. See Act of Mar. 4, 1921, Ch. 167, 41 Stat. 1439 (1921). This Act of Congress required DIBC to comply with the Bridge Act of 1906, 33 U.S.C. § 491 et seq., which mandates that bridge operators obtain the approval of the United States Secretary of Transportation for “plans and specifications and the location of such bridge and accessory works” before commencing a construction project. 33 U.S.C. § 491. The statute also states that “ it shall not be lawful to deviate from such plans, either before or after completion of the structure, unless the modification of such plans has previously been submitted to and received the approval of the Secretary.” Ibid. When the Bridge was initially built, motor vehicles seeking to access the Bridge were required to exit the highway system and travel through city streets in Detroit. In 1998, Congress passed legislation authorizing funds for the -3- Gateway Project, which consists of “improvements to access roads and construction of access roads, approaches, and related facilities (such as signs, lights, and signals) necessary to connect the Ambassador Bridge in Detroit, Michigan, to the Interstate [Highway] System.” Transportation Equity Act for the Twenty-First Century, Pub. L. No. 105-178, § 1217, 112 Stat. 107, 214 (1998). Michigan obtained federal funds to help with this project, and it states that completing the project according to plans and specifications is a requirement of retaining the funding. The plaintiffs have characterized MDOT’s refusal to open the ramps as a “Closure Order.” That denomination is a misnomer at best and perhaps a deliberate mischaracterization at worst. There is no “order” as such closing the ramps. In fact, they never have been opened. While the ramps remain closed, the plaintiffs contend that they must resort to existing surface roads through Detroit to gain access to the Bridge. The plaintiffs’ description of the State’s maintenance of the status quo likely is an effort to frame the inertia as state action. The defendants acknowledge that MDOT has finished its part of the project, but they insist that they cannot open the ramps until DIBC has completed its construction, lest federal funding be jeopardized. The plaintiffs’ filed a complaint, followed by an amended complaint three weeks later, which contains five counts. Count I seeks a mandatory injunction compelling the defendants to open the ramps to vehicle traffic; it is based on 49 U.S.C. §§ 10101-16106, which include the Interstate Commerce Commission Termination Act (ICCTA) and the Federal Motor Carrier Safety Improvement Act (MCSIA). Count II is based on 42 U.S.C. § 1983, alleging a violation of the Supremacy Clause and the Commerce Clause, and prays for injunctive and declaratory relief. It is not clear whether damages are sought under this count. Count III alleges a violation of 49 U.S.C. §§ 14501 and 10501, which prohibit states from enacting laws and regulations “related to a price, -4- route, or service of any motor carrier.” Count IV pleads common law nuisance under state law. Count V alleges a violation of 49 U.S.C. § 31114 (part of the Surface Transportation Assistance Act) and an implementing regulation, 23 C.F.R. § 658.19, which prohibit states from enacting laws and regulations restricting access to the interstate highway system, except in cases of safety considerations. The common thread among these counts is that the plaintiffs presently are required to drive on city streets to gain access to the Bridge; if the ramps were open, they could save considerable time and money by driving directly from the highway onto the Bridge. The plaintiffs filed a motion for a preliminary injunction, on which the Court held a hearing. The motion remains pending. The plaintiffs also filed a motion to strike an affidavit filed by an MDOT official and a motion for discovery. In addition, three other trucking companies, E.L. Hollingsworth & Co., Churchill Transportation Inc., Superior Global, Inc., and Rush Trucking Company, moved to intervene as plaintiffs. On December 1, 2010, the Court granted the motions and allowed Superior Global, Inc. to file an intervenor’s complaint. The intervening plaintiffs filed their complaint on December 6, 2010 alleging substantially the same federal claims as the original plaintiffs, but they added DIBC as a defendant, and they make specific reference to state highway M-85 as a point of access to the Bridge. They also avoid the nomenclature “Closure Order,” and instead characterize the contract between MDOT and DIBC establishing the Gateway Project as a “regulation.” Since oral argument of the motion to dismiss in this case, the plaintiffs and intervening plaintiffs filed emergency motions for preliminary injunctions seeking access to the Bridge via the closed ramps when weather conditions closed the Blue Water Bridge connecting Port Huron, -5- Michigan to Sarnia, Canada, resulting in lengthy traffic delays crossing the Ambassador Bridge. The decision on the present motion to dismiss renders those motions moot. II. Discussion Although the defendants cite additional rules of procedure, their argument indicates their motion to dismiss is based on lack of subject matter jurisdiction and the failure of the plaintiffs to state claims for which relief can be granted. See Fed. R. Civ. P. 12(b)(1), (6). “A Rule 12(b)(1) motion can either attack the claim of jurisdiction on its face, in which case all allegations of the plaintiff must be considered as true, or it can attack the factual basis for jurisdiction, in which case the trial court must weigh the evidence and the plaintiff bears the burden of proving that jurisdiction exists.” Abbott v. Michigan, 474 F.3d 324, 328 (6th Cir. 2007) (citing DLX, Inc. v. Kentucky, 381 F.3d 511, 516 (6th Cir. 2004 . The present motions attack the face of the jurisdictional allegations in the amended complaint. Rule 12(b)(6) authorizes dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). When deciding a motion under that Rule, “[t]he court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief.” Cline v. Rogers, 87 F.3d 176, 179 (6th Cir.1996). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Columbia Nat’l Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). “However, while liberal, this standard of review does require more than the bare assertion -6- of legal conclusions.” Ibid. “In practice, ‘a . . . complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.’” In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir. 1993) (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984 . Consideration of a motion to dismiss under Rule 12(b)(6) is confined to the pleadings. “[A] court may accept ‘matters outside the pleadings,’ but in doing so it generally must treat the motion ‘as one for summary judgment under Rule 56.’” Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008) (citing Fed. R. Civ. P. 12(d . However, “documents attached to the pleadings become part of the pleadings and may be considered on a motion to dismiss. . . . In addition, when a document is referred to in the pleadings and is integral to the claims, it may be considered without converting a motion to dismiss into one for summary judgment.” Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 335-336 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c); Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir. 1999), abrogated on other grounds by Swierkiewicz v. Sorema N.A., (2002 . The Sixth Circuit has warned that attacks on the merits should not be confounded with jurisdictional challenges, and has admonished courts to be more exacting when addressing challenges that are phrased as an attack on jurisdiction: In two very recent decisions, the Supreme Court has admonished courts to use the term “jurisdiction” with more precision, describing the term as “a word of many, too many, meanings,” Kontrick v. Ryan, , 453 (2004) (quoting Steel Co. v. Citizens for a Better Env’t, , 90 (1998 . In Kontrick, a unanimous Court held that time requirements of Federal Rules of Bankruptcy Procedure 4004 and instead 9006 did not “claim-processing rules.” Id. at 455. Just over one year later, in Eberhart v. United States, (2005) (per curiam), the Supreme Court similarly described Federal Rule of Criminal Procedure 33 with its time limitations as a nonjurisdictional “claim-processing rule.” “Clarity would be facilitated,” the Supreme Court implicate subject-matter jurisdiction, but were -7- remarked, “if courts and litigants used the label ‘jurisdictional’ not for claim-processing rules, but only for prescriptions delineating the classes of cases (subject-matter jurisdiction) and the persons (personal jurisdiction) falling within a court’s adjudicatory authority.” Id. at 405 (quoting Kontrick, 540 U.S. at 455). “Characteristically, a court’s subject-matter jurisdiction cannot be expanded to account for the parties’ litigation conduct. . . .” Kontrick, 540 U.S. at 456. Primax Recoveries, Inc. v. Gunter, 433 F.3d 515, 518-19 (6th Cir. 2006). Heeding that warning, this Court also is mindful of Supreme Court precedent holding that federal question jurisdiction under 28 U.S.C. § 1331 will not be found when the federal statute invoked by a plaintiff does not create a private right of action. See Merrell Dow Pharm., Inc. v. Thompson, , 814 (1986) (holding that “the congressional determination that there should be no federal remedy for the violation of [a] federal statute is tantamount to a congressional conclusion that the presence of a claimed violation of the statute as an element of a state cause of action is insufficiently ‘substantial’ to confer federal-question jurisdiction”); see also Care Choices HMO v. Engstrom, 330 F.3d 786, 788 (6th Cir. 2003). A. Interstate Commerce Commission Termination Act The Interstate Commerce Commission Termination Act (ICCTA), 49 U.S.C. § 10101 et seq., abolished the Interstate Commerce Commission and transferred most its responsibilities concerning rail and motor vehicle carrier transportation to the Secretary of Transportation and the Surface Transportation Board. See 49 U.S.C. § 13501; Dep’t of Transp. v. Public Citizen, 541 U.S. 752, 759 n.1 (2004). The provision relied upon by the plaintiffs, 49 U.S.C. § 14501 (actually enacted as part of the Federal Aviation Administration Authorization Act), states: Except as provided in paragraphs (2) and (3), a State, political subdivision of a State, or political authority of 2 or more States may not enact or enforce a law, regulation, -8- or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . with respect to the transportation of property. 49 U.S.C. § 14501(c)(1). Subsection 14501(c)(2) exempts from this preemption provision “the safety regulatory authority of a State with respect to motor vehicles” and other limitations based on size, weight, or cargo. Id. § 14501(c)(2)(A). The defendants argue that this section does not create a private right of action. However, courts, including the Supreme Court, have found that section 14501(c)(1) furnishes the authority for private parties to challenge state laws and local ordinances that purport to regulate motor carrier routes, usually in the context of tow truck operator regulations. See, e.g., City of Columbus v. Ours Garage & Wrecker Service, Inc., 536 U.S. 424 (2002); Auto. Club of N.Y., Inc. v. Dykstra, 520 F.3d 210 (2d Cir. 2008); Loyal Tire & Auto Center, Inc. v. Town of Woodbury, 445 F.3d 136 (2d Cir. 2006) (Sotomayor, J.); Ware v. Tow Pro Custom Towing & Hauling, Inc., 289 F. App’x 852 (6th Cir. 2008) (unpublished). The preemptive language in the statute is enforceable through the Supremacy Clause to invalidate conflicting state and local laws. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n.14 (1983) (“A plaintiff who seeks injunctive relief from state regulation, on the ground that such regulation is pre-empted by a federal statute which, by virtue of the Supremacy Clause of the Constitution, must prevail, thus presents a federal question which the federal courts have jurisdiction under 28 U.S.C. § 1331 to resolve.”). Section 14501(c)(2)(A) does not provide a source of relief for the plaintiffs and intervening plaintiffs in this case, however. It is undisputed that the plaintiffs fall within the statutory definition of motor carriers. 49 U.S.C. § 13102(14). However, the plaintiffs have pointed to no state law or regulation enacted or enforced by the defendants in violation of federal law. Instead, the plaintiffs challenge what they describe as the “Closure Order” — the “MDOT’s ad hoc administrative actions -9- and unilateral decision to effectively close the Interstate Connecting Ramps by barricading and blockading the ramps” and “caus[ing] construction equipment, MDOT barricade cones, construction debris, and mounds of dirt and concrete to be placed on the Interstate Connecting Ramps with the intent to stultify, directly inhibit and prohibit the direct and efficient flow of international travel over the Ambassador Bridge.” Amend. Compl. ¶¶ 28-29. The plaintiffs have not provided a copy of any order or any other evidence tending to show that administrative action was taken or that a decision was made by the MDOT or MSTC. The cases determining whether section 14501(c)(1) effects a preemption involve state and local laws and regulation. See, e.g., Ours Garage, 536 U.S. at 428 (regulation); Dykstra, 520 F.3d at 211-12 (administrative scheme); Loyal Tire, 445 F.3d at 139 (municipal ordinance); Ware, 289 F. App’x at 856 (storage fee alws); cf. Tillison v. Gregoire, 424 F.3d 1093, 1095-06 (9th Cir. 2005) (state or local law); Indep. Towers of Wash. v. Washington, 350 F.3d 925, 930 (9th Cir. 2003) (law); cf. INS v. Chadha, 462 U.S. 919, 986 n.19 (1983) (rule making has the force and effect of law). The question remains whether the state’s inaction amounts to an “other provision having the force and effect of law.” 49 U.S.C. § 14501(c)(1). The Court does not believe it does. The plaintiffs try to help their case by characterizing the non-opening of the ramps as a “Closure Order.” That nomenclature is misleading. The ramps were never open, so there was never any “closure”; and there is no “order” effectuating any action by the state officials. Instead, the ramps remain closed because of a dispute between the State and its construction partner over responsibility for finishing the project in accordance with plans approved by the U.S. Department of Transportation. Nor does the contract between MDOC and DIBC constitute a provision having the force or effect of law. The Gateway Project Agreement is just that: an agreement. It was not enacted by a -10- legislative or administrative authority, and it does not constitute a law, rule, pronouncement, regulation, or prescription. It is a memorialization of the mutual promises and undertakings of the subscribing parties, no more no less. Pronouncements that do not follow prescribed legislative or rule making procedures cannot be said to constitute provisions having the force and effect of law. For instance, in Martin v. Stites, 4 F. App’x 621 (10th Cir. 2001), the Tenth Circuit examined the possible preemption of two county towing policies, one of which divided the county “geographically into eastern and western portions for purposes of assigning non-preference tow truck calls.” Id. at 623-24. The court determined that a county policy did not have the “force and effect of law” because it did not meet the state process or requirements for formal legislation, did not provide guidelines or standards to govern the sheriff’s conduct, could be changed unilaterally by the sheriff at any time, and provided no repercussions for violations of the policy. Id. at 627-29. The same obtains here. The state officials simply refuse to open the ramps. That is an executive decision, not an legislative or administrative one. It was not made pursuant to a “provision” and does not have the “force or effect of law.” The amended and intervening complaints, therefore, fail to describe a “a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . with respect to the transportation of property” being enforced these defendants that is subject to federal preemption. The claim by the plaintiffs and intervening plaintiffs founded on 49 U.S.C. § 14501(c)(1) and the Supremacy Clause fails as a matter of law. B. Motor Carrier Safety Improvement Act -11- The plaintiffs’ and intervening plaintiffs’ claim under the Motor Carrier Safety Improvement Act (MCSIA) fairs no better. That Act states as its purposes the improvement of the federal motor carrier safety program through the establishment of a permanent government agency, the Federal Motor Carrier Safety Administration, and the reduction of large-truck accidents through increased inspection and enforcement measures. Pub. L. No. 106-159, § 4, 113 Stat. 1748, 1749. The plaintiffs have not developed an argument as to how the defendants’ conduct might collide with a provision of this statute. By its terms, the Act addresses matters of highway safety, which traditionally has remained within the province of the States. Consequently, the likelihood that a provision of this legislation would preempt state law is remote. There is no Sixth Circuit precedent dealing with this particular legislation. However, in 1993, the Sixth Circuit grappled with the predecessor to the present statute, the Motor Carrier Safety Act (MCSA), and determined that it “does not purport to set up a comprehensive regulatory scheme, but to ‘establish minimum Federal safety standard for commercial motor vehicles.’” Interstate Towing Ass’n, Inc. v. City of Cincinnati, Ohio, 6 F.3d 1154, 1160 (6th Cir. 1993) (quoting 49 U.S.C. app. § 2505(a . The Sixth Circuit also noted that “[i]n no field has [the Supreme Court’s] deference to state regulation been greater than that of highway safety regulation” and held that the MCSA did not preempt state motor carrier regulation “on a wholesale basis.” Id. at 1162 (quoting Raymond Motor Transp., Inc. v. Rice, 434 U.S. 429, 444 (1978 . Other courts have reached similar conclusions. See North Carolina Motorcoach Ass’n v. Guilford Cnty. Bd. of Educ., 315 F. Supp. 2d 784, 801-04 (M.D.N.C. 2004); Sadorf v. Valdez, No. 04-1563, 2004 WL 1375534, at *2-3 (N.D. Ill. Jun 17, 2004). -12- Because the MCSIA governs safety issues that are largely irrelevant to the plaintiffs’ challenge to their lack of access to the ramps in this case, it does not on its face preempt the state’s inaction, nor would the “Closure Order” or the Gateway Project Agreement conflict with any of the MCSIA’s provisions. Therefore, the plaintiffs’ and intervening plaintiffs’ claims of preemption under this statute fail. Nor does the Court find a private right of action in this legislation that is material to the present dispute. Courts have reached inconsistent results on whether 49 U.S.C. § 14704(a)(2) creates a private right of action. Compare Marrier v. New Penn Motor Express, Inc., 140 F. Supp. 2d 326 (D. Vt. 2001), with Jones v. D’Souza, No. 06-00547, 2007 WL 2688332, at *7 (W.D. Va. Sept. 11, 2007). But that statute deals with “damages sustained by a person as a result of an act or omission of that carrier or broker.” 49 U.S.C. § 14704(a)(2). The statute creates no private right of action against state officials. The plaintiffs and intervening plaintiffs have not stated a claim in their pleadings that can be sustained by the Motor Carrier Safety Improvement Act. C. 42 U.S.C. § 1983 The plaintiffs also allege that they are entitled to relief under 42 U.S.C. § 1983. Section 1983, however, does not itself create federal rights, but only provides judicial relief for the violation of rights arising under the Constitution or laws of the United States. Baker v. McCollan, 443 U.S. 137, 144 n.3 (1979). The main source of the federal right upon which the plaintiffs and intervening plaintiffs rely is the section of the Interstate Commerce Commission Termination Act (via the Supremacy Clause) discussed above, 49 U.S.C. § 14501(c)(1). -13- In a well-reasoned opinion, the Second Circuit held that section 14501(c)(1) does not provide an individual right of action on its own or enforceable through 42 U.S.C. § 1983. Loyal Tire, 445 F.3d at 149 (explaining that “‘[a] claim under the Supremacy Clause that a federal law preempts a state regulation is distinct from a claim for enforcement of that federal law” under § 1983 and that “‘[a] claim under the Supremacy Clause simply asserts that a federal statute has taken away local authority to regulate a certain activity”) (quoting Western Air Lines, Inc. v. Port Auth. of N.Y. & N.J., 817 F.2d 222, 225 (2d Cir. 1987 . Determining whether section 14501(c)(1) is the source of a private right requires an analysis of the statutory text and context in light of the factors set out in Gonzaga Univ. v. Doe, 536 U.S. 273, 285-89 (2002), and Blessing v. Freestone, 520 U.S. 329, 340-41 (1997). The Supreme Court has held that the critical question that determines whether legislation can be enforced privately is “whether or not Congress intended to confer individual rights upon a class of beneficiaries.” Gonzaga Univ., 536 U.S. at 285. In Gonzaga University, the Supreme Court acknowledged that confusion may have resulted from the conflation of its cases dealing with whether a statute created an implied private right of action with those cases determining whether there were private rights enforceable under section 1983. The Court held, however, that “in either case we must first determine whether Congress intended to create a federal right.” Id. at 283 (emphasis omitted). “For a statute to create such private rights, its text must be ‘phrased in terms of the persons benefitted.’” Id. at 284 (citing Cannon v. Univ. of Chicago, 441 U.S. 677, 692 n.13 (1979 . The Court stated that the statute unambiguously must confer “rights,” not merely “benefits.” Id. at 283. “[I]f Congress wishes to create new rights enforceable under § 1983, it must do so in clear and unambiguous terms.” Id. at 290. “[W]here the text and structure of a statute -14- provide no indication that Congress intends to create new individual rights, there is no basis for a private suit, whether under § 1983 or under an implied right of action.” Id. at 286. In Harris v. Olszewski, 442 F.3d 456 (6th Cir. 2006), the Sixth Circuit explained: In ascertaining “whether Congress intended to create a federal right” in the freedom-of-choice provision, . . . the Court has directed us to look at three factors, see Blessing v. Freestone, 520 U.S. 329, 340-41 (1997); see also Westside Mothers v. Haveman, 289 F.3d 852, 862-63 (6th Cir. 2002). “First, Congress must have intended that the provision in question benefit the plaintiff.” Blessing, 520 U.S. at 340. In answering this initial inquiry, courts look for a statutory right or “individual entitlement,” Gonzaga, 536 U.S. at 287, that is “unambiguously conferred,” id. at 283, by the use of “rights-creating language,” id. at 284 n.3. An “aggregate focus” unconcerned “with whether the needs of any particular person have been satisfied,” id. at 288 (internal quotation marks omitted), is insufficient; the statute must be “phrased in terms of the persons benefitted,” id. at 284, and use “individually focused terminology,” id. at 287. “Second, the plaintiff must demonstrate that the right assertedly protected by the statute is not so vague and amorphous that its enforcement would strain judicial competence.” Blessing, 520 U.S. at 340-41 (internal quotation marks omitted). “Third, the statute must unambiguously impose a binding obligation on the States. In other words, the provision giving rise to the asserted right must be couched in mandatory, rather than precatory, terms.” Id. at 341. Harris, 442 F.3d at 461. If a plaintiff can make these three showings, “a rebuttable presumption [arises] that the right is enforceable under § 1983,” ibid. (quoting City of Rancho Palos Verdes v. Abrams, 544 U.S. 113, 120 (2005 , which the defendant can defeat by showing that the statute’s comprehensive enforcement scheme is incompatible with individual enforcement. In Loyal Tire, the Second Circuit reasoned that although section 14501 prohibited states and local governments from regulating motor carriers, it was not phrased in terms of the person benefitted. Loyal Tire, 445 F.3d at 150 (“The statute, which provides that a state or municipality may not ‘enact or enforce’ certain kinds of laws governing motor carriers of property, 49 U.S.C. § 14501(c)(1), is not ‘phrased in terms of the persons benefitted.’” (quoting Cannon, 441 U.S. at 692 -15- n.13 . The court also found that “because the statute focuses on the regulated actors (state and local authorities), it has an aggregate, rather than an individual, focus.” Ibid. This Court agrees with that reasoning and finds that 49 U.S.C. § 14501(c)(1) does not create a private right of action that can be enforced through section 1983. The Court already determined that there is no private right of action material to this case under the Motor Carrier Safety Improvement Act. D. Surface Transportation Assistance Act The plaintiffs also make reference in their amended complaint to a section of the Surface Transportation Assistance Act and one of its implementing regulations, 49 U.S.C. § 31114 and 23 C.F.R. § 658.19. That statute states: (a) Prohibition on denying access. A State may not enact or enforce a law denying to a commercial motor vehicle . . . reasonable access between- (1) the Dwight D. Eisenhower System of Interstate and Defense Highways . . . ; and (2) terminals, facilities for food, fuel, repairs, and rest, and points of loading and unloading for household goods carriers, motor carriers of passengers, or any truck tractor-semitrailer combination . . . . (b) Exception. This section does not prevent a State or local government from imposing reasonable restrictions, based on safety considerations, on a truck tractor-semitrailer combination . . . . 49 U.S.C. § 31114. The Act “governs . . . access to and from the national Interstate system” and “guarantees commercial motor vehicles ‘reasonable access,’ free from State interference, between the Interstate and terminals,” while “cabin[ning] the degree and manner in which state and local governments may restrict commercial vehicles’ access to and from the Interstate.” Aux Sable Liquid Prods. v. Murphy, 526 F.3d 1028, 1032-33 (7th Cir. 2008) (footnotes omitted). The Act also “seeks to increase construction and safety on the interstate and national highway systems” and provides federal funding to the states for construction, conditioned on agreements with the Secretary of -16- Transportation to comply with the terms and conditions of the regulations set out in Title 23. New Hampshire v. Ramsey, 366 F.3d 1, 7 (1st Cir. 2004) (citing 23 C.F.R. § 630.112(a . Section 31114 uses the term “reasonable access.” The corresponding regulation, 23 C.F.R. § 658.19, provides in relevant part: (a) No State may enact or enforce any law denying reasonable access to vehicles with dimensions authorized by the STAA between the NN and terminals and facilities for food, fuel, repairs, and rest. In addition, no State may enact or enforce any law denying reasonable access between the NN and points of loading and unloading to household goods carriers, motor carriers of passengers, and any truck tractor-semitrailer combination . . . . . . . (d) No State may enact or enforce any law denying access within 1 road-mile from the National Network using the most reasonable and practicable route available except for specific safety reasons on individual routes. . . . (h) States shall ensure compliance with the requirements of this section for roads under the jurisdiction of local units of government. 23 C.F.R. § 658.19. The statute focuses on “law[s]” and regulations and has been construed to permit states to “exercise their police powers over state highways and local roads,” Aux Sable Liquid Prods., 526 F.3d at 1036, over matters beyond just “safety considerations,” N.H. Motor Transp. Ass’n v. Town of Plaistow, 67 F.3d 326, 329-30 (1st Cir. 1995). However, states may not “deny all methods of access to the Interstate from the Terminal for fully loaded propane trucks.” Aux Sable Liquid Prods., 526 F.3d at 1037. The plaintiffs seek access from a highway to an international bridge. Whether the Bridge falls within the definition of a “terminal” is debatable. However, even assuming that it does, the preemption provision of the STAA explicitly applies only to “a law,” and the plaintiffs have pointed to no law enacted or enforced by the defendants. As discussed above, neither the “Closure Order” -17- nor the Gateway Project Agreement has the force or effect of law, and they do not fall within the terms of this statute. Moreover, the plaintiffs have not alleged that they do not have reasonable access to the Bridge. To the contrary, in their amended complaint, they acknowledge that they continue to access the Bridge via city streets. Although their briefs seem to suggest that this access route is a “detour” that has not been in place for very long, the defendants cite law tending to show that the highway was never connected to the Bridge previously via a direct route, indicating that the city streets were historically the only means of access to the Bridge. The plaintiffs do not argue that this route has always been unreasonable, but seem to suggest only that it is unreasonable since the date that the construction of the ramps was allegedly completed. However, Aux Sable Liquid Prods., 526 F.3d at 1036-37, states that the State does not violate the STAA if it provides an alternate route of access that is merely less preferable. Such is the case here. The STAA does not preempt the State’s decision to not open the ramps until the entire project is substantially complete. The STAA regulations, specifically 23 C.F.R. § 658.19(d), prohibits a State from “enact[ing] or enforc[ing] any law denying access within 1 road-mile from the National Network [of highways] using the most reasonable and practicable route available.” Once again, however, the regulation on its face applies only to “law[s]”; the plaintiffs have pointed to no state law violating this regulation. The plaintiffs amended complaint states no cognizable claim for relief under the Surface Transportation Assistance Act. E. Dormant Commerce Clause -18- The plaintiffs assert that the defendants’ inaction violates the Commerce Clause of the federal Constitution. The Commerce Clause provides that “Congress shall have Power . . . [t]o regulate Commerce . . . among the several States . . . .” U.S. Const. art. I, § 8, cl. 3. “[T]he Commerce Clause as an implicit restraint on state authority, even in the absence of a conflicting federal statute.” United Haulers Ass’n, Inc. v. Oneida-Herkimer Solid Waste Mgmt. Auth., 550 U.S. 330, 338 (2007). The “dormant Commerce Clause” is the negative corollary to this grant of federal power to Congress, which prohibits certain State regulation of interstate commerce. It is “the principle that state and local laws are unconstitutional if they place an undue burden on interstate commerce.” See Erwin Chemerinsky, Constitutional Law: Principles & Policies § 5.3.1, at 419 (3d ed. 2006). Under this doctrine, states are free to enact laws regulating “matters of local state concern, even though [these laws] in some measure affect[] the commerce, provided [they] do[] not materially restrict the free flow of commerce across state lines, or interfere with it in matters with respect to which uniformity of regulation is of predominant national concern.” S. Pac. Co. v. State of Arizona ex rel. Sullivan, 325 U.S. 761, 770 (1945). The dormant Commerce Clause prohibits States from “build[ing] up [their] domestic commerce by means of unequal and oppressive burdens upon the industry and business of other States.” Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 272- 73 (1984) (internal quotation marks and citation omitted; alteration in original) (striking down as unconstitutional a Hawaii excise tax that exempted beverages produced within the State). “When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests, [courts] have generally struck down the statute without further inquiry.” Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, 579 (1986). To escape invalidation, the State must show that a statute -19- or regulation effectuating discriminatory treatment of non-residents is “demonstrably justified.” Granholm v. Heald, 544 U.S. 460, 492 (2005) (quoting Chem. Waste Mgmt., Inc. v. Hunt, 504 U.S. 334, 344 (1992 . Where the state employs nondiscriminatory means to regulate interstate commerce, the “proper standard” for determining whether that statute violates the Commerce Clause is “whether the burden the statute imposes on interstate commerce is ‘clearly excessive in relation to the putative local benefits.’” CSX Transp., Inc. v. City of Plymouth, 283 F.3d 812, 818 (6th Cir. 2002) (quoting C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 390 (1994 . The plaintiffs contend that the “Closure Order” violates the Commerce Clause because it blocks the free flow of travel between the interstate highways and the Ambassador Bridge. The intervening plaintiffs argue that the Gateway Project Agreement is the equivalent of law. However, as noted above, the plaintiffs fail to identify a state law, regulation, or other official pronouncement that has the force of law. There is no direct regulation at issue here. Indirect effects on federal commerce may be actionable under the Commerce Clause. Even so, the states are free to regulate local issues — here a local construction project — provided that the regulation “does not materially restrict the free flow of commerce across state lines.” S. Pac. Co., 325 U.S. at 770. As noted above, the plaintiffs continue to be able to access the Bridge via city streets, as they had historically been able to do prior to the commencement of the Gateway Project. There can be no doubt that the ramps will enhance traffic flow. But there is no contention that the defendants have interfered with existing Bridge access. Moreover, there is no allegation that the defendants’ actions discriminate in favor of a private enterprise. See United Haulers, 550 U.S. at 343 (restricting application of the dormant Commerce Clause to laws that benefit private, not public, interests, reasoning that “[t]he contrary approach of treating public and private entities the same -20- under the dormant Commerce Clause would lead to unprecedented and unbounded interference by the courts with state and local government. The dormant Commerce Clause is not a roving license for federal courts to decide what activities are appropriate for state and local government to undertake, and what activities must be the province of private market competition”). Instead, they affect all motorists the same, regardless of state citizenship, and there is no allegation of economic protectionism to support a dormant Commerce Clause challenge. F. Other issues The defendants also assert that the claims in the amended complaint are barred by the Eleventh Amendment. The Court reads the amended complaint and intervenors’ complaint as seeking no more than an injunction against state action that is preempted by section 14501(c)(1) and a declaration of their rights under the Supremacy Clause and other federal statutes. They do not seek damages or other forms of compensatory relief. State sovereign immunity as recognized by the Eleventh Amendment does not extend to suits against state officials seeking to enjoin violations of federal law. Ex parte Young, , 159-160 (1908). A plaintiff can “avoid[] this sovereign immunity bar by suing for injunctive or declaratory relief, rather than monetary relief.” Johnson v. Unknown Dellatifa, 357 F.3d 539, 545 n.1 (6th Cir. 2004) (citing Will v. Michigan Dep’t of State Police, 491 U.S. 58, 71 n.10 (1989 . To determine whether a claim for such relief avoids sovereign immunity, “‘a court need only conduct a straightforward inquiry into whether [the] complaint alleges an ongoing violation of federal law and seeks relief properly characterized as prospective.’” Dubuc v. Michigan Bd. of Law Examiners, 342 F.3d 610, 616 (6th Cir. 2003) (quoting Verizon Maryland, Inc. v. Public Service Comm’n of Maryland, 535 U.S. 635, 645 (2002 . -21- Here, there is no clear statement in the complaint that the plaintiffs seek damages or other forms of monetary relief, which would not be recoverable against these defendants in their official capacity due to the Eleventh Amendment bar. See Lowe v. Hamilton Cnty. Dep’t of Job & Family Servs., 610 F.3d 321, 324-25 (6th Cir. 2010). The plaintiffs also allege a claim of nuisance under state law. Federal courts have jurisdiction over state law claims that “are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.” 28 U.S.C. § 1367(a). A court also has discretion to “decline to exercise supplemental jurisdiction.” 28 U.S.C. § 1367(c). “In determining whether to retain jurisdiction over state-law claims, a district court should consider and weigh several factors, including the ‘values of judicial economy, convenience, fairness, and comity.’” Gamel v. City of Cincinnati, 625 F.3d 949, 951 (6th Cir. 2010) (quoting Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988 . In this case, the Court is dismissing all of the federal claims, which form the basis of the Court’s original jurisdiction. “When all federal claims are dismissed before trial, the balance of considerations usually will point to dismissing the state law claims, or remanding them to state court if the action was removed.” Musson Theatrical, Inc. v. Fed. Exp. Corp., 89 F.3d 1244, 1254-1255 (6th Cir. 1996); see also 28 U.S.C. § 1367(c)(3) (stating that a district court may decline to exercise supplemental jurisdiction if it has “dismissed all claims over which it ha[d] original jurisdiction”). The Court believes that discretion compels declining jurisdiction over the nuisance claim in this case for that reason. Another important, perhaps overriding, consideration weighs heavily against exercising supplemental jurisdiction in this case as well. As the Sixth Circuit has noted, “[a] district court may -22- also ‘consider whether the plaintiff has engaged in any manipulative tactics when it decides whether to remand a case. If the plaintiff has attempted to manipulate the forum, the court should take this behavior into account’ in determining whether the balance of factors supports a remand of the state-law claims.” Gamel, 625 F.3d at 952 (quoting Carnegie-Mellon, 484 U.S. at 357). The present case falls squarely within that rubric. From the standpoint of the named plaintiffs, who are affiliated with the controlling interests of DIBC, and apparently the intervening plaintiffs as well, the case represents another attempt to gain an upper hand in the dispute between the state and DIBC over completion of DIBC’s portion of the Gateway Project. As noted earlier, DIBC and MDOT are involved in litigation over that issue pending in the Wayne County, Michigan circuit court. DIBC attempted to remove that case to this Court, with support from some of the same freight companies who have intervened in the present case. In granting the State’s motion to remand, another judge of this Court wrote: On September 21, 2010, the Detroit International Bridge Company (“DBIC”) removed this action for a second time from the Wayne County Circuit Court asserting federal question jurisdiction. On September 27, 2010, the Michigan Department of Transportation (“MDOT”) filed an emergency motion for remand and for costs and fees. That motion has been fully briefed. In the meantime, the Court has been flooded with motions filed by DIBC and parties scheming with DBIC to keep the action in federal court. Considering this Court’s more than thirty-three years as a judicial officer, DBIC may be entitled to its recognition as the party who has devised the most creative schemes and maneuvers to delay compliance with a court order. Mich. Dep’t of Trans. v. Det. Int’l Bridge Co., No. 10-13767, Op. and Order of Remand [dkt #30] at 1-2 (footnote omitted) (Nov. 5, 2010) (Duggan, J.). Because the present case can be seen as another such “maneuver,” the Court declines to exercise supplemental jurisdiction over the remaining state law claim. III. Conclusion -23- The Court finds that it has jurisdiction over the plaintiffs’ and intervening plaintiffs’ claims brought under the Supremacy Clause and the Commerce Clause, but they have failed to state claims under those constitutional provisions for which relief can be granted. The claims brought under other federal statutes and regulations may not proceed because those statutes and regulations do not create private rights of action, and to that extent, the Court does not have subject matter jurisdiction over them. See Merrell Dow Pharm., Inc. v. Thompson, 478 U.S. at 814. The Court declines to exercise supplemental jurisdiction over the state law claim of nuisance. The plaintiffs filed a motion to strike the affidavit of Victor Judnic that was filed along with the defendants’ motion to dismiss. Because the Court did not consider that affidavit in deciding the motion to dismiss, no action need be taken on that motion, and it is moot. Likewise, the plaintiffs’ motion to allow discovery has been rendered moot by the present opinion and order. The dismissal of the case constitutes a denial of the motion and emergency motions for a preliminary injunction. Accordingly, it is ORDERED that the defendants’ motion to dismiss [dkt. #13] is GRANTED. It is further ORDERED that Counts I through III and Count V of the amended complaint and all counts of the intervenors’ complaint are DISMISSED WITH PREJUDICE. Count IV of the amended complaint is DISMISSED WITHOUT PREJUDICE. It is further ORDERED that the motion for preliminary injunction [dkt. #8] and the emergency motions for preliminary injunction [dkt. #81, 82, 83] are DENIED. It is further ORDERED that the motions to strike the affidavit of Victor Judnic [dkt. #36], and the motion for discovery [dkt. #37] are DENIED as moot. -24- s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: January 13, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 13, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -25-

=== ETERNAL PRESERVATION ASSOCIATES, Plaintiff and counter-defendant v. ACCIDENTAL MUMMIES TOURING, Defendant and counter-plaintiff v. WOLF CAPITAL PARTNERS, INC., Third-party defendant. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ETERNAL PRESERVATION ASSOCIATES, LLC, Plaintiff and counter-defendant, v. ACCIDENTAL MUMMIES TOURING COMPANY, LLC, Defendant and counter-plaintiff, and Third-party plaintiff, v. WOLF CAPITAL PARTNERS, INC., Third-party defendant. Case Number 10-13008 Honorable David M. Lawson ____________________________________________/ OPINION AND ORDER DENYING MOTION TO DISQUALIFY COUNSEL When allies unite in a defense against a common enemy, they might effectively select a single champion to advance their cause. But when a dispute arises between the allies, the champion may be required to choose sides, and his divided loyalties could undermine his effectiveness. Or so says third-party defendant Wolf Capital Partners, Inc. (Wolf). In this case, defendant Accidental Mummies Touring Company, L.L.C. (AMTC) has been sued by plaintiff Eternal Preservation Associates, L.L.C. (EPA) for breach of a sublicensing agreement concerning the display of the mummified remains of residents of Guanajuato, Mexico. AMTC is a limited liability company owned half by Wolf and half by an entity substantially controlled by the Detroit Science Center (DSC). The managing member of AMTC (controlled by DSC) chose DSC’s law firm — Clark Hill LLC — to represent AMTC in this case. Wolf, understandably upset that Clark Hill sued it as a third-party defendant, contends in a motion to disqualify Clark Hill that AMTC has legal interests that may conflict with DSC’s interests, and therefore DSC’s lawyers should not be allowed to represent AMTC in the present case. More to the point, Wolf wants AMTC to sue DSC as well. The Court finds that a conflict certainly exists; but the conflict is between Wolf and DSC over who should control the litigation against AMTC. Disqualifying Clark Hill would do little to resolve that conflict, and the Court finds it unnecessary to do so under the Michigan Rules of Professional Conduct. Clark Hill’s loyalties are not divided, since the firm is doing the bidding of AMTC’s managing member. That is not to say, however, that Clark Hill may not have a fiduciary duty to Wolf as an equal member of AMTC. For now, however, the Court concludes that Clark Hill may continue to represent AMTC in this litigation, albeit at its own peril. The motion to disqualify, therefore, will be denied. I. The legal relationships in this case are intertwined, as happens when limited liability companies contract with their members, or their members’ members. It begins with the efforts of one Manuel Andres Hernandez-Berlin (Berlin), who is not a party to this lawsuit, to exhibit thirty- six naturally mummified bodies that were unearthed from a cemetery near Guanajuato, Mexico between 1865 and 1958. In approximately November 2007, Berlin was granted the authority to act as an agent on behalf of the City of Guanajuato to license the right to exhibit the mummies. On December 12, 2008 Berlin entered into a licensing agreement with plaintiff EPA, a Florida limited liability company that received a “three (3) year exclusive right . . . to market, promote and present in the United States the touring exhibition of the Momias de Guanajuato, -2- including all merchandising rights.” Wolf’s Mot., Ex. A., Berlin Agr. at 1. On April 16, 2009 defendant AMTC was formed for the purpose of owning, designing, fabricating, operating, producing, and managing the Accidental Mummies exhibit. AMTC was formed by third-party defendant Wolf and a Michigan limited liability company called Marcon Eekstein, L.L.C. (Marcon Eekstein), each of which holds a 50% ownership interest in AMTC. Marcon Eekstein, in turn, is composed of Marcon Exhibits & Events, Inc., a 67% owner, and Eekstein’s Workshop, L.L.C., a 33% owner. Eekstein’s Workshop, L.L.C. is a wholly-owned subsidiary of DSC. The record indicates that Eekstein’s Workshop, L.L.C. serves as managing member of Marcon Eekstein, which means that Marcon Eekstein essentially is controlled by DSC. AMTC’s operating agreement does not designate an “Administrative Member,” but the record indicates that Marcon Eekstein (and therefore DSC) has functioned as AMTC’s Administrative Member without objection from Wolf. AMTC’s operating agreement required Wolf to cause EPA to grant AMTC an exclusive sublicense to exhibit the mummies on terms that paralleled EPA’s license with Berlin. That does not appear to have been a tall order, since EPA is owned by Marcus Corwin, its sole member; and Corwin also is the president of Wolf. That sublicense was granted on June 9, 2009. AMTC became the “exclusive [licensee] . . . to market, promote and present in the United States the Exhibition for a period of three (3) years.” Wolf’s Mot., Ex. C, Sublicense Agr. at 1. Under that agreement, AMTC was to pay EPA $1,000,000 in thirty-six monthly installments of $27,777 (the same payments EPA owed Berlin under the main licensing agreement, and which apparently were to pass through to Berlin). In addition, AMTC was to pay Berlin all other fees that EPA agreed to pay to Berlin, which included -3- $8 per paid ticket for each exhibition in Chicago and Los Angeles, and $6 per paid ticket for all other exhibitions in the United States, if attendance projections were met and venue costs permitted, as well as twenty percent of all revenue received for the sale of merchandise relating to the exhibit. AMTC’s Operating Agreement also stated that the Exhibition was to open at DSC and remain there on display “until the later of (i) ninety (90) days after the date [AMTC] provides DSC written notice that is has secured a subsequent Venue, or (ii) January 1, 2011.” Wolf’s Mot., Ex. B, AMTC Operating Agr. § 2.3(d). Furthermore, Marcon Eekstein was required to “cause DSC to enter into the Exhibition Agreement” and to “guarant[y] DSC’s performance of its obligations [as listed] and the Exhibition Agreement to be executed between [AMTC] and DSC.” Ibid. Since Marcon Eekstein was managed by DSC, as noted earlier, procuring the exhibition agreement could not have been difficult. In fact, on that same June 9, 2009, AMTC and DSC entered into a Traveling Exhibition Agreement, stating “their intention that the Exhibition be exhibited at the [DSC] Facility [from October 10, 2009 through April 11, 2010] and subsequent Bi- Monthly Term(s).” Wolf’s Mot., Ex. D, Traveling Exhibition Agr. ¶ 2. The agreement also included an exhibition display period that paralleled the one in AMTC’s operating agreement. It was reported that “The Accidental Mummies of Guanajuato” exhibition was scheduled to make a seven-city tour of the United States starting in 2009 and continuing though 2012. However, the mummies’ first stop was at the Detroit Science Center, and there they remain. The exhibit appeared from October 2009 through January 2010, but after initial interest, ticket sales waned, and by March 2010, the exhibition was not generating sufficient revenue to cover its costs and fees. -4- Wolf alleges that a dispute arose over fees owed under the Berlin agreement. Sometime between January and March 8, 2010, DSC threatened to close the Exhibition as of April 12, 2010 if the contractual relationship between EPA and Berlin were not resolved to DSC’s satisfaction. Around this time, the Corwin company lawyers (a Florida law firm on behalf of Wolf and EPA) began to raise concerns about DSC’s role as the manager of Marcon Eekstein, and therefore as the Administrative Member of AMTC. In a letter to DSC’s CEO Kevin Prihod dated Match 8, 2010, an attorney for Wolf asked for a change of ATMC’s Administrative Member. A week later, the same lawyer wrote to Prihod to declare AMTC in default of the sublicense agreement. In another letter from that lawyer sent to Prihod that same day, Wolf accused DSC (as the managing member of Marcon Eekstein) of causing AMTC to breach its own operating agreement by failing to facilitate the relocation of the exhibit to other locations. Meanwhile, Berlin apparently was not getting paid. An attorney on his behalf suggested that a settlement conference be held. It appears that efforts to reach a resolution were made by lawyers on behalf of the Corwin companies, Berlin, and DSC. Clark Hill, the law firm challenged in the present motion, represented DSC in those discussions. Clark Hill notified the respective attorneys for Berlin and EPA (and Wolf) that DSC would pay the exhibition receipts otherwise payable to AMTC into an escrow account held by Marcon Eekstein. For several months, the attorneys for the three principal interests engaged in settlement discussions. On April 6, 2010, EPA’s attorney purported to terminate the sublicense agreement with AMTC, although he instructed DSC to continue hosting the exhibit. Wolf alleges that as of that date, Marcon Eekstein resigned as Administrative Member of AMTC, although the record contains no evidence of that. Settlement was not reached, and on July 30, 2010 EPA filed suit against AMTC -5- for breach of the sublicense agreement. On September 16, 2010, Clark Hill filed an answer to the complaint on behalf of AMTC. It also filed a counterclaim against EPA for breach of contract and added Wolf as an additional counterclaim defendant (denominated as a “third-party defendant”). AMTC alleges in the counterclaim that EPA failed to make payments to Berlin, thereby jeopardizing the license agreement, and improperly withdrew the sublicense, and Wolf failed to secure a continuance of the sublicense agreement with AMTC. On September 20, 2010, Wolf’s Florida attorneys contacted Clark Hill and demanded that the firm withdraw as counsel for AMTC because (1) AMTC’s managing member had no authority to hire counsel unilaterally, and (2) Clark Hill represents DSC, whose interests are adverse to AMTC’s under the Traveling Exhibition Agreement between AMTC and DSC. On October 13, 2010, a different lawyer on behalf of Wolf (from the Butzel law firm in Detroit) contacted Clark Hill and threatened aggressive action against AMTC by Wolf if Clark Hill did not withdraw as its attorneys. The Butzel lawyer argued that AMTC should be pushing the liability downstream toward DSC, since DSC had obligations under the Traveling Exhibition Agreement, and Clark Hill was not in a position to do that. He also argued that Marcon Eekstein had resigned as Administrative Member of AMTC and therefore had no authority to hire counsel to defend the lawsuit. Neither AMTC nor Clark Hill would yield, so Wolf filed the present motion to disqualify Clark Hill. Unsurprisingly, EPA filed a joinder in the motion, although it has not developed an argument why Clark Hill’s representation of AMTC would harm EPA. The Court heard oral argument on December 20, 2010. -6- II. Courts have the inherent authority to prevent individuals from practicing before it. D.H. Overmyer Co., Inc. v. Robson, 750 F.2d 31, 33 (6th Cir. 1984). “The power is one which ought to be exercised with great caution, but which is, we think, incidental to all Courts, and is necessary for the preservation of decorum, and for the respectability of the profession.” Ex parte Burr, 22 U.S. (9 Wheat.) 529, 531 (1824) (Marshall, C.J.). “Unquestionably, the ability to deny one’s opponent the services of capable counsel, is a potent weapon. Confronted with such a motion, courts must be sensitive to the competing public policy interests of preserving client confidences and of permitting a party to retain counsel of his choice.” Manning v. Waring, Cox, James, Sklar and Allen, 849 F.2d 222, 224 (6th Cir. 1988). “A court should only disqualify an attorney ‘when there is a reasonable possibility that some specifically identifiable impropriety actually occurred.’” Moses v. Sterling Commerce (America), Inc., 122 Fed. App’x. 177, 183-84 (6th Cir. 2005) (quoting Kitchen v. Aristech Chem., 769 F. Supp. 254, 257 (S.D. Ohio 1991 . In determining whether disqualification ought to occur, the Court must account for “‘the traditional concerns of the legal profession that client confidences be protected and that appearances of professional impropriety be avoided.’” DeBiasi v. Charter County of Wayne, 284 F. Supp. 2d 760, 770-71 (E.D. Mich. 2003) (quoting Manning v. Waring, Cox, James Sklar and Allen, 849 F.2d 222, 225 (6th Cir. 1988 . A state’s ethics rules are appropriate standards against which to measure the propriety of an attorney’s conduct for the purpose of determining whether a lawyer should be disqualified in a particular case. National Union Fire Ins. Co. of Pittsburgh, Pennsylvania v. Alticor, Inc., 466 F.3d 456, 457-58 (6th Cir. 2006), vacated on other grounds, 472 -7- F.3d 436 (6th Cir. 2007) (citing Evans & Luptak, PLC v. Lizza, 251 Mich. App. 187, 650 N.W.2d 364, 368-69 (2002 . A. Conflict Wolf’s main argument is that Clark Hill’s representation of AMTC it tainted by a conflict of interest because AMTC and DSC each have potential claims against the other, which Clark Hill is not in a position to pursue because it also represents DSC. Wolf would like to see AMTC sue DSC for breaching the Traveling Exhibition Agreement by its unauthorized and premature closing of the Exhibition . AMTC responds that there is no actual conflict because DSC is not a party to this case, and even if were to become one, the documents Wolf attached to its motion show that AMTC’s and DSC’s interests actually are aligned. AMTC also asserts that if there is a conflict of interest, all interested parties have waived it. A court may disqualify an attorney for having a conflict of interest. See National Union Fire Ins. Co. of Pittsburgh, Pennsylvania, 472 F.3d at 437. Rule 1.7(b) of the Michigan Rules of Professional Conduct states: A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person, or by the lawyer’s own interests unless: (1) the lawyer reasonably believes the representation will not be adversely affected; and (2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved. Mich. R. Prof’l Conduct § 1.7(b). When a client appears to have consented to a conflict of interest, the question becomes whether the attorney “reasonably believes the representation will not be adversely affected.” Not all conflicts are waivable: when an attorney cannot reasonably believe that its representation will not be adversely affected, the conflict cannot be waived. See Centra, Inc. v. -8- Estrin, 538 F.3d 402, 413 (6th Cir. 2008). The Comments to Mich. R. Prof’l Conduct 1.7(b) state: “An impermissible conflict may exist by reason of substantial discrepancy in the parties’ testimony, incompatibility in positions in relation to an opposing party, or the fact that there are substantially different possibilities of settlement of the claims or liabilities in question.” Mich. R. Prof’l Conduct 1.7(b) cmt. AMTC’s argument that a conflict of interest can be waived effectively is problematic. The waiver letter in this case was drafted by Clark Hill. It was executed by Kevin Prihod in his capacity as president of DSC and manager of Marcon Eekstein, the administrative member of AMTC. The letter outlines the fact that “Clark Hill’s representation of AMTC may indirectly raise a potential conflict of interest between Marcon Exhibits, Eekstein’s Workshop, and the DSC.” Resp. to Mot., Ex. K at 1. The letter notes that “based on our discussions, it is clear that the parties possess a commonality of interest regarding the representation of AMTC against EPA and the Exhibition and are not adverse with one another or the DSC.” Ibid. Prihod signed the letter on behalf of Eekstein’s Workshop and DSC, and Robert Gardella signed on behalf of Marcon Eekstein and himself in his individual capacity. When an organization deals with its officers, directors, or members, Michigan law respects the separate identities of those involved, especially with respect to matching lawyers with clients. Fassihi v. Sommers, Schwartz, Silver, Schwartz & Tyler, P.C., 107 Mich. App. 509, 514, 309 N.W.2d 645, 648 (1981) (holding that “[a] corporation exists as an entity apart from its shareholders, even where the corporation has but one shareholder. . . . [T]he general proposition of corporate identity apart from its shareholders leads us to conclude, in accordance with decisions from other jurisdictions, that the attorney’s client is the corporation and not the shareholders”). The ethics rules -9- allow an lawyer to represent both an organization and one or more constituent members, but the usual conflict rules apply. Mich. R. Prof’l Conduct § 1.13(e). However, the waiver rule contains a special provision: A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders, or other constituents, subject to the provisions of Rule 1.7. If the organization’s consent to the dual representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders. Ibid. (emphasis added). Under that rule, if a conflict between AMTC and Clark Hill’s other client, DSC, is to be waived, the waiver must be made by an entity not controlled by DSC. According to AMTC’s organizational chart, that would leave Wolf to make the decision, and it is safe to say that consent from that territory will not be forthcoming. The question remains, however, whether there exists a conflict of interest governed by the Rules of Professional Conduct. The conflict that Wolf identifies extends well beyond Clark Hill’s involvement as AMTC’s lawyer. The root cause of the dispute is the disagreement between the interests controlled by Marcus Corwin — that is, EPA and Wolf — and those controlled by DSC — which include Marcon Eekstein, Eekstein’s Workshop, L.L.C., and, at least for now, AMTC. That conflict plays out in the context of this case in the fight over who controls AMTC. According to the filed papers in this case, it appears that there is no shortage of finger pointing between those parties. Each side accuses the other of having some responsibility for the failure of the exhibition and for payment of expenses and losses. DSC has alleged that AMTC owes it expenses for assembling and maintaining the exhibit. But DSC also contended that it closed the exhibit in part because EPA breached its agreements with Berlin, suggesting that the source of the problem is the Corwin entities. Wolf contends, on the other and, that if AMTC is found liable to -10- EPA, DSC may be responsible for all or part of those damages because it thwarted AMTC’s efforts to find a new (and more lucrative) venue for the exhibition. Wolf also argues that DSC violated the Traveling Exhibition Agreement (a contract between AMTC and DSC) when it closed the exhibit. Wolf reasons that Clark Hill may be hindered from impleading DSC on these claims because it represents DSC. Wolf points to the comment to Michigan Rule of Professional Conduct 1.7(b) as an illustration of the conflict of interest faced by Clark Hill. That comment states, “Loyalty to a client is . . . impaired when a lawyer cannot consider, recommend, or carry out an appropriate course of action for the client because of the lawyer’s other responsibilities or interests. The conflict in effect forecloses alternatives that would otherwise be available to the client.” Mich. R. Prof’l Conduct § 1.7(b) cmt. However, as long as DSC controls AMTC, Clark Hill will not face that conflict. Clark Hill must follow the instruction of its client, and it must give advice unfettered by conflicting loyalty to another client. But it is unlikely that AMTC would consider the possibility of a suit against DSC while an entity controlled by DSC determines AMTC’s litigation decisions. As long as DSC- controlled interests are in a position to decide what is in AMTC’s best interests, Clark Hill’s simultaneous representation of both AMTC and DSC will not violate Michigan Rule of Professional Conduct 1.7. The situation would be the same if the shoe were on the other foot. If the Wolf interests controlled AMTC and attorneys of Wolf’s choice represented it, there is little chance that Wolf would be impleaded in the lawsuit, although DSC likely would find itself a party. DSC may then claim a conflict of interest if the lawyer Wolf selected would not bring Wolf into the case. No -11- matter which entity controls AMTC, the likelihood of finding counsel that would be “neutral” would be quite remote. It is important to note that Wolf’s claim of conflict of interest is not based on Clark Hill’s possession of confidential information, see Barkley v. City of Detroit, 204 Mich. App. 194, 204, 514 N.W.2d 242, 246 (1994) (holding that “an attorney may only undertake to represent a new client against a former client . . . where there is no confidential information received from the former client that is in any way relevant to representation of the current client”) (citing General Elec. Co. v. Valeron Corp., 608 F.2d 265, 267 (6th Cir. 1979 , or its prior representation of a Corwin entity, see Alpha Capital Mgmt., Inc. v. Rentenbach, 287 Mich. App. 589, ---, --- N.W.2d ---, --- (2010) (noting that “under the common law and pursuant to the rules of professional responsibility, the continuing duties of loyalty and confidentiality apply only to matters in which the new client’s interests qualify as both adverse to those of the former client and substantially related to the subjects of the attorney's former representation”). Instead, it is based on the idea that Clark Hill, taking instruction from the managing member of AMTC, Marcon Eekstein (which is manages by Eekstein’s Workshop, L.L.C., in turn wholly owned by DSC), will not pursue a litigation strategy that Wolf would like and DSC may not. That cannot constitute a violation of Michigan Rule of Professional Conduct 1.7(b); if it did, no lawyer could represent AMTC in the present litigation, regardless of which of the fifty percent members controlled AMTC. Disputes between constituent members over control of an entity should not be resolved under the guise of an attorney conflict of interest. That is not to say that Wolf may not have recourse against Clark Hill directly. An attorney who represents a closely held corporation and a controlling shareholder may also have a fiduciary -12- to the other shareholder(s). See Fassihi, 107 Mich. App. at 515, 516, 309 N.W.2d at 648, 649 (holding that even where no attorney-client relationship exists between a shareholder and the corporate attorney, “this does not necessarily mean that [the law firm] had no fiduciary duty to [the shareholder],” and observing that “[i]nstances in which the corporation attorneys stand in a fiduciary relationship to individual shareholders are obviously more likely to arise where the number of shareholders is small. In such cases it is not really a matter of the courts piercing the corporate entity”); see also Schaeffer v. Cohen, Rosenthal, Price, Mirkin, Jennings & Berg, P.C., 541 N.E.2d 997, 1002 (Mass. 1989) (“Indeed, there is logic in the proposition that, even though counsel for a closely held corporation does not by virtue of that relationship alone have an attorney-client relationship with the individual shareholders, counsel nevertheless owes each shareholder a fiduciary duty.”) (citing Fassihi). These are dangerous waters for any law firm, and they must be navigated carefully. Any law firm representing AMTC, having to decide which of the two equal members from which to take direction, would find itself in this predicament. Perhaps even a file full of consents would not provide safe harbor. But unless counsel founders, disqualification is not warranted. B. Standing Wolf also argues that AMTC did not have the authority to hire Clark Hill under the terms of the operation agreement. Wolf contends that the decision to hire counsel is a “Major Decision,” as defined in section 5.2 of the AMTC Operating Agreement, and major decisions require unanimous consent of all members. In a related argument, Wolf states that AMTC does not have standing to file a claim against it for breach of the AMTC Operating Agreement because the -13- Operating Agreement is a contract between Wolf and Marcon Eekstein, not between Wolf and AMTC. Neither of these contentions, even if true, warrant disqualification of Clark Hill. The first argument frames a dispute between Wolf and Marcon Eekstein over the latter’s authority to spend money and take action on behalf of AMTC. If Wolf wants to press the point, it must do so against the proper party in the proper forum. See Mich. Comp. Laws § 450.4515(1)(c) (“A member of a limited liability company may bring an action in the circuit court of the county in which the limited liability company’s principal place of business or registered office is located to establish that acts of the managers or members in control of the limited liability company are illegal or fraudulent or constitute willfully unfair and oppressive conduct toward the limited liability company or the member. If the member establishes grounds for relief, the circuit court may issue an order . . . providing for . . . [t]he direction, alteration, or prohibition of an act of the limited liability company, or of members, managers, or other persons party to the action.”). An alleged breach of the Operating Agreement, however, does not furnish a basis to invoke this Court’s inherent power to prevent a lawyer from practicing before it. The second argument amounts to an affirmative defense to the third-party complaint. Suggesting that disqualification of the AMTC’s law firm follows from a lack of standing to bring an action is a non sequitur. It has nothing to do with an alleged conflict of interest, and it provides no other ground for disqualification. III. No party contends that Clark Hill is in possession of confidential information belonging to Wolf, and the Court concludes that there is no conflict that arises from Clark Hill’s representation of AMTC while it is under the control of an entity directed by DSC. -14- Accordingly, it is ORDERED that the motion by third-party defendant Wolf Capital Partners, Inc. to disqualify counsel for AMTC [dkt #15] is DENIED. It is further ORDERED that counsel for the parties shall appear for a case management conference on January 13, 2011 at 10:30 a.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: January 3, 2011 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 3, 2011. s/Deborah R. Tofil DEBORAH R. TOFIL -15-

=== Kent Jones v. Bency Mathai ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Plaintiff, Case No. 06-11925 Honorable David M. Lawson KENT JONES, v. BENCY MATHAI, ____________________________________/ Defendant. ORDER DENYING DEFENDANT’S FOURTH MOTION TO DISMISS OR FOR SUMMARY JUDGMENT Before the Court is a motion filed by the defendant, which she styles as a motion to dismiss or for summary judgment “regarding plaintiff’s recently added retaliation claim.” The gist of the motion is that the Court recently allowed the plaintiff to add a theory of liability on the eve of trial, and the plaintiff never filed a grievance on that claim to exhaust his administrative remedies as required by the Prison Litigation Reform Act. Because the motion is based on a false premise that arises from a mischaracterization of the record, and otherwise lacks merit, the Court will deny it. I. At the time his cause of action arose, the plaintiff was a prisoner in the custody of the Michigan Department of Corrections (MDOC). He alleges in his complaint that prison officials were deliberately indifferent to his medical needs and retaliated against him for filing a non- frivolous grievance concerning his medical care. The remaining defendant is Bency Mathai, a prison physician. The plaintiff claims that he suffers from“a[b]normal feet” that do not fit the normal state- issued walking shoes, which cause him to develop painful “corns (callous)” on his feet. Compl ¶ 49. According to the complaint, after X-rays were taken of the plaintiff’s feet, he was issued a notice of special accommodation on December 6, 2000, permitting him to wear tennis shoes. The plaintiff currently uses “special ordered deep box state shoes at his [then-]current facility.” Compl. ¶ 54. He was permitted to wear gym shoes at “numerous” times when he visited physicians and with family members. Compl. ¶ 60. On June 12, 2002, defendant Epp stated that “[i]nvestigation reveals that [the plaintiff was] revaluated by the MSP in the clinic regarding [his] accommodations and they have not changed since 12/06/00.” Compl. ¶ 28. On April 21, 2003, Defendant Mathai cancelled the plaintiff’s accommodation. The plaintiff claims that he reported for a psychiatrist call-out on that date to be considered for placement in the assaultive offender group. To be considered, he had to report to the “SMT Med/Psych” building. He arrived and was stopped by Steven Hood, a yard sergeant who no longer is a defendant in this case, who told him that gym shoes were not allowed in the building. When he reported that he had a special accommodation, Hood ordered him to retrieve the notice from his cell and report back. The plaintiff complied and then saw that Hood had his medical file. Hood then took the notice, placed it with the file, and stated, “you will not be getting this back!” Compl. ¶ 17. The plaintiff was then led to defendant Mathai’s office, even though there was no appointment scheduled. Mathai then told the plaintiff, “I have reviewed your records and I am cancelling your ‘special accommodation notice’ to wear ‘gym shoes.’” Compl. ¶ 19. The plaintiff claims that Dr. Mathai cancelled the accommodation under orders of custody staff, especially Sergeant Hood. He also alleged in his complaint that “Defendant Mathai cancelled plaintiff’s notice [for a shoe accommodation] on orders from defendant Hood [a]nd issued no substitute plan for care of plaintiff who had a medical foot condition . . . .” Compl.¶ 56. Dr. Pandya -2- at the defendant’s new facility later stated that this cancellation was appropriate. The plaintiff alleges: 58. Plaintiff has previously filed grievances regarding health care staff’s inactions toward him, and mainly against defendant Mathai. While a physician assistant listed facts that plaintiff was going to hire a lawyer against medical staff in his 8/29/02 medical progress notes in violation of policy . . . . 59. Such inactions on plaintiff’s behalf demonstrate why defendant Mathai gladly cancelled plaintiff’s notice to wear gym shoes on orders from defendant Hood without resistance. . . . 63. Therefore, based on these facts medical staff defendant(s) Mathai, Lee, Roth, and Epp exhibited retaliation against plaintiff because he had filed previous grievances against their department. 64. And these facts are substantiated as medical staff failed [to] provide medical evidence that plaintiff should [have] retained his gym shoe notice. Instead of allowing custody staff defendant Hood with no medical training, to be on the prowl seeking candidates to escort to medical staff to have their notice cancelled when plaintiff had a permanent medical foot condition. 65. And based on these inactions, defendant(s) Mathai, Lee, Roth, and Epp are liable for actions implored to retaliate against this plaintiff. . . . 66. Plaintiff had a constitutional right to file grievance(s) and be free from retaliatory punishment while doing so. And enduring any acts that exhibited retaliation and a denial of equal protection of policy and state or federal law, and violates plaintiff[’s] first amendment right exhibiting retaliation. Compl. ¶¶ 58-66. The plaintiff filed a number of grievances shortly after his accommodation was cancelled. One such grievance was 03-04-02613-12Z, where he complains Dr. Mathai was delighted to cancelled [sic] this [special accommodation] Notice for Sgt. Hood, [sic] because this Prisoner had filed a number of grievances against her. . . . And as this Prisoner is [sic] already had filed a Civil Rights litigation against the Warden H. White, such inactions by Staff are a violation of Policy, as these retaliatory acts are projected against this Prisoner. And also because he has filed Grievances against Staff. . . . As this Prisoner has a Foot condition that will never allow him to wear “State Shoes.” And has a number of Grievances pending about his Foot condition. This Prisoner arrived at SMT wearing Gym Shoes on transport, on 5/31/02/ And was not accessed for any “Special Accommodation Notice,” per PD 03.04.100 (3)(j), and his Notice was not cancelled, as explained to the Corrections Ombudsman. And as SMT -3- has not provided him with any “Foot Care,” Dr. Mathai now cancels his Notice. When at any of the other visits this Prisoner has had with Dr. Mathai, per PD 04.06.160 (D), she had not cancelled this Notice. Therefore supporting that her actions on this date were to appease Sgt. Hood, and project retaliation and harassment toward this Prisoner. [dkt. #11, p. 51]. This grievance was processed through stage three, the final level within the prison system. On April 25, 2006, the plaintiff filed a complaint alleging four causes of action against several prison officials: (1) deliberate indifference to the plaintiff’s serious medical needs in violation of the Eighth Amendment’s prohibition against cruel and unusual punishment when the plaintiff’s special accommodation for gym shoes was discontinued; (2) retaliation against the plaintiff for filing grievances; (3) retaliatory transfer from the Parnall facility to the MDOC’s Deerfield facility; and (4) deliberate indifference when the plaintiff was transferred to a facility that could not meet his serious medical need for a toilet in his room. Counts one and three were dismissed by the Court on the merits, and the dismissal was affirmed by the Sixth Circuit. Counts two and four were dismissed for failure to exhaust administrative remedies. The dismissal of counts two and four was reversed by the Sixth Circuit in light of Jones v. Bock, (2007). After remand, the case once again was referred to Magistrate Judge Binder to conduct pretrial proceedings. Ultimately, as a result of further motion practice, including motions to dismiss for failure to exhaust administrative remedies, the case against the remaining defendants save defendant Mathai was dismissed, and the deliberate indifference claim against that defendant was dismissed, leaving only the First Amendment retaliation claim against her. -4- Dissatisfied with that result, defendant Mathai filed a motion for reconsideration in April 2010. The Court appointed counsel for the plaintiff and ordered a response to the motion. The Court denied that motion and scheduled the matter for trial on December 14, 2010. Due to inclement weather, the Court was not able to assemble a jury venire of adequate size, so trial was adjourned to January 4, 2011. However, on the scheduled trial date in December, the Court resolved some disputed matters at the parties’ request. One matter for resolution, as presented in the joint final pretrial order, was the scope of the retaliation allegations as presented by the complaint. The plaintiff framed the issue for trial as whether the defendant violated the First Amendment by cancelling the plaintiff’s shoe accommodation and not ordering alternative treatment for his foot condition in retaliation for filing grievances against her, not failing to provide alternate foot treatment. The defendant asserted that the act of retaliation must be limited to cancelling the shoe accommodation because the plaintiff never pleaded the allegation that the defendant failed provide alternate treatment. The Court denied the plaintiff’s oral motion to amend the complaint but ruled that the allegations in the complaint were broad enough to include a theory of the case as characterized by the plaintiff. The Court based its ruling on the latitude afforded pro se filers, like the plaintiff, and the actual language in the complaint stating that after cancelling the plaintiff’s shoe accommodation, “Defendant Mathai . . . issued no substitute plan for care of plaintiff who had a medical foot condition . . . .” Compl. ¶ 56. The Court was mindful that the parties also had addressed that theory of liability in the several motion papers that had been filed, and the defendant could not have been surprised that the plaintiff intended to proceed to trial on the claim so characterized. -5- II. The defendant’s latest motion purportedly addresses a “recently added claim.” Based on the inaccurate contention that theory of liability was recently added, the defendant proceeds to attack it on procedural grounds, contending, once again, that the plaintiff did not exhaust administrative remedies by filing a grievance. This defendant raised that claim unsuccessfully in a motion filed November 14, 2007. The Prison Litigation Reform Act prohibits the filing of lawsuits alleging a violation of federal law “with respect to prison conditions . . . until such administrative remedies as are available are exhausted.” 42 U.S.C. § 1997e(a). In 2006, the Supreme Court interpreted this provision to bar suit unless the prisoner presented his grievance to the state administrative appeal system within the deadlines set by the state. Woodford v. Ngo, , 93 (2006). “[I]t is the prison’s requirements, and not the PLRA, that define the boundaries of proper exhaustion.” Bock, 549 U.S. at 218. The Court and the parties have been down this road before. Everyone agrees that the MDOC has a policy directive applicable to prisoners who wish to file grievances against prison officials, and the Court has discussed that protocol in prior opinions filed in this case. The Court has already found that the plaintiff exhausted the claims presently before the Court by engaging the prison’s grievance system through its final stages. That order was entered June 24, 2008. The defendant’s effort to seek reconsideration of that ruling is woefully out of time. Even if the matter were fresh and properly raised at the present time, the record does not support the defendant’s contention that the plaintiff failed to raise the matter in a grievance. As noted above, the plaintiff’s grievance 03-04-02613-12Z states, among other things, that the prison -6- “has not provided him with any ‘Foot Care,’ [and] Dr. Mathai now cancels his Notice . . . .” [dkt. #11, p. 51]. As the Court noted in an earlier order, the grievance was processed through all the available stages before the present lawsuit was filed. The defendant apparently seeks to avoid the finding that she has not established the defense of failure to exhaust as a matter of law by characterizing the Court’s ruling on December 14, 2010 as allowing the plaintiff to “recently add[ a] claim.” The Court plainly ruled, however, that the plaintiff’s liability theories are included in the complaint as originally filed. The defendant’s effort to recast this ruling as allowing a new theory of liability mischaracterizes the proceedings, the Court’s prior ruling, and the state of the record. The defendant has filed two motions for summary judgment, a motion to dismiss (which she withdrew as meritless after the plaintiff filed an answer to it), a motion for reconsideration, and now the present motion to dismiss or for summary judgment. The Court certainly admires zealous advocacy, but the present motion crosses the line separating zeal from vexatious practice. The defendant has attempted to manufacture grounds for yet another round of motion practice by misrepresenting this Court’s ruling and asserting arguments that are not based on the record of the proceedings in this case, filing the motion several days after the Court’s oral pronouncement, apparently in an effort to delay or avoid a trial on the merits of the claim that survives in this case. The Court has discretion to award attorney’s fees, costs, and expenses against “[a]ny attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiples the proceedings in any case unreasonably and vexatiously.” 28 U.S.C. § 1927. “Under § 1927, a court must review whether the attorneys engaged in conduct which multiplied the litigation unreasonably or vexatiously.” Riddle v. Egensperger, 266 F.3d 542, 553 (6th Cir. 2001). -7- Under this provision, a court may impose sanctions “when an attorney knows or reasonably should know that a claim pursued is frivolous, or that his or her litigation tactics will needlessly obstruct the litigation of nonfrivolous claims.” Jones v. Cont’l Corp., 789 F.2d 1225, 1230 (6th Cir. 1986). A finding of bad faith is not necessary under section 1927. Dixon v. Clem, 492 F.3d 665, 679 (6th Cir. 2007). “Simple inadvertence or negligence that frustrates the trial judge will not support a sanction under § 1927.” Riddle, 266 F.3d at 553. Rather, “‘[t]here must be some conduct on the part of the subject attorney that trial judges, applying the collective wisdom of their experience on the bench, could agree falls short of the obligations owed by a member of the bar to the court and which, as a result, causes additional expense to the opposing party.’” Ibid. (quoting In re Ruben, 825 F.2d 977, 984 (6th Cir. 1987 . The primary goal of 28 U.S.C. § 1927 is deterrence and punishment. See Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d 642, 647 (6th Cir. 2006). “As with a Rule 11 sanction, district courts have broad discretion in deciding upon a sanction award under § 1927.” In re Meier, 223 F.R.D. 514, 520 (W.D. Wis. 2004). The Court has addressed the present motion before the plaintiff has responded, in the interest of clarifying the state of the litigation in light of the impending trial date. Consequently, the Court is not yet aware whether the motion has caused plaintiff’s counsel to incur additional expenses. It would be inappropriate, therefore, to render a decision under section 1927 at this time. However, the Court will reserve the question of sanctions until after trial and consider a proper request at that time. III. The Court finds no merit in the defendant’s latest motion to dismiss or for summary judgment. There is no basis in the record to support the defendant’s assertion that the Court allowed -8- the plaintiff to recently add a claim. The question of exhaustion of remedies in this case was resolved over two years ago. Repeatedly raising issues in this litigation when no apparent merit supports the filings is vexatious. Accordingly, it is ORDERED that the defendant’s latest motion to dismiss or for summary judgment [dkt #169] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: December 27, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 27, 2010. s/Deborah R. Tofil DEBORAH R. TOFIL -9-

=== Lee v. Sheet Metal Workers' National Pension Fund ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case No. 09-12226 Honorable David M. Lawson NORVELLE SAMUEL LEE, Plaintiff, v. SHEET METAL WORKERS’ NATIONAL PENSION FUND, Defendant. ___________________________________________/ OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO AFFIRM THE PLAN ADMINISTRATOR AND DENYING PLAINTIFF’S MOTION TO REVERSE THE PLAN ADMINISTRATOR Several years ago, plaintiff Norvelle Lee was employed in the sheet metal industry as a welder and was a member of two union locals that were affiliated with Sheet Metal Workers International Association (SMWIA). As a union member, the plaintiff became entitled to benefits, including pension benefits, now administered by defendant Sheet Metal Workers’ National Pension Fund (Fund), a multiemployer jointly-administered labor-management pension fund established pursuant to section 302(c)(5) of the Labor Management Relations Act, 29 U.S.C. § 186(c)(5), and a tax-qualified employee pension benefit plan within the meaning of sections 3(2) and 3(3) of ERISA, 29 U.S.C. § 1002(2), (3). Under the terms of the pension plan, a participant is entitled to normal retirement benefits upon attaining age 65. The plan also provides early retirement benefits, for which the plaintiff applied at age 55 and was denied. The trustees of the defendant pension fund determined that the plaintiff had not “retired” when he submitted his application, and his early retirement eligibility date was extended under a plan provision because he had engaged in disqualifying employment that postponed his right to receive early retirement benefits. The plaintiff filed the present action alleging, among other things, that the defendant improperly denied his application for early retirement benefits and he was entitled to benefits under section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B). The parties filed cross motions on the administrative record, and the Court heard oral argument on November 30, 2010. The Court now finds that the defendant’s interpretation of the plan was arbitrary, at least in part, and some of its reasons for denying the plaintiff early retirement benefits employed an unreasonable interpretation of the plan language. However, there is substantial evidence in the record to support the conclusion that the plaintiff is not presently entitled to early retirement benefits under the Plan’s provisions. Therefore, the Court will grant the defendant’s motion, deny the plaintiff’s motion, and dismiss the case. I. Facts and proceedings A. Background Plaintiff Norvelle Samuel Lee worked in the sheet metal industry from January 1977 until approximately March 2000. He was a member of the Sheet Metal Workers Local 110 in Kentucky until June 1986. In 1986, he moved to Michigan looking for work, and he joined Sheet Metal Workers Local 292 in Troy, Michigan. After withdrawing from the union altogether sometime in 2001 because of difficulties finding work in the sheet metal industry, the plaintiff worked for nine years for Chrysler LLC, which does not have a collective bargaining agreement with the SMWIA or any of its affiliated locals. While at Chrysler, the plaintiff was a maintenance welder from March 2000 until November 2003 and from March 2007 to January 2008; an endurance driver driving prototype vehicles at Chrysler’s proving grounds from July 2006 until December 2006; and a laborer assigned from the -2- jobs bank from November 2003 to July 2006, December 2006 to March 2007, and January 2008 until he retired from Chrysler on February 1, 2010. Under the plan, a person who has accumulated the requisite pension credit or attained vested status is entitled to a monthly pension payment upon retirement at the “Normal Retirement Age.” Plan § 5.03(a). “Normal Retirement Age” in most instances under the plan is 65 years old. Plan § 1.24(b). The plan also provides a right to early retirement benefits for persons 55 years old or older if certain conditions are met, which consist of a formula accounting for earned pension credit and years of service. Plan § 5.04(a). A plan provision extends the eligibility date for early retirement beyond age 55 if the participant engages in disqualifying work. Section 5.04(b)(1) of the Plan states: . . . for every calendar quarter in which a Participant or Employee, or a former Participant or Employee performs at least one hour of employment on or after September 1, 1988, in the Sheet Metal Industry that is not covered by a collective bargaining agreement between the Union and the employer, the early retirement date of said Participant or Employee will be delayed by six (6) months. The plaintiff applied for early retirement benefits on May 20, 2008, one month before he retired from his job at Chrysler. He was 55 years old at the time and sought benefits to commence August 1, 2008. The benefits applications were submitted to the union locals in Kentucky and Troy. Local 292 granted the application, but Local 110 in Kentucky had had economic difficulties, and its members’ pensions were transferred to and administered by the Sheet Metal Workers’ National Pension Fund, the defendant in this case. On October 1, 2008, the Fund Coordinator sent the plaintiff a letter denying his benefits application on the ground that the plaintiff was not yet “retired” within the meaning of the Plan because his employment with Chrysler was disqualifying employment, which also and it operated to extend the plaintiff’s early retirement date well beyond age 55. The defendant reasoned that all of the plaintiff’s employment with Chrysler, which is an -3- automobile manufacturer, constituted work in the sheet metal industry. The Fund Coordinator noted that the plaintiff is still eligible for his pension at normal retirement age. The plaintiff appealed the decision on December 7, 2008. On March 9, 2009, the Appeals Committee denied the plaintiff’s appeal. The explanatory letter sent three days later stated that the work Chrysler performed was in the same or related business conducted by one or more contributing employers, and his employment with Chrysler was not covered by a collective bargaining agreement with an affiliate of the SMWIA. The Appeals Committee concluded that all of the plaintiff’s work at Chrysler was disqualifying employment, which extended his eligibility date for early retirement. The plaintiff then filed the present lawsuit, submitting a seven-count complaint on June 9, 2009. The defendant moved to dismiss all counts except the claim for pension benefits under section 502(a)(1)(B) of ERISA. The Court granted the motion and dismissed counts two through seven of the complaint. Thereafter, the parties filed their cross motions on the administrative record. B. Plan provisions Under the Plan, a participant may apply for retirement benefits only if that person is “retired.” Plan § 5.01. (“A Participant’s eligibility to receive benefits is conditioned upon his retirement, as determined below, and his submission of an application for benefits in accordance with Article 8.”). A participant is “retired” if he has ceased working in Covered Employment, as well as in any Disqualifying Employment, and such cessation of work is intended to be permanent. A Participant also will be treated as “retired” within the meaning of the Plan, if he only performs work that would result in the suspension of benefits as Disqualifying Employment but for the provisions of Section 8.06(b) or 8.06(c), and he otherwise satisfies the conditions of the Plan concerning post-retirement employment. Ibid. The plan defines “Disqualifying Employment” as follows: -4- When used in Section 8.06(a) and 8.06(b), the term “Disqualifying Employment” means: (A) employment with any Contributing Employer; (B) employment with any employer in the same or related business as any Contributing Employer; (C) self-employment in the same or related business as a Contributing Employer; (D) employment or self-employment in any business which is under the jurisdiction of the Union; (E) employment in the Sheet Metal Industry that is not covered by a collective bargaining agreement between the Union and the employer. Plan § 8.06(d)(1). As mentioned above, the Plan allows a worker to apply for early retirement benefits at age 55, but that eligibility date “will be delayed by six (6) months” “for every calendar quarter in which . . . a former Participant . . . performs at least one hour of employment . . . in the Sheet Metal Industry that is not covered by a collective bargaining agreement between the Union and the employer.” Plan § 5.04(b)(1). The plan defines “Sheet Metal Industry” as follows: The term “Sheet Metal Industry” shall mean any and all types of work covered by collective bargaining agreements to which the Union and/or any Local are a party; or under the trade jurisdiction of the Union, as that trade jurisdiction is described in the SMWIA’s constitution; or in a related building trade; or any other work to which a sheet metal worker has been assigned, referred, or can perform because of his skill and training as a sheet metal worker. Plan § 1.35. Section 5(t) of the SMWIA Constitution defines the trade jurisdiction of the Union to include “[a]ny and all types of sheet metal work, coppersmith work and mechanical work in connection with or incidental to the manufacture, fabrication, assembling, maintenance and repair of automobiles . . . .” AR 20. Section 5(z) of the SMWIA Constitution extends the trade jurisdiction of the Union to “[a]ny and all welding in connection with the work specified in this Article.” AR 21. C. Administrative decision -5- The Fund Coordinator denied the plaintiff’s initial application for benefits because he found that the plaintiff continued to perform work after March 2000 for Chrysler LLC. He reasoned that Chrysler assembles automobiles and found that work to be similar to the work performed by contributing employers. He concluded that the plaintiff’s work at Chrysler was disqualifying employment under Plan section 8.06(d)(1)(B). The Fund Coordinator also found that the plaintiff’s work at Chrysler was work in the Sheet Metal Industry because it was under the trade jurisdiction of the SMWIA, primarily because Chrysler “works with and manufacturing automobiles.” AR at 16. He found, therefore, that the plaintiff’s work at Chrysler also was disqualifying employment under Plan section 8.06(d)(1)(E). Because Chrysler had not signed a collective bargaining agreement with the SMWIA, the Fund Coordinator also concluded that the plaintiff’s employment at Chrysler would extend his early retirement eligibility date under Plan section 5.04. On appeal, the Appeals Committee also determined that the plaintiff was not “retired” because he worked as a maintenance welder at Chrysler. The Committee cited both sections 8.06(d)(1)(B) and 8.06(d)(1)(E) of the plan, and found the work to be disqualifying employment. D. Cross motions The parties filed cross motions on the administrative record. As an initial matter, the plaintiff argues that the Fund Coordinator’s decision is not entitled to deferential review in this Court because he has a conflict of interest arising from the his obligation to protect the Fund assets on the one hand and to protect vested benefits of the Plan participants on the other hand. The plaintiff also argues that the plan provision on disqualifying employment operates as a forfeiture of vested benefits in violation of section 203 of ERISA, see 29 U.S.C. § 1053(a)(1)-(2); the Fund Coordinator’s -6- interpretation of the disqualifying employment provisions is unreasonable and overbroad because welding at an engine plant, driving at a test track, and working in the jobs bank should not be considered sheet metal work; and the plan documents did not make the participants reasonably aware of the possibility of forfeiture in advance. The defendant counters with the argument that the Appeals Committee’s interpretation of the Plan is reasonable, and its decision that the plaintiff had engaged in disqualifying employment faithfully tracks the Plan’s language. It insists that the plaintiff’s employment with Chrysler was “employment in the same or related business as a Contributing Employer” under section 8.06(d)(1)(B) of the Plan because the work Chrysler performs requires welding, numerous employers contributing to the Fund perform welding, and welding is a major part of the national apprenticeship curriculum. The defendant contends that Chrysler also performs work in the sheet metal industry, as that term is employed by the Plan, which is within the union’s trade jurisdiction, so the plaintiff’s work constitutes disqualifying employment under section 8.06(d)(1)(E) as well. The defendant also points out that as of the time of the administrative hearings, the plaintiff still was employed at Chrysler and therefore was not “retired.” The defendant maintains that the plaintiff’s subsequent retirement is not part of the administrative record and therefore he must file a new application for benefits for that fact to be considered. The defendant refutes the plaintiff’s forfeiture argument by observing that the plaintiff still has rights to his regular retirement at age 65. II. Discussion A. Standard of review -7- In the remaining count of the complaint, the plaintiff challenges the denial of benefits under section 502(a)(1)(B) of ERISA, which authorizes an individual to bring an action “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). “[T]he validity of a claim to benefits under an ERISA plan is likely to turn on the interpretation of terms in the plan at issue.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Regardless of the language of the plan that the administrative decision is “final and binding,” section 502 of ERISA affords plan participants a judicial remedy. Adams v. Ford Motor Co., 847 F. Supp. 1365, 1377 (E.D. Mich. 1994). In such an action, the Court considers only that evidence presented to the plan administrator at the time he or she determined the employee’s eligibility. Smith v. Ameritech, 129 F.3d 857, 863 (6th Cir. 1997). The Court’s review is limited to the administrative record. Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 615 (6th Cir. 1998). The Supreme Court has held that “a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Firestone, 489 U.S. at 115. The plan here contains such language. Section 8.03 of the Plan gives the Fund’s trustees discretionary authority over determinations of pension eligibility and benefits. Therefore, the Court normally would “apply the highly deferential arbitrary and capricious standard of review.” Cox v. Standard Ins. Co., 585 F.3d 295, 299 (6th Cir. 2009). The plaintiff maintains, however, that due to the Fund Coordinator’s conflict of interest mentioned earlier, the proper standard of review is de novo. -8- Sixth Circuit law does not support the plaintiff’s position. Although that court has acknowledged that “[w]hen the same entity determines eligibility for benefits and also pays those benefits out of its own pocket, an inherent conflict of interest arises,” Cox, 585 F.3d at 299, the court also held that existence of a conflict of interest can “shape” the application of, but does not change, the arbitrary and capricious standard of review. Miller v. Metro. Life Ins. Co., 925 F.2d 979, 984 (6th Cir. 1991) (holding that when the plan administrator has a conflict of interest, “the abuse of discretion or arbitrary and capricious standard still applies, but application of the standard should be shaped by the circumstances of the inherent conflict of interest” (citing Brown v. Blue Cross & Blue Shield of Alabama, Inc., 898 F.2d 1556, 1561-63 (11th Cir.1990 ; see also Firestone, 489 U.S. at 115 (a “conflict must be weighed as a factor in determining whether there is an abuse of discretion” (internal quotation marks and citations omitted . The Supreme Court recently reinforced the idea that a conflict of interest exists when a plan administrator both evaluates claims for benefits and pays benefits claims. Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 112 (2008). The Court instructed lower courts to consider a structural conflict of interest, but counseled that the weight accorded to that factor should vary depending on the circumstances of the case. The conflict of interest at issue here, for example, should prove more important (perhaps of great importance) where circumstances suggest a higher likelihood that it affected the benefits decision, including, but not limited to, cases where an insurance company administrator has a history of biased claims administration. . . . It should prove less important (perhaps to the vanishing point) where the administrator has taken active steps to reduce potential bias and to promote accuracy, for example, by walling off claims administrators from those interested in firm inaccurate finances, or by decisionmaking irrespective of whom the inaccuracy benefits. imposing management checks that penalize Glenn, 554 U.S. at 117 (citations omitted). -9- The relationship between the Fund trustees and the Fund itself is considerably different than that of an employee benefit plan and an insurance company that funds and administers it. In this case, the Trustees of the defendant Fund determine eligibility for pension benefits and the benefits are paid from a fund to which contributing employers pay. The final decision was rendered by an Appeals Committee consisting of two trustees, one union trustee and one employer trustee. Thus, the Trustees both determine who is eligible for Fund benefits and pay the benefits out of the Fund of which they are the Trustees, and to that extent there may be a structural conflict of interest. See Durakovic v. Bldg. Serv. 32 BJ Pension Fund, 609 F.3d 133, 138 (2d Cir. 2010) (holding that a fund organized pursuant to 29 U.S.C. § 186(c)(5) was conflicted within the meaning of Glenn); but see Klein v. Cent. States, Se. & Sw. Areas Health & Welfare Plan, 346 F. App’x 1, 3-4 (6th Cir. 2009) (holding that no conflict existed where the Plan is a “multi-employer benefit plan without a profit motive, and individual trustees receive no personal financial benefit from approving or denying claims,” and where “the record contains no evidence that cost savings concerns motivated the Trustees’ decision”); Wildeboer v. Sheet Metal Workers’ Nat’l Pension Fund, No. 09-39-DLB, 2010 WL 821122, at *4-5 (E.D. Ky. Mar. 5, 2010) (finding that no conflict of interest existed where the Plan was a “jointly-administered multi-employer fund where benefits are paid from a pool of money funded by multiple employers and decisions are made by employer and union trustees”). But the parties have not presented any evidence of “circumstances suggest[ing] a higher likelihood that [the conflict of interest] affected the benefits decision.” DeLisle v. Sun Life Assur. Co. of Canada, 558 F.3d 440, 445 (6th Cir. 2009) (quotation marks and citation omitted). The Appeals Committee meeting minutes from March 2009 do not suggest that the Trustees were affected by any improper consideration in affirming the denial of early retirement benefits to the plaintiff. Nor does anything -10- else in the administrative record suggest improper motivation on the part of Trustees in denying the plaintiff’s claim. The Court believes that the traditional arbitrary-and-capricious standard of review governs this case, and the alleged structural conflict does not deserve much weight. The arbitrary-and-capricious “standard [of review] is the least demanding form of judicial review of administrative action. When it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, that outcome is not arbitrary or capricious.” Davis v. Kentucky Fin. Cos. Ret. Plan, 887 F.2d 689, 693 (6th Cir. 1989) (internal quotes and citation omitted). An administrator’s decision will be upheld under the arbitrary and capricious standard “if it is the result of a deliberate, principled reasoning process, and is rational in light of the plan’s provisions.” Cooper v. Life Ins. Co. of N. Am., 486 F.3d 157, 165 (6th Cir. 2007) (internal citations omitted). A decision reviewed according to this standard must be upheld if it is supported by “substantial evidence.” Baker v. United Mine Workers of Am. Health and Ret. Funds, 929 F.2d 1140, 1144 (6th Cir. 1991). Substantial evidence supports an administrator’s decision if the evidence is “rational in light of the plan’s provisions.” See Smith, 129 F.3d at 863. However, “the federal courts do not sit in review of the administrator's decisions only for the purpose of rubber stamping those decisions.” Moon v. Unum Provident Corp., 405 F.3d 373, 379 (6th Cir. 2005) (citing McDonald v. Western-Southern Life Ins. Co., 347 F.3d 161, 172 (6th Cir. 2003) (“Deferential review is not no review, and deference need not be abject.”). B. Forfeiture of vested benefits The plaintiff argues that the Plan’s disqualifying employment provision causes a de facto forfeiture of participants’ fully vested pension benefits and therefore violates ERISA. However, -11- “[t]he term ‘forfeiture’ normally connotes a total loss in consequence of some event rather than a limit on the value of a person’s rights.” Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 513 (1981) (emphasis added; internal quotation marks and citation omitted). Under Section 203(a) of ERISA, an employee’s right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age and satisfaction of certain other conditions. The statute reads: Each pension plan shall provide that an employee’s right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age and in addition shall satisfy the requirements of paragraphs (1) and (2) of this subsection. (1) A plan satisfies the requirements of this paragraph if an employee’s rights in his accrued benefit derived from his own contributions are nonforfeitable. (2)(A)(i) In the case of a defined benefit plan, a plan satisfies the requirements of this paragraph if it satisfies the requirements of clause (ii) or (iii). (ii) A plan satisfies the requirements of this clause if an employee who has completed at least 5 years of service has a nonforfeitable right to 100 percent of the employee’s accrued benefit derived from employer contributions. (iii) A plan satisfies the requirements of this clause if an employee has a nonforfeitable right to a percentage of the employee's accrued benefit derived from employer contributions determined under the following table: Years of service: 3 4 5 6 7 or more The nonforfeitable percentage is: 20 40 60 80 100 29 U.S.C. § 1053(a)(1)-(2). ERISA also defines the term “accrued benefit” as used in section 1053 with reference to a defined benefit plan as “the individual’s accrued benefit determined under the plan and . . . expressed in the form of an annual benefit commencing at normal retirement age.” 29 U.S.C. § 1002(23)(A) (emphasis added); see also Treas. Reg. § 1.411(a)-7(a)(1) (excluding early retirement benefits from the definition of “accrued benefits”). Consistent with these statutes and regulations, -12- many courts — including the Sixth Circuit — reject the idea that pension plan provisions disqualifying participants from early retirement benefits violate ERISA. See Whisman v. Robbins, 55 F.3d 1140, 1147-48 (6th Cir. 1995) (employee’s post-retirement employment with the United States Postal Service warranted suspension of early retirement benefits he received under multiemployer pension plan, which provided for suspension of pension payments “for all periods of reemployment in the Teamster Industry” and defined “Teamster Industry” as “all public and private work covered, or of the type covered, by any Collective Bargaining Agreement or any Teamster Contract”); see also Militello v. Cent. States Se. & Sw. Areas Pension Fund, 209 F. Supp. 2d 923, 932-33 (N.D. Ill. 2002) (holding that Section 1053(a) applies only to benefits at normal retirement age); cf. Cattin v. Gen. Motors Corp., 955 F.2d 416, 420 & n.1 (6th Cir. 1992) (“Plaintiffs have conceded that the non-forfeiture provision of the Employee Retirement Income Security Act . . . , 29 U.S.C. § 1053, did not prohibit GM from amending its retirement plan to eliminate their early retirement benefits, including the social security supplements.”). These courts subscribe to the view that Congress “did not intend for early retirement supplements to be unforfeitable,” Chambless v. Masters, Mates & Pilots Pension Plan, 571 F. Supp. 1430, 1440-41 (S.D.N.Y. 1983) (quoting Riley v. MEBA Pension Trust, 586 F.2d 968, 970 n.2 (2d Cir. 1978 , and consider the deprivation of early retirement benefits as a “suspension” of benefits, not their “reduction or elimination.” Whisman, 55 F.3d at 1147. The Court agrees with that reasoning. The Plan’s disqualifying employment provision and its effect on extending the plaintiff’s eligibility for early retirement benefits do not violate 29 U.S.C. § 1053. -13- The plaintiff also argues that the denial of early retirement benefits conflicts with section 3(19) of ERISA. That statute defines a “nonforfeitable” pension benefit as a claim to an immediate or deferred benefit that “arises from the participant’s service,” “is unconditional,” and “is legally enforceable against the plan.” 29 U.S.C. § 1002(19). This definitional statute also states that “a right to an accrued benefit derived from employer contributions shall not be treated as forfeitable merely because the plan contains a provision described in section 1053(a)(3) of this title.” Ibid. Section 1053(a) states that “[a] right to an accrued benefit from employer contributions shall not be treated as forfeitable solely because the plan provides that the payment of benefits is suspended for such period of time as the employee is employed, subsequent to commencement of payment of such benefits . . . in the same industry, in the same trade or craft, and the same geographic area covered by the plan, as when such benefits commenced.” 29 U.S.C. § 1053(a)(3)(B)(ii). The plaintiff’s argument would have some purchase if the pension benefit he was discussing was his accrued benefit payable at normal retirement age. However, the statutes quoted above do not prohibit withholding or suspending benefits payable before that milestone. The purpose of these sections is to protect plan participants’ accrued benefits from forfeiture, but that does not mean that a plan cannot provide for suspension of benefits before they are otherwise due. Subsection (a)(3) contemplates that a plan may contractually provide for withholding or suspending benefits under the conditions stated therein without effecting a forfeiture. See Eisenrich v. Minneapolis Retail Meat Cutters & Food Handlers Pension Plan, 574 F.3d 644, 646 (8th Cir. 2009) (holding that “multiemployer plans may condition benefits on an employee’s promise not to engage in certain kinds of employment after retirement”). In Nachman Corp. v. Pension Ben. Guaranty Corp., 446 U.S. 359 (1980), the Supreme Court explained that “[a] provision in a plan which purports to -14- sanction forfeiture of vested benefits for any reason, other than one listed in subsection (a)(3), would violate this section after January 1, 1976, its effective date.” Id. at 367 n.10 (emphasis added). And the Department of Labor’s regulation on the subject confirms that point: A plan may provide for the suspension of pension benefits which commence prior to the attainment of normal retirement age . . . for any reemployment and without regard to the provisions of section 203(a)(3)(B) and this regulation to the extent (but only to the extent) that suspension of such benefits does not affect a retiree’s entitlement to normal retirement benefits payable after attainment of normal retirement age, or the actuarial equivalent thereof. 29 C.F.R. § 2530.203-3(a) (emphasis added). The disqualifying employment provisions of the Plan do not create a forfeiture of benefits. The Plan provisions challenged by the plaintiff are not inconsistent with 29 U.S.C. § 1002(19). C. Notice of forfeiture The plaintiff’s argument that the Plan did not give him fair notice of the effect of disqualifying employment on early retirement eligibility, or that the provision was applied to him after the fact, likewise fails. The Plan was not amended in a way that pretermitted the plaintiff’s right to early retirement. And the Plan’s provisions relating to disqualifying employment were plainly set forth. The plaintiff relies heavily on Hillis v. Waukesha Title Co., 576 F. Supp. 1103 (E.D. Wis. 1983), to support his argument, but that case provides him no help. In that case, it was undisputed that the defendants failed to inform the plaintiff of the non-competition clause, since the plaintiff was never provided a summary Plan description or a copy of the Plan. Further, in Hillis, the offending clause deprived a participant of his entire vested interest in the pension, including his pension at a normal retirement age, if a participant aided a competitor within two years of leaving the employer. In the present case, there is no suggestion that the plaintiff was not provided with a -15- copy of the Plan or summary plan description upon joining the union or at some point during his tenure. Nor does the plaintiff risk losing his normal retirement benefits, which will become available to him at the age of 65. D. Disqualifying employment The remaining question is whether the defendant’s determination that plaintiff’s employment at Chrysler amounted to Disqualifying Employment as defined by the Plan was arbitrary and capricious. The Fund Coordinator and the Appeals Committee relied on two sections of the Plan when they found that the plaintiff’s work at Chrysler was disqualifying. However, the Appeals Committee minutes from its March 9, 2009 meeting indicate that the Committee conflated subsections 8.06(d)(1)(B) and 8.06(d)(1)(E), equating work for an “employer in the same or related business” (in subsection (B with “employment in the Sheet Metal Industry” (in subsection (E . The minutes reflect an understanding that the plaintiff was employed “with Chrysler LLC of Auburn Hills as a maintenance welder.” AR at 2. The Committee observed that the Fund Coordinator “deemed this work in the Sheet Metal Industry as welding is practiced throughout the industry.” Ibid. It then reviewed the definition of “Sheet Metal Industry” in Plan section 1.35, “noted that numerous employers perform welding,” AR at 3, and concluded that the plaintiff’s “employment with Chrysler LLC was work in the Sheet Metal industry as defined in Section 1.35, and Disqualifying Employment under Section 8.06(d)(1)(B) and 8.06(d)(1)(E) of the Plan . . . .” Ibid. The Plan does not define what “employer in the same or related business” means, but the language suggests that the focus of this provision is on the activity of the employer, not the task the employee performs. There is no discussion in the administrative record, however, of how or why -16- the defendant concluded that Chrysler was in the same business as its signatory employers. The Plan’s language must be read in light of the statute, which permits suspension of pension benefits by multiemployer plans when the participant takes new employment “in the same industry, in the same trade or craft, and the same geographic area covered by the plan.” 29 U.S.C. § 1053(a)(3)(B)(ii). “The term ‘industry’ means the business activities of the types engaged in by any employers maintaining the plan.” 29 C.F.R. § 2530.203-3(c)(2)(i). It does not refer to “the outside industry.” Whisman, 55 F.3d at 1149. The Fund Coordinator’s letter to the plaintiff noted that “Chrysler LLC assembles automobiles,” AR at 15, but there is no evidence in the record, for example, that any of the defendant’s contributing employers is involved in manufacturing automobiles, which, of course, is Chrysler’s primary business. Importing the language defining “Sheet Metal Industry” does not bridge that gap. Section 1.35, defining that term, makes specific reference to “any and all types of work covered by” a collective bargaining agreement or within the Union’s trade jurisdiction, “or any other work to which a sheet metal worker has been assigned, referred, or can perform because of his skill and training as a sheet metal worker.” Plan § 1.35 (emphasis added). That definition is clearly tasked focused, that is, it requires consideration of the work performed by the plan participant. Similarly, reference to the SMWIA’s constitution does not support the finding that Chrysler is “in the same or related business,” because that language is task-oriented as well. Section 5(t) of the SMWIA Constitution defines the trade jurisdiction as “[a]ny and all types of sheet metal work, coppersmith work and mechanical work in connection with or incidental to the manufacture, fabrication, assembling, maintenance and repair of automobiles . . . .” AR 20 (emphasis added). The fact that certain work may be characterized as sheet metal work, and thus within the Union’s trade jurisdiction, does not -17- render an employer requiring those skill generally within “the same or related business” as a covered employer. The defendant’s conclusion that all of the plaintiff’s work at Chrysler was disqualifying employment under section 8.06(d)(1)(B) on the ground that Chrysler was engaged in the same business as a covered employer, therefore, was arbitrary because it was not rational in light of the Plan’s provisions and was not supported by substantial evidence in the administrative record. See Shelby Cnty. Health Care Corp. v. Southern Council of Indus. Workers Health and Welfare Trust Fund, 203 F.3d 926, 935 (6th Cir. 2000) (“A plan administrator’s interpretation of ambiguous provisions must, however, be reasonable.”). However, the Fund’s reliance on section 8.06(d)(1)(E), at least with respect to the plaintiff’s employment with Chrysler as a welder, is rational in light of the Plan’s provisions. Unlike section 8.06(d)(1)(B), section 8.06(d)(1)(E) focuses on the kind of work actually performed by the Plan participant for a non-contributing employer, i.e., “employment in the Sheet Metal Industry.” Section 1.35 of the Plan defines “Sheet Metal Industry” in terms of the SMWIA’a trade jurisdiction as described in its constitution. And article I, sections 5(t) and 5(z) of that constitution claims jurisdiction over “[a]ny and all types of sheet metal work, coppersmith work and mechanical work in connection with or incidental to the manufacture, fabrication, assembling, maintenance and repair of automobiles, buses, trucks” and “[a]ny and all welding in connection with the work specified in this Article.” AR 20-21. Applying this language requires a functional approach, which means “looking beyond the skills typically associated with a particular job” and “look[ing] to the skills put to ‘use by the [participant].’” Eisenrich, 574 F.3d at 650 (citing 29 C.F.R. § 2530.203-3(c)(2)(ii . -18- The record indicates that the plaintiff was employed by Chrysler as a maintenance welder from March 2000 until November 2003 and from March 2007 to January 2008 at one of Chrysler’s engine plants. It was reasonable for the defendant to conclude that working as a welder was “sheet metal work [or] mechanical work . . . incidental to the manufacture . . . of automobiles.” The plaintiff’s work as a welder for Chrysler, therefore, was disqualifying employment under section 8.06(d)(1)(E) of the Plan. See Wildeboer, 2010 WL 821122, at *6 (affirming Sheet Metal Workers’ National Pension Fund’s denial of early retirement benefits to a plaintiff who, in his new employment, used welding and welding was admittedly one of the skills, albeit incidental, used in his previous occupation). There is no evidence in the record, however, that the plaintiff’s assignment to Chrysler’s jobs bank or employment as an endurance driver amounted to “employment in the Sheet Metal Industry,” and therefore was disqualifying under section 8.06(d)(1)(E). There is no evidence of the duties the plaintiff performed when assigned to the jobs bank, and there is no explanation in the record how driving at the test track would fall within the trade jurisdiction of the union. Because there is not substantial evidence in the administrative record that the plaintiff’s employment at Chrysler in those capacities was disqualifying employment under the provisions of the plan, the determination that the plaintiff was not “retired” when he applied for benefits is arbitrary and capricious. This conclusion, however, does not help the plaintiff in the end. Section 5.04(b) of the Plan calls for delaying eligibility for early retirement benefits six months for each calendar quarter in which the participant engages in at least one hour of disqualifying employment. The record indicates that the plaintiff was employed as a maintenance welder for parts of twenty-one quarters, which would delay his eligibility for early retirement benefits by 10.5 years, that is, until after his -19- sixty-fifth birthday. The Fund Coordinator and the Appeals Committee addressed the delay factor, although they did not calculate the length of the delay or specifically apply the provision. Nonetheless, the record supports the ultimate conclusion that the plaintiff is not entitled to early retirement benefits according to the Plan’s provisions. III. Conclusion Although the Court finds that certain aspects of the defendant’s decision denying the plaintiff’s application for early retirement benefits were arbitrary and capricious, for the reasons stated above, the Court concludes that denial is supported by substantial evidence in the record and is rational in light of the Plan’s provisions. Accordingly, it is ORDERED that the defendant’s motion to affirm the administrator’s decision [dkt #20] is GRANTED. It is further ORDERED that the plaintiff’s motion to reverse the administrator’s decision [dkt #18] is DENIED. It is further ORDERED that the complaint is DISMISSED WITH PREJUDICE. Dated: December 20, 2010 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 20, 2010. s/Deborah R. Tofil DEBORAH R. TOFIL -20-

=== Belfor USA Group, Inc. v. Insurance Reconstruction, LLC and Brad Barrett ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION BELFOR USA GROUP, INC., Plaintiff, v. INSURANCE RECONSTRUCTION, LLC and BRAD BARRETT, Defendants. ____________________________________/ Civil No. 08-12525 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART PLAINTIFF’S EMERGENCY MOTION FOR CONTEMPT The plaintiff has filed a motion seeking a finding that the defendants are in contempt of a provision of a consent judgment enjoining activity that infringes on a trademark and service mark owned by the plaintiff. The defendants have offered no evidence or argument that they are unable to comply with the judgment’s requirements or that they have not committed the infringing acts. Instead, they argue that the consent judgment is invalid for a number of reasons. A hearing was held on December 7, 2010. The Court now finds by clear and convincing evidence that defendants Brad Barrett and Insurance Reconstruction, LLC have violated and are in civil contempt of the consent judgment and are subject to the remedial action set out below. I. On August 21, 2008, the Court approved and entered a consent judgment presented by the parties, finding that the plaintiff had valid rights to the trademark INRECON. The judgment contained the following injunction: Defendants, their . . . officers, . . . employees, . . . and those persons in active concert or participation with them . . . are hereby permanently restrained and enjoined from registering, or directly or indirectly using “INRECON” or any other trademark or service mark of Plaintiff Belfor, or any colorable imitation thereof, including, but not limited to, “IN-RECON” or “FLA-INRECON,” as part of any trademark, service mark or trade name, or in such a way as to be likely to cause confusion, mistake, or to deceive as to the affiliation, connection, or association of Defendants with Plaintiff Belfor, or as to the origin, sponsorship, or approval of Defendant’s goods, services, or commercial activities, by Plaintiff Belfor. Such prohibited uses shall specifically include, but are not limited to, use in connection with disaster recovery services, data or information recovery services, and/or insurance consulting services. Consent Judgment [dkt. #5], ¶ 9. The parties agreed to and the Court approved a provision in the judgment vesting continuing jurisdiction in this Court to enforce its terms. The judgment was the product of a lawsuit brought by plaintiff Belfor USA Group, a company that provides disaster recovery services throughout the nation, including Florida. The services include restoring electronics, computers, and servers. In 2002, Belfor acquired the rights to the federally registered trademark INRECON from previous owners of this mark. At some point after this acquisition, defendant Brad Barrett left his position with the plaintiff and started his own company, Insurance Reconstruction, LLC, to provide database reconstruction services. The defendants apparently used the INRECON mark for their company since July 24, 2007. In late May 2008, the plaintiff learned that the defendants had filed for trademark rights over INRECON, IN- RECON, and FLA-INRECON to identify its database recovery services (for INRECON) and anticipated insurance consultation services (for the latter two). After communications between the parties and Barrett’s refusal to cease and desist in his use of the INRECON mark, the plaintiff filed a six-count complaint against the defendants on June 13, 2008 alleging trademark infringement, false designation, non-registrability of the defendant’s alleged mark, trademark dilution, common law trademark infringement, and common law unfair competition. The lawsuit was resolved by the consent judgment mentioned earlier. -2- The plaintiff has offered evidence that on July 28, 2010, Barrett filed organizational papers with the Florida Division of Corporations to establish Inrecon, LLC. Barrett sent out an e-mail on October 7, 2010 stating, “Yes it is true I am now INRECON in the state of Florida . . . .” Br. in Support of Mot for Contempt at 3 & Ex. C, Oct. 7, 2010 e-mail. After the plaintiff learned of the e-mail, it apparently began to investigate and learned that Barrett was operating a website at www.inrecon.org, using the INRECON name, and offering disaster recovery services. The plaintiff also discovered the incorporation papers at the same time. And the defendants acknowledge that they filed an application to register the marks with the United States Patent and Trademark Office (USPTO), followed by a petition to the Trademark Trial and Appeal Board (TTAB) for cancellation of Belfor’s INRECON mark. On October 11, 2010, plaintiff’s counsel sent a letter and e-mail to defendants’ counsel, who had signed the stipulation for the consent judgment, informing him that “your client has . . . violated the terms of the Consent Judgment and in . . . [an] egregious fashion.” Br. in Support of Mot. for Contempt at 4 & Ex. F, Oct. 11, 2010 Letter. The letter demanded that the defendants take specific remedial action. The response appears to be unsatisfying: the defendants did not deny violating the injunction, but rather asserted that the plaintiff had abandoned its mark in Florida. This motion followed. II. The judiciary’s contempt power is “one weapon in its arsenal” that may be deployed to enforce its orders. Elec. Workers Pension Trust Fund of Local Union # 58, IBEW v. Gary’s Elec. Serv. Co., 340 F.3d 373, 378 (6th Cir. 2003). The Supreme Court has characterized that power as “a necessary and integral part of the independence of the judiciary, and [it] is absolutely essential -3- to the performance of the duties imposed on them by law.” Gompers v. Buck’s Stove & Range Co., 221 U.S. 418, 450 (1911); see also Shillitani v. United States, 384 U.S. 364, 370 (1966) (asserting that “[t]here can be no question that courts have inherent power to enforce compliance with their lawful orders through civil contempt”). A consent judgment has features both of a contract and a judicial pronouncement. See Williams v. Vukovich, 720 F.2d 909, 920 (6th Cir. 1983). It is contractual in that it represents an agreement by the parties, but is a judicial act because the court’s approval places the imprimatur of the court on the parties’ agreement. United States v. State of Mich., 940 F.2d 143, 150 (6th Cir. 1991). It is beyond debate, however, that a consent judgment is a judicial act, see United States v. Swift & Co., 286 U.S. 106, 115 (1932) (“We reject the argument . . . that a decree entered upon consent is to be treated as a contract and not as a judicial act.”), and its terms are enforceable by the Court through its contempt powers, see Rolex Watch U.S.A., Inc. v. Crowley, 74 F.3d 716 (6th Cir. 1996). In order to establish a contempt, the charging party must prove the existence of a court order and show that the respondent’s conduct violated its terms. Rolex Watch, 74 F.3d at 720 (stating that the plaintiffs “ha[ve] the burden of establishing by clear and convincing evidence that the [defendants] ‘violated a definite and specific order of the court requiring [them] to perform or refrain from performing a particular act or acts with knowledge of the court’s order.’” (quoting NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 591 (6th Cir. 1987 . Since civil contempt is remedial in nature, the charging party need not establish willfulness; “intent in disobeying [an] order . . . is irrelevant to the validity of the contempt finding.” In re Jaques, 761 F.2d 302, 306 (6th Cir. 1985) (citation omitted). -4- There is no contest that a court order — the consent judgment — is in place. The defendants cannot and do not dispute their knowledge of the injunctive provisions of the judgment, since they agreed to its entry by the Court. The consent judgment permanently enjoins the defendants from registering or using the “INRECON” mark (or any other trademark of the plaintiff) or an imitation thereof, including “IN-RECON” and “FLA-INRECON,” in any way. This language is not ambiguous. The plaintiffs have provided evidence that the defendants registered the enterprise Inrecon, LLC with the State of Florida, represented that they were Inrecon in Florida, and maintained a website at www.inrecon.org. All of this activity is prohibited by the injunction. The defendants do not deny that they have taken these actions. They argue instead that the plaintiff is no longer entitled to the protection of the Copyright Act because the plaintiff abandoned the use of the “INRECON” mark in Florida. The defendants request discovery on that point. They also contend that the plaintiff committed fraud on the court when procuring the consent judgment, and therefore the judgment is invalid. These arguments talk past the issue presented for resolution, that is, whether the defendants have disobeyed the injunction embodied in the consent judgment. To the extent that the defendants attempt to collaterally attack the judgment, their arguments collide directly with a long line of cases holding that a party is obligated to comply with the terms of a court order, including a consent judgment, even if such order is not valid, until the order has been set aside. See, e.g., United States v. United Mine Workers, 330 U.S. 258, 293 & n.58 (1947) (“an order issued by a court with jurisdiction over the subject matter and person must be obeyed by the parties until it is reversed by orderly and proper proceedings.”); Walker v. City of Birmingham, 388 U.S. 307, 313-14 (1967) (noting that the defendants were precluded from attacking the court’s injunction in a collateral -5- proceeding); Kelly v. Carr, 691 F.2d 800, 807 n.19 (6th Cir. 1980) (“Even assuming the injunction invalid by reasons urged by appellants, until litigated and determined so by an appellate court, the appellants remain obliged to obey the court order.”). The appropriate method for challenging a court order is a motion to set aside the judgment under Federal Rule of Civil Procedure 60(b), which the defendants have not filed. The fraud argument is puzzling, since the defendants joined with the plaintiff in presenting the consent judgment to the Court. The defendants also argue that the language of the injunction is not as clear as it initially appears, and it can be read to presume that the plaintiff has a valid and enforceable service mark before the injunction can become operative. They point to the provision stating that the defendant may not “us[e] ‘INRECON’ or any other trademark or service mark of Plaintiff Belfor, or any colorable imitation thereof” (emphasis added), and contend that if INRECON is not itself a present and enforceable mark, the injunction cannot be enforced. The defendants reason that if the plaintiff abandons the mark, the injunction is unenforceable and the defendants may challenge the plaintiff’s right to it in the TTAB. To the extent that a consent judgment represents an agreement of the parties, its meaning “is a question of contractual interpretation.” Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 372 (6th Cir. 1998) (citing Huguley v. General Motors Corp., 67 F.3d 129, 132 (6th Cir. 1995 . State contract law provides the rules of interpretation. Ibid. In this case, where the contract was formed in Michigan, “[t]he primary goal in the construction or interpretation of any contract is to honor the intent of the parties.” Rasheed v. Chrysler Corp., 445 Mich. 109, 127 n.28, 517 N.W.2d 19, 29 n.28 (1994). -6- Viewing the consent judgment in its entirety, it is plain that the parties acknowledged the plaintiff’s primary right to the mark INRECON and its derivatives, and they agreed that the defendants would abandon their efforts to register that mark or a closely related mark and would not use the mark in the future. In exchange, the lawsuit was dismissed. The reference to “other trademark or service mark” is understandable, since the parties acknowledged that the plaintiff owned the United States Trademark Registration for that mark and had “strong common law rights” in the mark as well. Consent Judgment [dkt. #5], ¶ 4. The parties intended that the plaintiff would continue to enjoy its right to the mark, and that the defendant would not use or try to use it in the future. The defendants’ effort to engraft a requirement that the plaintiff’s right to the mark has not been abandoned as a condition of enforcing the injunction is not supported by a plausible reading of the consent judgment. The parties intended that in exchange for dismissing the lawsuit and the plaintiff’s forbearance on the damages claim, the defendants would not use the mark or try to register it in the future. As noted above, the plaintiff offered unrebutted proof that the defendants have used the mark and filed papers with the USPTO to register the mark in their name. The plaintiff has shown by clear and convincing evidence that the defendants have violated the injunctive provisions of the consent judgment. The Court finds that they are in contempt of the Court’s judgment. The plaintiff seeks as relief an order that restores its rights in the mark and compensates it for the loss caused by the defendants contumacy. At the hearing, the plaintiff clarified that it wants an order requiring the defendants (1) to abandon the application filed with the USPTO for the INRECON mark, serial number 85158177; (2) to withdraw the petition for cancellation of the Belfor INRECON mark filed with the Trademark Trial and Appeal Board (TTAB), cancellation number -7- 92053203; (3) to expressly withdraw the Florida registration for Inrecon LLC, and cease all use of that name as a trade name or corporate name; (4) permanently to cease all use of the term INRECON in any form as a trademark, service mark or trade name, or in any way promoting the defendants’ business and services; (5) and to transfer to Belfor, at the defendants’ sole expense, the domain name, also known as a URL, of Inrecon.org and any other URL containing the term, Inrecon. In civil contempt proceedings, “[j]udicial sanctions . . . may, in a proper case, be employed for either or both of two purposes: to coerce the defendant into compliance with the court’s order, and to compensate the complainant for losses sustained.” United Mine Workers of Am., 330 U.S. at 303-04. The Court finds that the proposed remedies are reasonable for the most part and designed to achieve those ends. At the hearing the defendants represented that they had withdrawn the Florida business registration. Counsel for the plaintiff stated that this Court’s decision would be dispositive of the proceedings pending in the TTAB. Therefore, it appears that no affirmative order from this Court is necessary to achieve those forms of relief. The plaintiff also seeks sanctions, costs, and attorney’s fees, but has provided the Court with neither proposed amounts nor any evidence to support these amounts. No evidence of costs, expenses, or other losses was offered by the plaintiff at the hearing, despite having the opportunity to do so. III. The Court determines that the plaintiff has carried its burden to establish that the defendants are in contempt of the Court’s consent judgment. Remedial sanctions are required to address the disobedience of the order. -8- Accordingly, it is ORDERED that the plaintiff’s emergency motion for a contempt finding [dkt #7] is GRANTED IN PART. It is further ORDERED that the defendants Brad Barrett and Insurance Reconstruction, LLC, and each of them, are found in CONTEMPT of this Court’s judgment dated August 21, 2008. It is further ORDERED that the defendants Brad Barrett and Insurance Reconstruction, LLC, and each of them must forthwith do all of the following: (1) Disable and assign to plaintiff Belfor the domain name (URL) inrecon.org, as well as any other URLs incorporating the INRECON mark, at their sole expense; (2) Abandon the application filed with the USPTO for the INRECON mark, serial number 85158177; and (3) Cease all advertising and promotion of their services under the name INRECON, and any similar name and cease all use of the name INRECON in any form as a trademark, service mark, and trade name. It is further ORDERED that if the defendants fail or refuse to complete items (1) and (2) and furnish proof of completion to the Court on or before December 17, 2010, the defendants shall pay to the plaintiff the sum of $500 for each day after December 17, 2010 that the items remain incomplete. It is further ORDERED that the plaintiff’s request for additional costs and attorney’s fees is DENIED because the plaintiff has not submitted any evidence of the fact or amount of these expenses. s/David M. Lawson DAVID M. LAWSON United States District Judge -9- Dated: December 10, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 10, 2010. s/Deborah R. Tofil DEBORAH R. TOFIL -10-

=== TIMOTHY KROPF v. TCA, Inc, d/b/a THE COLLECTION AGENCY, and REBECCA PARKS ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION TIMOTHY KROPF, Plaintiff, v. TCA, Inc, d/b/a THE COLLECTION AGENCY, and REBECCA PARKS, _________________________________________/ Defendants. Case Number 10-11989 Honorable David M. Lawson OPINION AND ORDER GRANTING PLAINTIFF’S MOTION TO DISMISS DEFENDANT REBECCA PARKS’S COUNTERCLAIM The plaintiff filed this case alleging violations of the Fair Debt Collection Practices Act (FDCPA) by the defendants, who allegedly harassed the plaintiff in an attempt to collect a debt. Defendant Rebecca Parks filed a counterclaim seeking attorney’s fees and costs on the ground that the plaintiff’s lawsuit was filed in bad faith as an attempt to harass the defendants. The plaintiff has filed a motion to dismiss the counterclaim on the ground that the request for fees and costs is premature under the statute. Parks opposes the motion. The Court has reviewed the submissions of the parties and finds that the relevant law and facts have been set forth in the motion papers and that oral argument will not aid in the disposition of the motion. Accordingly, it is ORDERED that the motion be decided on the papers submitted. See E.D. Mich. LR 7.1(e)(2). The Court finds that defendant Parks’s request for attorney’s fees is premature and the Fair Debt Collection Practices Act does not create an independent cause of action for attorney’s fees. Therefore, the Court will grant the plaintiff’s motion and dismiss the defendant’s counterclaim without prejudice. The defendant may file a motion for attorney’s fees at the appropriate time. See Fed. R. Civ. P. 54(d). I. According to the complaint, in January 2008 a non-party creditor contacted TCA, Inc. (doing business as “The Collection Agency”) to collect an out-of-state judgment against a judgment debtor named Tim Kropt. In May 2009, TCA obtained the location and contact information for Timothy Kropf, the plaintiff in this case but not the correct debtor, and attempted to collect the debt from him, apparently overlooking the fact that Mr. Kropf’s last name was different that the judgment debtor’s. The plaintiff alleges that the defendants failed to verify his identity before pursuing “a reckless and egregious campaign of collector harassment” against him. Compl. ¶ 14. The complaint describes several contacts by the defendants, including collection letters asserting a debt of $2,353.79, telephone calls where the caller hung up when Mr. Kropf’s answering machine picked up, telephone answering machine messages that did not identify the caller or the company (allegedly placed by TCA representative Linda Greene), and conversations with collectors who would not identify themselves or clarify earlier answering machine messages. TCA and its president Rebecca Parks deny the allegations of inappropriate contacts. On July 2, 2009, a TCA representative called and made verbal contact with the plaintiff, but apparently failed to disclose the details of the alleged debt. Mr. Kropf alleges that this call and the company’s allegedly deceptive “we’re on your side” approach upset him, in part because he was unable to determine if the debt was genuine. Later that day, Mr. Kropf called TCA, advised the representative that she had the wrong person, and asked her to stop harassing him. Mr. Kropf alleges that he was so upset by the end of this call that he was shaking. TCA and Ms. Parks assert that Mr. Kropf demanded monetary damages during this phone call and was verbally abusive to Ms. Greene. -2- At some point during this period of harassment (the date is not specified in the record), Mr. Kropf contacted the Michigan Attorney General’s office and filed a complaint against TCA in an attempt to stop the collection calls. In response to contacts from attorney general personnel, TCA admitted that it had contacted the wrong person and described its actions after learning its mistake. The attorney general apparently found no basis to pursue Mr. Kropf’s complaint, but he responded to Mr. Kropf’s inquiry by informing him that TCA had admitted it had contacted the wrong person. On May 18, 2010, Mr. Kropf filed a complaint in this Court against TCA, Inc. and its president, Rebecca Parks, alleging violations of the FDCPA (count I), violations of the Michigan Collection Practices Act (count II), negligent supervision by Parks over her employees and TCA activities (count III), intentional infliction of emotional distress (count IV), and intrusion upon seclusion (count V). The plaintiff seeks actual, consequential, and statutory damages. On June 24, 2010, defendant Rebecca Parks filed a pro se answer to the complaint, affirmative defenses, and a counterclaim, all on behalf of herself. Defendant TCA has not appeared or pleaded. In the counterclaim, Ms. Parks asserts that Mr. Kropf brought his lawsuit “in bad faith, as a means of harassment, intimidation, and for personal financial gain in a case or situation which has no merit, was a bona fide error, and was clearly resolved responsibly and timely, pursuant to the Fair Debt Collection Practices Act.” Counterclaim at 7-8. She asserts that Mr. Kropf contacted the TCA offices on two occasions “exclusively to swear and curse at the collector, Linda Greene, and make a demand of $5000.00 in exchange for him not contacting the Attorney General.” Id. at 8. Ms. Parks seeks “a judgment . . . against the Defendant to the Counterclaim for court costs and attorney fees, actual damages for verbal and extreme harassment, [and] pursuing a claim without merit.” Id. at 9. -3- On July 7, 2010, plaintiff Kropf filed a motion to dismiss the counterclaim. He argues that the defendant may seek attorney’s fees only by filing a motion after a determination by the Court that the plaintiff’s action was brought in bad faith, which has not occurred. The plaintiff also argues that the FDCPA does not provide an independent cause of action for attorney’s fees; therefore, the defendant’s counterclaim is not justiciable and should be dismissed for failure to state a claim. In response, the defendant argues that the counterclaim is legally and factually related to the plaintiff’s complaint, the allegations in the counterclaim properly defeat or diminish the plaintiff’s claim, the claim is ripe, and the defendant has alleged a separate cause of action in addition to her request for attorney’s fees. II. A. The plaintiff has attached to his motion a number of documents describing contacts with a woman who represented that she was the defendant’s attorney but who has not filed an appearance in this case. A motion to dismiss under Rule 12(b)(6) is confined to a consideration of the pleadings. Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008). “[A] court may accept ‘matters outside the pleadings,’ but in doing so it generally must treat the motion ‘as one for summary judgment under Rule 56.’” Ibid. (citing Fed. R. Civ. P. 12(d . The Court believes that the documents attached to the plaintiff’s motion would not aid in resolving the legal issues presented in the motion, and summary judgment is inappropriate at this time. Therefore, the Court will not consider the documents supplied by the plaintiff. The motion to dismiss will be determined on the motion papers only. -4- B. A motion to dismiss is governed by Rule 12(b) of the Federal Rules of Civil Procedure, which allows dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). Motions to dismiss under Rule 12(b)(6) generally require the Court to construe the complaint in the light most favorable to the non-moving party and determine whether the party has presented “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Towmbly, , 570 (2007). However, this procedural device allows the Court to dismiss a claim on the basis of a dispositive legal issue, independent of the facts presented by the parties. See, e.g., Nietzke v. Williams, 490 U.S. 319, 326-27 (1989). The parties have presented the Court with a pure legal question concerning the propriety of the defendant’s counterclaim. Section 1692k(a)(3) of the FDCPA states: On a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs. 15 U.S.C. § 1692k(a)(3). Although some courts have found that this statute authorizes a counterclaim for attorney’s fees, see Emanuel v. Am. Credit Exch., 870 F.2d 805, 809 (2d Cir. 1989), the majority of cases to consider this issue have instead dismissed the counterclaim as premature or for lack of a statutory cause of action, permitting defendants to renew attorney’s fee requests at the conclusion of the case. See Hardin v. Folger, 704 F. Supp. 355, 356-57 (W.D.N.Y. 1988) (dismissing the counterclaim -5- because section 1692k(a)(3) “provides relief, but not a claim, to defendants” and noting that the decision to grant attorney’s fees was itself discretionary following a determination by the Court that the action was brought in bad faith); Kirscher v. Messerli & Kramer, P.A., No. 05-1901, 2006 WL 145162, at *7 (D. Minn. Jan. 18, 2006) (dismissing the defendant’s counterclaim but permitting it to request attorney’s fees via a motion filed at a later stage in the proceedings); Young v. Reuben, No. 04-0113, 2005 WL 1484671, at *1-2 (S.D. Ind. June 21, 2005) (same); Taylor v. Frost-Arnett Co. of Tenn., No. 98-0564, 1998 WL 472052, at *1 (E.D. La. Aug. 5, 1998) (determining that “[t]he bad faith and harassment allegations of the counterclaim, even if proved, afford neither a defense to the merits of the case nor provide the defendant with a cause of action under the FDCPA,” and dismissing the defendant’s counterclaim without prejudice to the defendant filing a motion for attorney’s fees later); Chlanda v. Wymard, No. 3-93-321, 1994 WL 583124, at *1 (S.D. Ohio Aug. 16, 1994) (finding that the defendant’s request was not ripe until after a decision by the court on the merits and that the statute did not create a cause of action but instead anticipated that a defendant would proceed via a motion for attorney’s fees). The Court finds that the latter approach is preferred and consistent with the Federal Rules of Civil Procedure. Rule 54, for example, states that “[a] claim for attorney’s fees and related nontaxable expenses must be made by motion unless the substantive law requires those fees to be proved at trial as an element of damages.” Fed. R. Civ. P. 54(d)(2)(A). The motion must “be filed no later than 14 days after the entry of judgment.” Fed. R. Civ. P. 54(d)(2)(B)(i). Section 1692k is retrospective, and it does not require proof of attorney’s fees at trial. Instead, it contemplates a post-trial proceeding following an assessment of the merits of a plaintiff’s complaint. -6- The defendant also argues that her counterclaim includes an independent claim for damages against the plaintiff for harassment, which should be allowed. That argument is not well taken. The primary allegations in the counterclaim address the plaintiff’s filing in this Court, contending the complaint was made in bad faith. The relief sought is in the form of attorney’s fees. The only legal authority cited in the counterclaim is 15 U.S.C. § 1692k(a)(3). There are statements in the counterclaim that the plaintiff engaged in harassing conduct, but that conduct was directed at Linda Greene. The counterclaim was filed solely on behalf of defendant Parks, who admitted that she “was not personally involved in the collection of the debt at issue.” Counterclaim ¶ 3. Parks has not indicated that she is an attorney, and therefore she cannot assert claims on behalf of others, including the corporation. See Rowland v. California Men’s Colony, 506 U.S. 194, 202-03 (1993) (describing a long-standing rule that a “corporation may appear in the federal courts only through licensed counsel.”). The Court will construe a pro se litigant’s papers liberally. Erickson v. Pardus, 551 U.S. 89, 94 (2007). However, “[t]he leniency granted to pro se [litigants] . . . is not boundless,” Martin v. Overton, 391 F.3d 710, 714 (6th Cir. 2004). The allegations in the defendant’s counterclaim do not state an independent cause of action for harassment on behalf of Ms. Parks. III. The Court finds that the counterclaim fails to state a cognizable claim. However, the defendant may file a motion for attorney’s fees under 15 U.S.C. § 1692k(a)(3) at the appropriate time at the conclusion of the litigation. Accordingly, it is ORDERED that the plaintiff’s motion to dismiss [dkt. #7] is GRANTED. -7- It is further ORDERED that the defendant’s counterclaim is DISMISSED WITHOUT PREJUDICE. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: November 22, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on November 22, 2010. s/Deborah R. Tofil DEBORAH R. TOFIL -8-

=== Jane Price v. Hartford Life And Insurance Company ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JANE PRICE, v. Plaintiff, HARTFORD LIFE AND ACCIDENT INSURANCE CO., ______________________________________/ Defendant. Case Number 09-14171 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION TO COMPEL DISCOVERY The plaintiff’s motion presently before the Court is to compel discovery in a case to recover disability benefits under section 502(a)(1)(B) of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(a)(1)(B). As the parties acknowledge, the general rule is that review of a denial of benefits by a district court is confined to the administrative record developed by the plan administrator, and therefore no discovery is necessary. Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 618 (6th Cir. 1998) (citing Perry v. Simplicity Engin’g, 900 F.2d 963, 966 (6th Cir. 1990 . However, where the plaintiff alleges that she has been denied due process by the plan administrator, or the administrator was burdened with a conflict of interest — issues on which the administrative record itself would shed no light — circuit precedent permits additional evidence relevant to those issues to be presented to the district court. Id. at 619. A corresponding right to discovery on those issues has been recognized, as the plaintiff claims here. Ibid.; Johnson v. Ct. Gen. Life Ins. Co., 324 F. App’x 459, 466 (6th Cir. Apr. 7, 2009). The questions presented by the present motion are whether the plaintiff must satisfy a condition before she can engage in discovery on those issues, and if so, whether the plaintiff has satisfied it. The Court heard the parties’ arguments in open court on October 6, 2010 and now concludes that existing rules of procedure govern discovery in ERISA cases, just as other civil actions in the district courts. Under those rules, before a plaintiff may obtain discovery in an ERISA benefits action, the matters under inquiry must be relevant (within the meaning of Federal Rule of Civil Procedure 26(b)(1 to the dispute raised in good faith by the suit papers (as required by Federal Rule of Civil Procedure 11(b . The scope of such discovery is always subject to the Court’s authority to limit inquiry under Rule 26(b)(2)(C). See Fed. R. Civ. P. 26(b)(1). Applying these principles, the Court will direct the defendant to answer some of the plaintiff’s interrogatories, as outlined in detail below. I. According to the suit papers, the plaintiff was an employee of Herman Miller, Inc., which carried a group disability policy issued by the defendant and governed by ERISA. The plaintiff was a participant in this plan and sought long-term disability benefits following a diagnosis of degenerative disc disease, herniated disc, and discogenic low back pain for which she underwent surgery on October 31, 2006. She alleges that she has been taking strong pain medications since then and has been unable to work. The disability plan provides benefits for 24 months to an employee who is unable to perform her “own occupation,” and for an extended period thereafter if the employee cannot perform any work for which she is suited. The plaintiff received benefits for 24 months following her surgery, but the defendant discontinued benefits based on a determination that the plaintiff would not be considered disabled from “any occupation.” The defendant allegedly based the decision to discontinue benefits on a functional capacity examination of the plaintiff performed on October 1, 2008 by a physician hired by the defendant. -2- The plaintiff disputes the conclusions reached by the examiner. She also argues that there was no substantial change in her condition and that her doctors supported her classification as disabled. At some point during this process, the plaintiff applied for and received Social Security Disability benefits. She believes that the defendant either ignored or improperly discounted this evidence. At another unspecified point during this administrative process, the defendant had the plaintiff’s records reviewed by a physician from an organization the parties refer to as “MCMC,” which allegedly performs over 50,000 medical reviews and 18,000 medical examinations for the insurance industry annually. The plaintiff notes that the review of her records cost $1,950, and she believes that MCMC may generate over $9 million of revenue from this defendant alone. On August 26, 2009, the plaintiff filed a complaint in the Wayne County, Michigan circuit court against Hartford Life Insurance Company (later corrected to its proper name, defendant Hartford Life and Accident Insurance Company), alleging that the defendant had improperly denied her disability benefits against sufficient evidence of her disability. The plaintiff alleged that “[t]he only reasonable explanation for Defendant’s denial of this claim is bias, self-dealing and/or a complete absence of due process.” Compl. ¶ 18. The defendant removed the case to this Court on October 22, 2009. The Court conducted a status conference and entered an order under Federal Rule of Civil Procedure 16 directing the parties to file cross motions on the administrative record to affirm or reverse the plan administrator’s decision. The case management order stated, however, that if either party timely raised a procedural challenge, the Court would determine whether discovery was warranted and, if so, adjust the deadlines for the cross motions. -3- On May 5, 2010, the plaintiff filed a Notice of Procedural Challenge challenging the failure to produce “SIU records” (neither party defines this acronym), the conclusion of the functional capacity evaluation, and the potential bias from the relationship between MCMC and the defendant. The plaintiff asserts that the claim notes state “claim referred to SIU and accepted for investigation,” but that the defendant failed to provide any records from SIU as part of the administrative record. Pl.’s Statement of Proc. Challenge at 4. The plaintiff also sent discovery requests to the defendant seeking information about the relationship between the defendant and its file reviewers, the claims made under the plaintiff’s plan for the last ten years, and the individuals who performed an administrative review of the plaintiff’s file. The defendant responded via a letter to plaintiff’s counsel and refused to comply with the discovery requests, citing both ERISA-specific discovery rules and Federal Rule of Civil Procedure 26. The present motion followed. II. The general rule in cases challenging the denial of employee benefits under ERISA section 502(a)(1)(B) is that the district court reviews the plan administrator’s decision de novo, unless the plan gives the administrator discretionary authority to determine participants’ eligibility for benefits, in which case the court must apply the highly deferential arbitrary and capricious standard of review. Cox v. Standard Ins. Co., 585 F.3d 295, 299 (6th Cir. 2009). When applying either standard, the court may consider only evidence that was presented to the plan administrator and may not consider additional evidence outside the administrative record. See Wilkins, 150 F.3d at 615 (citing Perry, 900 F.2d at 966). Since no evidence beyond the administrative record would be considered, no discovery is required. Limiting review to the administrative record advances ERISA’s primary goal -4- of “provid[ing] a method for workers and beneficiaries to resolve disputes over benefits inexpensively and expeditiously.” Perry, 900 F.2d at 967. However, in Wilkins, the court recognized that there were certain cases in which matters beyond the administrative record were relevant. In those cases, the district court may deem additional evidence appropriate, such as “when consideration of that evidence is necessary to resolve an ERISA claimant’s procedural challenge to the administrator’s decision, such as an alleged lack of due process afforded by the administrator or alleged bias on its part.” Wilkins, 150 F.3d at 618. When new evidence is to be allowed on those narrow issues, prehearing discovery is also appropriate, but it “should be limited to such procedural challenges.” Id. at 619. Since Wilkins, discovery has been the exception rather than the rule in the mine run ERISA benefits case. Although the Sixth Circuit has not addressed the issue in a published opinion, in a series of unpublished decisions the court has stated that a plaintiff seeking discovery in an ERISA benefits case must make some sort of “predicate showing” of “an alleged procedural violation” as a condition of obtaining discovery, presumably to avoid allowing discovery as a matter of routine, in the interest of advancing the goal of inexpensive and expeditious dispositions. Huffaker v. Metro. Life Ins., 271 F. App’x 493, 504 (6th Cir. Mar. 25, 2008); see also Likas v. Life Ins. Co. of N. Am., 222 F. App’x 481, 486 (6th Cir. 2007); Putney v. Med. Mut. of Ohio, 111 F. App’x 803, 807 (6th Cir. 2004). In another line of cases, the Sixth Circuit has recognized the relevance of the potential bias of a plan administrator that arises from the structural conflict of interest created by the administrator’s dual roles of adjudicator and benefits payor; however, the court has held that the plaintiff has the burden of proof, and “conclusory allegations of bias” will not satisfy it. Kalish v. -5- Liberty Mut./Liberty Life Assurance of Boston, 419 F.3d 501, 508 (6th Cir. 2005); see also Cooper v. Life Ins. Co. of N. Am., 486 F.3d 157, 165 (6th Cir. 2007) (noting that the plaintiff was required to show “significant evidence” of the conflict of interest and rejecting the plaintiff’s bias argument because she “provided no evidence whatsoever” concerning the effect of the alleged conflict in her case); Calvert v. Firstar Fin., Inc., 409 F.3d 286, 293 n.2 (6th Cir. 2005). Notably, in Calvert, the court lamented the absence of pretrial discovery: “The Court would have a better feel for the weight to accord this conflict of interest if Calvert had explored the issue through discovery. While Calvert’s counsel asserted that it was his understanding that discovery is never permissible in an ERISA action premised on a review of the administrative record, an exception to that rule exists where a plaintiff seeks to pursue a decision-maker’s bias.” Calvert, 409 F.3d at 293 n.2. The relevance of a plan administrator’s potential conflict of interest in cases where the plan confers discretion on the administrator and judicial review employs a deferential standard was affirmed by the Supreme Court in Met. Life Ins. v. Glenn, 554 U.S. 105, 128 S. Ct. 2343 (2008). The Court found that “the fact that a plan administrator both evaluates claims for benefits and pays benefits claims creates the kind of ‘conflict of interest’” a reviewing court should consider, 128 S. Ct. at 2348, but the extent and effect of that conflict depends on the facts of each case. The Court did not address the issue of pretrial discovery of the conflict, but it did state that lower courts should not invent or apply special rules when deciding these cases: Neither do we believe it necessary or desirable for courts to create special burden-of-proof rules, or other special procedural or evidentiary rules, focused narrowly upon the evaluator/payor conflict. In principle, as we have said, conflicts are but one factor among many that a reviewing judge must take into account. Benefits decisions arise in too many contexts, concern too many circumstances, and can relate in too many different ways to conflicts — which themselves vary in kind and in degree of seriousness — for us to come up with a one-size-fits-all procedural system that is likely to promote fair and accurate review. Indeed, special procedural -6- rules would create further complexity, adding time and expense to a process that may already be too costly for many of those who seek redress. Glenn, 128 S. Ct. at 2351. The Court also noted that its elucidation of the appropriate standard of review “does not consist of a detailed set of instructions” that courts must follow, and that conflicts of interest may weigh more heavily where the circumstances suggest more likelihood of bias in the plaintiff’s case and less where the circumstances show procedural protections by the defendant to avoid bias. Id. at 2352, 2351. In its first post-Glenn decision, albeit an unpublished one, the Sixth Circuit held that plaintiffs do not need to make a predicate showing of bias prior to receiving some discovery. Johnson v. Ct. Gen. Life Ins. Co., 324 F. App’x 459 (6th Cir. Apr. 7, 2009). In that case, the court discussed the case law in the circuit, and then stated: Although Connecticut General argues that these cases should be interpreted to impose a threshold evidentiary showing of bias as a prerequisite to discovery under Wilkins, the Supreme Court’s admonition in Glenn discouraging the creation of special procedural or evidentiary rules for evaluating administrator/payor conflicts of interest counsels against it. That does not mean, however, that discovery will automatically be available any time the defendant is both the administrator and the payor under an ERISA plan. . . . District courts are well-equipped to evaluate and determine whether and to what extent limited discovery is appropriate in furtherance of a colorable procedural challenge under Wilkins. Id. at 466-67. A survey of the district court decisions suggests that what constitutes a “colorable procedural challenge” remains unsettled. Some courts, through their magistrate judges, have interpreted this statement as eliminating any special threshold showing save that required by Rule 26. Back v. Hartford Life & Accident Ins.Co., No. 09-14446, slip. op. at 5 (E.D. Mich. July 1, 2010); Myers v. Prudential Ins. Co. of Am., 581 F. Supp. 2d 904 (E.D. Tenn. 2008). Another magistrate judge believes that the plaintiff still must make some showing as a condition of pretrial discovery. Geer -7- v. Hartford Life & Accident Ins. Co., No. 08-12837, 2009 WL 1620402, at *5 (E.D. Mich. June 9, 2009). This Court believes that existing rules of procedure provide district courts with means of addressing pretrial discovery issues in ERISA benefits cases so that the interests of economy, efficiency, accuracy, and fairness are all served. Disputes over the scope of discovery in such cases should be addressed in the context of existing rules and the cases interpreting them. No special rules or procedures are necessary or appropriate. However, when determining a discovery dispute, the Court must be mindful that Wilkins instructs courts to decide these cases as actions for review on an administrative record, intended to be expeditious and inexpensive, and must apply the existing rules accordingly. See, e.g., Fed. R. Civ. P. 26(a)(1(B)(I) (exempting such actions from initial disclosure requirements). Rule 26 defines the scope of allowable pretrial discovery in terms of relevance: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense . . . . For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. Fed. R. Civ. P. 26(b)(1). Relevance is determined by the pleadings and other documents in the case that set out the parties’ claims and defenses, but it is a broader concept in the context of discovery compared to evidentiary relevancy. Oppenheimer Fund Inc. v. Sanders, 437 U.S. 340, 350-51 (1978). However, Rule 26 also allows the Court to limit discovery that is unreasonably cumulative or burdensome, or where the potential benefits outweigh the burden of production. Fed. R. Civ. P. 26(b)(1) (“All discovery is subject to the limitations imposed by Rule 26(b)(2)(C).”); Scales v. J.C. Bradford & Co., 925 F.2d 901, 906 (6th Cir. 1991). -8- Rule 16 requires the Court to issue a scheduling order in most civil actions, including ERISA benefits actions. See Fed. R. Civ. P. 16(b)(1). The order should address the issue of discovery and any limitations or modifications of the procedures in Rule 26. See Fed. R. Civ. P. 16(b)(3)(B)(ii). In this case, the Court’s scheduling order required the plaintiff to file a statement of procedural challenge before discovery would be allowed. The procedural challenge is a “paper” that must be signed by the plaintiff’s attorney, who thereby certifies that the challenge has “evidentiary support.” See Fed. R. Civ. P. 11(b)(3). This procedure allows the Court to determine if the procedural challenge is “colorable,” Johnson, 324 F. App’x at 467, and to assess whether “the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.” Fed. R. Civ. P. 26(b)(2)(C)(iii). In this case, the plaintiff has alleged that the plan administrator was biased against the plaintiff because of its motivation to avoid paying a claim from its own coffers. The standard of review in this case presently is contested, with the defendant arguing that the arbitrary and capricious standard applies and the plaintiff contending that review should be de novo. If the former, the plan administrator’s potential conflict of interest is relevant to whether it abused its discretion. Glenn, 128 S. Ct. at 2348. Discovery aimed at exploring the defendant’s relationship with and motive for selecting the consultants and evaluators who provided opinions that the plaintiff was not disabled falls with the scope of Rule 26(b). If the standard of review is de novo, then the significance of the administrator’s conflict of interest evaporates. But since the issue is unresolved and remains in the case, the discovery dispute must be decided. -9- The defendant has resisted discovery, arguing by way of objection that it is too broad and burdensome, and the plaintiff has not established her right to it. Usually, those issues are raised by a motion for a protective order under Rule 26(c), but a motion to compel under Rule 37 frames the issue adequately as well. The Court has “wide discretion” to limit discovery, and must balance the relative benefits and burdens. Scales, 925 F.2d at 906. “Although a plaintiff should not be denied access to information necessary to establish her claim, neither may a plaintiff be permitted ‘to “go fishing” and a trial court retains discretion to determine that a discovery request is too broad and oppressive.’” Surles ex rel. Johnson v. Greyhound Lines, Inc., 474 F.3d 288, 305 (6th Cir. 2007) (quoting Marshall v. Westinghouse Elec. Corp., 576 F.2d 588, 592 (5th Cir. 1978 . In her statement of procedural challenge and motion to compel discovery, the plaintiff presents the following theories of bias: (1) the defendant plan administrator both evaluates claims and makes decisions concerning the payment of benefits, and thus “has a direct financial stake in the outcome of this case,” Mot. to Compel at 3; (2) the defendant relied solely on the reviewer’s conclusions from the October 1, 2008 functional capacity evaluation and failed to consider other details and observations that the plaintiff experienced high pain levels throughout the short testing period, including during the seated portions, as well as evidence from her doctors and the Social Security Administration in reaching its conclusion that the plaintiff could perform sedentary work; (3) the defendant failed to produce records from SIU, which suggests that the plaintiff did not receive a full and fair review; (4) the defendant had the plaintiff’s records reviewed by MCMC, an organization that provides over 50,000 independent medical reviews for the insurance industry annually, and paid MCMC $1950 for this review; (5) the defendant and MCMC have a particularly close working relationship, as evidenced by the special referral form created specifically for this -10- organization, and MCMC would have an incentive to provide favorable reviews for the defendant; and (6) the defendant terminated the plaintiff’s benefits even though there had not been a substantial change in circumstances, her doctors continued to conclude that she was disabled, and she had been approved for Social Security disability benefits (following the defendant’s recommendation that she seek out these benefits). In support of these allegations, the plaintiff has provided a California Market Conduct Examination, which the plaintiff describes as “an examination of this Insurer’s claims handling practices [which] has been strongly criticized during a market conduct examination.” Id. at 5 & Ex. E, California Market Conduct Examination. The plaintiff asks the Court to order the defendant to answer the following questions: Interrogatory No. 1: For each doctor, file reviewer, or surveillance company used for file review in this claim, please state the following: a. The name of each physician, reviewer, surveillance company or vendor involved in this claim; b. Whether the relationship of each individual or entity identified above is subject to a contract; c. The fees paid to each physician, reviewer or contractor (including any entity through which they are utilized) in this matter; d. The fees paid to each physician, reviewer or contractor (including any entity through which they are utilized) for each of the past three years; e. The number of times Defendant has utilized each physician, reviewer or contractor; f. The number of times the physician, reviewer or contractor opinion has supported a decision to deny benefits; g. A complete list of documents provided to each individual or entity identified above. Interrogatory No. 2: Please state the total number of claims made under the subject disability plan for the last ten (10) years with respect to those, please state the following: a. number of claims approved; b. total amounts paid for LTD benefits under the plan; c. the number of claims denied under the plan; and d. the amount expended by Defendant on the individuals and entities identified above for each claim that was denied. -11- Interrogatory No.3: Please state the names of all persons who performed any administrative review of the Plaintiffs claim. With respect to those persons listed, please state the following: a. whether the person is employed by Defendant and b. credentials the person has with regard to said review. Mot. to Compel, Ex. A, Pl.’s First Interrogatories. The defendant asserts that the plaintiff has presented nothing more than mere allegations that do not support discovery in this case, points out that the plaintiff’s treatment history and Social Security findings are already included in the record and do not support the need for additional discovery, and argues that the plaintiff has failed to demonstrate how the California market study — which was conducted several years before the plaintiff’s claim and relied on California laws and regulations — is relevant here. The defendant also argues that much of the discovery would be burdensome to assemble, although that argument appears to be directed primarily at question 2. The Court finds that the discovery sought by the plaintiff is relevant to the issues in this case. The plaintiff has made a good-faith and articulate assertion of a potential conflict of interest in its statement of procedural challenge, certified under Rule 11(b), and that is all that is required by Rule 26(b) to make the issue “relevant.” The Sixth Circuit has stated that evidence relating to the relationship between the plan administrator and its consultants and evaluators is relevant to the question of abuse of discretion by the administrator. DeLisle v. Sun Life Assur. Co. of Canada, 558 F.3d 440, 445 (6th Cir. 2009) (stating that “our own Court has observed that when a plan administrator both decides claims and pays benefits, it has a ‘clear incentive’ to contract with consultants who are ‘inclined to find’ that a claimant is not entitled to benefits” (citing Kalish, 419 F.3d at 507 . The court has stated that statistical evidence showing a consultant’s proclivity to find nondisability may be relevant. Kalish, 419 F.3d at 508. The use of in-house versus independent -12- consultants also is a relevant consideration. Helfman v. GE Group Life Assur. Co., 573 F.3d 383, 393 (6th Cir. 2009); Moon v. Unum Provident Corp., 405 F.3d 373, 381-82 (6th Cir. 2005) (stating that “when a plan administrator’s explanation is based on the work of a doctor in its employ, we must view the explanation with some skepticism”). The information sought by questions 1 and 3 have a direct bearing on these issues. The defendant has not argued that the burden of producing that information is great or the information is inaccessible. Most of the information sought is specific to the present claim and presumably can be found in the claim file. The information concerning how frequently a consultant has been used and the compensation paid should be readily available, since much of that data is required to be reported to tax authorities. Question 1(f), which asks how often a consultant supports denial of a claim, may be somewhat difficult to assemble. However, that information is highly relevant to the plan administrator’s exercise of discretion. See Kalish, 419 F.3d at 507-08 (“This court has similarly observed that a plan administrator, in choosing the independent experts who are paid to assess a claim, is operating under a conflict of interest that provides it with a ‘clear incentive to contract with individuals who were inclined to find in its favor that [a claimant] was not entitled to continued [disability] benefits.’” (quoting Calvert, 409 F.3d at 292 . The Court finds that the potential benefits that may be realized from this discovery and its illumination of the decisional process outweigh the burdens of production that the defendant must bear. Question 2 seeks information about all claims made under the plaintiff’s plan by any individual in the past ten years. The defendant states that it does not track that information and assembling it would require a file-by-file review. The plaintiff has not explained why she needs this information or how it relates to the plan administrator’s exercise of discretion in her case. Whatever -13- the potential benefit of this discovery is, it is surely outweighed by the burden and cost of production that would be incurred by the defendant. III. The Court finds that the discovery sought in this case is relevant to the issues raised by the suit papers, and the potential usefulness of the information sought by the plaintiff in questions 1 and 3 of its interrogatories outweighs the burden of production on the defendant. The relevance of the information sought in question 2 is marginal and the burden of production is great. Accordingly, it is ORDERED that the plaintiff’s motion to compel discovery [dkt #25] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the defendant must furnish to the plaintiff answers to interrogatory questions 1 and 3 on or before November 9, 2010. It is further ORDERED that the scheduling order is AMENDED as follows: the parties shall file their cross motions on the administrative record and joint appendix on or before November 30, 2010. The balance of the scheduling order remains in full force and effect. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: October 12, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 12, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -14-

=== Ernest Payton v. Saginaw County Jail ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ERNEST PAYTON, Plaintiff, v. SAGINAW COUNTY JAIL, Defendant. ___________________________________/ Case No. 09-14288 Honorable David M. Lawson Magistrate Judge Mark A. Randon ORDER VACATING MAGISTRATE JUDGE’S ORDER GRANTING DEFENDANT’S MOTION TO CHANGE VENUE Ernest Payton, while residing in the Saginaw County jail, filed an action under 42 U.S.C. § 1983 challenging the conditions of his confinement as violating his rights under the Constitution. Payton filed his lawsuit in the Southern Division of this Court, despite his apparent residence in Saginaw County, which is in the Northern Division. The defendant also is located in the Northern Division of this Court. The Court entered an order referring all pretrial matters to Magistrate Judge Mark Randon. The defendant filed a motion to dismiss or in the alternative to transfer venue to the Northern Division. Judge Randon entered an order granting the motion on March 22, 2010. The plaintiff resisted the motion, arguing that he would be disadvantaged by litigating in the Northern Division, which is where the defendant’s attorneys are located. The magistrate judge’s power to act in such cases is derived from 28 U.S.C. § 636, which in part states as follows: Notwithstanding any provision of law to the contrary– (A) a judge may designate a magistrate judge to hear and determine any pretrial matter pending before the court, except a motion for injunctive relief, for judgment on the pleadings, for summary judgment, to dismiss or quash an indictment or information made by the defendant, to suppress evidence in a criminal case, to dismiss or to permit maintenance of a class action, to dismiss for failure to state a claim upon which relief can be granted, and to involuntarily dismiss an action. 28 U.S.C. § 636(b)(1)(A). The magistrate judge in this case concluded that he had authority to determine the matter instead of furnishing a report an recommendation, even though the defendant sought dismissal as an alternative form of relief in its motion, because a motion to transfer venue is not listed among the exceptions in the statute quoted above. Magistrate judges in other courts have come to similar conclusions, reasoning that venue transfer motions do not address the merits of the case, but only the forum where an action is adjudicated, and therefore such motions are not “dispositive.” See Dunn & Fenley, LLC v. Diederich, 2010 WL 28662, at *2 (D. Or. Jan. 5, 2010) (citing Holmes v. TV-3, Inc., 141 F.R.D. 697, 697 (W.D. La. 1991); Paoa v. Marati, No. 07-00370, 2007 WL 4563938 (D. Haw. Dec. 28, 2007). The question is far from settled, however. In Beavers v. Express Jet Holdings, Inc., 421 F. Supp. 2d 994 (E.D. Tex. 2005), the court acknowledged that other courts had held that venue transfer motions were dispositive and therefore the magistrate judge addressed the motion by report and recommendation. Id. at 995-96, 996 n.2 (citing Campbell v. United States Dist. Ct., 501 F.2d 196, 207 (9th Cir. 1974); Outlast Technologies, Inc. v. Frisby Technologies, Inc., 298 F. Supp. 2d 1112, 1114 (D. Colo. 2004) (each holding that ordering a change of venue is dispositive . Other courts have followed that course. See, e.g., Autodesk Canada Co. v. Assimilate, Inc., No. 08- 587, 2009 WL 3151026 (D. Del. Sept. 29, 2009); ICHL, LLC v. NEC Corp. of America, 2009 WL 1748573, 1 (E.D. Tex. June 19, 2009); Forest Laboratories Inc. v. Cobalt Laboratories Inc., No. 08- 21-GMS-LPS, 2009 WL 605745 (D. Del. Mar. 09, 2009). -2- The Court believes that the most accurate measure of whether an order on a motion is “dispositive” is not whether the merits of the dispute are adjudicated, but whether activity in the case in that forum is terminated. That was the approach taken by the Third Circuit when deciding whether a magistrate judge had authority to determine a motion to remand. In re U.S. Healthcare, 159 F.3d 142, 145 (3d Cir. 1998). In that case, the court acknowledged that remand motions were not listed among the exceptions in section 636(b)(1)(A). Instead, the court looked to the consequences to the parties of granting such a motion: It is clear that 28 U.S.C. § 636(b)(1)(A) does not in terms preclude a magistrate judge from hearing and determining a motion to remand a case to a state court. Nevertheless, because a remand order is dispositive insofar as proceedings in the federal court are concerned, the order is the functional equivalent of an order of dismissal for purposes of that section. While we recognize that after a remand a case may go forward in the state court, still the order for remand conclusively terminates the matter in the federal court against the will of the party who removed the case. Id. at 145. An order transferring venue has a similar effect on the litigation. Although the parties may proceed in a different forum, the plaintiff is deprived of his chosen forum and is forced to litigate elsewhere. The order is the functional equivalent of a dismissal of the case — albeit without prejudice — in that forum. That outcome may be determinative to some plaintiffs, especially some pro se plaintiffs, who may not have the resources to take their cases on the road. Decisions with consequences of that character ought to be made in final form by Article III judges, even when the able assistance of a magistrate judge is sought. See United States v. Raddatz, 447 U.S. 667, 683 (1980) (stating that “although the statute permits the district court to give to the magistrate’s proposed findings of fact and recommendations ‘such weight as [their] merit commands and the -3- sound discretion of the judge warrants,’ that delegation does not violate Art. III so long as the ultimate decision is made by the district court” (citation omitted . The Court concludes that the magistrate judge did not have the authority to enter the order transferring venue out of Southern Division of this Court. Accordingly, it is ORDERED that the magistrate judge’s order granting the defendant’s motion to change venue [dkt. #28] is VACATED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: October 12, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 12, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -4-

=== Ericka Savage v. City of Pontiac, Emergency Financial Manager Fred Leeb and Larry Marshall ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ERICKA SAVAGE, v. Plaintiff, CITY OF PONTIAC, EMERGENCY FINANCIAL MANAGER FRED LEEB, individually and in his official capacity, and LARRY MARSHALL, individually and in his official capacity, ___________________________________________/ Defendants. Case Number 09-13447 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND DEFENDANTS’ MOTIONS TO DISMISS, AND SCHEDULING CASE MANAGEMENT CONFERENCE Plaintiff Erika Savage filed the present lawsuit after she was fired from her position as the City of Pontiac’s Legislative Auditor by defendant Fred Leeb, who was appointed by action of Michigan’s governor as Pontiac’s emergency financial manager. Savage was hired by action of the city council for a fixed term of employment that expressly could not be terminated except for defined cause. She contends that her termination violated the Due Process Clause and breached her employment contract. The defendants contend that they had a right to fire the plaintiff without regard to cause under powers granted by the Local Government Fiscal Responsibility Act (LGFRA), Mich. Comp. Laws § 141.1201 et seq, and even if that is not the case, the individual defendants are entitled to qualified immunity. Both sides have filed dispositive motions, which were argued in open court on June 2, 2010. The Court concludes that the plaintiff had a property right in her “just cause” employment contract that could not be taken from her without due process of law; she was not afforded adequate process before she was fired; and the plaintiff’s right to procedural due process was clearly established at the time. Therefore, the Court will deny the defendants’ motions to dismiss, construed as motions for summary judgment, and grant the plaintiff’s motion for summary judgment on liability. I. It appears from the pleadings and motion papers that the key facts are not in dispute. Savage was hired as the Legislative Auditor by the Pontiac City Council via Resolution 06-624 in 2006. The Legislative Auditor is a full-time position within Pontiac city government, responsible for analyzing pending issues before the City Council and advising Council members on the different policy choices they encounter. Savage’s employment duties began on December 4, 2006 and initially were to terminate on December 4, 2009. The City Council passed a second resolution on June 19, 2009 extending her term until December 4, 2010 in accordance with the terms of the City Charter. Pontiac’s Home Rule Charter (“City Charter”), effective May 3, 1982, governs the functions and powers of the Pontiac City Council. Under section 3.301, the City Council is authorized “by ordinance, [to] provide for the office of Legislative Auditor and shall, by not less than five (5) affirmative votes appoint the Auditor for a term of not less than four (4) years.” Compl., Ex. 1, City Charter, at ¶ 3.301. This section also states that “[t]he Auditor may be removed by not less than five (5) Council members only for cause.” Ibid. The City Charter defines “cause” as “lack of qualifications, incompetency, neglect of duties, misconduct, conviction of a felony, or a violation of this charter or any job-related ordinance, rule or regulation.” Id. at ¶ 6.109. The City Charter grants procedural rights prior to termination as well, stating that “[a]n appointee may not be removed under this subsection without an opportunity for a public hearing before the appointing authority. A copy of the charges shall be furnished at least 10 days in advance of the hearing.” Ibid. -2- The plaintiff alleges that the Charter and these resolutions created an express employment contract between the City Council and herself that prevented her discharge without just cause, and requires a due process hearing in advance of termination. There is no dispute that cause was not established or even offered as a reason for termination, and there was no prior notice or opportunity for Savage to respond. The defendants contend that Savage’s position was eliminated because of the City’s dire financial straits, which resulted in the appointment of Fred Leeb as the Emergency Financial Manager (EFM) under the LGFRA. On February 20, 2009, the Governor of Michigan determined that a financial emergency existed in the City of Pontiac and authorized the Local Emergency Financial Assistance Loan Board to appoint an EFM. Defendant Fred Leeb was appointed as the EFM for the City of Pontiac on March 19, 2009 by order of the Local Emergency Financial Assistance Loan Board. On June 18, 2009, Leeb notified Savage via a letter that he was eliminating her position as Legislative Auditor, citing the city’s financial emergency and his power under the LGFRA. The letter, sent on the City of Pontiac’s Department of Human Resources letterhead, stated in full: Due to the financial emergency that exists within the City of Pontiac I am faced with the difficult task of making major adjustments to the operations of the municipality. It is therefore with great regret that I must inform you that your position as Legislative Auditor will be eliminated. You will be compensated through the end of business on June 26th, 2009 however; [sic] you are being immediately removed from active employment. An exit interview will be scheduled for you in the Human Resources Department at which time you will also receive information regarding benefits that you may be entitled to and your final payout for fringe benefits that you have accrued. Please accept my appreciation for the contribution you have made to the City of Pontiac and the Growth Group. I would like to extend to you my best wishes for the future. You may contact Human Resources at (248) 758-3252 if you have any questions. -3- Sincerely, Fred Leeb, Emergency Financial Manager cc: Human Resources Pontiac/Marshall Mot. to Dismiss, Ex. 3. The plaintiff claims that Larry Marshall, Pontiac’s human resources and labor relations director, was also involved in the decision to terminate her. The plaintiff was escorted from the premises on the same day that she received the letter by individuals other than those responsible for her termination. She alleges that she was not provided an explanation as to why she was terminated, granted an opportunity to collect her personal effects, or afforded her rights to notice and a hearing. Various media outlets allegedly covered her removal from the building, which caused the plaintiff to suffer humiliation, she contends. The plaintiff says that she has been without employment since June 18, 2009. On August 31, 2009, the plaintiff filed a complaint against the City of Pontiac, Fred Leeb, and Larry Marshall, both individually and in their official capacities. She filed an amended complaint on September 4, 2009, which includes claims for violations of federal and state constitutional due process protections and breach of contract. Defendants Pontiac and Marshall filed a joint motion to dismiss, and defendant Leeb filed a motion to dismiss of his own. The plaintiff filed a motion for summary judgment. II. The defendants’ motions are styled motions to dismiss; however, they have attached to their motion papers affidavits and documentary evidence that are not part of the pleadings. Because the parties have had notice and an opportunity to present their materials in support of their positions, the Court can and does convert the defendants’ motions to summary judgment motions under Rule 56. See Fed. R. Civ. P. 12(d) (stating that “[i]f, on a motion under Rule 12(b)(6) or 12(c), matters -4- outside the pleading are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties shall be given reasonable opportunity to present all material that is pertinent to the motion.”); Hayes v. Equitable Energy Res. Co., 266 F.3d 560, 571 (6th Cir. 2001) (stating that Rule 12(b) “empowers a district court to grant summary judgment sua sponte where the court is presented with materials outside the pleadings. Whether a district court must provide notice that it intends to convert a motion to dismiss into a motion for summary judgment depends on the facts and circumstances of each case”). Summary judgment is appropriate where “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). A trial is required only when “there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Anderson v. Liberty Lobby, Inc., , 250 (1986). Where the facts are mostly settled, and the question before the court is purely a legal one, as here, the summary judgment procedure is well suited for resolution of the case. See Cincom Systems, Inc. v. Novelis Corp., 581 F.3d 431, 435 (6th Cir. 2009). A. The plaintiff brought her action under 42 U.S.C. § 1983, the Michigan constitution, and the common law of contracts. The claim under the Michigan constitution must fail as a matter of law, because the Michigan Supreme Court has held that the state constitution does not provide remedies to enforce the rights created therein. Jones v. Powell, 462 Mich. 329, 612 N.W.2d 423 (2000). Section 1983, although not itself a source of substantive rights, provides a vehicle for vindicating rights provided by the United States Constitution and their laws only, and does not apply to state law -5- claims. See Braley v. City of Pontiac, 906 F.2d 220, 223 (6th Cir. 1990). Therefore, count II of the complaint must be dismissed. B. To recover under section 1983, the plaintiff must plead and prove two elements: (1) she suffered a deprivation of a right secured by the Constitution or laws of the United States, and (2) the deprivation was caused by a person acting under color of state law. Wittstock v. Mark A. Van Sile, Inc. 330 F.3d 899, 902 (6th Cir. 2003). Municipal employees qualify as state actors because they exercise the power “possessed by virtue of state law and made possible only because the wrongdoer is clothed by the authority of state law.” West v. Atkins, 487 U.S. 42, 48 (1988). There can be no dispute that in making the employment decision in this case, defendants Leeb and Marshall were acting under color of law. Municipalities, such as defendant Pontiac, are considered “persons” within the meaning of section 1983, see Monell v. Dep’t of Soc. Servs., , 690 (1978), and, because they derive their power from the state, are considered amenable to suit as state actors, see Hughes v. Region VII Area Agency on Aging, 423 F. Supp. 2d 708, 716-18 (E.D. Mich. 2006), aff’d in part 542 F.3d 169 (6th Cir. 2008). And although municipal liability will attach only where the plaintiff establishes that the municipality promoted a “policy or custom” that was the “moving force” behind the deprivation of the plaintiff’s rights, Monell, 436 U.S. at 694; Polk County v. Dodson, 454 U.S. 312, 326 (1981); see also Doe v. Claiborne County, Tenn. ex rel. Claiborne County Bd. of Educ., 103 F.3d 495, 507-08 (6th Cir. 1996), municipal “policy” is established when the challenged “actions [are] taken by officials with final decision-making authority,” which defendant Leeb was. Spears v. Ruth, 589 F.3d 249, 256 (6th Cir. 2009) (quoting Thomas v. City of Chattanooga, 398 F.3d 426, 429 (6th Cir. 2005 . -6- The federal right of which the plaintiff alleges she was deprived is the right to due process of law under the Fourteenth Amendment. In order to establish a procedural due process violation, the plaintiff must show that (1) she has a life, liberty, or property interest protected by the Constitution; (2) she was deprived of that interest by a state actor; and (3) she was not afforded timely and adequate process under law. Waeschle v. Dragovic, 576 F.3d 539, 544 (6th Cir. 2009). The defendants insist that the plaintiff had no property interest in her continued employment, and therefore her due process claim must fail. “Property interests are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law — rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.” Women’s Med. Prof’l Corp. v. Baird, 438 F.3d 595, 611 (6th Cir. 2006) (quoting Bd. of Regents of State Colls. v. Roth, , 577 (1972) (internal quotation marks omitted . To have a property interest, “a person clearly must have more than an abstract need or desire for [a certain benefit]. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it.” Roth, 408 U.S. at 577. Federal courts have recognized that state civil servants may have a property interest in continued employment under certain circumstances and must be afforded due process before being discharged. See, e.g., Cleveland Bd. of Educ. v. Loudermill, (1986); Relford v. Lexington-Fayette Urban County Gov’t, 390 F.3d 452, 460 (6th Cir. 2004) (“Under state law, government and civil service employees may have a property right in their continued employment”). Generally, a showing that a civil servant may be fired only for cause by operation of state contract law, statute, or administrative rules and regulations is sufficient establish a right to a pretermination hearing. Farhat v. Jopke, 370 F.3d 580, 595 (6th Cir. 2004). -7- The defendants do not dispute that the plaintiff’s employment terms as set forth in the City Council’s resolution require cause to terminate her. Instead, they contend that the LGFRA extinguished any property interest the plaintiff may have had once the financial emergency was declared, and the emergency financial manager was not limited to removal only for cause. The defendants’ argument is based on the statutory language. The Michigan Local Government Fiscal Responsibility Act, Mich. Comp. Laws § 141.1201 et seq., passed in 1990, permits the governor to appoint an emergency financial manager for a local governing body if she determines, based on a committee review and a hearing, that a financial emergency exists in the municipality. See Mich. Comp. Laws §§ 141.1212-141.1218. The emergency financial manager is responsible for developing and “regularly reexamin[ing]” with the governing body a written financial plan to meet the municipality’s financial crisis. Id. § 141.1220. He also has the power to “issue to the appropriate officials or employees of the local government the orders the manager considers necessary to accomplish the purposes of this act. . . . An order issued under this section is binding on the local officials or employees to whom it is issued.” Id. § 141.1219. The statute does not elaborate on the types of orders the emergency financial manager may issue. The LGFRA was amended in 2002 to add section 141.1221, which enlarges and enumerates the emergency financial manager’s powers. Pub. Act. 408, S.B. No. 1064, 91st Leg., eff. Jun. 3, 2002, 2002 Mich. Legis. Serv. P.A. 408. (The language, but not the substance, of section 141.1221 was amended in 2004, Pub. Act. 282, S.B. No. 771, 92nd Legis., eff. Jan. 8, 2004, 2003 Mich. Legis. Serv. P.A. 282 (S.B. 771 . Under this section, -8- An emergency financial manager may take 1 or more of the following additional actions with respect to a unit of local government in which a financial emergency has been determined to exist: . . . (f) Make, approve, or disapprove any appropriation, contract, expenditure, or loan, the creation of any new position, or the filling of any vacancy in a permanent position by any appointing authority. . . . (h) Exercise all of the authority of the unit of local government to renegotiate existing labor contracts and act as an agent of the unit of local government in collective bargaining with employees or representatives and approve any contract or agreement. (I) Notwithstanding the provisions of any charter to the contrary, consolidate departments of the unit of local government or transfer functions from 1 department to another and to appoint, supervise, and, at his or her discretion, remove heads of departments other than elected officials, the clerk of the unit of local government, and any ombudsman position in the unit of local government. . . . (k) Require compliance with the orders of the emergency financial manager by court action if necessary. . . . (p) Exercise the authority and responsibilities of the chief administrative officer and governing body concerning the adoption, amendment, and enforcement of ordinances or resolutions affecting the financial condition of the unit of local government as provided in the following acts: (I) The home rule city act, 1909 PA 279, MCL 117.1 to 117.38. . . . (q) Reduce, suspend, or eliminate the salary, or other compensation of the chief administrative officer and members of the governing body of the unit of local government during the financial emergency. . . . . Mich. Comp. Laws § 141.1221(1). The defendants contend that the statutory authorization to EFMs to “disapprove any . . . contract” and “remove heads of departments” allowed defendant Leeb to ignore the cause and procedural requirements when terminating the plaintiff. The defendants also point to the order appointing the EFM, which states that it converts all city employees not covered by collective bargaining agreements to at-will employees. The Court finds none of these arguments persuasive. -9- As an initial matter, there is no provision in the statute that allows an EFM to accept or reject existing or executory contracts. The language in section 141.1221(1)(f) that authorizes the EFM to “[m]ake, approve, or disapprove any appropriation, contract, expenditure, or loan” cannot be fairly read that way, since the context of the subsection plainly refers to new or prospective actions and not past or existing financial obligations of the troubled municipality. For instance, among the list of authorized actions is the approval of “the creation of any new position,” and “the filling of any vacancy.” Ibid. (emphasis added). There is no stated authorization to revoke existing appointments or ignore contracts in force. The list of enumerated powers is forward-looking, and the grant of power to “disapprove” contracts must be construed that way. See United States v. Mabry, 518 F.3d 442, 447 (6th Cir. 2008) (stating that “[u]nder ejusdem generis, we attribute ‘the same characteristic of discreteness shared by all the preceding items’ to the term in question” (quoting Norton v. S. Utah Wilderness Alliance, 542 U.S. 55, 63 (2004 ; Canton Police Benevolent Ass’n of Canton v. United States, 844 F.2d 1231, 1236 (6th Cir. 1988) (under the “time-honored rule of ejusdem generis, . . . a general word in a statute takes its character from the specific words with which it appears”). Where the intention to extinguish existing rights is not clearly expressed, a court ought not impute that intention to a legislature. Greene v. United States, 376 U.S. 149, 160 (1964) (“[T]he first rule of construction is that legislation must be addressed to the future, not to the past . . . [and] a retrospective operation will not be given to a statute which interferes with antecedent rights . . . unless such be ‘the unequivocal and inflexible import of the terms, and the manifest intention of the legislature.’”). The defendants would read section 141.1221(1)(f) as equivalent to the bankruptcy provision that confers an analogous power upon a bankruptcy trustee. See 11 U.S.C. § 365(a) (“Except as -10- provided in sections 765 and 766 of this title and in subsections (b), (c), and (d) of this section, the trustee, subject to the court’s approval, may assume or reject any executory contract or unexpired lease of the debtor.”). No Michigan case supports that interpretation. To the contrary, the only state cases that speak to the subject are limited to the authority of an EFM to reduce salaries of local elected officials, which the plaintiff is not. See Attorney Gen. v. Flint City Council, 269 Mich. App. 209, 713 N.W.2d 782 (2005) (construing Mich. Comp. Laws § 141.1221(1)(q ; Porter v. City of Highland Park, No. 263470, 2006 WL 1479909 (Mich. Ct. App. May 30, 2006) (same). Moreover, the legislative history of the amendment suggests a conclusion contrary to the defendants’ argument. The House Legislative Analysis Section’s report entitled “Emergency Fiscal Financial Managers for Municipalities – Senate Bill 771, First Analysis,” dated December 9, 2003 (available at http://www.legislature.mi.gov/documents/2003-2004/billanalysis/House/pdf/ 2003-HLA-0771-a.pdf (last visited Sept. 30, 2010 , notes that “[t]he law confers the combined power of mayor and city council upon financial managers, allowing them to unilaterally take action . . . to balance the books in troubled local governments.” Id. at 1. The bill under consideration “would amend the Local Government Fiscal Responsibility Act to give an emergency financial manager additional powers, including the authority to reduce, suspend, or eliminate the salary or other compensation of members of the governing body of a local unit of government during a financial emergency,” in line with the actions taken by emergency financial managers in Flint, Hamtramck, and Highland Park. Id. at 1-2. “The bill specifies that the manager could exercise the authority and responsibilities of the local unit’s chief administrative officer and governing body concerning the adoption, amendment, and enforcement of ordinances or resolutions affecting the financial condition of the local unit as provided in the statutes cited.” Id. at 2. The Senate Fiscal -11- Agency’s Bill Analysis of Public Act 282 of 2003 (Senate Bill 771), dated March 15, 2004 (available at http://www.legislature.mi.gov/documents/2003-2004/billanalysis/Senate/pdf/2003- SFA-0771-S.pdf (last visited Sept. 30, 2010 repeats this language almost verbatim. Id. at 1. However, this report also notes that the bill specifically prevents the emergency financial manager from “impair[ing] vested retirement benefits,” which represents some limit on the EFM’s authority with respect to employment decisions. Ibid. In April 2010, the Citizens Research Council of Michigan (CRC) published a report entitled “Financial Emergencies in Michigan Local Governments, Report 362” (available at http://www.crcmich.org/PUBLICAT/2010s/2010/rpt362.pdf (last visited Sept. 30, 2010 . According to the CRC, “[a]n emergency financial manager assumes the power and duties of the chief executive officer and legislative body, and may reorganize the government structure and renegotiate contracts,” id. at iii, 3, “but may not abrogate contracts,” id. at 7. The report further notes that: There is no prohibition in any Michigan statute on the voluntary renegotiation of local government contracts. There is, however, no way to amend any Michigan statute to allow abrogation of local government contracts. Therefore, if the critical problem facing a local government is the inability to afford contractually obligated pay and benefits, unions refuse to make concessions, and no further layoffs may reasonably be made without endangering public health and welfare, no remedy for that problem is possible outside of bankruptcy. Id. at 15; see also id. at 18 (“However, if the resolution of the emergency requires abrogation of contracts, only bankruptcy will provide the necessary authority.”). Although not formally a part of the legislative history, this recent report provides the most clear statement (after two decades of experimenting with and implementing the LGFRA) concerning the authority, or lack thereof, of the -12- emergency financial manager to avoid existing contracts. Consistent with those observations, and for the other reasons stated above, the Court concludes that an EFM has no such power. The Court does not believe that subsection 141.1221(1)(I), which allows an EFM to consolidate municipal departments and remove department heads, applies to the plaintiff, either. By its terms, that section extends only to “heads of departments other than elected officials, the clerk of the unit of local government, and any ombudsman position in the unit of local government.” Mich. Comp. Laws § 141.1221(1)(I). Presumably, that reference denotes the departments authorized and established by law. Michigan’s Home Rule City Act confers upon a municipality the power to establish “any department that it may deem necessary for the general welfare of the city and for the separate incorporation thereof . . . .” Mich. Comp. Laws § 117.4j(1). Under that authority, Article IV of the Pontiac City Charter describes the Executive Branch and establishes the Office of the Mayor, the Law Department, the Finance Department, the Police Department, the Fire Department, other Executive Branch departments, and the Arts Commission. Pl.’s Mot. Summ. J., Ex. 1, City Charter. Article III, describing the Legislative Branch, says nothing about the creation of departments. In Chapter 6 of Article IV, describing the Remainder of the Executive Branch, section 4.601 states that “[o]ther departments, not created by this charter, for performance of executive and administrative functions may be created in the executive branch by ordinance, consistent with Sections 4.106-4.109 of this charter,” which provide for appointment by the Mayor and approval by City Council, and delineate the duties of department directors to hire, fire, supervise, and assign duties to employees of the department. A “Director” is defined in the city Charter as “the administrative head of a -13- department, notwithstanding that another title may, by this charter or ordinance, be given to that position.” Id. § 6.206(1). There is no dispute that the plaintiff was appointed to her job as Legislative Auditor by the City Council and that she had some supervisory authority. She therefore fits neatly into the definition of an “appointee,” which the City Charter defines as “persons either (I) serving on boards and commissions or (ii) holding upper level positions included in the management of City government and outside any civil service system or collective bargaining unit.” Id. § 6.206(2)(a). As such, she falls within the scope of “management.” See id. § 6.102 (stating that “[m]anagement consists of elective officers and appointees as defined in Section 6.206”). The defendants argue that the Court therefore should consider the plaintiff’s function as equating to that of a department head, but they have cited no authority that allows the Court to disregard the express definitions contained in the City Charter. There is no part of the LGFRA that authorizes such action, and the EFM does not have any inherent power to do so. In fact, “appointee” is defined in the same section of the Charter that defines “employee.” See id. § 6.206(1)-(2). As noted earlier “Director” is defined elsewhere. See id. § 6.206(1). The inescapable conclusion required by the plain language of LGFRA and the City Charter is that the plaintiff was an appointed employee, nothing more. According to the appointing ordinance, her term of employment was fixed at four years, and she could be fired only for cause. Nothing in the LGFRA changes that, nor does the statute authorize the EFM to change that. The defendants also argue that the order of the Local Emergency Financial Assistance Loan Board that appointed defendant Leeb converted all Pontiac city government employees to at-will status, so the plaintiff had no property interest that required a pretermination procedure. A -14- moment’s reflection reveals the fallacy of that argument. The property right granted to the plaintiff when she was hired as Legislative Auditor was the right to employment for a fixed term, to be interrupted only for cause. The Supreme Court has explained that “the significance of the private interest in retaining employment cannot be gainsaid.” Loudermill, 470 U.S. at 543. The protected property right was the “interest in the tenured nature of the employment itself.” See Ramsey v. Bd. of Educ. of Whitley County, Ky., 844 F.2d 1268, 1274 (6th Cir. 1988). Consequently, the order purporting to extinguish the plaintiff’s right to tenure in her position, converting her fixed-term contract to an at-will contract, was merely a step along the way to her termination and amounted to a deprivation of due process. See Leary v. Daeschner, 228 F.3d 729, 743 (6th Cir. 2000). The Court concludes that the record establishes as a matter of law that the plaintiff had a property interest in her continuing employment through December 2010 protected by the United States Constitution, she was deprived of that interest by state actors, and she was not afforded any predeprivation process. The record also conclusively establishes that the deprivation was carried out by defendants Pontiac and Leeb. That is sufficient to establish liability as to these defendants. Defendant Marshall contends that the plaintiff failed to detail specific conduct by him relating to the plaintiff’s termination and therefore failed to state a claim against him. However, the plaintiff alleges that Marshall, the director of human relations for the city of Pontiac government, participated in the decision to eliminate the plaintiff’s position and in ordering her termination without notice or a hearing. See Compl. ¶ 22. Furthermore, the record includes a termination letter from Leeb to the plaintiff, notably on letterhead from the Pontiac City Human Relations department, Marshall’s office. Pontiac/Marshall Mot. to Dismiss, Ex. 3, Letter of Termination. This evidence is sufficient -15- to permit the Court to infer defendant Marshall’s liability in the plaintiff’s termination, but it does not conclusively establish his liability as a matter of law. C. Defendant Leeb argues that he is entitled to statutory immunity under Mich. Comp. Laws § 141.1223, which states that “the emergency financial manager [is] not liable for any obligation of or claim against a local government resulting from actions taken in accordance with the terms of this article.” However, that statute cannot protect Leeb from a claim under section 1983. “‘Conduct by persons acting under color of state law which is wrongful under 42 U.S.C. § 1983 or § 1985(3) cannot be immunized by state law. A construction of the federal statute which permitted a state immunity defense to have controlling effect would transmute a basic guarantee into an illusory promise; and the supremacy clause of the Constitution insures that the proper construction may be enforced.’” Martinez v. State of Cal., 444 U.S. 277, 284 n.8 (1980) (quoting Hampton v. Chicago, 484 F.2d 602, 607 (7th Cir. 1973 ; see also McPherson v. Kelsey, 125 F.3d 989, 994-95 (6th Cir. 1997). Defendants Leeb and Marshall also argue that they are entitled to qualified immunity. Of course, that defense does not apply to the claims against them in their official capacities. A suit against a public official in his official capacity is merely “another way of pleading an action against an entity of which an officer is an agent.” Monell v. Dep’t of Soc. Servs. of City of New York, , 690 n.55 (1978). “As qualified immunity protects a public official in his individual capacity from civil damages, such immunity is unavailable to the public entity itself or the official acting in his official capacity.” Everson v. Leis, 556 F.3d 484, 501 n.7 (6th Cir. 2009) (citing Hall v. Tollett, 128 F.3d 418, 430 (6th Cir. 1997 . -16- Both these defendants were also sued in their individual capacities. To overcome the qualified immunity defense against the plaintiff’s individual capacity claim, the “plaintiff must establish (1) that the defendant violated a ‘constitutional right’ and (2) that the right ‘was clearly established.’” Leary v. Livingston County, 528 F.3d 438, 441 (6th Cir. 2008) (quoting Saucier v. Katz, , 201 (2001 . The Court has found already that the defendants violated a constitutional right when they terminated the plaintiff without affording her any process whatsoever. To determine whether the right was clearly established, the Court must ask “whether it would be clear to a reasonable officer that his conduct was unlawful in the situation he confronted.” Saucier v. Katz, , 202 (2001), overruled on other grounds by Pearson v. Callahan, --- U.S. ---, 129 S. Ct. 808 (2009). When considering that question, the Supreme Court has observed that “officials can still be on notice that their conduct violates established law even in novel factual circumstances.” Hope v. Pelzer, 536 U.S. 730, 741 (2002). As the Supreme Court explained in United States v. Lanier, 520 U.S. 259 (1997): In some circumstances, as when an earlier case expressly leaves open whether a general rule applies to the particular type of conduct at issue, a very high degree of prior factual particularity may be necessary. But general statements of the law are not inherently incapable of giving fair and clear warning, and in other instances a general constitutional rule already identified in the decisional law may apply with obvious clarity to the specific conduct in question, even though the very action in question has [not] previously been held unlawful. Id. at 271 (internal citations and quotation marks omitted). See also Gould v. Symons, 275 F. Supp. 2d 843, 848 (E.D. Mich. 2003). “The fact that the law may have been unclear, or even hotly disputed, at the margins does not afford state actors immunity from suit where their actions violate -17- the heartland of the constitutional guarantee, as that guarantee was understood at the time of the violation.” Stemler v. City of Florence, 126 F.3d 856, 867 (6th Cir. 1997). Silberstein v. City of Dayton, 440 F.3d 306 (6th Cir. 2006), provides some guidance on that question. The case involved a claim by a public employee that her termination without a hearing deprived her of property without due process. The defendants challenged the proper classification of the plaintiff’s job position and quibbled over whether her job fell within the category of classified employees that maintained a clearly established right to a hearing; because of this dispute, the defendants argued that “a reasonable person would not know that he or she was violating Silberstein’s rights.” Silberstein, 440 F.3d at 316. The court stated that “[a]t the time of Silberstein’s termination in August 2002, Supreme Court precedent had clearly established that a pre-termination hearing is required before terminating an employee who holds a property interest in her employment, and also clearly established that statutes restricting the terms and procedures under which an employee may be terminated create such a property interest.” Ibid. The Silberstein court cited Loudermill for this proposition and advanced Loudermill one step further to include city charters and ordinances as sufficient rights-granting state actions. Ibid. To resolve the dispute over the plaintiff’s job classification, the Silberstein court looked at “the plain language of the Charter [and] general understanding and practice” to determine that the plaintiff’s position carried a clearly established right and qualified immunity was not available to the defendants. Id. at 317. The court noted that evidence of a long-standing general understanding that the employees in the plaintiff’s position were entitled to a pre-termination hearing had been considered sufficient to deny qualified immunity in previous cases. Ibid. (citing Singfield v. Akron Metro. Hous. Auth., 389 F.3d 555, 567-68 (6th Cir. 2004 . -18- The same result obtains here. The just cause and hearing provisions in the City Charter, plus the fixed term of the plaintiff’s tenure, establishes “a legitimate claim of entitlement” to continued employment on the plaintiff’s part. Roth, 408 U.S. at 577. Any reasonable officer would know that termination from that job without some measure of process was unreasonable. The language of the LGFRA does not provide justification for the defendants’ actions or cast doubt on the plaintiff’s entitlement to a hearing. Only a tortured reading of that law would permit the conclusion that the plaintiff fell within the class of elected officials or department heads that could be terminated by the EFM. Moreover, a reasonable officer in the defendants’ positions should know that state law cannot contravene federal rights and a public employee retains these federal rights regardless of the language of the state statute. Qualified immunity, therefore, provides no safe harbor for the defendants. III. The Court finds that the plaintiff’s claims based on violation of state constitutional law fail as a matter of law. The plaintiff has a constitutionally protected property right in her continued employment, and she was deprived of that right without due process of law. She is entitled to recover from defendants City of Pontiac and Fred Leeb as a matter of law, but fact questions preclude summary judgment in her favor against defendant Marshall. The plaintiff is entitled to partial judgment on liability; she has presented no proof of damages. Accordingly, it is ORDERED that the defendant’s motions’ to dismiss, construed as motions for summary judgment [dkt #s 11, 12], are GRANTED IN PART AND DENIED IN PART. It is further ORDERED that count II of the amended complaint is DISMISSED WITH PREJUDICE. -19- It is further ORDERED that the plaintiff’s motion for summary judgment [dkt #21] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that plaintiff may recover on her theory of liability stated in count I of her amended complaint from defendants City of Pontiac and Fred Leeb in his individual and official capacities. It is further ORDERED that counsel for the parties shall appear for a scheduling conference on October 25, 2010 at 12:00 p.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: September 30, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on September 30, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -20-

=== Wendy A. Arrington v. Michigan Bell Telephone Company ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION WENDY A. ARRINGTON, Plaintiff, v. MICHIGAN BELL TELEPHONE COMPANY, Defendant. ________________________________________ / Case Number 10-10975 Honorable David M. Lawson OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO DISMISS COUNT II OF THE COMPLAINT Contending that her employer, the defendant, misclassified her job as a managerial position to avoid having to pay premium overtime wages, the plaintiff brought suit against defendant Michigan Bell under the Fair Labor Standards Act (FLSA) and the Michigan Minimum Wage Law (MMWL). The statute of limitations in the FLSA is two years (unless the violation is willful), but the statute of limitations in the Michigan law is three years. The defendant has filed a motion to dismiss the count of the complaint based on the MMWL, arguing that by its own terms the statute does not apply to an employer who also is covered by the FLSA, which the defendant undoubtedly is. The plaintiff contends that because a provision of the Michigan law negates the employer’s exemption when application of “those federal minimum wage provisions would result in a lower minimum wage than provided in this act,” Mich. Comp. Laws § 408.394(1), “application” of the shorter federal statute of limitations would result in a smaller recovery for the plaintiff and therefore an effectively lower minimum wage. Precedent from the state intermediate appellate court is contrary to the plaintiff’s position, and this Court believes that the state supreme court would construe the MMWL the same way. Consequently, the Court finds that the MMWL does not apply to this dispute and the defendant’s motion to dismiss count II of the complaint will be granted. I The plaintiff brought this action as a putative collective action under the FLSA and a putative class action under the MMWL. She alleges that she has been employed by defendant Michigan Bell Telephone Company since 2001 and was promoted to the position of First Level Manager in 2005. She describes her job duties and alleges that the work she performs should not be considered “exempt” under the FLSA or the MMWL. She contends that the defendant has incorrectly, either willfully or negligently, misclassified her position and thus has failed to compensate her at a premium rate for overtime wages she has accrued as a First Level Manager. There appears to be little dispute that before 2006, the defendant’s obligations under the FLSA and the MMWL were the same. In 2006, Michigan law was amended to increase the minimum hourly wage from $5.15 to $7.40 over a two-year period. That change has no effect on the plaintiff’s claim, however, which is based on the overtime provisions of the statutes, not the minimum hourly wage provisions. The defendant’s motion to dismiss the state law claim is based on its reading of the Michigan statutory provisions, which, the defendant argues, exempt it from the MMWL and leave its employees to their remedies under the FLSA. The plaintiff insists that she may pursue a claim under the MMWL because a longer period of limitations would permit a larger recovery, and the Michigan law focuses not only on the hourly rate that must be paid to employees, but also on the total sum that the employer owes its workers. Therefore, the plaintiff reasons, the exception to the MMWL’s exemption, quoted above, renders the statute applicable to the defendant here. -2- II. Motions to dismiss are governed by Rule 12(b) of the Federal Rules of Civil Procedure and allow for dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). Recently, motions under this rule have become the vehicle to determine whether factual allegations were pleaded in a proper way to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, , 570 (2007). Where the facts are plainly set forth in the complaint, and the defendant takes no issue with their sufficiency, however, Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law. Nietzke v. Williams, , 326-27 (1989) (citing Hishon v. King & Spalding, 467 U.S. 69, 73 (1984 . When a claim is based entirely on state law, the Court must apply the law of the forum state’s highest court. Erie R.R. v. Tompkins, , 78 (1938). If the state’s highest court has not decided an issue, then “the federal court must ascertain the state law from ‘all relevant data.’” Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995) (quoting Bailey v. V&O Press Co., 770 F.2d 601, 604 (6th Cir. 1985 . “Relevant data includes the state’s intermediate appellate court decisions, as well as the state supreme court’s relevant dicta, restatements of the law, law review commentaries, and the majority rule among other states.” Ososki v. St. Paul Surplus Lines, 156 F. Supp. 2d 669, 674 (E.D. Mich. 2001) (quotation marks and citation omitted). -3- Overtime compensation is governed by both the federal FLSA, 29 U.S.C. § 201 et seq., and the state’s MMWL, Mich. Comp. Laws § 408.381 et seq. The two statutes largely parallel each other. See Saginaw Firefighters Ass’n v. City of Saginaw, 137 Mich. App. 625, 631-32, 357 N.W.2d 908, 911 (1984). The FLSA applies to employers with two or more employees who are engaged in interstate commerce and have an annual gross income of over $500,000. 29 U.S.C. § 203(b), (d), (I), (j), & (s). The MMWL applies to employers who have two or more employees, but it specifically exempts employers who are otherwise covered by the FLSA. See Mich. Comp. Laws §§ 408.382-.383 & .394(1). Section 14 of the MMWL expressly states that the law “does not apply to an employer who is subject to the minimum wage provisions of the fair labor standards act of 1938 . . . unless those federal minimum wage provisions would result in a lower minimum wage than provided in this act.” Mich. Comp. Laws § 408.394(1) (emphasis added). Prior to the 2006 amendments to the MMWL, both statutes required that covered employers pay a minimum wage of $5.15, 29 U.S.C. § 206(a)(1); Mich. Comp. Laws § 408.384(1), and compensate overtime work in excess of 40 hours per week at a rate of one-and-one-half times the regular rate. 29 U.S.C. § 207(a)(1); Mich. Comp. Laws § 408.384a(1). In October 2006, the Michigan legislature amended the MMWL and increased the minimum wage within the state. Recognizing that this amendment would bring many new employers under the statute only by virtue of the fact that the “federal minimum wage provisions would result in a lower minimum wage than provided in this act,” Mich. Comp. Laws § 408.394, the legislature also amended section 14 to add the following language: “Section 4a does not apply” to “an employer who is subject to this act only by application of this subsection [of section 14].” Id. § 408.394(1)(a). -4- Section 4a, Mich. Comp. Laws § 408.384a, governs overtime compensation and requires a time-and- a-half premium. The amended section 14 retained an additional exemption from the statutory overtime requirements for “[a]n employee employed in a bona fide executive, administrative, or professional capacity,” the category contested by the plaintiff in this case. Mich. Comp. Laws § 408.384a(4)(a), (f). The exemption language plainly states that employers subject to the FLSA are not also subject to the MMWL despite section 14’s provision that the exemption does not apply where the “federal minimum wage provisions would result in a lower minimum wage,” even in light of the increase in the state minimum wage. The natural reading of the text allows for no other conclusion, and no other statutory interpretation is necessary. See Lockhart v. Napolitano, 573 F.3d 251, 255 (6th Cir. 2009) (stating that courts apply the three-step approach established by the Supreme Court when interpreting a statute: “first, a natural reading of the full text; second, the common-law meaning of the statutory terms; and finally, consideration of the statutory and legislative history for guidance” (citing United States v. Wells, 519 U.S. 482, 490-92 (1997 ; see also Elgharib v. Napolitano, 600 F.3d 597, 601 (6th Cir. 2010) (reiterating this standard). Nonetheless, other sources confirm the meaning of the statute noted above. Legislative analyses prepared in conjunction with the 2006 amendments confirm that the amendments to section 14 were intended to “exempt from the Law’s overtime compensation requirements an employer who otherwise would be subject to the Law only because the State’s minimum wage exceeds the federal minimum wage.” Joe Carrasco et al., Michigan Senate Fiscal Agency, S0506\2318es, Bill Analysis – S.B. 318, 453, & 1364 and H.B. 6213: Enrolled Summary (Apr. 4, 2007), at 1, 2; Steve Angelotti et al., Michigan Senate Fiscal -5- Agency, S0506\s6213sa, Bill Analysis – H.B. 6213: Floor Analysis (Jun. 27, 2006), at 1; Steve Angelotti et al., Michigan Senate Fiscal Agency, S0506/s6213sa, Bill Analysis – H.B. 6213: Committee Summary (Jun. 26, 2006), at 1; Chris Couch & Jim Stansell, Michigan House Fiscal Agency, Legislative Analysis – Minimum Wage: Overtime Exemptions, House Bill 6213 (Jun. 19, 2006), at 1. Secondary sources analyzing the amendments support this interpretation as well. In Employment Litigation in Michigan, the authors write that following the increase in minimum wage, “there was a concern that more employees would be eligible for overtime under the state law. Later amendments to MCL 408.394, under 2006 PA 373, provide that the state’s overtime provisions do not apply to employees who would be eligible for overtime only because of the minimum wage difference.” David B. Calzone et al., Employment Litigation In Michigan § 9.49, p. 9-26 (Institute of Continuing Legal Education, 2d ed. 2003, 2010 update). The plaintiff’s argument that the MMWL applies in her case is based on a slightly different application of the exception language of section 14 and the interplay with the different periods of limitation in the MMWL and the FSLA. She contends that when applying that language, the court must look at the total potential recovery for premium overtime wages against an employer rather than focusing on the hourly wage itself. She reasons that application of the FLSA’s two year statute of limitations for non-wilful violations will “result in a lower minimum wage than provided in” the MMWL. Mich. Comp. Laws § 408.394(1). Therefore, she says, the exemption in section 14 does not apply to the defendant, and the MMWL governs. The plaintiff’s argument finds support in Zimmer v. Bergstrom, Quinn & Oole, No. 88-506, 1989 WL 223111, at *3 (W.D. Mich. Oct. 16, 1989), in which the court, without much analysis of the statutory language, stated that “MWL is concerned with more than just the determination of the -6- hourly rate to be paid to an employee; its scope encompasses the total sum which may be owing to an employee.” Ibid. (emphasis omitted). The court reasoned that “because the statute of limitations would allow plaintiff to bring her entire employment period within the scope of her complaint, application of the MWL does result in a higher ‘minimum wage’ as defined by the MWL.” Ibid. The court concluded that the employer in that case was subject to the MMWL. The Michigan Court of Appeals did not adopt Zimmer’s approach and rejected the argument plaintiff makes here in Allen v. MGM Grand Detroit, LLC, 260 Mich. App. 90, 675 N.W.2d 907 (2003). The court parsed section 14 and noted that the exception to the exemption made reference to “those federal minimum wage provisions” in the FLSA when establishing the comparator for determining if the federal minimum wage would be lower than under the Michigan law. “[T]hose . . . provisions,” the court determined, referred only to the sections of the federal Act listed in the Michigan statute, that is 29 U.S.C. §§ 201 to 216 and 217 to 219. Id. at 96. The court then determined that “the FLSA statute of limitations, 29 U.S.C. 255, is not an FLSA ‘minimum wage provision’ as defined under MCL 408.394. Therefore, application of the federal limitations period cannot result in ‘a lower minimum wage’ than that provided by the MWL.” Id. at 91, 675 N.W.2d at 908. Ultimately, the court held that “29 U.S.C. § 255 is not one of those federal minimum wage provisions expressly identified by the Michigan Legislature that should be applied to determine whether the FLSA results in a lower minimum wage than that provided by the MWL. Therefore, the FLSA statute of limitations is irrelevant to whether the MWL is applicable . . . .” Id. at 96-97, 675 N.W.2d at 910. This Court believes that the Michigan Supreme Court likely would follow the reasoning of Allen over the rationale set out in Zimmer. There are several reasons for this. First, Allen is based -7- on the actual text of section 14. That section makes reference to federal statues that establish rules for payment of wages for work performed. The statute of limitations, which is a claim processing rule, is not listed among them. Allen, therefore, applies section 14 as written. Second, the rationale set forth in Zimmer confounds the idea of a minimum wage with civil actions brought to enforce payment of that wage. The right to the wage is a creature of statute — state or federal, as the case may be. The right to recover under that statute depends on the timeliness of the litigant’s lawsuit, which has no effect on the amount of the hourly or weekly wage, but rather on how far back the right may be enforced. Third, Allen’s reasoning was adopted and applied in Allison v. Pepsi Bottling Group, Inc., No. 03-244, 2004 WL 3926015 (W.D. Mich. June 28, 2004), a case in which the court found that the MMWL governed because a statute specifically listed in section 14 resulted in a lower federal minimum wage. Allison was decided by Zimmer’s author. Other federal courts have followed that reasoning as well. See Pacheco v. Boar’s Head Provisions Co., Inc., No. 09-298, 2010 WL 1323785, at *3-*4 (W.D. Mich. Mar. 30, 2010); Morrison v. Staples, Inc., No. 08-616, 2008 WL 4911156, at *3 (D. Conn. Nov. 13, 2008). Finally, Allen does no violence to the state legislature’s intent. As the Allen court interpreted the state statute, employees in Michigan covered by both the FLSA and the MMWL have a substantive right to the higher of the two possible minimum wages, which they can enforce with equal measure, provided their lawsuits are timely. This Court holds, therefore, that the exemption found in section 14 of the MMWL applies to the defendant in this case because it also is subject to the FLSA, and no exception suspends the application of that exemption. Consequently, the plaintiff has not stated a claim under the MMWL for which relief can be granted. -8- III. Because the MMWL does not apply to the defendant’s employment of the plaintiff, the plaintiff cannot maintain an action thereunder, and the defendant is entitled to a dismissal of count II of the complaint as a matter of law. Accordingly, it is ORDERED that the defendant’s motion to dismiss [dkt #10] is GRANTED. It is further ORDERED that count II of the complaint is DISMISSED WITH PREJUDICE. Dated: September 29, 2010 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on September 29, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -9-

=== Arrington v. Michigan Bell Telephone ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION WENDY A. ARRINGTON, Plaintiff, v. MICHIGAN BELL TELEPHONE COMPANY, Defendant. ________________________________________ / Case Number 10-10975 Honorable David M. Lawson OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO DISMISS COUNT II OF THE COMPLAINT Contending that her employer, the defendant, misclassified her job as a managerial position to avoid having to pay premium overtime wages, the plaintiff brought suit against defendant Michigan Bell under the Fair Labor Standards Act (FLSA) and the Michigan Minimum Wage Law (MMWL). The statute of limitations in the FLSA is two years (unless the violation is willful), but the statute of limitations in the Michigan law is three years. The defendant has filed a motion to dismiss the count of the complaint based on the MMWL, arguing that by its own terms the statute does not apply to an employer who also is covered by the FLSA, which the defendant undoubtedly is. The plaintiff contends that because a provision of the Michigan law negates the employer’s exemption when application of “those federal minimum wage provisions would result in a lower minimum wage than provided in this act,” Mich. Comp. Laws § 408.394(1), “application” of the shorter federal statute of limitations would result in a smaller recovery for the plaintiff and therefore an effectively lower minimum wage. Precedent from the state intermediate appellate court is contrary to the plaintiff’s position, and this Court believes that the state supreme court would construe the MMWL the same way. Consequently, the Court finds that the MMWL does not apply to this dispute and the defendant’s motion to dismiss count II of the complaint will be granted. I The plaintiff brought this action as a putative collective action under the FLSA and a putative class action under the MMWL. She alleges that she has been employed by defendant Michigan Bell Telephone Company since 2001 and was promoted to the position of First Level Manager in 2005. She describes her job duties and alleges that the work she performs should not be considered “exempt” under the FLSA or the MMWL. She contends that the defendant has incorrectly, either willfully or negligently, misclassified her position and thus has failed to compensate her at a premium rate for overtime wages she has accrued as a First Level Manager. There appears to be little dispute that before 2006, the defendant’s obligations under the FLSA and the MMWL were the same. In 2006, Michigan law was amended to increase the minimum hourly wage from $5.15 to $7.40 over a two-year period. That change has no effect on the plaintiff’s claim, however, which is based on the overtime provisions of the statutes, not the minimum hourly wage provisions. The defendant’s motion to dismiss the state law claim is based on its reading of the Michigan statutory provisions, which, the defendant argues, exempt it from the MMWL and leave its employees to their remedies under the FLSA. The plaintiff insists that she may pursue a claim under the MMWL because a longer period of limitations would permit a larger recovery, and the Michigan law focuses not only on the hourly rate that must be paid to employees, but also on the total sum that the employer owes its workers. Therefore, the plaintiff reasons, the exception to the MMWL’s exemption, quoted above, renders the statute applicable to the defendant here. -2- II. Motions to dismiss are governed by Rule 12(b) of the Federal Rules of Civil Procedure and allow for dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). Recently, motions under this rule have become the vehicle to determine whether factual allegations were pleaded in a proper way to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, , 570 (2007). Where the facts are plainly set forth in the complaint, and the defendant takes no issue with their sufficiency, however, Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law. Nietzke v. Williams, , 326-27 (1989) (citing Hishon v. King & Spalding, 467 U.S. 69, 73 (1984 . When a claim is based entirely on state law, the Court must apply the law of the forum state’s highest court. Erie R.R. v. Tompkins, , 78 (1938). If the state’s highest court has not decided an issue, then “the federal court must ascertain the state law from ‘all relevant data.’” Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995) (quoting Bailey v. V&O Press Co., 770 F.2d 601, 604 (6th Cir. 1985 . “Relevant data includes the state’s intermediate appellate court decisions, as well as the state supreme court’s relevant dicta, restatements of the law, law review commentaries, and the majority rule among other states.” Ososki v. St. Paul Surplus Lines, 156 F. Supp. 2d 669, 674 (E.D. Mich. 2001) (quotation marks and citation omitted). -3- Overtime compensation is governed by both the federal FLSA, 29 U.S.C. § 201 et seq., and the state’s MMWL, Mich. Comp. Laws § 408.381 et seq. The two statutes largely parallel each other. See Saginaw Firefighters Ass’n v. City of Saginaw, 137 Mich. App. 625, 631-32, 357 N.W.2d 908, 911 (1984). The FLSA applies to employers with two or more employees who are engaged in interstate commerce and have an annual gross income of over $500,000. 29 U.S.C. § 203(b), (d), (I), (j), & (s). The MMWL applies to employers who have two or more employees, but it specifically exempts employers who are otherwise covered by the FLSA. See Mich. Comp. Laws §§ 408.382-.383 & .394(1). Section 14 of the MMWL expressly states that the law “does not apply to an employer who is subject to the minimum wage provisions of the fair labor standards act of 1938 . . . unless those federal minimum wage provisions would result in a lower minimum wage than provided in this act.” Mich. Comp. Laws § 408.394(1) (emphasis added). Prior to the 2006 amendments to the MMWL, both statutes required that covered employers pay a minimum wage of $5.15, 29 U.S.C. § 206(a)(1); Mich. Comp. Laws § 408.384(1), and compensate overtime work in excess of 40 hours per week at a rate of one-and-one-half times the regular rate. 29 U.S.C. § 207(a)(1); Mich. Comp. Laws § 408.384a(1). In October 2006, the Michigan legislature amended the MMWL and increased the minimum wage within the state. Recognizing that this amendment would bring many new employers under the statute only by virtue of the fact that the “federal minimum wage provisions would result in a lower minimum wage than provided in this act,” Mich. Comp. Laws § 408.394, the legislature also amended section 14 to add the following language: “Section 4a does not apply” to “an employer who is subject to this act only by application of this subsection [of section 14].” Id. § 408.394(1)(a). -4- Section 4a, Mich. Comp. Laws § 408.384a, governs overtime compensation and requires a time-and- a-half premium. The amended section 14 retained an additional exemption from the statutory overtime requirements for “[a]n employee employed in a bona fide executive, administrative, or professional capacity,” the category contested by the plaintiff in this case. Mich. Comp. Laws § 408.384a(4)(a), (f). The exemption language plainly states that employers subject to the FLSA are not also subject to the MMWL despite section 14’s provision that the exemption does not apply where the “federal minimum wage provisions would result in a lower minimum wage,” even in light of the increase in the state minimum wage. The natural reading of the text allows for no other conclusion, and no other statutory interpretation is necessary. See Lockhart v. Napolitano, 573 F.3d 251, 255 (6th Cir. 2009) (stating that courts apply the three-step approach established by the Supreme Court when interpreting a statute: “first, a natural reading of the full text; second, the common-law meaning of the statutory terms; and finally, consideration of the statutory and legislative history for guidance” (citing United States v. Wells, 519 U.S. 482, 490-92 (1997 ; see also Elgharib v. Napolitano, 600 F.3d 597, 601 (6th Cir. 2010) (reiterating this standard). Nonetheless, other sources confirm the meaning of the statute noted above. Legislative analyses prepared in conjunction with the 2006 amendments confirm that the amendments to section 14 were intended to “exempt from the Law’s overtime compensation requirements an employer who otherwise would be subject to the Law only because the State’s minimum wage exceeds the federal minimum wage.” Joe Carrasco et al., Michigan Senate Fiscal Agency, S0506\2318es, Bill Analysis – S.B. 318, 453, & 1364 and H.B. 6213: Enrolled Summary (Apr. 4, 2007), at 1, 2; Steve Angelotti et al., Michigan Senate Fiscal -5- Agency, S0506\s6213sa, Bill Analysis – H.B. 6213: Floor Analysis (Jun. 27, 2006), at 1; Steve Angelotti et al., Michigan Senate Fiscal Agency, S0506/s6213sa, Bill Analysis – H.B. 6213: Committee Summary (Jun. 26, 2006), at 1; Chris Couch & Jim Stansell, Michigan House Fiscal Agency, Legislative Analysis – Minimum Wage: Overtime Exemptions, House Bill 6213 (Jun. 19, 2006), at 1. Secondary sources analyzing the amendments support this interpretation as well. In Employment Litigation in Michigan, the authors write that following the increase in minimum wage, “there was a concern that more employees would be eligible for overtime under the state law. Later amendments to MCL 408.394, under 2006 PA 373, provide that the state’s overtime provisions do not apply to employees who would be eligible for overtime only because of the minimum wage difference.” David B. Calzone et al., Employment Litigation In Michigan § 9.49, p. 9-26 (Institute of Continuing Legal Education, 2d ed. 2003, 2010 update). The plaintiff’s argument that the MMWL applies in her case is based on a slightly different application of the exception language of section 14 and the interplay with the different periods of limitation in the MMWL and the FSLA. She contends that when applying that language, the court must look at the total potential recovery for premium overtime wages against an employer rather than focusing on the hourly wage itself. She reasons that application of the FLSA’s two year statute of limitations for non-wilful violations will “result in a lower minimum wage than provided in” the MMWL. Mich. Comp. Laws § 408.394(1). Therefore, she says, the exemption in section 14 does not apply to the defendant, and the MMWL governs. The plaintiff’s argument finds support in Zimmer v. Bergstrom, Quinn & Oole, No. 88-506, 1989 WL 223111, at *3 (W.D. Mich. Oct. 16, 1989), in which the court, without much analysis of the statutory language, stated that “MWL is concerned with more than just the determination of the -6- hourly rate to be paid to an employee; its scope encompasses the total sum which may be owing to an employee.” Ibid. (emphasis omitted). The court reasoned that “because the statute of limitations would allow plaintiff to bring her entire employment period within the scope of her complaint, application of the MWL does result in a higher ‘minimum wage’ as defined by the MWL.” Ibid. The court concluded that the employer in that case was subject to the MMWL. The Michigan Court of Appeals did not adopt Zimmer’s approach and rejected the argument plaintiff makes here in Allen v. MGM Grand Detroit, LLC, 260 Mich. App. 90, 675 N.W.2d 907 (2003). The court parsed section 14 and noted that the exception to the exemption made reference to “those federal minimum wage provisions” in the FLSA when establishing the comparator for determining if the federal minimum wage would be lower than under the Michigan law. “[T]hose . . . provisions,” the court determined, referred only to the sections of the federal Act listed in the Michigan statute, that is 29 U.S.C. §§ 201 to 216 and 217 to 219. Id. at 96. The court then determined that “the FLSA statute of limitations, 29 U.S.C. 255, is not an FLSA ‘minimum wage provision’ as defined under MCL 408.394. Therefore, application of the federal limitations period cannot result in ‘a lower minimum wage’ than that provided by the MWL.” Id. at 91, 675 N.W.2d at 908. Ultimately, the court held that “29 U.S.C. § 255 is not one of those federal minimum wage provisions expressly identified by the Michigan Legislature that should be applied to determine whether the FLSA results in a lower minimum wage than that provided by the MWL. Therefore, the FLSA statute of limitations is irrelevant to whether the MWL is applicable . . . .” Id. at 96-97, 675 N.W.2d at 910. This Court believes that the Michigan Supreme Court likely would follow the reasoning of Allen over the rationale set out in Zimmer. There are several reasons for this. First, Allen is based -7- on the actual text of section 14. That section makes reference to federal statues that establish rules for payment of wages for work performed. The statute of limitations, which is a claim processing rule, is not listed among them. Allen, therefore, applies section 14 as written. Second, the rationale set forth in Zimmer confounds the idea of a minimum wage with civil actions brought to enforce payment of that wage. The right to the wage is a creature of statute — state or federal, as the case may be. The right to recover under that statute depends on the timeliness of the litigant’s lawsuit, which has no effect on the amount of the hourly or weekly wage, but rather on how far back the right may be enforced. Third, Allen’s reasoning was adopted and applied in Allison v. Pepsi Bottling Group, Inc., No. 03-244, 2004 WL 3926015 (W.D. Mich. June 28, 2004), a case in which the court found that the MMWL governed because a statute specifically listed in section 14 resulted in a lower federal minimum wage. Allison was decided by Zimmer’s author. Other federal courts have followed that reasoning as well. See Pacheco v. Boar’s Head Provisions Co., Inc., No. 09-298, 2010 WL 1323785, at *3-*4 (W.D. Mich. Mar. 30, 2010); Morrison v. Staples, Inc., No. 08-616, 2008 WL 4911156, at *3 (D. Conn. Nov. 13, 2008). Finally, Allen does no violence to the state legislature’s intent. As the Allen court interpreted the state statute, employees in Michigan covered by both the FLSA and the MMWL have a substantive right to the higher of the two possible minimum wages, which they can enforce with equal measure, provided their lawsuits are timely. This Court holds, therefore, that the exemption found in section 14 of the MMWL applies to the defendant in this case because it also is subject to the FLSA, and no exception suspends the application of that exemption. Consequently, the plaintiff has not stated a claim under the MMWL for which relief can be granted. -8- III. Because the MMWL does not apply to the defendant’s employment of the plaintiff, the plaintiff cannot maintain an action thereunder, and the defendant is entitled to a dismissal of count II of the complaint as a matter of law. Accordingly, it is ORDERED that the defendant’s motion to dismiss [dkt #10] is GRANTED. It is further ORDERED that count II of the complaint is DISMISSED WITH PREJUDICE. Dated: September 29, 2010 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on September 29, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -9-

=== JOHN SEARCY v. COUNTY OF OAKLAND et al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JOHN SEARCY, Plaintiff, v. COUNTY OF OAKLAND, MICHAEL J. BOUCHARD, CITY OF PONTIAC, JOHN DOE 1-2, ______________________________________/ Defendants. Case Number 09-13007 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTIONS TO DISMISS OR FOR SUMMARY JUDGMENT, DISMISSING CERTAIN COUNTS, REQUIRING ANSWERS TO THE COMPLAINT, AND SETTING SCHEDULING CONFERENCE The defendants have raised several issues in their motions to dismiss this civil rights case presently pending before the Court. The main issue relating to the timeliness of the complaint — and whether the plaintiff has avoided the statute of limitations bar — presents the following question: Is an action “commenced” under Federal Rule of Civil Procedure 3 when a complaint is submitted electronically through the Court’s Case Management/Electronic Case Filing (CM/ECF) system, even though the filing fee is not paid at that time? Pre-CM/ECF Sixth Circuit precedent suggests a negative answer to that question. However, under current practice and the Court’s CM/ECF Policies and Procedures, the Court determines that a complaint is “filed” when it is lodged electronically with the Clerk. The non-payment of the fee may subject the complaint to later dismissal, but it does not upset its status as “filed” under Rule 3. Despite this determination, some of the counts in the complaint are untimely, and the plaintiff has made no effort to identify and name certain “John Doe” defendants. Consequently, for the reasons set out in detail below, the Court will grant in part and deny in part the defendants’ motions to dismiss. I. The plaintiff contends that he was falsely arrested, the officers who arrested him used excessive force, and he was detained without the opportunity to post bond. His complaint alleges various constitutional violations via 42 U.S.C. § 1983 and several state law causes of action against two municipal defendants and three police officers, two of whom are identified by John Doe pseudonyms. According to the complaint’s allegations, which the defendants do not contest for the purpose of their motions, on July 13, 2006, plaintiff John Searcy received a letter from “M.I.B.” inviting him participate in research concerning some new vehicles and offering an opportunity to win a new car. The letter instructed the plaintiff to go to 409 North Telegraph Road in Pontiac, Michigan on July 29, 2006. The plaintiff alleges that this letter was actually part of a sting operation set up by the City of Pontiac police department and the Oakland County Sheriff’s Department to apprehend fugitives with outstanding warrants. When the plaintiff arrived at 409 North Telegraph Road, he was asked to present the letter he received and a form of identification. Two or three unidentified individuals began showing the plaintiff the vehicles. When they reached the final vehicle, one individual allegedly said “Nothing in this life is free” and the officers escorted the plaintiff to the back of the building. There, he was greeted by two plain-clothes police officers and handcuffed. The plaintiff was not told that he was under arrest, but he did not resist the officers’ actions. Nonetheless, he contends that the officers threw him against a wall and injured his head, right shoulder, and back. He alleges that he was -2- denied medical treatment when he requested it. At some point later, the plaintiff was told that he was being arrested for an outstanding warrant. When he denied that he had any warrants, an officer allegedly told him to “shut up.” The plaintiff was transported to the Pontiac Police Department. The officers allegedly refused to release him on bond when his family arrived with the necessary bond money. The plaintiff says he informed a deputy that he would be fired if he did not appear for work. His pleas fell on deaf ears, and he was detained in jail over the weekend and was not brought to court until the following Monday, August 1, 2006. On that date, the plaintiff was returned to the jail and released without being brought before a judge and without any charges brought against him. The plaintiff alleges that he was forced to sign papers releasing the police department and the City of Pontiac from liability and states that signing these papers was a condition of his release. On July 29, 2009, three years to the day after the arrest, the plaintiff’s attorney submitted his complaint for filing to this Court via the CM/ECF electronic filing system. The complaint names as defendants Oakland County, Sheriff Michael J. Bouchard, and a John Doe Deputy Sheriff from Oakland County (the Oakland County defendants); and the City of Pontiac and a John Doe police officer from the Pontiac police department (the Pontiac defendants). The complaint includes counts for gross negligence, intentional infliction of emotional distress, false arrest, false imprisonment, assault and battery, and three counts under 42 U.S.C. § 1983 for violating the plaintiff’s Fourth and Eighth Amendment rights. Plaintiff’s counsel did not pay the filing fee at the time the complaint was submitted electronically. The Clerk of Court issued a Notice of Filing Fee Not Paid on July 30, 2009, which directed the plaintiff to pay the filing fee “within seven calendar days,” i.e., by August 6, 2009, or -3- face dismissal. Inexplicably, the plaintiff did not pay the filing fee until August 12, 2009. The Clerk then issued summonses for the named defendants on August 13, 2009. The record does not indicate when these defendants were served, but the defendants assert (and the plaintiff admits) that they were not served with the summons and complaint until December 9, 2009. Plaintiff’s counsel also has asserted that she became ill on October 14, 2009, but did not seek medical attention until October 21, 2009. She was diagnosed with the H1N1 influenza virus and suffered complications with her diabetes as a result. She says she took a medical leave from work until November 9, 2009 under doctor’s orders. On December 22 and 29, 2009, the defendants filed dispositive motions. The plaintiff did not respond to these motions within the deadlines established by the local rules. The Court scheduled a hearing on these motions for May 3, 2010. Five days before the hearing — and four months after the dismissal motions were filed — the plaintiff’s attorney filed an emergency motion for an extension of time to file responses to the dispositive motions. The Court heard oral argument on this motion on May 3, 2010. Plaintiff’s counsel explained that her office had been burglarized in November 2009 and her office computer was stolen. She said she lost her records of pending cases and her calendar deadlines. Despite the fact that the defendants filed their motions after the computer theft, the Court granted the plaintiff’s motion due to other non-case-related difficulties encountered by the plaintiff’s attorney and permitted the plaintiff to file responses by May 10, 2010. Remarkably, the plaintiff filed responsive briefs — without explanation — one day late, on May 11, 2010. -4- II. The Oakland County defendants filed a motion to dismiss. The Pontiac defendants styled their motion as one for summary judgment; however, they reference only the complaint and have not attached materials beyond the pleadings, so the Court will treat both motions under Rule 12. All the defendants argue that the plaintiff’s claims are barred by the three-year statute of limitations. The Pontiac defendants seem to argue that a two-year limitations period applies, which may be true for the state law claims but is incorrect as to the federal claims, as explained below. The defendants acknowledge that the complaint was submitted to the Court on the last possible day, but they insist that the complaint cannot be considered “filed” until the filing fee is paid. Since the filing fee was not paid within the three-year period, they reason, the statute of limitations bars the plaintiff’s claims. The defendants also contend that they were not served with the summons and complaint until December 9, 2009, which was 133 days after the complaint was submitted to court, 119 days after the filing fee was paid, and 118 days after the summons was issued by the clerk. They contend that defect requires dismissal. The Pontiac defendants argue that the John Doe defendants were never identified or served and therefore should be dismissed from the case, since the plaintiff has had a generous amount of time to investigate and learn their identities. Finally, the Pontiac defendants allege that the John Doe defendants are necessary parties to the case, and the case cannot proceed against the municipalities after they are dismissed. A. Statute of limitations “A motion to dismiss based on the expiration of the statute of limitations is analyzed under [Federal] Rule [of Civil Procedure] 12(b)(6).” Moseke v. Miller & Smith, Inc., 202 F. Supp. 2d 492, 501 (E.D. Va. 2002). Rule 12(b)(6) authorizes federal courts to dismiss a pleading for “failure to -5- state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When deciding a motion under this Rule, the court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the complaint contains “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, , 570 (2007). “Like other Rule 12(b)(6) motions to dismiss, a motion to dismiss on statute of limitations grounds should be granted ‘when the statement of the claim affirmatively shows that the plaintiff can prove no set of facts that would entitle him to relief.’” New Eng. Health Care Employees Pension Fund v. Ernst & Young, LLP, 336 F.3d 495, 501 (6th Cir. 2003) (quoting Ott v. Midland-Ross Corp., 523 F.2d 1367, 1369 (6th Cir. 1975 ; see also Berry v. Chrysler Corp., 150 F.2d 1002, 1003 (6th Cir. 1945) (stating that “[t]he defense of the statute of limitations is covered by [Rule 12(b)](6), and therefore is properly raised by motion”). “What that means in the statute of limitations context is that dismissal is appropriate only if a complaint clearly shows the claim is out of time.” Harris v. New York, 186 F.3d 243, 250 (2d Cir. 1999). “Among the basic policies served by statutes of limitations is preventing plaintiffs from sleeping on their rights and prohibiting the prosecution of stale claims.” Wright v. Heyne, 349 F.3d 321, 330 (6th Cir. 2003) (citing Board of Regents of Univ. of State of N.Y. v. Tomanio, 446 U.S. 478, 487-88 (1980 . To avoid a statute of limitations bar, a plaintiff must commence his action within a prescribed time frame measured from the date the claim accrues. See Fonseca v. Consol. Rail Corp., 246 F.3d 585, 590 (6th Cir. 2001). A statute of limitations claim therefore has three variables: the date the claim accrues; the date the action is commenced; and the permissible period of delay between those two events. All three components are in dispute in this case. The sequence of events in this case is summarized as follows: -6- July 29, 2006 – Plaintiff is arrested August 1, 2006 – Plaintiff is released from custody July 29, 2009 – Complaint submitted to court through CM/ECF system July 30, 2009 – Notice issued to pay filing fee “within seven calendar days” (i.e. by August 6) August 12, 2009 – filing fee paid August 13, 2009 – Summonses issued October 14, 2009 – Plaintiff’s counsel became ill October 21, 2009 – Plaintiff’s counsel sought medical treatment and took leave from work November 9, 2009 – Plaintiff’s counsel returned to work November 13, 2009 – Burglary discovered at plaintiff’s counsel’s office (suggesting that break-in happened on the night of November 12, 2009) December 9, 2009 – Defendants served December 22 & 29, 2009 – Motions to dismiss filed 1. Accrual date The defendants argue that the plaintiff’s claim accrued when he was arrested on July 29, 2006. The plaintiff contends that his claim did not accrue until he was released from custody on August 1, 2006. “[T]he accrual date of a § 1983 cause of action is a question of federal law that is not resolved by reference to state law.” Wallace v. Kato, 549 U.S. 384, 388 (2007). In Wallace, the plaintiff brought an action under 42 U.S.C. § 1983 for false arrest, filing the case after the underlying criminal action terminated. The Supreme Court reiterated “‘the standard rule that [accrual occurs] when the plaintiff has “a complete and present cause of action.”’” Id. at 388 (quoting Bay Area Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corp. of Cal., 522 U.S. 192, 201 (1997 . Applying that rule, the Court concluded that the plaintiff’s false arrest claim accrued “as soon as the allegedly wrongful arrest occurred, subjecting him to the harm of involuntary detention.” Ibid. The Court also determined that “[l]imitations begin to run against an action for false imprisonment when the alleged false imprisonment ends.” Id. at 389 (quotation marks and citations omitted). Because the plaintiff’s claim under section 1983 was “[r]eflective of the fact that false imprisonment consists -7- of detention without legal process, a false imprisonment ends once the victim becomes held pursuant to such process — when, for example, he is bound over by a magistrate or arraigned on charges.” Ibid. The plaintiff’s claim for false imprisonment under section 1983 accrues, then, when the plaintiff is brought before a judicial officer or when he is released, whichever is earlier. Based on this authority, it appears that the plaintiff’s claim for false arrest and excessive force accrued on the date of the arrest, that is, July 29, 2006. The claim for unlawful detention without bond accrued when the plaintiff was released on August 1, 2006, since he never was taken before a judicial officer. 2. Period of limitations To determine the length of the period of limitations, “federal law looks to the law of the State in which the cause of action arose.” Id. at 387. The Pontiac defendants argue that a two-year limitations period applies to the plaintiff’s 1983-based false arrest and unlawful detention claims, presumably because there are analogous state law causes of action that carry two-year statutes of limitations. However, it is well settled that the statute of limitations for claims filed in Michigan based on 42 U.S.C. § 1983 is three years. McCune v. City of Grand Rapids, 842 F.2d 903 (6th Cir. 1988). In McCune, the court of appeals explained that “the appropriate statute of limitations to be applied in all section 1983 actions is the state statute of limitations governing actions for personal injury. . . . Michigan’s three year statute of limitations for personal injury claims, Mich. Comp. Laws Ann. § 600.5805(8) (West 1987), governs section 1983 actions when the cause of action arises in Michigan.” Id. at 905 (emphasis added). However, the complaint in this case alleges causes of action under state law as well. Under Michigan law, the statute of limitations for assault and battery, false imprisonment, and false arrest -8- is two years, Mich. Comp. Laws § 600.5805(2); Wolfe v. Perry, 412 F.3d 707, 715 (6th Cir. 2005) (citing Mich. Comp. Laws § 600.5805(2) as the statute of limitations for false arrest claims); gross negligence is three years, Mich. Comp. Laws § 600.5805(10); see also Bestway Recycling, Inc. v. Bean, No. 239440, 2003 WL 21186596, at *1 (Mich. App. May 20, 2003); and “all other actions to recover damages . . . for injury to a person,” including intentional infliction of emotional distress, have three-year statutes of limitations, id. § 600.5805(10); Nelson v. Ho, 222 Mich. App. 74, 85 & n.6, 564 N.W.2d 482, 487 & n.2 (1997) (noting that the Michigan Supreme Court has not formally recognized this tort, but the Michigan Court of Appeals has and applies a three-year statute of limitations). 3. Lawsuit commencement date “A civil action is commenced by filing a complaint with the court.” Fed. R. Civ. P. 3. The defendants contend that the additional act of paying a filing fee is required before a “filing” occurs. This argument does not find support in the text of the rules of procedure or the statutes. Rule 5(d)(2)(A) states that “[a] paper is filed by delivering it . . . to the clerk” and subsection (d)(4) prohibits the clerk from “refus[ing] to file a paper solely because it is not in the form prescribed by these rules or by a local rule or practice.” Fed. R. Civ. P. 5. Under 28 U.S.C. § 1914(a), the clerk is entitled to collect a filing fee when a complaint is submitted, but the statute does not speak to the status of complaint presented without a fee. The statutory language actually implies that payment of a fee is not a mandatory prerequisite to “filing” a complaint; instead, the matter is left to local practice. See 28 U.S.C. § 1914(c) (“Each district court by rule or standing order may require advance payment of fees.” (emphasis added . Nonetheless, courts have held that presenting a complaint without a filing fee does not constitute “filing” sufficient to stop a statute of limitations -9- from expiring. E.g. Jarrett v. US Sprint Commc’ns Co., 22 F.3d 256 (10th Cir. 1994). There is no consensus on either view. One commentator has stated: Filing a complaint requires nothing more than delivery of the document to a court officer authorized to receive it; the actual establishment of personal jurisdiction over the defendant, by service of process or other means, is not essential to the commencement of the action. . . . [However,] [i]n some cases the paying of filing fees may be a requirement to filing a complaint. 4 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1052 (3d ed.) (footnotes omitted). The weight of authority favors the view that presentment to the clerk constitutes “filing” irrespective of when the filing fee is paid. See, e.g., Farzana K. v. Ind. Dep’t of Educ., 473 F.3d 703, 707 (7th Cir. 2007) (holding that a “brief delay in payment is not a fatal misstep” that prevents a court from accepting an otherwise properly filed complaint and noting that the complaint must be accepted if it satisfies the statute of limitations, even if the filing fee is not paid); Rodgers ex rel. Jones v. Bowen, 790 F.2d 1550, 1551-52 (11th Cir. 1986) (“This circuit and others have long recognized that local rules should not be elevated to the status of jurisdictional requirements. . . . [W]e expressly rejected the theory that timely payment of a filing fee is a jurisdictional requirement . . . . [A] complaint is ‘filed’ for statute of limitations purposes when it is ‘in the actual or constructive possession of the clerk,’ regardless of the untimely payment of the required filing fee.” (internal citations omitted ; Johnson v. Brown, 803 F. Supp. 1414, 1417-18 (N.D. Ind. 1992) (determining that the plaintiff’s complaint, following a Title VII right-to-sue letter, should be deemed filed on the date his in forma pauperis application was denied even though the plaintiff had failed to pay the filing fee); cf. In re Bade, 87 B.R. 78, 79 (Bankr. D. Neb. 1988) (“Payment of the filing fee is not jurisdictional; the critical date, is the date upon which the pleading was initially filed with the Court.”). -10- The defendants’ argument that the lawsuit was not commenced until the filing fee was paid is based on language found in Truitt v. County of Wayne, 148 F.3d 644, 648 (6th Cir. 1998), a case originating in this district. The plaintiff presented to the Clerk of Court her complaint against her former employer under Title VII of the Civil Rights Act within 90 days of receiving her right-to-sue letter, together with a pauper affidavit. The pauper petition was denied, but the plaintiff did not pay her filing fee until five months later, well after the 90-day time limit expired. The Clerk formally filed the complaint when the fee was paid. The court of appeals affirmed the dismissal of the case on statute of limitations grounds, holding “that it is proper for a district court to deem a complaint ‘filed’ only when IFP [in forma pauperis] status is granted or the appropriate filing fee is paid, rather than at the time a complaint is delivered to the clerk of a court.” Id. at 648. At first blush, it appears that Truitt should govern this case and require dismissal of the complaint as untimely, but there are several reasons why it does not. First, as noted earlier, the decision runs against the grain of the text of Rule 5(d)(4) (“The clerk must not refuse to file a paper solely because it is not in the form prescribed by these rules or by a local rule or practice.”). The better-reasoned view, the Court believes, is expressed by the Seventh Circuit in Farzana K. v. Indiana Department of Education: By refusing to accept complaints (or notices of appeal) for filing, clerks may prevent litigants from satisfying time limits. To prevent this — to ensure that judges rather than administrative staff decide whether a document is adequate — Fed. R. Civ. P. 5(e) was amended in 1993 to require clerks to accept documents tendered for filing. . . . . . . That raises the question what happens (for limitations purposes) if a complaint is lodged with the clerk on time, but the fee is not paid until after the period of limitations has expired. We held in Robinson v. Doe, 272 F.3d 921 (7th Cir. 2001), relying in part on Rule 5(e), that a complaint must be accepted and filed even if neither the fee nor an application to proceed in forma pauperis is enclosed, and that -11- the complaint alone satisfies the statute of limitations. . . . If the fee is not paid promptly, however, the court is entitled to dismiss the complaint for failure to prosecute, and that dismissal will be conclusive. See Fed. R. Civ. P. 41(b). A plaintiff cannot avoid all required fees, but brief delay in payment is not a fatal misstep. Farzana K., 473 F.3d at 707. Capping off that reasoning, the court observed, “the Supreme Court held that a complaint (actually) filed in the wrong court generally satisfies a federal statute of limitations, provided that suit is re-filed in the right court promptly after the misadventure in the wrong forum ends.” Id. at 708 (citing Burnett v. New York Central R.R., 380 U.S. 424 (1965); Herb v. Pitcairn, 325 U.S. 77 (1945 . A delay in fee payment in the right court, the Seventh Circuit suggested, should not be treated with greater formalism. Of course, a disagreement among circuits by itself does not justify a departure from circuit law. A second reason Truitt does not govern is that the practice in this district has changed since Truitt was decided. In 1997 when Truitt’s complaint was dismissed, complaints lodged with the Clerk were held and not formally filed until a filing fee was paid or a pauper petition was granted. At that time, a docket number was assigned and a file was opened. That explains the phrasing of the court of appeals’s holding that a district court may “deem a complaint ‘filed’ only when IFP status is granted or the appropriate filing fee is paid.” Truitt, 148 F.3d at 648 (emphasis added). That choice of language also reflects the reality that under 28 U.S.C. § 1914, Congress allowed district courts flexibility in administering the mechanics of receiving complaints, collecting fees, and starting cases. In Jarrett v. US Sprint Communications Co., the Tenth Circuit approved a local practice similar to the former practice in this district. However, it eschewed an “absolute rule,” “leav[ing] the matter to each district court, within the bounds of § 1914.” 22 F.3d at 259 (stating that “[i]f the District of Kansas does not formally file a complaint until the filing fee is paid, such -12- action does not violate the statutory provision and is notice to a plaintiff that the filing fee requirement is enforced.”). Truitt was decided before the advent of electronic filing, and the practice in this district has changed as a result that new technology. Now, complaints may be filed over the Internet, as was done in this case, and Rule 5 has been amended to reflect that practice. Rule 5(d)(3) states: A court may, by local rule, allow papers to be filed, signed, or verified by electronic means that are consistent with any technical standards established by the Judicial Conference of the United States. . . . A paper filed electronically in compliance with a local rule is a written paper for purposes of these rules. Fed. R. Civ. P. 5(d)(3). Rule 6(a) of the Electronic Filing Policies and Procedures outlines the present practice: R6 Filing - Initiating Papers (a) The filing of civil initiating papers, issuance and service of the summons, and payment of initial filing fees may be done electronically until July 31, 2008, and must be done electronically beginning August 1, 2008. A case is not considered filed until an initiating paper has been uploaded and a judicial officer has been assigned to the case. The filing fee can be paid routinely up to seven days after “filing.” If it is not paid within this time frame, the assigned judge is contacted, but the case remains “filed” until it is dismissed by a judge. The complaint in this case was uploaded and the undersigned was assigned to the matter on July 29, 2009. That is when the case was “filed” under local practice, and that filing commenced the action under Federal Rule of Civil Procedure 3. No filing fee was paid then, so the next day a notice was sent to the plaintiff’s lawyer to see that it was paid within seven days. The fee was not paid until August 12, 2009, and summonses were issued the next day. The fee payment was tardy, and the plaintiff’s attorney was careless. Had further delay ensued, the Court would have issued a -13- show cause order and dismissed the case for failure to prosecute absent a satisfactory explanation. However, the non-payment of the fee did not upset the “filed” status of the complaint. The Court concludes, therefore, that this case was commenced within the meaning of Rule 3 on July 29, 2009. 4. Equitable tolling For counting purposes, the Court “exclude[s] the day of the event that triggers [the] period.” Fed. R. Civ. P. 6(a)(1)(A). The complaint was filed, therefore, within three years of the false arrest claim and three days short of that for the false imprisonment claim under section 1983. The plaintiff’s federal causes of action are not time-barred. The state law claims of assault and battery, false imprisonment, and false arrest carry two-year statutes of limitations, and those claims are tardy. The plaintiff argues that she should receive the benefit of equitable tolling on those claims. That doctrine applies to the statute of limitations defense and may excuse a late filing. See Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 393 (1982). But its application here would not be appropriate. In order to benefit from equitable tolling, the plaintiff must show “(1) that he has been pursuing his rights diligently, and (2) that some extraordinary circumstance stood in his way.” Pace v. DiGuglielmo, 544 U.S. 408, 418 (2005); see also Rice v. Jefferson Pilot Fin. Ins. Co., 578 F.3d 450, 457 (6th Cir. 2009). We consider the following factors in this circuit when deciding whether to apply equitable tolling in a given case: “(1) lack of notice of the filing requirement, (2) lack of constructive knowledge of the filing requirement, (3) diligence in pursuing one’s rights, (4) absence of prejudice to the defendant, and (5) the plaintiff’s reasonableness in remaining ignorant of the particular legal requirement.” Chavez v. Carranza, 559 F.3d 486, 492 (6th Cir. 2009) (citing Graham-Humphreys v. Memphis Brooks Museum of Art, Inc., 209 F.3d 552, 561 (6th Cir. 2000 . -14- The plaintiff has made no showing on factors 1, 2, or 5; and he has not rebutted the defendants’ argument that the delay prejudiced their ability to gather information about the incident. The third factor — diligence — weighs decidedly against the plaintiff. He and his attorney have been late with respect to nearly every significant procedural event in this case. And counsel’s excuses refer to developments that occurred after the deadlines had passed. As the Seventh Circuit bluntly observed: Waiting until the last hours is not diligent; the errors that often accompany hurried action do not enable the bungling lawyer to grant himself extra time. . . . Nothing prevented plaintiff’s lawyer from acting a day or a week earlier, so that counsel could recover from any gaffe. If counsel blundered to his client’s prejudice, the remedy is malpractice litigation against the culprit, not the continuation of litigation against an adversary who played no role in the error. Farzana K., 473 F.3d at 705-06 (citation omitted). The plaintiff is not entitled to equitable tolling. The state claims of assault and battery, false imprisonment, and false arrest will be dismissed as time-barred. B. The defendants also argue that dismissal is required by rule 4(m), which states: If a defendant is not served within 120 days after the complaint is filed, the court — on motion or on its own after notice to the plaintiff — must dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period. Fed. R. Civ. P. 4(m). There appears to be no dispute that none of the defendants were served until December 9, 2009, which is more than 120 days “after the complaint [was] filed.” The Sixth Circuit has emphasized the mandatory nature of the dismissal language in Rule 4(m). See Nafziger v. McDermott Int’l, Inc., 467 F.3d 514, 521 (6th Cir. 2006); see also 4 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1053 (3d ed.) (describing -15- dismissal “as a method of sanctioning a plaintiff’s failure to make service on the defendant within 120 days after filing the complaint with the court”). The plaintiff contends that good cause exists to extend the summonses. He points to the parade of unfortunate events that overtook his lawyer beginning on October 14, 2009 when she became ill. “Establishing good cause is the responsibility of the party opposing the motion to dismiss — here, the plaintiff[] — and ‘necessitates a demonstration of why service was not made within the time constraints.’” Nafziger, 467 F.3d at 521 (quoting Habib v. Gen. Motors Corp., 15 F.3d 72, 73 (6th Cir. 1994 . Surely, an illness and an office burglary that disables computer equipment can cause a temporary but significant setback in one’s law practice and amount to a justification for missing deadlines. Absent from the picture, however, is any explanation why service was not made promptly on the defendants after the case was filed. Rule 4(m) allows 120 days to complete service, probably in contemplation of the fact that some defendants are hard to locate and serve. But that cannot be true here. The identified defendants are Oakland County, its sheriff, and the City of Pontiac. There is no evidence here that any of them either could or did run or hide. And there is no evidence that the plaintiff made any effort to identify the Jon Doe defendants. Nor did the plaintiff seek an extension of time by motion to serve the summonses either before or after they expired. “To demonstrate good cause, other courts have held that a plaintiff may also show he/she made a reasonable and diligent effort to effect service.” Habib, 15 F.3d at 74 (citing Electrical Specialty Co. v. Road & Ranch Supply, Inc., 967 F.2d 309, 312 (9th Cir. 1992). “The legislative history to the Fed. R. Civ. P. 4 amendments of 1983 also refers to ‘diligence’ and ‘reasonable efforts to effect service.’” Ibid. (quoting Boykin v. Commerce Union Bank of Union City, Tennessee, 109 -16- F.R.D. 344, 348 (W.D. Tenn. 1986 . In this case, the plaintiff has shown neither. Good cause to extend the life of the summons has not been demonstrated. However, “courts have been accorded discretion to enlarge the 120-day period ‘even if there is no good cause shown.’” Henderson v. United States, 517 U.S. 654, 662-63 (1996) (quoting Advisory Committee Notes on 1993 amendments to Fed. R. Civ. P. 4). The Henderson court did not elaborate on when courts should exercise their discretion to extend this period, outside of service on officers of the United States when the government itself had already been served. Ibid. In Slenzka v. Landstar Ranger, Inc., 204 F.R.D. 322 (E.D. Mich. 2001), the court discussed several factors, relying on Wise v. Dep’t of Defense, 196 F.R.D. 52 (S.D. Ohio 1999), which in turn quoted language from the Advisory Committee stating that “[r]elief may be justified, for example, if the applicable statute of limitations would bar the refiled action. . . .” Wise, 196 F.R.D. at 55 (quoting Advisory Committee Notes on Fed. R. Civ. P. 4(m . The factors are (1) the length of additional time required to perfect service; (2) prejudice to the defendant resulting from delay; (3) whether the defendant had actual notice of the suit; (4) whether a dismissal without prejudice nonetheless would substantially prejudice the plaintiff because the case would be time-barred; and (5) whether the plaintiff made a good faith effort to serve the defendant within the time allowed. See Slenzka, 204 F.R.D. at 326. In this case, the first factor favors an extension, since service on the named defendants was made within a few days of the summons expiration deadline. The fourth factor favors the plaintiff as well. A dismissal without prejudice under Rule 4(m) here would equate to a case-termination sanction because there is no time left on the statute of limitations. The other factors favor the defendants or are neutral. The defendants had no notice of the case before receiving the complaint -17- in December 2009, but they have not shown that they are prejudiced by the few days beyond the deadline that elapsed before service was made. There is no evidence fo any effort to serve the defendants while the summonses were still alive. On balance, however, the Court believes a short extension is in order. As noted, a dismissal for tardy service would effect a harsh result. “Because courts favor trials on the merits, . . . special care is taken to make certain that a party with a meritorious [claim] is not deprived of an adjudication because of counsel’s failure to [act] timely . . . . Without an inquiry into the merits . . ., the court would run the risk of cutting short an action that in all justice should be permitted to proceed in the absence of flagrantly egregious conduct by counsel.” Buck v. U.S. Dept. of Agriculture, Farmers Home Admin., 960 F.2d 603, 607 (6th Cir 1992). Although plaintiff’s counsel may be undeserving, her client should not bear the brunt of her inattention. The Court, therefore, will extend the summonses to Oakland County, Sheriff Bouchard, and the City of Pontiac. C. The pseudonymous defendants The same latitude will not be permitted as to the John Doe defendants, consisting of an Oakland County deputy sheriff and a Pontiac police officer. Federal Rule of Civil Procedure 10(a) requires that a plaintiff “name all the parties” in the complaint. Fed. R. Civ. P. 10(a); cf. Doe v. Porter, 370 F.3d 558, 560 (6th Cir. 2004) (discussing this requirement in the context of a plaintiff’s attempt to proceed anonymously). “In general, the use of unnamed defendants is not favored in the federal courts.” Haddad v. Fromson, 154 F. Supp. 2d 1085, 1093 (W.D. Mich. 2001); see also Burnett v. Marschke, No. 09-00225, 2010 WL 502712, at *3 (W.D. Mich. Feb. 5, 2010) (noting that “[t]he use of the fictitious names of Jane and John Doe is permitted only in limited circumstances” and determining from the case law that such circumstances require “at least one named party and -18- discovery from that party [that] may eventually allow the true identity of the Jane or John Doe to be discovered”). Sometimes pseudonymous defendants cannot be named until a plaintiff has time to discover their identities and amend the complaint. However, in the three pre-suit years and the additional year this case has been pending, the plaintiff has yet to attempt to discover the identities of, name, or serve the officers. Rule 4(m) applies equally to the pseudonymous defendants. Petty v. County of Franklin, Ohio, 478 F.3d 341, 345-46 (6th Cir. 2007). There has been no justification offered for the failure to name and serve the John Does in this case. Perhaps word has filtered back through the respective departments that this case was filed, as was the case in Petty. However, here, just as there, the “constructive-notice argument makes sense only if, at some point, [the plaintiff] actually substitutes the names of real persons for his John Doe defendants.” Ibid. That has not happened, and the John Doe defendants will be dismissed without prejudice under Rule 4(m). D. Finally, the Pontiac defendants reason that if the John Doe defendants are dismissed, the case against the municipality must fall as well because under Rule 19 the officers are necessary parties. They reason that because the municipality’s liability depends on the officer’s conduct, the failure to join and retain the officers is fatal to the case. That reasoning does not reflect current law. Under Rule 19, a person must be joined as a party if “in that person’s absence, the court cannot accord complete relief among existing parties,” or the “person claims an interest relating to the subject of the action” but may not be able to protect that interest or might be subjected to inconsistent legal obligations unless he or she is joined in the case. Fed. R. Civ. P. 19(a)(1)(A)&(B). The Pontiac defendants have not explained how the John Doe defendants fit those criteria. The -19- City’s liability is independent of that of the individual officer, in that the plaintiff must show that the municipality engaged in a “policy or custom” that was the “moving force” behind the deprivation of the plaintiff’s rights. Monell v. Dep’t of Soc. Servs. of City of New York, , 694 (1978); see also Doe v. Claiborne County, 103 F.3d 495, 507 (6th Cir. 1996) (“Under Monell, the [defendants] cannot be found liable unless the plaintiff can establish that an officially executed policy, or the toleration of a custom . . . leads to, causes, or results in the deprivation of a constitutionally protected right.”). It is well established that “[i]f no constitutional violation by the individual defendants is established, the municipal defendants cannot be held liable under § 1983.” Watkins v. City of Battle Creek, 273 F.3d 683, 687 (6th Cir. 2001); see also Kinkus v. Vill. of Yorkville, Ohio, 289 F. App’x 86, 93 (6th Cir. 2008) (dismissing municipal liability claim because conduct of individual officers did not violate plaintiff’s rights under the First Amendment); Peet v. City of Detroit, 502 F.3d 557, 566 (6th Cir. 2007) (dismissing municipal liability claim because conduct of individual officers did not violate plaintiffs’ right under Fourth Amendment to be free from unreasonable seizure); see also City of Los Angeles v. Heller, 475 U.S. 796, 799 (1986) (stating that “neither Monell [], nor any other of our cases authorizes the award of damages against a municipal corporation based on the actions of one of its officers when in fact the jury has concluded that the officer inflicted no constitutional harm”). However, there has been no adjudication with respect to the conduct of the John Doe defendants, and their absence from the roll of parties does not prevent the plaintiff from taking evidence of their conduct in order to establish an official, unconstitutional policy by the City. The Court does not believe that the pseudonymous defendants are necessary parties. -20- III. The Court concludes that the federal causes of action stated in the complaint are not time- barred, several state law causes of action are barred by the statutes of limitations, the plaintiff is not entitled to equitable tolling, the proper exercise of discretion favors extending the summons on the named defendants but not the pseudonymous defendants, and the pseudonymous defendants are not necessary parties to the action. Accordingly, it is ORDERED that the motion to dismiss by defendants Oakland County, Michael Bouchard, and John Doe Oakland County Sheriff Deputy [dkt #8] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the motion to dismiss or for summary judgment by defendants City of Pontiac and John Doe Pontiac Police Officer [dkt #10] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the plaintiff’s claims for assault and battery (count V), false imprisonment (count IV), and false arrest (count III) are DISMISSED WITH PREJUDICE. It is further ORDERED that the complaint is DISMISSED in its entirety WITHOUT PREJUDICE as to defendants John Doe Oakland County Sheriff Deputy and John Doe Pontiac Police Officer, ONLY. It is further ORDERED that the remaining defendant must file their answers to the complaint on or before September 20, 2010. It is further ORDERED that counsel for the parties shall appear for a scheduling conference on September 29, 2010 at 3:30 p.m. -21- s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: August 30, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 30, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -22-

=== GEORGE T. PAETH and MARGARET C. PAETH v. WORTH TOWNSHIP and BARBARA CUTCHER ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 08-13926 Honorable David M. Lawson GEORGE T. PAETH and MARGARET C. PAETH, Plaintiffs, v. WORTH TOWNSHIP and BARBARA CUTCHER, Defendants. ______________________________________/ OPINION This case was tried to a jury from August 9 through 13, 2010 on two of the counts in the plaintiffs’ complaint. Both counts were premised on allegations that the defendant Township interfered with and delayed the plaintiffs’ efforts to renovate their cottage into a permanent residence. In one count of the complaint, the plaintiffs alleged that the defendant violated their right to procedural due process of law guaranteed by the Fourteenth Amendment to the Constitution by posting a stop work order on their property on November 5, 2007 without prior notice required by state law or giving them an opportunity to be heard. The Court had granted the plaintiffs summary judgment on that count before trial and instructed the jury to assess damages. In a different count of the complaint, the plaintiffs alleged that the defendant retaliated against the plaintiffs for exercising their right under the First Amendment to access the courts of the State of Michigan when they challenged the decision of the Worth Township Zoning Board of Appeals that denied the plaintiffs’ application for a variance from the Township’s land use ordinance requiring a five-foot side yard setback. Based in part on the Court’s determination of the summary judgment motions, the first act of retaliation the jury could have considered occurred on May 24, 2006. The jury returned a verdict in favor of the plaintiffs on the retaliation claim and awarded damages in the amount of $275,000. The jury separately awarded damages on the procedural due process claim in the amount of $325,000. Neither party objected to the jury’s verdict, and neither side requested a poll of the jury. The Court discharged the jury and instructed the clerk to record the verdict. The Court then inquired whether the parties believed that the verdicts should be cumulated, or whether damages on the retaliation claim were subsumed by the verdict on the procedural due process claim. The parties disagreed on the answer, and the Court ordered them to file briefs on the issue. Unfortunately, neither party’s brief cites authority that addresses the precise issue before the Court. The defendant cites no pertinent authority at all and instead argues that the evidence does not support either damage award. The plaintiffs cite Federal Rule of Civil Procedure 49 and rely on Radvansky v. City of Olmsted Falls, 496 F.3d 609 (6th Cir. 2007), for the proposition that a party’s failure to object to a verdict that is inconsistent with special interrogatories before the jury is discharged waives the issue on review. The Court does not believe the plaintiff’s authority provides guidance because the jury returned a general verdict and there were no special interrogatories. The Court’s inquiry to the parties was prompted by the basic principle that “an injured party is entitled to receive full satisfaction for his injury only once.” Hageman v. Signal L. P. Gas, Inc., 486 F.2d 479, 487 (6th Cir. 1973). The parties had not requested a jury instruction on that point, and the Court did not give one. The verdict form called for a separate award of damages on each count. In other cases where there was apparent confusion by the jury on damage awards, a new trial was ordered. For instance, in Astor Chauffeured Limousine Co. v. Runnfeldt Inv. Corp., 910 F.2d -2- 1540 (7th Cir. 1990), where the purchaser of corporation that operated limousine service brought action against the seller under federal securities statutes and Illinois common law alleging fraud and misrepresentation made during negotiations, the court determined that the jury’s verdict awarding separate damages on multiple counts evidenced confusion. The plaintiff’s complaint stated claims under section 12 of the Securities Act of 1933, section 10(b) of the Securities Exchange Act of 1934, the SEC’s Rule 10b-5, and common law, and sought $525,270 in compensatory damages. The jury verdict totaled almost that exact amount: $525,000, allocating $300,000 under section 10(b); $193,466 under section 12(2); $6,534 on the common law count, and $25,000 for punitive damages. The court found that the damages under those separate counts would not cumulate, although the jury was never told that, and there was no way to reconcile the verdicts except to assume that the jury intended to award the plaintiff what it asked. The court ordered a new trial because of the “evident confusion” and because the jury was never instructed that “it must calculate damages independently on each theory.” Id. at 1551. By contrast, in another case where the jury was instructed that it could not award duplicate damages on different theories for the same injury, the court of appeals affirmed the district court’s cumulation of the jury’s award of compensatory and punitive damages on each of the four counts that totaled $15 million. The court of appeals “presume[d] that juries follow the court’s instructions,” and “presume[d further] that the damages the jury awarded on each of the four counts are not duplicative awards for the same injury.” Havoco of America, Ltd. v. Sumitomo Corp. of America, 971 F.2d 1332, 1346 (7th Cir. 1992) (quotation marks and citation omitted). On the issue of damages, the jury was instructed in this case as follows: “If you find in favor of the plaintiffs on their First Amendment retaliation claim, and with respect to their Fourteenth Amendment procedural due process violation claim, -3- you must award the plaintiffs such sum of money as you find from the preponderance of the evidence will fairly and justly compensate the plaintiffs for any damages you find that the plaintiffs sustained as a direct result of the defendant’s retaliation against the plaintiffs for exercising their First Amendment rights, and for violating the plaintiffs’ right to procedural due process. You should consider the following elements of damages: (A) conduct; (B) and are reasonably certain to experience in the future; (C) (D) The expenses reasonably incurred as a result of the defendant’s unlawful The physical, mental, and emotional suffering the plaintiffs have experienced Impairment of reputation; and Personal humiliation. Which, if any, of these elements of damage has been proved is for you to decide based upon evidence and not upon speculation, guess or conjecture. The amount of money to be awarded for certain of these elements of damage cannot be proved in a precise dollar amount. The law leaves such amount to your sound judgment. Your verdict must be solely to compensate plaintiff for his damages, and not to punish the defendant. . . . In determining the amount of damages, you may not include or add to the damages any sum for the purpose of punishing defendant, Worth Township, or serving as an example to others. In deciding what damages to award the plaintiffs, you may not consider any loss or suffering by the plaintiffs prior the May 24, 2006 Zoning Board of Appeals meeting. The plaintiffs are entitled to recover only damages proximately caused by the defendant’s conduct after May 24, 2006. The jury was not instructed specifically that it could not duplicate damages for a single injury. On the other hand, the instructions made clear the temporal limitations on each of the separate theories of recovery. The first act of retaliation in the First Amendment count occurred on May 24, 2006, but the procedural due process violation did not occur until November 5, 2007. It is entirely possible that the damages the jury awarded for retaliation covered the period up to November 5, 2007, and the due process violation damages covered the period thereafter. The evidence would have allowed the jury to conclude that the plaintiffs suffered discrete expense and delay for each of these periods. -4- In retrospect, perhaps it would have been desirable to instruct the jury not to award duplicate damages under each theory of liability for a single wrong. However, neither party requested such an instruction, and the defendant cannot complain of that oversight now. See Navigant Consulting, Inc. v. Wilkinson, 508 F.3d 277 (5th Cir. 2007) (holding that where two defendants were sued for breach of fiduciary duty, breach of contract, and misappropriation of trade secrets, a jury award of $1.5 million against each defendant was not duplicative because the defendant did not object to the jury instructions, the plaintiff did not allege that it “only suffered a single injury; as the verdict form itself indicated, [the plaintiff] sought damages relating to two separate injuries,” and the court’s instruction to“the jury to answer for each person who had been found to violate a fiduciary duty” was not plain error). The verdict form, which was approved by both parties, called for a separate award of damages on each count. As noted earlier, the effect of the defendant’s unlawful conduct was experienced by the plaintiffs in different time frames. Because the evidence would permit the jury to award damages for discrete periods under each count, the verdict form indicated that separate damage awards should be assessed for each count, and there is no inconsistency or apparent jury confusion that produced the separate awards, the Court finds that the amounts awarded by the jury under each count should be cumulated. Judgment will enter accordingly. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: August 25, 2010 -5- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 25, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -6-

=== USA v. Brady Muse, Jr. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. BRADY MUSE, JR., ______________________________________/ Defendant. Case No. 09-20581 Honorable David M. Lawson OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO SUPPRESS EVIDENCE On May 2, 2006, a federal magistrate judge issued a warrant authorizing agents of the Federal Bureau of Investigation to search “Suite 218” of a certain office building in Southfield, Michigan for evidence of fraud in connection with mortgage loan activity by three companies known as Collage Financial Services, Inc., Jem Marketing, Inc., and Challenge Mortgage, Inc. When they arrived, FBI agents soon learned that some of the documents they wanted to seize might be located in a separate suite, which displayed the sign for another business, Lumiere Business Services, Inc. and was designated as “Suite 218A.” The agents gained entry into Suite 218A without any additional judicial authorization and seized documents therefrom belonging to defendant Brady Muse, who has filed a motion to suppress that is now before the Court. The Court held an evidentiary hearing on June 28, 2010, and thereafter allowed the parties to file supplemental briefs. The Court now finds that the search of Suite 218A exceeded the scope of the search warrant, no exigent circumstances justified the resulting warrantless search, the FBI agents did not act in good faith when they disregarded the limitation plainly stated on the fact of the warrant, and the evidence seized from Suite 218A must be suppressed. Therefore, the Court will grant the defendant’s motion to suppress evidence. I. Sometime prior to 2006, government agents suspected that defendants Brady Muse, Melvin Johnson, and Curtis Johnson were involved in procuring fraudulent mortgage loans by recruiting straw home purchasers and then furnishing phony documents, such as employment verification, to construct a false credit history that would qualify the “purchasers” for the loans. According to the search warrant affidavit filed in this case, FBI agent Claudia Link spearheaded the ensuing investigation. Working with a cooperating witness, Link says she learned that Melvin Johnson and Curtis Johnson were operating this enterprise in offices located at “16250 Northland Drive, Suite 218, Southfield, Michigan.” Mot. to Supp., Ex 2, Attch. B, ¶ 4. They were conducting business under the business names of Jem Marketing and Challenge Mortgage. Through review of public filings and other investigation, Link was able to confirm that the Johnson brothers and their businesses were located at the 16250 Northland Drive office building, although Gem Marketing had filed an incorporation document that listed Suite 106 as its address. Nonetheless, Link went to the office building on February 22, 2006 and proceeded to Suite 218, where she met the Johnsons and Brady Muse. She learned that Muse operated a different company, Collage Financial, but that it was co-located in Suite 218 with Jem Marketing. Link’s investigation had focused on certain residential properties in Detroit that allegedly had been purchased by a Bertha Powell through loans brokered by Gem Marketing. Link interviewed Powell in August 2005, who told her that despite the representations in the various loan packages, -2- she never worked for Collage Financial Services and never received the earnings statements or W-2s from Collage Financial Services that were submitted as part of the loan packages to [the lender]. . . . Powell said that neither Curtis Johnson nor Melvin Johnson asked her about employment when she met with them concerning the loans. Powell also advised that she met with Brady Muse at the office of Melvin Johnson and Curtis Johnson. Mot. to Supp., Ex 2, Attch. B, ¶ 15. According to closing documents, a company called First United Realty was to receive a commission for brokering the loan on one of the Powell purchases. Records showed that Muse formed that company and listed 16250 Northland Drive, Suite 362 as the address. However, when link went back to that location in April 2006, a different business was in that suite. Link’s affidavit describes other real estate transactions brokered by Melvin and Curtis Johnson in which the named buyers stated that they had no knowledge of the real estate transactions and were not the true purchasers. Some of them stated that their identities had been stolen. Through interviewing witnesses, including Bertha Powell, Link stated that she learned the following about 16250 Northland Drive, Suite 218: 49. 50. The CW [cooperating witness] described Suite 218 at 16250 Northland Drive., Southfield, Michigan, as containing several offices. Curtis and Melvin Johnson shared one of the offices. In their office were two desks with computers and two filing cabinets. Bertha Powell informed me that the closings for loans to purchase the houses at 22115 Karl, Detroit, Michigan, and 15866 Turner, Detroit, Michigan both took place at the office of Curtis and Melvin Johnson at 16250 Northland Drive, Suite 218, Southfield, Michigan. Powell advised the two men shared an office but each had his own computer at his desk. The closings took place in a separate room within the office space at 16250 Northland Drive that contained four-door, metal filing cabinets. Powerll also stated Brady Muse had his own office at 16250 Northland Drive, Suite 218. Muse’s office also contained a desk with a computer. Powell advised there was also a third office, which was the loan processor’s office, that held a desk, a computer, and a credenza. (Powell also related that the directory for 16250 Northland Drive contained no listing for Suite 106, and that she observed that Suite 106 appeared to be empty.) -3- 51. Jessica Cameron and Jakeema Roberson advised they had both been to the office of Melvin and Curtis Johnson at 16250 Northland Drive, Suite 218, Southfield, Michigan, to attend mortgage closings brokered by the two men. They stated Melvin and Curtis Johnson shared an office that contained two desks and two computers. They also advised there were at least two other offices within the suite; Nina Diederichsen, a loan processor at Challenge Mortgage, used one of the two offices. Mot. to Supp., Ex 2, Attch. B, ¶ 49. On April 12, 2006, agent Link arranged for Powell and another cooperating witness, Bridget Williams, to visit Suite 218 while wearing a recording device. The transcript of the conversation indicates that when Williams asked the receptionist at Suite 218 for Brady Muse, she was told that Muse had moved “next door. The next door on the right. . . . He changed offices . . . . This is a different opening.” Mot. to Supp., Ex. 5 at 1. On May 2, 2006, agent Link applied for and obtained a search warrant to search “16250 Northland Drive, Suite 218, Southfield, Michigan” for “[a]ll records . . . relating to any mortgage loan involving, in any capacity, Challenge Mortgage, Challenge Financial Investors Corp. (CFC), Jem Marketing, Jem Marketing Realty, Jem Processing, First United Realty, Collage Financial, Melvin Johnson, Curtis Johnson, or Brady Muse . . . .” Mot. to Suppress, Ex. 1, Search Warrant, attachment A. Suite 218A was not mentioned in the search warrant or affidavit. Agents executed the search warrant the same day. Agent Link testified at the hearing that she believed that Brady Muse’s office adjoined the offices of Melvin and Curtis Johnson. She testified that Powell had told her that Muse’s office was part of Suite 218, connected by an adjoining hallway. Powell provided Link with a sketch of the suite’s floor plan drawn by her daughter and fellow witness, Bridgitte Williams (hearing Exhibit 8). -4- Link said that Powell told her that Muse had a separate office but never told Link there was a separate number on Muse’s office door. When she arrived at the office building on May 2, 2006 with other agents to execute the search warrant, Link was surprised to see that Suite 218A was a separate office suite with its own entrance accessible only from the common hallway. There was no access to it from Suite 218; the back hall entrance from Suite 218 had been closed off. The front door to Suite 218A was also locked, and Link noticed a sign on the door that read “Lumiere Business Services – Suite 218A.” According to the owner, Charles Lechner, the office building at 16250 Northland Drive consists of 180,000 square feet, four floors, and 70 to 76 suites. There were four building entrances on the main floor, but only one contained a directory. Marquees also were posted on every floor by the elevators and signs were posted on every door. Lechner testified that he first met Muse in 2003 or 2004 and knew that Muse shared office space with Melvin Johnson until sometime in 2004 or 2005, when they separated the office spaces. At first, Lechner had his staff remove the door handles and put plates on the door that separated Muse’s office suite from the rest of Suite 218. Later he covered the door opening with drywall. After these alterations, Lechner testified that the only access to Suite 218A was through the common hallway. In 2005, Lechner also ordered and affixed signs to Suite 218A and to the building directory, although he was not certain exactly when the signs went up. According to the drawings submitted at the hearing, Suite 218 originally consisted of eleven rooms with two doors that opened into the common hallway. Corinne Swain, Muse’s receptionist in 2006, testified that after the suites were separated, Suite 218A was comprised of five rooms, all of which could be accessed only though the single common hallway door. -5- It is obvious that Link harbored doubts about her authority to search Suite 218A under the search warrant she had obtained. She testified that she knew Suite 218A was “separate and distinct” from Suite 218 when she executed the warrant, the search warrant listed only Suite 218 as the premises to be searched, and she knew there was no way to enter Suite 218A except through a separate, locked entrance. She asserted that she intended to search for and seize documents connected with Collage Financial and Brady Muse, however. Faced with that doubt, agent Link contacted an Assistant United States Attorney, who told her, remarkably, to proceed with the search of Suite 218A without obtaining additional judicial authorization. So that is what Link and her colleagues did. Link ordered a building maintenance person to unlock the door of Suite 218A. (Suite 218 was occupied and the door was unlocked when the agents arrived.) And they seized documents and computer records from both Suite 218 and 218A. Link testified she thought she had the authority to do so under the warrant. II. A. The Fourth Amendment states that “no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” U.S. Const. am. IV. Defendant Muse does not contend that the search warrant issued in this case was invalid, unsupported by probable cause, or vague in its description of the place to be searched or the things seized. To the contrary, he says that the warrant was specific in its authorization to search Suite 218, and the government agents proceeded beyond those clear limitations when they entered and searched Suite 218A. The government believes that -6- the warrant should be read to allow the search of Suite 218A because agent Link had probable cause to believe evidence of the mortgage fraud scheme would be found there. The Supreme Court has stated: The Warrant Clause of the Fourth Amendment categorically prohibits the issuance of any warrant except one “particularly describing the place to be searched and the persons or things to be seized.” The manifest purpose of this particularity requirement was to prevent general searches. By limiting the authorization to search to the specific areas and things for which there is probable cause to search, the requirement ensures that the search will be carefully tailored to its justifications, and will not take on the character of the wide-ranging exploratory searches the Framers intended to prohibit. Maryland v. Garrison, 480 U.S. 79, 84 (1987). When officers “flagrant[ly] disregard . . . the limitations of [the] search warrant,” United States v. Lambert, 771 F.2d 83, 93 (6th Cir. 1985), “[a] search pursuant to a valid warrant may devolve into an invalid general search.” United States v. Garcia, 496 F.3d 495, 507 (6th Cir. 2007). Under current Sixth Circuit law, “ an officer flagrantly disregards the limitations of a warrant only where he ‘exceed[s] the scope of the warrant in the places searched’ (rather than the items seized).” Ibid. (citing Waller v. Georgia, 467 U.S. 39, 43 n.3 (1984 . As the court explained, “[t]he test for determining if the officers engaged in an impermissible general search is whether their search unreasonably exceeded the scope of the warrant.” Ibid. (citing Brindley v. Best, 192 F.3d 525, 531 (6th Cir. 1999 . When a single structure houses several discrete units, the terms of the search warrant will prescribe which units within that structure may be searched lawfully. The government does not claim here, nor could it with any credibility, that the warrant authorized the search of all the office suites in 16250 Northland Drive. “For purposes of satisfying the Fourth Amendment, searching two or more apartments in the same building is no different than searching two or more completely -7- separate houses.” United States v. Votteller, 544 F.2d 1355, 1363 (6th Cir. 1976) (quoting United States v. Hinton, 219 F.2d 324, 325-26 (7th Cir. 1955 ; see also United States v. Gonzalez, 697 F.2d 155, 156 (6th Cir. 1983) (noting that “[i]t is settled that where . . . a structure is divided into more than one unit, probable cause must exist for each unit”). The search warrant here was limited to Suite 218; it could not be read reasonably to authorize the search of any other suite of offices in the building. There are cases in which searches have been upheld when rooms or outbuildings not specifically described in a search warrant have been searched. For instance, in United States v. Stefonek, 179 F.3d 1030 (7th Cir. 1999), the search warrant authorized the search of office suites 101, 102, and 103 in an office building, but a significant portion of the evidence was seized from suite 104, which was adjacent to suite 103. The court held that the agents’ conduct was reasonable because the door to the businesses’ office was marked “Suite 101,” and the division of the interior into separately numbered suites was obscure. Similarly, in United States v. Heldt, 668 F.2d 1238 (D.C. Cir. 1981), the court held that the search of a “free-standing penthouse room, or hut, built on the top of a roof” extending outside the “suite of offices” named in the search warrant was within the scope of the warrant, even though the individual named in the warrant did not work in the penthouse room. The court found that the area reasonably could have been viewed by officers conducting the search as constituting part of the suite of offices named in the warrant, because access to the penthouse was available through the French doors in one of the office suites included in the warrant, and the “hut” outside the doors of the office suite appeared to be part of that suite. Compare those cases to United States v. King, 227 F.3d 732 (6th Cir. 2000), where the court found that officers exceeded the scope of their warrant by searching the basement of a two-unit -8- dwelling when the individual named on the warrant only resided in one of the units, and the second unit was occupied by a family member not named in the warrant. The court determined that the officers’ actions “flagrantly disregard[ed] the limitations of the warrant” because “the area was not ‘common’ area . . . and the nature of the location of the basement in this two-unit dwelling should have put the agents on notice that the search warrant did not include this area.” Id. at 751 (emphasis added). In United States v. Shamaeizadeh, 80 F.3d 1131 (6th Cir. 1996), the court held that a warrant to search one residence within a building could not authorized the search of basement apartments in that same building, even where the residents of those apartments were named in the warrant. In that case, the officers executing the warrant had actual notice that the residential building in question was divided into two apartments before they actually searched the second apartment, which was not specified in the warrant. The court also found that the officers had constructive notice that the building was comprised of two separate residences because the living conditions at the time of the search indicated that two of the defendants exercised exclusive control over the basement floor apartments. The officers discovered that the door connecting the upper floor and the basement floor was locked, and they had been told by their informant, also a tenant of the building, that access to the basement by main floor tenants was restricted. The court distinguished that case from United States v. Whitney, 633 F.2d 902 (9th Cir. 1980), in which the search warrant designated the place to be searched as a single residence that in fact was comprised of two separate apartments. In Whitney, the court found that the warrant authorized a search of the entire building because ‘“there [was] no evidence that the living arrangement was ever described as one involving two separate apartments.’” Shamaeizadeh, 80 F.3d at 1139 (quoting Whitney, 633 F.2d at 908). Therefore, the -9- living conditions in Whitney failed to put the police on constructive notice that the building contained more than one residence. The government attempts to distinguish United States v. King, stating that “[t]he special rules concerning multi-unit residences are not applicable to the facts in the instant case.” Gov’t Suppl. Br. at 7. King, however, represents mainstream Fourth Amendment law and articulates no “special rules.” The government also notes that neither the warrant nor the affidavit in King mentioned the basement apartment and the officers were not aware that the building included a basement or which of the defendants had access to this space; but the government does not explain how these facts distinguish King from the present case. The government also insists that when agent Link obtained the search warrant from the magistrate judge, she had no knowledge that Suites 218 and 218A were separate units. Whether she should have been aware of that fact is a debatable point, especially in light of the recorded conversation by the cooperating witnesses just two weeks before the warrant was obtained in which the informant stated that Brady Muse had “changed offices” and the new one had “a different opening.” Mot. to Supp., Ex 5 at 1. But that is inconsequential under the present facts. The reasonableness of the agents’ conduct must be assessed “not in light of facts discovered upon execution of [i.e., signing] the search warrant, but rather in light of the information available to the officers at the time they acted.” Garrison, 480 U.S. at 81. The circumstances of the search in Garrison provides a good lesson here. In that case, the officers obtained a warrant to search the third floor of an apartment building believing that only one apartment existed on that floor. However, after discovering contraband in Garrison’s apartment on the third floor, the officers became aware that the floor was divided into two separate apartments. Once the officers became -10- aware of the separate apartments, they discontinued the search. The Court sustain the seizure of Garrison’s contraband because it occurred before the officers’ discovery of the separate units. The Court refused to invalidate the search warrant as overbroad. Id. at 85 (“Just as the discovery of contraband cannot validate a warrant invalid when issued, so is it equally clear that the discovery of facts demonstrating that a valid warrant was unnecessarily broad does not retroactively invalidate the warrant.”). The Court cautioned however: “Plainly, if the officers had known, or even if they should have known, that there were two separate dwelling units on the third floor of 2036 Park Avenue, they would have been obligated to exclude respondent’s apartment from the scope of the requested warrant.” Ibid. The Court believes that the facts in this case are much closer to King and Shamaeizadeh than to Stefonek, and Heldt. Certainly, “[a]n expectation of privacy in commercial premises . . . is different from, and indeed less than, a similar expectation in an individual’s home.” New York v. Burger, 482 U.S. 691, 700 (1987). But the difference between the residences in the former cases and the offices in the latter cases is not the distinguishing feature. “For the Fourth Amendment protects people, not places. What a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection. . . . But what he seeks to preserve as private, even in an area accessible to the public, may be constitutionally protected.” Katz v. United States, 389 U.S. 347, 351-352 (1967) (citations omitted). Rather, the point of distinction of these cases is the information available to the officers at the time they conducted their search. There is no proper way a reasonable person could conclude that Suites 218 and 218A were part of the same unit on May 2, 2006. Suite 218A was distinct, different, separate, discrete, and clearly identified as such. There was no access from one suite to -11- the other. Entry to Suite 218A was restricted by a separate lock and key. The signage was distinct. The name on the door identified a business that was not the focus of the investigation or even mentioned in the search warrant affidavit. The record shows that the agents were not only on constructive notice of the separateness of the units, they had actual notice, which prompted a call to the AUSA. Unlike the officers in Garrison, the agents in this case did not discontinue their search of Suite 218A when they discovered it was a separate unit. They went ahead anyway, when they could have easily sought and likely obtained judicial authorization to search the separate unit, simply by providing some additional information to the magistrate judge who had issued the search warrant only hours earlier. The search warrant issued in this case did not authorize the search of Suite 218A. B. Because the search of Suite 218A was beyond the plain terms of the search warrant, that search was, by definition, warrantless. The Supreme Court has consistently held that in the criminal context, warrantless searches are per se unreasonable unless they fall within a few specifically established and well-delineated exceptions. Payton v. New York, 445 U.S. 573, 585-86 (1980); Mincey v. Arizona, 437 U.S. 385, 390 (1978); Katz, 389 U.S. at 357. Those exceptions include the seizure of a fleeing suspect, Warden v. Hayden, 387 U.S. 294, 298-300 (1967), prevention of the imminent destruction of evidence, Schmerber v. California, 384 U.S. 757, 770-71 (1966), searches incident to a lawful arrest, Chimel v. California, 395 U.S. 752, 762-63 (1969), and consent, Schneckloth v. Bustamonte, 412 U.S. 218, 219 (1973). The government offers no evidence of any such circumstances and the records suggests none. The search of Suite 218A, therefore, must be deemed unreasonable. -12- C. The government argues that even if the search of that suite was not authorized by the warrant, the agents acted in good faith and the evidence should not be suppressed under the rule in United States v. Leon, 468 U.S. 897 (1984). One might question whether the rationale of Leon applies in the present situation. Under Leon, the justification for the exclusionary rule is undermined when officers seize evidence pursuant to a defective search warrant they believe in good faith to be valid. See id. at 918 (“If exclusion of evidence obtained pursuant to a subsequently invalidated warrant is to have any deterrent effect, . . . it must alter the behavior of individual law enforcement officers or the policies of their departments. . . . We have frequently questioned whether the exclusionary rule can have any deterrent effect when the offending officers acted in the objectively reasonable belief that their conduct did not violate the Fourth Amendment.”). In this case, there is no challenge to the validity of the search warrant. Instead, the Court has found that the agents violated the Fourth Amendment because they “unreasonably exceeded the scope of the warrant.” Garcia, 496 F.3d at 507. As noted above, “unreasonableness” results when “an officer flagrantly disregards the limitations of a warrant . . . [by] exceed[ing] the scope of the warrant in the places searched.” Ibid. (citation omitted). It is difficult to find good faith in a flagrant disregard of a search warrant’s limitations. Nonetheless, the court in King considered a claim of good faith when the officers exceeded the scope of a valid warrant. The court dismissed the government’s argument, noting that “[a]lthough it is true that the warrant was not facially deficient as applied to Defendant’s downstairs unit, it is also true that the warrant did not reference the basement area, and the agent was aware of the warrant’s limitations. The agent’s assertions that the basement was included in the common -13- area of Defendant’s downstairs unit of this two-family dwelling is not reasonable under these facts.” King, 227 f.3d at 754. In considering the good-faith exception to the exclusionary rule, the circumstances in the present case are virtually identical to those in King, except one: the agent here sought advice from an AUSA. However, that does not demonstrate good faith or help the government. The government attorney here was part of the investigative team. His conduct — and the bad advice given to the agents — is attributable to the government itself. The AUSA was hardly neutral and detached, so consultation with him could not advance the purposes of the Fourth Amendment. The point of the warrant requirement is to channel government actors toward judicial officers when the government seeks to engage in conduct that may trench upon individual rights. See Johnson v. United States, 333 U.S. 10, 13-14 (1948) (“The point of the Fourth Amendment, which often is not grasped by zealous officers, is not that it denies law enforcement the support of the usual inferences which reasonable men draw from evidence. Its protection consists in requiring that those inferences be drawn by a neutral and detached magistrate instead of being judged by the officer engaged in the often competitive enterprise of ferreting out crime.”). When the agent realized that the search warrant did not authorize the search of Suite 218A — which occurred to her before she searched those premises and seized items from there — she should have turned to the magistrate judge. The Leon exception does not save the search of Suite 218A. III. -14- The Court concludes that the Search of Suite 218A exceeded the scope of the search warrant issues in this case. The search of that suite was unreasonable, and the evidence seized must be suppressed. Accordingly, it is ORDERED that the defendant’s motion to suppress evidence [dkt #43] is GRANTED. It is further ORDERED that items seized from Suite 218A on May 2, 2006 may not be introduced in evidence at trial against defendant Brady Muse. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: August 2, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 2, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -15-

=== Maxine White and James Flanders, III v. Loomis Armored US, Inc. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION MAXINE WHITE and JAMES FLANDERS, III, Plaintiffs, v. LOOMIS ARMORED US, INC., Defendant. ___________________________________/ Case No. 09-14682 Honorable David M. Lawson OPINION AND ORDER DENYING PLAINTIFFS’ MOTION TO REMAND The plaintiffs in this case filed a complaint in the Wayne County, Michigan circuit court alleging violations of state law arising from their termination from employment as armored car drivers. After the defendant removed the case to this Court alleging diversity jurisdiction, the plaintiffs filed a timely motion to remand, which is now before the Court, contending that the amount in controversy is below the jurisdictional limit. The Court heard oral argument on the motion on May 27, 2010, and now finds that although one of the plaintiffs’ claims may seek damages less than $75,000, the other plaintiff’s claim exceeds that amount. Therefore, the Court has jurisdiction over the entire case, and the motion to remand will be denied. I. The plaintiffs’ complaint tells a remarkable story. Both plaintiffs, Maxine White and James Flanders, III, were employed as drivers/messengers at the Highland Park office of defendant Loomis Armored US, Inc. On June 11, 2009, the plaintiffs were traveling south on I-75 near the Clay Street exit in a company truck when the side door of their armored vehicle “flew open,” sending airborne an unidentified amount of cash from the vehicle. Compl. ¶ 3. According to the complaint, Flanders previously had noticed that the side doors on the company’s armored vehicles were prone to fly open, and he had reported this defect to management. Flanders states he had previously requested, but was denied, a “secure vehicle.” Compl. ¶ 7. When confronted with the open door and cash circling over the freeway, the plaintiffs reportedly tried to gather in as much of the swirling cash as they could, but apparently still came up short of the original load. The plaintiffs reported the incident to their supervisors, and immediately thereafter they were escorted to Loomis’s Highland Park branch office, where Branch Manager Hugh Adams and Loss Prevention Manager Darcey Hatchett suggested that the plaintiffs take a polygraph test to confirm their story. The plaintiffs were told that they could not resume work unless they both took the test, but if they passed, they would be reinstated and compensated for lost wages. A week later, the plaintiffs took the test administered by the Michigan State Police. Flanders passed, but White’s results were “inconclusive.” Compl. ¶ 6. Four days later, on June 23, 2009, both plaintiffs were terminated effective June 11, 2009. Loomis stated the official reason as “the loss of liability for the incident on June 11, 2009 . . . [which is] a terminable offense under Loomis policies and procedures.” Exs. A & B to Pls.’ Mot. for Remand [dkt. # 7] (Flanders’s and Loomis’s Letters of Termination). An additional reason for termination was the plaintiffs’ failure to properly secure the load inside the armored vehicle. When leaving the company, both employees requested copies of their personnel files. The complaint alleges that Branch Manager Hugh Adams refused to produce a copy of White’s personnel file absent a court order. According to the complaint, the company failed to respond to two of Flanders’s letters requesting copies of his personnel file. The plaintiffs’ complaint alleges (1) a violation of the Michigan Polygraph Protection Act, Mich. Comp. Laws § 37.201 et seq., and (2) a violation of the Michigan Bullard-Plawecki Employee -2- Right to Know Act, Mich. Comp. Laws § 423.501 et seq. — both state law claims. The plaintiffs allege the following damages: Plaintiffs White and Flanders demand their damages under both the Polygraph Protection and Bullard-Plawecki Employee Right to Know Acts, including but not limited to injunctive relief restoring them to their employment, or in the alternative to future damages in the premises presented, their actual damages, including double wages lost in consequences of the cited statutory violations and their unlawful discharges, penalties of $200 per violation, interest, reasonable attorney fees, costs, MCL 37.208; 423.511, and such other and further relief as legally permitted or mandated in the premises. Compl. ¶ 14. The plaintiffs served the defendant on November 13, 2009, and the defendant removed the case on December 1, 2009 and filed an answer on the same date. On December 11, 2009, the Court issued its standard standing order requiring submission of information regarding removal. See Order [dkt. # 3]. The defendant responded on December 17, 2009, asserting, as it did in its initial notice of removal, that the plaintiffs’ allegations regarding damages satisfy the more-likely-than-not standard for determining amount in controversy on removal. On December 28, 2009, the plaintiffs moved to remand. In their motion papers, the plaintiffs assert that White, who was 51 at the time she was fired, was earning $11.13 per hour when she was fired, and Flanders, who was 28, was making $12.75 per hour. In 2008,White’s gross earnings were $27,137.11, and Flanders earned $41,497.12 in the same period. II. Section 1441(a) of Title 28 provides that “any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.” 28 U.S.C. § 1441(a). When an action has been removed -3- improperly, the matter may be remanded to the state court from which it came pursuant to 28 U.S.C. § 1447(c). Federal courts have jurisdiction “of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different States.” 28 U.S.C. § 1332(a)(1). The amount in controversy is assessed as of the time the complaint is filed, Rosen v. Chrysler Corp., 205 F.3d 918, 920-21 (6th Cir. 2000), or, in the case of removal, when the removal notice is filed, Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 871 (6th Cir. 2000). “Because lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts resolved in favor of remand.” Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996) (quoting Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985 ; see also Her Majesty the Queen in Right of the Province of Ontario v. City of Detroit, 874 F.2d 332, 339 (6th Cir. 1989). “[T]he amount in controversy must be calculated based on a reasonable reading of the complaint, and a plaintiff’s stipulation subsequent to removal as to the amount in controversy or the types of relief sought is of no legal significance to the court’s determination.” Werwinski v. Ford Motor Co., 286 F.3d 661, 667 (3d Cir. 2002) (internal quotation marks omitted). The Sixth Circuit places the “burden on a defendant seeking to remove an action to federal court to show by a preponderance of the evidence that the amount in controversy requirement has been met.” Hayes v. Equitable Energy Res. Co., 266 F.3d 560, 572 (6th Cir 2001) (citing Gafford v. Gen. Elec. Co., 997 F.2d 150, 158 (6th Cir. 1993), abrogated on other grounds by Hertz Corp. v. Friend, 130 S. Ct. 1181 (Feb. 23, 2010 . This standard “does not place upon the defendant the daunting burden of proving, to a legal certainty, that the plaintiff’s damages are not less than the -4- amount-in-controversy requirement. Such a burden might well require the defendant to research, state and prove the plaintiff’s claim for damages.” Gafford, 997 F.2d at 159. The defendant must show that it is “more likely than not” that the plaintiff is seeking damages in excess of the $75,000 limit. Id. at 158. To make such a showing, the removing party must transcend from the realm of conceivable to the realm of possible by making an attempt to quantify the plaintiff’s injuries. In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 610 (7th Cir. 1997) (cited in Everett v. Verizon Wireless, Inc., 460 F.3d 818, 829 (6th Cir. 2006 . The plaintiffs here concede diversity of citizenship. However, they insist that as of the time the defendant filed a removal notice on December 1, 2009, Flanders’s damages were only $36,176.22, and White’s damages were $26,471.72 (or possibly $31,037.07, depending on the calculation technique). They arrive at these figures as follows: Flanders’s year-to-date wages for approximately twenty-three weeks of work between January 1 and June 14, 2009 amounted to $16,980.53, or an average wage of $738.29 per week. White’s year-to-date wages for the same period were $16,711.38, or $726.58 per week. Based on these weekly averages, by the time the defendant removed the case on December 1, 2009 (24.5 weeks after termination), Flanders lost $18,088.11 in wages, and White lost $17,801.21. When doubled, as provided under the Michigan Polygraph Protection Act, Flanders’s damages as of the time of removal constituted $36,176.22 and White’s $35,602.42. However, sometime after her discharge from the defendant, White became employed by Trinity, Inc. working as a bus driver earning $11.26 per hour. As of the date of removal, Trinity had paid White $4,565.35. Therefore, as of the date of removal, Flanders’s and White’s respective damages were $36,176.22 and $31,037.07. (For White, this figure is $26,471.72 if the wage loss is doubled after deducting her alternative income from Trinity.) When the damages -5- are calculated as of the time the complaint was filed, they amounted to $28,793.32 for Flanders and $25,387.44 (or $22,438.20 if doubling occurs after deducting alternative income) for White. Even though under the Michigan Polygraph Protection Act, attorney’s fees are considered to be damages, as of the date of removal, the plaintiffs say they incurred only $3,217.50 in attorney’s fees. In addition, the Michigan Bullard-Plawecki Employee Right to Know Act provides for statutory damages of $200 per violation, or arguably $200 for each Flanders and White. When each plaintiff’s damages are considered separately, they fall far below the $75,000 threshold necessary to invoke the Court’s jurisdiction. The defendant responds first with the argument that the plaintiffs damages should be aggregated, which is a non-starter. “When two or more plaintiffs, having separate and distinct demands, unite for convenience and economy in a single suit, it is essential that the demand of each be of the requisite judicial amount.” Troy Bank of Troy, Indiana v. G.A. Whitehead & Co., 222 U.S. 39, 40-41 (1911); see also Sturgeon v. Great Lakes Steel Corp., 143 F.2d 819, 821 (6th Cir. 1944) (“The rule is thoroughly settled that where two or more plaintiffs have separate and distinct demands in a single suit, it is essential that the demand of each be of the requisite jurisdictional amount.”). The defendant maintains, however, that even if the Court declines to aggregate the two plaintiffs’ damages, the amount-in-controversy requirement is still met. The defendant emphasizes that the plaintiffs are seeking future damages for wrongful discharge, presumably up to their retirement age. Assuming that White has 13 years and Flanders has 37 years until retirement, the defendant submits that the damages of each exceed the jurisdictional threshold. The defendant states that each plaintiff’s request for reinstatement or for lost wages paid in the future translates to more than $75,000. The defendant also points out that the plaintiffs are seeking injunctive relief that would -6- restore them to their previous positions. The defendant contends that the average tenure at Loomis for an Armored Services Technician is 4.21 years and the average tenure for a driver is 6.25 years. Given their gross earnings, White’s damages could be $169,606.93 and Flanders’s could be $174,702.87. In determining diversity jurisdiction under 28 U.S.C. § 1332, the amount in controversy is measured by the value of the object of litigation, which means that the Court must account for the value of injunctive relief, when it is sought. Northup Props., Inc. v. Chesapeake Appalachia, LLC, 567 F.3d 767, 770 (6th Cir. 2009). The Sixth Circuit has not yet resolved whether it “view[s] the amount in controversy from the perspective of the plaintiff or the defendant,” id. at 770 n.1, although the majority rule appears to weigh in favor of adopting the plaintiff’s point of view as to the costs of compliance. S. States Police Benevolent Ass’n v. Second Chance Body Armor, Inc., 336 F. Supp. 2d 731, 734 (W.D. Mich. 2004). With respect to the lost wages, courts have used the wages the plaintiff stands to recover by the time the case concludes in calculating the amount in controversy. See Andrews v. E.I. Du Pont de Nemours & Co., 447 F.3d 510, 515 (7th Cir. 2006) (counting future lost wages as one of the factors that help the plaintiff meet the jurisdictional threshold); Chabal v. Reagan, 822 F.2d 349, 356-57 (3d Cir. 1987) (where the plaintiff asserted a right to continued employment, the amount in controversy for Tucker Act purposes is not limited to the amount of backpay accrued at the time the complaint was filed, but also includes the amount of backpay the plaintiff ultimately stands to recover after the case concludes) (citing Shaw v. Gwatney, 795 F.2d 1351, 1354-55 (8th Cir. 1986) and Goble v. Marsh, 684 F.2d 12, 15-16 & n.5 (D.C. Cir. 1982 ; Broglie v. MacKay-Smith, 541 F.2d 453 (4th Cir. 1976) (diversity jurisdiction existed where buyer’s expenses in caring for a lame -7- horse pending rescission of the purchase would accrue to more than the jurisdictional minimum before the court would likely rule on a motion to dismiss, even though damages were less than the jurisdictional minimum when the complaint was filed); DeWolff v. Hexacomb Corp., No. 09-548, 2009 WL 2370723, at *3 (W.D. Mich. July 30, 2009) (holding that the backpay component of the plaintiff’s damages runs from the date of the plaintiff’s termination through the date of entry of the judgment in the case); cf. Weinberger v. Wiesenfeld, 420 U.S. 636, 642 n.10 (1975) (counting the present value of future Social Security benefits in calculating the amount in controversy). Where a state statute provides for award of statutory damages and recovery of attorney’s fees, such damages and fees can be considered in determining whether the jurisdictional amount has been met. Clark v. Nat’l Travelers Life Ins. Co., 518 F.2d 1167, 1168-69 (6th Cir. 1975). In the end, however, in diversity cases, damages must be measured according to state law. In this case, the plaintiffs seek recovery under the Michigan’s Polygraph Protection Act (“PPA”), Mich. Comp. Laws § 37.201 et seq., and the Bullard-Plawecki Employee Right to Know Act, Mich. Comp. Laws § 423.501 et seq. The PPA prohibits employers from requesting or requiring that an employee or applicant submit to a polygraph examination as a condition of employment, promotion, or change in status of employment, or as an express or implied condition of a benefit or privilege of employment. Mich. Comp. Laws § 37.203(1)(a). The act prohibits an employer from “tak[ing] any action against an employee or applicant for employment based upon an alleged or actual opinion that the employee or applicant for employment did not tell the truth during a polygraph examination.” Mich. Comp. Laws § 37.204. The act gives an aggrieved employee a private cause of action “for injunctive relief or damages, or both.” Mich. Comp. Laws § 37.207(1). “For purposes of [the] act, damages include damages for injury or loss caused by each violation of this act and -8- reasonable attorney’s fees . . . and [i]f an employee is discharged in violation of [the] act, damages for which the employer is liable under this section shall include double the wages lost.” Mich. Comp. Laws § 37.207(2)-(3). The Bullard-Plawecki Employee Right to Know Act requires an employer, upon a written request by an employee, to provide an employee with access to the employee’s personnel record and with the ability to obtain a copy of such record. See Mich. Comp. Laws §§ 423.503-423.504. The act provides an employee a private right of action for violations, and a court may compel production of the sought-after employment records. The employee may recover “actual damages plus costs,” and [f]or a wilful and knowing violation of this act, $200.00 plus costs, reasonable attorney’s fees, and actual damages.” Mich. Comp. Laws § 423.511(a)-(b). Comparing the relief afforded by these statutes, it is evident that the plaintiffs will achieve the greatest relief under the PPA. Under that statute, Flanders’s case meets the amount-in- controversy requirement. According to the motion papers, in 2008, Flanders’s annual income with the company was $41,497.12 (or approximately $798 a week). In the 23 weeks between January 1, 2009 until his termination on June 14, 2009, Flanders earned $16,980.53 (or approximately $738.29 a week). He has been out of work for over a year, so double his projected annual income exceeds $75,000 even without adding his share of the statutory attorney’s fees. Calculating future wages, which would approximate the value of the injunction from the perspective of each party, makes the case only more clear. White’s damages are not so easily reconciled, however, because she had found another job at the time of removal, and her projected loss is somewhat frozen below $75,000. No matter. Although these cases do not qualify for aggregation, since each plaintiff’s employment claim is -9- separate and they are joined solely for convenience, see Everett, 460 F.3d at 824 (noting that “[a] common interest in a litigation recovery thus represents a necessary, but by itself insufficient, ground to qualify claims for aggregation,” and that “[t]he point of the ‘common fund exception’ is not to permit plaintiffs to aggregate their claims whenever they share a proprietary interest in the proceeds of litigation; it is to permit them to aggregate their claims when they jointly own, or have an undivided interest in, property at issue in the litigation”), jurisdiction over Flanders’s claim allows the Court to hear White’s claim, too. As the Seventh Circuit has held, “[o]nce one plaintiff satisfies the amount-in controversy requirement for diversity jurisdiction, the other plaintiffs come in under the court’s supplemental jurisdiction regardless of whether their individual claims satisfy the requirements of § 1332.” Oshana v. Coca-Cola Co., 472 F.3d 506, 511 (7th Cir. 2006). One might reasonably conclude that the Seventh Circuit’s pronouncement collides with the Supreme Court’s earlier holding in Troy Bank of Troy that when there are multiple plaintiffs, “the demand of each [must] be of the requisite judicial amount.” Troy Bank of Troy, 222 U.S. at 40 (emphasis added). However, the Supreme Court resolved the apparent conflict by interpreting the supplemental jurisdiction statute, 28 U.S.C. § 1367(a), in Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546 (2005), holding as follows: The single question before us, therefore, is whether a diversity case in which the claims of some plaintiffs satisfy the amount-in-controversy requirement, but the claims of other plaintiffs do not, presents a “civil action of which the district courts have original jurisdiction.” If the answer is yes, § 1367(a) confers supplemental jurisdiction over all claims, including those that do not independently satisfy the amount-in-controversy requirement, if the claims are part of the same Article III case or controversy. If the answer is no, § 1367(a) is inapplicable and, in light of our holdings in Clark and Zahn, the district court has no statutory basis for exercising supplemental jurisdiction over the additional claims. We now conclude the answer must be yes. When the well-pleaded complaint contains at least one claim that satisfies the amount-in-controversy requirement, and -10- there are no other relevant jurisdictional defects, the district court, beyond all question, has original jurisdiction over that claim. The presence of other claims in the complaint, over which the district court may lack original jurisdiction, is of no moment. If the court has original jurisdiction over a single claim in the complaint, it has original jurisdiction over a “civil action” within the meaning of § 1367(a), even if the civil action over which it has jurisdiction comprises fewer claims than were included in the complaint. Id. at 558-59. The Court concluded that “where some, but not all, of the plaintiffs in a diversity action allege a sufficient amount in controversy,” “the threshold requirement of § 1367(a) is satisfied.” Id. at 566. The Court denied that the exceptions enumerated in section 1367(b) run counter to its holding. Id. at 565-66. See also Olden v. LaFarge Corp., 383 F.3d 495 (6th Cir. 2004) (establishing the same principle in a class action context). Under section 1367(a), the district court has jurisdiction over pendent claims that are “so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.” 28 U.S.C. § 1367(a). The complaint plainly demonstrates that Flanders’s and White’s claims, although separate, are so related. They arose from the same incident, and the defendant took the same adverse action against them. The wrongs are individualized, and the damages are separate, but the claims are part of the same “case or controversy.” III. The Court is satisfied that it has subject matter jurisdiction over the case, because the parties are diverse, Flanders’s claim meets the amount-in-controversy limit in 28 U.S.C. § 1332(a), and White’s claim forms part of the same case as Flanders’s claim. Accordingly, it is ORDERED that the plaintiff’s motion to remand [dkt #7] is DENIED. -11- s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 28, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 28, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -12-

=== Fharmacy Records and Shelton Rivers v. Salaam Nassar et al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION FHARMACY RECORDS, a/k/a FHARMACY RECORDS PRODUCTION CO., FHARM I PUBLISHING COMPANY, and SHELTON RIVERS, v. Plaintiffs, SALAAM NASSAR, CURTIS JACKSON, DARRIN DEAN, DEF JAM RECORDING, RUFF RYDERS, JUSTIN COMBS PUBLISHING, UNIVERSAL MUSIC PUBLISHING, UNIVERSAL MUSIC & VIDEO DISTRIBUTION CORPORATION, EMI APRIL, INC., SOO SOO’S SWEET SWISHER MUSIC, and SCHLECTER, Agents and Attorneys, ______________________________________/ Defendants. Case Number 05-72126 Honorable David M. Lawson Magistrate Judge Donald A. Scheer OPINION AND ORDER OVERRULING PLAINTIFFS’ OBJECTIONS TO MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION TO AWARD ATTORNEY’S FEES, ADOPTING REPORT AND RECOMMENDATION, AND GRANTING IN PART DEFENDANTS’ MOTION FOR ATTORNEY’S FEES AND COSTS Presently before the Court are the plaintiffs’ objections to a report filed by Magistrate Judge Donald A. Scheer pursuant to an order entered by the undersigned to conduct appropriate hearings on a joint motion for attorney’s fees and costs filed by the defendants. On August 15, 2008, the Court found that the defendants were entitled to attorney’s fees and costs in some amount, but referred the matter to Judge Scheer for a report on “the amount of attorney’s fees, costs, and expenses, if any, that should be awarded to the respective defendants, and to determine further whether the plaintiffs’ attorneys ought to be personally accountable for any or all of those fees and expenses.” Op. & Order [dkt #271] at 19. On November 5, 2009, Judge Scheer filed his report recommending that the defendants’ motion be granted in part, allowing some fees as requested, reducing some, disallowing others, and discussing expense reimbursement. Judge Scheer also recommended that the plaintiffs’ attorney, Gregory J. Reed, should be held personally liable for the attorney’s fees and some of the expert witness expenses. The plaintiffs filed timely objections to the report and recommendation, followed by two sets of repetitive supplemental objections. The defendants responded, and the matter is before the Court for de novo review. In its previous order, the Court found that the defendants had shown that they were entitled to attorney’s fees under the Copyright Act and as a result of discovery abuse by the plaintiffs. However, because the defendants did not make a proper showing that the amount of fees and costs they seek is reasonable, the Court engaged the services of Judge Scheer to address the details of the fee motion. The Court now reaffirms its determination that the defendants are entitled to attorney’s fees under the Copyright Act, 17 U.S.C. § 505, and fees and costs under 28 U.S.C. § 1927 and, finding no merit in any of the plaintiffs’ objections and agreeing with the findings and reasoning of the magistrate judge, adopts the recommendation as to the amounts and allocations. I. The facts of this case are set forth in detail in the Court’s order granting the defendants’ motion for summary judgment and motion to dismiss, see dkt. #248, and they need not be repeated here. In brief summary, the plaintiffs brought suit alleging that defendant Salaam Nassar stole a rhythmic beat created by plaintiff Shelton Rivers, a.k.a. the “Ess Man.” After Rivers made the beat, the Fharmacy plaintiffs acquired an interest in it and secured copyright protection. Later on, rap artist DMX released a song with a strikingly similar beat entitled “Shot Down.” Many of the defendants were involved in the production of “Shot Down” and sales of the album on which it -2- appeared. When the album went platinum, the plaintiffs sued. Their theory was that Nassar had access to Rivers’s equipment, and he simply lifted the beat when Rivers wasn’t looking. The case involved a substantial amount of electronic and documentary discovery, but when the defendants began to test the plaintiffs’ claims against the evidence, things quickly unraveled. Whether the plaintiffs spun the case out of whole cloth or simply tried to bolster weaknesses through chicanery remains unknown. What is certain is that the plaintiffs engaged in fabrication and spoliation of evidence, using one lie to cover up another. And it is also clear that counsel Gregory Reed played a key role. The Court so found when it dismissed the plaintiffs’ case and entered judgment in favor of the defendants on March 31, 2008. The forty-eight-page opinion recounted in detail multiple instances of discovery misconduct by the plaintiffs and their counsel and concluded that “the conduct of the plaintiffs and their attorney has been so egregiously improper and abusive that the ultimate sanction of dismissal is the only appropriate response.” Op. & Order Granting Defs.’ Mot. for Sum. J. at 47. The Court found that the plaintiffs’ complaint alleged a claim of unlawful “sampling” of a sound recording in violation of 17 U.S.C. § 114(b), the plaintiffs were unable to produce any evidence that the protected work and the accused work were identical, and the defendants were entitled to summary judgment on the merits of the claim. The Court also documented the disturbing conduct of the plaintiffs and their attorneys in the manipulation and destruction of evidence in the case, which resulted in termination sanctions. On April 14, 2008, the plaintiffs filed a motion for relief under Rule 60 and a motion for reconsideration, followed by the plaintiffs’ counsel’s expedited motion for relief from judgment filed on August 8, 2008, yet one more motion for relief from the March 31, 2008 order filed on August -3- 11, 2008, and a motion for recusal of the undersigned. Several defendants also moved for an award of attorney’s fees and costs. The Court addressed these post-judgment motions on August 15, 2008, when it denied all of the plaintiffs’ motions and referred the defendants’ motion for attorney’s fees to Magistrate Judge Donald A. Scheer for consideration. See Op. & Order [dkt. # 271]. The Court stated: In the present case the Court has little trouble concluding that the plaintiffs and their counsel should be held jointly and severally liable for the defendants’ costs and fees. An award is appropriate under both 17 U.S.C. § 505 and 28 U.S.C. § 1927; the Court need not resort to its inherent authority. . . . justice requires that the defendants be compensated for the distress in warding off a frivolous case. Although section 505 does not expressly authorize an award from an attorney for a party, 28 U.S.C. § 1927 plainly does. A court may hold parties and their counsel jointly and severally liable under that statute for “multipl[ying] the proceedings in any case unreasonably and vexatiously.” See 28 U.S.C. § 1927; Royal Oak Entertainment, LLC, 486 F. Supp. 2d at 679. There likely is cause to hold attorney Gregory Reed accountable for at least a portion of the fees and expenses, and perhaps against Mr. Reed’s co-counsel, Stephanie Hammonds, as well. Those issues will be referred to Magistrate Judge Donald A. Scheer to determine. . . . The Court finds that the exhibits on which [the defendants’ demands for attorney’s fees] are premised do not furnish the level of detail that is required to determine the reasonableness of the fee requests. . . . These entries do not allow the Court to assess the amount of time spent on specific tasks by individual lawyers, and they do not furnish sufficient detail to permit a reasoned challenge by the plaintiffs or their attorneys. The defendants state in their brief that they are “willing to provide their billing records should the Court so desire, but given the conduct of Plaintiffs’ counsel to date, they prefer that such a review occur in camera by the Court.” . . . The defendants correctly anticipate the need for further review, but they have not justified the need for in camera production. However unreasonably the plaintiffs and their counsel have behaved, they have not forfeited the right to examine the defendants’ billing records. The Court, therefore, will refer the defendants’ attorney’s fees motion to Magistrate Judge Donald A. Scheer to conduct a hearing in whatever manner he deems appropriate for the purpose of determining the amount of attorney’s fees, costs, and expenses, if any, that should be awarded to the respective defendants, and to determine further whether the plaintiffs’ attorneys ought to be personally accountable for any or all of those fees and expenses . . . . -4- Id. at 17-19. The Court’s August 15, 2008 opinion caused yet another flurry of motions on the part of the plaintiffs. The plaintiffs filed eight motions for reconsideration or relief from the ruling (dkts. # 277, 278, 285, 290, 291, 300, 306, 312), and followed them with two more motions to disqualify the undersigned judge. The first disqualification motion was assigned by random draw to Judge Stephen J. Murphy of this Court, who denied it on November 18, 2008. Then, on December 4, 2008, the Court denied the rest of the plaintiffs’ motions for reconsideration or relief from judgment and the remaining motion for disqualification. The Court continued referral of the motion for attorney’s fees and costs to Judge Scheer, who, as noted earlier, issued his report and recommendation recommending award of attorney’s fees and costs to the defendants on November 5, 2009. In the meantime, the court of appeals affirmed the dismissal, choosing not to address the merits of the copyright claim, but finding that the plaintiffs’ discovery abuses warranted dismissal. Fharmacy Records v. Nassar, Nos. 08-1607, 08-2201, 2010 WL 2294538 (6th Cir., June 7, 2010). Addressing the decision to dismiss the case for discovery abuse, the court stated: Based on our careful review of the district court’s opinion and the record as a whole, we find that the district court identified and properly applied the correct legal standard, and made a reasoned conclusion upon its weighing of the relevant factors. . . . We conclude that the district court properly exercised its discretion in this matter. Id. at *5. On the matter of disqualification, the court held, Finally, the plaintiffs’ claim that Judge Lawson should have recused in this matter is so blatantly without merit as to warrant no further discussion. Ibid. II. -5- The magistrate judge relied on this Court’s August 15, 2008 opinion in suggesting that “an award of reasonable attorney fees to the Defendants is plainly authorized by 17 U.S.C. § 505, and that it is fully warranted by the facts and circumstances of record in this action.” R&R at 5. After recounting the lengthy history of litigation misconduct on the part of the plaintiffs’ attorney Gregory Reed, the magistrate judge also concluded that the case was “a perfect example of a circumstance warranting the imposition of an award of costs, expenses and attorneys’ fees under 28 U.S.C. § 1927.” Id. at 8. However, Judge Scheer held that Ms. Hammonds did not commit similar acts of “misconduct and obfuscation,” was not “complicit[] in the concealment or alteration of any evidence in the case,” and therefore did not deserve to bear responsibility for the plaintiffs’ attorney’s fees either under the Copyright Act or 28 U.S.C. § 1927. Id. at 8-9. In applying the lodestar method for calculating the attorney’s fees, Judge Scheer was satisfied that the 2,257.96 hours of legal work spent collectively by the five law firms representing various defendants was reasonable, with some listed exceptions, given that the case contained forty- three substantive motions (thirty-one of which were filed by the plaintiffs, with nine of them post- trial), 319 docket entries, lasted thirty-three months, and considering that the defendants prevailed on all of the twelve motions that they filed. The magistrate judge then found that, based on the 2003 State Bar of Michigan report “Economics of Law Practice” and the 2007 study conducted by the American Intellectual Property Law Association, “a reasonable hourly rate for services rendered in this intellectual property case would be $330.00 for partner level practitioners, $250.00 for senior associate level attorneys, . . . $150.00 for junior associates (less than five years experience),” and $100.00 for non-attorney search assistants. R&R at 18. -6- The Magistrate Judge then adjusted various defendants’ requests for attorney’s fees accordingly. With respect to defendants The Island Def Jam Music Group, a division of UMG Recordings, Inc., Universal Music Publishing, Inc., Universal Music and Video Distribution Corp., and Curtis Jackson (collectively referred to as “Universal Defendants”), Judge Scheer applied the rates discussed above to the hours expended by various attorneys from the Dickinson Wright law firm (who represented the Universal Defendants). The Universal Defendants state that the following attorneys from the firm worked on the matter, along with six non-lawyer assistants: Daniel D. Quick, partner Michael Socha, senior associate Kari Low, junior associate Patrick Green, junior associate 251.3 hours 571 hours 66.5 hours 48.5 hours By using the rates listed above, Judge Scheer arrived at the result of $229,578 (instead of $233,188 requested by the Universal Defendants). With respect to defendant EMI April Music, Inc., represented by the Butzel Long law firm, Judge Scheer was satisfied generally with the number of hours billed, but he suggested reducing the hours by 6.7 hours that the two firm attorneys (Michael Huget and John Blattner) billed for performing work on appellate issues. Judge Scheer believed that compensation for this work should be addressed at the conclusion of appellate proceedings. Using the partner rate for Mr. Huget and Ms. Swedlow (Swedlow became a partner in January 2008; before that she was a senior associate), a senior-associate rate for attorneys Carol Romej and Christopher Taylor, and a junior-associate rate for attorneys Zachary Moen and John Blattner, Judge Scheer calculated the total of $225,720 for the EMI April Music, Inc.’s attorneys. Next, the magistrate judge addressed the request for attorney’s fees by counsel for defendant Justin Combs Publishing (JCP). JCP was initially represented by John William Martin, Jr. of -7- Plunkett Cooney, P.C., who expended 195.8 hours at the rate of $325 per hour. Plunkett Cooney was JCP’s counsel of record from August 4, 2005 through August 9, 2007. Although Plunkett Cooney submitted itemized billing for 195.8 hours of time expended by Martin, 1.6 hours of time expended by Martin’s associate Jennifer Damico, and an additional one hour expended by non- attorney Kelly Klimmek, totaling some $64,099, Martin’s supplemental declaration requests only $35,000, $1,545.67 of which represents billed expenses. The magistrate judge concluded that Martin’s request was “fully justified by the work performed,” even opining that the “work performed [by Martin] exceeds that value,” id. at 21-22 & n.7, and awarded $33,454.33 against the plaintiffs and attorney Reed, to be recovered jointly and severally. However, Judge Scheer denied the attorney’s fees requested by Johnathan D. Davis and his associate Thomas M. McCaffrey, who claim to have been the “primary contact with . . . [JSP] and served as the conduit between counsel of record for JCP. . . .” Id. at 22. Judge Scheer was troubled by the fact that Johnathan D. Davis, P.C. was never an attorney of record. Instead, on August 9, 2007, John W. Martin, Jr. withdrew and Butzel Long took over JCP’s representation. Further, JCP and EMI filed a stipulation for the substitution of attorneys, which declared that they had “mutually decided to proceed with one attorney [Butzel Long] to represent both parties’ interests.” See dkt. # 207. As outlined earlier, the magistrate judge recommended that Butzel Long be fully reimbursed for its representation of both EMI April Music and JCP. Because Judge Scheer was not persuaded that Davis’s services as an intermediary between JSP and its counsel were necessary, he recommended disallowing an award of attorney’s fees in his favor. In denying the fees, the magistrate judge also relied on unsatisfactory billing descriptions and the fact that significant portions of the attorney time billed by the Davis firm relate directly to efforts on Mr. Martin’s part -8- to secure payment of his billings and to Mr. Davis’s efforts in securing the substitution of Butzel Long as counsel for JSP. Judge Scheer next discussed the request for attorney’s fees from attorneys for Salaam Nassar and Soo Soo’s Sweet Swisher Music, Leslie C. Schefman and his summer law clerk. Judge Scheer found that Mr. Schefman’s own billing consisting of 128.8 hours billed at the hourly rate of $225 for a total of $28,980 is reasonable, but he rejected billing submitted by Mr. Schefman’s law clerk. Judge Scheer suggested that the law clerk’s billing was deficient in that (a) it did not explain the nature of tasks performed; (b) it switched from the hour-and-minutes billing format (as in “55:45") to the decimal system format (as in “1.7 hours”); and (c) the supplemental declaration altogether failed to describe the qualifications of the clerk. Judge Scheer then proceeded to deny expert witness expenses for Ives R. Potrafka and Anthony Ricigliano, who were retained by EMI and the Universal Defendants in the course of litigation. Services of Portrafka, who examined a zip disc obtained from the plaintiffs’ counsel and performed the analysis of the Fharmacy computer, cost the two defendants $18,142.57; Ricigliano, who is a musicologist who compared the accused composition “Shot Down” with the plaintiffs’ work “ESS Beats,” cost the defendants $10,325. Although the magistrate judge denied the award of these fees against the plaintiffs under17 U.S.C. § 505, siding with the majority of circuits that hold that the Copyright Act limits recovery to only taxable costs listed in 28 U.S.C. §§ 1821, 1920, he recommended that the defendants recover these costs from attorney Reed himself as a sanction under 28 U.S.C. § 1927. Judge Scheer concluded that these reports were necessary for the defendants toward off the “highly questionable evidence proffered by attorney Reed in support of his clients’ copyright claims.” R&R at 28. -9- The magistrate judge denied the request for recovery of computer billing costs, which is the single largest category of expenses sought by the defendants apart from the expert witness costs. Judge viewed these expenses as part of the attorney’s fees and concluded that the defendants are not entitled to recover these expenses in addition to the attorney’s fees. Nor was the magistrate judge sympathetic to the defendants’ request for recovery of such expenses as copying, filing fees, telephone and facsimile charges, delivery expenses and service supplies. Judge Scheer concluded that, to the extent these fees are not recoverable under 28 U.S.C. § 1920 (which must be pursued under E.D. Mich. LR 54.1 and the Bill of Costs Handbook adopted by the Court), these expenses are subsumed within the overhead component of each particular attorney’s hourly billing rate and are not recoverable. Judge Scheer directed the defendants to move for recovery of their court costs under Fed. R. Civ. P. 54(d) and the Local Rules within 28 days after the entry of judgment and recommended that each moving defendant “recover such costs as may be taxed by the clerk in accordance with that procedure.” R&R at 31. Finally, the magistrate judge addressed and rejected some of the arguments made by the plaintiffs against the award of attorney’s fees and costs. Judge Scheer rejected the plaintiffs’ accusations that the defendants’ joint supplemental memorandum is untimely or deficient because it is not supported by an affidavit from each attorney who participated in the defense. The magistrate judge also rejected the plaintiffs’ argument that EMI April Music, Inc. is not entitled to an attorney’s fee award because their own counsel’s misconduct vexatiously multiplied the proceedings. The magistrate judge viewed this argument foreclosed by this Court’s consideration of the parties’ respective motions for sanctions. Nor did the magistrate judge credit the plaintiffs’ assertion that the amount of the plaintiffs’ attorney’s fees is excessive. In rejecting this assertion, -10- Judge Scheer found it significant that just twenty-two months into this litigation, Mr. Reed’s own fees exceeded $160,000. In total, Judge Scheer recommended an award of $546,199.89 in attorney’s fees and costs, allocated as follows: DEFENDANTS RECOMMENDED RECOVERY Universal Defendants (The Island Def Jam Music Group, a division of UMG Recording, Inc., Universal Music Publishing, Inc., Universal Music and Video Distribution Corp., and Curtis Jackson) (represented by Dickinson Wright) $229,578.00 in attorney’s fees against the plaintiff and Gregory J. Reed, jointly and severally $14,233.78 in expert witness expenses against Gregory J. Reed personally EMI April Music, Inc. (represented by Butzel Long) Janice Combs Publishing d/b/a Justin Combs Publishing (JSP) (represented by Plunkett Cooney, P.C. and then by Butzel Long; Johnathan D. Davis, P.C. does not recover anything) $225,720.00 in attorney’s fees against the plaintiffs and Gregory J. Reed, jointly and severally $14,233.78 in expert witness expenses against Gregory J. Reed personally $33,454.33 in attorney’s fees against the plaintiffs and Gregory J. Reed, jointly and severally Salaam Nassar and Soo Soo’s Sweet Swisher Music (represented by Leslie C. Schefman) $28,980.00 in attorney’s fees against the plaintiffs and Gregory J. Reed, jointly and severally All defendants costs as may be taxed by the clerk in accordance with Fed. R. Civ. P. 54(d)(1) and E.D. Mich. LR 54.1 against the plaintiffs and Gregory J. Reed, jointly and severally III. -11- The plaintiffs filed several objections to the report. Curiously, none of the parties, including the plaintiffs, challenged the magistrate judge’s calculation of the reasonable hours or his determination that the suggested hourly rates were reasonable. Instead, the plaintiffs’ objections focus on procedural issues and other matters already decided by this Court and affirmed on appeal. Objections to a report and recommendation dealing with the post-judgment motion for attorney’s fees and costs are reviewed de novo. “A judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made. A judge of the court may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1). The parties’ failure to file objections to the report and recommendation waives any further right to appeal. Smith v. Detroit Fed’n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987). Likewise, the failure to object to the magistrate judge’s report releases the Court from its duty to independently review the motion. Thomas v. Arn, , 149 (1985). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller v. Currie, 50 F.3d 373, 380 (6th Cir. 1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). “[T]he failure to file specific objections to a magistrate’s report constitutes a waiver of those objections.” Cowherd v. Million, 380 F.3d 909, 912 (6th Cir.2004). -12- The plaintiffs’ first objection challenges the authority of the magistrate judge to take the referral from this Court and issue his report and recommendation. The plaintiffs maintain that the post-judgment referral of the motion for attorney’s fees and costs to the magistrate judge exceeded the jurisdictional scope of 28 U.S.C. § 636(b)(1)(A). They cite Massey v. City of Ferndale, 7 F.3d 506 (6th Cir. 1993), and Bennett v. General Caster Service of N. Gordon Co., 976 F.2d 995 (6th Cir. 1992), for that proposition and reason that since the May 31, 2008 order granting summary judgment closed the case, the Court could not refer a post-judgment matter to a magistrate judge. Under 28 U.S.C. § 636(b)(1)(A), a district judge “may designate a magistrate judge to hear and determine any pretrial matter pending before the court,” with the exception of certain dispositive matters, such as summary judgment motions and motions for injunctions. Although a magistrate judge does not have the authority to determine dispositive motions, he still may conduct hearings on these motions and submit to the district court “proposed findings of fact and recommendations for . . . disposition” pursuant to 28 U.S.C. § 636(b)(1)(B) (“[A] judge may also designate a magistrate judge to conduct hearings, including evidentiary hearings, and to submit to a judge of the court proposed findings of fact and recommendations for the disposition, by a judge of the court, of any motion excepted in subparagraph (A), of applications for posttrial relief made by individuals convicted of criminal offenses and of prisoner petitions challenging conditions of confinement. ”). In addition, a “magistrate may be assigned such additional duties as are not inconsistent with the Constitution and laws of the United States.” 28 U.S.C. § 636(b)(3). When a magistrate judge makes a recommendation, to be distinguished from a “determination,” the parties are given an opportunity to file objections. See 28 U.S.C. § 636(b) (“Within fourteen days after being served with a copy, any party may serve and file written -13- objections to such proposed findings and recommendations as provided by rules of court.”); Fed. R. Civ. P. 72(b). If objections are filed, the district judge makes “a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” 28 U.S.C. § 636(b) (emphasis added). If a magistrate judge makes a “determination” of a matter, the district judge’s review of it is circumscribed by the “clear error” standard. 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a). In Massey v. City of Ferndale, 7 F.3d 506, 509 (6th Cir. 1993), the case upon which the plaintiffs rely, the district judge referred a post-judgment motion for sanctions under Federal Rule of Civil Procedure 11 to a magistrate judge for “hearing and determination,” and then proceeded to review the ensuing order under the clear error standard. The court of appeals held only that the district court should have reviewed the magistrate judge’s findings de novo. The court did not hold that the referral was not authorized under the statute. Indeed, the Sixth Circuit has recognized that subsection 636(b)(3) authorizes referral to a magistrate judge of various post-judgment matters that “reasonably should bear some relation to the specified duties” in the statute, such as the determination of damages. Callier v. Gray, 167 F.3d 977, 983 (6th Cir. 1999) (quoting Gomez v. United States, 490 U.S. 858, 863-65 (1989 . The Massey court acknowledged as much with respect to post-judgment attorney’s fee motions: [W]e have maintained that resolution of such motions is “dispositive of a claim.” Fed. R. Civ. P. 72(b); see Bennett, 976 F.2d at 998 (“Nothing remained but to execute the judgment; therefore, [the magistrate judge’s] purported order was dispositive of the Rule 11 matter and, consequently, dispositive of a ‘claim’ of a party. Because this was a dispositive matter, under Fed. R. Civ. P. 72(b), the magistrate judge should have issued a report and recommendation for de novo review by the district court.”) (footnotes omitted); see also Insurance Co. of N. Am. v. Bath, 968 F.2d 20 (10th Cir. 1992). Consequently, we hold that the magistrate judge in the instant case did not have the authority to rule upon post-dismissal -14- motions for sanctions, fees and costs as requested by the district court. See Weatherby v. Secretary of HHS, 654 F. Supp. 96, 97 (E.D. Mich. 1987). Massey, 7 F.3d at 510 (emphasis added). More recently, the court of appeals has clarified that “[a] Magistrate Judge is not permitted to determine costs or fees, but may make a report and recommendation to the district court on such issues.” McCombs v. Meijer, Inc., 395 F.3d 346, 360 (6th Cir. 2005) (citing Massey, 7 F.3d at 510- 11). “After being presented with the Magistrate Judge’s report and recommendation, the district court must then conduct a de novo review of the findings and issue an order as it sees fit.” Ibid. In this case, the Court referred the matter to Magistrate Judge Scheer to conduct appropriate hearings and issue a report and recommendation. The plaintiffs availed themselves of the opportunity to file objections, and the matter is now under de novo review “of those portions of the report or specified proposed findings or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1). The procedure utilized by the Court is authorized under 28 U.S.C. § 636(b)(3). See Callier, 167 F.3d at 983. The plaintiffs’ first objection, therefore, has no merit. Many of the plaintiffs’ other objections address matters that have been presented previously to the Court in the several post-judgment motions the plaintiffs have filed, and these matters all have been decided adversely to the plaintiffs. For instance, the plaintiffs once again accuse the defendants of perpetrating fraud and argue that, as a result, the defendants are not entitled to attorney’s fees. They base their accusations on a confirmation they received from the Copyright Office on November 12, 2009 that the plaintiffs had the CD of ESS Beats on file with the Copyright Office, which the defendants had secured on December 7, 2005. The plaintiffs take issue with the magistrate judge’s conclusion that the plaintiffs’ case was frivolous. They raise the issue of witness shopping concerning attorney Daniel Quick’s decision to change an expert witness from Dr. Ferrara to Dr. -15- Ricigliano. And they deny any wrongdoing on their part. In the first set of supplemental objections, the plaintiffs renew the argument that the report of Ives Potrafka was unsigned and otherwise fails the Daubert standards and suggest that it was the defendants’ attorneys who drafted the report. The second set of supplemental objections are merely a re-rehash of many of these same matters. The Court need not address specifically any of these items, as they all have been considered and decided against the plaintiffs in the context of other motions in the case. The confirmation that the plaintiffs received from the Copyright Office (verifying that the defendants were provided a copy of the CD on file with the Copyright Office) does not provide new evidence for the Court to consider. The main point of contention was not that the defendants could not access the item on file with the Copyright Office; rather it related to the authenticity of electronic files that appear on the original CD sent to the Copyright Office — that is, the original CD that the defendants never received. As to the expert witness issue, the defendants explained previously that the substitution of Lawrence Ferrara for Mr. Ricigliano as an expert witness became necessary after the defendants learned during the deposition of R.J. Rice that Mr. Rice’s counsel had initially contacted Dr. Ferrara about the song at issue. These objections are overruled. Next, the plaintiffs argue that Magistrate Judge Scheer was mistaken when he stated that the defendants had to respond to nine post-judgment motions filed by the plaintiffs. In fact, contend the plaintiffs, the defendants did not respond to any of these post-judgment motions. According to the plaintiffs, the magistrate judge also acted improperly when he overlooked the defendants’ violations of Rule 54 (which required submission of the cost application within 28 days from the date of the judgment) and allowed expenses for expert witnesses in the absence of formal invoices. The plaintiffs also complain that in 2005, the defendants violated the Court’s order directing them to -16- obtain new counsel within sixty days, which in turn resulted in extension of proceedings by 145 days. The record does not substantiate the plaintiffs’ arguments. The defendants responded to most of the post-judgment motions. The attorney’s fee motion was filed in accordance with Rule 54, after which it was adjudicated by the Court, which in turn resulted in the referral to the magistrate judge. The objection concerning substitution of an attorney has no bearing on the magistrate judge’s recommendation. The plaintiffs next challenge the report and recommendation based on the fact that not all attorneys involved in representation of the defendants submitted personal affidavits, as required by Fed. R. Civ. P. 54(d) and Local Rule 54.1.2. However, the record contains verification of the hours expended by the various law firms and declarations are filed by lead counsel. Local Rule 54.1.2 requires only an “affidavit of counsel,” — most frequently, a supervising attorney — which was provided in this case. See also FTSS Korea v. First Technology Safety Sys., Inc., 254 F.R.D. 78, 81 (E.D. Mich. 2008) (awarding attorney’s fees on the basis of counsel’s billing statement, notwithstanding the absence of any affidavits). The plaintiffs next object to the portion of the magistrate judge’s report that directs the defendants to submit a bill of costs in accordance with the Bill of Costs Handbook. According to the plaintiffs, the defendants’ requests for costs is untimely (under Local Rule 54.1, such request must be brought within 28 days from the date of the judgment) and should not be authorized now. The plaintiffs also maintain that pursuant to the handbook, expert fees are not recoverable in the absence of trial; transcript costs are not recoverable unless ordered by the Court; and costs of copying and distributing CDs are not recoverable. A related objection is that the defendants filed their joint supplemental memorandum late – five months after the April 14, 2008 deadline. The bill -17- of costs issue can be decided by the Clerk if the defendants ever submit such a filing. The matter presently is not before the Court. The alleged tardiness of the defendants’ supplemental submission is a procedural matter that should have been addressed to the magistrate judge. It has no bearing on the recommendation presently before the Court for review. The plaintiffs object to an award of attorney’s fees to Michael Socha and Bea Swedlow who allegedly questioned the plaintiffs’ witness Rofael Jackson without the plaintiffs’ counsel’s permission. The Court finds no support for this claim in the record and overrules this objection. Next, the plaintiffs attack sufficiency of the defendants’ billing statements on the ground that the defendants failed to produce engagement letters, copies of joint defense agreements, and necessary documentation regarding costs. The plaintiffs also charge that the defendants engaged in block/excessive/double billing, included superfluous charges, and redacted certain entries so the plaintiffs and the Court cannot assess their reasonableness. The Court agrees with the magistrate judge that the information presented by the defendants is adequate and sufficiently verifiable to ascertain the reasonable time spent in the defense of the plaintiffs’ claims under the lodestar method. That objection is overruled. IV. The Court concludes that the magistrate judge properly determined the issues and his findings are amply supported by the record. The plaintiffs’ objections lack merit and are overruled. The magistrate judge properly suggested the appropriate amounts of reasonable costs and expenses that the respective defendants should recover from the plaintiffs and their attorney, Gregory J. Reed, jointly and several, and against Mr. Reed separately, under the Copyright Act and 28 U.S.C. § 1927, and the Court adopts those recommendations as its own findings, in the absence of valid objections -18- thereto by the plaintiffs. The magistrate judge recommended that no fees or expenses be awarded against attorney Stephanie Hammonds, and in the absence of objections from the defendants, the Court adopts that conclusion as its own as well. Accordingly, the defendants’ motion for attorney’s fees and costs [dkt #252] is GRANTED IN PART. It is further ORDERED that the plaintiff’s objections to the report and recommendation [dkt #s 321, 323, 326] are OVERRULED. It is further ORDERED that the report and recommendation [dkt #320] is ADOPTED. It is further ORDERED that the defendants shall have judgment against the plaintiffs and their counsel in the amount recommended by the magistrate judge. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 23, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 23, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -19-

=== Board of Trustees, Sheet Metal Workers' National Pension Fund et. al. v. Palladium Equity Partners, LLC et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION BOARD OF TRUSTEES, SHEET METAL WORKERS’ NATIONAL PENSION FUND, and BOARD OF TRUSTEES, SHEET METAL WORKERS LOCAL NO. 292 PENSION FUND, Plaintiffs, v. PALLADIUM EQUITY PARTNERS, LLC, PALLADIUM EQUITY PARTNERS II, LP, PALLADIUM EQUITY PARTNERS II-A, LP, and PALLADIUM EQUITY INVESTORS II, LP, Defendants. ______________________________________________/ Case Number 08-12586 Honorable David M. Lawson OPINION AND ORDER DENYING PLAINTIFFS’ AND DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT AND SCHEDULING STATUS CONFERENCE Before the Court are the parties’ cross-motions for summary judgment. The plaintiffs, who are multi-employer pension plans, seek to impose the withdrawal liability of a group of bankrupt companies that supplied painting services to industrial customers upon three private equity limited partnerships and their common financial advisor under controlled group (statutory) and alter ego (common law) theories of liability. The Court heard oral argument on the motions on May 10, 2010 and now finds that fact issues preclude summary judgment for either side. Therefore, the motions for summary judgment will be denied. I. Background A. Withdrawal liability The plaintiffs in this case seek to collect millions of dollars of “withdrawal liability” owed by the Haden group of companies under a collective bargaining agreement that benefits the plaintiff pension funds. “Withdrawal liability” is a creature of statute, and finds its source in the Multiemployer Pension Plan Amendments Act (MPPAA), 29 U.S.C. § § 1381-1453, which amended portions of the Employee Retirement Income Security Act of 1974 (ERISA) to increase the financial liability of employers who withdraw from underfunded employee benefit plans. Withdrawal liability can arise when an employer participates in and then withdraws from a multi-employer benefit plan through a collective bargaining agreement. “An employer’s withdrawal liability is its proportionate share of the plan’s unfunded vested benefits, that is, the difference between the present value of vested benefits (benefits that are currently being paid to retirees and that will be paid in the future to covered employees who have already completed some specified period of service, 29 U.S.C. § 1053) and the current value of the plan’s assets.” Concrete Pipe and Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., , 609 (1993) (citing 29 U.S.C. §§ 1381, 1391 and PBGC v. R.A. Gray & Co., 467 U.S. 717, 724 (1984 (internal quotations omitted). B. The Haden companies The Haden group of companies consists of four defunct entities, all Michigan corporations with their principal places of business in Auburn Hills, Michigan. Haden International Group, Inc. wholly owns Haden, Inc., which in turn wholly owns Haden Schweitzer Corporation, which in turn wholly owns Haden Environmental Corporation. Haden Schweitzer Corporation and Haden Environmental Corporation both dissolved on February 1, 2006 as a result of bankruptcy. Prior to bankruptcy, Haden Schweitzer Corporation and Haden Environmental Corporation were in the business of fabricating and installing paint systems for various automobile and other industrial manufacturers. These companies were signatories to a collective bargaining agreement with Local 292 of the Sheet Metal Workers Union and, upon dissolution on February 1, 2006, became subject to withdrawal liability. Plaintiff National Fund assessed $3,369,584.99 against Haden Schweitzer -2- Corporation. Plaintiff Local Fund assessed $8,286,072.09 in withdrawal liability against Haden Schweitzer Corporation. and $1,533,456.80 against Haden Environmental Corporation. Because of its total control over these subsidiaries, Haden International Group, Inc. (HIG) was jointly and severally liable for these amounts. Together, the plaintiffs seek a joint and several judgment against all the defendants in this case in excess of $13 million, plus unpaid interest, statutory damages under 29 U.S.C. § 1132(g)(2)(C), attorney’s fees, and costs. C. The Palladium companies The plaintiffs allege that the defendants took over the troubled Haden companies before the bankruptcy and as a result are responsible for Haden’s withdrawal liability. According to the record presented by the parties, it is undisputed that the four defendants consist of three limited partnerships — Palladium Equity Partners II, L.P. (“PEP II LP”), Palladium Equity Partners II-A, L.P. (“PEP II- A LP”), and Palladium Equity Investors II, L.P. (“PEI II LP”) — and one private equity firm — Palladium Equity Partners, L.L.C. (“PEP LLC”), who acted as an advisor to these partnerships. The limited partners of the three limited partnerships do not overlap, but they all share the same single General Partner: Palladium Equity Partners II, LLC (“PEP II LLC”), which is not a party to this case. It is the relationship among these entities, and their collective relationship with the Haden companies, that form the basis of the dispute in this case. II. Statutory framework As mentioned above, to remove incentives for employers to withdraw from financially weak employee benefits plans, Congress amended ERISA in 1980 by enacting the MPPAA, 29 U.S.C. §§ 1381-1453. See Mason & Dixon Tank Lines, Inc. v. Cent. States, SE & SW Areas Pension Fund, 852 F.2d 156, 158 (6th Cir. 1988). The MPPAA “requires employers who withdraw, completely or -3- partially, from a multiemployer pension plan to contribute to the plan a proportionate share of the unfunded, vested benefits.” Ibid. Further, to prevent employers from circumventing their ERISA and MPPAA obligations by operating through separate entities, the MPPAA amended Title IV of ERISA to provide that members of the so-called common controlled group are held jointly and severally liable for withdrawal payments. Cent. States Se. & Sw. Areas Pension Fund v. Chatham Props., 929 F.2d 260, 263 (6th Cir. 1991). Under the controlled group liability provision, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer and all such trades and businesses as a single employer. The regulations prescribed under the preceding sentence shall be consistent and coextensive with regulations prescribed for similar purposes by the Secretary of the Treasury under section 414(c) of Title 26. 29 U.S.C. § 1301(b)(1). “To impose withdrawal liability on an organization other than the one obligated to the Fund, two conditions must be satisfied: 1) the organization must be under ‘common control’ with the obligated organization, and 2) the organization must be a trade or business.” McDougall v. Pioneer Ranch Ltd. P’ship, 494 F.3d 571, 577 (7th Cir. 2007). Common control is established in one of three ways outlined in the Treasury regulations: through a parent-subsidiary control group, brother-sister control group, or a combined group of trades and businesses under common control. 26 C.F.R. § 1.414(c)-2(a); Cent. States, Se. & Sw. Areas Pension Fund v. Lloyd L. Sztanyo Trust, 693 F. Supp. 531, 538 (E.D. Mich. 1988); see also Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 120 n.5 (4th Cir. 1991) (explaining that although the Pension Benefit Guaranty Corporation is charged with developing regulations for implementing section 1301(b), the PBGC has not passed regulations on the subject, so courts have resorted to the Treasury Department regulations concerning what constitutes a common controlled -4- group). The only theory the plaintiffs seem to be pursuing in this case is the parent-subsidiary controlled group. According to the Treasury Department regulations, The term “parent-subsidiary group of trades or businesses under common control” means one or more chains of organizations conducting trades or businesses connected through ownership of a controlling interest with a common parent organization if – (i) A controlling interest in each of the organizations, except the common parent organization, is owned (directly and with the application of § 1.414(c)-4(b)(1), relating to options) by one or more of the other organizations; and (ii) The common parent organization owns (directly and with the application of § 1.414(c)-4(b)(1), relating to options) a controlling interest in at least one of the other organizations, excluding, in computing such controlling interest, any direct ownership interest by such other organizations. 26 C.F.R. § 1.414(c)-2(b). The operative term “controlling interest” used in the regulations is defined, in the case of a corporation, as “ownership of stock possessing at least 80 percent of total combined voting power of all classes of stock entitled to vote of such corporation or at least 80 percent of the total value of shares of all classes of stock of such corporation.” 26 C.F.R. § 1.414(c)-2(b)(2)(i)(A). It is the plaintiffs’ theory that the Palladium entities qualify under the parent-subsidiary regulation as controlling the operation of the Haden companies at the time of the bankruptcy because they owned or controlled more than 80% of the outstanding stock in the Haden companies. The undisputed facts show that the three limited partnerships, under the guidance of their common advisor PEP LLC, acquired substantial interests in HIG beginning in the summer of 2001. At the time of the bankruptcy in February 2006, the stock ownership distribution of HIG’s 4.1 million outstanding shares was: PEP II PEP II-A 1,842,938.47 shares 815,481,46 shares -5- PEI II Kenneth Dargatz 341,580.07 shares 870,000 shares Pls.’ Mot. for Sum. J., Ex. 21 (Defs.’ Response to Pls.’ Request for Admission No. 9) at 12. Kenneth Dargatz was the president and CFO of HIG, and his ability to sell his shares was restricted. The parties agree that Treasury regulations exclude his shares from calculation of ownership. See 26 C.F.R. § 1.414(c)-3(b)(5) (which deems as not outstanding the stock of the subsidiary organization owned by an employee of that subsidiary organization if “such stock is subject to conditions which substantially restrict or limit the employee’s right . . . to dispose of such interest or such stock and which run in favor of the parent or subsidiary organization”). Excluding Dargatz’s shares, the total number of outstanding shares at that time was 3.23 million, of which the Palladium entities owned a combined total of 3 million shares — over the 80% behcnmark. Individually, however, none of the entities separately owned over 80% of the HIG shares. (PEP II, which owned the most, held 57%). Consequently, for the plaintiffs to prevail on their statutory theory, they must show that the Palladium entities comprised a joint venture or partnership in their ownership and operation of HIG. The plaintiffs argue that the undisputed facts establish exactly that. The defendants insist that the Palladium LPs operated independently and did not form a joint venture or partnership either in fact or in law with respect to the operation of HIG. They maintain that the LPs were merely passive investors. Following that argument, they also contend that neither individually nor as a group did the LPs constitute a “trade or business” as the regulations require for controlled group liability. And they argue that the undisputed facts establish their position. The defendants seek summary judgment as to all four counts of the amended complaint, which assert controlled group and alter ego liability by the national fund and the local fund against -6- the four defendants. The plaintiffs seek summary judgment against the defendants on the controlled group counts only. III. Summary judgment standard The standards for evaluating a motion for summary judgment are well known but bear repeating here. As the Sixth Circuit recently explained: Both claimants and parties defending against a claim may move for summary judgment “with or without supporting affidavits.” Fed. R. Civ. P. 56(a), (b). Such a motion presumes the absence of a genuine issue of material fact for trial. The court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record that demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). Once that occurs, the party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). Alexander v. CareSource, 576 F.3d 551, 557-58 (6th Cir. 2009). In addition, when “‘reviewing a summary judgment motion, credibility judgments and weighing of the evidence are prohibited. Rather, the evidence should be viewed in the light most favorable to the non-moving party. . . . Thus, the facts and any inferences that can be drawn from those facts[] must be viewed in the light most favorable to the non-moving party.’” Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 374 (6th Cir. 2009) (quoting Bennett v. City of Eastpointe, 410 F.3d 810, 817 (6th Cir. 2005) (citations omitted ; see also Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003) (“In evaluating the evidence, [the district court] ‘draw[s] all reasonable inferences therefrom in a light most favorable -7- to the non-moving party.’”) (quoting PDV Midwest Refining, LLC v. Armada Oil & Gas Co., 305 F.3d 498, 505 (6th Cir. 2002 . The fact that the parties have filed cross motions for summary judgment does not automatically justify the conclusion that there are no facts in dispute. Parks v. LaFace Records, 329 F.3d 437, 444 (6th Cir. 2003) (“The fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate.”). Instead, the Court must apply the well-recognized standards when deciding such cross motions: it “must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party.” Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003). A. Statutory liability theory 1. Joint venture/partnership The Treasury regulations expressly state that a partnership qualifies as a trade or business for the purposes of assessing controlled group liability. See 26 C.F.R. § 1.414(c)-2(a) (“For purposes of this section and §§ 1.414(c)-3 and 1.414(c)-4, the term ‘organization’ means a sole proprietorship, a partnership (as defined in section 7701(a)(2 , a trust, an estate, or a corporation.”). Section 7701(a)(2) of the Internal Revenue Code, in turn, defines the term “partnership” as follows: The term “partnership” includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a trust or estate or a corporation; and the term “partner” includes a member in such a syndicate, group, pool, joint venture, or organization. 26 U.S.C. § 7701(a)(2). In interpreting section 7701(a)(2), the Supreme Court noted: A partnership is generally said to be created when persons join together their money, goods, labor, or skill for the purpose of carrying on a trade, profession, or -8- business and when there is community of interest in the profits and losses. When the existence of an alleged partnership arrangement is challenged by outsiders, the question arises whether the partners really and truly intended to join together for the purpose of carrying on business and sharing in the profits or losses or both. And their intention in this respect is a question of fact, to be determined from testimony disclosed by their agreement, considered as a whole, and by their conduct in execution of its provisions. We see no reason why this general rule should not apply in tax cases where the government challenges the existence of a partnership for tax purposes. Comm’r of Internal Rev. v. Tower, 327 U.S. 280, 286-87 (1946) (internal quotation marks and citations omitted). A joint venture is included within the definition of a partnership under section 7701(a)(2). “The elements of a joint venture are: (a) A contract (express or implied) showing that it was the intent of the parties that a business venture be established; (b) an agreement for joint control and proprietorship; (c) a contribution of money, property, and/or services by the prospective joint venturers; and (d) a sharing of profits, but not necessarily of losses (although some jurisdictions require that there be a sharing of losses).” Podell v. Comm’r of Internal Rev., 55 T.C. 429, 431 (1971); see also Ballou v. United States, 370 F.2d 659, 674 (6th Cir. 1966) (“controlling consideration is whether the parties intend to join in a business venture”). The concept of a joint venture is similar to the concept of a partnership, with a primary distinction being that “a joint venture is generally established for a single business venture (even though the business of managing the venture to a successful conclusion may continue for a number of years) while a partnership is formed to carry on a business for profit over a long period of time.” Podell, 55 T. Ct. at 432. The record in this case does not clearly establish whether the Palladium entities acted as a joint venture or partnership concerning their portfolio companies, including HIG. It is uncontested that the three limited partnerships were established in separate limited partnership agreements -9- executed on February 24, 2000 (for PEP II LP and PEI II LP) and May 23, 2000 (for PEP II-A LP) on substantially similar terms. The agreements declared that the purpose of each partnership was to “make investments in accordance with the Investment Guidelines,” Defs.’ Mot. for Sum. J., Exs. 1-3 (PEP LP Agrs.) § 2.4, which envisioned “invest[ing] in underperforming companies that are in transition and require a new financial or operational strategy.” Defs.’ Mot. for Sum. J., Exs. 1-3 (Investment Guidelines, Annex B to PEP LP Agrs.) at 1. The strategy of each LP was “to make equity and equity-related investments in connection with the acquisition of a controlling interest in companies (although it may also take significant minority stakes).” Ibid. Section 4.2 of each limited partnership agreement vested the General Partner of these three partnerships — PEP II LLC, who is not a party to this case — with authority to manage investments of the three LPs and to act as their agent. All three limited partnership agreements entered into virtually identical advisory agreements with a single entity: PEP LLC, a large New York private equity firm and the fourth defendant in this case. Although PEP LLC did not engage in any investment activities itself, it functioned as the brain for the investment operations of the three LPs. Under the advisory agreements with each limited partnership, the role of PEP LLC was to (i) originate, recommend, structure and identify sources of capital for investment opportunities to the Partnership, (ii) monitor, evaluate and make recommendations regarding the timing and manner of disposition of Portfolio Investments and (iii) provide such other services related thereto for the Partnership as the Partnership may reasonably request, and the Advisor desires to render such services to the Partnership in consideration of an advisory fee and other compensation. Defs.’ Mot. for Sum. J., Exs. 1-3 (Advisory Agr. Annex C to PEP LP Agrs.), at 1. Once the advisor recommended a certain investment, the General Partner would send out capital call notices to each limited partner in each of the partnerships, and if the limited partners responded to the capital call, the money would be wired directly to the respective portfolio company. -10- The advisory agreements described the separate identity of each limited partnership and stated expressly that they are “not intended to create, and do[] not create, a partnership, joint venture or any like relationship among the parties hereto (or any other parties).” Id. at 5, § 7(e). However, section 2.10 of each limited partnership agreement gave General Partner PEP II LLC authority to set up “parallel funds,” by which investments of the three LPs were coordinated. For example, this provision in the limited partnership agreement establishing PEP II LP reads: . . . the General Partner may create parallel investment entities (“Parallel Funds”), which will invest proportionately (based upon available capital) in all Portfolio Investments on effectively the same terms and conditions as the Partnership . . . ; provided, that the formation of any Parallel Fund and the issuance of any interest therein shall occur not later than 180 days after the Closing Date. Defs.’ Mot. for Sum. J., Ex. 1 (PEP II LP Agr.), ¶ 2.10(a), at 18-19. That provision meant that “PEP II and PEI II are parallel funds with PEP II-A . . . [and] will invest proportionately based upon available capital.” Pls.’ Mot. for Sum. J., Ex. 4 (Reymond dep.) at 141-42. Despite many similarities, the respective limited partnership agreements had a few differences. For example, the defendants emphasize that, since partnerships had different limited partners, the “General Partner ha[d] separate fiduciary obligations to each of the Private Equity Funds.” Defs.’ Mot. for Sum. J., Ex. 12 (Adams Report) at ¶ 19; see also Defs.’ Response to Pls.’ Mot. for Sum. J., Ex. 1 (Rodriguez dep.) at 51. Additionally, the agreement for PEP II-A LP included a few provisions favoring its single limited partner, the likes of which were absent from the other two agreements. See Defs.’ Mot. for Sum. J., Ex. 2 (PEP II-A LPA) § 3.4(g)(iv), at 35 & 3.5(f), at 37; see also Defs.’ Response to Pls.’ Mot. for Sum. J., Ex. 1 (Rodriguez dep.) at 51. The partnerships filed separate tax returns and maintained separate books and records. When the Haden Companies filed for bankruptcy in November 2006, the partnerships declared respective -11- losses on their separate tax returns: PEP II LP realized a loss of $27.6 million, PEP II-A LP lost $12.2 million, and PEI II LP realized a loss of $5.1 million. Yet, the partnerships had no equipment, employees, or customers of their own. The defendants maintain that the only activity at the three limited partnerships was to answer or not answer capital calls. Despite some formalities emphasizing their separate existence, there were many things the LPs had in common. For example, the partnerships’ common advisor, PEP LLC, held a single annual meeting for all investors of the limited partnerships. The limited partnerships also shared an Advisory Committee, which included representatives from all three LPs, among other members, whose task was to approve valuations of the portfolio investments and waive a twenty-five percent divestiture limit. PEP LLC informally referred to the three limited partnerships collectively as “Fund II” and consistently used that term in its annual reports. And when the bankruptcy trustee forwarded money to the three LPs, he did so in a single check. “Fund II” also referred to the three LPs’ investments in other portfolio companies recommended to them by PEP LLC (there were at least six of such companies). The Palladium LPs did not have the exclusive right to invest in PEP LLC-endorsed portfolio companies; other funds associated with PEP LLC or its successors were also permitted to purchase stock in such companies at the same time. Despite issuing unitary annual reports for “Fund II,” PEP LLC broke down each partnership’s respective interests in various portfolio companies and appended each partnership’s respective audited financial statements to the annual reports. For example, the 2004 annual report summarized that Fund II obtained a total of $231 million in capital from its investors. Of that amount, approximately 61 percent (or $142 million) came from PEP II LP, 27 percent (or $62.75 million) came from PEP II-A, and 12 percent (or $26.25 million) came from PEI II. Pls.’ Mot. for -12- Sum. J., Ex. 14 (2004 Annual Report) at 5. There is some evidence in the record suggesting that a ratio of 62/27/11 was used to “invest pro rata in everything,” Pls.’ Mot. for Sum. J., Ex. 3 (Rodriguez dep.) at 116, and to determine each limited partnership’s percentage of the $35-million- dollar line of credit that Palladium extended to Haden Schweitzer, see Pls.’ Mot. for Sum. J., Ex. 23 (Am. & Rest. Loan Agr.), Sch. 2.1, at D0043508 (61.43% for PEP II, 27.18% for PEP II-A, and 11.39% for PEI II), and was used in the draft indemnification agreement of Haden’s Chief Restructuring Officer John Criso that was never finalized. With respect to the acquisition of the interests in the Haden companies, the three LPs purchased on August 1, 2001 the total of three million shares of HIG stock for $40 million on the advice of their common advisor, PEP LLC. On the same day, PEP II wired to HIG $1,842,938.47 from its bank account; PEI II wired $341,580.07 from its own bank account; and PEP II-A wired $815,481.46, likewise from its separate bank account. PEP II, PEI II, and PEP II-A were issued separate stock certificates for, respectively, 1,842,938.47, 341,580.07, and 815,481.46 shares of HIG stock. On the same day, the limited partnerships signed separate promissory notes with Haden Schweitzer, under which they extended credit to Haden Schweitzer and the latter agreed to repay approximately $16.5 million to PEP II LP, $7.3 million to PEP II-A LP, and $3 million to PEI II LP. Despite the separate wire transfers and separate stock certificates, the three LPs entered into a single Securities Purchase Agreement with Haden, signed on their behalf by their General Partner PEP II LLC. The same is true with regard to the Shareholders and Registration Rights Agreement, which was also executed on behalf of all three of the LPs by PEP II LLC. The Shareholders and -13- Registration Rights Agreement among HIG, Haden Group, LLC, and the three LPs stated, however, that the agreement does not give rise to a partnership between the parties thereto. As one might expect, with the large infusion of cash came control over the Haden companies by the Palladium entities. By acquiring the majority of Haden shares, the Palladium LPs became entitled to elect five of the seven directors on HIG’s Board. They filled these spots with Marcos Rodriguez, Walter Loh, Kevin Reymond (all three members and employees of LPs’ advisor PEP LLC) and two PEP LLC executives (but not employees – i.e., they were not compensated by PEP LLC) with experience in the auto industry – Dennis Pawley and William Smith. The remaining Board seats went to HIG CEO Kenneth Dargatz and HIG CFO Bruce Potts. Rodriguez took a leadership role on the Board: he chaired the meetings, set the agenda, and other members of the Board generally deferred to him, according to Dargatz. Rodriguez was also a managing member of PEP II LLC, the LPs’ general partner, and was named as the “Key Executive” in each of the respective limited partnership agreements. Rodriguez was also the founder and managing director of PEP LLC. The Palladium entities used a “hands-on operating and financial approach” to their Portfolio Companies, although their involvement on the financial side was much more pervasive than on the operations side. The point was “to bring financial expertise to these [troubled] companies” and “to bring resources to bear in finance and operations.” Pls.’ Mot. for Sum. J., Ex. 4 (Reymond dep.) at 199-200; Pls.’ Mot. for Sum. J., Ex. 6 (Dargatz dep.) at 41. “[F]or certain periods of time [the Palladium team] were intimately involved in things that were going on at Haden.” Pls.’ Mot. for Sum. J., Ex. 5 (Green dep.) at 111. Consistent with this approach, four months after initial investment in Haden the HIG Board of Directors established a four-member HIG Finance -14- Committee, which was granted exclusive authority to review and approve bids, monitor and adjust overhead (including headcount), and approve capital budgets and unbudgeted expenditures. The committee was created at the initiative of PEP LLC and was staffed with HIG’s CFO Bruce Potts, two PEP LLC employees who were on HIG’s Board, Walter Loh and Kevin Reymond, and PEP LLC executive William Smith. The Board also established an Office of the President consisting of Dennis Pawley and William Smith, whose task was to provide guidance to HIG CEO Kenneth Dargatz and HIG CFO Bruce Potts on the operations side. Another committee established by the Board was the Audit Committee, which was charged with reviewing and approving the Haden Corporations’ financial statements and selecting their independent auditors. The Audit Committee consisted of Kevin Reymond, Walter Loh, and William Smith, all employees of PEP LLC; the Committee had no Haden members. There also is conflicting testimony about the extent of Palladium’s involvement in other Haden’s matters. For example, HIG CEO and President Kenneth Dargatz testified that the Palladium entities became involved in Haden’s manpower issues, pension and benefits decisions, and retention and remuneration issues. Justin Green, an employee of PEP LLC, confirmed that he was at times responsible for overseeing the implementation of head count reductions. PEP LLC also hired, over Dargatz’s objections, Rodriguez’s protégé John Criso as a Chief Restructuring Officer and Chief Operating Officer at Haden. According to Dargatz, it was not uncommon for Rodriguez to be present in Haden’s office in Auburn Hills. And on several occasions, PEP LLC communicated directly with the Haden companies’ existing and potential customers. PEP LLC Pawley and Smith -15- even personally met with key personnel at Haden’s major customers – DaimlerChrysler, Toyota, and Peugeot. On the other hand, it was the Haden Corporations’ management, consisting of Dargatz and Potts, who decided which employees would be terminated pursuant to the Board’s decision to reduce the workforce. Nor did PEP LLC deal with the Haden Corporations’ collective bargaining agreements or grievances with their employees’ union. Finally, Haden’s CFO Bruce Potts testified that he “can’t say [he] saw much involvement from Palladium on HR issues,” on “pension and benefit issues, . . . performance evaluation, retention and remuneration issues.” See Defs.’ Mot. for Sum. J., Ex. 29 (Potts dep.) at 48-49. These facts create issues that cannot be resolved at the summary judgment stage. The LP agreements — which decidedly disclaim any joint relationship among the three Palladium units — are not themselves dispositive on the issue under IRC section 7701(a)(2). As the Ninth Circuit cogently explained: To determine whether a partnership has been formed, the court does not look simply to the stated intent of the parties; rather, it analyzes the terms of their agreement and their conduct. See Luna v. Commissioner, 42 T.C. 1067, 1077-78, 1964 WL 1259 (1964); Madison Gas & Elec. Co. v. Commissioner, 633 F.2d 512, 514 (7th Cir. 1980) (“The arrangement is, of course, not taken out of this classification [as a partnership] simply because the three utilities intended to be taxed only as a co-tenancy and not as a partnership.”). A partnership for federal tax purposes is “broader in scope than the common law meaning of partnership, and may include groups not commonly called partnerships.” 26 C.F.R. § 1.761-1(a); see also McManus v. Commissioner, 583 F.2d 443, 447 (9th Cir. 1978). It does not matter whether state law classifies a venture as a partnership. Estate of Kahn v. Commissioner, 499 F.2d 1186, 1189 (2d Cir. 1974). For federal tax purposes, the Supreme Court has described a partnership as “an organization for the production of income to which each partner contributes one or both of the ingredients of income — capital or services.” [Comm’r of Internal Rev. v.] Culbertson, 337 U.S. [733, 740 (1949)]; see also Bussing [v. Comm’r of Internal Rev.,] 88 T.C. [449, 460 (1987)] (“A partnership for Federal income tax purposes is -16- formed when the parties to a venture join together capital or services with the intent of conducting a business or enterprise and of sharing the profits and/or losses of the venture.”). In determining whether parties intended to conduct an enterprise jointly, the Court in Culbertson looked to “the agreement, the conduct of the parties in execution of its provisions, their statements, the testimony of disinterested persons, the relationship of the parties, their respective abilities and capital contributions, the actual control of income and the purposes for which it is used, and any other facts throwing light on their true intent.” Culbertson, 337 U.S. at 742. And in Luna, the Tax Court identified other factors that bear on whether a venture is a partnership for tax purposes: whether each party was a principal and coproprietor, sharing a mutual proprietary interest in the net profits and having an obligation to share losses, or whether one party was the agent or employee of the other, receiving for his services contingent compensation in the form of a percentage of income; whether business was conducted in the joint names of the parties; whether the parties filed Federal partnership returns or otherwise represented to respondent or to persons with whom they dealt that they were joint venturers; whether separate books of account were maintained for the venture; and whether the parties exercised mutual control over and assumed mutual responsibilities for the enterprise. 42 T.C. at 1078. Bergford v. Comm’r of Internal Rev., 12 F.3d 166, 168-69 (9th Cir. 1993); see also Cobb v. Comm’r of Internal Rev., 185 F.2d 255, 258-59 (6th Cir. 1951) (“The ultimate question is whether the partnership is real, and the contribution of capital or services are but elements in the determination of its realty [sic].”). The Court must conclude that there exists a genuine issue of material fact as to whether the three LPs constituted a partnership or a joint venture. On one hand, there is no direct evidence of written or oral agreements between the LPs to “join together their money, goods, labor, or skill for the purpose of carrying on a trade, profession, or business” and to share “in the profits and losses.” Tower, 327 U.S. at 286-87. As noted above, the LPs are governed by separate limited partnership agreements, have separate Advisory Agreements with PEP LLC, and had different limited partners. They purchased separate stock in Portfolio Companies through individual (although parallel) -17- transactions from separate accounts without actually pooling their money together. Under the limited partnership agreements, none of the LPs could bind or act as an agent for the other LPs. Under the cases interpreting the Internal Revenue Code, the express disclaimer of the intent to create a partnership or a joint venture undermines the taxpayer’s goal to establish a partnership or a joint venture. See Ragland Inv. Co. v. Comm’r of Internal Rev., 52 T.C. 867, 878-88 (1969) (deciding not to “recast[]” agreement between the parties with conflicting tax interests which set forth duties and obligations “which conform to the business or economic realities of the situation”). But see United States ex rel. Perler v. Papandon, 331 F.3d 52, 55 (2d Cir. 2003) (stating that “[i]ndividuals may constitute a partnership for tax purposes even though they expressly disclaim an intention to enter into a partnership relation”) (citation omitted). On the other hand, the partnerships shared their single general partner PEP II LLC and a financial advisor PEP LLP, who wielded a significant amount of power over the LPs’ decisions. The general partner was authorized to act as the agent for all three of the limited partnerships and had authority to set up “parallel” investment entities. In fact, in its capacity as an agent for all three of the limited partnerships, PEP II LLC entered into a single Securities Purchase Agreement for the purchase of HIG stock. Also in its capacity as an agent of the three LPs, PEP II LLC entered into the Amended and Restated Loan Agreement with Haden Schweitzer Corporation, under the terms of which the three LPs extended to the company a $35 million line-of-credit in proportions that tracked their share of their respective investments into the company. PEP II LLC prepared unitary annual reports for the three LPs, referring to them collectively as “Fund II.” It is also significant that the three LPs invested and yielded profits in approximately the same proportions compared to one another: 61.5/27.2/11.3. The variance in the proportions did not vary by more than .18%. -18- These facts preclude determination of the issue of the joint venture or partnership as a matter of law. 2. Trade or business To constitute a partnership within the meaning of IRC section 7701(a)(2), the entity must be created “for the purpose of carrying on a trade, profession, or business.” See Tower, 327 U.S. at 286; McDougall, 494 F.3d at 577. The defendants’ mantra throughout this litigation has been that passive investment does not amount to a “trade or business,” and they are merely passive investors. The Court agrees with half of that proposition. Although the term “trade or business” is not defined in ERISA or MPPAA, courts have used the two-prong test outlined by the Supreme Court in Commissioner of Internal Revenue v. Groetzinger, 480 U.S. 23 (1987), which interprets IRC section 162 dealing with deduction of business expenses. See Cent. States, Se. & Sw. Areas Pension Fund v. White, 258 F.3d 636, 642 (7th Cir. 2001) (discussing the Groetzinger test); Connors v. Incoal, Inc., 995 F.2d 245, 250-51 (D.C. Cir. 1993) (characterizing the Groetzinger test as “the most authoritative pronouncement available” in the MPPAA context). The Groetzinger test states that a person’s activity constitutes a “trade or business” when he engages in an activity (1) for the primary purpose of income or profit; and (2) with continuity and regularity. 480 U.S. at 35. The case emphasizes that a thorough examination of particular facts of each case is necessary to determine whether an entity constitutes a “trade or business.” Groetzinger, 480 U.S. at 36. Groetzinger itself involved an attempt by a full-time gambler who attempted to deduct the expenses he incurred when wagering for his own account to produce income. The Court emphasized that “not every income-producing and profit-making endeavor constitutes a trade or business. . . . -19- A sporadic activity, a hobby, or an amusement diversion does not qualify.” Groetzinger, 480 U.S. at 35. That case was consistent with another decision interpreting the same Code section, Whipple v. Comm’r of Internal Rev., 373 U.S. 193 (1963), which denied business deductions to a taxpayer who furnished services to a series of corporations in the hopes of yielding higher returns on his investments. The Court explained, “[w]hen the only return is that of an investor, the taxpayer has not satisfied his burden of demonstrating that he is engaged in a trade or business since investing is not a trade or business and the return to the taxpayer, though substantially the product of his services, legally arises not from his own trade or business but from that of the corporation.” Id. at 202. The many courts agree that an entity does not normally conduct a trade or business with sufficient continuity and regularity to satisfy the second prong of the Groetzinger test if it merely holds a passive investment interest in some property. See, e.g., Serv. Bolt & Nut Co. v. Comm’r of Internal Rev., 724 F.2d 519, 522 (6th Cir. 1983) (“a limited partnership interest is a passive investment that does not permit the trust to actively engage in the management, operation or control of the partnership” and therefore, it is not a “trade or business” under the Internal Revenue Code); Dietrick v. Comm’r of Internal Rev., 881 F.2d 336, 338-39 (6th Cir. 1989) (stating that passive investment activity is not “trade or business” for the purposes of an Internal Revenue Code provision allowing the deduction of expenses incurred in carrying on a trade or business); Cent. States, SE & SW Areas Pension Fund v. Fulkerson, 238 F.3d 891, 895 (7th Cir. 2001) (stating that “possession of a property, be it stocks, commodities, leases, or something else, without more[,] is the hallmark of an investment” and rejecting the claim that merely holding leases was a sufficiently continuous and regular business activity to satisfy the second prong of the Groetzinger test). At least one court -20- however has rejected the idea that a passive investment can never qualify as a “trade or business” under the MPPAA. See Bd. of Trustees of W. Conference of Teamsters Pension Trust Fund v. Lafrenz, 837 F.2d 892, 894 (9th Cir. 1988) (noting that the statute does not distinguish between active and passive investors and finding a proprietorship that leased the trucks to the commonly controlled corporation to be a “trade or business” under section 1301(b)(1 . The plaintiffs rely heavily on an opinion of the Pension Benefit Guaranty Corporation Appeals Board (“PBGC”) issued on September 26, 2007 in which the Board held a private equity fund liable for the underfunded liabilities of a pension plan sponsored by one of its portfolio companies. App’x to Pls.’ Mot. for Sum. J., Ex. A [dkt. # 90] (PBGC Appeals Board Opinion). The PBGC concluded that the privaty equity fund satisfied the first prong of the Groetzinger test because (a) the general partner of the fund and various independent institutional investors created the fund for the express purpose of “creating and realizing long-term capital gains primarily from investments . . . including . . . the general buying, selling, holding, and otherwise investing in securities of every kind and nature”; (b) the fund reported on partnership tax returns that its principal business activity was “investment advisory” and its principal service was “investment services”; and (c) the general partner of the fund received compensation for its investment advisory and management services, including consulting fees, management fees, and carried interest. When considering the second prong of the Groetzinger test, the PBGC found significant the size of the fund’s overall portfolio (almost $470 million) and the profits generated as a result of the fund’s investments ($207,203 in total investment income reported, as well as over $7 million in management fees). The PBGC distinguished the Whipple line of cases based on active involvement of the Fund in the activities of the portfolio company and on Whipple’s focus on personal investments. The Board noted that -21- Higgins v. Comm’r of Internal Rev., 312 U.S. 212 (1941), and Whipple “refer to individuals managing their own personal investments rather than to partnerships, like the Fund, whose purpose is to acquire, hold, and sell securities and other investment interests in United States industrial businesses. . . .” Op. at 12. The Board continued: The Fund, unlike the taxpayer in Higgins, is not: (1) an individual acting on his own behalf; (2) merely keeping records and collecting dividends and interest from investments; and (3) solely receiving a return as an [sic] passive investor. Instead, the Fund is a “trade or business” because it regularly is involved in investment activities of a much more active nature than those in Higgins. This is reflected in the responsibilities of its agent . . . who: (i) provides investment advisory and management services to others (i.e., its partners); (ii) hires a third-party . . . to assist in selecting and purchasing potential investments (e.g., the Other Companies) and in distributing the net profits and losses from these companies to itself and limited partners; and (iii) receive compensation for such services (e.g., 20% of all realized profits from the Fund’s investments). . . . The facts in Whipple are distinguishable because the Fund, as evidenced by its tax returns and Partnership Agreement, was directly and substantially involved in a recognized business activity (i.e., providing investment advisory and management services) for the benefit of several other entities (i.e., its general and limited partners). . . . Furthermore, in contrast to the taxpayer in Whipple, . . . the Fund’s agent was entitled to compensation for investment advisory and management services it performed. Id. at 12-13. The parties dispute the degree of deference the Court ought to pay to the opinion of the PBGC. That body is charged with interpreting the MPPAA and is “entitled to substantial deference when it construes the statute.” Cent. States, Se. & Sw. Areas Pension Fund v. Nitehawk Express, Inc., 223 F.3d 483, 491 (7th Cir. 2000); see also 29 U.S.C. § 1301(a)(14)(B) (“the determination of whether two or more persons are under ‘common control’ shall be made under regulations of the [Pension Benefit Guaranty] corporation which are consistent and coextensive with regulations prescribed for similar purposes by the Secretary of the Treasury under subsections (b) and (c) of -22- section 414 of Title 26”). However, “PBGC opinion letters are not as authoritative as PBGC regulations, but they have been discussed in the same vein as revenue rulings.” Nitehawn Express, Inc., 223 F.3d at 491. In this circuit, revenue rulings are “not entitled to the deference accorded a . . . Treasury Regulation,” Threlkeld v. Comm’r of Internal Rev., 848 F.2d 81, 84 (6th Cir. 1988); they are merely persuasive authority. Constantino v. TRW, Inc., 13 F.3d 969, 980-81 (6th Cir. 1994). “[I]nterpretations contained in formats such as opinion letters are ‘entitled to respect’ under our decision in Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944), but only to the extent that those interpretations have the ‘power to persuade,’ ibid.” Christensen v. Harris County, 529 U.S. 576, 587 (2000). The Court finds the PBGC’s reasoning persuasive, and it remains faithful to the general rule that no matter how large an investor’s portfolio or how much managerial attention an investor pays to his investments, investing alone does not constitute a “trade or business.” Higgins v. Comm’r of Internal Rev., 312 U.S. 212, 218 (1941). Rather, the approach coins an “investment plus” standard, which the facts in this case, taken in the light most favorable to the plaintiffs, tend to support. There is evidence in the record that Fund II, consisting of the three LPs led by PEP LLC, had a business purpose other than mere investment. The three LPs joined their investments to exert power over financial and managerial activities of Haden. See Defs.’ Mot. for Sum. J., Exs. 1-3 (Investment Guidelines, Annex B to PEP LP Agrs.), at 1 (describing the purpose of the partnerships to “make equity . . . investments in connection with the acquisition of a controlling interest in companies”). Collectively, the three LPs were able to select five of the seven members of Haden’s board and set up several committees to control internal operations of the company. The three LPs also purchased the rights to Haden Schweitzer’s senior credit facility and became a major source of credit to the -23- Haden corporations. These practices were consistent with the overall functional model for private equity funds, which, according to the defendants’ expert Steven M. Adams, aggregat[e] capital with a long term investment horizon (typically four to eight years) with the involvement of a team of experienced and professional financial experts (“Private Equity Managers”). In this model, value is created by investing in relatively large, often controlling, percentages of the stock of an enterprise. Thus, the Private Equity Manager achieves some degree of governance control and ability to influence the management of the corporation in which it has invested. This can be done by assuming seats on the board of directors and by frequent communication with the officers of the company. Often, the economic incentives of the shareholders and management are aligned by compensating management in the same currency held by the shareholders – stock in the company. Defs.’ Mot. for Sum. J., Ex. 12 (Adams Report) at ¶ 16. That satisfies the first prong of the Groetzinger test. In addition, the consistent involvement of the private equity funds in the management of the portfolio company meets the second prong of the Groetzinger test. As Adams further stated, the typical characteristics of the private equity form of investing [are that e]xperienced, professional fund managers make relatively large and non-diversified investments where they intend to own the companies for a long period of time, typically several years, and intend to exert an active influence over the management and affairs of the company. This consistency and activism of ownership allows the Private Equity Fund to create value by improving the operations, practices, financial conditions, capital structure and governance of the corporation in which it has a controlling shareholding or shares a controlling shareholding (a “Portfolio Company”). Defs.’ Mot. for Sum. J., Ex. 12 (Adams Report) at ¶ 17 (emphasis added). The objectives of the three limited partnership defendants in this case were no different: to acquire controlling interest in companies and actively manage that investment. Defs.’ Mot. for Sum. J., Exs. 1-3 (Investment Guidelines, Annex B to PEP LP Agrs.) at 1; see also Pls.’ Mot. for Sum. J., Ex. 4 (Reymond dep.) at 199-200; Pls.’ Mot. for Sum. J., Ex. 6 (Dargatz dep.) at 41 (characterizing the defendants’ approach to Portfolio Companies as “hands-on operating and financial approach” and stating that -24- Palladium LPs’ objective was “to bring financial expertise to these [troubled] companies” and “to bring resources to bear in finance and operations”). This strategy is far from passive investment discussed in the tax cases. Imposing the burdens of controlled group liability in this instance would be reasonable and consistent with remedial purpose of ERISA. Of course, the opposite inference could be drawn from the facts as well. Therefore, neither side can prevail as a matter of law on this issue at this stage of the proceedings. B. Alter ego theory The plaintiffs also argue that the defendants were the alter ego of the Haden companies and should be liable for withdrawal liability under that theory. Alternatively, the plaintiffs urge the Court to treat the defendants as a single employer. The defendants seek a judgment as a matter of law dismissing those claims. 1. Alter ego “The alter ego doctrine was developed to prevent employers from evading obligations under the [MPPAA] merely by changing or altering their corporate form.” NLRB v. Allcoast Transfer, Inc., 780 F.2d 576, 579 (6th Cir. 1986). The alter ego theory is fundamentally different from the controlled group theory because “[a]n alter ego’s liability is the same as the liability of the alleged corporation . . . [and] a controlled group member is jointly and severally liable only if it is a party to the action and the plaintiff obtains a judgment against it.” Cent. States, Se. & Sw. Areas Pension Fund v. Mississippi Warehouse Corp., 853 F. Supp. 1053, 1059 (N.D. Ill. 1994). The theory has been extended to the MPPAA context. Brown v. Astro Holdings, Inc., 385 F. Supp. 2d 519, 531 (E.D. Pa. 2005). -25- In the labor law context, courts have employed the so-called “relaxed” version of the alter ego test, which requires a showing that “the two enterprises have substantially identical management, business, purpose, operation, equipment, customers, supervision and ownership,” Nelson Elec. v. NLRB, 638 F.2d 965, 968 (6th Cir. 1981), and which is applied in “a more relaxed, less exacting fashion than would be required under federal common law principles,” NLRB v. Fullerton Transfer & Storage Ltd., Inc., 910 F.2d 331, 336 (6th Cir. 1990). Under the relaxed version of the test, the plaintiff is relieved of the obligation to show intent to avoid labor obligations. See Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 587-88 (6th Cir. 2006). The relaxed version of the alter ego test applies in two situations: The alter ego doctrine is most commonly used in labor cases to bind a new employer that continues the operations of an old employer in those cases where the new employer is “merely a disguised continuance of the old employer.” Southport Petroleum, Co. v. NLRB, 315 U.S. 100, 106 (1942); see also Howard Johnson Co. v. Detroit Local Joint Executive Bd., Hotel and Restaurant Employees, and Bartenders Int’l Union, 417 U.S. 249, 259 n.5 (1974). Increasingly, the term also is applied to so-called double-breasted operations to determine whether two or more coexisting employers performing the same work are in fact one business, separated only in form. Fullerton Transfer & Storage Ltd., Inc., 910 F.2d at 336 (footnote omitted). In both of these situations, the company sought to be held liable must be engaged in the same line of business as the company originally liable under labor law. See Fullerton Transfer, 910 F.2d at 337 & 336 n.7 (explaining that double-breasted operations arise “where a company operating with a unionized work force establishes a second, nonunionized company performing the same work in the same market under the same control”) (emphasis added). The relaxed standard is not applicable where the two entities “are, respectively, a corporation engaged in a different business and stockholders and officers of another corporation.” Id. at 337. This is so because, unlike in the -26- situation where employers are able to thwart union obligations by merely changing a corporate form, in which case “intent can too easily be disguised,” the application of the relaxed standard is not justified where the businesses are separated into multiple corporations from the get-go, before facing any pension liability repercussions. Ibid. Under regular iteration of the test, “‘an intent to evade’ preexisting obligations is ‘clearly the focus of the alter ego doctrine.’” Trustees of Resilient Floor Decorations Ins. Fund v. A & M Installations, Inc., 395 F.3d 244, 248 (6th Cir. 2005) (quoting Cement Masons’ Pension Trust Fund v. O’Reilly, 664 F. Supp. 277, 279 (E.D. Mich. 1987 . But see Trustees of Detroit Carpenters Fringe Benefit Funds v. Indus. Contracting, LLC, 581 F.3d 313, 319 (6th Cir. 2009) (recognizing limited application of the Resilient Floor holding and insisting that this quotation referred to the purpose of the alter ego doctrine rather than its formulation). Still, no factor of the test is controlling and all relevant factors must be considered together. NLRB v. Allcoast Transfer, Inc., 780 F.2d at 581-82. In deciding whether corporate formalities can be disregarded, the Fullerton Transfer court considered the following three factors: “‘the amount of respect given to the separate identity of the corporation by its shareholders, the degree of injustice visited on the litigants by recognition of the corporate entity, and the fraudulent intent of the incorporators.’” Fullerton Transfer, 910 F.2d at 340 (quoting Seymour v. Hull & Moreland Eng’g, 605 F.2d 1105, 1111 (9th Cir. 1979 . The court instructed: “When fraud is shown, we do not believe that it is always necessary to show the other two factors. Similarly, if both injustice and little respect for the corporate entity are shown, we do not believe it necessary to show fraud. Where extraordinary injustice is shown, it may alone be a sufficient predicate to liability.” Ibid. -27- The defendants in this case argue that the standard test should apply, whereas the plaintiffs advocate for the relaxed test. 2. Single-employer doctrine The single-employer doctrine permits courts to aggregate several smaller private entities for purposes of determining whether they constitute “employer” within the meaning of federal employment discrimination statutes. See Swallows v. Barnes & Noble Book Stores, Inc., 128 F.3d 990, 993 (6th Cir. 1997). Under the doctrine, when there is “sufficient indicia of an interrelationship between the immediate corporate employer and the affiliated corporation to justify the belief on the part of an aggrieved employee that the affiliated corporation is jointly responsible for the acts of the immediate employer,” courts may view subsidiary’s conduct as that of both subsidiary and a parent. Armbruster v. Quinn, 711 F.2d 1332, 1337 (6th Cir. 1983), abrogated on other grounds by Arbaugh v. Y&H Corp., 546 U.S. 500 (2006). Courts must consider “the degree of (1) interrelated operations, (2) common management, (3) centralized control of labor relations, and (4) common ownership.” Armbruster, 711 F.2d at 1337 (citations and footnote omitted). No single factor is conclusive, and all four factors need not be present. Ibid. This “integrated enterprise” test for the presence of a single employer represents a “sort of labor-specific veil-piercing test, first developed by the National Labor Relations Board.” Pearson v. Component Technology Corp., 247 F.3d 471, 485 (3d Cir. 2001). Although extended to several employment discrimination statutes, the test has not been applied in the contexts other than to meet the jurisdictional prerequisites of such statutes. Ibid.; see also Stephen F. Befort, Labor Law and the Double-Breasted Employer: A Critique of the Single Employer and Alter Ego Doctrines and a Proposed Reformulation, 1987 Wis. L. Rev. 67, 75 (1987). -28- * * * * * * * Genuine issue of material fact on the issue of alter ego liability under the standard alter ego liability test as set forth in Fullerton Transfer preclude summary judgment on those counts. At this point, it is unclear how much “respect” the three Palladium LPs paid to Haden’s independence, how much “injustice” would be visited upon the litigants through denial of the alter ego liability, and how much the three defendant LPs influenced and controlled the HIG business. Although this theory of liability is weak due to equivocal evidence on the extent to which the defendants’ interference with Haden’s business rose to the level justifying imposition of alter ego liability, the record before the Court contains some testimony that the Palladium entities took it upon themselves to contact Haden’s clients directly, to fire some percentage of Haden’s work force, to force Haden to seek Palladium’s approval for bids and all capital expenditures, and were generally intimately involved in the operation of Haden. See, e.g., Pls.’ Mot. for Sum. J., Ex. 4 (Reymond dep.) at 199- 200; Pls.’ Mot. for Sum. J., Ex. 6 (Dargatz dep.) at 41. At the summary-judgment stage of the litigation, these facts are sufficient to preclude disposition of the alter ego issues as a matter of law. IV. Building and construction industry defense The defendants also assert they were entirely exempt from withdrawal liability by virtue of the “building and construction industry” exemption, 29 U.S.C. § 1383(b), and that they established applicability of this exemption as a matter of law. They argue that the National Fund has admitted that more than 85% of the Haden Corporations’ employees were engaged in construction work over the five-year period preceding the assessment, as would be required to trigger the exemption, and therefore, the defendants seek dismissal of the National Fund’s claims stated in counts I and II of the amended complaint. The defendants alternatively ask for the opportunity to arbitrate the issue. -29- The plaintiffs argue that the defendants have waived that defense by failing to demand arbitration within 60 days of receiving notice of the assessment of withdrawal liability as required by 29 U.S.C. § 1401(a)(1)(A)-(B). Under the MPPAA, mulitemployer pension plans can assess proportional liability on withdrawing employers for the unfunded vested benefit obligations of their plans. Ordinarily, a plan assesses such liability when an employer terminates its obligation to contribute or ceases all operations covered by the plan. 29 U.S.C. § 1383(a). However, “in enacting the MPPAA Congress recognized the transitory nature of contracts and employment in the building and construction industry with a specific exception” that defined an event triggering withdrawal liability for employers within that industry differently. Carpenters Pension Trust Fund for N. Cal. v. Underground Constr. Co., 31 F.3d 776, 778 (9th Cir. 1994). Under the building and construction industry exemption, withdrawal for the purposes of the MPPAA withdrawal liability provisions occurs when two conditions are met: (A) an employer ceases to have an obligation to contribute under the plan, and (B) the employer – (i) continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required, or (ii) resumes such work within 5 years after the date on which the obligation to contribute under the plan ceases, and does not renew the obligation at the time of the resumption. 29 U.S.C. § 1383(b)(2). Therefore, withdrawal depends on whether an employer continues to engage in the covered activity. When the employer covered by this exemption does not continue in the industry, withdrawal liability never occurs. Under the facts in this case, since the Haden -30- companies dissolved, and the Palladium entities never continued the business thereafter, this exception could be a complete defense to the plaintiffs’ claims, if it applies. To qualify for the construction industry exception, an employer must meet the following conditions: (A) substantially all the employees with respect to whom the employer has an obligation to contribute under the plan [must] perform work in the building and construction industry, and (B) the plan – (i) [must] primarily cover[] employees in the building and construction industry, or (ii) [must be] amended to provide that this subsection applies to employers described in this paragraph. 29 U.S.C. § 1383(b)(1). ERISA does not define the term “substantially all the employees” in subsection (b)(1)(A) of section 4203, 29 U.S.C. § 1383, nor has the Sixth Circuit spoken on that point. However, the Seventh Circuit has defined the phrase to mean 85% or more. See Cent. States, SE & SW Areas Pension Fund v. Robinson Cartage Co., 55 F.3d 1318, 1321 (7th Cir. 1995). The term “building and construction industry” must be construed narrowly; work or significant involvement of the employees on the construction site (as opposed to abstract relationship to the construction industry) is a sine qua non to the exception’s applicability. Union Asphalts & Roadoils, Inc. v. MO-KAN Teamsters Pension Fund, 857 F.2d 1230, 1234-35 (8th Cir. 1988) (cataloguing cases that hold that employers who manufacture construction materials but do not install them at the construction site are not in the building and construction industry). The record contains factual disputes on all these points. More fundamentally, however, the MPPAA requires that “[a]ny dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 of [title 29] . . . be resolved through arbitration.” 29 U.S.C. § -31- 1401(a)(1). As in many other areas, in withdrawal liability actions under ERISA “arbitration reigns supreme.” Mason & Dixon, 852 F.2d at 164; see also Trustees of Sheet Metal Workers’ Local Union No. 80 Pension Trust Fund v. W.G. Heating & Cooling, 555 F. Supp. 2d 838, 853 (E.D. Mich. 2008). Notably, the main issue before the Court — whether the Palladium defendants are an “employer” under 29 U.S.C. § 1301(b)(1) — falls within one of the three exceptions to the arbitration requirement under the MPPAA outlined in Mason & Dixon, 852 F.2d at 165-68, and none of the parties disputes that that issue is properly before the Court. The issue of the applicability of the building and construction industry exception is another matter. The district courts that have addressed the subject, albeit in unpublished decisions, all hold that this defense is subject to MPPAA’s mandatory arbitration requirement. See Trustees of Laborers’ Local 310 Pension Fund v. Able Contracting Group, Inc., No. 06-1925, 2007 WL 2238361, at *7 (N.D. Ohio Aug. 1, 2007) (concluding that applicability of the building and construction industry exception is subject to arbitration); Trucking Employees of New Jersey Welfare Fund, Inc. v. Parsippany Constr. Co., No. 08-2763, 2009 WL 1076201, at *2-3 (D.N.J. Apr. 21, 2009) (requiring an employer to arbitrate whether the case falls within the building and construction industry exception); Trustees of Utah Carpenters’ & Cement Masons’ Pension Trust v. New Star/Culp LC, No. 07-699, 2009 WL 321573, at *5 (D. Utah Feb. 9, 2009) (stating that applicability of the exception must have been arbitrated because “an arbitrator skilled in pension and labor matters would have had superior expertise to offer . . . [a]nd this court would have undoubtedly benefitted from a thoroughly developed factual record”). This Court agrees. -32- The MPPAA establishes strict time frames for demanding arbitration. 29 U.S.C. § 1401(a)(1)(A)-(B). They have not been met in this case. Normally, the employer’s failure to submit its dispute to arbitration results in a waiver of any defenses to the imposition of withdrawal liability. 29 U.S.C. § 1401(b)(1). However, because arbitration is conceptualized as an exhaustion requirement, not a jurisdictional prerequisite, Mason & Dixon, 852 F.2d at 163; Cent. States, Se. & Sw. Areas Pension Fund v. 888 Corp., 813 F.2d 760, 764 (6th Cir. 1987), courts can equitably toll the deadline for initiating arbitration. See Bowers v. Transportacion Maritima Mexicana, S.A., 901 F.2d 258, 264 (2d Cir. 1990); Banner Indus. v. Cent. States, Se. & Sw. Areas Pension Fund, 875 F.2d 1285, 1293 (7th Cir. 1989). For the purposes of the present motion, the Court need not determine if the arbitration deadline should be extended or whether the defendants have waived the defense. If the Court determines that the defendants are employers subject to withdrawal liability under the MPPAA, the parties may have an opportunity to present evidence on the question of equitable tolling. At that time, if the Court decides that equitable tolling applies, the matter can be referred to an arbitrator. If not, then the defense will be deemed waived. In either event, the defendants have not established that they qualify for that defense as a matter of law. V. Conclusion The Court finds that the facts in this detailed record present questions that cannot be resolved at the summary judgment stage under Rule 56. Therefore, a trial will be necessary. Accordingly, it is ORDERED that the defendants’ and the plaintiffs’ motions for summary judgment [dkt #s 89, 90] are DENIED. -33- It is further ORDERED that counsel for the parties appear before the Court for a status conference to discuss further case management dates on August 23, 2010 at 4:30 p.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 14, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 14, 2010. s/Susan K. Pinkowski SUSAN K. PINKOWSKI -34-

=== Board of Trustees, Sheet Metal Workers' National Pension Fund, et. al. v. Palladium Equity Partners, LLC, et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION BOARD OF TRUSTEES, SHEET METAL WORKERS’ NATIONAL PENSION FUND, and BOARD OF TRUSTEES, SHEET METAL WORKERS LOCAL NO. 292 PENSION FUND, Plaintiffs, v. PALLADIUM EQUITY PARTNERS, LLC, PALLADIUM EQUITY PARTNERS II, LP, PALLADIUM EQUITY PARTNERS II-A, LP, and PALLADIUM EQUITY INVESTORS II, LP, Defendants. ______________________________________________/ Case Number 08-12586 Honorable David M. Lawson OPINION AND ORDER DENYING PLAINTIFFS’ MOTION FOR AN ORDER INVALIDATING DEFENDANTS’ CLAIMS OF PRIVILEGE, GRANTING DEFENDANTS’ MOTION IN LIMINE, AND GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION TO STRIKE DEFENDANTS’ EXPERT WITNESS REPORT Presently before the Court are three evidentiary motions, two dealing with the disclosure by the defendants to the plaintiffs’ attorneys of documents in paper and electronic format that the defendants argue are privileged, and one dealing with the defendants’ proposed expert witness. In the first two motions (a motion by the plaintiffs to determine the validity of the defendants’ privilege claim and the defendants’ corresponding motion in limine), the defendants assert the attorney-client privilege to 184 documents they say were inadvertently disclosed. In the third motion, the plaintiffs argue that the opinion of the defendants’ proposed expert, Steven M. Adams, will not be helpful to the trier of fact. The Court heard oral argument on the motions on August 4, 2009 and May 10, 2010. The Court finds that application of Federal Rule of Civil Procedure 26(b)(5) and Federal Rule of Evidence 502 requires that the defendants’ claim of privilege be sustained because the disclosures were inadvertent and the defendants took reasonably prompt measures to rectify their mistake. The Court also finds that although portions of the Adams report may be relevant, the report contains certain opinions that would not be helpful to a resolution of the issues presently pending before the Court. Therefore, the Court will deny the plaintiffs’ motion to invalidate the defendants’ claim of privilege, grant the defendants’ motion in limine, and grant in part and deny in part the plaintiffs’ motion to strike the expert witness report. I. The case involves claims by the plaintiffs — two multi-employer pension plans — that the defendants — three private equity investment partnerships and their common financial advisor — that the defendants are liable for the withdrawal liability of Haden Schweitzer Corporation and Haden Environmental Corporation (the Haden companies) under the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiemployer Pension Plan Amendment Act of 1980 (“MPPAA”), 29 U.S.C. §§ 1381-1453. The plaintiffs contend that the defendants are jointly and severally liable for the Haden companies’ obligation because the defendants are part of the same controlled group within the meaning of 29 U.S.C. § 1301(b), and the defendants are alter egos of the Haden companies as well. II. In the plaintiffs’ motion for an order invalidating the defendants’ claims of privilege and the defendants’ motion in limine, the parties ask the Court to rule on the validity of the defendants’ claim of attorney-client privilege to 184 separate documents the defendants have delivered to the plaintiffs’ attorneys during discovery. The documents fill over 1,000 pages that the defendants produced to the plaintiffs from December 2008 through March 2009. -2- Beginning October 10, 2008, the plaintiffs served on defendants a series of document requests that resulted in the production of more than 63,000 documents consisting of over 4.3 million pages in both paper and electronic format. On three occasions from November 10, 2008 through January 29, 2009, the plaintiffs produced to the defendants over 81,000 pages of materials for review; and on four more occasions from January 29, 2009 through March 4, 2009, the plaintiffs produced 874,138 additional documents for the plaintiffs’ review. On four separate occasions — on March 26, 2009, March 31, 2009, June 1, 2009 and June 26, 2009 — the defendants submitted privilege logs identifying documents that the defendants claimed were inadvertently produced to the plaintiffs on December 23, 2008 and January 29, 2009. Among them are (a) attorney drafts of memoranda on attorney letterhead (DE008976); (b) attorney memoranda marked as “Privileged and Confidential” (DE0791410); (c) case printouts marked with what appear to be attorney handwritten notes (D0071-807); (d) draft agreements marked as attorney drafts (D0056501, D0054059); (e) hundreds of pages of emails that include communications between counsel (D0072001), communications between counsel and Palladium personnel (DE0791410, DE0863711.012636), communications between counsel, Palladium personnel, and Haden personnel (DE0595719, DE0863712.003017), and (f) several documents that appear to be privileged that were produced multiple times in multiple formats. See Dkts. # 67-68 (sealed copies of 105 documents alleged to be privileged by the defendants). However, the document causing the most acrimony between the parties is the May 13, 2005 e-mail from PEP LLC Chief Financial Officer Kevin Reymond in which Reymond admits that Palladium controlled Haden International Group and Haden Environmental, Inc., which goes to the heart of a disputed factual issue that the plaintiffs seek to establish in their case before the Court. See Exs. 32-34, Docs. Filed by Pls. Under -3- Seal [dkt. # 68], at 84. There appears to be no dispute the email is privileged because Reymond relates a conversation he had with PEP LLC counsel Adam Harris concerning legal advice. According to the plaintiffs, the defendants produced the May 13, 2005 email from Kevin Reymond on four separate occasions (under Bates Nos. DE 863711.004342, DE 863711.004343, DE0865025, and DE0865026), and the defendants did not list the email in their privilege logs until June 22, 2009. The plaintiffs argue that, given the volume and extent of the disclosure at issue and the defendants’ delay in mitigating allegedly unintended disclosure, the plaintiffs’ disclosure was not inadvertent within the meaning of Fed. R. Evid. 502. The plaintiffs emphasize that many of the documents were produced to the plaintiffs several times, and maintain that the defendants conceded in the March 31, 2009 letter from Meredith Nachman of Schulte Roth & Zabel LLP representing the defendants that they did not perform an adequate review of certain documents. See Ex. A to Pls.’ Mot. [dkt. # 66], at 2 n.1 (“as soon as we realized that you had documents we suspected might be privileged, we asked that you sequester them and not review them”). They further point out that much of the evidence the defendants produced was in electronic format – and therefore was easily searchable, since many of them were marked “privileged and confidential,” and came directly from the attorneys involved in the case. The plaintiffs also state that they relied on these documents in formulating their discovery strategy. The defendants emphasize the enormity of the document production in this case and suggest that the mistaken disclosure of 184 out of over 63,000 documents is not inconsistent with inadvertence. They also insist that the plaintiffs are obliged to return the documents under a stipulated protective order that contains the following language: If a party has inadvertently produced to the other party information subject to [a] claim of privilege or immunity, the other party upon request shall promptly return -4- the information for which a claim of inadvertent production is made. The party returning such information may then move the Court for an order compelling production of such information, but said party shall not assert that inadvertent disclosure constitutes a waiver. Stip. Protect. Order, Dec. 15, 2009, at ¶ 14 [dkt #40]. The defendants accuse the plaintiffs of not complying with Federal Rule of Civil Procedure 26(b)(5)(B) that requires a party notified of a privilege claim to return to the sender, sequester, or destroy the specified information and any copies of it and not use this information until the claim of privilege is resolved. Likewise, the defendants contend the plaintiffs acted unethically when they sat on the information they knew to be privileged, citing Resolution Trust Corporation v. First of America Bank, 868 F. Supp. 217, 220 (W.D. Mich. 1994). Of the disputed documents, the defendants acknowledge that 116 of them were returned, but they maintain that the plaintiffs are still holding at least 18 documents recalled as privileged by the defendants. The defendants contend that the recently enacted Rule 502 was intended to protect against waiver of privilege disclosure in exactly these circumstances, that is, when vast amounts of documents are exchanged during discovery and when the privileged information is easily overlooked. Federal Rule of Evidence 502, which became effective on September 19, 2008, addresses the waiver of evidentiary privileges in cases of inadvertent disclosure as follows: The following provisions apply, in the circumstances set out, to disclosure of a communication or information covered by the attorney-client privilege or work-product protection. When made in a Federal proceeding or to a Federal office or agency, the disclosure does not operate as a waiver in a Federal or State proceeding if: (1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26(b)(5)(B). -5- Fed. R. Evid. 502(b). The rule was adopted in response to “the widespread complaint that litigation costs necessary to protect against waiver of attorney-client privilege or work product have become prohibitive due to the concern that any disclosure (however innocent or minimal) will operate as a subject matter waiver of all protected communications or information. This concern is especially troubling in cases involving electronic discovery.” Explan. Note to Fed. R. Evid. 502 (rev. Nov. 28, 2007) (citing Hopson v. City of Baltimore, 232 F.R.D. 228, 244 (D. Md. 2005) (electronic discovery may encompass “millions of documents” and insist upon “record-by-record pre-production privilege review, on pain of subject matter waiver, would impose upon parties costs of production that bear no proportionality to what is at stake in the litigation” . “When a producing party claims inadvertent disclosure, it has the burden of proving that the disclosure was truly inadvertent.” Fox v. Massey-Ferguson, Inc., 172 F.R.D. 653, 671 (E.D. Mich. 1995) (citing Golden Valley Microwave Foods, Inc. v. Weaver Popcorn Co., 132 F.R.D. 204, 207 (N.D. Ind. 1990 . Although Rule 502 does not contain any factors to determine whether the disclosure should constitute a waiver, the Advisory Committee Notes to the rule suggest a flexible test that considers “the reasonableness of precautions taken, the time taken to rectify the error, the scope of discovery, the extent of disclosure and the overriding issue of fairness[,] . . . the number of documents to be reviewed and the time constraints for production[,] . . . [the] use . . . [of] advanced analytical software applications and linguistic tools in screening for privilege and work product,” and “implementation of an efficient system of records management before litigation.” Explan. Note to Fed. R. Evid. 502, at Federal Civil Judicial Procedure and Rules (2010 Ed.), at 434; see also Fox, 172 F.R.D. at 671 (which considers “(1) the reasonableness of precautions taken in view of the extent of document production, (2) the number of inadvertent disclosures, (3) the -6- magnitude of the disclosure, (4) any measures taken to mitigate the damage of the disclosures, and (5) the overriding interests of justice”). Neither the Sixth Circuit nor any other court of appeals has addressed a list of factors under Rule 502 yet. The Explanatory Note to Rule 502 also states that although the rule “does not require the producing party to engage in a post-production review to determine whether any protected communication or information has been produced by mistake,” the “rule does require the producing party to follow up on any obvious indications that a protected communication or information has been produced inadvertently.” For example, when a privileged document is used at a deposition, and the privilege holder fails to object immediately, courts have found the privilege to be waived. Nguyen v. Excel Corp., 197 F.3d 200, 206 (5th Cir. 1999); Brandon v. D.R. Horton, Inc., No. 07-CV-1256, 2008 WL 2096883, at *3 (S.D. Cal. May 16, 2008) (listing cases); cf. Clarke v. J.P. Morgan Chase & Co., No. 08-CV-02400, 2009 WL 970940, at *6 (S.D.N.Y. Apr. 10, 2009) (holding two-month delay in asserting privilege, including failure to assert privilege at a deposition, weighed in favor of finding waiver and describing cases in which waiver was found after delay ranging from six days to one month). Of course, the burden of proving that disclosure was truly inadvertent lies with the party producing the document. Golden Valley Microwave Foods, Inc. v. Weaver Popcorn Co., 132 F.R.D. 204, 207 (N.D. Ind. 1990). Rule 502 also contemplates separate protective orders fashioned by the court or by agreement of the parties. Fed. R. Evid. 502(d) & (e). As explained in the Explanatory Note: . . . the court order may provide for return of documents without waiver irrespective of the care taken by the disclosing party; the rule contemplates enforcement of “claw-back” and “quick peek” arrangements as a way to avoid the excessive costs of pre-production review for privilege and work product. See Zubulake v. UBS Warburg LLC, 216 F.R.D. 280, 290 (S.D.N.Y. 2003) (noting that parties may enter into “so-called ‘claw-back’ agreements that allow the parties to forego privilege -7- review altogether in favor of an agreement to return inadvertently produced privilege documents”). The rule provides a party with a predictable protection from a court order — predictability that is needed to allow the party to plan in advance to limit the prohibitive costs of privilege and work product review and retention. Explan. Note to Rule 502(d) (emphasis added); see also Capitol Records, Inc. v. MP3tunes, LLC, 261 F.R.D. 44, 49 n.6 (S.D.N.Y. 2009) (emphasizing that a party constrained by production deadlines may seek to negotiate a clawback provision under Fed. R. Evid. 502(d), which would allow it to forego privilege review altogether). The stipulated protective order in this case represents just such a claw-back agreement. Moreover, the Court is satisfied that the defendants took reasonable steps to prevent disclosure during the voluminous document production. According to the defendants, their law firm reviewed 63,025 documents totaling an estimated 4.7 million pages; produced 56,846 documents totaling some 4.3 million pages; and prepared privilege logs for 1,306 documents. The defendants used a team of sixteen associates (who were supervised by two senior associates) to conduct review, and the team spent about 2,500 hours reviewing 8,700 hard copy documents and more than 59,000 electronic documents, including emails. They say review was complicated by the fact that the documents contained correspondences with at least eleven law firms representing defendants and their affiliates on a broad range of matters. The Court also is satisfied that the defendants took prompt steps to recall the documents once they realized that they had been disclosed. In an affidavit, attorney Scott A. Gold avers that once the defendants discovered the disclosure of the May 13, 2005 email “late in the day on Friday, June 19, 2009,” they notified the plaintiffs on Monday, June 22, 2009 of the inadvertent production. With respect to the reason for inadvertent production, Mr. Gold explains: -8- Plaintiffs list four iterations of the May 13, 2005 Email that Defendants produced to them. This is an inaccurate description. The four iterations are actually two pairs of documents. The first pair, Bates-stamped DE0865025 and DE0865026, are two pages that were shuffled within a non-privileged 36-page draft document entitled Amended and Restated Limited Liability Company Agreement of Haden Prism, Inc., dated May 3, 2005 . . . that was produced to Plaintiffs. Because the copies of the May 13, 2005 Email Bates-stamped DE0865025 and DE0865026 were in the middle of an otherwise non-privileged document, they were inadvertently missed by the attorneys reviewing the Hard Copy Documents for privilege. They were therefore inadvertently produced as part of the larger document. The other two iterations of the May 13, 2005 Email bear the document identifiers DE083711.004342 and DE0863711.004343. DE083711.004342 and DE0863711.004343 are a pair of documents located sequentially in the Concordance database, and were reviewed for privilege by the same Reviewing Associate. That Reviewing Associate inadvertently failed to “tag” the documents with the appropriate marker for privilege that they needed to keep them out of the production. Gold Aff. ¶ 18(b)-(c), at 11 (footnote omitted). The Court, therefore, believes that the defendants are entitled to avoid a finding of waiver as a result of the production of the discovery documents, which the Court is satisfied was inadvertent. The Court expresses no opinion on the question whether waiver of the privilege resulted from by other conduct before or during the litigation. The parties may raise those issues at the appropriate time for dealing with admissible evidence at trial. III. In the third motion, the plaintiffs move to strike the expert witness report of Steven M. Adams, an attorney, who apparently intends to testify to the usual custom and practice of private equity fund managers when dealing with their portfolio companies, and the negative effects a judgment for the plaintiffs could have on the private equity industry. The plaintiffs argue that -9- Adams’s opinions will not aid in evaluating either the controlled group liability or alter ego/single employer claims. The defendants respond that Adams is qualified to render expert testimony on the issues in this case and that the private equity fund structure is not a matter of common knowledge. The defendants contend that Adams’s testimony regarding the business structure of private equity funds and the rationale for that structure bears on whether the three independent LPs could form a partnership under the multi-factor test for formation of the partnership, and it is important for a determination whether the relationship constitutes a sham in connection with the alter ego and single-employer analysis. Any challenge to expert testimony must begin with Rule 702 of the Federal Rules of Evidence, which was modified in December 2000 to reflect the Supreme Court’s emphasis in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999), on the trial court’s gatekeeping obligation to conduct a preliminary assessment of relevance and reliability whenever a witness testifies as to an opinion based on some sort of specialized knowledge. Rule 702 states: If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case. Fed. R. Evid. 702. The language added by the amendment to Rule 702 restates Daubert’s insistence on the requirements that an expert’s opinion be based on a foundation grounded in the actual facts of the case, that the opinion is valid according to the discipline that furnished the base of special -10- knowledge, and that the expert appropriately “fits” the facts of the case into the theories and methods he or she espouses. See Daubert, 509 U.S. at 591-93. In addition, expert testimony is not admissible unless it will be helpful to the factfinder. Such testimony is unhelpful when it is unreliable or irrelevant, as the Court observed in Daubert, see id. at 591-92, and when it merely deals with a proposition that is not beyond the ken of common knowledge. See, e.g., Berry v. City of Detroit, 25 F.3d 1342, 1350 (6th Cir. 1994) (“If everyone knows this, then we do not need an expert because the testimony will not ‘assist the trier of fact to understand the evidence or to determine a fact in issue.’”) (quoting Rule 702). Finally, before an expert may give an opinion, the witness must be qualified to do so. See id. at 1348-50; Morales v. Am. Honda Motor Co., Inc., 151 F.3d 500, 516 (6th Cir. 1998). The proponent of expert testimony must establish all the foundational elements of admissibility by a preponderance of proof. Nelson v. Tenn. Gas Pipeline Co., 243 F.3d 244, 251 (6th Cir. 2001) (citing Daubert, 509 U.S. at 592 n.10). An opinion is “reliable” from an evidentiary standpoint if it is “valid” according to the discipline upon which it is based. See Daubert, 509 U.S. at 590. In determining validity, the Court’s focus is on principles and methodology, not results. And there is no precise formula by which a court might deem a methodology “acceptable” or “unacceptable.” Daubert and its progeny have therefore not created a straightjacket, Gross v. Commissioner of Internal Revenue, 272 F.3d 333, 339 (6th Cir. 2001), but rather counsel a flexible approach, reconciling the “liberal thrust” of Rule 702 which “relax[es] the traditional barriers to opinion testimony” with the responsibility to “screen[] such evidence” in order to keep unreliable or invalid opinions from the jury. See Daubert, 509 U.S. at 588-89 (quotation marks and citations omitted); see also Jahn v. Equine Serv., PSC, 233 F.3d 382, 388 (6th Cir. 2000). There are several hallmarks of reliability that serve as proxies for the -11- four factors identified in Daubert. See Zuzula v. ABB Power T & D Co., 267 F. Supp. 2d 703, 712 (E.D. Mich. 2003). Adams likely is qualified to describe the structure of private equity firms and their relationships with the companies in which they invest. According to him, he is a founding partner, former general counsel, and current senior advisor to a Minnesota investment fund managing over $5 billion in assets. He has twelve years of firsthand experience in structuring and negotiating the terms of separate private equity funds and hedge funds and negotiating acquisition and disposition of numerous portfolio companies. And he teaches Mergers & Acquisitions at the University of St. Thomas School of Law and is on the Board of Directors of several large companies. In addition, Adams’s opinions comparing the way the defendants operated the Haden Companies to the way private equity funds operate in general may shed some light on the defendants’ intent in forming the limited partnerships (LP), the rationale for some of the LPs’ management practices, and whether the LPs indeed intended to form a partnership or a joint venture. Details of private equity funds’ investment and management practices are outside the domain of an ordinary person’s knowledge, and might be helpful to a decisionmaker. However, the plaintiffs have a valid point when they challenge Adams’s testimony that holding the defendants accountable would have a detrimental effect on the private equity industry. Such policy-type arguments fall outside of the scope of expert testimony sanctioned by Rule 702, and are irrelevant to issues at hand. Cf. Chavez v. Carranza, 559 F.3d 486, 498 (6th Cir. 2009) (holding that “[a]n expert opinion on a question of law is inadmissible”) (citing Berry v. City of Detroit, 25 F.3d 1342, 1353-54 (6th Cir. 1994 . -12- The Court concludes, therefore, that Mr. Adams may testify as to issues of structure and function of the defendants compared to comparable practices in the industry, but he may not provide opinions on the consequences of a liability finding against the defendants. IV. The Court finds that the defendants’ disclosure of the subject documents was inadvertent, they took reasonable measures to ensure against unintended disclosure, and they promptly sought to rectify the disclosure when they learned about it. Therefore, the Court finds that the defendants did not waive the privilege. The Court expresses no definitive ruling on the validity or applicability of the attorney-client privilege with respect to any particular document at this time. The report of the defendants’ expert witness need not be stricken, but the subject matter of his testimony will be restricted. Accordingly, it is ORDERED that the plaintiffs’ motion for an order invalidating the defendants’ claims of privilege [dkt #66] is DENIED and the defendants’ motion in limine [dkt #120] is GRANTED. It is further ORDERED that the plaintiffs’ motion to strike the defendants’ expert witness report [dkt #65] is GRANTED IN PART AND DENIED IN PART. Witness Adams may not provide testimony on the consequences of a liability finding against the defendants. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 14, 2010 -13- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 14, 2010. s/Susan K. Pinkowski SUSAN K. PINKOWSKI -14-

=== Kiesgen v. St. Clair Marine Salvage, Inc ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION GREGORY L. KIESGEN, Plaintiff, v. ST. CLAIR MARINE SALVAGE, INC., Defendant. _________________________________________/ Case No. 09-13396 Honorable David M. Lawson OPINION AND ORDER GRANTING PLAINTIFF’S MOTIONS TO STRIKE THIRD-PARTY COMPLAINT AND REMAND TO STATE COURT, DENYING DEFENDANT’S MOTION TO SET ASIDE DEFAULT AS MOOT, AND REMANDING CASE TO STATE COURT This case involves a dispute over the price charged by defendant St. Clair Marine Salvage, Inc. for services rendered in freeing a vessel that plaintiff Gregory L. Kiesgen ran aground in the shallow waters of Lake St. Clair. After the boat was freed, the plaintiff successfully piloted it to a marina, where he put it on a trailer and transported it to his home, but he refused to pay the defendant for the charges, which he alleges are inflated and far in excess of the quoted price. In response, the defendant took possession of the boat and asserted a salvage lien. The plaintiff then filed a tort action in state court to recover his boat, and the defendant removed the action to this Court and attempted to file an untimely third-party complaint against the vessel, invoking the Court’s admiralty jurisdiction. In the meantime, because the defendant failed to file a timely answer to the plaintiff’s complaint in this Court, the Clerk entered a default. Presently before the Court are the plaintiff’s motions to remand the case to state court and strike the third-party complaint, and the defendant’s motion to set aside the default. The Court heard oral argument on these motions on December 22, 2009, at which time the parties expressed a desire to attempt a resolution of their dispute through mediation facilitated by the magistrate judge. That attempt was unsuccessful, and the motions are now ready for decision. For reasons explained below in detail, the Court finds that it does not have subject matter jurisdiction over the original complaint, the removal therefore was improper, the defendant’s attempt to implead an admiralty action must be rejected, and the absence of jurisdiction renders the Clerk’s entry of default a nullity. Therefore, the Court will grant the plaintiff’s motions to remand and strike the third-party complaint, and deny the defendant’s motion to set aside the default as moot. I. On a Sunday morning in August last year, the plaintiff, Gregory L. Kiesgen, piloted his 48’ Sea Ray yacht, which he purchased two months previously for $425,000 and named Toys “For” Us, into shallow waters near the western shore of Lake St. Clair and ran it aground in approximately eighteen inches of water. He called defendant St. Clair Marine Salvage, Inc. for assistance. According to the complaint, the defendant’s employee, Jason Elliott, came to the scene and quoted the plaintiff a price to tow the vessel from the marsh and free it based on the following formula: “the towing fee would be calculated by multiplying $20.00 by the length of Plaintiff’s Boat (48 feet), by the number of hours to tow the Boat, and by the number of boats used (“Quoted Rate”; $960.00 per towing boat per hour).” Compl. ¶ 10. Apparently this was not a simple task. But three rescue boats and four hours later, Toys “For” Us was freed from the marsh. It was only then, the plaintiff alleges, that Elliott told him that the charges could run between $60,000 and $75,000. The charges were not nearly that expensive. However, instead of the $2,500-2,800 that the plaintiff anticipated based on Elliott’s original quote, the defendant presented the plaintiff with the bill of $26,260. When the plaintiff refused to pay the bill, the defendant came to the plaintiff’s -2- house and towed the boat away, asserting a salvage lien against the vessel. The defendant then assessed a surcharge of $4 per day per foot of vessel length on account of storage and a $750 impound fee. On August 21, 2009, the plaintiff sued the defendant in Macomb County, Michigan circuit court in a seven-count complaint alleging: (1) invalidity of the lien and seeking declaratory and injunctive relief declaring the charge for towing the boat excessive and the lien invalid; (2) claim and delivery for the wrongful taking of the boat without legal justification; (3) conversion; (4) statutory conversion; (5) fraudulent misrepresentation; (6) violation of the Michigan Consumer Protection Act; and (7) negligence. On August 24, 2009, the plaintiff served the defendant with a summons and complaint and a motion for immediate possession pending final judgment pursuant to Mich. Ct. R. 3.105(E)(1) & (2)(a). Three days later, on August 27, 2009, the defendant removed the case to this Court. When doing so, the defendant filed a complaint naming Toys “For” Us as the defendant, followed by a notice of removal. The Clerk marked the entry of St. Clair Marine Salvage, Inc.’s complaint against the in rem defendant as “Filing Error – See Notice of Removal” and proceeded with the removal in a usual manner. On September 14, 2009, the plaintiff moved to remand. In the meantime, the plaintiff continued to litigate the case in the state court. On August 31, 2009, after the defendant filed its notice of removal, served the plaintiff, and informed the state court of the same, the state court held a hearing on the plaintiff’s motion for possession of the boat over the defendant’s objections. On the same date, the state court entered an order instructing the defendant to return the boat to the plaintiff. However, on September 4, 2009, it appears that the state judge reconsidered his previous decision and instead gave the defendant seven days to object to the -3- order to return the boat. It is unclear whether the state court ultimately ordered the return of the boat to the plaintiff, but at the motion hearing the parties confirmed that the plaintiff is in possession of the boat. On September 11, 2009, the defendant inexplicably filed an answer to the complaint in the state court but filed no such answer in this Court, to which the defendant itself had removed the case. Therefore, on September 15, 2009, the plaintiff requested the Clerk to enter a default pursuant to Federal Rule of Civil Procedure 55(a). The Clerk entered the default on September 17, 2009, and the defendant moved to set it aside on the same day. Despite its unsuccessful attempt at the time of removal to bring an action against the vessel in rem, the defendant made another try to convert the action into an in rem proceeding on September 30, 2009 by filing a third-party complaint naming the boat as the third-party defendant. The defendant labeled the case as one of admiralty and maritime jurisdiction under Federal Rule of Civil Procedure 9(h) and Supplemental Rule for Admiralty or Marine Claims and Asset Forfeiture Actions C(1)(a). The plaintiff moved to strike the third-party complaint on October 14, 2009. After presenting oral argument on the motions, the parties acknowledged to the Court that attorney’s fees could quickly consume the approximately $30,000 in dispute. They agreed to seek help from the magistrate judge to settle the case, but apparently settlement efforts have not borne fruit. Further cultivation of the parties’ claims must occur in the state court, however, because the defendant’s removal of the plaintiff’s state court action to this Court was improper. II. The federal district courts are courts of “limited jurisdiction,” and the burden of establishing jurisdiction rests with the defendant as the party removing the case and asserting federal jurisdiction. -4- See Kokkonen v. Guardian Life Ins. Co. of Am., , 377 (1994). “Because lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts resolved in favor of remand.” Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996) (quoting Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985); see also Her Majesty The Queen In Right of the Province of Ontario v. City of Detroit, 874 F.2d 332, 339 (6th Cir. 1989); Jacada (Europe), Ltd. v. Int’l Mktg. Strategies, Inc., 401 F.3d 701, 704 (6th Cir. 2005) (citing Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999 , abrogated on other grounds by Hall St. Assocs., LLC v. Mattel, Inc., (2008). Section 1441(a) of Title 28 provides that “any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.” There is no suggestion that the parties to this action are citizens of different states, and therefore there can be no subject matter jurisdiction under 28 U.S.C. § 1332(a). However, federal courts have jurisdiction over actions “arising under the Constitution, laws, or treaties of the United States,” 28 U.S.C. § 1331, and such a case may be removed by the defendant if the complaint is based on federal law. See 28 U.S.C. § 1441(b). If a matter over which this Court lacks subject matter jurisdiction is removed to this Court, “the case shall be remanded. . . . The State court may thereupon proceed with such case.” 28 U.S.C. 1447(c). Federal courts “look to the complaint at the time of removal, . . . and determine whether the action was properly removed in the first place.” Ahearn v. Charter Twp. of Bloomfield, 100 F.3d 451, 453 (6th Cir. 1996). -5- The defendant resists the plaintiff’s remand motion by asserting that its third-party complaint invokes this Court’s exclusive admiralty jurisdiction, and therefore the dispute over the price charged for towing the vessel off the lake bottom should be adjudicated in the context of its effort to enforce a salvage lien by proceeding against the vessel in rem. There are several problems with that argument. First, as explained below, admiralty jurisdiction is not a proper basis upon which to predicate removal after the plaintiff elected to pursue common law remedies in state court. Second, removability must be based on the claims in the complaint, not on defenses or counterclaims. Third, the attempt to implead the in rem action was tardy and therefore ineffective. Congress has granted to federal district courts exclusive jurisdiction over “[a]ny civil case of admiralty or maritime jurisdiction”; but the statute also “sav[es] to suitors in all cases all other remedies to which they are otherwise entitled.” 28 U.S.C. § 1333(1). Therefore, a case may fall within the federal court’s admiralty jurisdiction, but it also may be subject to state law remedies. For claims sounding in contract, a case may be brought under section 1333(1) if it involves claims under a “‘maritime contract,’ which in turn ‘depends upon the nature and character of the contract, and the true criterion is whether [the contract] has reference to maritime service or maritime transactions.’” New Hampshire Ins. Co. v. Home Sav. & Loan Co. of Youngstown, Ohio, 581 F.3d 420, 423 (6th Cir. 2009) (quoting Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 24 (2004 . The contract does not become a “maritime contract” just because it relates to boats. Rather, the inquiry is focused on whether “the principal objective of a contract is maritime commerce.” Kirby, 543 U.S. at 25. For claims sounding in tort, there is jurisdiction under section 1333(1) where (a) there is a potential hazard to maritime activity and (b) when there is a substantial relationship between the -6- activity giving rise to the incident and traditional maritime activity. Sisson v. Ruby, 497 U.S. 358, 362-63 (1990) (citing Foremost Ins. Co. v. Richardson, 457 U.S. 668, 674 (1982 . The court must ask whether “‘a tortfeasor’s activity, commercial or noncommercial, on navigable waters is so closely related to activity traditionally subject to admiralty law that the reasons for applying special admiralty rules would apply in the suit at hand.’” Ayers v. United States, 277 F.3d 821, 826 (6th Cir. 2002) (quoting Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 539-40 (1995 . Under the test for contract actions, it would not be difficult to determine that the present dispute over the price for towing the plaintiff’s yacht into deeper water involved “maritime service.” However, the plaintiff’s state court action raised tort claims, and the question whether the defendant’s self-help seizure of the vessel from the plaintiff’s property on dry land was substantially related to traditional maritime activity is a close one. Nonetheless, even if the suit falls within this Court’s maritime jurisdiction, “the Supreme Court has clearly held that the ‘saving’ clause [in section 1333(1)] leave[s] state courts competent to adjudicate maritime causes of action in proceedings in personam, that is, where the defendant is a person, not a ship or some other instrument of navigation.” In re Chimenti, 79 F.3d 534, 537 (6th Cir. 1996) (citing Madruga v. Superior Ct. of State of Cal., 346 U.S. 556, 560-61 (1954) (internal quotation marks omitted . And the Sixth Circuit has clearly stated that federal courts must respect the plaintiff’s original choice of forum. Id. at 537-38. As the court explained: Courts have consistently interpreted the “saving clause” to preclude removal of maritime actions brought in state court and invoking a state law remedy, provided there is no independent federal basis for removal, such as diversity jurisdiction. Although the Supreme Court has never directly held that removal is prohibited, lower courts have relied on strongly worded dicta in Romero v. International Terminal Operating Co., 358 U.S. 354 (1959), which support preserving the plaintiff's choice -7- of forum. Romero’s actual holding was that general maritime law claims do not fall under Congress’s grant of federal question jurisdiction in 28 U.S.C. § 1331. Id. at 378-79. . . . In arriving at such a conclusion, though, the Court observed that if the rule were otherwise, the historic option of a maritime suitor pursuing a common-law remedy to select his forum, state or federal, would be taken away. . . . By making maritime cases removable to the federal courts it would make considerable inroads into the traditionally exercised concurrent jurisdiction of the state courts in admiralty matters — a jurisdiction which it was the unquestioned aim of the saving clause of 1789 to preserve. Id. at 371-72. . . . Earlier in the opinion, the Court noted, “The removal provisions of the original Judiciary Act of 1789, 1 Stat. 79, conferred a limited removal jurisdiction, not including cases of admiralty and maritime jurisdiction. In none of the statutes enacted since that time have saving-clause cases been made removable.” Id. at 363 n.16. . . . In short, it is settled that actions brought in state court under the “saving to suitors” clause are not generally removable. This makes sense, since the entire purpose of the saving clause was to give claimants pursuing a common-law remedy the ability to choose their forum, and such purpose would be completely diluted if defendants were allowed to remove saving-clause actions just like any other federal action. See generally 14 Wright, Miller & Cooper § 3674, at 460-68. Although the [plaintiffs] could have commenced their maritime action in federal court, once they selected state court, that choice could not be disturbed. Because defendants . . . cannot show the presence of one of the additional requirements for federal jurisdiction found in 28 U.S.C. §§ 1331 or 1332 (an independent federal question or complete diversity of the parties), we conclude that removal was improper. In re Chimenti, 79 F.3d at 537-38. Consequently, in the present case, removal on the basis of admiralty jurisdiction is ineffective, since the plaintiff, having filed the action originally in state court, is deemed to have elected to pursue traditional common law remedies to resolve the dispute. See Bonnette v. Shell Offshore, Inc., 838 F. Supp. 1175, 1181 (S.D. Tex. 1993) (holding that a plaintiff need not plead the “saving to suitors” exception to exclusive federal jurisdiction to make his election). In fact, if the plaintiff intended to bring his claim under the Court’s admiralty or maritime jurisdiction, he must affirmatively designate that election. See Fed. R. Civ. P. 9(h); Greenwell v. Aztar Indiana Gaming -8- Corp., 268 F.3d 486, 493-94 (7th Cir. 2001) (“The purpose is to enable the plaintiff to notify his opponent and the court that he’s invoking those rules . . . when, having another basis for federal jurisdiction, he could just rely on the ordinary civil rules. If he doesn’t so indicate, by means of the statement or otherwise, . . . the case proceeds under the ordinary civil rules. Since the plaintiff by thus forgoing the use of the admiralty rules surrenders whatever advantages he might derive from them, there is no reason to permit the defendant to invoke them either.”); Harrison v. Flota Mercante Grancolombiana, S.A., 577 F.2d 968, 987 (5th Cir. 1978) (refusing to “permit a third-party defendant to emasculate the election given to the plaintiff by Rule 9(h) by exercising the simple expedient of bringing in a fourth-party defendant”). Once the election to proceed under the common law occurred, admiralty jurisdiction was not a proper basis for removal. Rather, the defendant was required to show another independent ground for federal jurisdiction, that is, either a discrete federal question or diversity of citizenship. The defendant has shown neither. The defendant’s clumsy attempt to enforce its salvage lien through an in rem third-party action against the vessel does not furnish an independent basis for federal jurisdiction. Of course, the defendant has a colorable claim for such a lien. Salvage is “‘the compensation allowed to persons by whose assistance a ship or her cargo has been saved, in whole or in part, from impending peril on the sea.’” Bartholomew v. Crowley Marine Servs., Inc., 337 F.3d 1083, 1085 (9th Cir. 2003) (quoting The Blackwall, 77 U.S. (10 Wall.) 1, 12 (1869 . To support a salvage claim, the plaintiff must establish three elements: “1. A marine peril. 2. Service voluntarily rendered when not required as an existing duty or from a special contract. 3. Success in whole or in part, or that the service rendered contributed to such success.” Dorrington v. City of Detroit, 223 F. 232, 239 (1915); accord United States v. EX-USS CABOT/DEDALO, 297 F.3d 378, 381-82 (5th Cir. 2002). The salvage lien -9- enjoys a status as a preferred maritime lien which is superior to most security interests, including a ship mortgage. See 46 U.S.C. § 31301(5)(F); see also Faneuil Advisors, Inc. v. O/S Sea Hawk, 50 F.3d 88, 92 (1st Cir. 1995). A salvor also enjoys “the right to possession of the salved property, a right exclusive even of the owner, until such time as the salvage lien on the property is extinguished or adequate security for this obligation is given.” Treasure Salvors, Inc. v. Unidentified Wrecked & Abandoned Sailing Vessel, 640 F.2d 560, 567 (5th Cir. 1981). In order to enforce a salvage lien, a salvor may commence an in rem proceeding agianst the property in the district where the ship or cargo is located. See Suppl. R. of Admiralty or Maritime Claims & Asset Forfeiture Actions C(1)(a) (“An action in rem may be brought . . . [t]o enforce any maritime lien.”). The salvor may also enforce its claim for salvage service through an in personam action against the owner. See Suppl. R. C(1)(b) (stating that “a party who may proceed in rem may also, or in the alternative, proceed in personam against any person who may be liable”); see also R.M.S. Titanic, Inc. v. Haver, 171 F.3d 943, 963 (4th Cir. 1999). However, even if the third-party complaint states a federal claim to enforce the salvage lien, it is not a proper ground for removal. “[I]t is well settled that federal counterclaims and defenses are ‘inadequate to confer federal jurisdiction.’” Chase Manhattan Mortg. Corp. v. Smith, 507 F.3d 910, 914-15 (6th Cir. 2007) (citing Merrell Dow Pharm. Inc. v. Thompson, , 808 (1986) (“A defense that raises a federal question is inadequate to confer federal jurisdiction.”); Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 831 (2002) (“[A] counter-claim — which appears as part of the defendant’s answer, not as part of the plaintiff’s complaint — cannot serve as the basis for ‘arising under’ jurisdiction.” . -10- Finally, although a defendant normally would be permitted to file a third-party complaint in admiralty against a defendant in rem under Federal Rule of Civil Procedure 14(a)(6), in this case the defendant’s impleader comes too late because, at the time the third-party complaint was filed on September 30, 2009, the defendant was in default. A party in default may not plead to otherwise proceed until the default is set aside. See Newhouse v. Probert, 608 F. Supp. 978, 985 (W.D. Mich. 1985); see generally Moore’s Federal Practice § 55.03[2] (“‘When a party is in default . . . the party himself has lost his standing in court, cannot appear in any way, cannot adduce any evidence, and cannot be heard at the final hearing.’”) (quoting Clifton v. Tomb, 21 F.2d 893, 897 (4th Cir. 1927 ; Therefore, the defendant’s third-party complaint must be stricken. Newhouse, 608 F. Supp. at 985. That brings us to the Clerk’s entry of a default against the defendant, which occurred after removal from state court. The defendant argues that the filing of its answer in state court was adequate to respond to the complaint, since the state court had jurisdiction over the motion for possession pending judgment, despite the removal notice. Once a removal notice is filed, “the State court shall proceed no further unless and until the case is remanded.” 28 U.S.C. § 1446(d). Therefore, the defendant filed its answer to the complaint in the wrong, which could not stave off a default. Nonetheless, the Clerk’s action of entering the default cannot stand. Since removal was improper, the Court is without subject matter jurisdiction over the case, and its actions while the case was pending are a nullity. See U.S. Fidelity & Guar. Co. v. Thomas Solvent Co., 955 F.2d 1085, 1087 (6th Cir. 1992) (stating that, where the Court did not have diversity jurisdiction over the case, all actions in the district court were void); see also In re Texlon Corp., 596 F.2d 1092, 1099 (2d Cir. 1979) (stating that an order is void if “the court that rendered it lacked jurisdiction of the subject -11- matter, or of the parties, or if it acted in a manner inconsistent with due process of law”) (quoting Charles Alan Wright & Arthur R. Miller, 11 Fed. Practice & Procedure § 2862, at 198 (1973 . Accordingly, the entry of default has no effect. III. The Court concludes that it does not have subject matter jurisdiction over the present action, and removal was improper. The matter, therefore, must be remanded to state court. The third-party complaint was filed out of time and when the defendant was in default and will be stricken. The default entered against the defendant in this court is a nullity. Accordingly, it is ORDERED that the plaintiff’s motions to strike the third-party complaint and remand to state court [dkt #s 13, 3] are GRANTED. It is further ORDERED that the default entered by the Clerk is VACATED. It is further ORDERED that the defendant’s motion to set aside the default [dkt # 6] is DENIED as moot. It is further ORDERED that the case is REMANDED to the Macomb County, Michigan circuit court. Dated: July 12, 2010 s/David M. Lawson DAVID M. LAWSON United States District Judge -12- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 12, 2010. s/Susan K. Pinkowski SUSAN K. PINKOWSKI -13-

=== Prestige Capital Corp. v. Michigan Gage and Manufacturing, LLC et. Al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION PRESTIGE CAPITAL CORP., Plaintiff, v. MICHIGAN GAGE AND MANUFACTURING, LLC, MICHAEL PORATH, and RICHARD MAST, _________________________________________/ Defendants. Case No. 09-11111 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND SETTING CASE MANAGEMENT DEADLINES Plaintiff Prestige Capital Corporation provides non-traditional financing to business ventures. In 2006, Prestige entered into an agreement to purchase the accounts receivable of a Michigan business with recourse, and also obtained the personal guarantees of the defendants as security for the potential recourse obligation. Prestige has brought suit against the guarantors alleging that some of the accounts it purchased were subject to charge backs, and the obligor has declared bankruptcy. Now before the Court is Prestige’s motion for summary judgment, to which the defendants have failed to respond. Prestige’s guarantees contain an explicit choice-of-law provision plainly designating the law of New Jersey as the governing rules of decision, but despite that choice, Prestige cited no New Jersey authority in support of its motion. The Court heard oral argument on the motion on April 20, 2010, at which time the Court advised the plaintiff of that deficiency and that the record was incomplete on the issues of the plaintiff’s damages. The parties were given time to file supplemental materials. The plaintiff filed a supplemental brief and affidavit on May 4, 2010, which failed to fill the gap in the record on the damages issue. The Court now finds that the plaintiff is entitled to partial judgment as a matter of law on the issue of the defendants’ liability. However, the plaintiff has not offered sufficient proof of damages. Therefore, the Court will grant the plaintiff’s motion for summary judgment in part and schedule the matter for a trial on damages. I. Plaintiff Prestige Capital Corporation is a nationwide factoring firm that provides financing to small and mid-sized companies who cannot obtain traditional bank financing for any number of reasons. According to the record it presented in support of its motion for summary judgment, Prestige purchased the account receivable of Solar Stamping and Manufacturing, LLC, (Solar) through a Purchase and Sale Agreement (PSA) dated November 29, 2006. In that agreement, Solar agreed to sell to Prestige all of its rights in certain accounts receivable for 75% of their face value. The PSA included fourteen warranties that Solar made concerning the status of the accounts. In relevant part, this provision states as follows: 5. WARRANTIES, REPRESENTATION AND COVENANTS. As an inducement for Prestige’s entering into this Agreement and with full knowledge that the truth and accuracy of the warranties, representations and covenants in this Agreement are being relied upon by Prestige, instead of the delay of a complete credit investigation, Seller warrants, represents and covenants that: . . . (d) Each Account is an accurate and undisputed statement of indebtedness from an account debtor for a sum certain, without offset or counterclaim and which is due and payable in ninety days or less; . . . The warranties, representations and covenants contained in this paragraph 5 shall be continuous and be deemed to be renewed each time Seller assigns Accounts to Prestige. Notwithstanding the provisions contained in paragraph 6 of this Agreement, Prestige shall have recourse against the Seller in the event that any of the warranties, representations and covenants set forth in this paragraph 5 are breached. Mot. Summ. J., Ex. 1, PSA ¶ 5. According to Prestige, this warranty grants it the right to charge back the account in the event that it learns the account is subject to an offset or counterclaim. The charge-back privilege allows Prestige to seek a total refund from Solar of the amount paid for the -2- specific account, without reassigning the account back to Solar. The PSA also specifically states that “[t]his Agreement . . . shall be governed and construed in accordance with the laws of the State of New Jersey.” Id. ¶ 24. Concurrently with the PSA, Prestige obtained personal guaranties from Michael Porath, Richard Mast, Richard Ignagni, and James Glasgow. The guaranties each state: Each of the undersigned hereby personally guarantees and shall be jointly and severally liable for any damages suffered by Prestige Capital Corporation by virtue of the breach of any warranty, representation or covenant made by Seller in paragraph 5 above. Each of the undersigned also personally waives presentment for payment, demand, protest, notice of protest, notice of dishonor and notice of every nature whatsoever. Mot. Summ. J., Ex. 1, 2, 4. On February 26, 2007, Prestige obtained an additional guaranty by defendant Michigan Gage and Manufacturing, LLC, signed by Michael Porath as the President and CEO (the “Gage Guaranty”). That guaranty states: Each of the undersigned hereby jointly and severally guarantees full, prompt and unconditional payment when due of each and every Liability of the Client to Prestige, now existing or hereafter incurred . . . and the full, prompt, and unconditional performance of every term and condition of any transaction to be kept and performed by the Client. This Guaranty is a primary obligation of the undersigned and shall be a continuing inexhaustible Guaranty without limitation as to the amount or duration. . . . Upon the happening of any of the following events: the failure of Client to pay when due any Liability of the Client; . . . or an adverse change in the financial condition of the Client or any aforesaid person; or suspension of business of the Client or any aforesaid person; . . . or any proceeding being commenced by or against the Client or any aforesaid person under any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of debt, receivership, liquidation or dissolution law or statute; or if an Order for Relief as to the Client or any aforesaid person is entered under the Bankruptcy Code; or if the Client or any aforesaid person is generally not paying their debts as they become due; . . . then and in such event, and at any time thereafter, Prestige may, without notice to the Client or any aforesaid person, make the Liability of the Client immediately due and payable hereunder as to the -3- undersigned, and Prestige shall be entitled to enforce the obligations of the undersigned hereunder. . . . All rights, powers and remedies of Prestige hereunder and under any agreement between the Client or any Guarantor and Prestige, now, or at any time hereafter in force, shall be cumulative and not alternative, and shall be in addition to all rights, powers and remedies given to Prestige by law. The Guarantors’ liability hereunder shall be joint and several. Mot. Summ. J., Ex. 2, Gage Guaranty. That guaranty includes a forum selection clause through which “[t]he Guarantors . . . irrevocably consent[] to the nonexclusive jurisdiction of the Courts of the State of New Jersey or any Federal court in such State in connection with any action or proceeding arising out of or related to this Guaranty.” Ibid. According to the plaintiff, several account debtors asserted offsets against a number of the accounts transferred to Prestige under the PSA with Solar. As a result, Prestige collected less from these accounts than it had expected. The plaintiff alleges that it attempted on several occasions to recover the amounts it had advanced to Solar, but was unable to do so. Eventually, Solar filed for bankruptcy on August 29, 2007. The plaintiff alleges that it asserted its rights in an adversary proceeding in the bankruptcy case but was unable to collect on these accounts through this process. On January 30, 2008, Prestige and Michigan Gage entered into an additional agreement in which Michigan Gage acknowledged that it was liable to Prestige under the Gage Guaranty for $948,605.21, plus interest and attorney’s fees (the “Agreement”). The Agreement specifically acknowledged that the Gage Guaranty remained in effect and established a payment schedule by which Michigan Gage could repay the debt. The schedule called for payments “at the rate of $5,000 per week, payable each successive Friday, commencing February 22, 2008 until August 22, 2008. Thereafter, the remaining open balance of the Indebtedness shall be due and payable in full on September 2, 2008.” Mot. Summ. J., Ex. 3, Agreement ¶ 2(a). As with the other documents in this -4- case, the Agreement also included a choice of law clause designating the “laws of the State of New Jersey” at the rules of decision. Id. ¶ 7. The plaintiff avers that Michigan Gage failed to make any of the payments required under the Agreement. On March 25, 2009, the plaintiff filed a complaint against defendants Michigan Gage and Manufacturing, LLC, Michael Porath, Richard Mast, Richard Ignagni, and James Glasgow. In early April 2010, the plaintiff reached a settlement with defendants Ignagni and Glasgow and the Court dismissed them from the case. On February 5, 2010, the plaintiff filed a motion for summary judgment against defendants Michigan Gage, Porath, and Mast. The defendants have not responded. II. A motion for summary judgment under Federal Rule of Civil Procedure 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” -5- if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics & Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Mich. Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). The party bringing the summary judgment motion has the initial burden of informing the court of the basis for its motion and identifying portions of the record that demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Pers. Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). The party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. If the non- moving party, after sufficient opportunity for discovery, is unable to meet his burden of proof, summary judgment is clearly proper. Celotex Corp., 477 U.S. at 322-23. In a defensive motion for summary judgment, the party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). “[T]he party opposing the summary judgment motion must ‘do more than simply show that there is some “metaphysical doubt as to the material facts.”’” Highland Capital, Inc. v. -6- Franklin Nat’l Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir. 1994), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 586 (1986 . “Thus, the mere existence of a scintilla of evidence in support of the [opposing party]’s position will be insufficient; there must be evidence on which the jury could reasonably find for the [opposing party].” Ibid. (quoting Anderson, 477 U.S. at 252) (internal quote marks omitted). When the moving party also bears the ultimate burden of persuasion, the movant’s affidavits and other evidence not only must show the absence of a material fact issue, they also must satisfy that burden. Vance v. Latimer, 648 F. Supp. 2d 914, 919 (E.D. Mich. 2009); see also Stat-Tech Liquidating Trust v. Fenster, 981 F. Supp. 1325, 1335 (D. Colo. 1997) (stating that where “the crucial issue is one on which the movant will bear the ultimate burden of proof at trial, summary judgment can be entered only if the movant submits evidentiary materials to establish all of the elements of the claim or defense”); Resolution Trust Corp. v. Gill, 960 F.2d 336, 340 (3d Cir. 1992). In his commentary on affirmative motions for summary judgment, Judge William Schwarzer explains: When the moving party bears the burden of persuasion on the issue at trial, its showing must sustain that burden as well as demonstrate the absence of a genuine dispute. Thus, it must satisfy both the initial burden of production on the summary judgment motion — by showing that no genuine dispute exists as to any material fact — and the ultimate burden of persuasion on the claim — by showing that it would be entitled to a directed verdict at trial. William W. Schwarzer, et al., The Analysis and Decision of Summary Judgment Motions, , 477-78 (1992) (footnote omitted). This case is before the Court on the basis of diversity jurisdiction, 28 U.S.C. § 1332, and the plaintiff’s claim is based entirely on state law. Therefore, the Court must apply the law of the forum -7- state’s highest court. Erie R.R. v. Tompkins, , 78 (1938). If the state’s highest court has not decided an issue, then “the federal court must ascertain the state law from ‘all relevant data.’” Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995) (quoting Bailey v. V & O Press Co., 770 F.2d 601, 604 (6th Cir. 1985 . “Relevant data includes the state’s intermediate appellate court decisions, as well as the state supreme court’s relevant dicta, restatements of the law, law review commentaries, and the majority rule among other states.” Ososki v. St. Paul Surplus Lines, 156 F. Supp. 2d 669, 674 (E.D. Mich. 2001) (internal quotes and citation omitted). A. As noted above, the guarantees signed by the defendants contain choice-of-law provisions requiring the application of New Jersey law. Federal courts sitting in diversity apply the choice-of- law rules of the forum state (in this case, Michigan choice-of-law rules). Equitable Life Assur. Soc. of United States v. Poe, 143 F.3d 1013, 1016 (6th Cir. 1998). When a contract contains a choice-of- law clause, “Michigan choice of law rules require courts to examine the factors articulated in sections 187 and 188 [of] the Second Restatement [of Conflicts].” Meridian Leasing, Inc. v. Assoc. Aviation Underwriters, Inc., 297 F. Supp. 2d 972, 977-78 (W.D. Mich. 2004) (citing Chrysler Corp. v. Skyline Indus. Servs., Inc., 448 Mich. 113, 122-25, 528 N.W.2d 698 (1995 . Under Section 187, “[t]he first step of analysis . . . is to determine whether the contractual parties could have resolved the particular issue being litigated by an explicit provision in the contract. If they could have, then the choice of law provision is enforceable.” DaimlerChrysler Corp. Healthcare Benefits Plan v. Durden, 448 F.3d 918, 923 (6th Cir. 2006). “[B]oth Michigan choice-of-law rules and general equitable choice-of-law policies support enforcing parties’ agreed-upon choice-of-law clauses absent -8- any strong public policy concerns to the contrary.” Bennett v. Am. Online, Inc., No. 06-13221, 2007 WL 2875169, at *13 n.6 (E.D. Mich. Sept. 28, 2007) (citing In re Dow Corning Corp., 419 F.3d 543 (6th Cir. 2005). The choice-of-law provisions in the guaranties certainly could have been the subject of negotiations and resolved by the explicit language included in the agreements. See Durden, 448 F.3d at 923. Michigan law requires the Court to enforce the parties’ agreements concerning the body of law governing their contracts, unless there is a strong policy reason for not doing so. See Bennett, 2007 WL 2875169, at *13 n.6. There is none here. To the contrary, New Jersey clearly has a relationship to this conflict, as the plaintiff is a New Jersey resident. In addition, New Jersey law is substantially similar to Michigan law concerning the construction and enforcement of guaranty agreements. New Jersey law, therefore, governs. B. Under New Jersey law, a guaranty is a contract. New Jersey courts have held that “[t]he rules governing the construction of contracts generally are to be referred to . . . in resolving a question as to the interpretation of a contract of guaranty.” Garfield Trust Co. v. Teichmann, 95 A.2d 18, 22 (N.J. Super. App. Div. 1953); see also Center 48 Ltd. P’ship v. May Dep’t Stores Co., 810 A.2d 610, 618-19 (N.J. Super. App. Div. 2002); First Bank & Trust Co. v. Siegel, 115 A.2d 152, 153 (N.J. Super. Law Div. 1955). Under New Jersey law, the elements of a valid contract are: (1) parties competent to enter into a contract; (2) a proper subject matter; (3) legal consideration; (4) mutuality of agreement; and (5) mutuality of obligation. See, e.g., Oscar v. Simeonidis, 800 A.2d 271, 276 (N.J. Super. App. Div. 2002). However, “[i]f the consideration requirement is met, there is no additional requirement of gain or benefit to the promisor, loss or detriment to the promisee, -9- equivalence in the values exchanged, or mutuality of obligation.” Shebar v. Sanyo Bus. Sys. Corp., 544 A.2d 377, 383 (N.J. 1988). To obtain a judgment on a guarantee, “a plaintiff must demonstrate the following: 1) execution of the guarantee by the guarantor . . .; 2) the principal obligation and terms of the guarantee; 3) the lender’s reliance on the guaranty in extending monies to the borrower; 4) default by the principal obligator; 5) written demand for payment on the guarantee; and 6) failure of the guarantor to pay upon written demand.” United States ex rel. Small Bus. Admin. v. DelGuercia, 818 F. Supp. 725, 727-28 (D.N.J. 1993). “Where . . . several writings are essentially made as part of one transaction relating to the same subject matter, they may be read together as one instrument, and the recitals in one may be amplified or limited by reference to the other.” Gen. Elec. Credit Corp. v. Castiglione, 360 A.2d 418, 424 (N.J. Super. Ct. Law Div. 1976) (citing Schlossman’s, Inc. v. Radcliffe, 70 A.2d 493 (N.J. 1950), and Lawrence v. Tandy & Allen, 100 A.2d 891 (N.J. 1953 . The plaintiff has offered specific evidence that the defendants signed the guaranties; the promises contained therein required payment in the event that Solar did not make good on its recourse obligations; Prestige relied on the guaranties in purchasing the accounts without performing a time-consuming audit of the accounts’ validity; the guarantors’ liability was triggered by Solar’s default and subsequent bankruptcy; the guarantors were notified of their obligation to pay; and the remaining defendant guarantors have not paid. The defendants have not responded to the plaintiff’s motion and therefore have not contested the plaintiff’s allegations. However, the plaintiff has the ultimate burden of persuasion at trial and must demonstrate the absence of a genuine issue of material fact by presenting sufficient evidence to carry its ultimate burden at this early stage on all the elements of its claim, including damages. The plaintiff alleges -10- that it has suffered more than $880,000 in damages as a result of the defendants’ failure to pay under the guaranty agreements, but it failed to supply any evidence in its motion papers of the accounts it purchased, the offsets claimed against those accounts, or any amounts the plaintiff has been able to recover to date. The plaintiff filed a supplemental brief along with an attached two-page affidavit from Alan Eliasof, the plaintiff’s vice president and chief financial officer. The brief states the conclusion that Prestige “has suffered, and continues to suffer, substantial damages in the amount of $616,796.36,” without interest or costs, and argues that the appropriate remedy under New Jersey law is expectation damages or compensatory damages. Suppl. Br. at 2-3. The only factual support the plaintiff provides for this amount is Eliasof’s affidavit, in which he merely states that he has reviewed the books and records and has determined that defendant Michigan Gage & Manufacturing, LLC, owes the plaintiff $616,796.36 plus attorney’s fees and costs. There are no facts supporting this naked conclusion; for instance, Eliasof does not discuss the method he used to calculate the amount, he provides no proof the amounts owed by the individual defendants, and he did not furnish any proof of the accounts that breached the warranties given by Solar, which surely the plaintiff could have done since it tried an adversary proceeding in the bankruptcy court involving these same issues. Because the plaintiff carries the burden of persuasion on all the issues of its claim — including the issue of damages — it must offer evidence at the summary judgment stage that satisfies that burden. The plaintiff’s conclusory affidavit falls far short of the mark. -11- III. The Court finds that there is no genuine issue of material fact on the issue of the defendants’ liability under the guaranties and the plaintiff is entitled to judgment as a matter of law on that part of its claim. However, despite two opportunities to do so, the plaintiff has not offered sufficient evidence of its damages. Accordingly, it is ORDERED that the plaintiff’s motion for summary judgment [dkt #24] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the parties shall appear for a trial to the Court on the issue of damages only on August 16, 2010 at 8:30 a.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 12, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 12, 2010. s/Susan K. Pinkowski SUSAN K. PINKOWSKI -12-

=== ERNEST DURMISHI v. NATIONAL CASUALTY COMPANY ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ERNEST DURMISHI, Plaintiff, v. NATIONAL CASUALTY COMPANY, ______________________________________/ Defendant. Case Number 09-11061 Honorable David M. Lawson OPINION AND ORDER DENYING DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT, GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT, AND DENYING DEFENDANT’S MOTION TO STRIKE EXPERT WITNESS Plaintiff Ernest Durmishi was injured in a motor vehicle accident and suffered serious injuries. He sued his insurance carrier, National Casualty Company, for first-party benefits under Michigan’s no-fault insurance law, Mich. Comp. Laws § 500.3101 et seq. His main claim is for the value of attendant care benefits furnished by his wife. The defendant refused to pay the benefits demanded. The plaintiff has filed a motion for partial summary judgment seeking an amount equal to 24-hour attendant care at a rate of $26.34 per hour for every day since the Mr. Durmishi was discharged to his home, plus penalty interest and attorney’s fees as allowed by Michigan law. The defendant has filed a motion for partial summary judgment, arguing that it is entitled to set off against payment for attendant care services an amount equal to eight hours each day because Mr. Durmishi was injured on the job, and that portion of the benefit is the obligation of his worker’s compensation insurer. The defendant also argues that it should not have to pay attorney’s fees as a matter of law because Mr. Durmishi refused to attend a medical evaluation as required by state law and the insurance contract. Finally, the defendant has moved to bar testimony from the plaintiff’s vocational rehabilitation expert on the ground that his proposed testimony falls within the scope of common knowledge and therefore would not be helpful to a jury. The Court heard oral argument on the motions on April 19, 2010, after which it permitted the parties to file supplemental briefs to address recent appellate decisions. The Court now finds that fact issues preclude summary judgment for the plaintiff except on the issue of the defendant’s obligation to pay penalty interest and attorney’s fees for some of the attendant care benefits after thirty days following December 4, 2009, when it had reasonable proof of the claim; the defendant is not entitled to set off an amount for worker’s compensation benefits until the plaintiff has a right to those benefits, evidence of which is absent from this record; the defendant’s right to a medical examination of the plaintiff is governed by Federal Rule of Civil Procedure 35, with which the plaintiff complied, and therefore there is no basis to deny the plaintiff the right to pursue his claim for attorney’s fees as a matter of law; and there is no basis to strike the plaintiff’s proposed expert witness at this time. Therefore, the defendant’s motion for partial summary judgment will be denied, the plaintiff’s motion for partial summary judgment will be granted in part and denied in part, and the defendant’s motion to strike the expert witness will be denied. I. The accident occurred on August 8, 2008 at about 8:30 in the morning. At that time, the plaintiff was a 31-year-old Albanian man employed by L & D Transport, Inc. as a truck driver. The plaintiff spoke Albanian and Greek and had only minimal English proficiency; he relied on his wife, Erjola Durmishi, to translate for him. The plaintiff was driving a semi-tractor-trailer truck down the exit ramp from northbound M-53 onto 23 Mile Road heading east in Shelby Township, Michigan. Witnesses reported that he took a turn off the exit ramp at a high speed and the police report -2- concludes that this speed caused cargo inside the vehicle to shift, which caused the truck to roll over. The parties do not dispute that this accident occurred in the course of the plaintiff’s employment with L & D Transport. A Shelby Township Fire Department and Emergency Medical Services team responded to the accident and found the plaintiff unconscious and pinned under the steering wheel, but he regained consciousness at the scene and became combative. The plaintiff was transported to Henry Ford Hospital where he was found to have brain bleeding that required a craniotomy. He remained in intensive care, and after he failed to regain consciousness, additional brain surgeries were performed. The plaintiff regained consciousness, but other complications extended his hospital stay. Eventually, he was discharged on August 19, 2008 to the Rehabilitation Institute of Michigan (RIM), where he was observed to suffer from difficulties with balance, functional mobility, range of movement, self-care, sensory and motor function, and lack of strength and bed mobility. During his stay at RIM, the plaintiff received physical therapy, occupational therapy, speech therapy, neuropsychology therapy, and attended an interdisciplinary rehabilitation program. The plaintiff was discharged to his own home on August 26, 2008. Just before discharge, on August 22, 2008, case manager Jean Ward stated in a letter that the plaintiff “will continue to require 24 hour supervision following discharge and for the foreseeable future. Mrs. Durmishi has attended education with her husband’s therapists and will be providing the necessary supervision and assistance at home post discharge.” Pl.’s Mot. Summ. J., Ex. 21, Ward letter. Before the accident, Mrs. Durmishi had been employed in two part-time jobs as a salesperson at Burlington Coat Factory and a cashier at a grocery store. She quit both jobs and began providing 24-hour-per- day care to her husband. Because of her husband’s English deficiency, Mrs. Durmishi served as his -3- interpreter, and she helped him groom, bathe, and dress himself. She also helped him use the bathroom, and woke during the night several times to do so. The plaintiff apparently continued to have weakness on his right side, pain in his right shoulder, problems with his balance, and confusion. Mrs. Durmishi also prepared her husband’s meals, making food that he was able to chew with the pain in his jaw, ear, and head, and helped to feed him because of problems with his right arm. She assisted him with his medication by picking up his prescriptions at the pharmacy and ensuring that he took the correct dosage of his medications on schedule. She helped him to move around the apartment and walk up and down the stairs, tasks that he has increasingly been able to do without assistance. The plaintiff testified that he continues to experience dizziness “when I’m sitting, when I get up, when I lay down, when I turn my head left to right.” Pl.’s Mot. Partial Summ. J., Ex. 20, dep. of Ernest Durmishi, at 19. His wife still helps him stand; he holds onto her for a few moments after standing to calm his dizziness. The plaintiff does exercises at home to improve his balance with the assistance of his wife. He remains unable to walk outside on his own due to dizziness and requires his wife by his side in case he falls down. The plaintiff has not yet been certified to drive a vehicle again and relies on his wife for transportation. He also has memory problems and explained that “[w]hat I’m thinking now to tell you, in two minutes I don’t recall or if I do something, let’s say, if I took my medicine or not.” Id. at 47. Based on his forgetfulness, some of the plaintiff’s doctors, including Dr. Jay Meythaler from RIM, expressed concerns about the plaintiff’s safety if left alone. On September 8, 2008, the plaintiff began an outpatient rehabilitation program at RIM that spanned the next two months. The evaluator determined that the plaintiff required minimum to moderate assistance for most activities of daily living. The examiner noted that he had no -4- orientation to person, place, or situation, and seemed easily distracted. The examiner recommended 24-hour supervision based the plaintiff’s potential for falling, poor gait, balance, right upper extremity function, safety and functional skills, endurance, mobility, community skills, and strength. On October 21, 2008, the plaintiff was referred to Dr. Jennifer A. LaBuda, a licensed clinical psychologist at the Wayne State University Medical Group, for an assessment of his cognitive and affective functioning. Dr. LaBuda used an independent translator to interview the plaintiff and also received information from Mrs. Durmishi. She noted that “the patient demonstrates significant variability in daily therapy. At times he has evidenced progress, however, at other times, seems disengaged from treatment.” Ans. to Pl.’s Mot. Summ. J., Ex. B, Report of LaBuda at 1. On both September 22 and October 21, 2008, Dr. Lawrence Horn at RIM issued a prescription for the plaintiff to receive 24-hour attendant care and indicated that the termination date of such care was to be determined. On October 31, 2008, the plaintiff was discharged from the outpatient therapy program. The record is not clear when the plaintiff first made a claim for no-fault insurance benefits. However, sometime after the accident the plaintiff applied for first-party benefits that included wage-loss differential and attendant care. He sent demand letters for coverage to The Scottsdale Insurance Company on December 5, 2008, January 9, 2009, January 29, 2009, and February 4, 2009, seeking attendant care benefits at the rate of $26.34 per hour, 24 hours per day, and wage-loss differential. The plaintiff received some workers’ disability compensation payments from his employer’s insurer, Liberty Mutual Insurance Company; however, Liberty Mutual refused to continue paying benefits after December 31, 2008. The plaintiff has stated that he has sued for worker’s compensation benefits in the Michigan worker’s compensation bureau. Since the motion -5- argument, plaintiff’s counsel has informed the Court that Liberty Mutual has stated an intention to voluntarily pay additional benefits from December 8, 2008 through April 23, 2010; however no funds had been received yet. The plaintiff hired Robert Ancell, Ph.D., and Laura Kling, RN, to conduct a vocational rehabilitation and case management evaluation of the plaintiff in his home to determine his need for attendant care and the value of Mrs. Durmishi’s services. Ancell concluded that Mrs. Durmishi’s service should be valued between $16.28 and $20.26 per hour, plus 30% for the value of a comparable in-home care worker’s benefits. He justified 24-hour care on the basis of the prescriptions from Drs. Meythaler and Horn. Dr. Ancell referred the plaintiff to Dr. Gerald A. Shiener, a psychiatrist, who reported his conclusions to Ancell in a letter dated April 16, 2009. Dr. Shiener determined that the plaintiff’s current functioning level was poor, with a global assessment of functioning (GAF) of 40. He wrote that the plaintiff will continue to require supervision and attendant care, possibly permanently. On June 23, 2009, Dr. Shiener issued a prescription for 24 hour attendant care by a “Nurse’s Aide/Family Member who attends to and cares for the patient due to physical injuries and/or subsequent surgery resulting in physical disability,” covering the period of September 1, 2008 through June 23, 2009. Ans. to Pl.’s Mot. Partial Summ. J., Ex. F, Records of Dr. Shiener. The plaintiff also began seeing Dr. Jay Meythaler again at RIM on a regular outpatient basis on January 26, 2009. Dr. Meythaler determined that the plaintiff’s gait was slower, that there was some weakness in the plaintiff’s lower right side, and that the plaintiff did have pain in his right shoulder, but the doctor determined that the plaintiff’s mobility and strength had both improved. He prescribed additional medication and physical therapy. At that time, the doctor believed that 24- -6- hour attendant care was appropriate. However, on June 11, 2009, Dr. Meythaler’s plan included consideration of reducing or eliminating home care to assist the plaintiff with independent living skills during the day and to ensure his safety in those tasks. The plaintiff received neuropsychological testing from Bradley Sewick, a Ph.D. psychologist, on April 23, 2009. Dr. Sewick concluded that the plaintiff “demonstrates a number of cognitive, sensory-motor and emotional-behavioral problems” and requires “additional rehabilitation interventions.” Pl.’s Mot. Partial Summ. J., Ex. 13, Report of Dr. Sewick. Dr. Sewick testified at his deposition that the plaintiff possibly could be left alone for “an hour or two now and then,” but no more. Ans. to Pl.’s Mot. Partial Summ. J., Ex. G, dep. of Dr. Sewick. Plaintiff’s counsel also referred the plaintiff to Dr. Jack Belen, a psychiatrist, who examined Mr. Durmishi on August 20, 2009. That same day, Dr. Belen provided the plaintiff with a prescription for 24-hour attendant care. The prescription did not include a termination date. Dr. Belen examined the plaintiff again on October 1, 2009 and found that he continued to present with the same impairments. The defendant apparently did not seek any physical or psychological examinations of the plaintiff until after the present lawsuit was filed on February 18, 2009. Since that time, Dr. Philip Liethen, a psychologist, examined the plaintiff on October 28, 2009 and administered psychological testing. He concluded that the plaintiff required supervision no more than twelve hours per day, and he opined that the plaintiff “is capable of far more functional independence than had been reported by he and his wife, as also had been demonstrated/documented at RIM.” Ans. to Pl.’s Mot. Partial Summ. J., Ex. L, Dr. Liethen’s report at 14. -7- On October 26, 2009, the plaintiff also appeared for an examination by Dr. Harvey Ager, a psychiatrist, with an independent interpreter. Dr. Ager determined that the plaintiff did not need any attendant care. Ager suggested that the plaintiff’s problems were not the result of a close head injury, but more likely were caused by a vascular problem that developed alongside the ischemic episode shortly after surgery, resulting in a problem with the vision in his right eye and possible right-side weakness. He further opined that the plaintiff did not appear clinically depressed or anxious, never became angry or agitated, did not exhibit signs of post-traumatic stress disorder or confusion, had no problems with short or long term memory functions, and did not appear to be psychotic. He did notice that the plaintiff limped when he walked; however, he did not perform a physical examination of the plaintiff. On December 4, 2009, the plaintiff presented for an examination by Dr. Antoine Geffrard, a physical medicine specialist. Dr. Geffrard interviewed the plaintiff through his wife and an independent interpreter simultaneously, conducted a physical examination, and found no physical problems with the plaintiff’s range of motion in either shoulder, but noted motor sluggishness and reduced power in the right arm. He noted a defect in the plaintiff’s gait but found no balance deficit. He concluded that the plaintiff did not need attendant care or any form of supervision or observation. On December 3, 2009, Dr. Diane Hudson at Spectrum Rehabilitation Centers completed an Individual Psychotherapy Re-Evaluation and Community-Based Treatment Plan Update for the plaintiff. It is unclear from the report whether this update was prompted by the litigation or was part of a standard course of treatment. Dr. Hudson concluded that the plaintiff continued to rely on his cane, “move[d] slowly,” and his “constant pain” was “evident.” Pl.’s Mot. Partial Summ. J., Ex. 16, Spectrum Health Plan Update at 1. He continued to exhibit depression, inertia, fatigue, difficulty -8- concentrating, forgetfulness, dizziness, and right-side limitations. He required “standby assist” when walking down stairs and continued to rely on his wife to help him bathe, dress, and groom himself. Dr. Hudson recommended that he continue therapy and learn pain- and anger-management techniques. She did not comment on the need for attendant care. The defendant also submitted an affidavit by Sharon Tait, a nurse case manager at Professional Rehabilitation Services of Michigan, completed on March 3, 2010. Ms. Tait only reviewed the plaintiff’s medical records; she did not examine or interview the plaintiff. She was critical of Dr. Sewick’s conclusions, suggested that the plaintiff no longer needed 24-hour attendant care, concluded that attendant care should have been reduced from 24 to 12 hours on October 3, 2009, and stated that the plaintiff currently needs attendant care no more than four hours per day. As mentioned above, the plaintiff filed the present action in the Wayne County, Michigan circuit court on February 18, 2009 against the Scottsdale Insurance Company. The parties stipulated to substitute the present defendant, National Casualty Company, who then removed the action to this court. Following the removal, the parties engaged in several discovery squabbles, largely relating to the defendant’s requests for medical evaluations of the plaintiff by doctors of its choosing and with the defendant’s own interpreters. Rather than follow the procedures set forth in Federal Rule of Civil Procedure 35, the defendant served multiple notices for examinations by Drs. Liethen and Ager. Plaintiff’s counsel responded by letter that he would not produce his client for the examinations absent an order from the Court under Rule 35. On October 5, 2009, the defendant filed a motion for summary judgment on the ground that the plaintiff would not submit to an examination, arguing that under the insurance contract, the plaintiff was obliged to “[c]ooperate with us in the investigation or settlement of the claim” and “[s]ubmit to examination at our expense, by physicians -9- of our choice, as often as we reasonably require.” See Def.’s Mot. Partial Summ. J., Ex. I, Insurance Policy. On October 12, 2009, the plaintiff agreed to submit to the examinations if the defendant withdrew its motion for summary judgment. The defendant withdrew its motion for summary judgment on January 26, 2010, after all requested examinations had been completed. Another dispute arose when the defendant sought an examination by Dr. Geffrard, who worked for RIM, one of the plaintiff’s treating facilities. The Court resolved that dispute by entering an order following a motion hearing, which limited Dr. Geffrard’s access to the plaintiff’s medical records and treating sources. On February 8, 2010, the defendant tendered checks in the amount of $112,673.20 to the plaintiff for a portion of the attendant care demanded. The plaintiff notes that the amount does not represent payment at the rate claimed, nor does it cover the entire period for 24-hours-per-day care. Nonetheless, the checks contained the legend that this portion of the attendant care was “undisputed.” The checks were dated January 14, 2010. The record does not indicate whether the defendant is continuing to pay some part of the attendant care benefits demanded. II. On February 12, 2010, the defendant filed a motion for partial summary judgment arguing that it is entitled as a matter of law to set off against attendant care payments an amount equal to eight hours per day at the applicable rate, because there is no factual dispute that the plaintiff was injured during the course of his employment, and that part of his attendant care benefit should be the obligation of the worker’s compensation insurer. The defendant also contends that the plaintiff’s refusal to submit to medical and psychological examinations violated its contractual and statutory rights, and therefore the defendant should not be held responsible for attorney’s fees as a matter of -10- law. The plaintiff has countered with a motion for summary judgment of his own, arguing that the defendant’s refusal to pay no-fault benefits it is statutorily and contractually obliged to pay cannot be justified. The plaintiff notes that the defendant possesses no medical opinion to contradict his physicians’ prescription for 24-hour attendant care benefits until October 29, 2009, and at present there is no dispute that the plaintiff is entitled to at least twelve hours of attendant care per day, as evidenced by the defendant’s voluntary, although belated, payment. The standards for evaluating a motion for summary judgment are well known but bear repeating here. As the Sixth Circuit recently explained: Both claimants and parties defending against a claim may move for summary judgment “with or without supporting affidavits.” Fed. R. Civ. P. 56(a), (b). Such a motion presumes the absence of a genuine issue of material fact for trial. The court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record that demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). Once that occurs, the party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). Alexander v. CareSource, 576 F.3d 551, 557-58 (6th Cir. 2009). In addition, when “‘reviewing a summary judgment motion, credibility judgments and weighing of the evidence are prohibited. Rather, the evidence should be viewed in the light most favorable to the non-moving party. . . . Thus, the facts and any inferences that can be drawn from those facts[] must be viewed in the light most favorable to the non-moving party.’” Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 374 (6th Cir. 2009) (quoting Bennett v. City of Eastpointe, 410 F.3d 810, 817 (6th Cir. 2005) (citations -11- omitted ; see also Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003) (“In evaluating the evidence, [the district court] ‘draw[s] all reasonable inferences therefrom in a light most favorable to the non-moving party.’”) (quoting PDV Midwest Ref., LLC v. Armada Oil & Gas Co., 305 F.3d 498, 505 (6th Cir. 2002 . “[T]he party opposing the summary judgment motion must ‘do more than simply show that there is some “metaphysical doubt as to the material facts.”’” Highland Capital, Inc. v. Franklin Nat’l Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir. 1994), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 586 (1986 . A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp., 477 U.S. at 322-23. “Thus, the mere existence of a scintilla of evidence in support of the [opposing party]’s position will be insufficient; there must be evidence on which the jury could reasonably find for the [opposing party].” Ibid. (quoting Anderson, 477 U.S. at 252) (internal quotation marks omitted). In a defensive motion for summary judgment, the party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). -12- When the moving party also bears the ultimate burden of persuasion, the movant’s affidavits and other evidence not only must show the absence of a material fact issue, they also must carry that burden. Vance v. Latimer, 648 F. Supp. 2d 914, 919 (E.D. Mich. 2009) (stating that where “the crucial issue is one on which the movant will bear the ultimate burden of proof at trial, summary judgment can be entered only if the movant submits evidentiary materials to establish all of the elements of the claim or defense”) (quoting Stat-Tech Liquidating Trust v. Fenster, 981 F. Supp. 1325, 1335 (D. Colo. 1997); Resolution Trust Corp. v. Gill, 960 F.2d 336, 340 (3d Cir. 1992). In his commentary on affirmative motions for summary judgment, Judge William Schwarzer explains: When the moving party bears the burden of persuasion on the issue at trial, its showing must sustain that burden as well as demonstrate the absence of a genuine dispute. Thus, it must satisfy both the initial burden of production on the summary judgment motion–by showing that no genuine dispute exists as to any material fact–and the ultimate burden of persuasion on the claim–by showing that it would be entitled to a directed verdict at trial. William W. Schwarzer, et al., The Analysis and Decision of Summary Judgment Motions, , 477-78 (1992) (footnote omitted). This case is before the Court on the basis of diversity jurisdiction, 28 U.S.C. § 1332, and the plaintiff’s claim is based entirely on state law. Therefore, the Court must apply the law of the forum state’s highest court. Erie R.R. v. Tompkins, , 78 (1938). If the state’s highest court has not decided an issue, then “the federal court must ascertain the state law from ‘all relevant data.’” Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995) (quoting Bailey v. V & O Press Co., 770 F.2d 601, 604 (6th Cir. 1985 . “Relevant data includes the state’s intermediate appellate court decisions, as well as the state supreme court’s relevant dicta, restatements of the law, law review commentaries, and the majority rule among other states.” -13- Ososki v. St. Paul Surplus Lines, 156 F. Supp. 2d 669, 674 (E.D. Mich. 2001) (internal quotation marks and citation omitted). A. The defendant’s argument that it is entitled to set off a portion of attendant care benefits that would be paid by a worker’s compensation insurer is based on statutory language found in the no- fault act. The defendant does not dispute its statutory obligation to pay for attendant care that is incurred, reasonably necessary for the injured person’s care and rehabilitation, and reasonable in amount. See Nasser v. ACIA, 435 Mich. 33, 48-49, 457 N.W.2d 637, 644-45 (1990); Moghis v. Citizens Ins. Co. of Am., 187 Mich. App. 245, 247, 466 N.W.2d 290, 292 (1990). However, Michigan cases make clear that when enacting the no-fault automobile insurance act and the worker’s disability compensation act, both of which are statutory schemes designated as substitutes for traditional tort reparations systems, the state legislature did not intend to countenance double recovery for a person injured in an automobile accident while on the job, even though “[n]either act refers expressly to the other.” Mathis v. Interstate Motor Freight Sys., 408 Mich. 164, 179, 289 N.W.2d 708, 712 (1980); see also Wood v. Auto-Owners Ins. Co., 469 Mich. 401, 405-06, 668 N.W.2d 353, 355 (2003); Booth v. Auto Owners Ins. Co., 224 Mich. App. 724, 731, 569 N.W.2d 903, 906 (1997); DeMeglio v. Auto Club Ins. Ass’n, 202 Mich. App. 361, 364, 509 N.W.2d 526, 527- 28 (1993), rev’d on other grounds, 449 Mich. 33, 534 N.W.2d 665 (1995). The Michigan legislature specifically enacted legislation that states: “Benefits provided or required to be provided under the laws of any state or the federal government shall be subtracted from the personal protection insurance benefits otherwise payable for the injury.” Mich. Comp. Laws § 500.3109(1). Michigan courts have interpreted this provision to mean that the “workers’ compensation system should be -14- the primary insurer with respect to disabilities arising from an automobile accident at work.” Gregory v. Transam. Ins. Co., 425 Mich. 625, 631, 391 N.W.2d 312, 315 (1986). The defendant has seized upon the language “required to be provided” in section 3109(1) as authority for the idea that where an injured employee is theoretically entitled under law to worker’s compensation benefits, the no-fault insurer is entitled to withhold an equivalent amount from first- party no-fault benefits to be paid, regardless of whether the injured worker actually receives the worker’s compensation benefits. After reviewing Michigan precedent, the Court does not find that argument to be sustainable. The Michigan Supreme Court held in Perez v. State Farm Mut. Auto. Ins. Co., 418 Mich. 634, 344 N.W.2d 773 (1983), that a worker injured on the job in an automobile accident, whose employer did not have mandatory worker’s compensation coverage, could not be subject to the set- off prescribed by section 3109(1). The court explained, “[t]he ‘required to be provided’ clause does not mean that sums payable as workers’ compensation that are not available to the injured worker because his employer failed to provide workers’ compensation coverage are nonetheless to be subtracted from no-fault work-loss benefits.” Id. at 645, 244 N.W.2d at 778. Instead, the court described the injured employee’s obligation as follows: The “required to be provided” clause of § 3109(1) means that the injured person is obliged to use reasonable efforts to obtain payments that are available from a workers’ compensation insurer. If workers’ compensation payments are available to him, he does not have a choice of seeking workers’ compensation or no-fault benefits; the no-fault insurer is entitled to subtract the available workers’ compensation payments even if they are not in fact paid because of the failure of the injured person to use reasonable efforts to obtain them. Id. at 645-46, 244 N.W.2d at 778-79. -15- Similarly, if an injured employee settles his worker’s compensation claim, he may not then turn to his (or his employer’s) no-fault insurer to recover benefits he otherwise would have received from his worker’s compensation insurer on an on-going basis had he not settled his worker’s compensation claim. See Gregory, 425 Mich. at 635, 636, 391 N.W.2d at 316, 317 (1986) (noting, however, that “the no-fault insurer remains liable for any benefits due which are greater than the amounts which the workers’ compensation system is required by statute to pay to disabled workers”). The plaintiff acknowledges the vitality of the set-off provision in section 3109(1), but he insists that he is doing all that the law requires of him: he applied for worker’s compensation benefits, and when he was refused, he pursued the matter through litigation against the worker’s compensation insurer. Therefore, he says, he has employed “reasonable efforts to obtain payments that are available from a workers’ compensation insurer,” which is all Perez requires. He contends, however, that as the defendant has the burden of establishing its right to a set-off, see Conway v. Cont. Ins. Co., 180 Mich. App. 447, 450, 447 N.W.2d 761, 762 (1989), the defendant cannot withhold payments awaiting the outcome of his worker’s compensation case. The Court agrees. In Specht v. Citizens Insurance Company of America, 234 Mich. App. 292, 593 N.W.2d 670 (1999), the Michigan Court of Appeals held explicitly that “[w]here, as here, a claim for worker’s compensation benefits is still pending when the no-fault carrier is sued for benefits, the no-fault carrier will be unable to prove its entitlement to a setoff. . . . [T]he no-fault carrier is not entitled to delay payments in order to wait for the bureau’s determination.” Id. at 296, 593 N.W.2d at 672. That proposition appears to be well settled under Michigan law. See Joiner v. Mich. Mut. Ins. Co., 137 Mich. App. 464, 475, 357 N.W.2d 875 (1984) (holding that since the plaintiff’s claim was -16- pending, “[d]efendant was unable to . . . and in fact did not attempt to” set off worker’s compensation benefits against required first-party no-fault payments); Joiner v. Mich. Mut. Ins. Co., 161 Mich. App. 285, 293, 409 N.W.2d 808 (1987) (holding that a setoff cannot be made until the amount of worker’s compensation benefits to which plaintiff is entitled is finally determined). Although the defendant will be able to set off worker’s compensation payments for attendant care that the plaintiff actually receives, there is no evidence in the record that the plaintiff has received anything to date. The plaintiff has satisfied his obligation to make reasonable efforts to pursue his remedies under the worker’s compensation statutes. The defendant is not allowed to speculate or anticipate the amount the plaintiff might receive, nor may it withhold benefits otherwise payable pending a determination by the worker’s compensation bureau. The defendant’s motion for summary judgment on this ground must be denied. B. The defendant next argues that it is entitled to a judgment as a matter of law that the plaintiff may not recover attorney’s fees because the plaintiff insisted on compliance with Federal Rule of Civil Procedure 35 as a condition of submitting to medical examinations by doctors of the defendant’s choosing. The plaintiff wanted a showing of good cause and conditions imposed on the examinations as required by Rule 35; the defendant contends it has an unconditional right under a Michigan statute, see Mich. Comp. Laws § 500.3151, to examine the plaintiff. Michigan Complied Laws § 500.3148(1) states that “[a]n attorney is entitled to a reasonable fee for advising and representing a claimant in an action for . . . benefits which are overdue. . . charge[d] against the insurer . . . if the court finds that the insurer unreasonably refused to pay the claim or unreasonably delayed in making proper payment.” The defendant reasons that if it is found to have delayed -17- payments, its delay must be deemed reasonable as a matter of law because the plaintiff breached its own obligation to submit to medical examinations, Rule 35 notwithstanding. In order for a court to grant attorney’s fees under section 500.3148, the following statutory prerequisites must be met: First, the benefits must be overdue, meaning “not paid within 30 days after [the] insurer receives reasonable proof of the fact and of the amount of loss sustained.” Mich. Comp. Laws § 500.3142(2). Second, in postjudgment proceedings, the trial court must find that the insurer “unreasonably refused to pay the claim or unreasonably delayed in making proper payment.” Mich. Comp. Laws § 500.3148(1). Moore v. Secura Ins., 482 Mich. 507, 517, 759 N.W.2d 833, 838 (2008). “Neither Michigan Compiled Laws § 500.3142(2) nor Michigan Compiled Laws § 500.3148(1) permits the recovery of attorney fees for actions in which a court awarded plaintiff benefits that were reasonably in dispute, or, stated slightly differently, benefits not yet overdue.” Id. at 519, 759 N.W.2d at 839. Most Michigan courts have determined that the issue whether the insurer’s delay was reasonable presents a mixed question of law and fact. Ross v. Auto Club Group, 481 Mich. 1, 7, 748 N.W.2d 552, 555 (2008) (citing Sweebe v. Sweebe, 474 Mich. 151, 154, 712 N.W.2d 708 (2006 ; see also Tinnin v. Farmers Ins. Exch., --- Mich. App.--- , --- N.W.2d ---, 2010 WL 364187 (Feb. 2, 2010). “What constitutes reasonableness is a question of law, but whether the defendant’s denial of benefits is reasonable under the particular facts of the case is a question of fact.” Ross, 481 Mich. at 7, 748 N.W.2d at 555; but see Regents of Univ. of Mich. v. State Farm Mut. Ins. Co., 250 Mich. App. 719, 737, 650 N.W.2d 129, 139 (2002) (“Subsection 3148(1) specifically provides that the court should determine whether an insurer unreasonably refused to pay or unreasonably delayed in making payment. Thus, this was not a question for the jury”). An initial refusal or delay by the defendant in paying benefits creates a rebuttable presumption of unreasonableness, and the -18- defendant then has the burden of justifying its refusal or delay. Univ. Rehab. Alliance, Inc. v. Farm Bureau Gen. Ins. Co. of Mich., 483 Mich. 955, 956, 763 N.W.2d 908, 908 (2009) (citing Ross, 481 Mich. at 11, 748 N.W.2d 552). “[T]he scope of inquiry under § 3148 is not whether the insurer ultimately is held responsible for a given expense, but whether its initial refusal to pay the expense was unreasonable.” McCarthy v. Auto Club Ins. Ass’n, 208 Mich. App. 97, 105, 527 N.W.2d 524, 527 (1994); see also Univ. Rehab. Alliance, 483 Mich. at 956, 763 N.W.2d at 908. “The insurer can meet this burden [of rebutting the presumption] by showing that the refusal or delay is the product of a legitimate question of statutory construction, constitutional law, or factual uncertainty” at the time the insurer declined to pay the benefits. Ross, 481 Mich. at 11, 748 N.W.2d at 558; cf. Ivezaj v. Auto Club, 275 Mich. App. 349, 354, 355, 737 N.W.2d 807, 810, 811 (2007) (discussing McCarthy and alternatively describing the relevant period of time as “at the time the plaintiff requested this coverage” and “at the time [the insurer] initially refused to make the payments.”). The centerpiece of the defendant’s argument here is the decision in Roberts v. Farmers Insurance Exchange, 275 Mich. App. 58, 737 N.W.2d 332 (2007), which held that Michigan Compiled Laws § 500.3151 grants a no-fault insurer a statutory right to require the plaintiff to submit to an examination. In Roberts, the court interpreted the statute to create this right and to impose an analogous duty on the plaintiff to submit to an examination where his or her mental or physical condition was material to the claim. When the claimant repeatedly failed or refused to attend the examination, the court determined that she breached her duty under the statute, which raised legitimate statutory questions about her continuing entitlement to first-party benefits and the appropriate consequences for such a breach under the statute. Therefore, the court determined that -19- the insurer’s suspension of benefits was reasonable, and the insurer was not liable for attorney’s fees. The statute cited by the Roberts court, Mich. Comp. Laws § 500.3151, states: When the mental or physical condition of a person is material to a claim that has been or may be made for past or future personal protection insurance benefits, the person shall submit to mental or physical examination by physicians. A personal protection insurer may include reasonable provisions in a personal protection insurance policy for mental and physical examination of persons claiming personal protection insurance benefits. Federal Rule of Civil Procedure 35 states that the federal court “may order a party whose mental or physical condition . . . is in controversy to submit to a physical or mental examination by a suitably licensed or certified examiner”; however, the order may be issued “only on motion for good cause and on notice to all parties and the person to be examined,” and the order “must specify the time, place, manner, conditions, and scope of the examination, as well as the person or persons who will perform it.” Fed. R. Civ. P. 35(a)(1), (2)(A)&(B). If Rule 35 governs, the plaintiff was well within his right to insist on a determination of good cause and to have the Court prescribe the conditions of the examination before submitting to the defendant’s demand. The defendant argues, however, that the state statutory scheme creates substantive rights to which federal procedural prescriptions must yield when the matter is adjudicated by a federal court exercising its diversity jurisdiction. The defendant’s argument is flawed for several reasons. First, under the state statutory scheme, the defendant is not entitled to an unconditional right to a physical examination. Rather, under section 3159 of the no-fault act, an order compelling the discovery “of facts about an injured person’s . . . condition, treatment and dates and costs of treatment” may be entered by a state court “only on motion for good cause shown and upon notice to all persons having an interest, and shall specify the time, place, manner, conditions and scope of the discovery.” Mich. Comp. Laws § -20- 500.3159. The statute also states: “A court, in order to protect against annoyance, embarrassment or oppression, as justice requires, may enter an order refusing discovery or specifying conditions of discovery and may order payments of costs and expenses of the proceeding, including reasonable fees for the appearance of attorneys at the proceedings, as justice requires.” Ibid. That plain statutory language would settle the issue (and avoid a collision with Rule 35), except that the Michigan Supreme Court engrafted upon it the provision that a no-fault insurer could alter the meaning of the statute through language in the insurance contract. See Muci v. State Farm Mut. Auto. Ins. Co., 478 Mich. 178, 194, 732 N.W.2d 88, 97 (2007) (holding that under the no-fault act, “the provisions of the parties’ insurance policy control whether any conditions may be placed on independent medical examinations”). However, that reasoning, questionable in its own right, does not govern the application of Rule 35 in a federal court, which leads to the second flaw in the defendant’s argument. It is well settled that under the Erie doctrine, see Erie R.R. v. Tompkins, (1938), the Court must apply the substantive law of the state in which it sits, but must apply federal procedural law, provided that the federal rule “shall not abridge, enlarge or modify any substantive right.” See 28 U.S.C. § 2072(b). The Supreme Court has held that Rule 35 is a rule of procedure, and in federal litigation “the District Court was not bound to follow the [state] practice respecting an order for physical examination.” Sibbach v. Wilson & Co., 312 U.S. 1, 10 (1941). The Supreme Court took the opportunity to expound on that holding just this term in Shady Grove Orthopedic Assoc., P.A. v. Allstate Ins. Co., 559 U.S. ---, 130 S. Ct. 1431 (2010), when it considered just when a federal procedure will be found to have “abridge[d], enlarge[d] or modif[ied]” a substantive right. -21- The question in Shady Grove was whether a New York statute that prohibited class actions in suits seeking penalties or minimum damages bound a federal court sitting in diversity, when Federal Rule of Civil Procedure 23 would have permitted such an action. The Court framed the issue thus: “We must first determine whether Rule 23 answers the question in dispute. . . . If it does, it governs – New York’s law notwithstanding – unless it exceeds statutory authorization or Congress’s rulemaking power.” 130 S. Ct. at 1437. The Court answered the first question – whether Rule 23 applied in the case – in the affirmative. Rule 23 states that class actions may be maintained in federal courts if certain conditions are satisfied; the New York law prohibiting class actions was in direct conflict with the federal rule. The Court also concluded that Rule 23 fell within the statutory authorization; but there was no majority on the reason why. The plurality focused solely on the federal rule under examination to determine whether the rule “regulate[s] matters ‘rationally capable of classification’ as procedure.” Id. at 1442 (quoting Hanna v. Plumer, 380 U.S. 460, 472 (1965 . If so, the Rules Enabling Act authorizes the federal rule under the “Supreme Court[‘s] . . . power to prescribe general rules of practice and procedure,” 28 U.S.C. § 2072(a), unless “[s]uch rule[] . . . abridge[s], enlarge[s] or modif[ies] any substantive right.” 28 U.S.C. § 2072(b). The plurality stated that if the rule “really regulat[es] procedure,” Shady Grove, 130 S. Ct. at 1442 (quoting Sibbach, 312 U.S. at 14), it is valid. It defined “procedure” as “the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard or infraction of them.” Ibid. (quoting Sibbach, 312 U.S. at 14). According to the plurality, it matters not that the rule “affects” a litigant’s substantive rights, as “most procedural rules do.” Ibid. “What matters is what the rule itself regulates: If it governs only ‘the manner and the means’ by which the litigants’ rights are ‘enforced,’ -22- it is valid; if it alters ‘the rules of decision by which [the] court will adjudicate [those] rights,’ it is not.” Ibid. (quoting Miss. Publ’g Corp. v. Murphree, 326 U.S. 438, 446 (1946 . The plurality found that Rule 23 easily satisfied this test. Justice Stevens concurred in the judgment. He noted that the Rules of Decision Act, 28 U.S.C. § 1652, which requires state laws to “be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply,” does not apply when an issue is governed by a federal rule; in that case, the Rules Enabling Act controls. Justice Stevens would broaden the focus of the Rules Enabling Act inquiry to include the “the nature of the state law that is being displaced by a federal rule.” Id. at 1449 (Stevens, J., concurring). Justice Stevens would allow that “[a] state procedural rule, though undeniably ‘procedural’ in the ordinary sense of the term, may exist to influence substantive outcomes, and may in some instances become so bound up with the state-created right or remedy that it defines the scope of that substantive right or remedy.” Id. at 1450 (Stevens, J., concurring) (internal quotation marks and citation omitted). In his view, in order to comply with the Rules Enabling Act, “[w]hen a State chooses to use a traditionally procedural vehicle as a means of defining the scope of substantive rights or remedies, federal courts must recognize and respect that choice.” Ibid. He would hold that the Rules Enabling Act would not permit a “federal rule . . . [to] govern a particular case in which the rule would displace a state law that is procedural in the ordinary use of the term but is so intertwined with a state right or remedy that it functions to define the scope of the state-created right.” Id. at 1452 (Stevens, J., concurring). Applying that test, Justice Stevens concluded that the New York law limiting the availability of class actions and constricting the scope of damages did not create substantive rights or remedies, and therefore Rule 23, which collided with that state law, satisfied the Rules Enabling Act. -23- Following either approach, it is not difficult to conclude that the application of Rule 35 to the present dispute does not violate the Rules Enabling Act. Rule 35 is unquestionably a rule of procedure; its purpose is to regulate access to proof through different modes of discovery during the course of litigation. It does not prescribe rights or remedies. Instead, it merely sets forth a process for obtaining information that might bear on a matter in controversy. The suggestion that Rule 35 is anything more than a rule of procedure was soundly rejected by the Supreme Court in Sibbach: The petitioner says the phrase [“substantive rights”] connotes more; that by its use Congress intended that in regulating procedure this court should not deal with important and substantial rights theretofore recognized. Recognized where and by whom? The state courts are divided as to the power in the absence of statute to order a physical examination. In a number such an order is authorized by statute or rule. . . . The asserted right, moreover, is no more important than many others enjoyed by litigants in District Courts sitting in the several states, before the Federal Rules of Civil Procedure altered and abolished old rights or privileges and created new ones in connection with the conduct of litigation. The suggestion that the rule offends the important right to freedom from invasion of the person ignores the fact that as we hold, no invasion of freedom from personal restraint attaches to refusal so to comply with its provisions. If we were to adopt the suggested criterion of the importance of the alleged right we should invite endless litigation and confusion worse confounded. The test must be whether a rule really regulates procedure, – the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard or infraction of them. That the rules in question are such is admitted. Sibbach, 312 U.S. at 13-14 (footnotes omitted). Nor does Rule 35 abridge a state substantive right that is embedded in a procedural statute. The defendant suggests that state law defines its right to demand an examination from a first-party no-fault claimant as a substantive right. That argument is based on the state supreme court’s anemic definition of “substantive right” found in Muci, as a rule or statute “that has ‘“as its basis something other than court administration.”’” Muci, 478 Mich. at 191, 732 N.W.2d at 96 (quoting McDougall -24- v. Schanz, 461 Mich. 15, 31, 597 N.W.2d 148, 156 (1999 . That definition conflicts with federal law. See Sibbach, 312 U.S. at 14 (defining “procedure” much more broadly than merely “court administration”). Like Rule 35, the state statutes, Mich. Comp. Laws §§ 500.3151, .3159, do no more than regulate access to proof. They do not set forth elements of claims or prescribe rights or remedies. These state laws do not affect the statutory cause of action or adjust the plaintiff’s obligation to prove that the costs of attendant care have been incurred, are necessary, and are reasonable. They are not “so bound up with the state-created right or remedy that it defines the scope of that substantive right or remedy.” Shady Grove, 130 S. Ct. at 1450 (Stevens, J., concurring). The state statutes prescribe a rule of procedure and nothing more. The plaintiff’s insistence on compliance with Rule 35 does not by itself justify the defendant’s delay in payment of benefits that otherwise were “overdue” within the meaning of the no-fault act. Although the defendant still may be able to rebut the inference that the delay was unreasonable, it is not entitled to a determination to that effect as a matter of law. The defendant suggests that the outcome on this issue would be different in state court. Perhaps that is so. However, in our federal system, “federal courts sitting in diversity operate as an independent system for administering justice to litigants who properly invoke its jurisdiction . . . and not as state-court clones that assume all aspects of state tribunals.” Shady Grove, 130 S. Ct. at 1448-49 (Stevens, J., concurring). Having removed this dispute to federal court, the defendant is bound to follow the applicable federal procedural rules. The defendant’s motion for partial summary judgment on that ground, therefore, will be denied. C. -25- The plaintiff moves for partial summary judgment as well. He seeks a judgment requiring the defendant to pay the total amount of 24-hour attendant care benefits at the rate of $26.34 per hour, which amounts to $424,275.28 through the date of the motion filing. The plaintiff argues that there is no genuine issue of material fact concerning the appropriateness of the amount due and owing because the defendant has paid some of this money in checks stating that the benefits were “undisputed” and in doing so has allegedly conceded that it owes the money. However, the plaintiff also points out that the defendant’s payments were for the “incorrect” hourly rate and number of hours. Nonetheless, the plaintiff insists that he is entitled to judgment as a matter of law. The Court disagrees. As the defendant points out, the plaintiff has the burden of demonstrating the reasonableness of the amounts he seeks, that these expenses are reasonably necessary, and that the plaintiff actually incurred these expenses. Nasser v. ACIA, 435 Mich. 33, 48-49, 457 N.W.2d 637, 644-45 (1990). The plaintiff has provided medical records and reports from Drs. Horn, Ancell, Shiener, Meythaler, Sewick, Belen, and Hudson tending to support his claim that he required 24-hour attendant care, as well as testimony from the plaintiff and his wife detailing the types of care she provided him. The plaintiff also has included the information he provided to the insurers to support his initial claim for benefits, which the plaintiff describes as “reasonable proof.” However, these documents merely list figures for the different categories of the plaintiff’s loss and provide no evidentiary support for the requested amounts. Notably, none of the letters containing “reasonable proof” were addressed to the present defendant. The defendant has responded with medical records and reports from Drs. Meythaler, Mazhari, Liethen, Ager, Geffrard, and nurse Tait tending to show that, although the plaintiff may have required 24-hour attendant care at some point following his accident, he had improved -26- cognitively and physically so that he no longer required attendant care for more than 12 hours per day, if that. The defendant also questions the amount of care provided by the plaintiff’s wife, suggesting that it would be impossible for one person to provide 24 hours worth of care while also caring for herself. In general, “[w]hether expenses are reasonable and reasonably necessary is generally a question of fact to be resolved by the jury.” Kallabat v. State Farm Ins., 256 Mich. App. 146, 151, 662 N.W.2d 97, 100 (2003). Drawing all reasonable inferences in favor of the defendant, these conflicting reports demonstrate a genuine issue of material fact as to the amount of care the plaintiff required and when, if at all, his need for care dropped from 24 to less than 12 hours. Further, there remains a factual question about the type and amount of care the plaintiff’s wife provided and the extent to which the plaintiff was capable of functioning on his own. These material issues require an evaluation of the facts properly performed by a jury. In addition, viewing the defendant’s payments in the light most favorable to the defendant, the jury could conclude that the defendant considered the claim for a certain portion of the attendant care benefits to be undisputed and paid only that portion of the benefits. At no point during the lawsuit has the defendant argued that it is not responsible for at least some of the attendant care benefits, but has merely contested the amount, and claimed a right to a setoff for worker’s compensation payments. The defendant’s payments, therefore, need not be viewed as a concession that the defendant owes all requested benefits. However, the defendant apparently does not contest that the plaintiff has required at least 12 hours of attendant care from the time of his discharge through December 2009. As noted, the defendant did pay some benefits for attendant care on February 8, 2010 with checks dated January -27- 14, 2010. The defendant received medical reports from its own examiners, Drs. Liethen, Ager, and Geffrard, on October 28, 2009, October 26, 2009, and December 4, 2009, respectively, which apparently substantiated at least part of the plaintiff’s claims to the defendant’s satisfaction. Therefore, by December 4, 2009 at the latest, the defendant had reasonable proof that the plaintiff required some attendant care. At that point, the 30-day clock on this portion of the claim began to run. The defendant failed to pay any benefits until almost two months later. Therefore, no material fact dispute exists that the defendant is liable for penalty interest and fees as to the initial 12 hours of attendant care benefits paid by the defendant on February 8, 2010. The remaining portion of benefits must await a determination whether they were reasonably in dispute, and therefore the plaintiff is not entitled to an award of penalty interest and fees as to the balance of his claim at this time. Therefore, the Court will grant in part and deny in part the plaintiff’s motion for partial summary judgment. III. Finally, the defendant has moved to strike the potential testimony of the plaintiff’s vocational rehabilitation expert, Dr. Robert Ancell. It argues that Ancell’s opinion on the value of Mrs. Durmishi’s attendant care of her husband is irrelevant because Mrs. Durmishi is not qualified for the classification utilized by Ancell or entitled to receive the wages Ancell recommended, based on her own testimony about the care she provides her husband. In addition, the defendant argues that Dr. Ancell’s testimony is not based on specialized knowledge, and the opinions he offers can be established by Mrs. Durmishi’s testimony alone, and therefore Ancell’s opinions will not be helpful to a jury. -28- Traditionally, attendant care benefits for persons injured in automobile accidents are furnished by licensed care providers, who charge rates that are reasonable and customary in the market, the payment of which generally is negotiated directly between the care provider and the insurance carrier. Michigan courts have also approved no-fault compensation for attendant care provided by family members of the injured individual. Booth v. Auto-Owners Ins. Co., 224 Mich. App. 724, 727-29, 569 N.W.2d 903, 904-05 (1997) (citing Reed v. Citizens Ins. Co. of Am., 198 Mich. App. 443, 499 N.W.2d 22 (1993), Botsford Gen. Hosp. v. Citizens Ins. Co., 195 Mich. App. 127, 489 N.W.2d 137 (1992), Van Marter v. Am. Fid. Fire Ins. Co., 114 Mich. App. 171, 318 N.W.2d 679 (1982), and Visconti v. DAIIE, 90 Mich. App. 477, 282 N.W.2d 360 (1979 . In such cases, the plaintiff bears the burden of demonstrating that the amount of compensation is reasonable and the care provided is appropriate. See Bonkowski v. Allstate Ins. Co., 281 Mich. App. 154, 172, 761 N.W.2d 784, 795 (2008); Attard v. Citizens Ins. Co. of Am., 237 Mich. App. 311, 317-18, 602 N.W.2d 633, 637 (1999). The defendant argues that Dr. Ancell’s testimony will not illuminate that inquiry and that the jury can figure out a reasonable rate of compensation on its own. In support of the former proposition, the defendant contends that Dr. Ancell’s methods do not comply with Michigan law, since he uses home health care workers as comparators and Mrs. Durmishi’s skill level is not equivalent to theirs; and the rates they charge is not a proper measure of reasonable compensation for Mrs. Durmishi. In support of the latter proposition, the defendant characterizes Dr. Ancell’s function as interviewing the plaintiff’s wife, accepting the responses she provides, comparing those responses to published guidelines, and valuing the work based on the matching classification; and -29- then simply states that “Ancell is . . . no more qualified to perform such a task than are the ordinary men and women that will make up the jury.” Br. in Support of Def.’s Mot. Strike at 4. Any challenge to expert testimony must begin with Rule 702 of the Federal Rules of Evidence, which was modified in December 2000 to reflect the Supreme Court’s emphasis in Daubert v. Merrell Dow Pharm., Inc., (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999), on the trial court’s gate-keeping obligation to conduct a preliminary assessment of relevance and reliability whenever a witness testifies to an opinion based on some sort of specialized knowledge. Rule 702 states: If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case. The language added by the amendment to Rule 702 restates Daubert’s insistence on the requirements that an expert’s opinion be based on a foundation grounded in the actual facts of the case, that the opinion is valid according to the discipline that furnished the base of special knowledge, and that the expert appropriately “fits” the facts of the case into the theories and methods he or she espouses. See Daubert, 509 U.S. at 591-93. In addition, expert testimony is not admissible unless it will be helpful to the fact finder. Such testimony is unhelpful when it is unreliable or irrelevant, as the Court observed in Daubert, see id. at 591-92, and also when it merely deals with a proposition that is not beyond the ken of common knowledge. See, e.g., Berry v. City of Detroit, 25 F.3d 1342, 1350 (6th Cir. 1994) (“If everyone knows this, then we do not need an expert because the testimony will not ‘assist the trier -30- of fact to understand the evidence or to determine a fact in issue.’”) (quoting Rule 702 . Finally, before an expert may give an opinion, the witness must be qualified to do so. See id. at 1348-50; Morales v. Am. Honda Motor Co., Inc., 151 F.3d 500, 516 (6th Cir. 1998). The proponent of expert testimony must establish all the foundational elements of admissibility by a preponderance of proof. Nelson v. Tenn. Gas Pipeline Co., 243 F.3d 244, 251 (6th Cir. 2001) (citing Daubert, 509 U.S. at 592 n.10). An opinion is “reliable” from an evidentiary standpoint if it is “valid” according to the discipline upon which it is based. See Daubert, 509 U.S. at 590. In determining validity, the Court’s focus is on principles and methodology, not results. And there is no precise formula by which a court might deem a methodology “acceptable” or “unacceptable.” Daubert and its progeny have therefore not created a straitjacket, Gross v. Comm’r of Internal Revenue, 272 F.3d 333, 339 (6th Cir. 2001), but rather counsel a flexible approach, reconciling the “liberal thrust” of Rule 702 which “relax[es] the traditional barriers to opinion testimony” with the responsibility to “screen[ ] such evidence” in order to keep unreliable or invalid opinions from the jury. See Daubert, 509 U.S. at 588-89 (internal citations and quotation marks omitted); see also Jahn v. Equine Serv., PSC, 233 F.3d 382, 388 (6th Cir. 2000). The Court believes that Dr. Ancell likely is qualified to provide an opinion on reasonable rates of compensation for home health care workers. He is a currently a Rehabilitation Consultant with Ancell & Associates, which performs vocational rehabilitation consultation, medical rehabilitation consultation, and case management services. He has a Bachelor’s degree in Psychology from Wayne State University, a Masters in Counseling from the University of Detroit, and a Ph.D. in Human Services from Walden University. He is a certified rehabilitation counselor -31- and a certified case manager. He has worked in the rehabilitation and counseling field in various positions since 1967. He has received many professional awards for his work in rehabilitation services and is a member of about 20 professional organizations. The plaintiff was referred to Dr. Ancell by his attorney, Timothy Sulloli, to conduct “an evaluation as to his need for attendant care and the relative value of that.” Resp. to Mot. Strike, Ex. 2, dep of Dr. Ancell, at 9, 16, 34. Dr. Ancell and nurse Laura Kling “evaluated Ernest and took a history . . . from the wife and observed him” in his house. Id. at 10, 22. This history included both the plaintiff’s and his wife’s background and relied on an open-ended questioning method. Id. at 10, 27-29, 33. Although Dr. Ancell agreed that he did not write prescriptions for attendant care, he testified that doctors often rely on his expertise and recommendations in prescribing attendant care. Id. at 9-11. In his deposition, Dr. Ancell explained the difference between rate of pay, which varies based on the employer, and value of services, which attempts to reflect fair market value for services. Id. at 16-17. He also explained the process in which he engages when determining the value of attendant care services: first, he compares the services performed to those listed on Michigan Civil Service job descriptions and looks to the associated rate of pay for the analogous governmental job category; then, he compares this rate to the rate of pay for comparable services in a private agency; finally, he compares this data to his personal experience of rates for comparable services. Id. at 17-18, 35-38, 41-47, 49-51, 52-53, 56, 57, 62-64, 67, 77-79. Dr. Ancell also explained how he calculates and incorporates, or why he does not incorporate, different benefits and costs. Id. at 18-21, 36-37, 58, 60-62, 75-76. Finally, Dr. Ancell also testified that, if presented with a 12 hour prescription and a 24 hour prescription from doctors of two different disciplines, he would look at both prescriptions and ultimately default to the higher number; here, he would proceed under -32- the 24 hour prescription. Id. at 71-72. He also stated that he would default to treating doctors. Id. at 72. This approach appears to be consistent with Michigan law as a method of calculating the value of attendant care services under the Michigan no-fault act. In Bonkowski v. Allstate Insurance Company, the court explained: In determining reasonable compensation for an unlicensed person who provides health care services, a fact-finder may consider the compensation paid to licensed health care professionals who provide similar services. . . . For this reason, consideration of the compensation paid by health care agencies to their licensed health care employees for rendering services similar to the services provided by unlicensed family members is appropriate when determining reasonable compensation for those family members. However, the actual charges assessed by health care agencies in the business of providing such services is not relevant and provides no assistance in determining reasonable compensation for the actual provider of such services. The focus should be on the compensation provided to the person providing the services, not the charge assessed by an agency that hires health care professionals to provide such services. Bonkowski, 281 Mich. App. at 164-65, 761 N.W.2d at 791. The method used by Dr. Ancell to arrive at an opinion on the value of attendant care services provided by Mrs. Durmishi, therefore, appears to be consistent with the methodology countenanced by the Michigan courts. Although there does not appear to be an “industry” standard for making such determinations, the state courts have established a methodology that produces a satisfactory result in litigation. That satisfies the demands of Rule 702 and Daubert. Although the four traditional Daubert factors for determining reliability – developed for scientific fields with publications and computed error rates, etc. – do not map easily onto the social-science context, the Supreme Court has held that these factors “neither necessarily nor exclusively appl[y] to all experts or in every case.” Kumho Tire, 526 U.S. at 141, 153. Instead, the Court enjoys “broad latitude” in determining whether any such factors are “reasonable measures of reliability in a particular case.” Id. at 153. The expert must satisfy the trial court that he “employs in the courtroom the same level -33- of intellectual rigor that characterizes the practice of an expert in the relevant field,” Id. at 152, and can do so by explaining not only what he did to reach his conclusion, but why and how he arrived at his result as well. Dr. Ancell’s proposed testimony meets these requirements. Dr. Ancell has laid out the detailed methodology by which he typically considers these cases. The method is straight-forward and comprised of relatively simple comparisons. Therefore, it would be easy both for the expert to explain his method and for the jury to replicate his process on their own. The defendant argues that because the jury could do this on their own, the expert is unnecessary. However, Dr. Ancell has a knowledge of the industry that informs his method and that would be helpful to the jury in making its comparisons and determining which costs to include in its hourly rate. Dr. Ancell testified about the rates paid to private agencies and which portions of these rates he excludes, as well as why he rejected certain metrics based on their summary of irrelevant portions of the industry. This type of specialized knowledge would be beneficial to the jury. The Court finds, therefore, that the defendant has demonstrated no basis on which to exclude Dr. Ancell’s proposed testimony on the value of attendant care provided by Mrs. Durmishi to her husband. Of course, the need for the care and whether and to what extent it was reasonable likely is beyond the scope of Dr. Ancell’s expertise. That evidence must be furnished by qualified health care professionals. The motion to strike Dr. Ancell’s valuation testimony, however, will be denied. IV. The Court finds that the defendant is not entitled to a judgment as a mater of law on the issues of setoff and attorney’s fees. The plaintiff is entitled to a judgment as a matter of law on the narrow issue of penalty interest and attorney’s fees for overdue benefits from thirty days after -34- December 4, 2009 until the attendant care benefits were paid, but fact issues preclude summary judgment in his favor for the remainder of his claim. There is no basis in the present record upon which to strike Dr. Robert Ancell’s proposed testimony. Accordingly, it is ORDERED that the defendant’s motion for partial summary judgment [dkt #38] is DENIED. It is further ORDERED that the plaintiff’s motion for partial summary judgment [dkt #40] is GRANTED IN PART AND DENIED IN PART. The plaintiff is entitled to an award of reasonable attorney’s fees and penalty interest for overdue benefits from thirty days after December 4, 2009 until the attendant care benefits were paid, and nothing more. The plaintiff’s motion is denied in all other respects. It is further ORDERED that the defendant’s motion to strike the testimony of the plaintiff’s expert witness Robert Ancell [dkt #39] is DENIED. It is further ORDERED that the parties shall appear for a final pretrial conference in accordance with the Case Management and Scheduling Order on August 5, 2010 at 2:30 p.m.; the parties shall present their proposed joint final pretrial order to chambers on or before July 29, 2010; and trial shall commence on August 17, 2010 at 8:30 a.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: June 30, 2010 -35- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on June 30, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -36-

=== USA v. David Goward ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. DAVID GOWARD, ______________________________________ / Defendant. Case Number 02-20043-BC Honorable David M. Lawson ORDER DENYING MOTION TO EXTEND TIME TO FILE MOTION UNDER 28 U.S.C. § 2255 Before the Court is defendant David Goward’s motion to enlarge the time within which he might file a motion to vacate his sentence under 28 U.S.C. § 2255. Goward was resentenced on May 27, 2009. He filed a timely notice of appeal, but his appeal was voluntarily dismissed by the Sixth Circuit on October 29, 2009. He has not sought further review since then. On May 24, 2010, Goward filed a motion to enlarge the time for filing a motion under section 2255 by “90-120 days.” He alleges that he has had difficulty accessing his legal papers as a result of prison transfers, and on January 8, 2010 he was released to a half-way house and found that many of his documents are missing. A federal prisoner claiming to be in custody in violation of the Constitution or laws of the United States may seek relief by filing a motion to vacate, set aside, or correct sentence under 28 U.S.C. § 2255. Section 2255 provides a one-year statute of limitations, which is measured from the latest of: (1) the date on which the judgment of conviction becomes final; (2) the date on which the impediment to making a motion created by governmental action in violation of the Constitution or laws of the United States is removed, if the movant was prevented from making a motion by such governmental action; (3) the date on which the right asserted was initially recognized by the Supreme Court, if that right has been newly recognized by the Supreme Court and made retroactively applicable to cases on collateral review; or (4) the date on which the facts supporting the claim or claims presented could have been discovered through the exercise of due diligence. 28 U.S.C. § 2255(f). The determination of the finality date of a criminal judgment – that is, the date the one-year limitations period begins to run – depends on the defendant’s post-conviction appellate activity. First, a federal criminal judgment becomes final for the purpose of section 2255 at the conclusion of direct review. United States v. Cottage, 307 F.3d 494, 499 (6th Cir. 2002). “[F]or federal criminal defendants who do not file a petition for certiorari with [the Supreme] Court on direct review, § 2255’s one-year limitation period starts to run when the time for seeking such review expires.” Clay v. United States, 537 U.S. 522, 532 (2003). Second, a federal criminal judgment that is not appealed becomes final for the purpose of section 2255 ten days after it is entered. Sanchez-Castellano v. United States, 358 F.3d 424, 428 (6th Cir. 2004). Goward’s case presents a third possibility, since he actually filed a notice of appeal but voluntarily dismissed it. The Sixth Circuit has held that when a notice of appeal is voluntarily dismissed, further direct review is not possible. Futernick v. Sumpter Twp., 207 F.3d 305, 312 (6th Cir. 2000) (“A notice of appeal filed and dismissed voluntarily is gone, no more effective in conferring jurisdiction on a court than a notice never filed. . . . Filing and dismissing an appeal prevents appellate review. . . .”) (quoting Barrow v. Falck, 977 F.2d 1100, 1103 (7th Cir. 1992 ; see also United States v. Arevalo, 408 F.3d 1233, 1236 (9th Cir. 2005); Williams v. United States, 553 F.2d 420, 421-22 (5th Cir. 1977). Although the Sixth Circuit has not addressed the impact of a voluntarily dismissed appeal on the commencement of section 2255’s period of limitations, the -2- Third Circuit has held that the time starts to run on the date the appeal is dismissed. United States v. Sylvester, 258 F. App’x 411, 412, 2007 WL 4395652, at *1 (3d Cir. Dec. 14, 2007) (unpublished) (holding that the defendant’s “conviction became final and the limitations period began to run when his appeal was voluntarily dismissed”); see also Gomez v. United States, 2010 WL 1609412, at *2 (E.D. Tenn. April 20, 2010). That rule makes sense because there is no legal basis to seek certiorari from an appeal that was withdrawn voluntarily, and tacking an additional ninety days onto the end of voluntarily-terminated proceedings in the court of appeals serves no useful purpose. Direct review cannot be prolonged if the defendant voluntarily abandons the effort. If that rule is applied in Goward’s case, his latest judgment of sentence became final on October 29, 2009, and his section 2255 motion must be filed within one year of that date. Perhaps he is not aware that he has a few months before his time expires. The Court has authority to accept late-filed section 2255 motions under the doctrine of equitable tolling, Solomon v. United States, 467 F.3d 928, 933 (6th Cir. 2006), although equitable tolling in section 2255 cases “should be granted sparingly.” Ibid. The Court is not aware of any published authority that would permit enlargement of time before the statute of limitations expires, although some courts have done that. See Gilmore v. United States, 2007 WL 2301180 *1-2 (N.D. Ohio August 8, 2007); cf. Prieto v. Quarterman, 456 F.3d 511, 514 (5th Cir. 2006) (discussing district’s order extending time for filing petition under 28 U.S.C. § 2254). The factors the Court must consider when applying the equitable tolling rule would seem to discourage the practice, since a defendant asking for additional time in advance may not be able to establish ignorance of the filing requirements. See Solomon, 467 F.3d at 933 (directing courts to consider “(1) the petitioner’s lack of notice of the filing requirement; (2) the petitioner’s lack of constructive knowledge of the filing requirement; (3) diligence in pursuing one’s rights; (4) -3- absence of prejudice to the respondent; and (5) the petitioner’s reasonableness in remaining ignorant of the legal requirement for filing his claim”) (citing Dunlap v. United States, 250 F.3d 1001, 1008 (6th Cir. 2001 . In this case, the defendant has enough time to comply with the time limit in section 2255(f) that the resort to equity is unnecessary. His request to extend the deadline by 90 to 120 days beyond the existing time limit is not warranted by the facts and circumstances as he describes them. Accordingly, his motion to enlarge the time for filing a motion under 28 U.S.C. § 2255 [dkt #387] is DENIED. Dated: June 17, 2010 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on June 17, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -4-

=== Proposition 2 ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case No. 06-15024 Hon. David M. Lawson OPINION AND ORDER DENYING INTERVENING DEFENDANT ERIC RUSSELL’S MOTION FOR ATTORNEY’S FEES AND COSTS COALITION TO DEFEND AFFIRMATIVE ACTION, INTEGRATION AND IMMIGRATION RIGHTS AND FIGHT FOR EQUALITY BY ANY MEANS NECESSARY (BAMN), UNITED FOR EQUALITY AND AFFIRMATIVE ACTION LEGAL DEFENSE FUND, RAINBOW PUSH COALITION, CALVIN JEVON COCHRAN, LASHELLE BENJAMIN, BEAUTIE MITCHELL, DENESHEA RICHEY, STASIA BROWN, MICHAEL GIBSON, CHRISTOPHER SUTTON, LAQUAY JOHNSON, TURQOISE WISE- KING, BRANDON FLANNIGAN, JOSIE HYMAN, ISSAMAR CAMACHO, KAHLEIF HENRY, SHANAE TATUM, MARICRUZ LOPEZ, ALEJANDRA CRUZ, ADARENE HOAG, CANDICE YOUNG, TRISTAN TAYLOR, WILLIAMS FRAZIER, JERELL ERVES, MATTHEW GRIFFITH, LACRISSA BEVERLY, D’SHAWN FEATHERSTONE, DANIELLE NELSON, JULIUS CARTER, KEVIN SMITH, KYLE SMITH, PARIS BUTLER, TOUISSANT KING, AIANA SCOTT, ALLEN VONOU, RANDIAH GREEN, BRITTANY JONES, COURTNEY DRAKE, DANTE DIXON, JOSEPH HENRY REED, AFSCME LOCAL 207, AFSCME LOCAL 214, AFSCME LOCAL 312, AFSCME LOCAL 836, AFSCME LOCAL 1642, AFSCME LOCAL 2920, and the DEFEND AFFIRMATIVE ACTION PARTY, Plaintiffs, v. THE REGENTS OF THE UNIVERSITY OF MICHIGAN, the BOARD OF TRUSTEES OF MICHIGAN STATE UNIVERSITY, the BOARD OF GOVERNORS OF WAYNE STATE UNIVERSITY, the TRUSTEES of any other public college or university, community college, or school district, ATTORNEY GENERAL MICHAEL COX, and ERIC RUSSELL, Defendants, -and- CONSOLIDATED CASES Case No. 06-15637 Hon. David M. Lawson CHASE CANTRELL, M.N., a minor child, by Karen Nestor, Mother and Next Friend, KAREN NESTOR, Mother and Next Friend of M.N., a minor child, C.U., a minor child, by Paula Uche, Mother and Next Friend, PAULA UCHE, Mother and Next Friend to C.U., a minor child, JOSHUA KAY, SHELDON JOHNSON, MATTHEW COUNTRYMAN, M.R., a minor child, by Brenda Foster, Mother and Next Friend, BRENDA FOSTER, Mother and Next Friend of M.R., a minor child, BRYON MAXEY, RACHEL QUINN, KEVIN GAINES, DANA CHRISTENSEN, T.J., a minor child, by Cathy Alfaro, Guardian and Next Friend, CATHY ALFARO, Guardian and Next Friend of T. J., a minor child, S.W., a minor child, by Michael Weisberg, Father and Next Friend, MICHAEL WEISBERG, Father and Next Friend of S.W., a minor child, CASEY KASPER, SERGIO EDUARDO MUNOZ, ROSARIO CEBALLO, KATHLEEN CANNING, EDWARD KIM, M.C.C., II, a minor child, by Carolyn Carter, Mother and Next Friend, CAROLYN CARTER, Mother and Next Friend of M.C.C., II, a minor child, J.R., a minor child, by Matthew Robinson, Father and Next Friend, and MATTHEW ROBINSON, Father and Next Friend of J.R., a minor child, Plaintiffs, v. ATTORNEY GENERAL MICHAEL COX and ERIC RUSSELL, Defendants, _____________________________________________________/ OPINION AND ORDER DENYING INTERVENING DEFENDANT ERIC RUSSELL’S MOTION FOR ATTORNEY’S FEES AND COSTS Eric Russell, a now-dismissed intervening defendant in this litigation, has filed a motion for attorney’s fees against certain Michigan universities and the State’s governor and attorney general, all co-defendants in the present action, under 42 U.S.C. § 1988(b), which states: “In any action or -2- proceeding to enforce a provision of sections 1981, 1981a, 1982, 1983, 1985, and 1986 of this title, title IX of Public Law 92-318, the Religious Freedom Restoration Act of 1993, the Religious Land Use and Institutionalized Persons Act of 2000, title VI of the Civil Rights Act of 1964, or section 13981 of this title, the court, in its discretion, may allow the prevailing party . . . a reasonable attorney’s fee as part of the costs.” Russell brought no claim under any of these federal statutes, and ultimately he was dismissed as a party since he no longer had a personal stake in the outcome of the case. He filed no cross-claim or counterclaim, and the remaining defendants ultimately prevailed on summary judgment by advancing arguments mimicked by Russell. Russell does not seek attorney’s fees from the plaintiffs. Rather, he contends that he should be considered a prevailing plaintiff because he succeeded on interlocutory appeal in obtaining a stay of a temporary injunction issued by this Court upon the stipulation of all the other parties before he had intervened in the case, thereby upsetting the delay in effectuating a state constitutional amendment (until the next school admission cycle) that would have prohibited consideration of race as a factor in admissions to state colleges and universities. The Court heard the parties’ arguments in open court on April 27, 2009. The Court finds that Mr. Russell cannot be considered a prevailing plaintiff, and even if he were a prevailing defendant, he has not established an entitlement to attorney’s fees from the co-defendants in this case. I. The basic facts of the case, as they pertain to intervenor Russell, are as follows. On November 7, 2006, Michigan voters approved a proposal to amend the Michigan constitution to bar affirmative action programs in public education, hiring and contracting. That ballot initiative has come to be known in this litigation and elsewhere as “Proposal 2.” The day after the election, a -3- collection of interest groups and individuals (the Coalition plaintiffs) brought suit alleging that the state constitutional amendment violated the United States Constitution and federal law. Another group (the Cantrell plaintiffs) brought suit on December 19, 2006, contending that Proposal 2 was unconstitutional as it is applied to public colleges and universities. This Court consolidated these cases on January 5, 2007. The original defendants in the lawsuit were Michigan’s governor and the boards of the State’s public universities, who had taken public positions before the election in opposition to the proposal. On December 11, 2006, the university defendants filed a motion for a preliminary injunction to delay the effective date of Proposal 2 until after the then-current college admissions cycle, which was in mid-cycle. No opposition to the motion had been filed at the time. The State’s attorney general, Michael Cox, had taken a public position in favor of the proposal. The Court ordered the attorney general to intervene. The parties presumably addressed the issues in the preliminary injunction motion through negotiation, and they presented a stipulation to the Court on or about December 17, 2006. On December 19, 2006, pursuant to the stipulation of all parties at the time (but not Russell), the Court entered an order and then an amended order granting a temporary injunction suspending the enforcement of Proposal 2 at the three Michigan public universities through the end of the admissions and financial aid cycles for 2006-07 school year, that is, until July 1, 2007. Meanwhile, on December 18, 2006, Eric Russell, who had applied for admission to the University of Michigan Law School, along with the organization called Toward a Fair Michigan, moved to intervene as defendants in this case. The next day, Russell moved for an expedited hearing on his motion to intervene and for a stay of the Court’s temporary injunction pending appeal of the -4- order. It appears that Russell simultaneously filed a motion in the United States Court of Appeals for the Sixth Circuit for emergency relief, including a stay, as well. On December 27, 2006, this Court granted Russell’s motion to intervene and denied other would-be intervenors’ motions to intervene. Coal. to Defend Affirmative Action v. Granholm, 240 F.R.D. 368 (E.D. Mich. 2006), aff’d 501 F.3d 775 (6th Cir. 2007). The Court did not rule on Russell’s motion for a stay, awaiting responses from the other parties. In the meantime, the Sixth Circuit appears to have ordered the parties to file their responses by December 28, 2006 and replies by December 29, 2006. The court of appeals notified this Court by letter (addressed incorrectly to the court offices in Bay City, Michigan) dated December 22, 2006 that it requested a response from this Court within ten days, which would have been by January 9, 2007. See Fed. R. Civ. P. 6(a). However, on December 29, 2006, the court of appeals filed a lengthy opinion granting a stay of the stipulated injunction until a merits appeal could be completed. Coal. to Defend Affirmative Action v. Granholm, 473 F.3d 237 (6th Cir. 2006). This Court denied Russell’s stay motion pending in the district court as moot on January 4, 2007. The court of appeals eventually dismissed its case as moot. Proposal 2 took effect on December 23, 2006, suspended only for the few days during which the stipulated preliminary injunction was in effect. The universities thereafter implemented Proposal 2 and applied it to the 2006-07 admissions cycle. This Court then turned to the merits of the case. After a futile attempt to expedite matters by reducing potential fact disputes to stipulations, the Court established a discovery schedule and eventually heard arguments on dispositive motions. On March 18, 2008, the Court granted the Michigan attorney general’s motion for summary judgment via opinion and order holding that Proposal 2 did not violate the federal Constitution. Coal. to Defend Affirmative Action v. Granholm, -5- 539 F. Supp. 2d 924 (E.D. Mich. 2008). The Court denied the Cantrell plaintiffs’ motion to alter or amendment judgment on December 11, 2008. Coalition to Defend Affirmative Action v. Granholm, 592 F. Supp. 2d 948 (E.D. Mich. 2008). Appeals from these rulings remain pending. The Court had granted Russell’s motion to intervene in December 2006 based in part on the finding that his interest in seeing Proposal 2 upheld was qualitatively different than the State’s. In fact, the attorney general had taken inconsistent positions on the question of Proposal 2’s enforcement. However, by the time the merits briefing occurred, it became apparent that Russell’s interest in the litigation paralleled that of the attorney general, and Russell’s filings substantially mirrored the arguments made by the State. In addition, Russell’s application to the University of Michigan Law School was denied based on post-Proposal 2 admission standards. The Court concluded that “the two summary judgment motions duplicate each other,” “Russell’s presence in the litigation is a mere makeweight that adds nothing of substance to the debate over Proposal 2’s constitutionality,” and “the attorney general . . . adequately represents the intervening defendant’s interest.” Coal. to Defend Affirmative Action v. Granholm, 539 F. Supp. 2d 960, 971 (E.D. Mich. 2008). The Court, therefore, granted the plaintiffs’ motion for summary judgment as to intervening defendant Russell and dismissed him as a party on March 18, 2008. Russell’s appeal of that ruling remains pending. On January 8, 2009, Russell filed a motion seeking $144,948.90 in attorney’s fees and $1,734.30 in costs to be paid by the defendants. He argues that he is entitled to these fees and costs as a prevailing party under 42 U.S.C. § 1988(b). Russell has since realized that a stipulated dismissal of Governor Granholm from the case shields her from an award of attorney’s fees against her, and he has redirected his motion only at the remaining state defendants. -6- The University defendants respond that Russell’s motion is untimely because it was filed nine months after the Court entered judgment against the plaintiffs in March 2008. They also contend that Russell cannot qualify as a prevailing plaintiff, and he cannot satisfy the heavy burden prevailing defendants must meet before attorney’s fees may be awarded. The Cantrell plaintiffs likewise oppose an award of attorney’s fees and costs against the University defendants on similar grounds. The attorney general argues that the motion should be denied because his interests were mostly aligned with Russell’s on the substantive merits of the case. He also points out that Russell did not prevail against the attorney general and therefore the attorney general is not responsible for losses that resulted to Russell, if any. II. A. Under 42 U.S.C. § 1988, a district court may “in its discretion . . . allow the prevailing party . . . a reasonable attorney’s fee as part of the costs.” 42 U.S.C. § 1988(b). Attorney’s fees motions generally are filed at the conclusion of the case, and in no event “later than 14 days after entry of judgment.” Fed. R. Civ. P. 54(d)(2)(B). The Local Rules direct parties to file their motions for attorney’s fees within twenty-eight days of the entry of judgment. See E.D. Mich. LR 54.1.2(a). However, the Sixth Circuit decided that “when a Rule 59(e) motion is filed and finality is suspended, the judgment is neither final nor an ‘order from which an appeal lies.’” Miltimore Sales, Inc. v. Int’l Rectifier, Inc., 412 F.3d 685, 688 (6th Cir. 2005). In recognition of this holding, the Local Rules provides that where a “request for reconsideration under Fed. R. Civ. P. 59(e) has been filed, the time limit shall begin to run upon the denial of the motion.” E.D. Mich. LR 54.1.2 cmt. -7- The defendants here argue that the Miltimore Sales rule should not apply to Russell because he was dismissed from the case at the same time the judgment was entered, and the pendency of the Cantrell plaintiffs’ Rule 59(e) motion should not have suspended the deadline for Russell’s filing of the motion for attorney’s fees. Although this argument has some superficial appeal, it runs contrary to the logic of the Supreme Court’s decision in Sole v. Wyner, 551 U.S. 74 (2007). In that case, the Court directed the focus toward the ultimate resolution of the case on the merits when determining whether a preliminary injunction or other transient relief entitles a party to a “prevailing party” status. If Russell prevailed on his motion to dissolve the stay delaying Proposal 2’s effective date but Proposal 2 were ultimately found to be unconstitutional, he could not be a prevailing party. Therefore, the intervenor’s motion for attorney’s fees is subject to the same considerations of finality under Rule 59(e) as the main plaintiffs and defendants. Russell’s motion filed within twenty-eight days of the order denying the Cantrell plaintiffs’ Rule 59(e) motion is timely. B. Russell cannot recover attorney’s fees and costs unless he is a “prevailing party,” either as a plaintiff or a defendant. To be a prevailing party under section 1988, a party must receive “at least some relief on the merits of his claim.” Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598, 603-04 (2001). A party prevails in his lawsuit when there has been a “material alteration of the legal relationship of the parties in a manner which Congress sought to promote in the fee statute.” Texas State Teachers Ass’n v. Garland Indep. Sch. Dist., 489 U.S. 782, 792-93 (1989). That material alteration must affect the behavior of the defendant towards the plaintiff. Rhodes v. Stewart, 488 U.S. 1, 4 (1988). A plaintiff who had obtained “‘neither a judgment on the merits nor a court-ordered consent decree’” is not eligible for award of attorney’s -8- fees under section 1988. Radvansky v. City of Olmsted Falls, 496 F.3d 609, 620 (6th Cir. 2007) (quoting Toms v. Taft, 338 F.3d 519, 528 (6th Cir. 2003 . Russell did not obtain a judgment in his favor. In fact, summary judgment was entered against him; his claims were dismissed when it became apparent that his intervenor status contributed nothing to the resolution of the main dispute over the constitutionality of Proposal 2. However, attorney’s fees awards may be given under section 1988 when a preliminary injunction or stay order issues under certain conditions. Cf. Garcia v. Younkers Sch. Dist., 561 F.3d 97, 102 (2d Cir. 2009) (“Thus, for example, the entry of an enforceable judgment, such as a stay or preliminary injunction, may permit the district court to confer prevailing-party status on the plaintiff notwithstanding the absence of a final judgment on the underlying claim.”). The Sixth Circuit has held that a party can be a “prevailing party” for having secured a preliminary injunction, as long as the injunction “represents ‘an unambiguous indication of probable success on the merits, and not merely a maintenance of the status quo ordered because the balance of equities greatly favors the plaintiff.’” Dubuc v. Green Oak Twp., 312 F.3d 736, 753-54 (6th Cir. 2002) (quoting Webster v. Sowders, 846 F.2d 1032, 1036 (6th Cir. 1988 . But if the injunctive relief is of the “‘procedural’ variety, even if there is a finding of likelihood of success on the merits, [it] cannot be the basis for interim attorney’s fees.” Ibid. (denying a prevailing-party status to the plaintiff despite his success in obtaining a preliminary injunction ordering the defendant to issue him a temporary certificate of occupancy because the injunction was based on the plaintiff’s compliance with several conditions that were imposed upon the plaintiff by the defendant township all along and the court’s ruling did not contain an unambiguous discussion of the merits of the case); see also Dearmore v. City of Garland, 519 F.3d 517, 524 (5th Cir. 2008) (holding that to qualify as a prevailing party entitled to -9- attorney fees under section 1988, the plaintiff “(1) must win a preliminary injunction, (2) based upon an unambiguous indication of probable success on the merits of the plaintiff's claims as opposed to a mere balancing of the equities in favor of the plaintiff, (3) that causes the defendant to moot the action, which prevents the plaintiff from obtaining final relief on the merits”); Sole v. Wyner, 551 U.S. at 84-86 (declining to bestow a prevailing party status on the party who secured a preliminary injunction but was denied a permanent injunction in the same case). The likelihood of obtaining “prevailing party” status increases where a preliminary injunction entered by the court alters rather than preserves the status quo ante. See Fiarman v. W. Publ’n Co., 620 F. Supp. 544, 546-47 (E.D. Mich. 1985). Russell’s “prevailing party” status is tenuous. It is true that the court of appeals’s discussion of the stay motion delved deeply into the merits of the case, and its decision cannot fairly be characterized as a mere procedural ruling. However, this Court ultimately dismissed Russell from the case because his claims became moot when he was denied admission to University of Michigan on the basis of race-neutral considerations. At that point, he no longer had a personal interest in enforcement of Proposal 2 in Michigan. The Supreme Court has held on several occasions that a party whose claims become moot prior to the issuance of a final judgment cannot be a “prevailing party” within the terms of the attorney’s fees statute. See, e.g., Lewis v. Continental Bank Corp., 494 U.S. 472, 482-83 (1990); Rhodes v. Stewart, 488 U.S. 1 (1988); Hewitt v. Helms, 482 U.S. 755, 763 (1987). The reasoning behind these holdings is that when the plaintiff’s claims are moot, any change in the behavior of the defendant can no longer benefit the plaintiff (or vice versa). Rhodes, 488 U.S. at 4. -10- But the term “prevailing party” has been accorded a “generous formulation.” See Hensley v. Eckerhart, , 437 (1983). The stay granted by the Sixth Circuit gave Russell what he sought: consideration of his law school application to the University of Michigan under a system that did not include race as a factor in the admission decision. It is doubtful that he could derive some satisfaction from knowing that he was rejected under a post-Proposal 2 regimen. Nonetheless, because the court of appeals gave him what he wanted, this Court will accept for argument’s sake that Russell has “prevailed.” C. The parties have acknowledged that prevailing plaintiffs and prevailing defendants are treated quite differently under section 1988. Prevailing defendants have a far greater burden to justify an award of attorney’s fees. See Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421-22 (1978). Although he was an intervening defendant, Russell contends that he should be considered a situational plaintiff. The difference in the standards for awarding attorney’s fees under section 1988 to plaintiffs versus defendants comes from the idea that unlike defendants, plaintiffs are usually “‘private attorney generals’ who act to eradicate unlawful discrimination,” Baker v. City of Detroit, 504 F. Supp. 841, 850 (E.D. Mich. 1980) (citing Newman v. Piggie Park Enters., Inc., 390 U.S. 400 (1968 , and “the ‘strong equitable considerations counseling an attorney’s fee award to a prevailing [civil rights] plaintiff’ may not be present when a defendant or an intervening defendant prevails in civil rights litigation.” King v. Illinois State Bd. of Elections, 410 F.3d 404, 416 (7th Cir. 2005) (citing Christiansburg Garment Co., 434 U.S. at 418). Courts occasionally have awarded attorney’s fees under section 1988 to other successful parties, such as plaintiff-intervenors who have played -11- a significant role in the litigation, see Shaw v. Hunt, 154 F.3d 161, 164-66 (4th Cir. 1998); Haslert v. Illinois State Bd. of Election Comm’rs, 28 F.3d 1430, 1441 (7th Cir. 1993); Wilder v. Bernstein, 965 F.2d 1196, 1204 (2d Cir. 1992); EEOC v. Strasburger, Price, Kelton, Martin & Unis, 626 F.2d 1272, 1275-76 (5th Cir. 1980); Grove v. Mead Sch. Dist. No. 354, 753 F.2d 1528, 1535 (9th Cir. 1985) (establishing significant-role standard), or even defendant-intervenors if their position can be “more readily . . . analogized to that of a plaintiff,” King, 410 F.3d at 414 n.10 (concluding, in the context of the Voting Rights Act, that it is “not realistic to view the intervenors as defendants opposing a civil rights claim” and “the intervenors’ position can be analogized to that of co-plaintiffs asserting their own rights” because they sought to defend their own federally-protected voting rights); Comm’r Ct. of Medina County v. United States, 683 F.2d 435, 440 (D.C. Cir. 1982) (finding that individuals who intervened as defendants in a suit for declaratory relief brought by the Commissioners of a county seeking a declaration that the two redistricting plans they designed were not adopted in furtherance of a discriminatory purpose could be “prevailing parties” where their intervention prompted reworking of a redistricting plan that mooted concerns of the intervenors); Baker, 504 F. Supp. at 850-51 (concluding that the Christiansburg Garment rule did not apply where African-American police officers intervened in a reverse discrimination suit brought by the white police officers contending that the city’s affirmative action program is unconstitutional because the intervenors could just as easily initiate their own suit). In arguing that he should be viewed as a plaintiff, Russell relies primarily on Baker v. Detroit. In that case, white police officers filed a reverse discrimination lawsuit brought seeking to invalidate an affirmative action program adopted by the Detroit police department. African- American police officers intervened in support of the program on the ground that past discrimination -12- required it. The court upheld the hiring program, and then granted the intervening defendants attorney’s fees under section 1988, finding that “[t]he procedural posture of the case should not be dispositive. The intervenors have vindicated their rights, and this Court believes it just and reasonable for the [plaintiff] to pay their attorney’s fees.” 504 F. Supp. at 851. The court based its decision on the following reasoning: In the large majority of cases that party or parties seeking to enforce such (civil) rights will be the plaintiffs and/or plaintiff-intervenors. However, in the procedural posture of some cases, the parties seeking to enforce such rights may be the defendants and/or intervenors. See e. g. Shelley v. Kramer, 334 U.S. 1 (68 S. Ct. 836, 92 LED. 1161) (1948). Ibid. (quoting S. Rep. No. 94-1011, 94th Cong.2d Sess. 4, n. 4, U.S. Code Cong. & Admin. News, 1976, pp. 5908, 5912 (1976 . According to that rationale, in order to achieve prevailing plaintiff status, despite contrary alignment, the party seeking attorney’s fees have been attempting to enforce federal constitutional rights. Russell may fit the mold of a private attorney general, since he sought to nullify an injunction that extended the effective date of Proposal 2 when Michigan’s attorney general had stipulated to that relief. However, Russell was not attempting to seek redress for the “the deprivation of any rights, privileges, or immunities secured by the Constitution and laws [of the United States].” 42 U.S.C. § 1983. The application of section 1988 is limited to “action[s] or proceeding to enforce a provision of sections 1981, 1981a, 1982, 1983, 1985, and 1986. . . .” 42 U.S.C. § 1988(b). Instead, Russell was attempting (with the help of Proposal 2, a state law) to upset an admissions protocol that had been declared constitutional by the Supreme Court. See Grutter v. Bollinger, 539 U.S. 306 (2003). Russell was not attempting to enforce a federal constitutional right at all; he was resisting -13- – as defendant sometimes do – the plaintiffs’ claims that the Constitution required the relief they sought. The other cases cited by Russell – King v. Illinois State Board of Elections, 410 F.3d at 416, and Donnell v. United States, 682 F.2d 240 (D.C. Cir 1982) – arose in the context of the Voting Rights Act, where municipal authorities moved for a declaratory judgment affirming their respective proposed redistricting plans as constitutional and the defendant-intervenors contended that such plans violated their rights under the Act. These cases have a unique procedural posture, which is easily distinguishable from the case at hand. The goal of section 1988 is “to reimburse with reasonable attorney’s fees those who as ‘private attorneys general’ take it upon themselves to invoke and thereby invigorate the federal constitutional and statutory rights.” Geier v. Richardson, 871 F.2d 1310, 1313 (6th Cir. 1989) (quoting Charles v. Daley, 846 F.2d 1057, 1063 (7th Cir. 1988 (emphasis added). That goal is not advanced by an award of attorney’s fees under prevailing plaintiff standards to a defendant- intervenor, who, like the other defendants in the case, opposed the plaintiffs’ attempt to assert their federal constitutional rights. See Geier, 871 F.2d at 1314 (holding that the United States intervenor acted as a civil rights defendant bound by the Christiansburg Garment rule when it alleged that the desegregation consent decree reached between the original parties to the action was unconstitutional because it employed racial quotas that, according to the United States, operated to deprive non- minority students of equal protection). Russell must be considered a defendant under the prevailing party rules. D. -14- In Christiansburg Garment Co. v. EEOC, the Supreme Court held that “a district court may in its discretion award attorney’s fees to a prevailing defendant in a Title VII case upon a finding that the plaintiff’s action was frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith.” 434 U.S. at 421. That same standard applies to defendants seeking attorney’s fees under section 1988. Hughes v. Rowe, 449 U.S. 5, 14 (1980) (“Although arguably a different standard might be applied in a civil rights action under 42 U.S.C. § 1983, we can perceive no reason for applying a less stringent standard.”); see also Pierzynowski v. Police Dep’t City of Detroit, 947 F. Supp. 1147, 1148 (E.D. Mich. 1996). Russell cannot satisfy this standard. As the Supreme Court explained, “the term ‘meritless’ is to be understood as meaning groundless or without foundation, rather than simply that the plaintiff has ultimately lost his case.” Christiansburg Garment, 434 U.S. at 421. Russell argues, however, that the university defendants and the attorney general agreed to a temporary injunction in the face of clear precedent that the ballot measure was constitutional, citing Coalition for Economic Equity v. Wilson, 122 F.3d 692 (9th Cir. 1997). That decision from another circuit hardly establishes a “universal rule” or a “well-accepted proposition.” To the contrary, the plaintiffs in this case advanced a cogent and lucid argument based on Supreme Court precedent that Proposal 2 is unconstitutional. See Hunter v. Erickson, 393 U.S. 385 (1969); Washington v. Seattle Sch. Dist. No. 1, 458 U.S. 457 (1982); Romer v. Evans, 517 U.S. 620 (1996). Their argument, therefore, cannot be said to be “groundless” or “without foundation.” The Sixth Circuit has yet to rule on the issue, even in the present case. And federal circuits have been known to reach opposite conclusions on legal questions. Nor was the plaintiffs’ position based on “an indisputably meritless legal theory” -15- so as to be frivolous. See Neitzke v. Williams, , 329-30 (1989) (interpreting “frivolous” within the meaning of the federal in forma pauperis statute, 28 U.S.C. § 1915). Russell is not entitled to attorney’s fees or costs under 42 U.S.C. § 1988 as a prevailing defendant. III. The Court finds that intervening defendant Eric Russell’s status as a prevailing party, based on his success in obtaining a stay in an appeal that ultimately was dismissed, to be dubious. If he is a prevailing party within the meaning of 42 U.S.C. § 1988(b), he must be viewed as a prevailing defendant. In that capacity, Russell has not established that he is entitled to attorney’s fees or costs from any other party in this case. Accordingly, it is ORDERED that the motion by intervening defendant Eric Russell for attorney’s fees and costs [dkt #259] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: June 17, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on June 17, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -16-

=== USA v. Stewart ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. THEODORE COOPER STEWART, ______________________________________/ Defendant. Case No. 09-20415 Honorable David M. Lawson OPINION AND ORDER DENYING MOTION TO SUPPRESS EVIDENCE Defendant Theodore Cooper Stewart stands charged by a grand jury with transportation of child pornography in violation of 18 U.S.C. § 2252(a)(1). He moves to suppress the evidence of that crime, which was discovered when his two computers were seized at the Detroit Metropolitan Airport port of entry in Romulus, Michigan as he reentered the United States when returning from Asia. Stewart argues that although the initial inspection by U.S. Customs officials at the border entry was valid, the seizure of his laptop computers and examination of one of them the next day at another location amounted to an extended border search requiring a level of reasonable suspicion, which was lacking. He contends, therefore, that the seizure was unreasonable and prohibited by the Fourth Amendment. The Court conducted an evidentiary hearing on the motion on March 18, 2010 and now concludes that the inspection of Stewart’s computers at the forensic facility of the Bureau of Customs and Immigration Enforcement (ICE) in Detroit was reasonable within the meaning of the Fourth Amendment. The motion to suppress, therefore, will be denied. I. Marvin Steigerwald testified at the evidentiary hearing that he was a Customs and Border Patrol officer on duty at the Wayne County Metropolitan International Airport in suburban Detroit on May 9, 2009. At approximately 2:00 p.m., when passengers on an international flight arriving from Japan were debarking, Steigerwald was engaging in his usual activity of talking with passengers at the baggage carousal – choosing them at random – and asking them for their passports and customs declarations. Steigerwald said that when he encountered defendant Stewart, Stewart was “standoffish and confrontational.” Stewart then was referred to the secondary area so his baggage could be examined. Among the items of interest in Stewart’s belongings were two laptop computers, a digital camera, and three computer memory sticks, sometimes called “thumb drives.” The two laptops were a Sony VAIO and a Twinhead. Steigerwald testified that these kinds of items usually are examined for images and videos. There are no forensic examination tools available at the airport inspection site. Instead, the examiner proceeds as an ordinary user would search the contents of a computer. Steigerwald powered up the Sony and found about a dozen photos of naked children in promiscuous poses, some photos focusing on their genitals. Steigerwald believed some of the subjects were under ten years old. He stopped his investigation and called in an ICE agent to proceed further. Andre Young was the ICE agent on duty that day and responded to the call at the airport. He characterized the images on the Sony as depicting nude individuals under sixteen years old. Young testified that the women in the photos were Asian, some could have been adults although one or two were undoubtedly under sixteen or fourteen years old, and they were naked although the -2- focus of the photos was not “necessarily on the genitals.” He said he could not determine if the images constituted child pornography. Both Steigerwald and Young testified that the Twinhead had a dead battery and could not be activated. The Twinhead’s power cord did not have a domestic electrical adaptor, although at the hearing Young discovered that he probably could have taken the adaptor from the Sony and used it to power up the Twinhead at the airport. In any event, the agents concluded that the Twinhead could not be accessed at the airport, so Young made a decision to transport it to the local ICE headquarters office in Detroit – about twenty miles away – where it could be examined by a forensic expert. Steigerwald returned the camera and thumb drives to Stewart after they were examined and found to contain no contraband. Young told Stewart (who was present when the Sony was examined) that the computers would be detained and Stewart was free to go. Young transported the two laptops to the Detroit office sometime between 4:00 and 5:00 p.m. that same day. Forensic analyst John Edwards logged them in that afternoon and conducted his examination the following day. The examination of the Twinhead required removal of the hard drive from the computer case. The government alleges that Edwards found images of child pornography on the Twinhead. Edwards then stopped his review, and Young obtained a warrant to conduct a thorough search of both computers. II. The defendant contends that seizing the computers from the airport and transporting them to the ICE office in Detroit was the equivalent of an extended border search that required justification by some level of government suspicion, which was not present in this case. He argues that the evidence of child pornography found on the Twinhead computer was discovered in violation -3- of the Fourth Amendment and therefore must be excluded from trial. The government contends that the examination of the computers at the Detroit ICE office was nothing more than a continuation of the original border inspection and seeks to justify it by analogizing to cases authorizing serial entries onto premises under the authority of a single search warrant. The Court cannot accept either of these arguments in full. It is well established that the Fourth Amendment prohibits the government from conducting “unreasonable searches and seizures.” U.S. Const. amend. IV. A search conducted without a warrant is “per se unreasonable under the Fourth Amendment, – subject only to a few specifically established and well-delineated exceptions.” Katz v. United States, 389 U.S. 347, 357 (1967) (footnotes omitted); see also United States v. Jenkins, 92 F.3d 430, 436 (6th Cir. 1996). A search conducted at a United States border – or the functional equivalent of a border, see Almeida-Sanchez v. United States, 413 U.S. 226, 272-73 (1973); see also United States v. Lawson, 461 F.3d 697, 700 (6th Cir. 2006) – is one of those exceptions. “[S]earches made at the border, pursuant to the longstanding right of the sovereign to protect itself by stopping and examining persons and property crossing into this country, are reasonable simply by virtue of the fact that they occur at the border.” United States v. Flores-Montano, 541 U.S. 149, 152-53 (2004) (internal quotation marks omitted); see also United States v. Ramsey, 431 U.S. 606, 618 (1977). These searches are considered necessary to prevent the introduction of contraband into the country. United States v. Montoya de Hernandez, 473 U.S. 531, 537-38 (1985). The Supreme Court has explained that an individual’s expectation of privacy is diminished at the border, id. at 539-40, and the “Government’s interest in preventing the entry of unwanted persons and effects is at its zenith at the international border.” Flores-Montano, 541 U.S. at 152. Therefore, “[r]outine searches of the -4- persons and effects of entrants are not subject to any requirement of reasonable suspicion, probable cause, or warrant.” Montoya de Hernandez, 473 U.S. at 538; see also Ramsey, 431 U.S. at 616-19. In some circumstances, the government must have reasonable suspicion to perform a search at a border. But those instances generally are confined to “highly intrusive searches of the person,” such as strip searches or body cavity searches, see Montoya de Hernandez, 473 U.S. at 540 n.3, searches carried out in a “particularly offensive manner,” or searches that are destructive of property, Flores-Montano, 541 U.S. at 152, 154 n.2, 155-56; Lawson, 461 F.3d at 699-700. The Supreme Court has not determined specifically “‘whether, and under what circumstances, a border search might be deemed ‘unreasonable’ because of the particularly offensive manner in which it is carried out.’” Flores-Montano, 541 U.S. at 154 n.2 (quoting Ramsey, 431 U.S. at 618 n.13). However, routine searches of a person and his belongings, including closed containers, do not fall into that category. Lawson, 461 F.3d at 700; United States v. Irving, 452 F.3d 110, 123 (2d Cir. 2006) (finding that “routine border searches of a person’s belongings are made reasonable by that person’s decision to enter this country”). The Sixth Circuit has not addressed the question whether the contents of a laptop computer may be examined as part of a routine, suspicionless border search. However, other circuits have had little trouble with that idea. For instance, the Ninth Circuit held in United States v. Arnold, 533 F.3d 1003, superseding 923 F.3d 921 (9th Cir. 2008), that a search of the defendant’s computer hard drive was analogous to a standard search of an individual’s property and did not require reasonable suspicion when the examination occurred at the functional equivalent of a border. Id. at 1009. The Second, Third, and Fourth Circuits have reached similar results. See United States v. Borello, 766 F.2d 46, 58-59 (2d Cir. 1985); United States v. Linarez-Delgado, 259 F. App’x 506, 508 (3d Cir. -5- Dec. 19, 2007) (unpublished); United States v. Ickes, 393 F.3d 501, 505-07 (4th Cir. 2005) (involving customs officers’ discovery of a video of a tennis match that focused excessively on the young ball boy, along with other questionable photos, and the defendant’s admission during questioning that he possessed child pornography). Defendant Stewart does not contend that the examination of the computers and digital media storage devices at the airport offended the Fourth Amendment. However, he argues that the detention of his property became unreasonable when the computers were taken from the airport and transported to a location about twenty miles away for examination the next day. There comes a point when the passage of time or other circumstances can transform a seizure of property reasonable at its outset into an unreasonable intrusion. See, e.g., United States v. Place, 462 U.S. 696, 709 (1983) (holding that the 90-minute detention of luggage at an airport to await the arrival of a drug-detecting dog was unreasonable); see also United States v. Davis, 430 F.3d 345, 354 (6th Cir. 2005) (observing that “while a Terry stop may be constitutionally permissible initially, it may become an impermissible ‘seizure if it occurs over an unreasonable period of time or under unreasonable circumstances’” (quoting United States v. Orsolini, 300 F.3d 724, 729-30 (6th Cir. 2002 . In the context of border crossings, other circuits, notably the Fifth and the Ninth, have developed the concept of “extended border searches,” which are removed in time and place from the actual border or its functional equivalent. See United States v. Niver, 689 F.2d 520, 526 (5th Cir. 1982) (“The main difference between the functional equivalent of the border search and an extended border search is that the latter takes place after the first point in time when the entity might have been stopped within the country.”). The Ninth Circuit explained that “[e]xtended border searches, which ‘occur after the actual entry has been effected and intrude more on an individual’s normal -6- expectation of privacy[,] . . . must be justified by “reasonable suspicion” that the subject of the search was involved in criminal activity.’” United States v. Guzman-Padilla, 573 F.3d 865, 877-78 (9th Cir. 2009) (quoting United States v. Alfonso, 759 F.2d 728, 734 (9th Cir. 1985 . The defendant cites United States v. Cotterman, No. 07-1207, 2009 WL 465028 (D. Ariz. Feb. 24, 2009), as an example of a seizure of a computer at a border that ripened into an “extended border search,” which required reasonable suspicion. In that case, the defendant’s computers and digital camera were seized at the border crossing on a Friday and transported to a location 170 miles away for a forensic examination, which was not completed until Sunday. The one computer that contained no contraband and the camera were returned on Monday. The court held that the detention of that property over the time and distance involved required reasonable suspicion, which the government did not demonstrate, and the court suppressed the evidence. The court distinguished cases from other circuits upholding searches of computers on which child pornography was found on the basis of the location of the search (at the point of entry – usually an airport) and the time involved (generally a matter of hours and not days). The defendant makes a valid point here. Removing the laptops from the point of entry into the country and transporting them to a remote forensic laboratory may result in an intrusion greater than one might reasonably expect upon entering or re-entering the United States. A traveler arriving at a border equivalent cannot reasonably expect that her baggage and other property will not be inspected before she is allowed to enter. However, the actual dispossession of a traveler’s belongings is different in kind from an inspection of those items, however thorough, at the border. As the Supreme Court explained: Particularly in the case of detention of luggage within the traveler’s immediate possession, the police conduct intrudes on both the suspect’s possessory interest in -7- his luggage as well as his liberty interest in proceeding with his itinerary. The person whose luggage is detained is technically still free to continue his travels or carry out other personal activities pending release of the luggage. Moreover, he is not subjected to the coercive atmosphere of a custodial confinement or to the public indignity of being personally detained. Nevertheless, such a seizure can effectively restrain the person since he is subjected to the possible disruption of his travel plans in order to remain with his luggage or to arrange for its return. Place, 462 U.S. at 708 (footnotes omitted). Removal of the computer from the airport to a remote location effectuates that same kind of dispossession. The defendant’s analogy to the extended border search cases therefore is apt. But that does not mean that the subsequent examination of the Twinhead laptop was invalid. The Court believes instead that the ICE agents had reasonable suspicion to believe that the computers – both the Twinhead and the Sony – contained contraband, and the continued detention and examination of those items was reasonable. “Reasonable suspicion,” of course, is more than an ill-defined hunch; it must be based upon “a particularized and objective basis for suspecting the particular person . . . of criminal activity.” United States v. Cortez, 449 U.S. 411, 417-18 (1981); see Houston v. Clark County Sheriff Deputy John Does 1-5, 174 F.3d 809, 813 (6th Cir. 1999). It requires “specific and articulable facts which, taken together with rational inferences from those facts, reasonably warrant” further investigation. Terry v. Ohio, 392 U.S. 1, 21 (1968); United States v. Erwin, 155 F.3d 818, 822 (6th Cir. 1998). The requisite “level of suspicion is considerably less than proof of wrongdoing by a preponderance of the evidence.” United States v. Sokolow, 490 U.S. 1, 7 (1989); McPherson v. Kelsey, 125 F.3d 989, 993 (6th Cir. 1997). “Moreover, reasonable suspicion can arise from evidence that is less reliable than what might be required to show probable cause.” Houston, 174 F.3d at 813 (citing Alabama v. White, 496 U.S. 325, 330 (1990 ; McPherson, 125 F.3d at 993. -8- Agents Steigerwald and Young both testified that they saw images on the defendant’s Sony VAIO that they reasonably believed were images of children in sexually explicit poses. Although Agent Young said he could not be sure that the images constituted child pornography, as federal law defines it, the images he saw constituted “a particularized and objective basis for suspecting” that the Sony laptop contained contraband. The defendant’s possession of possible contraband on one digital storage medium justified Agent Young’s suspicion that other storage media in the defendant’s possession likewise might contain contraband. See United States v. Wagers, 452 F.3d 534, 540 (6th Cir. 2006) (upholding finding of probable cause to search a home where the defendant had purchased subscriptions to known child pornography websites, but where it was unknown precisely which computer he had used to access those sites). To the extent that the government needed a reason to detain and examine further the Twinhead computer for contraband, the Court finds that the record supports one here. Under the extended border search line of cases, the government needed no more than reasonable suspicion to detain and inspect the computers. See Alfonso, 759 F.2d at 734 (finding a border search delayed thirty-six hours was justified by reasonable suspicion under the extended border search rationale). The Court finds that reasonable suspicion existed here. The inspection was conducted within a reasonable time – within twenty-four hours of the impoundment. The defendant has not argued, and the Court does not consider, whether the length of the detention of Stewart’s property resulted in a full-blown seizure requiring probable cause. For the purpose of the present motion, the government’s actions in this case were reasonable within the meaning of the Fourth Amendment. -9- III. The Court finds that the detention and inspection of the defendant’s laptop computers did not result in a violation of the Fourth Amendment. Accordingly, it is ORDERED that the defendant’s motion to suppress evidence [dkt # 29] is DENIED. It is further ORDERED that the final pretrial conference is extended to May 27, 2010 at 2:00 p.m.; if the defendant intends to plead guilty under a plea agreement, the plea agreement must be signed on or before May 26, 2010; and the trial is adjourned to June 15, 2010, at 8:30 a.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 24, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 24, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -10-

=== Heidenbreicht v. Nevilog Inc ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION RUTH HEIDENBREICHT and KURT HEIDENBREICHT, Plaintiffs, v. NEVILOG INC., d/b/a NEVILLE LOG HOMES, INC. and MARK NEVILLE, Defendants. __________________________________/ Case No. 09-12101 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION This lawsuit arises from the plaintiffs’ disappointment in the defendants’ failure to furnish proper materials for the construction of a manufactured log home. Defendant Nevilog Inc. (Nevilog) is located in Montana and manufactures home construction kits for log homes to be constructed on its customers’ properties. In 2007, the plaintiffs entered into an agreement to purchase from the defendant a home construction package consisting of plans and materials with the intention of building a home in Macomb County, Michigan. They paid a deposit of $100,000. The agreement promises a full refund if requested by the customer “for any reason.” The plaintiffs allege that they encountered difficulty with the log construction plans furnished by the defendants and requested return of their deposit, which the defendants have not paid. The defendants do not contest their obligation to refund the deposit, but they maintain that they cannot be sued in Michigan because they have insufficient contacts with this forum. They filed a motion to dismiss for want of personal jurisdiction, which was argued in open court on November 4, 2009. The Court gave the parties time -1- to file supplemental affidavits, which have been received. The Court now finds that the corporate defendant has sufficient contacts to permit the exercise of limited personal jurisdiction over it, but there is no evidence that the individual defendant had any contacts with Michigan. Therefore, the Court will grant the motion to dismiss as to defendant Mark Neville and deny it as to the corporate defendant. The defendants also have requested that venue be transferred for the convenience of the parties. The Court finds no merit in that request and will deny it. I. Plaintiffs Kurt and Ruth Heidenbreicht reside in Macomb County, Michigan. Defendant Nevilog, Inc., d/b/a/ Neville Log Homes, Inc. is incorporated under the laws of Montana and has its principal place of business in Victor, Montana. The individual defendant, Mark S. Neville, is the General Manager of Nevilog and resides in Montana. This much is undisputed. Nevilog manufactures products for the construction of rustic-looking log homes. It does not engage in the construction of homes as such; rather it designs and prepares the blueprints and materials for construction of the log homes. Mark Neville filed an affidavit describing his company’s customary practice is to receive an order for a standard- or custom-designed home, after which he finds the timber within Montana and processes it at his facility in Victor, Montana. When the logs are finished, Neville says he delivers them F.O.B. his factory in Montana, although none of the agreements filed in this case say as much. Neville avers that his company provides no on-site supervision or construction services. His company does, however, furnish the building plans and specifications. The plaintiffs entered into the contract involved in this case on January 31, 2007. They allege that they learned about the company through an “advertisement found within the State of -2- Michigan,” but provide no other information about this advertisement, and they do not say when they saw it. Pl.’s Ans. to Mot. to Dismiss at 2. The defendants speculate that the plaintiffs viewed the defendant’s passive website and subsequently contacted Nevilog to order a log home. As it turns out, this was not the first time the plaintiffs dealt with Nevilog. Apparently, the plaintiffs contracted for a different log home package sometime before August 2005. As the plaintiffs describe it, the January 2009 agreement “arose out of a previous contract” with the defendant, Aff. of Ruth Heidenbreicht [dkt #25] ¶ 6, for a home to be constructed in Michigan. During the construction of the first home, the plaintiffs encountered problems that required the advice of a structural engineer. The engineer, Jeffrey Sharpe, traveled from Montana to Michigan and performed a site inspection. The plaintiffs believe Sharpe was the defendants’ agent, and the defendants insist that he was an independent contractor, although the defendants state that they likely provided Sharpe’s name to the plaintiffs. Sharpe visited the construction site on August 12, 2005 and prepared a lengthy report to both Neville Log Homes and the Heidenbreichts containing his recommendations for “remedial measures.” Aff. of Kurt Heidenbreicht [dkt #24] ¶ 11 & Ex. D. At some point, the plaintiffs finalized the plans for the first house and presented them to the local building authorities. They contacted the defendants when they learned that an architectural seal was required, and defendant Nevilog charged them $7,000 for the documentation. Sharpe was the architect who signed off on the plans and furnished his professional seal. The plaintiffs never paid anything to Sharpe directly, either for the plans or for the site visit and consultation. It is unclear from the present record whether the first home was finished or abandoned. What is apparent, however, is that defendant Nevilog continued to do business with the plaintiffs. -3- On January 31, 2007, the plaintiffs entered into a Customer Deposit Agreement (the “Agreement”) with Nevilog “for the manufacture of a log package.” Aff. of Kurt Heidenbreicht [dkt #24], Ex. B. The agreement was sent by Nevilog’s employee Terry Trobinson to Kurt Heidenbreicht in Michigan via telefax on January 30, 2007. The message on the fax cover sheet makes reference to the attached deposit agreement, specifically calls attention to the refund provision, and assures that “I will not let you down.” Aff. of Kurt Heidenbreicht [dkt #24], Ex. A. The Agreement itself contains the handwritten legend “Engineering and Plan Design included in log package.” Aff. of Kurt Heidenbreicht [dkt #24], Ex. B. The plaintiffs state that they signed the Agreement and faxed it to the defendants on February 3, 2007. Mr. Neville signed this agreement on February 5, 2007 in Montana. The Agreement states that it was “preliminary” and “[t]he parties anticipate that a final agreement will be made upon the approval of final plans by Customer.” Ibid. The plaintiffs mailed their deposit check to the defendants in Montana. Nevilog began the process of fabricating the logs for the plaintiffs’ home. The defendants admit that they crafted logs for the plaintiffs in compliance with Michigan laws and ordinances. The plaintiffs allege that they were never presented with, nor accepted, final design plans. Instead, “the [d]efendant provided plans which did not meet with the specification and size proportions of the [p]laintiffs and the plans called for proportions in square footage beyond the limits of [p]laintiffs requests and anticipated financial obligations.” Compl. at 4. Therefore, on January 18, 2008, the plaintiffs sent a notice of termination to the defendants and requested a refund of their $100,000 deposit, which they claim the defendants were holding “under the laws of the State of Michigan.” Compl. at 3. The defendants assert that “[t]he funds, if any, paid by [p]laintiffs were transferred to [d]efendants’ bank account(s) within the State of Montana.” Br. in Support of Mot. to Dismiss at -4- 2. The defendants do not contest that they owe the plaintiffs a refund, stating that they “have every intention of refunding [the plaintiffs’] deposit as requested,” but state that they need additional time due to slow business. Compl., Ex. 2, Letter. When no refund was forthcoming, the plaintiffs commenced this action on June 1, 2009, and the defendants responded with a motion to dismiss for lack of personal jurisdiction, or alternatively to transfer venue to Montana. I. “The question of personal jurisdiction, which goes to the court’s power to exercise control over the parties, is typically decided in advance of venue, which is primarily a matter of choosing a convenient forum.” Leroy v. Great W. United Corp., 443 U.S. 173, 180 (1979). In a motion to dismiss for want of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), the plaintiff has the burden of proving the court’s jurisdiction over the defendant. Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002). “[I]n the face of a properly supported motion for dismissal, the plaintiff may not stand on his pleadings but must, by affidavit or otherwise, set forth specific facts showing that the court has jurisdiction.” Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). However, [w]here, as here, the district court relies solely on written submissions and affidavits to resolve a Rule 12(b)(2) motion, rather than resolving the motion after either an evidentiary hearing or limited discovery, the burden on the plaintiff is “relatively slight,” Am. Greetings Corp. v. Cohn, 839 F.2d 1164, 1169 (6th Cir. 1988), and “the plaintiff must make only a prima facie showing that personal jurisdiction exists in order to defeat dismissal,” Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). In that instance, the pleadings and affidavits submitted must be viewed in a light most favorable to the plaintiff, and the district court should not weigh “the controverting assertions of the party seeking dismissal.” Id. at 1459. -5- Air Prods. & Controls, Inc. v. Safetech Int’l., Inc., 503 F.3d 544, 549 (6th Cir. 2007). A plaintiff “can meet this burden by ‘establishing with reasonable particularity sufficient contacts between [the defendant] and the forum state to support jurisdiction.’” Neogen Corp., 282 F.3d at 887 (internal citation omitted). “In a diversity case, personal jurisdiction must be appropriate both under the law of the state in which the district court sits and the Due Process Clause of the Fourteenth Amendment.” Bagsby v. Gehres, 195 F. Supp. 2d 957, 961 (E.D. Mich. 2002) (citing Neogen Corp., 282 F.3d at 887-88). The Sixth Circuit has explained that “[w]here the state long-arm statute extends to the limits of the due process clause, the two inquiries are merged and the court need only determine whether exercising personal jurisdiction violates constitutional due process.” Bridgeport Music, Inc. v. Still N The Water Publ’g, 327 F.3d 472, 477 (6th Cir. 2003) (per curiam) (internal citation omitted). In Michigan, jurisdiction may be asserted over an individual on the basis of general personal jurisdiction, see Mich. Comp. Laws § 600.701, or limited personal jurisdiction, see Mich. Comp. Laws § 600.705. General personal jurisdiction invests the Court with the authority to pass judgment on a defendant regardless of where the facts giving rise to the cause of action occurred. General personal jurisdiction exists over any individual on the basis of his “(1) [p]resence in the state at the time when process is served; (2) [d]omicile in the state at the time when process is served; [or] (3) [c]onsent, to the extent authorized by the consent and subject to the limitations provided in section 745.” Mich. Comp. Laws § 600.701. The plaintiffs do not argue that the defendants’ contacts with Michigan are sufficient to establish general personal jurisdiction over them. Limited personal jurisdiction may be exercised over a defendant who has certain minimum contacts with the forum, but only over claims that arise from or relate to those contacts. Theunissen, -6- 935 F.2d at 1459-61. Limited personal jurisdiction may be exercised over an individual if he has one of the following relationships with the state: (1) The transaction of any business within the state. (2) The doing or causing an act to be done, or consequences to occur, in the state resulting in an action for tort. (3) The ownership, use, or possession of real or tangible personal property situated within the state. (4) Contracting to insure a person, property, or risk located within this state at the time of contracting. (5) Entering into a contract for services to be rendered or for materials to be furnished in the state by the defendant. (6) Acting as a director, manager, trustee, or other officer of a corporation incorporated under the laws of, or having its principal place of business within this state. (7) Maintaining a domicile in this state while subject to a marital or family relationship which is the basis of the claim for divorce, alimony, separate maintenance, property settlement, child support, or child custody. Mich. Comp. Laws § 600.705. A single contact with the forum state may suffice for personal jurisdiction if it is directly and substantially related to the plaintiff’s claim. Red Wing Shoe Co., Inc. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1359 (Fed. Cir. 1998). In addition, the Sixth Circuit has explained that the “transaction of any business” clause is quite broad: [T]he Michigan Supreme Court stated that “[t]he word ‘any’ means just what it says. It includes ‘each’ and ‘every.’ . . . It comprehends the ‘slightest.’” Lanier v. Am. Board of Endodontics, 843 F.2d 901, 905-06 (6th Cir. [1988]) (quoting [Sifers v. Horen, 385 Mich. 195, 199 n.2, 188 N.W.2d 623, 624 n.2 (1971 ]. This construction applies with equal force to section 705. Hertzberg & Noveck v. Spoon, 681 F.2d 474, 478 (6th Cir. 1982). Theunissen, 935 F.2d at 1463-64. A transaction of business includes “contact with Michigan customers through the mail and the wires.” Neogen, 282 F.3d at 892 (citing Sifers v. Horen, 385 Mich. 195, 188 N.W.2d 623 (1971 . Even if the plaintiff has satisfied the demands of a statutory grant of jurisdiction, the statute is circumscribed by the Due Process Clause. “[T]his Circuit historically has understood Michigan -7- to intend its long-arm statute to extend to the boundaries of the fourteenth amendment.” Theunissen, 935 F.2d at 1462. Therefore, jurisdiction over a non-resident defendant is consistent with due process only if the “facts of the case demonstrate that the non-resident defendant possesses such minimum contacts with the forum state that the exercise of jurisdiction would comport with ‘traditional notions of fair play and substantial justice.’” Theunissen, 935 F.2d at 1459 (quoting Int’l Shoe Co. v. Wash., 326 U.S. 310 (1945 . The Sixth Circuit has identified three considerations to determine whether limited personal jurisdiction extends to the defendant in a particular case: First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing consequence in the forum state. Second, the cause of action must arise from the defendant’s activities there. Finally, the acts of the defendant or consequences must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable. Theunissen, 935 F.2d at 1460 (internal quotations omitted); see also Neogen Corp., 282 F.3d at 890 (quoting S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968 . The Sixth Circuit “views the purposeful availment prong of the Southern Machine test as ‘essential’ to a finding of personal jurisdiction.” Intera Corp. v. Henderson, 428 F.3d 605, 616 (6th Cir. 2005) (citing Calphalon Corp. v. Rowlette, 228 F.3d 718, 722 (6th Cir. 2000 . “Purposeful availment” occurs when “the defendant’s contacts with the forum state proximately result from actions by the defendant himself that create a substantial connection with the forum State.” Neogen Corp., 282 F.3d at 889 (citing Burger King Corp. v. Rudzewicz, , 475 (1985 . This requirement “ensures that a defendant will not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts, or of the ‘unilateral activity of another party or a third person.’” Ibid. (quoting Burger King, 471 U.S. at 475). In that respect, the Sixth Circuit “has found that -8- contacts lack quality when they are initiated by the plaintiff rather than the defendant, in part because ‘[t]he unilateral activity of those who claim some relationship with a non-resident defendant cannot satisfy the requirement of contact with the forum.’” Air Products, 503 F.3d at 552 (quoting LAK, Inc. v. Deer Creek Enters., 855 F.2d 1293, 1301 (6th Cir. 1989) and Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 417 (1984 . On the other hand, “parties who reach out beyond one state and create continuing relationships and obligations with citizens of another state are subject to regulation and sanctions in the other State for the consequences of their activities.” Burger King, , 473 (1985) (internal quotation omitted). Simply entering into a contract with a party in a state may be insufficient to establish jurisdiction over the defendant. Burger King, 471 U.S. at 478. The law is clear that the mere fact that an out-of-state entity contracts with an in-state entity and undertakes communication related to that contract does not constitute purposeful availment of the forum state for an action related to breach of that contract. Instead, “prior negotiations and contemplated future consequences, along with the terms of the contract and the parties’ actual course of dealing . . . must be evaluated in determining whether the defendant purposefully established minimum contacts within the forum.” Id. at 479. In Air Products, for example, the court found purposeful availment based on a nine-year continuous business relationship, where the defendant reached out to conduct business with a company which it knew had its principal place of business in Michigan. Air Products, 503 F.3d at 551. However, the requisite amount of contacts need not rise to this level. “The acts of making phone calls and sending facsimiles into the forum, standing alone, may be sufficient to confer jurisdiction on the foreign defendant where the phone calls and faxes form the bases for the action.” Neal v. Janssen, 270 F.3d 328, 332 (6th Cir. 2001) (internal citations omitted). In Neal, the court -9- determined that sending fraudulent communications to a forum state did constitute purposeful availment sufficient for the exercise of personal jurisdiction. Ibid. Ultimately, though, “[i]t is the quality of the contacts, not the quantity, that determines whether they constitute ‘purposeful availment.’” Ibid. (citing LAK, 885 F.2d at 1301). For again, “telephone calls and letters on which the plaintiff's claim of jurisdiction primarily depends [can also] strike . . . as precisely the sort of ‘random,’ ‘fortuitous’ and ‘attenuated’ contacts that the Burger King Court rejected as a basis for haling non-resident defendants into foreign jurisdictions.” LAK, 885 F.2d at 1301. A debtor-creditor relationship, standing alone “likely would not satisfy the purposeful availment prong,” unless the “claims asserted . . . are also based on actions that arguably were directed at the resident of the forum state.” Air Products, 503 F.3d at 553 n.2. This suggests that without purposeful direction at the resident – even if the course of dealing arises out of the resident coming across information about the defendant and reaching out to it initially – a court may not have personal jurisdiction over the defendant. For example, in International Technologies Consultants, Inc. v. Euroglas S.A., the Sixth Circuit found the foreign defendant’s contacts with Michigan to be “purely fortuitous” because the defendant “was not attempting to exploit any market for its products in Michigan” and had contact with the state only because the plaintiff “happened to have a Michigan address.” 107 F.3d 386, 395 (6th Cir. 1997). Because employees of the defendant only “episodically” visited Michigan and because the case involved an issue of contract interpretation involving a European contract, the Euroglas court determined that it did not have personal jurisdiction over the foreign defendant and instead that venue was proper in the foreign jurisdiction. See id. at 393-94. -10- The defendants take the position that their relationship with the plaintiffs is solely as a manufacturer of products ordered by the Michigan plaintiffs. The defendants attempt to portray themselves as a parochial enterprise that confines its activity to its Montana factory, agreeing to sell log home packages to all comers who are willing to travel to Montana (or send their freight agents there) to pick them up. That argument might have some appeal if the plaintiffs merely saw the defendants’ advertisement, placed an order, and arranged for delivery of the product. But the plaintiffs’ affidavits establish more than that. Defendant Nevilog established a relationship with the plaintiffs that extended beyond its Montana factory to the plaintiffs’ property in Michigan. According to Nevilog’s own documents, its product included not only the logs and materials to assemble them, but also the plans and specifications. When the plaintiffs encountered difficulty with their first log home package, they turned to Nevilog for help, and Nevilog sent engineer Jeffrey Sharpe to the Michigan site. The defendants dispute that Sharpe was connected to them, but the record contains sufficient facts to undermine that claim. For instance, it is apparent that Sharpe drafted the original plans that Nevilog sold to the plaintiffs. Sharpe stated in his August 15, 2005 report that the foundation he viewed in Michigan “ha[d] been changed significantly from my original design.” Aff. of Kurt Heidenbreicht [dkt #24], Ex. 2, p. 1 (emphasis added). According to affiant Ruth Heidenbreicht, Sharpe was the architect who certified the plans and furnished his seal. The Heidenbreichts aver that they never paid Sharpe for his services and Sharpe was sent to them by Nevilog, who directed Sharpe’s activities. Nevilog’s conduct, therefore, supports a claim by the plaintiffs that Sharpe was their agent, conducting business in Michigan to remediate a flawed performance of a contract that originated in Montana. -11- That is not all the contacts Nevilog had with this forum. As an outgrowth of the plaintiff’s last purchase, Nevilog continued to do business with the plaintiffs in Michigan. Nevilog reached out to the plaintiffs by faxing a new Customer Deposit Agreement to the plaintiffs in Michigan. Because the plaintiffs apparently encountered construction problems with the previous design plans, this time the fax came with the notation that the agreement included engineering and plan designs, language assuring the plaintiffs that their deposit would be refunded upon request, and the assurance that the defendant would “not let [them] down.” These contacts were not random, attenuated, or fortuitous, but rather purposeful and directed. As the Supreme Court explained, “parties who reach out beyond one state and create continuing relationships and obligations with citizens of another state are subject to regulation and sanctions in the other State for the consequences of their activities.” Burger King, 471 U.S. at 473 (internal quotation marks omitted). The “arising from” prong is satisfied “when the operative facts of the controversy arise from the defendant’s contacts with the state.” Calphalon, 228 F.3d at 723. The Sixth Circuit has held that personal jurisdiction may exist over a non-resident defendant if the defendant “purposefully directs communications into the forum, and those communications form the ‘heart’ of the cause of action.” Neal, 270 F.3d at 333. However, “‘the locus of . . . a monetary injury is immaterial, as long as the obligation did not arise from a privilege the defendant exercised in the forum state.’” Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 151 (6th Cir. 1997) (quoting LAK, 885 F.2d at 1301). But see Neogen, 282 F.3d at 892 (determining that the plaintiff’s allegations of economic harm from trademark infringement were sufficient to support a prima facie case for personal jurisdiction). The court of appeals addressed the “arising from” component of the test in Lanier v. American Board of Endodontics, 843 F.2d 901, 908-09 (6th Cir. 1988). There, a female dentist sued -12- the Illinois-based American Board of Endodontics in federal court in Michigan, alleging that she was denied a license by the Board on the basis of gender. The Board moved to dismiss, arguing that it had insufficient minimum contacts with the State of Michigan. The court of appeals disagreed. After finding that the Board had transacted business within Michigan by exchanging correspondence and telephone calls with the plaintiff, in addition to collecting her application fee, the court found that the plaintiff’s cause of action arose out of those business transactions. The court considered two possible theories defining the “arising from” requirement: whether the business transactions “made possible” the cause of action; and whether the cause of action arose in the “wake” of the business transactions. Id. at 909. Applying both theories, the court held that the discrimination was made possible and occurred in the wake of the plaintiff’s filing of her application, which the court previously had found to constitute the transaction of business in Michigan by the Board. Id. at 908-09. The court found that the application process, evaluation, testing, and rejection were part of a “mosaic of activity,” “every step of which was a constituent part of the whole.” Id. at 908. The court reasoned that if the defendant discriminated against Dr. Lanier on account of her gender, it “must have done so, based at least in part, upon what it learned about her from its professional business contacts with her in Michigan during the very earliest stages of the application process.” Id. at 909. Because those contacts made possible the rejection and concomitant discrimination, and the cause of action lay in the wake of them, the court found that the claims arose from the contacts with the forum. The cause of action in this case is straightforward: Nevilog’s contract faxed to the plaintiffs in Michigan promised them a refund if the customer made a written request for one “for any reason,” and the defendants have not lived up to their promise. The parties’ continuing relationship made -13- the cause of action possible, since the continuing effort to supply goods to its previously-dissatisfied customer laid the foundation for the January 30, 2007 agreement. The cause of action also occurred in the wake of the defendant’s activity in this state. If the first two elements are met, an “inference of reasonableness arises . . . [and] only the unusual case will not meet this third criterion.” Theunissen, 935 F.2d at 1461 (internal quotations and citations omitted); see also Intera Corp., 428 F.3d at 618. In the Sixth Circuit, courts also determine the reasonableness of exercising personal jurisdiction over a defendant by weighing several factors, including “(1) the burden on the defendant; (2) the interest of the forum state; (3) the plaintiff’s interest in obtaining relief; and (4) other states’ interest in securing the most efficient resolution of the controversy.” Intera Corp., 428 F.3d at 618. Long-standing business relationships with a forum, and plans to continue those relationships, can support a finding of reasonableness. See Neogen, 282 F.3d at 892 (“[The defendant] anticipates from year to year that it will conduct a given level of sales in Michigan. . . . Although [the defendant’s contracts with] individual customers do not represent “continuing relationships and obligations” with those particular customers, its predictable yearly business in Michigan does represent such a continuing relationship with the state overall.”) In this case, there may be an economic burden on the defendants having to litigate the plaintiffs’ claims in a remote forum. However, this forum has an interest in protecting the rights of its citizens. The defendant did not have difficulty sending its architect to Michigan to resolve past problems, and it continued to seek the plaintiffs’ business and sell them more products, including the new design plans. The relationship with the plaintiffs was not “longstanding,” but it was -14- substantial and continuous. The Court has no trouble concluding that it is reasonable to require the corporate defendant to defend the lawsuit in this forum. The question of personal jurisdiction over the individual defendant, Mark Neville, is another matter, however. Limited personal jurisdiction over an individual may be established by showing that the person transacted business in the state, caused an act to be done that resulted in a tort within the state, owned property here, insured a risk within the state, entered into a contract to perform services in the state, acted as an officer or director of a corporation incorporated in this state, or was domiciled here. See Mich. Comp. Laws § 600.705. The plaintiffs have presented no facts to support any of these options and instead even confirm that “Mark Neville did not participate in the communication with Plaintiffs.” Aff. of Ruth Heidenbreicht [dkt. # 28] ¶ 19. Beyond his position as a co-owner of the corporate defendant, the plaintiffs have not explained why they are suing him and have presented no support for their claims against him as an individual. They have not shown that the Court may exercise personal jurisdiction over Mark Neville under Michigan’s long arm statute. III. The defendants have moved in the alternative to transfer venue of the case to the United States District Court for the District of Montana. Although the purpose of the venue rules is to protect a defendant against the risk that a plaintiff will select an unfair or inconvenient place of trial, see LeRoy v. Great W. United Corp., 443 U.S. 173, 183-84 (1979), the proper venue for a civil action is governed by statute. In civil cases “wherein jurisdiction is founded solely on diversity of citizenship,” venue is proper in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions -15- giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought. 28 U.S.C. § 1391(a). “Under § 1391(a)(2), . . . the appropriate forum for a case is any forum in which a substantial part of the events or omissions giving rise to the claim occurred.” First of Mich. Corp. v. Bramlet, 141 F.3d 260, 264 (6th Cir. 1998). Section 1391 further contains a specific subsection dealing with the propriety of venue when corporations are parties to a dispute: (c) For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. In a State which has more than one judicial district and in which a defendant that is a corporation is subject to personal jurisdiction at the time an action is commenced, such corporation shall be deemed to reside in any district in that State within which its contacts would be sufficient to subject it to personal jurisdiction if that district were a separate State, and, if there is no such district, the corporation shall be deemed to reside in the district within which it has the most significant contacts. 28 U.S.C. § 1391(c). The Court has found that it has personal jurisdiction over Nevilog. Venue in this district, therefore, is proper. Under 28 U.S.C. § 1404(a), a district court may transfer venue “[f]or the convenience of parties and witnesses, in the interest of justice . . . to any other district or division where it might have been brought.” The burden is on the moving party to establish the need for a change of forum. Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215 (2d Cir. 1978), abrogated on other grounds by Pirone v. MacMillan, Inc., 894 F.2d 579 (2d Cir. 1990). “[U]nless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be disturbed.” Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947). This requires the Court to make “individualized, case-by-case consideration of convenience and fairness.” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988) (internal quotations and citations omitted). -16- Courts have broad discretion to transfer an action pursuant to section 1404 to avoid unnecessary delay and to protect parties, witnesses, and the public from undue expenses and inconvenience. See generally Van Dusen v. Barrack, 376 U.S. 612 (1964); Norwood v. Kirkpatrick, 349 U.S. 29 (1955). The Sixth Circuit has summarized the law by noting that “[i]n short, the Court may consider any factor that may make any eventual trial easy, expeditious, and inexpensive.” Cherokee Export Co. v. Chrysler Intern. Corp., 142 F.3d 432 (table), 1998 WL 57279, at *2 (6th Cir. 1998) (internal citation and quotation marks omitted); see also Piper Aircraft Co. v. Reyno, 454 U.S. 235, 253 (1981) (noting that § 1404(a) was intended to bestow greater discretion on trial courts than forum non conveniens). “[I]n ruling on a motion to transfer under § 1404(a), a district court should consider the private interests of the parties, including their convenience and the convenience of potential witnesses, as well as other public-interest concerns, such as systemic integrity and fairness, which come under the rubric of ‘interests of justice.’” Moses v. Bus. Card Express, Inc., 929 F.2d 1131, 1137 (6th Cir. 1991) (citing Stewart Org., 487 U.S. at 30). Although “a plaintiff’s choice of forum should be given weight when deciding whether to grant a motion to change venue, this factor is not dispositive.” Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 413 (6th Cir. 1998) (internal citations omitted). This Court has identified the following factors as relevant for of transfers under § 1404(a): (1) convenience of the parties and the witnesses, (2) accessibility of sources of proof, (3) the costs of securing testimony from witnesses, (4) practical problems associated with trying the case in the least expensive and most expeditious fashion, and (5) the interests of justice. . . . Other factors include (1) the relative congestion in the courts of the two forums, (2) the public’s interest in having local controversies adjudicated locally, (3) the relative familiarity of the two courts with the applicable law, (4) the plaintiff’s original choice of forum, and (5) whether the parties have agreed to a forum selection clause. -17- Bennett v. Am. Online, Inc., 471 F. Supp. 2d 814, 820 (E.D. Mich. 2007) (citing Viron Int’l Corp. v. David Boland, Inc., 237 F. Supp. 2d 812, 816 (W.D. Mich. 2002). The defendants also seek dismissal under the doctrine of forum non conveniens. An action may be dismissed on the basis of forum non conveniens if the defendant demonstrates that (1) there is a reasonable alternative forum available and (2) the balance of private and public interests favors transfer. Stewart v. Dow Chem. Co., 865 F.2d 103, 106 (6th Cir. 1989). The defendant has the burden of persuasion on both elements. Leon v. Millon Air, Inc., 251 F.3d 1305, 1311 (11th Cir. 2001). The factors mimic those identified for consideration of a request to change venue under section 1404(a). See Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09 (1947); Kryvicky v. Scandinavian Airlines Sys., 807 F.2d 514, 516 (6th Cir. 1986). In the present case, the corporate defendant resides and is subject to personal jurisdiction in Montana. See 28 U.S.C. § 1391(a)(1). Montana, therefore, is a proper alternative venue. However, the events in this case took place in both states, with communications occurring by phone and fax. This case proves the point made by the Supreme Court in Burger King v. Rudzewicz, (1985), which expressed the “inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted.” Burger King, 471 U.S. at 476. The case is factually simple, thereby discounting problems of proof and the convenience of witnesses, since documentary evidence equally available to both sides seems to tell the whole story. Moreover, “because ‘modern transportation and communications have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity,’ it usually will not be unfair to subject him to the burdens of litigating in another forum for -18- disputes relating to such activity.” Id. at 474 (quoting McGee v. Int’l Life Ins. Co., 355 U.S. 220, 223 (1957 . The Court does not believe that the pertinent factors favor transferring venue or dismissing the case under the doctrine of forum non conveniens. IV. The Court finds that the plaintiffs have established personal jurisdiction over defendant Nevilog Inc., d/b/a Neville Log Homes, Inc. However, the plaintiffs have not shown a valid basis for exercising jurisdiction over defendant Mark Neville. Venue over the corporate defendant is proper in this district, and there is no good reason to transfer venue. Accordingly, it is ORDERED that the defendants’ motion to dismiss for want of personal jurisdiction or alternatively to transfer venue or dismiss for forum non conveniens [dkt #8] is GRANTED IN PART AND DENIED IN PART. The complaint and amended complaints are DISMISSED as to defendant Mark Neville, only. It is further ORDERED that counsel for the parties shall appear before the Court on April 21, 2010 at 11:00 a.m for a status conference to establish further case management deadlines. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 30, 2010 -19- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 30, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -20-

=== Lee v. Sheet Metal Workers' National Pension Fund ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION NORVELLE SAMUEL LEE, Plaintiff, v. SHEET METAL WORKERS’ NATIONAL PENSION FUND, Case No. 09-12226 Honorable David M. Lawson Defendant. ___________________________________________/ OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS Plaintiff Norvelle Lee filed a complaint alleging that the defendant wrongfully denied his application for early retirement pension benefits on the ground that his employment with another employer in the sheet metal industry renders him ineligible at the present time. He filed a seven- count complaint that included a traditional challenge to the fund administrator’s decision under the Employee Retirement Income Security Act of 1974 (ERISA) (Count I), plus claims for breach of contract (Count II); “reasonable expectation of pension benefits” (Count III); equitable estoppel (Count IV); violation of due process (Count V); fraud (Count VI); and violation of the Racketeer Influenced and Corrupt Organizations Act (RICO) (Count VII). The defendant filed a motion to dismiss contending inadequate service of process, the state law claims are preempted by ERISA, the due process claim fails for lack of state action, and the RICO claim has not been pleaded with particularity. The Court heard oral argument on March 11, 2010, during which the defendant withdrew the argument that service of process was insufficient. The Court now finds that the defendant’s remaining arguments have merit and will dismiss all but Count I of the complaint. I. According to the complaint, Norvelle Samuel Lee worked for sheet metal industry for more than twenty-four years and was a member of two different Sheet Metal Industry local unions, one in Kentucky and one in Troy, Michigan. He withdrew from these unions in March 2000 because, according to him, he could not find any work in the sheet metal industry. Instead, the plaintiff accepted a job with Chrysler Corporation, first as a tinsmith and then as a maintenance welder, where he stayed until May 2009, when he took a buy-out package. Although by the time of his withdrawal from the unions, the plaintiff’s pension benefits had fully vested, defendant Sheet Metal National Workers’ Pension Fund, which is the pension fund administrator for the local unions in question, denied the plaintiff’s application for early retirement pension benefits. The defendant took the position that Lee’s employment with Chrysler disqualified him from early retirement benefits because the work done by Chrysler qualifies as work in the sheet metal industry and Chrysler has not entered into a CBA with the unions. The fund relied on language in the plan that postpones the participant’s right to early retirement benefits by six months for “every calendar quarter in which a Participant or Employee, or a former Participant or Employee performs at least one hour of employment on or after September 1, 1988, in the Sheet Metal Industry that is not covered by a collective bargaining agreement between the Union and the employer.” Ex. B to Pl.’s Compl. The fund explained that based on his years of service, the plaintiff will be entitled to normal retirement pension at age 65. After exhausting available appeals, the plaintiff commenced the present action against Sheet Metal Workers’ National Pension Fund on June 9, 2009. His complaint contains the seven counts noted above. The defendant filed its motion to dismiss on July 23, 2009 relying on Federal Rule of Civil Procedure 12(b)(5) and (6). As mentioned, the argument under Rule 12(b)(5) has been -2- withdrawn; the defendant acknowledged that service of process was sufficient. The defendant still asserts the other grounds. II. Motions to dismiss governed by Rule 12(b)(6) of the Federal Rules of Civil Procedure challenge whether a complaint “state[s] a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). When deciding a motion under that Rule, the court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the complaint contains “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, , 570 (2007). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Ibid. Any claim for relief must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P 8(a)(2); see also Erickson v. Pardus, 551 U.S. 89, 93 (2007). “Specific facts are not necessary; the statement need only ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.’” Erickson, 551 U.S. at 93 (citing Twombly, 550 U.S. at 555). Nevertheless, to survive a motion to dismiss, a complaint must contain sufficient facts “to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ibid. (quoting Twombly, 550 U.S. at 556). Although this pleading standard “does not require ‘detailed factual allegations,’ . . . [a] -3- pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’” Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 555); see also Hensley Mfg., Inc. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir. 2009). If the court determines that certain counts of the plaintiff’s complaint are preempted by ERISA, it can dismiss such counts under Rule 12(b)(6). See Marks v. Newcourt Credit Group, Inc., 342 F.3d 444, 453 (6th Cir. 2003). A. The defendant contends that Counts II (breach of contract), III (“reasonable expectation of pension benefits”), IV (equitable estoppel) and VI (fraud) are based on state law and are preempted by ERISA. The plaintiff argues that the claims are allowed under “federal common law,” which is available to fill the gaps where “ERISA is silent or ambiguous.” Weiner v. Klais & Co., 108 F.3d 86, 92 (6th Cir. 1997). ERISA governs employee benefit and pension plans. 29 U.S.C. § 1003(a). To ensure uniform interpretation of covered plans, Congress drafted ERISA with an “expansive” preemption provision. Thomas v. Miller, 489 F.3d 293, 300 (6th Cir. 2007). Section 514 of the Act states that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” governed by ERISA. 29 U.S.C. § 1144(a). A state law therefore may be preempted “even if the law is not specifically designed to affect such plans, or the effect is only indirect.” Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139 (1990). “[T]he Supreme Court has held that even general state contract and tort laws may also be preempted by ERISA.” Thurman v. Pfizer, Inc., 484 F.3d 855, 861 (6th Cir. 2007) (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48 (1987 . State law claims that are “too tenuous, remote, or peripheral,” and therefore do not “relate to” a pension or benefit plan, may survive the sweeping ERISA preemption provision. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n.21 (1983). -4- To distinguish those state law claims that preempted and those that survive, the Sixth Circuit has stated: In deciding whether a state-law claim is too remote to be preempted by ERISA, our precedents focus on whether the remedy sought by a plaintiff is primarily plan-related. Marks v. Newcourt Credit Group, Inc., 342 F.3d 444, 453 (6th Cir. 2003). Recently, however, we have identified three categories of claims that ERISA clearly preempts: state-law claims “that (1) ‘mandate employee benefit structures or their administration;’ (2) provide ‘alternate enforcement mechanisms;’ or (3) ‘bind employers or plan administrators to particular choices or preclude uniform administrative practice, thereby functioning as a regulation of an ERISA plan itself.’” Penny/Ohlmann/Nieman, Inc. v. Miami Valley Pension Corp., 399 F.3d 692, 698 (6th Cir. 2005) (“PONI”) (quoting Coyne & Delany Co. v. Selman, 98 F.3d 1457, 1468 (4th Cir. 1996 . With respect to claims that do not fall within these three categories, we continue to follow our prior precedent that focuses on the nature of the remedy sought by a plaintiff. Thurman, 484 F.3d at 861. “Congress did not intend . . . for ERISA to preempt traditional state-based laws of general applicability that do not implicate the relations among the traditional ERISA plan entities, including the principals, the employer, the plan, the plan fiduciaries, and the beneficiaries.” Penny/Ohlmann/Neiman, Inc. v. Miami Valley Pension Corp., 399 F.3d 692, 698 (6th Cir. 2005) (internal quotation marks and citation omitted). For example, ERISA does not preempt a breach-of- contract claim where the claim related to the “employment contract irrespective of the plan” and where the plaintiff relied on his benefits under the plan only to measure his damages under the employment contract. Marks, 342 F.3d at 453. But where the cause of action is dependent on the existence of the plan, or seeks to enforce a right to benefits created by the plan, courts have had little trouble concluding that the relief sought relates to the plan, and therefore the state law claims must yield and the claimant is left to the remedies ERISA provides. See, e.g., Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004). ERISA specifically provides that “[a] civil action may be brought . . . by a participant or beneficiary . . . to -5- recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). “[Section 1132] is relatively straightforward. If a participant or beneficiary believes that benefits promised to him under the terms of the plan are not provided, he can bring suit seeking provision of those benefits.” Davila, 542 U.S. at 210. In bringing his state law claims, the plaintiff seeks payment of his pension benefits, no more and no less. A decision in his favor under any one of those claims would bind the plan fiduciary and amount to a regulation of the plan. “ERISA preempts in that situation because the state-law contract claim would bind fiduciaries to particular choices, thereby functioning as a regulation of the ERISA plan.” Hutchison v. Fifth Third Bancorp., 469 F.3d 583, 587-88 (6th Cir. 2006). As the Sixth Circuit explained, it does not matter whether plaintiffs cite a different body of law to support their cause of action (state tort or contract law versus ERISA fiduciary responsibility) or whether the relief that plaintiffs seek is different from the relief that ERISA affords (damages for personal injury or breach of contract versus plan benefits under ERISA). As long as ERISA exclusively regulates the activity (deciding whether to award benefits), ERISA prevents the distinct state law tort scheme from superimposing an extra layer of regulation on top of the ERISA-regulated plan benefit determination. Id. at 588. Because the plaintiff’s suit against the plan fiduciary seeks the payment of benefits created and measured by the terms of the plan, the state law claims relate to the plan and are preempted. The plaintiff may seek his remedy under section 1132(a)(1)(B), upon which Count I of the complaint is based. Counts II, III, IV, and VI, however, must be dismissed. B. In Count V of the complaint, the plaintiff alleges that he has been deprived of his property without due process of law because of the defendant’s actions. It is well recognized that the -6- Constitution protects citizens from infringement of their rights by government and state actors, not by private parties. Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 156 (1978) (recognizing that “most rights secured by the Constitution are protected only against infringement by governments”) (citing Jackson v. Metro. Edison Co., 419 U.S. 345, 349 (1974); Civil Rights Cases, 109 U.S. 3, 17-18 (1883 . The complaint does not suggest that the defendant is a state actor. At oral argument, plaintiff’s counsel stated that he included this count as a precautionary measure, suggesting that he would press this claim if his ERISA count was not found to afford relief. He theorized that if his section 1132 claim failed, then he would be able to prove government action because the inability to obtain relief would be attributable to the government’s failure to furnish sufficient remedial measures. As dubious as this theory is, it still does not account for the fact that the defendant is not a state actor. To establish liability under the Due Process Clause, the plaintiff must prove that the deprivation of rights was caused by a person acting under color of state law. Wittstock v. Mark A. Van Sile, Inc., 330 F.3d 899, 902 (6th Cir. 2003). Count V of the complaint does not state a valid claim for relief because of the plaintiff’s failure to plead this essential element. C. Count VII of the complaint is based on the Racketeer Influenced and Corrupt Organizations Act. RICO’s civil remedy provision states that “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee. . . .” 18 U.S.C. § 1964(c). One subsection of section 1962 that apparently is alleged in this case makes it “unlawful for any person employed by or associated -7- with any enterprise engaged in” activities affecting “interstate or foreign commerce . . . to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity.” Id. § 1962(c). It appears from the complaint that the plaintiff contends that the policy of the plan fiduciaries to enforce the terms of the plan requiring a delay in the eligibility for benefits of any worker who performed work in a non-union capacity for an employer within the jurisdiction of a union amounts to a pattern of racketeering activity. The pertinent portions of the complaint state: 28. 29. Defendant’s seizure of Plaintiff’s retirement benefits is not dependent on the work that Plaintiff, individually, did at Chrysler Corporation. That is, Plaintiff’s retirement benefits are forfeited whether or not he personally performed any work that Defendant’s related union unilaterally determined to be in their “jurisdiction”. Additionally, even after Plaintiff ceased working for Chrysler Corporation (Plaintiff retired in May, 2009), Plaintiff would be subjected to an additional delay of benefits for six month’s benefit for each calendar quarter in which Plaintiff worked one hour or more for Chrysler Corporation. 30. Defendant’s delay of six months for as little as one hour worked is clearly punitive and is a violation of ERISA. 31. Plaintiff is subject to an eighteen year delay due to his approximately nine years working at Chrysler Corporation. 32. 33. 34. Defendant’s policies regarding forfeiture and delay of previously earned benefits is: a) taking of property without due process; b) violates due process requirements of the US and Michigan constitution c) violates ERISA d) Is a breach of fiduciary duty for the fiduciaries of the Pension Fund e) Constitutes a pattern of conduct, used illegally to deprive participants of their previously earned benefits, which constitutes a violation of civil RICO. Under the provisions of ERISA, an individual’s pension must be administered for the sole benefit of the participant. The loss of previously fully earned pension benefits, due to employment subsequent to earning those benefits violates ERISA, constitutes a taking of -8- 35. 36. property without due process, and violates the United States Constitution, and the Constitution of the State of Michigan. The actions of the fiduciaries of Defendant Sheet Metal Workers’ National Pension Fund in allowing a forfeiture or delay of benefits constitutes of breach of fiduciary duty, which subjects the fiduciaries to the liabilities and penalties as provided for in ERISA. The fiduciaries of Defendant Sheet Metal Workers’ National Pension Fund have engaged in a regular and systematic procedure of disqualifying individuals who had full qualified for their pension benefits, and the actions of the fiduciaries in so denying the benefits constitutes a violation of the RICO Act. Compl. ¶¶ 28-36. “A violation of § 1962(c), the section on which [the plaintiff] relies, requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. The plaintiff must, of course, allege each of these elements to state a claim.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 495-96 (1985) (footnote omitted). In pleading the pattern of racketeering activity, at least two predicate acts are necessary (although not necessarily sufficient). Brown v. Cassens Transp. Co., 546 F.3d 347, 354 (6th Cir. 2008) (citing H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 238-43 (1989 . When the predicate acts are based on fraud, Rule 9(b)’s heightened pleading requirement applies. Id. at 356 n.4. At the minimum, the complaint alleging a RICO claim must state “the nature of the fraud which gives rise to the predicate offense.” Blount Fin. Servs., Inc. v. Walter E. Heller & Co., 819 F.2d 151, 152 (6th Cir. 1987). Under Rule 9(b), “[i]n alleging fraud or mistake a party must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). To satisfy the rule, a party must “‘allege the time, place, and content of the alleged misrepresentation on which he or she relied; the fraudulent scheme; the fraudulent intent of [the other party]; and the injury resulting from the fraud.’” Coffey v. Foamex L.P., 2 F.3d 157, 161-62 (6th Cir. 1993) (quoting Ballan v. Upjohn Co., 814 F. Supp. 1375, 1385 (W.D. Mich.1992 ; see also Vild v. -9- Visconsi, 956 F.2d 560, 567 (6th Cir. 1992); Bender v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir. 1984) (holding that as to each predicate act, the plaintiff must allege “the time, place and contents of the misrepresentation(s)”). Moreover, RICO defines an “enterprise” as “any individual, partnership, corporation, association, or other legal entity and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). To make out a claim under section 1962(c), the plaintiff must plead and prove that “the ‘enterprise’ is the instrument through which illegal activity is conducted.” United States v. Chance, 306 F.3d 356, 371-72 (6th Cir. 2002) (citing Nat’l Org. for Women, Inc. v. Scheidler, 510 U.S. 249, 258 (1994 . To meet that requirement, the plaintiff must establish: 1) an ongoing organization with some sort of framework or superstructure for making and carrying out decisions; 2) that the members of the enterprise functioned as a continuing unit with established duties; and 3) that the enterprise was separate and distinct from the pattern of racketeering activity in which it engaged. Id. at 372 (citing Frank v. D’Ambrosi, 4 F.3d 1378, 1386 (6th Cir. 1993 . In this case, the plaintiff has fallen far short of stating the required elements for a civil RICO claim. He has not pleaded a pattern of racketeering activity. By stating that the “plan fiduciaries” engaged in a pattern of illegal activity by enforcing plan policies, he has confounded the actor and the enterprise, and he has not identified an “enterprise [that] was separate and distinct from the pattern of racketeering activity in which it engaged.” Finally, he has not identified predicate acts, nor has he met the requirements of Rule 9(b) in pleading allegations of fraud. The plaintiff stated in his answer to the motion that in lieu of dismissing the complaint, he would like leave to amend. However, the RICO claim is so deficient, and the allegations are so confused and untethered to specific sections of the RICO statute, that it would be best to assign the -10- plaintiff to his remedies under Rule 15. If the plaintiff intends to pursue a RICO claim, he may file a motion to amend his complaint and attach the proposed amendment, so the Court and the defendant may examine the allegations when addressing the motion. For now, however, Count VII will be dismissed because it fails to state a claim for relief. III. The Court concludes that the plaintiff’s state law claims are preempted by ERISA, the claim for deprivation of property without due process of law must be dismissed because the plaintiff has not alleged that the defendant is a state actor, and the RICO count fails to state a claim for which relief may be granted. Accordingly, it is ORDERED that the defendant’s motion to dismiss the complaint [dkt #3] is GRANTED IN PART. It is further ORDERED that Counts II through VII of the complaint are DISMISSED. It is further ORDERED that the defendant must file an answer to Count I of the complaint on or before March 25, 2010. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 15, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 15, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -11-

=== Lanier v. Metorpolitan Life Insurance Company ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JOHN LANIER, v. Plaintiff, Case Number 08-11842 Honorable David M. Lawson METROPOLITAN LIFE INSURANCE COMPANY, _________________________________________/ Defendant. OPINION AND ORDER GRANTING PLAINTIFF’S MOTION TO REVERSE PLAN ADMINISTRATOR’S DENIAL OF BENEFITS AND DENYING DEFENDANT’S MOTION TO AFFIRM PLAN ADMINISTRATOR Among the benefits plaintiff John Lanier received from his employer, BearingPoint, Inc., was long-term disability insurance coverage underwritten by defendant Metropolitan Life Insurance Company. Lanier applied for disability benefits in 2002. He was granted short-term benefits for six months beginning in October 2002. Thereafter, he applied to MetLife for long-term benefits; MetLife was his company’s benefits plan administrator in addition to the insurance underwriter. Following a thirty-six-month period in which benefits were paid, MetLife initially denied the claim, but then granted it after Lanier filed an administrative appeal. Eight months later, after obtaining opinions from new consultants (although it does not appear that new data were considered), MetLife terminated Lanier’s long-term disability benefits. After having his administrative appeals denied, Lanier filed the present matter under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. The parties filed cross motions on the administrative record, and oral argument was held on June 30, 2009. The Court has reviewed the administrative record and the parties’ submissions and now concludes that the plan administrator’s determination that the plaintiff was not disabled within the meaning of the plan and was not entitled to long-term disability benefits was arbitrary and capricious, because the defendant did not consider or discuss the finding by the Social Security Administrator that the plaintiff is disabled; gave preemptive weight to the opinions of non-examining consulting physicians who found no positive objective findings of any ailment that could account for the plaintiff’s pain, despite abundant evidence in the record otherwise; discounted the findings and opinions of the plaintiff’s treating physician without justification for doing so when the physician correlated his clinical findings with the results of objective testing; and applied a standard for disability that appears to be more rigorous than required by the plan. Therefore, the Court will grant the plaintiff’s motion to reverse and award benefits and deny the defendant’s motion to affirm the plan administrator. I. John Lanier is presently forty-five years old. Since college, he worked as a manager and software engineer. He took a job with KPMG Consulting, Inc. in 1999 and remained with that company until he left on disability leave in October 2002. Earlier that year, KPMG Consulting became BearingPoint, Inc. At the time of the plaintiff’s departure, BearingPoint maintained an employee benefit package that included both short-term and long-term disability benefits. Under the plan, an employee is considered disabled if during the first three years following an elimination period the employee is “unable to perform the material and substantial duties of [his] Own Occupation,” and is under a doctor’s care. Thereafter, the employee is not considered disabled unless he is “unable to perform any job for which [he is] qualified or for which [he] may become reasonably qualified taking into account [his] training, education or experience.” AR 13. -2- Lanier states that during his younger years he was a “very active,” healthy individual without major health issues, enjoyed sports, and was a “good athlete.” AR 297, 520. He did not drink or smoke and maintained a healthy lifestyle. AR 556. However, his medical history shows that in his early twenties, Lanier began to experience back pain that progressed to the point that he had difficulty performing the mild exertional demands of his job, which consisted of “[e]xtensive travel, walk[ing], sit[ting], lift[ing] & carry[ing] computer [and] luggage.” AR 485. Lanier was required to travel by plane or car; lift 10-20 pounds; carry 10 pounds; pull 30-40 pounds; and push 30-40 pounds on “daily/weekly” basis. Ibid. The plaintiff underwent several surgeries to alleviate his back conditions. In 1999, he underwent a lumbar diskectomy and laminectomy. In 2001, a sports injury led to another laminectomy and diskectomy. At the time Lanier became disabled in 2002, his treating physician diagnosed him with chronic cervical and lumbar pain, left lumbosacral radiculopathy, “congenital narrowing of the spinal canal in the lumbar region,” “fibromyalgia-like features that he has had for multiple years where he has had chronic migratory pain,” “anatomical abnormalities with multiple impairments in the cervical and lumbar region that are objective in nature,” “advanced degenerative arthritis of the lumbar spine at multiple levels,” “disc protrusion and spondylosis from C3 all the way through T2, that is multiple levels of degenerative arthritis,” “bilateral ulnar neuropathy at the elbows,” and “dysfunctional sleep-wake cycle.” AR 195-96, 198, 414-15. In addition, the plaintiff was diagnosed with anxiety disorder and depression. AR 415. Lanier’s last day of work for BearingPoint was October 8, 2002. He applied for and received short-term disability benefits from MetLife, covering the period from October 9, 2002 through March 16, 2003. MetLife extended his short-term disability benefits retroactively through April 6, -3- 2003, which was the maximum time allowed under the plan, and referred his file to a long-term disability benefits case manager. The plaintiff then applied for long-term disability benefits on account of “severe fibromyalgia . . . , osteoarthritis of the lumbar spine and degenerative disc disease.” See Dr. Paul Valle Note, 2/20/2003, AR 141. On June 4, 2003, MetLife approved the plaintiff’s LTD benefits claim effective April 7, 2003. Lanier received his LTD payments for thirty-six months in the amount of $6389.21 per month, which was two-thirds of his income at BearingPoint. Six months before the thirty-six-month period expired, MetLife sent Lanier a letter on October 26, 2005 stating that it would not approve LTD benefits beyond April 6, 2006. MetLife had received and relied on (a) office visit notes dated April 25, 2005, July 26, 2005, and August 25, 2005 from the plaintiff’s treating physician, Dr. Geoffrey K. Seidel, a physical medicine specialist at Pain Management & Rehabilitation; (b) prescription requests to pharmacy dated June 11, 2005 and July 1, 2005; (c) Dr. Seidel’s attending physician statement from August 25, 2005; and (d) Dr. Seidel’s physical capacity evaluation dated August 25, 2005. It appears that the defendant placed great weight on Dr. Seidel’s August 25 physical capacity evaluation, which MetLife read as stating that the plaintiff could sit for six hours and stand and walk each for one hour. This evaluation differed from a previous evaluation performed on January 9, 2003 by Dr. Brenda Andritsis (Lanier’s primary care physician) stating that the plaintiff could sit only for four hours intermittently, stand for one hour intermittently, and walk for one hour intermittently. Relying on Dr. Seidel’s evaluation, MetLife concluded that the plaintiff could perform sedentary jobs including chief bank examiner, controller with the Department of Transportation, and credit and collection manager. MetLife also -4- relied on an employability assessment by vocational rehabilitation consultant Mary L. Hale on October 20, 2005, which in turn placed great weight on Dr. Seidel’s evaluation. The plaintiff appealed MetLife’s October 26, 2005 decision in March 2006, attaching a new report from Dr. Seidel, in which the physician corrected misstatements in his earlier physical capacity evaluation. Lanier also had applied for Social Security disability benefits, as the plan required him to do, and he received a favorable determination. There were additional diagnostic tests performed as well, and the plaintiff informed MetLife of all of this new information. The new tests described by Lanier included: C C C C September 22, 2005 electrodiagnostic tests confirming chronic left radiculopathy and revealing no changes since the 2003 tests; September 28, 2005 electrodiagnostic tests revealing bilateral ulnar neuropathy in both left and right elbows; September 23, 2005 magnetic resonance imaging (“MRI”) of lumbroscal spine confirming “previous congenital and chronic disc disease diagnosis and provid[ing] further evidence of Dr. Seidel’s spinal nerve root compression diagnosis”; September 26, 2005 MRI of the cervical spine confirming “worsening condition of multi-level degenerative disc disease and stenosis when compared to the 2003 MRI.” AR 275. In his updated report of December 5, 2005, Dr. Seidel amended his earlier evaluation, writing: I completed attending physician report for MetLife and on page 2 for the physical capabilities Item A, I had answered sitting four hours per day. I had to carry it over a prior answer that had been provided several years before. [Lanier] states to me that he has been denied disability insurance because of that answer. I empathize that answer was an error and I am clarifying that answer today. John Lanier states to me that he can only tolerate sitting for one to two hours per day working at a computer in a seated position. He must get up multiple times and he was getting headaches as he attempted to try this process. His back pain became unbearable and radicular symptoms became unbearable. -5- He tends to lean on his elbows to support his back, minimize pain and it had resulted in ulnar neuropathy at the elbows. He must avoid leaning on his elbows, so it is impractical for him to work. I note that he attempted to have chiropractic care to see if that would help once and he states that sometimes it helps and sometimes it does not. The only way that he is able to sit in one place is when he is sacral sitting in a recliner in which he has head support. It is not a practical work environment. AR 414. In his appeal letter, the plaintiff also mentioned his mental health impairments, citing his attending physician’s assessment of Class 5 in the Psychological Function category, which is consistent with a “significant loss of psychological, . . . personal and social adjustment – severe limitations.” AR 277. Dr. Patricia Pearson, a psychologist who evaluated Lanier for Social Security disability, diagnosed him with severe generalized anxiety, severe depressive disorder secondary to physical pain and limitations, and severe pain disorder with psychological factors associated with a general medical condition, concluding as a result that Lanier would be unable to do customary work. AR 300. The plaintiff also cited testimony in the Social Security proceedings of vocational expert Elaine M. Tripi, Ph.D., who stated that “a finding of credibility with respect to the claimant’s description of symptomatology and limitations in function would warrant the conclusion that he is unable to perform his past or any other work that exists in the community” and that a person with the claimant’s residual functional capacity and vocational factors “would be unable to perform any jobs existing in significant numbers in the national economy.” AR 322. Based on this evidence, MetLife reversed itself and concluded on June 14, 2006 that the plaintiff was unable to work in any occupation. AR 443. MetLife also found evidence of radiculopathy, which exempts the plaintiff’s case from the application of a twenty-four-month -6- limitation in the plan that exists for neuromusculoskeletal and soft tissue disorders. AR 19-20. MetLife reinstituted the plaintiff’s LTD benefits effective April 7, 2006. MetLife accounted for the Social Security benefits awarded to Lanier, as it had a right to do under the plan. Because the plaintiff received a retroactive payment of Social Security benefits to April 2003, MetLife claimed that it overpaid the plaintiff by $60,448.00 minus attorney’s fees for the period from April 7, 2003 through December 6, 2005. Therefore, MetLife reduced Lanier’s monthly payments by $1,990 that Lanier received from the Social Security Administration each month and further withheld all benefits starting January 2006 until it could recoup the entire $55,148 in overpaid benefits. Lanier compensated MetLife for overpayment on January 12, 2006, and the payment of benefits resumed. AR 301. Social Security benefits appears to be the plaintiff’s only income at the present time. However, about eight months after it had reversed its denial of benefits, on February 6, 2007, MetLife again terminated the plaintiff’s LTD benefits effective that day. It does not appear that the decision was based on any new medical evidence or a change in the plaintiff’s condition. Rather, MetLife’s change of mind this time was justified by the opinions of new experts it had engaged to review the existing file materials. Relying on the opinion of a MetLife Clinical Specialist and a new report by vocational rehabilitation consultant Mary L. Hale dated January 18, 2007, MetLife concluded that “there is no medical [evidence] to support that you have a less than sedentary capacity.” AR 422. The revocation letter cited Dr. Seidel’s August 25, 2005 letter (which Dr. Seidel already had repudiated by that time) and represented that Dr. Seidel opined that the plaintiff could sit intermittently for six -7- hours. The letter went on to discredit the rest of Dr. Seidel’s notes and progress reports as not supported by hard medical evidence. The new Hale physical capacity report appears to be based on the erroneous view of Dr. Seidel’s prior letter as well. Hale wrote: Medical information used for this assessment includes the Attending Physician Statement and functional capabilities provided by Physical Medicine and Rehabilitation (PM&R) doctor, G. Seidel, and the Board Certified PM&R Independent Physician Consultant review dated 5/3/06. Doctor Seidel provided the following restrictions and limitations: sit 4 hrs and stand, walk each 1 hour intermittently; lift and carry up to 10 lbs occasionally; no climbing, twisting, bending or stooping. Mr. Lanier can reach, handle, finger, push, pull, and operate a motor vehicle. A MetLife Nurse Consultant found that medical in the file to supports [sic] an ability for Mr. Lanier to function at the level, provided by the doctor, for an 8 hours [sic] work day. AR 425. Hale then concluded that the plaintiff could perform several sedentary jobs. Once again, Lanier appealed the decision to cancel his benefits in a letter dated August 2, 2007. He raised the error of relying on Dr. Seidel’s August 25, 2005 letter; attached a new attending physician statement by Dr. Seidel dated February 21, 2007, in which Dr. Seidel opined that the plaintiff was limited to one hour of sitting, standing, and walking; furnished a new doctor’s note by Seidel dated February 19, 2007, in which Dr. Seidel noticed no improvement in the plaintiff’s health; and argued that MetLife failed to take into consideration other information that he submitted in his March 6, 2006 appeal, including the outcome of a Social Security disability proceeding. Dr. Seidel’s letter repeated the diagnoses of “chronic cervical pain, chronic lumbar pain, and intrascapular pain of myofascial in nature” with “multiple disc abnormalities in the cervical spine, but no active cervical radiculopathy” and with “active left L5-S1 radiculopathy with pain extending to the left gluteal, left posterior thigh.” AR 262. He also wrote that the plaintiff suffered from -8- “chronic anxiety, depression, and paranoia” in addition and “has been having difficulty with the sleep-wake cycle.” Ibid. Dr. Seidel estimated the plaintiff’s physical limitations as follows: sitting tolerance is 15 to 20 minutes and he must get up, reposition, lie down, and walk for a few minutes. He is unable to work at his computer at home for more than 20 minutes and he has spasms that occur in the back of his neck. When he sits too long, he has increased pain in the back of the leg and then has to lie down. He has inability to bend, stoop, and twist of the lower back. He has difficulty coping from an emotional perspective. He feels very nervous, very anxious, very depressed. Ibid. MetLife referred the plaintiff’s appeal to two Medical Consultants, Dr. Reginald Givens, a psychiatrist, and Dr. Sankar Pemmaraju, a physical medicine specialist. Both physicians conducted a records review and neither examined nor talked to the plaintiff. On August 21, 2007, Dr. Givens acknowledged that “[i]n general, progression of symptoms has been towards continued complaints of depression and anxiety” and diagnosed the plaintiff with depressive and anxiety disorders. AR 222. But ultimately, he concluded that there was insufficient evidence to support functional limitations of the plaintiff as of February 7, 2007. AR 222-23. He criticized Dr. Seidel’s diagnosis and statement of limitations because Dr. Seidel did not perform any cognitive testing. On the same day, August 21, 2007, Dr. Pemmaraju likewise found a lack of medical information supporting functional limitations of the plaintiff. He wrote a report in which he pointed to the lack of a formal functional capacity examination. Dr. Pemmaraju’s comments follow: There is no indication from the available clinical documentation/information of the patient having any significant or severe positive objective findings that will be accounting for the multiple pain issues in multiple body segments. There was mention that electrodiagnostically there was bilateral ulnar neuropathy as well as lumbar radiculopathy occurring, but these findings did not correlate with significant or the available medical limitations based on documentation/information. There was also no documented functional measures detailing the patient’s overall objective work abilities including overall patient effort as well as validity of testing. The records indicated the patient has mostly subjective functional severe -9- pain complaints without significant or severe positive objective findings to account for the persistent pain issues and this is not enough to justify continued time off from work or work restrictions. AR 219. On August 24, 2007, MetLife forwarded both Dr. Pemmaraju’s and Dr. Givens’s reports to Dr. Seidel seeking comment. Dr. Seidel responded in a letter dated August 28, 2007, but apparently MetLife did not receive or consider it. Instead, on September 6, 2007, MetLife denied the plaintiff’s administrative appeal. MetLife’s denial-of-benefits letter included the following language: [W]ith the medical records available for review, we concluded that the file did not contain any severity of impairment that resulted in functional limitations and restrictions preventing you from performing sedentary level of employment beyond February 6, 2007. In completing our review, we have determined that although you have medical conditions that support you having restrictions and limitations, you would be able to perform sedentary level work. Your symptoms and diagnoses would not prevent you from performing the alternate occupations identified with alternate employers. Therefore, our original decision to terminate your long-term disability benefits beyond February 6, 2007 was appropriate. AR 202. In his August 28, 2007 letter to MetLife, Dr. Seidel disagreed with Dr. Pemmaraju’s findings. Dr. Seidel stated that he only received Dr. Pemmaraju’s letter for review; Dr. Givens’s letter was not sent. Dr. Seidel noted that Dr. Pemmaraju was not provided with a complete medical record and he “ignore[d] many clinical findings.” AR 195. Seidel explained that his patient has not had a full functional capacity evaluation because no one was willing to pay for it. Dr. Seidel performed yet another examination of Mr. Lanier and reconfirmed his prior opinion that Lanier “is completely disabled.” AR 198. After reviewing his clinical records and medical test results, Dr. Seidel repeated his list of the plaintiff’s impairments: -10- 1. 2. 3. 4. 5. 6. 7. 8. Chronic cervical pain. Chronic lumbar pain. Left lumbosacral radiculopathy. Right cervical radiculopathy. Fibromyalgia. Dysfunctional sleep-wake cycle. Objective reduced range of motion of the cervical spine, mild reduction in range of motion of the right shoulder, objective reduction in range of motion of the lumbar spine, and objective atrophy noted in the right upper extremity and left lower extremity. Radiographic evidence of advanced severe degenerative joint disease of the cervical spine and lumbar spine in excess of what would be expected for age. AR 197-98. Dr. Seidel then ordered another MRI of Lanier’s cervical and lumbar spine and electrodiagnostic testing of Seidel’s upper and lower extremities. MetLife considered this letter but was unpersuaded. On September 20, 2007, MetLife wrote that Dr. Seidel’s letter did not provide any “additional objective clinical documentation,” and “this additional information did not change our original appeal determination.” AR 194. MetLife declared that the plaintiff had exhausted administrative remedies and no further appeals would be considered. On October 9, 2007, MetLife received the electrodiagnostic studies of the plaintiff’s upper and lower extremities that Dr. Seidel ordered along with a letter from Dr. Seidel dated October 1, 2007. The nerve conduction study of upper extremities showed “no electrodiagnostic evidence of bilateral median mononeuropathy or carpal tunnel syndrome,” “electrodiagnostic evidence of worsening bilateral ulnar neuropathy at cubital tunnel [but] no active axonal loss,” and “no electrodiagnostic evidence of bilateral cervical radiculopathy or plexopathy.” AR 181. The nerve conduction study on lower extremities demonstrated: 1. 2. Abnormal study. Right L5-S1 radiculopathy without active axonal loss. Motor units are larger polyphasia still present. -11- 3. 4. No electrodiagnostic evidence of sensory and motor peripheral polyneuropathy. No electrodiagnostic evidence of right lumbrosacral radiculopathy or plexopathy. AR 186. The plaintiff underwent a new MRI on September 18, 2007, which revealed the following: Minimal retrolisthesis, mixed biforaminal protrusions and a small central protrusion at the C4-C5 level slightly flattens the vental cord, slightly effaces the exiting right and abuts the exiting left C5 nerves. Mixed biforaminal protrusions, right greater than left. Flatten the right side of the ventral cord at C5-C6 level. Mild retrolisthesis and mixed broad-based displacement slightly flatten the ventral cord at C6-C7 level and abut bilateral exiting C7 nerves. No abnormal enhancement is identified. AR 188. Dr. Seidel’s letter of October 1, 2007 recounted a variety of the plaintiff’s abnormalities. Dr. Seidel described the results of the most recent MRI as follows: “MRI of the cervical spine revealed numerous diagnostic abnormalities and the reports do speak for themselves for the cervical spine and lumbar spine, but at every level of the cervical spine there are disc abnormalities.” AR 192. “In the lumbar region there is Schmorl’s nodes or disc herniation into the bony surface, superior endplate of L2 and L4. In the cervical region, there is loss of cervical lordosis. In the lumbar region, there is loss of cervical lordosis.” Ibid. Dr. Seidel also lowered his estimate of the plaintiff’s functional capacity, concluding that the plaintiff “is not capable of tolerating sitting for more than 20 to 30 minutes at a time. He needs to change positions frequently. He is not able to tolerate standing. He is not able to tolerate bending, stooping, or twisting. He is not capable of repetitive use of his arms in terms of pushing or pulling.” Ibid. -12- MetLife refused to consider the new information, stating that since LTD claim was terminated on February 7, 2007, the tests results from September 2007 “could not assist in supporting a severity of [the plaintiff’s] condition that would have prevented [him] from performing sedentary work beyond February 7, 2007.” AR 175. Thereafter, the plaintiff commenced the present action. Both sides filed cross motions on the administrative record. II. The plaintiff challenges the denial of benefits pursuant to section 502(a)(1)(B) of ERISA, which authorizes an individual to bring an action “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). “[T]he validity of a claim to benefits under an ERISA plan is likely to turn on the interpretation of terms in the plan at issue.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Regardless of the language of the plan that the administrative decision is “final and binding,” section 502 of ERISA affords participants of the plan a judicial remedy. Adams v. Ford Motor Co., 847 F. Supp. 1365, 1377 (E.D. Mich. 1994). In such an action, the Court should consider only the evidence presented to the plan administrator at the time he or she determined the employee’s eligibility. Smith v. Ameritech, 129 F.3d 857, 863 (6th Cir. 1997). The Court’s review is limited to the administrative record. Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 615 (6th Cir. 1998). However, the Court “may consider evidence outside of the administrative record . . . if that evidence is offered in support of a procedural challenge to the administrator’s decision, such as an alleged lack of due process afforded by the administrator or alleged bias on its part.” Id. at 619. -13- “[A] plan administrator’s decision is reviewed ‘under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.’” Shelby County Health Care Corp. v. S. Council of Indus. Workers Health & Welfare Trust Fund, 203 F.3d 926, 933 (6th Cir. 2000) (quoting Firestone Tire & Rubber Co., 489 U.S. at 115). Where, as here, “the benefit plan does grant such discretionary authority, the plan administrator’s decision to deny benefits is reviewed under the ‘arbitrary and capricious’ standard of review.” Shelby County Health Care Corp., 203 F.3d at 933; see also Perez v. Aetna Life Ins. Co., 150 F.3d 550, 555 (6th Cir. 1998) (en banc). The section of the KPMG Consulting Employee Benefit Plan dealing with long-term disability benefits vests the plan administrator and other plan fiduciaries with considerable discretionary authority to interpret the terms of the plan and determine eligibility for and entitlement to plan benefits in accordance with the terms of the plan. See AR 33. The parties agree, and the Court finds, that the arbitrary and capricious standard of review applies. Roberson v. Gen. Motors Corp., Detroit Diesel Allison Div., 801 F.2d 176, 180 (6th Cir. 1986). “The arbitrary or capricious standard [of review] is the least demanding form of judicial review of administrative action. When it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, that outcome is not arbitrary or capricious.” Davis v. Kentucky Fin. Cos. Ret. Plan, 887 F.2d 689, 693 (6th Cir. 1989) (internal quotation marks and citations omitted). An administrator’s decision will be upheld under the arbitrary and capricious standard “if it is the result of a deliberate, principled reasoning process, and is rational in light of the plan’s provisions.” Cooper v. Life Ins. Co. of N. Am., 486 F.3d 157, 165 (6th Cir. 2007) (internal quotation marks and citations omitted). A decision reviewed under this standard must be upheld if it is -14- supported by “substantial evidence.” Baker v. United Mine Workers of Am. Health & Ret. Funds, 929 F.2d 1140, 1144 (6th Cir. 1991). Substantial evidence to support an administrator’s decision exists if the evidence is “rational in light of the plan’s provisions.” See Smith v. Ameritech, 129 F.3d at 863 (internal quotation marks and citation omitted). As a general rule, where a plan administrator “chooses to rely upon the medical opinion of one doctor over that of another . . . the plan administrator’s decision cannot be said to have been arbitrary and capricious.” McDonald v. W.-S. Life Ins. Co., 347 F.3d 161, 169 (6th Cir. 2003). However, the arbitrary and capricious standard of review “is not . . . without some teeth.” Evans v. UnumProvident Corp., 434 F.3d 866, 876 (6th Cir. 2006) (quotation marks and citation omitted). The administrator’s decision may be arbitrary and capricious if it relies on an interpretation of the plan that found no support in the text, see Haus v. Bechtel Jacobs Co., 491 F.3d 557, 564 (6th Cir. 2007), or where the administrator “cherry-pick[s evidence] in hopes of obtaining a favorable report.” Spangler v. Lockheed Martin Energy Sys., Inc., 313 F.3d 356, 362 (6th Cir. 2002). “[T]he arbitrary-and-capricious standard of review is not a ‘rubber stamp [of] the administrator’s decision.’” Cooper, 486 F.3d at 165 (quoting Jones v. Metro Life Ins. Co., 385 F.3d 654, 661 (6th Cir. 2004 . “The obligation under ERISA to review the administrative record in order to determine whether the plan administrator acted arbitrarily and capriciously ‘inherently includes some review of the quality and quantity of the medical evidence and the opinions on both sides of the issues.’” Evans, 434 F.3d at 876 (citing McDonald, 347 F.3d at 172). Although courts recognize that the interests of the insurance company are generally in conflict with the interests of a claimant, see Gismondi v. United Techs. Corp., 408 F.3d 295, 299 (6th Cir. 2005), existence of a conflict of interest “shapes” the application of, but does not change, -15- the arbitrary and capricious standard of review. Further, the degree of deference afforded the decision-maker under either standard is considerable, and many of the decisions use the terms interchangeably. For example, the Sixth Circuit has noted that: [b]ecause an insurance company pays out to beneficiaries from its own assets rather than from the assets of a trust, its fiduciary role lies in perpetual conflict with its profit-making role as a business, and the conflict of interest is substantial. . . . The court in Brown held that the abuse of discretion or arbitrary and capricious standard still applies, but application of the standard should be shaped by the circumstances of the inherent conflict of interest. Miller v. Metro. Life Ins. Co., 925 F.2d 979, 984 (6th Cir.1991) (citing Brown v. Blue Cross & Blue Shield of Alabama, Inc., 898 F.2d 1556, 1561-63 (11th Cir.1990 (internal citations omitted); see also Firestone Tire & Rubber Co., 489 U.S. at 115 (“Of course, if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a ‘facto[r] in determining whether there is an abuse of discretion.’”) (citation omitted). Mere allegations of the existence of a structural conflict of interest are not enough for the court to reject a plan administrator’s denial of benefits where there is substantial evidence in the administrative record that supports his or her decision; there must be some evidence that the alleged conflict of interest actually affected the plan administrator’s decision to deny benefits. See Peruzzi v. Summa Med. Plan, 137 F.3d 431, 433 (6th Cir. 1998) (“Because our review of the record reveals no significant evidence that SummaCare based its determination on the costs associated with Mrs. Peruzzi’s treatment . . . we cannot conclude that SummaCare was motivated by self-interest in this instance.”); see also Mers v. Marriott Int'l Group Accidental Death & Dismemberment Plan, 144 F.3d 1014, 1020 (7th Cir.1998) (“We presume that a fiduciary is acting neutrally unless a claimant shows by providing specific evidence of actual bias that there is a significant conflict.”); Sullivan v. LTV Aerospace & Def. Co., 82 F.3d 1251, 1259 (2d Cir.1996) (“[A] reasonable interpretation of -16- the Plan will stand unless the participants can show not only that a potential conflict of interest exists, . . . but that the conflict affected the reasonableness of the Committee’s decision.”) (internal quotation and citations omitted). The Supreme Court recently reinforced the idea that a conflict of interest exists when a plan administrator both evaluates claims for benefits and pays benefits claims. Metro. Life Ins. Co. v. Glenn, 128 S. Ct. 2343, 2349-50 (2008). The Court instructed lower courts to consider a structural conflict of interest, but counseled that the weight accorded to that factor should vary depending on the circumstances of the case. The conflict of interest at issue here, for example, should prove more important (perhaps of great importance) where circumstances suggest a higher likelihood that it affected the benefits decision, including, but not limited to, cases where an insurance company administrator has a history of biased claims administration. . . . It should prove less important (perhaps to the vanishing point) where the administrator has taken active steps to reduce potential bias and to promote accuracy, for example, by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decision making irrespective of whom the inaccuracy benefits. Glenn, 128 S. Ct. at 2351 (citations omitted). MetLife’s argument in this case is straightforward: it relied on evidence from medical consultants, who rationally concluded that no objective evidence supported the level of disability Dr. Seidel found to exist. MetLife contends that it had a right to insist on objective medical evidence to support the claim of disability. Since it based its decision on the opinions of medical consultants, MetLife reasons, its determination that the plaintiff could perform a range of sedentary work – and therefore was not disabled within the plan’s definition – could not be arbitrary or capricious. -17- The Court finds problems with this argument on several levels. First, it bears noting that in many cases where a claimant bases an allegation of disability on a diagnosis of fibromyalgia, difficulty arises over the lack of objective findings, because that ailment is difficult to correlate with objectively observable, physical manifestations. See, e.g., Preston v. Sec’y of Health & Human Servs., 854 F.2d 815, 817-18 (6th Cir. 1988) (observing that, “[a]s set forth in the two medical journal articles . . . fibrositis causes severe musculoskeletal pain which is accompanied by stiffness and fatigue due to sleep disturbances. . . . [I]t is a process of diagnosis by exclusion and testing of certain ‘focal tender points’ on the body for acute tenderness which is characteristic in fibrositis patients”); Clark v. Aetna Life Ins. Co., 395 F. Supp. 2d 589, 609 (W.D. Mich. 2005) (citing Gaffney v. Comm’r of Soc. Sec., 277 F. Supp. 2d 733, 736 (E.D. Mich. 2003 . Lanier’s case, however, is not one of those. The plaintiff here presented with multiple ailments – many objectively confirmed though imaging studies – that explain his reported limitations. Although the plan requires a claimant to “provide documented proof of your Disability,” AR 23, the plan does not specify that the documentation include “objective evidence.” See Boone v. Liberty Life Assurance Co. of Boston, 161 F. App’x 469, 472 (6th Cir. 2005) (unpublished) (requirement of furnishing “objective medical evidence” is contained in the plan and has to be observed); Iley v. Metro. Life Ins. Co., 261 F. App’x 860, 862 (6th Cir. 2008) (unpublished) (the plan required claimants to present objective clinical findings of nerve pathology to be eligible for disability benefits based on radiculopathy); Oody v. Kimberly-Clark Corp. Pension Plan, 215 F. App’x 447, 452 (6th Cir. 2007) (unpublished) (insisting on objective medical evidence to support claim of disability in the plan). Nevertheless, Sixth Circuit precedent “suggests that it is entirely reasonable for an insurer to request objective evidence of a claimant’s functional capacity.” Rose -18- v. Hartford Fin. Servs. Group, Inc., 268 F. App’x 444, 453-454 (6th Cir. 2008) (unpublished) (collecting cases). A formal functional capacity assessment, however, is not the only objective proof of a claimant’s limitations. A qualified physician can correlate clinical findings with the results of objective medical testing to render an opinion on the ability of an individual to perform certain tasks. See Calvert v. Firstar Fin., Inc., 409 F.3d 286 (6th Cir. 2005) (reversing denial of benefits because independent physician reviewing file focused only on subjective reports of pain and disregarded objective tests and a functional capacity assessment of Social Security Administration that concluded claimant could not perform sedentary work); Patrick v. Hartford Life & Accident Ins. Co., 543 F. Supp. 2d 770, 777-78 (W.D. Mich. 2008). That appears to be precisely what Dr. Seidel did in this case. Second, the conclusions of the medical consultants, particularly Dr. Pemmaraju, are inconsistent with the medical record and contain some internal inconsistencies as well. Dr. Pemmaraju discounted Dr. Seidel’s reports as a mere reflection of the plaintiff’s subjective complaints. However, Dr. Pemmaraju recognized multiple abnormalities reported in the imaging studies, which unquestionably are objective test results; he concluded nonetheless that the plaintiff’s complaints are “mostly subjective” and lack “significant or severe positive objective findings to account for the persistent pain issues.” AR 219. Dr. Pemmaraju relied heavily on the 2003 MRI results when he had at his disposal the results of more recent 2005 MRI tests which, according to Dr. Seidel, demonstrated deterioration of the plaintiff’s condition. Finally, Dr. Pemmaraju discounted on a wholesale basis Dr. Seidel’s conclusions regarding the diminished functional capacity of the plaintiff and concluded somewhat randomly that the claimant can perform “at least at a medium duty work activity level.” AR 219. In doing so, Dr. Pemmaraju does not attempt to -19- explain the error in Dr. Seidel’s characterization that the plaintiff “is not capable of tolerating sitting for more than 20 to 30 minutes at a time.” AR 192. As Dr. Seidel explained, the plaintiff deals with chronic radicular symptoms and has had electrodiagnostic evidence of correlating anatomical abnormalities with multiple impairments in the cervical and lumbar region that are objective in nature. He has had congenital narrowing of the spinal canal in the lumbar region, degenerative changes in left neuroforamen at L3- L4, left paracentral disc protrusion at L4-L5, facet arthrosis at multiple levels. This is a situation that is compatible with advanced degenerative arthritis of the lumbar spine at multiple levels and can be symptomatic. He has electrodiagnostic evidence of a chronic left L5-S1 radiculopathy that correlates with those anatomic findings. AR 195-96. Instead, Dr. Pemmaraju implicitly suggested that the plaintiff could work an entire eight-hour day. This consultant, in essence, made credibility findings concerning the plaintiff’s complaints without acknowledging and dealing with all of Dr. Seidel’s diagnoses or examining the plaintiff. The Sixth Circuit held in a similar case that although there is nothing improper in relying on a file review that disagrees with the conclusions of a treating physician, reliance on such review is inadequate where, as here, “conclusions from that review include critical credibility determinations regarding a claimant’s medical history and symptomology.” Calvert, 409 F.3d at 297 n.6. Even though the array of objective evidence of abnormalities is present in the record, Dr. Pemmaraju simply doubts that someone with all of the conditions enumerated in the report could have the kind of pain that would prevent him from performing sedentary work. Notably, Dr. Pemmaraju omits any mention of fibromyalgia with which the plaintiff has been diagnosed – a condition that can be painful and difficult to detect with objective means, as noted earlier. See Rogers v. Comm’r of Soc. Sec., 486 F.3d 234, 244 n.3 (6th Cir. 2007) (stating that a growing number of courts recognized that fibromyalgia is a disabling impairment that is not susceptible of verification by traditional means). And although the plan gives MetLife authority to conduct -20- medical examinations, Dr. Pemmaraju makes his conclusions about the plaintiff’s credibility without interviewing the plaintiff or the plaintiff’s treating physician and without the benefit of a full functional capacity evaluation, the absence of which he used to impeach Dr. Seidel’s report. See Calvert, 409 F.3d at 295 (considering the decision to forego personal examination of a claimant as one of the factors in the overall assessment of the decision for arbitrariness and capriciousness). Third, neither the consultants nor MetLife’s assessors mentioned the Social Security Administration’s finding of disability. It is true that qualifying for Social Security disability benefits does not necessarily mean that a claimant would qualify for LTD benefits under a particular ERISA plan. Whitaker v. Hartford Life & Accident Ins. Co., 404 F.3d 947, 949 (6th Cir. 2005). This is so because the Social Security disability program and ERISA benefit plans have certain “critical differences” stemming from obligatory nature of one program and voluntary nature of the other. Black & Decker Disability Plan v. Nord, 538 U.S. 822, 832 (2003). Further, ERISA plans are not uniform, and the administrator must administer benefits in accordance with the goals of each individual plan. Spangler, 313 F.3d at 361. Nonetheless, the Social Security Administration’s decision is “far from meaningless.” Calvert, 409 F.3d at 294. In a situation where the plan administrator encourages the applicant to apply for Social Security benefits and financially benefits from the applicant’s receipt of them, the plan administrator should explain why it is taking a position different from the Social Security Administration, and its failure to do so may be weighed in favor of finding that the decision was arbitrary and capricious. DeLisle v. Sun Life Assurance Co. of Canada, 558 F.3d 440, 446 (6th Cir. 2009) (citing Bennett v. Kemper Nat’l Servs., 514 F.3d 547, 554 (6th Cir. 2008 . The case for arbitrariness is especially strong where failure to explain the -21- deviation from the SSA findings is coupled with some degree of conflicting interests. DeLisle, 558 F.3d at 446 (citing Glenn, 128 S. Ct. at 2352). In this case, there was testimony from a vocational expert in the Social Security proceedings that discussed the plaintiff’s vocational capacity. Dr. Elaine Tripi testified that if the plaintiff’s description of his pain were credible, he could not perform work at any exertional level. The finding satisfies the plan’s definition of disability. Although MetLife did not have to accept that finding, it also was not at liberty to ignore it altogether. Fourth, it appears that MetLife gave no weight to Dr. Seidel’s opinions. Seidel was a treating doctor who actually examined and cared for the plaintiff. The Supreme Court has held that unlike Social Security cases, there is no automatic deference required of plan administrators for treating physicians. Black & Decker Disability Plan, 538 U.S. at 834 (“courts have no warrant to require administrators automatically to accord special weight to the opinions of a claimant’s physician; nor may courts impose on plan administrators a discrete burden of explanation when they credit reliable evidence that conflicts with a treating physician’s evaluation.”). However, the Supreme Court was also careful to point out that where reliable, opinions of a treating physician must be given appropriate weight. Ibid. Courts have endorsed the practice adopted by many insurance companies to refer a claimant’s file for review by an independent physician (or even a nurse), even if that physician does not conduct a physical examination of the claimant but relies on the review of a file instead. Calvert, 409 F.3d at 296; Boone, 161 F. App’x at 473-74 (approving practice of review by nurse). However, when assessing a non-treating physician’s opinion, the Sixth Circuit developed certain common-sense guidelines, -22- the court may consider several factors, including: (1) whether the reviewing physician has a conflict of interest, Moon [v. Unum Provident Corp.], 405 F.3d [373, 381-82 (6th Cir. 2005)]; (2) whether the administrator decided that the physician should conduct a file review rather than a physical exam, particularly when it has the right to require a physical exam, Calvert v. Firstar Fin. Inc., 409 F.3d 286, 295 (6th Cir. 2005); and (3) whether the non-treating physician’s conclusion makes a “critical credibility determination[] regarding a claimant’s medical history and symptomology” without observing the claimant, id. at 297. Houston v. Unum Life Ins. Co. of Am., 246 F. App’x 293, 301-02 (6th Cir. 2007) (footnote omitted). Especially where the plan administrator reserved a right to obtain an independent medical examination of the claimant but chose not to, relying instead on the opinion of a reviewing physician who, without personally meeting with the claimant, doubted the credibility of his complaints of pain, the administrator’s decision to forego physical examination is a factor that weighs in favor of finding the decision to be arbitrary and capricious. Helfman v. GE Group Life Assurance Co., 573 F.3d 383, 395-96 (6th Cir. 2009) (finding that “where an administrator exercises its discretion to conduct a file review, credibility determinations made without the benefit of a physical examination support a conclusion that the decision was arbitrary”); see also Smith v. Continental Cas. Co., 450 F.3d 253, 263-64 (6th Cir. 2006); Evans, 434 F.3d at 878-79 (citing Calvert, 409 F.3d at 297). The justification for rejecting Dr. Seidel’s opinions appears to be a lack of objective verification, as mentioned by the consulting medical file reviewers and other claim processors. But as discussed above, the record does not support that criticism. Nor do the circumstances of the file review support the credibility determinations that were inherent in the ultimate decision to deny benefits. The selection of Dr. Pemmaraju’s opinion of the severity of the plaintiff’s limitations over Dr. Seidel’s appears to be nothing more than arbitrary. Fifth, the manner in which the defendant processed this claim leads to the conclusion that its denial of benefits was influenced by its conflicting interests and was arbitrary. The defendant -23- determined in June 2006 that the plaintiff was disabled within the meaning of the plan and was entitled to continuation of his LTD benefits beyond the initial thirty-six months. The defendant presented no evidence of improvement in the plaintiff’s condition to account for the reversal of its position only eight months later. To the contrary, the plaintiff’s previous MRI reports revealed worsening of his degenerative disc disease and spinal stenosis from 2003 to 2005, and the new test performed on September 16, 2007 revealed disc abnormalities “at every level of the cervical spine.” AR 192. Although the first grant of LTD benefits does not entitle the plaintiff to those benefits throughout his normal work life, it is only reasonable that some new evidence calling into doubt the continuing disability of the claimant is necessary to justify the change of course. See, e.g., Rose, 268 F. App’x at 447 (the results of surveillance of the plaintiff were sufficient to discontinue benefits). Instead, the defendant relied on Mary Hale’s consultative report dated January 18, 2007, which in turn was based on Dr. Seidel’s August 2006 report that had been repudiated. When the plaintiff appealed the determination a second time, the defendant engaged medical consultants whose review of the medical record was somewhat selective, giving the impression that they “‘cherry-picked’ [his] file in hopes of obtaining a favorable report.” Spangler, 313 F.3d at 362; see also Nord, 538 U.S. at 832 (acknowledging that “physicians repeatedly retained by benefits plans may have an incentive to make a finding of ‘not disabled’ in order to save their employers money and preserve their own consulting arrangements”) (quotation marks and citation omitted); Kalish v. Liberty Mut./Liberty Life Assurance Co. of Boston, 419 F.3d 501, 507-08 (6th Cir. 2005) (“This court has similarly observed that a plan administrator, in choosing the independent experts who are paid to assess a claim, is operating under a conflict of interest that provides it with a ‘clear incentive to contract with individuals who were inclined to find in its favor that [a claimant] was not entitled to continued -24- [disability] benefits.’”) (quoting Calvert, 409 F.3d at 292). This approach suggests that the defendant’s interest in the claim of this relatively young man extended beyond discharging its fiduciary obligations to the plan and all its participants and beneficiaries under 29 U.S.C. § 1104. The inference is unavoidable that the defendant yielded to the “perpetual conflict with its profit-making role as a business,” requiring the “arbitrary and capricious standard” to “be shaped by the circumstances of the inherent conflict of interest.” Miller, 925 F.2d at 984. The Court finds that the defendant’s second reversal of its position – resulting in the denial of LTD benefits to the plaintiff – was arbitrary and capricious. III. The Court concludes that the defendant’s decision finding the plaintiff not disabled within the meaning of the KPMG Consulting, Inc. employee benefits plan cannot be sustained on this record even under the most deferential review standard. Accordingly, it is ORDERED that the plaintiff’s motion to reverse the decision of the defendant plan administrator [dkt #15] is GRANTED. It is further ORDERED that the defendant’s motion to affirm the decision of the plan administrator [dkt #17] is DENIED. It is further ORDERED that the matter is remanded to the defendant plan administrator with directions to pay benefits in accordance with the KPMG Consulting, Inc. long term disability benefits plan. Dated: March 9, 2010 s/David M. Lawson DAVID M. LAWSON United States District Judge -25- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 9, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -26-

=== Fieger v. Federal Election Commission ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION GEOFFREY NELS FIEGER, Plaintiff, v. FEDERAL ELECTION COMMISSION, ___________________________________/ Defendant. Case Number 08-14125 Honorable David M. Lawson OPINION AND ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT The plaintiff in this case, Geoffrey Nels Feiger, filed the present action under the Freedom of Information Act to compel the production of certain documents by the Federal Election Commission (FEC). The documents related to communications between that agency and Executive Branch officials that concerned possible violations of the Federal Election Campaign Act by Feiger’s law firm and its members and employees. The defendant has filed a motion for summary judgment alleging that the Court lacks subject-matter jurisdiction due to the named plaintiff’s lack of standing; the defendant’s search for records was adequate under the FOIA because it made a good faith effort to conduct a search for the requested records and has disclosed all non-exempt portions of records responsive to the FOIA requests; documents mentioning the Feiger firm only in passing were not responsive and non-disclosure of them was justified; and other documents withheld fit within exemptions in the statute. The Court heard oral argument on the motion on February 24, 2010. The Court now finds the jurisdictional issue dispositive; the motion must be granted and the case dismissed, because the documents were not requested by or on behalf of Feiger, the named plaintiff, and therefore he has no standing to complain about their non-production. I. On November 30, 2005, over 100 federal agents raided the law offices of Fieger, Fieger, Kenney & Johnson, P.C. in Southfield, Michigan and executed search warrants at the homes of several of the firm’s employees in an effort to find evidence of violations of the Federal Elections Campaign Act. A number of firm personnel were interrogated and records were seized. In August 2008, the law firm’s principal owners, plaintiff Geoffrey Feiger and his partner Vernon Johnson, were indicted for making illegal campaign contributions to a candidate in the 2004 presidential primary election. Feiger defended in part on the theory that his prosecution was politically motivated by Executive Branch officials who were members of the opposite political party. He was acquitted of the charges by a jury on June 2, 2009. It appears that the FEC commenced a civil enforcement proceeding thereafter. Counsel for the plaintiff reported at oral argument that the civil matter was resolved in October 2009 and made public the next month. The record suggests that the law firm then began a campaign to gather records relating to communications between the FEC and then-White House officials, especially Executive Branch political operatives and appointees, to determine if undue influence was exerted over the election law enforcement agency. The law firm accused the Bush Justice Department of conspiring with the FEC to politicize the enforcement of federal campaign finance laws. The first formal request for records under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, came from attorney Michael Deszi, who was a member of the Feiger law firm at the time of his request but who had not joined the firm until March 2006, after the raid. Deszi wrote a letter to the FEC on July 3, 2008, which read: -2- Dear Ms. Salley: Pursuant to the Freedom of Information Act, I am hereby requesting the following: 1. Any and all documents of any kind, including, but not limited to, memoranda, correspondence and e-mails dated from January 2001 through the present between officials, agents and/or employees of the FEC and officials, agents and/or employees of the Department of Justice relating to possible violations of the Federal Election Campaign Act by the law firm of Fieger, Fieger, Kenney & Johnson, P .C., including its partners, employees, contractors, associates, and their children and spouses. 2. Any and all documents of any kind, including, but not limited to, memoranda, correspondence and e-mails dated from January 2001 through the present between (to/from) FEC officials, employees or agents, including former FEC Chairman Michael E. Toner, and White House officials, employees or agents, including former White House Aide Karl Rove and former White House Counsel Harriet Miers, or their agents and/or assistants, relating in any way to enforcement of federal criminal statutes, including, but not limited to, the Federal Election Campaign Act. I look forward to your prompt response consistent with the requirements of the Freedom of Information Act. Please do not hesitate to contact me with any questions. Thank you for your kind attention to this matter. Very truly yours, FIEGER, FIEGER, KENNEY, JOHNSON & GIROUX, PC /s/ Michael Deszi On October 27, 2008, Mr. Dezsi sent a second request to the FEC for additional documents, which read as follows: Dear Ms. Salley: Pursuant to the Freedom of Information Act, I am hereby requesting the following: 1. Any and all documents of any kind, including, but not limited to, memoranda, correspondence and e-mails dated from January 2001 through the present between (to/from) FEC officials, employees or agents, including former FEC Chairman Michael E. Toner, and White House officials, employees or agents, including former White House Aide Karl Rove and former White House Counsel Harriet Miers, or their agents and/or assistants, including any and all present and/or former employees and/or agents of the Executive Office of the President and/or Vice President. -3- I look forward to your prompt response consistent with the requirements of the Freedom of Information Act. Please do not hesitate to contact me with any questions. Thank you for your kind attention to this matter. Very truly yours, FIEGER, FIEGER, KENNEY, JOHNSON & GIROUX, P.C. /s/ Michael R. Dezsi The FEC received the first request on July 9, 2008 and notified Mr. Deszi on September 30, 2008 that it had completed its search for and review of documents. The FEC received the second request on November 3, 2008 and requested several extensions. It did not complete its review until June 2009, when it notified Mr. Dezsi of that fact. Apparently dissatisfied with the response (or lack of one), the plaintiff filed his complaint in this case on September 25, 2008. As is evident from the case caption, the case was filed in the name of plaintiff Geoffrey Feiger. The FEC filed its answer on October 29, 2008 asserting, among other things, that Feiger never requested documents either personally or through Mr. Dezsi in a representative capacity, and alleged that the Court lacked subject matter jurisdiction over the dispute. On November 19, 2008, Mr. Dezsi sent a third letter to the FEC explaining that he had been acting on behalf of Feiger and explaining that his requests were made as Feiger’s attorney. The plaintiff filed an amended complaint on February 19, 2009 to include within the lawsuit the documents requested in the October 27, 2008 letter. The plaintiff now asks the Court to order the defendant to provide all relevant documents, expedite the proceedings under 28 U.S.C. § 1657, and award him costs and attorneys fees pursuant to 5 U.S.C. § 552(a)(4)(E). The defendant filed a motion for summary judgment on September 7, 2009, arguing that the plaintiff lacks standing, the agency made a good-faith effort to locate the requested items, the case is moot because the plaintiff has not challenged any of the withholding -4- determinations, and non-production of certain documents is justified by certain statutory exemptions. The Court heard oral argument on February 23, 2010. II. The Freedom of Information Act (FOIA) “was designed ‘to pierce the veil of administrative secrecy and to open agency action to the light of public scrutiny.’” U.S. Dep’t of State v. Ray, 502 U.S. 164, 173 (1991) (quoting Dep’t of Air Force v. Rose, 425 U.S. 352, 361 (1976 ; see also Abraham & Rose, P.L.C. v. United States, 138 F.3d 1075, 1078 (6th Cir. 1998); S. Rep. No. 89-813, at 38 (1965) (“Knowledge will forever govern ignorance, and a people who mean to be their own governors, must arm themselves with the power knowledge gives. A popular government without popular information or the means of acquiring it, is but a prologue to a farce or a tragedy or perhaps both.” (quoting James Madison . Therefore, “upon any request for records which (I) reasonably describes such records and (ii) is made in accordance with published rules stating the time, place, fees (if any), and procedures to be followed, [federal agencies] shall make the records promptly available to any person.” 5 U.S.C. § 552(a)(3)(A). When a requesting party is denied access to records, that person may turn to the courts for relief. As the Supreme Court explained, “the Freedom of Information Act creates a private cause of action for the benefit of persons who have requested certain records from a public agency and whose request has been denied. 5 U.S.C. § 552(a)(3). The statute requires nothing more than a request and the denial of that request as a predicate to a suit in the district court.” United States v. Richardson, 418 U.S. 166, 204 (1974). However, “a person whose name does not appear on a request for records has not made a formal request for documents within the meaning of the statute. Such a person, regardless of his or her personal interest in disclosure of the requested documents, -5- has no right to receive . . . the documents.” McDonnell v. United States, 4 F.3d 1227, 1236-37 (3d Cir. 1993) (citations omitted). It logically follows, then, that a person whose name does not appear on a request for records has no standing to prosecute a lawsuit to compel disclosure of those records. That is because “[a] ‘case or controversy’ conferring standing arises only when a person makes a request for information under the FOIA and the petitioned agency denies that request.” Id. at 1238. Standing is required in order to confer subject matter jurisdiction upon federal courts under Article III of the Constitution. It is “the threshold question in every federal case.” Warth v. Seldin, , 498 (1975). The Supreme Court has stated that the standing requirement “limits federal court jurisdiction to actual controversies so that the judicial process is not transformed into ‘a vehicle for the vindication of the value interests of concerned bystanders.’” Coal Operators & Assocs., Inc. v. Babbitt, 291 F.3d 912, 915-16 (6th Cir. 2002) (quoting Valley Forge Christian College v. Ams. United for Separation of Church & State, Inc., , 473 (1982 . There are three constitutional requirements for standing. See McConnell v. Fed. Election Comm’n, 540 U.S. 93, 225-26 (2003); City of Cleveland v. Ohio, 508 F.3d 827, 835 (6th Cir. 2007). “To establish Article III standing, a litigant must show (1) an injury in fact; (2) a causal connection between the injury and the conduct complained of; and (3) that the injury will likely be redressed by a favorable decision.” Barnes v. City of Cincinnati, 401 F.3d 729, 739 (6th Cir. 2005) (citing Lujan v. Defenders of Wildlife, , 560-61 (1992 . In addition to the constitutional requirements, a plaintiff must also satisfy three prudential standing requirements. See City of Cleveland, 508 F.3d at 835. First, a plaintiff must “assert his own legal rights and interests, and cannot rest his claim for relief on the legal rights or interests of -6- third parties.” Warth, 422 U.S. at 499 (citations omitted). Second, a plaintiff’s claim must be more than a “generalized grievance” that is pervasively shared by a large class of citizens. Coal Operators, 291 F.3d at 916 (citing Valley Forge, 454 U.S. at 474-75). Third, in statutory cases, the plaintiff’s claim must fall within the “zone of interests” regulated by the statute in question. Ibid. “These additional restrictions enforce the principle that, ‘as a prudential matter, the plaintiff must be a proper proponent, and the action a proper vehicle, to vindicate the rights asserted.’” Coal Operators, 291 F.3d at 916 (quoting Pestrak v. Ohio Elections Comm’n, 926 F.2d 573, 576 (6th Cir. 1991 . It is not possible to discern from the two letters Mr. Dezsi sent to the FEC a request for documents by or on behalf of plaintiff Feiger. Feiger did not sign the letters, and nowhere in either letter is there a statement or suggestion that Mr. Dezsi was making the requests on Feiger’s behalf. Nor does the context of the request compel an inference that the true requesting party is plaintiff Feiger himself. The letters were written on law firm letterhead, but the circumstances leading to the FOIA request could make nearly all the firm employees interested parties. Of course, a personal interest in the events is not necessary to justify a request for information. “Anyone whose request for specific information has been denied has standing to bring an action; the requester’s circumstances – why he wants the information, what he plans to do with it, what harm he suffered from the failure to disclose – are irrelevant to his standing.” Zivotofsky ex rel. Ari Z. v. Sec’y of State, 444 F.3d 614, 617 (D.C. Cir. 2006); see also Public Citizen v. U.S. Dep’t of Justice, 491 U.S. 440, 449 (1989) (holding that refusal to disclose records under FACA constituted sufficient injury to bestow standing, similar to “when an agency denies requests for information under the Freedom of Information Act”). However, there must be an identity between the requesting person and the -7- party bringing the lawsuit. “Although ‘the identity of the requester’ is generally ‘immaterial’ to ‘the exercise of the rights provided by the Act,’ ‘ the nature of an entity suing under the FOIA is not without relevance . . . .’” Feinman v. FBI, --- F. Supp. 2d ---, 2010 WL 276176, at *3 (D.D.C. Jan. 26, 2010) (citing Military Audit Proj. v. Casey, 656 F.2d 724, 730 n.11 (D.C. Cir. 1981) (emphasis added . A plaintiff who has neither made a request for information on his own nor explicitly through counsel cannot show an injury in fact, which is a necessary constitutional requirement of standing. Moreover, a plaintiff who bases a FOIA lawsuit upon the request for information by another person does not satisfy the prudential requirement that he must assert a violation of his own legal rights. A plaintiff who establishes Article III standing requirements faces the additional “rule that a party ‘generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties.’” Kowalski v. Tesmer, 543 U.S. 125, 129 (2004) (quoting Warth, 422 U.S. at 499). There is an “exception” to this rule when “the party asserting the right has a ‘close’ relationship with the person who possesses the right,” and “there is a ‘hindrance’ to the possessor’s ability to protect his own interests.” Id. at 130. The “close relationship” element requires consideration of whether “‘the relationship between the litigant and the third party [is] such that the former is fully, or very nearly, as effective a proponent of the right as the latter.’” Powers v. Ohio, 499 U.S. 400, 413 (1991) (quoting Singleton v. Wulff, 428 U.S. 106, 115 (1976 . The weight of authority cuts against recognizing third-party standing in the FOIA context, even when the request is made by a lawyer, in the absence of a clear statement that the request is being made on behalf of a named client. -8- In McDonnell v. United States, the Third Circuit held that a “passing reference” to the plaintiff’s name in the FOIA request was insufficient to confer standing. The reference to the plaintiff in that request did “not sufficiently identify him with the person making the request to confer on him standing to challenge the denial of the request under FOIA.” McDonnell, 4 F.3d at 1238 n.6; see also Mahtesian v. U.S. Office of Pers. Mgmt., 388 F. Supp. 2d 1047, 1048-49 (N.D. Cal. 2005) (discussing McDonnell). The McDonnell court drew support for this conclusion from the legislative history of FOIA, which the court read as demonstrating “Congress’s intent to identify the person making the request with the person aggrieved when a request is denied.” McDonnell, 4 F.3d at 1236-37. The plaintiff argues here that Mr. Dezsi obviously was acting as counsel in a representative capacity, and attorneys frequently make FOIA requests on behalf of clients. He says that when investigating potential claims against governmental entities, FOIA is a common pre-suit device for obtaining information for a client’s nascent cause of action. True enough. But federal FOIA jurisprudence leaves no doubt that a lawyer’s request for information must plainly spell out the representative capacity and the identity of the client before that client can bring a FOIA action in her own name. When an attorney files a FOIA request on behalf of a client, the attorney is the one to whom courts have granted standing to sue. See Constangy, Brooks & Smith, by Bridgesmith ex rel. Teledyne Indus., Inc. v. NLRB, 851 F.2d 839, 840 n.1 (6th Cir. 1988) (noting that the plaintiff, a law firm, had standing to request the FOIA documents on behalf of its client); see also Burka v. U.S. Dep’t of Health & Human Servs., 142 F.3d 1286, 1291 (D.C. Cir. 1998); Unigard Ins. Co. v. Dep’t of Treasury, 997 F. Supp. 1339, 1341 (S.D. Cal. 1997) (holding that when attorney representing Unigard submitted a FOIA request in his own name, Unigard lacked standing because -9- its name did not appear on the request itself) In Three Forks Ranch Corp. v. Bureau of Land Mgmt., 358 F. Supp. 2d 1 (D.D.C. 2005), for example, the court denied standing where the lawyer had identified his client by name, but did not assert that the request was being made “on behalf of” that client. Id. at 2. After discussing these cases, the court in Mahtesian v. U.S. Office of Personnel Management concluded that “reference to an anonymous [or named] client in a FOIA request[] can not, alone, confer standing on that client, any more than a reference to an anonymous [or named] person in a complaint could, by itself, confer standing on that person.” 388 F. Supp. 2d at 1050. The plaintiff states that the representative capacity was made very clear in Mr. Dezsi’s November 19, 2008 letter. However, Mr. Dezsi did not send that letter until after the complaint in this case was filed. “Jurisdiction, including standing, is ‘“assessed under the facts existing when the complaint is filed.”’” Am. Civil Liberties Union of Ohio, Inc. v. Taft, 385 F.3d 641, 645 (6th Cir. 2004) (quoting Cleveland Branch, NAACP v. City of Parma, 263 F.3d 513, 524 (6th Cir. 2001 ; see also Television Reception Corp. v. Dunbar, 426 F.2d 174, 177 (6th Cir. 1970) (“The general rule is that federal jurisdiction is tested according to the facts as they exist at the time an action is initiated”). Developments occurring after the lawsuit has been filed cannot confer standing that did not exist when the case was commenced. III. The requests for information dated July 3 and October 27, 2008 would have supported a FOIA claim by Mr. Dezsi, and perhaps even by the Feiger law firm. However, because there is no evidence presented that the named plaintiff ever requested information from the FEC, or that information was requested on his behalf, Article III standing has not been established. The Court, therefore, has no subject-matter jurisdiction over the dispute in this case. -10- Accordingly, it is ORDERED that the defendant’s motion for summary judgment [dkt #41] is GRANTED IN PART. It is further ORDERED that the matter is DISMISSED for want of subject-matter jurisdiction. Dated: February 26, 2010 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 26, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -11-

=== Systematic Recycling v. City of Detroit et al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION SYSTEMATIC RECYCLING, LLC, v. Plaintiff, CITY OF DETROIT and WILLA J. WILLIAMS, ______________________________________/ Defendants. Case Number 09-11430 Honorable David M. Lawson OPINION AND ORDER GRANTING DEFENDANTS’ MOTION FOR CLARIFICATION OF AND RELIEF FROM TEMPORARY RESTRAINING ORDER AND DENYING PLAINTIFF’S AMENDED MOTION FOR PRELIMINARY INJUNCTION The plaintiff is a company that operates a composting facility in the Delray neighborhood of Detroit under a conditional zoning permit issued by the City of Detroit’s Buildings and Safety Engineering Department. One of the conditions to the grant of the zoning permit was the execution of a “Community Host Agreement” between the plaintiff and the city, which required city council approval. After the Detroit City Council approved the Community Host Agreement and the conditional zoning permit was issued, disturbing facts came to light suggesting that the approval may have been procured by bribes, which cast a shadow over the validity of the agreement. In addition, the city received complaints about the operation of the facility, and the fire department reported possible spontaneous combustion of some of the compost. Rather than attempt to rescind the Host Community Agreement, however, the city simply let it expire at the end of its stated two- year duration, and then moved to revoke the conditional land use grant based on the failure of that condition. The plaintiff filed an action in the Wayne County, Michigan circuit court under 42 U.S.C. § 1983 alleging a violation of its due process and equal protection rights and obtained a temporary restraining order (TRO) enjoining the city and its Interim Director of the Department of Environmental Affairs, defendant Willa J. Williams, from taking action to revoke the permit. The defendants timely removed the action to this Court and filed a motion seeking clarification of or relief from the state court’s TRO. The plaintiff filed an amended motion for preliminary injunction. The Court held hearings on the motions, permitted limited discovery, and received several supplemental filings from all parties. While the matters have been under advisement, the city has honored the state court’s TRO. The Court now finds that the plaintiff has not established a violation of its rights under the Equal Protection Clause, and even if the plaintiff has a property interest in the continuation of the conditional zoning permit, which is questionable, the city’s proposed pre- deprivation hearing procedure coupled with the opportunity for post-hearing judicial review provides ample procedural protection to satisfy the Due Process Clause. Because the plaintiff has not demonstrated a likelihood of success on the merits, and other factors do not favor the plaintiff, the Court will grant the defendant’s motion for clarification, deny the plaintiff’s amended motion for a preliminary injunction, and dissolve the state court’s TRO. I. Systematic Recycling, LLC operates a composting facility located at 9125 Jefferson in the Delray neighborhood of the City of Detroit, which, according to the defendants, is an area of intense industrial activity zoned as “M4" on the Detroit Zoning Ordinance Map. Renee Michaels is the sole owner of Systematic Recycling. Michaels and her family members previously had operated a composting facility in Macomb County known as King of the Wind Farms, Inc.; according to the defendants, that facility was closed because it generated about four hundred complaints of nuisance. Michaels then leased the facility at 9125 Jefferson from James R. Rosendall, a former Synagro -2- Technologies vice president. Before the plaintiff began its current operations, the facility housed a paper company plant. As noted above, the land the plaintiff proposed to use for the composting facility was zoned “M4" under Article X, Division 5 of the Detroit City Zoning Ordinance. A composting facility is not listed as a permitted use in that district, and the city’s ordinances in effect at the time did not mention “composting facilities,” although it professed to regulate such uses as “recycling centers.” Wayne County regulated composting facilities under its solid waste ordinance, which required an operator to enter into a host community agreement under its solid waste management plan. For the City of Detroit, it appears that the plaintiff’s application to operate a composting facility was the first of its kind. On April 26, 2006, the City of Detroit’s Buildings and Safety Engineering Department conditionally approved the plaintiff’s application to establish and operate the composting facility. One of the conditions for the approval was that “Systematic Recycling shall enter into a Host Community agreement with the City of Detroit’s Department of Environmental Affairs prior to operating the site as a Compost facility.” Defs.’ Mot. for Clarification or Relief from Apr. 30, 2009 Order [dkt. # 5-3], Ex. A (Conditional Zoning Permit), at ¶ 26. However, the city council was slow to approve the Host Community Agreement, and Systematic was allowed to begin operation and start receiving waste in the summer of 2006 under a temporary permit issued by the City. It was not until March 30, 2007, almost a year later, that the plaintiff finally entered into the Host Community Agreement with the city. The Host Community Agreement was to “continue in effect for a period of Two (2) years” beginning on the date it was signed. Defs.’ Mot. for Clarification or Relief from Apr. 30, 2009 Order [dkt. # 5-4], Ex. B at § 17. -3- The defendants explain that the host community agreement requirement was important to them in order to enhance the city’s regulatory authority over composting facilities. Vincent R. Nathan, Ph.D., the director of the city’s Department of Environmental Affairs, testified that there was “a void in the law between state and Wayne County.” Pl.’s Notice of Filing Documents in Supp. of Mot. for Prelim. Inj., Ex 5 [dkt. # 21-8] (Nathan dep.) at 49. He said the state and local governments “had no composting regulation, so we developed the host community agreement. City council had to approve it.” Ibid. It was not until March of 2008 that the State of Michigan enacted legislation to regulate composting facilities located in the state. Before that time, unless a property owner’s practices violated the air or water pollution provisions of certain federal statutes, the state Department of Environmental Quality could not take any enforcement actions against owners of composting facilities. See Analysis of Senate Bill 513 as enacted, Jan. 30, 2007, 94th Leg., Reg. Sess. (Mich. 2007). The statute regulating composting facilities was enacted in January 2008, see Mich. Comp. Laws § 324.11521 (eff. Mar. 26, 2008), based on the concern that “existing law does not give State agencies sufficient authority to take actions against rogue composters in a timely fashion.” See First Analysis of Senate Bill 513, July 5, 2007, 94th Leg., Reg. Sess. (Mich. 2007). The only facility affected by the new statute in the City of Detroit happened to be Systematic. Before the 2008 statute, the city’s regulatory authority over composting facilities rested upon Wayne County’s solid waste ordinance, see Enrolled Wayne Co. Ord. 2004-787, § 235, and the Wayne County Solid Waste Management Plan, which city representatives did not regard as especially effective. Detroit does not have an ordinance directly regulating composting facilities in the city either. However, the city’s zoning ordinance regulates recycling centers, which include -4- “land, with or without buildings, upon which wastes are recovered in a process designed to provide an acceptable reuse of all or part of the waste.” City of Detroit Zoning Ordinance § 61-16-162. The plaintiff’s business fits that definition, and as such it is designated as a “conditional manufacturing and industrial use[]” under the ordinance, see id. § 61-10-83(12), in the M4 District, id. § 61-10-79. The city concluded therefore that its Buildings and Safety Engineering Department could “impose reasonable conditions or limitations upon the establishment, location, construction, maintenance, or operation of the Conditional Use as may be necessary, in its judgment, for the protection of the public interest, health, safety, welfare and environment. . . .” Id. § 61-3-241(b). The host community agreement requirement was one of those conditions. The host community agreement included a number of requirements and restrictions for operating the facility, closure and remediation provisions, and performance bond obligations, and it stated that a violation of any of these conditions could result in the revocation of the grant. The agreement required the plaintiff to pay a one-time fee of $10,000 to the city and a solid waste host fee of $10,000 to be paid semiannually, and submit to regular inspections by the city officials. The termination provisions state: This Agreement shall take effect on the date executed by the parties, and shall continue in effect for a period of Two (2) years. The parties agree to review the host community payment provisions of this Agreement from time-to-time [sic], but in no event later than the annual anniversary of this Agreement. This fee will increase or decrease by the same percentage as the Consumer Price Index, All Urban, which shall be measured over the most recently reported 12-month period. The initial adjustment shall take place on the first anniversary of this Agreement with each subsequent adjustment to take place on an annual basis thereafter. This agreement may be terminated by the City for any reason if the Applicant has received two (2) or more significant violations from the City within a 180 day time period. The determination of what constitutes a significant violation shall be within the sole discretion of the Director of Department of Environmental Affairs. Said termination shall be effective 30 days after written notice of said termination -5- is placed in a United States Post Office mail receptacle and addressed as specified in Paragraph 21(E). Upon termination of this Agreement, Applicant shall have no right to continue to operate the Facility. Defs.’ Mot. for Clarification or Relief from Apr. 30, 2009 Order [dkt. # 5-4], Ex. B (Host Community Agr.) at § 17. According to the City, the two-year term, which is uncharacteristic for host community agreements in general, was imposed out of concern that the facility might become a nuisance. The plaintiff denies that any such concerns ever existed and argues that the two-year limit was imposed for the purpose of reviewing and adjusting the host community payment provisions of the agreement. The plaintiff commenced operations in the spring of 2006. Under the terms of the Host Community Agreement, the plaintiff agreed to comply with all applicable state, local, and federal laws, regulations and requirements regarding the construction and operation of the composting facility, including but not limited to all environmental requirements. Id. at § 13. However, the operations of Systematic Recycling became a subject of several residents’ complaints. One resident complained of offensive odors. Defs.’ Mot. [dkt # 5], Ex. H (Anthony Laginess aff.) at ¶ 6. An owner of a small store near the facility, stated that she had heard comments from many of her customers “that the smell outside the store is horrible.” Defs.’ Mot. [dkt # 5], Ex. I (Norma West aff.) at ¶ 5. She believed that “customers have left the parking lot of my business to go eat someplace else because the smell is so bad.” Ibid. In its defense, the plaintiff mentions that the Wayne County circuit court case in which the two affidavits were filed were ultimately resolved in favor of Systematic Recycling on September 5, 2007. Systematic further emphasizes that the accounts of these two affiants were discredited during their cross-examination in the second -6- negligent and intentional nuisance case against Systematic. Id. at 10. That latter action remains to be pending in the Wayne County, Michigan circuit court. Ibid. Within the period from December 2006 through November 2008, Systematic Recycling received several citations and warnings from the Michigan Department of Environmental Quality (“MDEQ”) and Wayne County Department of Environment (“WCDE”), including citations and warnings for violations of the rule against emission of odors beyond the facility’s property line, accumulating an excessive amount of yard clippings in violation of Mich. Comp. Laws § 324.11501 and fires that occurred from heat generated by compost piles maintained in violation of the Wayne County solid waste ordinances. The MDEQ sent Michaels a warning letter on October 7, 2008 citing problems including improper storage of yard clippings in excess of allowable limits, ponding water, pests between waste piles, and fires requiring Detroit Fire Department responses. The City of Detroit itself never issued any citations to the plaintiff; however, an inspector for the City of Detroit Department of Environmental Affairs also detected strong composting odors emanating from the facility. The city now insists that the facility was in violation of state law even at the time of a final inspection on April 1, 2009. The plaintiff, on the other hand, denies ever being issued a citation by the city for violation of any ordinance, statute, or condition of the plaintiff’s conditional land use permit, and contends that it never received two “significant violations” within any given 180-day time period. The plaintiff also insists that it has never been fined by authorities. The plaintiff says that the citations they did receive were minor and when Systematic requested a review of the citations issued by the Wayne County Department of Environment in 2007 and 2008, the department dismissed or abandoned the prosecution of these citations. -7- In January of 2009, evidence came to light that Systematic Recycling might have secured its Host Community Agreement with the city by means of a bribe carried out by James R. Rosendall, an owner of the company that leased to Systematic its land in southwest Detroit. According to Rosendall’s statements in a guilty plea agreement filed in this court, Systematic Recycling was one of the two companies that bribed the city officials to gain certain business benefits. Rosendall stated that his business owned the East Jefferson property, he leased it to Systematic to operate a composting facility, Systematic began operating under a temporary permit, and the City of Detroit closed the facility because it had not obtained a host community agreement from the city. Rosendall then stated: Defendant [Rosendall] discussed giving Aide to City Official A a financial interest in defendant’s business in exchange for Aide to City Official A’s assistance in obtaining the Community Host Agreement. Defendant also gave Aide to City Official A $2,000 in cash to give to City Official B as an inducement to facilitate the City administration’s support of the Community Host Agreement. Defendant drove Aide to City Official A to City Official B’s home, at which time Aide to City Official A dropped off money for City Official B. In September and October 2007, Relative A also inquired about receiving regular payments from Systematic Recycling, although Relative A did not facilitate the Community Host Agreement. During the period October to December, 2006, defendant caused Systematic Recycling to pay Intermediary A over $20,000, in part, to help defendant obtain later approval of the Community Host Agreement with the Detroit City Council, which was receiving opposition to the facility from local community groups and activists. Def.’s Mot. [dkt # 5], Ex. J (Rule 11 Plea Agreement in United States v. Rosendall) at 8-9. Rosendall then stated that Intermediary A did not pay the bribe to Council Member A, as intended, so at a council session at which the host community was considered, “Council Member A said words to the effect of ‘you don’t have my vote and you’re short.’” Ibid. However, after the financial arrangements were completed, “[o]n March 28, 2007, Council Member A voted in favor of the -8- Community Host Agreement, allowing Systematic Recycling to restart composting operations.” Ibid. As these allegations of bribery surfaced and as Synagro (the other company that benefitted from Rosendall’s bribery scheme) voluntarily terminated its contract with the city, the city decided not to revoke the host community agreement, but rather to simply let it expire at the end of March 2009. Interim Director of the City of Detroit Department of Environmental Affairs Willa J. Williams notified the plaintiff in a letter on March 2, 2009 as follows: The Host Community Agreement (Agreement) entered into on March 30, 2007 between the City of Detroit (City) and Systematic Recycling, L.L.C. (SR), for a Compost Recycling Operation at 9125 W. Jefferson, Detroit, MI, expires March 31, 2009. This letter is to notify SR that the City shall allow the agreement to expire. In accordance with Section 12, Clean-Up and Guarantee, and Section 13, Post-Closure Care, of the Agreement, SR shall commence closure activities no later than April 1, 2009. Defs.’ Mot. [dkt. # 5], Ex. M (Letter from Willa J. Williams to Renee Michaels). In response to that letter, the plaintiff filed its action in state court on April 2, 2009 based on 42 U.S.C. § 1983. The plaintiff alleges that the defendants violated the plaintiff’s due process rights because they did not provide it with a notice or hearing on any charges that would form the basis for revocation of a conditional land use permit. The plaintiff also alleges that the defendants violated its rights under the Equal Protection Clause by discriminating against it as a class of one, and against its female owner, Renee Michaels, on the basis of gender. The state court judge issued a TRO and set the case for a hearing on a preliminary injunction. Before the hearing date, the defendants removed the case to this Court on April 16, 2009. After removal, the defendant scheduled hearings before the Building and Safety Engineering Department to revoke the conditional land use permit. However, the city eventually agreed to honor -9- the state court’s TRO, and no hearings have taken place. the defendants then filed a motion seeking clarification of relief under the state court’s TRO, asking that they be permitted to conduct the revocation hearings. The plaintiff filed an amended motion for preliminary injunction, seeking to forestall such action. II. Federal Rule of Civil Procedure 65 allows the Court to issue a preliminary injunctions restraining conduct during the pendency of a lawsuit and before final judgment. The Court must consider four factors when determining whether to issue a preliminary injunction: (1) the likelihood of the party’s success on the merits of the claim; (2) whether the injunction will save the party from irreparable injury; (3) the probability that granting the injunction will substantially harm others; and (4) whether the public interest will be served by the injunction. Summit County Democratic Cent. and Executive Comm. v. Blackwell, 388 F.3d 547, 550 (6th Cir. 2004); Rock & Roll Hall of Fame & Museum, Inc. v. Gentile Prods., 134 F.3d 749, 753 (6th Cir. 1998); Six Clinics Holding Corp., II v. Cafcomp Systems, Inc., 119 F.3d 393, 399 (6th Cir. 1997); Frisch’s Restaurant, Inc. v. Shoney’s, Inc., 759 F.2d 1261, 1263 (6th Cir. 1985). The Sixth Circuit has explained that the purpose of a preliminary injunction “is to preserve the status quo so that a reasoned resolution of a dispute may be had.” Procter & Gamble Co. v. Bankers Trust Co., 78 F.3d 219, 226 (6th Cir. 1996). “[T]he four factors are not prerequisites to be met, but rather must be balanced as part of a decision to grant or deny injunctive relief.” Performance Unlimited, Inc. v. Questar Publishers, Inc., 52 F.3d 1373, 1381 (6th Cir. 1995). The district court need not make specific findings regarding each of the four factors if fewer factors are dispositive of the issue. See Six Clinics Holding Corp., 119 F.3d at 399. “Although no one factor is controlling, a finding that there is -10- simply no likelihood of success on the merits is usually fatal.” Gonzales v. Nat’l Bd. of Med. Exam’rs, 225 F.3d 620, 625 (6th Cir. 2000). The plaintiff has the burden of proof, and that burden is the same irrespective of whether the relief sought is mandatory or prohibitive. United Food & Commercial Workers Union, Local 1099 v. SW. Ohio Reg. Transit Auth., 163 F.3d 341, 348 (6th Cir. 1998). A. Of all the factors for determining the propriety of a preliminary injunction, the most important is the plaintiff’s likelihood of success on the merits. The plaintiff’s complaint is based on 42 U.S.C. § 1983. Under section 1983, the plaintiff must establish that a person acting under color of state law deprived it of a right secured by the Constitution or laws of the United States. Berger v. City of Mayfield Heights, 265 F.3d 399, 405 (6th Cir. 2001); Ahlers v. Schebil, 188 F.3d 365, 370 (6th Cir. 1999). Section 1983 is not itself a source of substantive rights; rather, it provides a vehicle for vindicating rights provided by the Constitution. Braley v. City of Pontiac, 906 F.2d 220, 223 (6th Cir. 1990). As mentioned, the plaintiff alleges due process and equal protection violations. The Court will examine each in turn. 1. In order to establish a procedural due process violation, the plaintiff must show that (1) it has a life, liberty, or property interest protected by the Constitution; (2) it was deprived of that interest by a state actor; and (3) it was not afforded timely and adequate process under law. Waeschle v. Dragovic, 576 F.3d 539, 544 (6th Cir. 2009). The plaintiff argues that it has a property and a liberty interest in continuing to operate the composting facility under the conditional land use permit -11- because it had done nothing to justify terminating the host community agreement, and city officials had represented that Systematic could operate even without that agreement. “Property interests are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law-rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.” Women’s Med. Prof’l Corp. v. Baird, 438 F.3d 595, 611 (6th Cir. 2006) (quoting Bd. of Regents of Stater Colls. v. Roth, , 577 (1972) (internal quotation marks omitted . The plaintiff’s first argument – that the host community agreement cannot be revoked because the plaintiff did not commit the requisite violation – is undermined by the plain language of the agreement itself. The plaintiff insists that the agreement cannot be terminated unless it “has received two (2) or more significant violations from the City within a 180 day time period.” Defs.’ Mot. for Clarification or Relief from Apr. 30, 2009 Order, Ex. B [dkt. # 5-4] (Host Community Agr.) at § 17. It is uncontested that the City has not issued violations against the plaintiff. However, that argument ignores the first paragraph in section 17, which states that the agreement expires on its own after two years. The plaintiff insists that there was no understanding that the agreement would not be renewed after two years, and the anniversary date was inserted in order to reassess the payment terms. No evidence supports that assertion, and the language of the agreement contradicts it. Nor can it be said that termination was contingent on establishing a violation after the agreement’s two-year term expired. Fairly read, section 17 states that the agreement will last for two years, but the City could terminate it earlier if the plaintiff received two or more significant citations within six months. The two-year duration could not have been merely a mechanism for escalating the fees Systematic must pay, since the city could increase those fees anyway after just one year. -12- Although it is clear that the plaintiff hoped that the host community agreement would be renewed, it is equally apparent that there was no legal entitlement to its continuation beyond two years. A “person clearly must have more than an abstract need or desire for [a certain benefit]. He must have more than a unilateral expectation of it. He must have a legitimate claim of entitlement to it.” Roth, 408 U.S. at 577. The Court must conclude, therefore, that the plaintiff has no property interest in the host community agreement. The plaintiff contends that it has a right to the conditional land use permit even without the host community agreement. This argument is based on statements by city officials made before the host community agreement was signed. Renee Michaels, Systematic’s owner, states in her affidavit that she was “was told by Greg Moots, head of the City’s Planning Commission, and Dr. Vincent Nathan, director of the city’s Department of Environmental Affairs, that if the Host Community Agreement could not be put in place or was disapproved, then Systematic would still be able to operate, and either the City’s Planning Commission or the City’s Buildings and Safety Engineering Department would just waive that condition of the conditional/special land use grant.” Notice of Filing of Suppl. Documents in Supp. of the Pl.’s Mot., Ex. 1 [dkt. # 19-2] (Michaels aff.), at ¶ 35. The plaintiff argues that at no time did a city official ever tell it that if the Host Community Agreement expired and was not terminated for cause, Systematic would have to shut down operations. According to Systematic, Dr. Nathan and Mr. Moots relayed the same information to the City Council. The plaintiff also submitted a transcript of the November 17, 2006 city council meeting in which the agreement was discussed by certain council members as follows: -13- [Councilperson] S. COCKREL: Secondly, I want to get clear on this. If there is not a Host Agreement, there is ultimately a way for the project to go forward with less regulation than the Host Agreement that we have before us. Is that accurate? NATHAN: It would proceed with no regulation. S. COCKREL: Correct. So, this, in fact, may be a situation where there … all of us are concerned about the concerns of this community, but at the end of the day, not to approve this Host Agreement will result in less oversight, less requirements being on this use, and it’s going to go ahead. NATHAN: That’s correct. [Ex. 2 at 4.] . . . [Councilperson] KENYATTA: It would have to come back to us, then, for that amendment, if Buildings & Safety have to be regulating. MOOTS: It has to go to Buildings & Safety. Not to City Council. Just to Buildings & Safety. S. COCKREL: Shall we guess what will happen there? Then the company won’t have the level of regulation that they’re voluntarily agreeing to in the Host Agreement. … people could end up with an unattractive use with less regulation than if we approved it. [Ex. 2 at 5.] . . . [Councilperson] K. COCKREL, JR.: … If I remember correctly, from the reading that I’ve done on this. Hasn’t the Buildings & Safety Engineering Department already given some level of approval to this? MOOTS: That’s what I’m saying. The original permit which was issued, I believe in early summer, is the one that requires the Host Community Agreement. . . . Subsequent, . . . they withdrew the original Host Community Agreement and a temporary operating permit was issued to them, which had not conditions on it at all. . . . K. COCKREL, JR.: It’s just a question of what they’ll do, but I think I have an idea. S. COCKREL: We have the precedent that it was already granted on a temporary basis. Pl.’s Second Supp. Br. [dkt. # 29] at 2-3. This evidence does not establish that host community agreement was thought to be an unnecessary artifact. To the contrary, the permit explicitly states that “Systematic Recycling shall enter into a Host Community Agreement with the City of Detroit prior to operating the site as a Compost Facility.” Defs.’ Emergency Mot. [dkt # 5], Ex. A (Cond. Zoning Permit) at ¶ 26. The accommodation allowed by the City through its temporary permit does not alter that condition. -14- Moreover, the plaintiff actually entered into the host community agreement with the city. Michigan law regards such agreements as contracts, which may not be altered by parol evidence if they are unambiguous. Am. Prudential. Estates, Inc. v. Van Buren Twp., No. 213282, 2001 WL 672178, at *2 (Mich. App. May 15, 2001) (citing UAW-GM Human Res. Ctr. v. KSL Rec. Corp., 228 Mich. App. 486, 491-92; 579 N.W.2d 411, 414 (1998 . Furthermore, reliance on the statements of individual city council members is unreasonable as a matter of state law. “It is fundamental that those dealing with public officials must take notice of the powers of the officials. . . . Persons dealing with a municipal corporation through one of its officers must at their peril take notice of the authority of the particular officer to bind the corporation.” Johnson v. City of Menominee, 173 Mich. App. 690, 693-94, 434 N.W.2d 211, 213 (1988). “Generally, no officer or board, other than the common council, has the power to bind the municipal corporation by contract.” Ibid. Individual “municipal officers can bind a municipality only if they are empowered to do so by the city charter.” Manning v. Hazel Park, 202 Mich. App. 658, 691, 509 N.W.2d 874, 877 (1993). There is no evidence that the Detroit City Charter authorized Dr. Nathan or Mr. Moots to bind the city in the absence of the majority vote by the Detroit City Council. See Detroit City Charter § 4-108 (“Except as otherwise provided by this Charter, no action of the City council shall be effective unless adopted by at least a majority of City council members present.”). However, the absence of a valid host community agreement does not mean that the plaintiff has no property interest in the conditional use permit, which has been issued. In Dorr v. City of Ecorse, 305 F. App’x 270 (6th Cir. 2008), the Sixth Circuit held that a property owner had established a property interest in two separate building permits issued to him by the city, even though the city asserted that the plaintiff’s nonconforming use exceeded the scope that the city -15- allowed. Similarly, in Chandler v. Village of Chagrin Falls, 296 F. App’x 463 (6th Cir. 2008), the court held that the homeowner who sued the village following revocation of a permit for construction of a new garage had a protected property interest in the permit. This Court likewise concludes that the plaintiff has a protectable property interest in the conditional land use permit. The Court finds no protectable liberty interest, however. A constitutionally recognized liberty interest “may be implicated by certain injuries to a person’s reputation or good name which threaten to restrain the individual’s freedom to pursue business or employment opportunities.” Med. Corp., Inc. v. City of Lima, 296 F.3d 404, 413 (6th Cir. 2002) (citing Wisconsin v. Constantineau, 400 U.S. 433, 437 (1971 . Where the state actor neither precluded the plaintiff business from entering into other contracts nor defamed the plaintiff company’s good name, no deprivation of a protected liberty interest occurs. Alliance for Children, Inc. v. City of Detroit Pub. Schs., 475 F. Supp. 2d 655 (E.D. Mich. 2007) (holding that a provider of supplemental educational services who was removed from the approved list of providers of tutorial services to underachieving students failed to state a due process claim based on his liberty interest in the continued operation of his business). The plaintiff did not allege that the city publicly defamed it, nor have the defendants interfered with the plaintiff’s right to enter into other contracts. The second element of the plaintiff’s procedural due process claim requires proof of a deprivation. None has occurred here, as least with respect to the plaintiff’s protected interest in the land use permit. The city has not revoked the permit, nor has it interfered with the operation of the facility. Rather, the city seeks to hold a hearing to revoke the permit. That is not a deprivation of due process; it is fulfillment of due process. “The essence of due process is that a deprivation of a property or liberty interest must ‘be preceded by notice and opportunity for hearing appropriate to -16- the nature of the case.’” Brickner v. Voinovich, 977 F.2d 235, 237 (6th Cir. 1992) (quoting Mullane v. Cent. Hanover Bank & Trust Co., , 313 (1950 . Here, the plaintiff is receiving notice and a hearing of the intended deprivation. Procedural due process claim requires nothing more. 2. The plaintiff also argues that the defendants have violated its rights under the Equal Protection Clause by discriminating against the female owner of the business and by treating the plaintiff as a class of one differently than other similarly situated businesses. The first part of the argument can be dismissed out of hand: there is no evidence that the plaintiff’s owner’s gender played any role in the defendants’ decisions. “The Supreme Court has recognized successful equal protection claims brought by a ‘class of one’ where the plaintiff alleges that he or she has been treated differently from similarly situated individuals.” Braun v. Ann Arbor Charter Twp., 519 F.3d 564, 575 (6th Cir. 2008) (citing Vill. of Willowbrook v. Olech, 528 U.S. 562 (2000 . The Supreme Court has “explained that the purpose of the equal protection clause of the Fourteenth Amendment is to secure every person within the State’s jurisdiction against intentional and arbitrary discrimination, whether occasioned by express terms of a statute or by its improper execution through duly constituted agents.” Willowbrook, 528 U.S. at 564 (quoting Sioux City Bridge Co. v. Dakota County, 260 U.S. 441, 445 (1923) (internal quotation marks and alterations omitted . To establish a claim of class-of-one selective enforcement, a plaintiff must show “either that [the government actor] distinguished between [the plaintiff and others] based on some bad reason, proving intent, see Farm Labor Org. Comm. v. Ohio State Highway Patrol, 308 F.3d 523, 533-34 -17- (6th Cir.2002), or that [the government actor] had no rational reason to distinguish between [the plaintiff and others].” Boone v. Spurgess, 385 F.3d 923, 932 (6th Cir. 2004). The proof requires establishing that the plaintiff was selectively treated compared to others similarly situated and that the selective treatment was motivated by an intention to discriminate such as “race or religion, to punish or inhibit the exercise of constitutional rights, or by a malicious or bad faith intent to injure the person.” R.S.S.W., Inc. v. City of Keego Harbor, 18 F. Supp. 2d 738, 746 (E.D. Mich. 1998), rev’d on other grounds, 397 F.3d 427 (6th Cir. 2005) (citing Zahra v. Town of Southold, 48 F.3d 674, 683 (2d Cir. 1995 . The plaintiff argues that it has been held to more exacting requirements than other environmental operators. It points to the statement of Amru Meah, the city’s Director of the Building and Safety Engineering Department who testified that no special land use permit ever has been revoked because of the expiration of a host agreement. Meah also stated that in his twenty-four years in the department, he cannot recall any revocation of special land use permits without the city first issuing a citation and giving the entity an opportunity to correct the deficiency. Steven Leggat, the chief of the property maintenance in the Buildings and Safety Engineering Department testified that he has “sent correction orders like this that we have advised property owners of their noncompliance and have encouraged compliance. Generally speaking we get compliance for special land use grants because of the reality of noncompliance, that they want to maintain their business and they understand that.” Notice of Filing of Suppl. Docs. in Supp. to Pl.’s Mot., Ex. 4 [dkt. # 21- 4] (Leggat dep.) at 26-27. Unlike others who have been given a chance to cure deficiencies, the plaintiff contends that it has been deprived of that opportunity, since defendant Williams allegedly stated that there is -18- nothing the plaintiff can do in order to continue its operations. Williams stated that to continue operations, the plaintiff would have to enter into another host community agreement with the City, and she announced the decision not to renew the host community agreement with the plaintiff at a public meeting in southwest Detroit in February 2009, even before she communicated that decision to the plaintiff. Williams testified that the city has host community agreements with only two other businesses, both of which are transfer stations handling hazardous waste: Americal Corporation and Dynecol. David Whitaker, the city’s Director of Research and Analysis Division, wrote that recycling/composting facilities are not regulated by the state. Instead, Wayne County issues a solid waste plan registration to such facilities, and the facilities must obtain an approved license from the City of Detroit, in turn requiring the execution of a Host Community Agreement, to receive the Wayne County’s license. Notice of Filing of Suppl. Documents in Supp. of Pl.’s Mot. for Prelim. Inj., Ex. 1.G [dkt. # 20-8] (Whitaker letter, Nov. 19, 2007). Americal and Dynecol previously have been cited for violations of their respective community host agreements, and their agreements are not in jeopardy. Williams acknowledged at her deposition that Systematic was the first entity ever to be required to enter into a community host agreement. The plaintiff points out that even after it entered into the host community agreement, the city has not required other entities to enter into such agreements. For example, Williams said that Marathon Oil has obtained a special land use permit even though it was not required to enter into a similar agreement. Williams also testified that although Williams received hundreds of complaints from the Southwest Detroit Environmental Vision about nearly every business in Southwest Detroit, Williams has not chosen to commence closure activities for any entity but the plaintiff. -19- This evidence, however, will not satisfy the plaintiff’s heavy burden of showing irrational discrimination by the city. “Under rational basis scrutiny, government action amounts to a constitutional violation only if it ‘is so unrelated to the achievement of any combination of legitimate purposes that the court can only conclude that the government’s actions were irrational.’” Club Italia Soccer & Sports Org., Inc. v. Charter Twp. of Shelby, Mich., 470 F.3d 286, 298 (6th Cir. 2006) (quoting Warren v. City of Athens, 411 F.3d 697, 710 (6th Cir. 2005 . To make its case, the plaintiff is obliged to “either . . . negativ[e] every conceivable basis which might support the government action, or . . . demonstrat[e] that the challenged government action was motivated by animus or ill-will.” Warren, 411 F.3d at 711 (internal quotation marks and citations omitted). Although the city arguably may have demanded less of other businesses whose activity impacted the environment, the City has offered ample justification for its refusal to renew the host community agreement and its stated intention to commence permit revocation proceedings. There is substantial evidence that the host community agreement was procured by bribing public officials. Even if the plaintiff itself was not involved in the bribe, the prospect of corruption undermines the validity of the decision to allow the environmentally sensitive land use in the community. Although the city itself has not issued citations against the plaintiff, both the Wayne County Department of Environment and the MDEQ have found violations of laws, regulations and requirements on several occasions. In addition, on at least three occasions the fire department has been called to extinguish fires that have spontaneously ignited in the compost piles. Finally, residents and community groups have complained about the odors emitted by the plaintiff’s facility. The plaintiff has not “negatived” these bases, nor is it likely that it will. * * * * * * * -20- The Court concludes that the plaintiff has not demonstrated a substantial likelihood of success on the merits of its claim. B. The other factors do not favor a preliminary injunction. Certainly, closing the plaintiff’s facility and requiring its clean up will inflict great injury on the plaintiff. However, dissolving the state court’s TRO does not translate directly into closure. Rather, immediate result will be a hearing, preceded by notice, at which the plaintiff will have an opportunity to be heard, followed by judicial review in the state courts. Next, the possibility of harm to others if the facility continues operating is significant because, even though irreparable contamination of the site and the surrounding area is not very likely, the possibility of harm remains if operations are allowed to continue as before. The evidence suggests that the company has created fire hazards, stored too many compost piles within a small area, compromised air quality beyond the acceptable norms, provoked numerous complaints from the area’s residents, and allowed accumulations of pests and standing water. Finally, although the plaintiff disputes these allegations, the public interest is served by allowing the revocation proceedings to go forward so these grievances can be aired. III. The Court concludes, therefore, that the relevant factors disfavor a preliminary injunction. Accordingly, it is ORDERED that the defendants’ motion for clarification of and relief from the state court’s temporary restraining order [dkt #5] is GRANTED. It is further ORDERED that the plaintiff’s amended motion for a preliminary injunction [dkt #13] is DENIED. -21- It is further ORDERED that the temporary restraining order is DISSOLVED. It is further ORDERED that counsel for the parties shall appear for a status conference to discuss case management deadlines on March 3, 2010 at 3:30 p.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 17, 2010 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 17, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -22-

=== STADLER vs. CURTIN ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Petitioner, Case Number: 06-14286 Honorable David M. Lawson DAVID STADLER, v. CINDI S. CURTIN, _________________________________/ Respondent. OPINION AND ORDER DENYING PETITION FOR WRIT OF HABEAS CORPUS Michigan prisoner David Stadler has filed a petition for writ of habeas corpus pursuant to 28 U.S.C. § 2254 challenging his conviction for first-degree criminal sexual conduct and his prison sentence of twenty-five to forty years. The petition, filed by counsel, states ten claims. Stadler says he was deprived of due process of law as a result of the delay in bringing the charge, the denial of certain pretrial discovery motions, the destruction of exculpatory evidence, an improper pretrial photographic show-up, an improper jury instruction, the prosecutor’s failure to produce witnesses, and the prosecutor’s misconduct; he was denied effective assistance of competent counsel because his trial lawyer did not pursue an alibi defense and did not let him testify, and the trial court did not allow the petitioner to discharge the lawyer immediately before trial; and his sentence is improper because it is excessive under the Eighth Amendment and based on judge-found facts that were not determined by a jury in violation of the Sixth Amendment. The respondent filed an answer to the petition asserting that an adequate and independent state procedural ruling bars review of some of the claims by this Court, and the state courts’ disposition of the rest of them did not result in an objectively unreasonable application of clearly established Supreme Court law. The Court finds that three of the petitioner’s claims are barred by the doctrine of procedural default, and the balance do not warrant habeas relief on the merits. Therefore, the Court will deny the petition. I. The victim of the sexual assault, identified here as N.C., says that the petitioner raped her at her home on June 14, 1997. N.C. reported the incident to police the next day, but then she refused to cooperate in the prosecution until she was contacted three years later by a detective who was reviewing old open files. She apparently agreed to testify, and a charge was filed against the petitioner in the spring of 2001. The petitioner was brought to trial eventually on November 8, 2002 after several pretrial motions were litigated. N.C. testified at a preliminary examination and at trial that she first came into contact with the petitioner when he called her home, allegedly dialing a wrong number. N.C. nonetheless continued the conversation, and they talked on the phone six to eight times again. N.C. met the petitioner in person thereafter and saw him twice prior to the incident. They first met at a bar, where the N.C. had gone with friends and clients (N.C. said she was a nail technician) named Tracy and Kelly and Brian Bankey. The meeting was not pre-arranged; instead, N.C. said that the petitioner just showed up at the bar that night and approached her, even though she had not told him what she looked like. According to N.C., the petitioner walked over to her and asked her “if I was “N[] and I said yeah. And he said I’m Dave.” Trial Tr. vol. III at 56. She said they talked for about ten minutes. She did not introduce the petitioner to her friends. N.C. said she did not go out with these friends on a regular basis and could not remember their full names. N.C. testified that the next time she saw the petitioner was when she was outside her home playing with her four-year-old son. She said that the petitioner walked up to her and told her he was -2- visiting a friend, who lived across the street. N.C. said she then told her son to go inside, and she and the petitioner talked for about ten to twenty minutes. N.C. testified that she had not told the petitioner where she lived. The rape occurred two to three weeks after the initial phone call. Although N.C. described some of the details of the interaction leading up to the assault inconsistently at the preliminary examination and at trial, she said that on June 14, 1997, the petitioner came to N.C.’s house near 10:00 p.m.; they planned to go out that evening. The two were on the couch either before or after N.C. was getting ready in the bathroom. At some point, the petitioner tried to kiss N.C., and she told him no. Then the petitioner made his advance, either as they were sitting on the couch or as he was standing in the door of the bathroom while N.C. was in the midst of getting ready for the evening. N.C.’s two versions of the events converged when she described the rape itself. She testified that the petitioner pushed her onto the couch and, in a struggle that ensued, ripped her sweatshirt. N.C. claims that the defendant proceeded to take her pants and underwear off, ignoring her pleas to stop. In the process, she ended up with a black eye and a bite mark on her right breast. She said that the petitioner then forced his penis into her vagina. N.C. testified that once the petitioner ejaculated, she immediately ran into the bathroom and cleaned herself. She said that when she came out of the bathroom, the petitioner was still sitting on her couch and, when asked to leave, inquired whether they were still going to a movie. She said no, and the petitioner left. As the petitioner was leaving, he said, “[G]ood luck with Matt.” Trial Tr. vol. III at 90. N.C. testified that she told the petitioner that she had just split up with her son’s father, but she did not recall ever mentioning that his name was Matt. -3- After the petitioner left, N.C. said that she took a shower and douched three or four times, cleaned off the couch with Lysol, locked all the doors, and, after taking three sleeping pills, went to sleep. She said that she did not call the police or her neighbors because she was embarrassed over what had happened, and that she let the petitioner into her house. The next evening, N.C. saw her friend Jean and told her what had happened. At Jean’s urging, the two went to the Sterling Heights, Michigan police station together that night. N.C. talked to two or three police officers and filled out a statement, but did not tell the police everything because she did not want to pursue prosecution. The police investigator took photographs of her black eye and the bite mark on her breast. She explained that she did not lie to the police, but she did not tell them all of the details of the assault. She claims that she told the police the first and last name of her assailant, a point that was hotly contested at trial and contradicted by testimony from police witnesses, who said N.C. only revealed a first name. According to N.C., a police officer contacted her shortly afterward, and she told him that she had been raped. She acknowledged that she made several appointments to view a photo lineup but never kept those appointments. She said she just wanted to forget the incident and move on with her life. She said that she also wrote a letter to Matt (the father of her son) telling him what had happened but never told anyone else other than Matt and Jean. According to testimony from a pretrial hearing challenging the photographic show-up, this case came to the attention of Sterling Heights police detective Thomas McMullen, who was investigating other cases involving the petitioner and reports of stalking and random phone calls to women. McMullen said he called N.C. and asked her if she would now be interested in going forward with a prosecution. She agreed. On March 9, 2001, McMullen went to N.C.’s apartment -4- along with a female detective and showed N.C. a pre-arranged photo array. He said that N.C. identified the petitioner, whose photograph was number five in the array, within “three seconds or less.” Evid. Hr’g Tr., Oct. 18, 2002, at 13. A formal prosecution followed. The petitioner filed several pretrial motions in the state trial court. In October 2001, the petitioner moved for discovery of the names of the people at the bar the night N.C. said she first met the petitioner. He also said he wished to take a polygraph test to exonerate himself, although he changed his mind about that later and ultimately expressed satisfaction with the discovery information provided. In August 2002, the petitioner filed motions to dismiss for failure of the prosecution to provide discovery, for assistance in locating witnesses, and to dismiss for pretrial delay. The court denied the motions to dismiss. As for the delay in bringing the charges, the court found that the cause was attributed solely to N.C.’s reluctance to pursue prosecution, and the state played no role and did not delay to obtain a tactical advantage. In September 2002, the petitioner moved the trial court to exclude similar act evidence, and the motion was granted. In October 2002, the trial court held a hearing on the petitioner’s motion challenging the pretrial identification and found that the procedure used by Detective McMullen was not unduly suggestive. In the meantime, the State offered several plea agreements to the petitioner, including an agreement to dismiss the original charge if the petitioner would plead guilty to (1) fourth-degree criminal sexual conduct, a two-year misdemeanor; or (2) third-degree criminal sexual conduct, capped at Macomb County jail time; or (3) assault with intent to do great bodily harm. On May 3, 2002, the petitioner pleaded no contest to the offense of assault with intent to do great bodily harm. However, at his sentence hearing on June 11, 2002, the petitioner moved to withdraw his plea, and -5- on June 25, 2002 the trial court granted his request. At that time, the petitioner had retained new counsel. Trial began on October 30, 2002. During her testimony, N.C. acknowledged that she had destroyed potential evidence when she cleaned herself and her couch following the rape, she disposed of the clothes she wore that evening because she did not want to be reminded of the incident, she refused to go to a hospital for an examination after she first reported the incident to the police the following evening, and she delayed the case herself when she initially refused to prosecute. On November 8, 2002, the jury convicted the petitioner of the original charge of first- degree criminal sexual conduct. After sentencing, the petitioner filed a direct appeal. He filed a motion in the state court of appeals to remand the case for a hearing on the issue of trial counsel’s ineffectiveness. The appellate court granted that motion, and thereafter the trial court conducted an evidentiary hearing at which the petitioner, his mother, sister, trial counsel and Detective McMullen all testified. The trial court filed a written opinion denying the petitioner’s post-trial motion on February 27, 2004. On November 18, 2004, the Michigan Court of Appeals issued an unpublished per curiam opinion affirming the petitioner’s conviction and sentence. People v. Stadler, No. 245895, 2004 WL 2624741 (Mich. Ct. App. Nov. 18, 2004). The court found that three of the petitioner’s claims – the alleged destruction of exculpatory evidence by the victim, prosecutorial misconduct, and the trial court’s refusal to allow the petitioner to discharge his attorney before trial – were not raised properly in the lower court and it reviewed those claims for plain error. The petitioner then filed an application for leave to appeal in the Michigan Supreme Court, which was denied on September 28, 2005. People v. Stadler, 474 Mich. 868, 703 N.W.2d 815 (2005). -6- The petitioner filed the pending petition for a writ of habeas corpus on September 28, 2006, presenting the same claims as presented to both state appellate courts: I. II. III. IV. V. Excessive delay in charging the petitioner deprived him of due process of law; Denial of the petitioner’s discovery motions resulted in the denial of due process of law; The complainant’s deliberate destruction of exculpatory evidence and the police’s failure to take steps to preserve that evidence resulted in the denial of the petitioner’s due process rights; The sentencing judge’s failure to suppress identification resulted in the denial of the petitioner’s rights to a fair trial; The petitioner was denied a fair trial and his due process rights were violated through an incorrect jury instruction regarding the failure of the prosecution to produce requested witnesses and regarding the fact that the jury saw all the evidence that the prosecutor had regarding guilt or innocence of the petitioner; VI. The prosecutor prejudiced the petitioner when he called the complaining witness a “victim” before the jury and when he made other improper arguments; VII. The petitioner was prejudiced by ineffective assistance of counsel; VIII. The petitioner was deprived of his constitutional rights when the trial court refused to allow him to discharge his retained counsel; IX. X. The petitioner’s higher-than-the-Guidelines-range sentence was excessive and improper; and The petitioner’s sentence was unconstitutional in that the judge rather than the jury found facts that raised the petitioners sentence above the Sentencing Guidelines. Pet. at 2-14. The respondent filed an answer in due course raising a procedural defense and addressing the merits. -7- II. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the standard of review federal courts must apply when considering applications for a writ of habeas corpus raising constitutional claims, including claims of ineffective assistance of counsel. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) permits a federal court to issue the great writ only if the state court decision on a federal issue “was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court,” or it amounted to “an unreasonable determination of the facts in light of the evidence presented in the State court proceeding.” 28 U.S.C. § 2254(d)(1)&(2); Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Mere error by the state court will not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) ( internal quotes omitted . Additionally, this Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). The Supreme Court has explained the proper application of the “contrary to” clause as follows: -8- A state-court decision will certainly be contrary to [the Supreme Court’s] clearly established precedent if the state court applies a rule that contradicts the governing law set forth in our cases. . . . A state-court decision will also be contrary to this Court’s clearly established precedent if the state court confronts a set of facts that are materially indistinguishable from a decision of this Court and nevertheless arrives at a result different from [the Court’s] precedent. Williams, 529 U.S. at 405-06. The Supreme Court has held that a federal court should analyze a claim for habeas corpus relief under the “unreasonable application” clause of § 2254(d)(1) “when a state-court decision unreasonably applies the law of this Court to the facts of a prisoner’s case.” Id. at 409. The Court defined “unreasonable application” as follows: [A] federal habeas court making the “unreasonable application” inquiry should ask whether the state court’s application of clearly established federal law was objectively unreasonable. . . . [A]n unreasonable application of federal law is different from an incorrect application of federal law. . . . Under § 2254(d)(1)’s “unreasonable application” clause, then, a federal habeas court may not issue the writ simply because that court concludes in its independent judgment that the relevant state-court decision applied clearly established federal law erroneously or incorrectly. Rather, that application must also be unreasonable. Id. at 409-11; see also Knowles v. Mirzayance, __ U.S. __, __, 129 S. Ct. 1411, 1419 (2009) (noting that the Supreme “Court has held on numerous occasions that it is not ‘“‘an unreasonable application of clearly established Federal law’”’ for a state court to decline to apply a specific legal rule that has not been squarely established by this Court”) (quoting Wright v. Van Patten, 552 U.S. 120, 125-26 (2008) (per curiam ; Murphy v. Ohio, 551 F.3d 485, 493-94 (6th Cir. 2009); Eady v. Morgan, 515 F.3d 587, 594-95 (6th Cir. 2008); Davis v. Coyle, 475 F.3d 761, 766-67 (6th Cir. 2007); King v. -9- Bobby, 433 F.3d 483, 489 (6th Cir. 2006); Rockwell v. Yukins, 341 F.3d 507, 512 (6th Cir. 2003) (en banc). A. In his first claim, the petitioner argues that his due process rights were violated by the prosecutor’s delay in bringing charges, since the offense occurred in June 1997 and the petitioner was not charged until March of 2001. The state court denied the petitioner’s pretrial motion to dismiss on this ground. The petitioner had argued that he was prejudiced by the delay because his potential alibi defense was weakened, he could not determine the identity of individuals that were present with N.C. at the bar on the night in question, and he could not use a bite mark expert until discovery in the case was completed. In rejecting this claim, the trial court found that the petitioner had failed to establish that the prosecutor intentionally delayed this case to gain a tactical advantage, the delay was caused by N.C.’s refusal to identify and prosecute the petitioner, and the petitioner had failed to establish that he had suffered substantial prejudice as a result of the delay. The Michigan Court of Appeals agreed, stating: Here, defendant relied on testimony from the preliminary examination, as well as the victim’s 1997 police report, in which the assailant was identified only as “Dave” and reflected the victim’s unwillingness to prosecute, as support for his motion to dismiss. In denying defendant’s motion, the trial court determined that defendant failed to establish either that he was prejudiced by the delay or that the prosecution obtained an advantage. We agree. The record discloses that defendant failed to establish that any relevant information beneficial to the defense was lost because of the delay. “Actual prejudice is not established by general allegations or speculative claims of faded memories, missing witness, or other lost evidence.” Because we agree with the trial court that there was no evidence to suggest that the delay in filing formal charges was intended to give the prosecution a tactical advantage, the trial court did not abuse its discretion in denying defendant’s motion to dismiss. Stadler, No. 245895, 2004 WL 2624741, at *2 (citations omitted). -10- The petitioner contends that this ruling misapplies federal law. However, the Supreme Court has held consistently that “[t]here is no constitutional right to be arrested.” Hoffa v. United States, 385 U.S. 293, 310 (1966). Elaborating on that concept, the Hoffa Court explained: The police are not required to guess at their peril the precise moment at which they have probable cause to arrest a suspect, risking a violation of the Fourth Amendment if they act too soon, and a violation of the Sixth Amendment if they wait too long. Law enforcement officers are under no constitutional duty to call a halt to a criminal investigation the moment they have the minimum evidence to establish probable cause, a quantum of evidence which may fall far short of the amount necessary to support a criminal conviction. Ibid. The Due Process Clause does provide some measure of protection against preindictment delay. United States v. Lovasco, 431 U.S. 783, 789 (1977); see also United States v. Marion, 404 U.S. 307, 324 (1971). But the Court has observed that “no one’s interests would be well served by compelling prosecutors to initiate prosecutions as soon as they are legally entitled to do so.” Lovasco, 431 U.S. at 792. Proof of prejudice is a necessary element of a due process claim for preindictment delay. Lovasco, 431 U.S. at 790. The Sixth Circuit has consistently read Lovasco to hold that dismissal for preindictment delay is warranted only when the defendant shows both substantial prejudice to his right to a fair trial and that the delay was intentionally imposed by the government to gain a tactical advantage. See United States v. Brown, 959 F.2d 63, 66 (6th Cir. 1992). The prosecution of a defendant following an investigative delay does not necessarily deprive him of due process, even if his defense is somewhat prejudiced by the lapse of time. Lovasco, 431 U.S. at 796. -11- The petitioner in this case contends that the delay was intentional or used by the prosecution to gain a tactical advantage. The state trial court’s contrary conclusion is well supported by the evidence, and therefore this Court is bound to accept it. See 28 U.S.C. § 2254(e)(1). The petitioner also argues that the delay caused him substantial prejudice. Prejudice does not result automatically from long periods of delay alone. Brown, 959 F.2d at 67 (citing cases in which pre-indictment delay was thirty-three months, twenty-nine months, and five years). The Supreme Court has held that a criminal defendant’s interest in avoiding unreasonable delays is served by statutes of limitation. Marion, 404 U.S. at 325-26. Actual prejudice must be shown to establish a deprivation of due process when a prosecution is commenced within the period of limitation. The Marion Court explained: Appellees rely solely on the real possibility of prejudice inherent in any extended delay: that memories will dim, witnesses become inaccessible, and evidence be lost. In light of the applicable statute of limitations, however, these possibilities are not in themselves enough to demonstrate that appellees cannot receive a fair trial and to therefore justify the dismissal of the indictment. Ibid. The Court finds that the state court of appeals’ determination that the petitioner did not demonstrate sufficient prejudice was reasonable. The petitioner did not suggest to the state court any specific witness or evidence that was denied him as a result of the delay in bringing the charge. For instance, he did not file an affidavit from a bite mark expert to show that such a witness could have helped the defense. The petitioner did not explain which witnesses could support his alibi defense, what their testimony could be, and how the delay interfered with the testimony. The petitioner did file in this Court affidavits of himself, his mother, his sister, and his nephew asserting -12- that the petitioner spent the evening in question at a family get-together. But these witnesses are still available and apparently able to testify; delay has not deprived the petitioner of this evidence. Of course, as with any witness, memories likely faded over the time between the crime and the arrest, and it always is better to hear from a witness when the events are fresh in the mind. But no constitutional violation results merely because a witness’s rendition of events is less than perfect. The petitioner here has presented witnesses whose memories were diminished no more than in Marion. Because the petitioner has shown neither prejudice nor unfair advantage to the State, the Court must conclude that no constitutional violation was presented in the first claim. B. In his second claim, the petitioner contends that his due process rights were violated because the trial court denied his motion to compel the prosecutor to turn over information about past misconduct, including prior convictions, of the State’s non-police witnesses. In response to the petitioner’s motion during trial, the prosecution agreed to provide such materials as to N.C. and her neighbor, but stated that it was not aware of any evidence of prior misconduct by any of its non- police witnesses. The trial court found that the prosecution’s concession was adequate and denied additional relief. The Michigan Court of Appeals affirmed the ruling of the trial court, stating: We find no basis for defendant’s claim that the prosecutor was required to disclose evidence of past false or unfounded accusations made by the victim. The trial court’s order states otherwise. Additionally, the trial court did not abuse its discretion to the extent that it denied defendant’s request to have the prosecutor disclose unidentified evidence that would qualify for admission under MRE 404(b). The prosecutor did not have a duty to find evidence for defendant that might satisfy MRE 404(b). There is a distinction between the failure to develop evidence and the failure to disclose evidence. “The prosecutor’s office is not required to undertake discovery on behalf of a defendant.” In this case, defendant is arguing that because the prosecution failed to undertake his discovery, reversal is warranted. We find the opposite to be true, and find no error in the trial court’s opinion in this matter. -13- Stadler, 2004 WL2624741, at *3 (citations omitted). The state courts’ rulings are consistent with federal law. It is well settled that there is no general constitutional right to discovery in a criminal case. Weatherford v. Bursey, 429 U.S. 545, 559 (1977); United States v. Presser, 844 F.2d 1275, 1281 (6th Cir. 1988). “[A]ll the Constitution requires, per the due process clause, is that the defendant not be deprived of a fundamentally fair trial.” Lorraine v. Coyle, 291 F.3d 416, 441 (6th Cir. 2002). A prosecutor’s failure to disclose evidence favorable to the defense constitutes a denial of due process “where the evidence is material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution.” Brady v. Maryland, , 87 (1963). But this rule is not violated – at least to the point of warranting habeas relief – unless the state actually suppresses evidence in its possession, and the suppressed evidence is material and favorable to the accused. Elmore v. Foltz, 768 F.2d 773, 777 (6th Cir. 1985). Favorable evidence is material “if there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different.” United States v. Bagley, 473 U.S. 667, 682 (1985); see also Kyles v. Whitley, 514 U.S. 419, 432-36 (1995). Material evidence is that which is “so clearly supportive of a claim of innocence that it gives the prosecution notice of a duty to produce.” United States v. Clark, 988 F.2d 1459, 1467 (6th Cir. 1993). The obvious corollary to that rule is that “Brady . . . does not require the government to create exculpatory material that does not exist.” United States v. Sukumolachan, 610 F.2d 685, 687 (9th Cir.1980); see also Richards v. Solem, 693 F.2d 760, 766 (8th Cir. 1982) (“Although the state has a duty to disclose evidence, it does not have a duty to create evidence.”). In this case, the prosecution had no evidence of its witnesses’ prior misconduct, and the petitioner has not come up -14- with any to date. Due process does not require the police to seek and find exculpatory evidence. The Michigan Court of Appeals correctly found that the State had no duty to investigate this case more thoroughly than it did. The petitioner is not entitled to habeas relief on this claim. C. The petitioner’s fourth claim is that the identification by N.C. should have been suppressed because the pretrial photographic show-up conducted by Detective McMillan was unduly suggestive. In order to prevail, the petitioner “would have to show that the state court’s adjudication of the claim was ‘contrary to, or involved an unreasonable application of, clearly established Federal law.’ 28 U.S.C. § 2254(d)(1).” McDaniel v. Brown, --- U.S.---, 2010 WL 58361 at *8 (Jan. 11, 2010). In Manson v. Brathwaite, 432 U.S. 98, 114 (1977), the Supreme Court “held that when the police have used a suggestive eyewitness identification procedure, ‘reliability is the linchpin in determining’ whether an eyewitness identification may be admissible, with reliability determined according to factors set out in Neil v. Biggers, 409 U.S. 188 (1972).” Ibid. The Michigan Court of Appeals found that there was “no basis in the record for concluding that the trial court clearly erred in finding that the photographic lineup that the victim viewed in March 2001 was not unduly suggestive.” Stadler, 2004 WL 2624741, at *3. The court reasoned: The time lapse between the June 1997 sexual assault and the March 2001 photographic lineup, while significant, was only one factor to consider in determining whether the photographic lineup was so impermissibly suggestive that it led to a substantial likelihood of misidentification. There is no per se rule invalidating an identification procedure if a time lapse of more than eighteen months is involved. Furthermore, the trial court also found that there was an independent basis for the victim’s in-court identification. Because defendant has failed to address this aspect of the trial court’s ruling, we deem this issue abandoned. -15- Whether the absence of counsel at the photographic lineup and the failure of the police to use a live lineup justified suppression of the victim’s in-court identification present distinct questions that were outside the scope of defendant’s motion to suppress. Hence, these questions are unpreserved and we review them for plain error affecting defendant’s substantial rights. Because the evidence at the suppression hearing indicated that defendant was not in custody when the photographic lineup was held, Detective McMullen’s use of a photographic lineup without the presence of counsel was not plain error. Id. at *3-4 (citations omitted). This Court cannot find fault with that reasoning. Due process protects the accused against the introduction of evidence which results from an unreliable identification obtained through unnecessarily suggestive procedures. Moore v. Illinois, 434 U.S. 220, 227 (1977). However, to determine whether an identification procedure violates due process, courts look first to whether the procedure was impermissibly suggestive; if so, courts then determine whether, under the totality of circumstances, the suggestiveness has led to a substantial likelihood of an irreparable misidentification. Neil v. Biggers, 409 U.S. 188 (1972). Five factors should be considered in determining the reliability of identification evidence: (1) the witness’s opportunity to view the criminal at the time of the crime; (2) the witness’s degree of attention at the time of the crime; (3) the accuracy of the witness’s prior description of the defendant; (4) the witness’s level of certainty when identifying the suspect at the confrontation; and (5) the length of time that has elapsed between the time and the confrontation. Id. at 199-200. A criminal defendant has the initial burden of proving that the identification procedure was impermissibly suggestive. It is only after a defendant meets this burden of proof that the burden then shifts to the prosecutor to prove that the identification was reliable independent of the suggestive identification procedure. See United States v. Wade, 388 U.S. 218, 240 n.31 (1967); Johnson v. Warren, 344 F. Supp. 2d 1081, 1090 (E.D. Mich. 2004). If a defendant fails to show that -16- the identification procedures were impermissibly suggestive, or if the totality of the circumstances indicates that the identification is otherwise reliable, no due process violation has occurred. As long as there is not a substantial likelihood of misidentification, it is for the jury to determine the ultimate weight to be given to the identification. See United States v. Hill, 967 F.2d 226, 230 (6th Cir. 1992); Johnson, 344 F. Supp. 2d at 1090. At an evidentiary hearing on October 18, 2002, Detective McMullen testified that when he met the victim in 2001, he took with him a photo array containing six mug shots that had been prepared earlier by Detective Maurer. McMullen said that the pictures were of white males, all with mustaches, and all about twenty years old. The pictures were arranged in two rows with three pictures in each row. McMullen met with the victim on March 9, 2001 and talked with her for about half an hour. He then showed her the six photographs, and she immediately said, “that’s him, I will never forget that face,” pointing at the photo of the petitioner bearing number five. Evid. Hr’g Tr. at 41, Oct. 18, 2002. There was no live lineup because the petitioner was not in custody at the time. The petitioner has not argued any sound basis to question the trial court’s finding that there was no evidence that the petitioner’s photograph was suggested to the victim. Moreover, there is ample evidence in the record to support the conclusion that the victim’s identification of the petitioner was based on something other than the photograph. She was with the petitioner at least twice before the rape occurred. Her familiarity with his features developed in non-traumatic circumstances unrelated to the assault. She knew him by name. She saw him for a considerable period of time in her home before he became aggressive. The likelihood of mistaken identity in this case is slim. The state courts’ adjudication of this issue comports with Supreme Court precedent. D. -17- In his fifth claim, the petitioner asserts that his trial was unfair because the trial court did not give an appropriate instruction to the jury regarding the failure of the prosecution to produce the individuals who were with N.C. at the bar the day she first met the petitioner. The Michigan Court of Appeals rejected the petitioner’s jury instruction claims primarily on state law grounds. The court did note however that “[d]ue process requires that a prosecutor present sufficient evidence to justify a rational trier of fact in finding guilt beyond a reasonable doubt. Hence, the instruction given by the trial court regarding the prosecutor’s burden of proving each element of the crime beyond a reasonable doubt, which included, in part, a definition that ‘reasonable doubt is a fair honest doubt growing out of the evidence or lack of evidence,’ was sufficient to protect defendant’s rights.” Stadler, 2004 WL 2624741, at *4-5 (citations omitted). The state court’s disposition of this claim was not contrary to and did not unreasonably apply Supreme Court precedent. A habeas petitioner is entitled to relief only if the defective jury instruction “so infected the entire trial that the resulting conviction violates due process.” Cupp v. Naughten, 414 U.S. 141, 147 (1973). A federal court may not grant the writ of habeas corpus on the ground that a jury instruction was incorrect under state law, Estelle v. McGuire, , 71-72 (1991), and “[a]n omission, or an incomplete instruction, is less likely to be prejudicial than a misstatement of the law.” Henderson v. Kibbe, 431 U.S. 145, 155 (1977). “[I]t must be established not merely that the instruction is undesirable, erroneous, or even ‘universally condemned,’ but that it violated some [constitutional] right.” Donnelly v. DeChristoforo, , 643 (1974). The jury instruction “‘may not be judged in artificial isolation,’ but must be considered in the context of the instructions as a whole and the trial record.” Estelle, 502 U.S. at 72 (quoting Cupp, 414 U.S. at 147). The Court must “inquire ‘whether there is a reasonable -18- likelihood that the jury has applied the challenged instruction in a way’ that violates the Constitution.” Ibid. (quoting Boyde v. California, 494 U.S. 370, 380 (1990 . The petitioner’s complaint about the trial court’s failure to give a missing witness instruction finds no basis in federal precedent. There has been a recognition that “the jury may draw an adverse inference when a party fails to produce a material witness who is peculiarly available to that party.” United States v. Ariza-Ibarra, 651 F.2d 2, 16 (2d Cir. 1981). However, an instruction of that sort is appropriate only on a showing that a party has “exclusive control over a witness who could provide relevant, noncumulative testimony [and] fails to produce the witness.” Ibid. No such showing was made in this case, and – more importantly – no Supreme Court case has clearly established that a due process violation results from the failure to give such an instruction. Habeas relief cannot be predicated on this claim. The petitioner also alleged that the trial court should have instructed the jury on the defense of consent sua sponte. However, the trial court’s obligation to give instructions on the theories of the parties only exists where a request is made and there is evidence to support the theory. Here, the evidence established that N.C. was overcome by force and violence, and nothing in the record suggests that the sexual act was consensual. The petitioner’s theory was that he was not the perpetrator. There were no witnesses to support the petitioner’s theory of consent. This Court is not persuaded that the jury instructions, as given, denied the petitioner a fair trial, or so infected the entire trial that the resulting conviction violated his due process rights. Therefore, this Court concludes that the state court’s resolution of the jury instruction claims is not contrary to or an unreasonable application of Supreme Court precedent. E. -19- In his seventh habeas claim, the petitioner alleges that trial counsel was ineffective because he failed to investigate adequately the petitioner’s alibi defense and call alibi witnesses, and he did not allow the petitioner to testify in his own defense. As noted earlier, the trial court held an evidentiary hearing on these issues pursuant to People v. Ginther, 390 Mich. 436, 212 N.W.2d 922 (1973), and rejected the petitioner’s arguments, finding that trial counsel investigated the alibi defense and chose not to raise it as a matter of trial strategy after discussing the options with the petitioner. The trail judge found that “Barkovic and defendant made a strategic decision not to call alibi witnesses at trial. In light of the potential problems of the alibi testimony, Barkovic’s adivce was within the range of competence demanded of attorneys in criminal cases.” Tr. Ct. Op. at 4. The state court of appeals upheld “the trial court’s determination that defense counsel’s decisions not to pursue an alibi defense or have defendant testify were not objectively unreasonable,” finding that “defendant consented to these strategic decisions.” Stadler, 2004 WL 2624741, at *8. The court of appeals also noted that “the evidence [at the post-remand hearing] indicated that defense counsel conducted a reasonable investigation of defendant’s proposed alibi defense by discussing the matter with defendant’s mother and defendant. Defense counsel’s concern that the alibi testimony would be viewed with suspicion, given that only persons having a familial relationship with defendant would provide the testimony, was reasonable.” Ibid. To determine if those rulings reasonably applied federal law, a brief review of the evidentiary hearing testimony is useful. At that hearing, trial counsel Timothy Barkovic testified that he was the defendant’s third attorney, and he met with the petitioner at least ten times in the county jail to discuss the trial. Throughout these meetings, the petitioner continuously maintained his innocence. Barkovic acknowledged discussing the prospect of calling the petitioner’s mother as an alibi witness. She -20- would have testified that the petitioner was at a party at her house on the night in question. Barkovic also discussed this defense with the petitioner’s mother, Bonnie Stadler. According to Barkovic, however, “there was some controversy over – not a controversy, but there was some dispute as to the date of this offense and the date on which a party was held at the Stadler residence.” Hr’g Tr. at 10, Jan. 21, 2004 (testimony of Timothy Barkovic). Counsel also stated that he has never received the name of other family members who were willing to testify in support of the petitioner’s alibi defense, nor did he ask for them, although he acknowledged that he was told that such family members existed and “were just generally identified as being family members.” Id. at 11. Barkovic conceded that he made the decision not to present an alibi defense before he interviewed potential alibi witnesses other than Bonnie Stadler – i.e., Michael Nusbietel, the petitioner’s nephew, and Marie Stadler, the petitioner’s sister. He justified his conduct by listing the following considerations: Number one, neither Mr. Stadler nor his mother could definitively give me any information that would lead me to believe that the so-called party at the family residence coincided with the date of this offense. And no one was able to in fact verify that the dates coincided so that in fact an alibi would have occurred to taken place. Secondly, the alibi witnesses were all family members of Mr. Stadler, and he and I discussed the fact that by virtue of the relationship with the alibi witnesses being family members their testimony may be suspect based upon the relationship by and between them and Mr. Stadler. And lastly, I discussed in general terms the defense itself. The fact that I had had significant prior trial experience with the use of alibi witnesses and after those trials in terms of interviewing witnesses and the like and interviewing prospective jurors the fact that alibi defenses by family members just doesn’t seem to work so to speak. The testimony is considered suspect to begin with but when you have family members supporting an alibi it becomes even more or less credible. . . . Id. at 14-15. A photograph was presented at the hearing depicting the petitioner at his mother’s house, bearing the inscription of the date it was taken, “6-14-97,” made by Bonnie Stadler. Barkovic -21- stated that he was not sure if that photograph was ever shown to him because he reviewed many photographs provided to him by the petitioner’s mother. Barkovic also addressed his decision not to call the petitioner as a witness, explaining that he believed the petitioner could not be trusted on the witness stand. The petitioner had prior stalking convictions, which could have been used to impeach him, and Barkovic believed the petitioner was a “loose cannon” who could open the door for introduction of character evidence in the case. Barkovic maintained that he had tried at least two hundred criminal cases in his last eighteen years as an attorney. He said he discussed the possibility of an alibi defense at length with the petitioner, and since the victim was the only complaining witness testifying against him, Barkovic believed that an alibi defense was not necessary. Barkovic identified a letter dated August 27, 2002, in which he requested that the petitioner provide to him the names and addresses of any alibi witnesses that he wished to call so that Barkovic could give proper notice to the prosecution. It appears that at some point the petitioner acceded to Mr. Barkovic’s advice not to rely on the alibi defense, and Barkovic confirmed his client’s assent to not call alibi witnesses in the September 16, 2002 letter to him, writing, “You agreed with me that [alibi witnesses] should not be called. Accordingly, no alibi witnesses will be called.” Id. at 46. Neither of these letters are part of the record before the Court, but it appears that both were introduced during the post-remand hearing. Bonnie Stadler, the petitioner’s mother, testified that she told Barkovic that her son was present at a family gathering at her house on June 14, 1997 during the entire evening. She said the party started at 5:30 p.m., but she could not recall if the petitioner was there at that time. She did insist that the petitioner, his sister, and she were at the party all night, and when the last few people left the party left around 11:15 p.m., the petitioner was asleep on the couch and he never left the -22- house. She was then shown a picture of the petitioner and Ed Stadler, saying that the picture was taken on the day of the party because she wrote the date on the back of the picture, as was her custom. Bonnie Stadler testified that she hired Mr. Barkovic on the recommendation of another inmate. She said that she told Barkovic about the petitioner’s alibi during their first meeting. At their second meeting, she said Barkovic told her that they should not pursue an alibi defense. He told her that in his experience juries do not usually believe an alibi defense. She said she did not disagree with him because she felt intimidated. But she did write the witnesses’ names down for several attorneys including Barkovic, for whom she wrote down the names of alibi witnesses on the back of the letter Barkovic had sent to her requesting these names, and gave the letter back to him. The petitioner’s mother also related the contents of another letter Barkovic sent to the petitioner on September 16, 2002. In that letter, Barkovic insisted that the petitioner get a haircut before trial, and if he did not, then Barkovic would withdraw from the case. According to Bonnie Stadler, trial counsel also told her that if things did not go as he suggested, she should get another attorney. Mrs. Stadler acknowledged that she did testify in a prior criminal sexual misconduct case on her son’s behalf when he was charged with the criminal sexual conduct resulting in personal injury in 1991, and he was acquitted following the trial. However, her testimony in that case was confined to stating that she had seen the complainant at her house to counter the victim’s allegation that she had never visited Stadler’s house. Marie Stadler, the petitioner’s sister, testified that she was at her parents’ home on June 14, 1997 together with her son Michael Nustietel and the petitioner. She said that the petitioner was -23- present from 6:00 p.m. when she arrived until 11:30 p.m. when she left. To verify the date of the gathering, she produced a newspaper article covering a fishing derby that her son competed in on June 14, 1997. She said her son won third place, and that one of her parents took him to the derby, which ended around 4:00 p.m. Her son was not in the photograph. The petitioner also testified that he was at a party at his parents’ house on the night in question; he said he was there all evening. He said he told his attorney that he wanted the alibi witnesses to be called, but attorney Barkovic told him that a jury would not believe relatives as the alibi witnesses. The petitioner also testified that he told trial counsel that he wanted to testify without testifying about his character, but Barkovic told him he should not because the prosecution could then bring up his prior bad acts on other charges that he had against him. He acknowledged that he had been previously convicted of a couple of stalking charges as part of a plea bargain on a marijuana charge. The petitioner said he did not remember the September 16, 2002 letter confirming the agreement on which defense would be pursued, although he may have seen it. He said he wanted to testify that he had never seen the complainant before, but Barkovic told him that if he did not follow his advice, then he would withdraw from the case. The petitioner said he was uncomfortable about trial counsel withdrawing because he needed an attorney and had no money to retain new counsel. Based on this record, the petitioner contends that attorney Barkovic’s performance was constitutionally deficient. However, to establish the ineffective assistance of counsel, the petitioner must show that: (1) counsel’s errors were so serious that “counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment;” and (2) counsel’s deficient performance prejudiced the defense. Strickland v. Washington, , 687 (1984). An -24- attorney’s performance is deficient if “counsel’s representation fell below an objective standard of reasonableness.” Id. at 688. But “[j]udicial scrutiny of counsel’s performance must be highly deferential.” Id. at 689. The Supreme Court has “declined to articulate specific guidelines for appropriate attorney conduct and instead [has] emphasized that ‘[t]he proper measure of attorney performance means simply reasonableness under prevailing professional norms.’” Wiggins, 539 U.S. at 521 (quoting Strickland, 466 U.S. at 688). Without question, the decision made by attorney Barkovic to jettison the alibi defense was a strategic choice on his part. As a general rule, trial counsel’s strategic decisions on how the trial is to be conducted are afforded great deference. As the Supreme Court explained: It is all too tempting for a defendant to second-guess counsel’s assistance after conviction or adverse sentence, and it is all too easy for a court, examining counsel’s defense after it has proved unsuccessful, to conclude that a particular act or omission of counsel was unreasonable. A fair assessment of attorney performance requires that every effort be made to eliminate the distorting effects of hindsight, to reconstruct the circumstances of counsel’s challenged conduct, and to evaluate the conduct from counsel’s perspective at the time. Because of the difficulties inherent in making the evaluation, a court must indulge a strong presumption that counsel’s conduct falls within the wide range of reasonable professional assistance; that is, the defendant must overcome the presumption that, under the circumstances, the challenged action might be considered sound trial strategy. Strickland, 466 U.S. at 689 (internal quotes and citations omitted). “[A] lawyer’s acts and omissions must be judged on the basis of what he knew, or should have known, at the time his tactical choices were made and implemented.” Ouber v. Guarino, 293 F.3d 19, 25 (1st Cir. 2002) (citing Bell v. Cone, 535 U.S. 685 (2002 . It is equally true that “errors of tactics or omission do not necessarily mean that counsel has functioned in a constitutionally deficient manner.” Greer v. Mitchell, 264 F.3d 663, 676 (6th Cir. 2001). -25- Of course, the determination that trial counsel’s ill-conceived choices amount to trial strategy does not insulate them from habeas review. “Strategic” choices that have no hope of succeeding, are made without adequate investigation or preparation, or actually imperil the defendant’s case cannot be considered “sound.” For instance, in Wiggins, 539 U.S. at 527-28, a death penalty case, the Supreme Court held that the state court of appeals unreasonably applied Strickland’s governing principles in rejecting the petitioner’s ineffective assistance claim because the state court of appeals’s conclusion that counsel’s performance was within professional norms was objectively unreasonable. Counsel did not present evidence at the penalty phase on the petitioner’s personal background – a valid strategic choice under some circumstances – but counsel had failed to make a reasonable investigation into the petitioner’s social history. Ibid. (noting that under Strickland, “strategic choices made after less than complete investigation are reasonable precisely to the extent that reasonable professional judgments support the limitations on investigation” (citation and internal quotation marks omitted . This failure reasonably to investigate, in turn, rendered the state court’s deference to counsel’s strategic decision not to present mitigating evidence of the petitioner’s social history objectively unreasonable as well. Ibid. (stating that “counsel chose to abandon their investigation at an unreasonable juncture, making a fully informed decision with respect to sentencing strategy impossible”). A “decision . . . cannot be according the normal deference to strategic choices [where] it was uninformed.” Rolan v. Vaughn, 445 F.3d 671, 682 (3d Cir. 2006). Other “strategic” choices by counsel, such as the failure to object to obviously tainted and inadmissible evidence, Ege v. Yukins, 485 F.3d 364, 378-79 (6th Cir. 2007), and the failure to cross-examine a key prosecution witness, Higgins v. Renico, 362 F. Supp. 2d 904, 916-17 (E.D. -26- Mich. 2005), have been found to be so unsound as to negate the finding that counsel’s performance tracked “prevailing professional norms.” Wiggins, 539 U.S. at 521. Moreover,“[o]nly choices made after a reasonable investigation of the factual scenario are entitled to a presumption of validity.” Rolan, 445 F.3d at 682 (citation omitted). An obviously defective choice is “not a reasonable strategic decision entitled to deference.” Moss v. Hofbauer, 286 F.3d 851, 865 (6th Cir. 2002) (finding that defense counsel’s reliance on the cross-examination of an eyewitness by a co-defendant unreasonable when the two defendants’ interests were not aligned). As the Seventh Circuit has put it: [I]f as in this case there is only one argument that could be made on the defendant’s behalf, and it is not frivolous, the lawyer may have a professional obligation to make it. Keys v. Duckworth, 761 F.2d 390, 392 (7th Cir. 1985) (per curiam); cf. Fortenberry v. Haley, 297 F.3d 1213, 1226-27 (11th Cir. 2002) (per curiam); Tejeda v. Dubois, 142 F.3d 18, 25 (1st Cir. 1998). It is not suggested that Rezin’s lawyer had a tactical reason not to make the argument that we are about to examine; he could not have, since he had no other basis for knocking five years off his client’s sentence. “The spectrum of counsel’s legitimate tactical choices does not include abandoning a client’s only defense.” United States ex rel. Barnard v. Lane, 819 F.2d 798, 805 (7th Cir. 1987). There was nothing to lose and something to gain, though only in a probabilistic sense, from making the argument. United States v. Rezin, 322 F.3d 443, 446 (7th Cir. 2003). It is not difficult to conclude in this case that attorney Barkovic’s defense of the petitioner was poorly conceived and badly executed. The main thrust of his strategy appeared to be the exploitation of the victim’s inconsistent description of the assailant’s pre-rape conduct, her failure to give the police the petitioner’s first and last names, and the victim’s initial reluctance to prosecute would create a reasonable doubt in the jury’s mind. It is unclear whether that doubt would have rested on a belief that no rape occurred, or the victim was mistaken about the identity of her assailant, or the sexual activity was consensual; and Barkovic’s trial tactics and argument shed little -27- light on the intended logical consequence of his theme. He argued that N.C.’s story was implausible, suggesting that she fabricated the assault; but that strategy was problematic because it required that he explain away the physical evidence (the black eye and bite mark) introduced by the State. The alibi defense would have been quite consistent with any defense theory except consent. Barkovic’s only justification for rejecting it was his concern over fixing the date of the party, which was undermined by the undisputed conversation he had with the petitioner’s mother, who had a photograph documenting the date (he never talked to the sister, who had additional evidence of the date of the party); and his personal belief that juries usually turn a cold shoulder to family-member witnesses who can establish an alibi. This Court disagrees with the state courts’ conclusions that Barkovic’s choice was reasonable and made after a proper investigation. However, despite that disagreement, the Court cannot conclude that habeas relief is warranted on the ground of ineffective assistance of counsel. As the Supreme Court explained last term: The question “is not whether a federal court believes the state court’s determination” under the Strickland standard “was incorrect but whether that determination was unreasonable – a substantially higher threshold.” . . . And, because the Strickland standard is a general standard, a state court has even more latitude to reasonably determine that a defendant has not satisfied that standard. See Yarborough v. Alvarado, , 664 (2004) (“[E]valuating whether a rule application was unreasonable requires considering the rule’s specificity. The more general the rule, the more leeway courts have in reaching outcomes in case-by-case determinations”). Knowles v. Mirzayance, 129 S. Ct. at 1420 (citation omitted); see also Wood v. Allen, -- U.S. --, --, 2010 WL 173369, *6 (Jan. 20, 2010) (“It suffices to say, however, that a state-court factual determination is not unreasonable merely because the federal habeas court would have reached a different conclusion in the first instance.”). -28- The state courts’ determination that Barkovic’s strategic choice was reasonable was based on their observations that he articulated reasons for recommending against the alibi defense, and the petitioner’s consent to that choice. There is evidence in the record that supports those conclusions, including Barkovic’s own testimony and the letter confirming the trial strategy he sent to the petitioner. The state courts’ conclusion that the petitioner consented to the strategy – albeit without much alternative, since trial was looming and he was out of money to hire a new lawyer – is not clearly erroneous and therefore presumed correct. 28 U.S.C. § 2254(e)(1); West v. Seabold, 73 F.3d at 84. The state courts’ conclusion that attorney Barkovic’s failure to call alibi witnesses and present alibi defense did not amount to substandard performance – even if he had nothing to lose by presenting the defense, Knowles, 129 S. Ct. at 1419 (stating that the Supreme “Court has never established anything akin to the Court of Appeals’ ‘nothing to lose’ standard for evaluating Strickland claims) – was not an unreasonable application of Supreme Court precedent. The decision not to allow the petitioner to testify is a far easier call. Attorney Barkovic testified that he had several consultations with the petitioner on this issue, and Barkovic learned that the petitioner wanted to take the stand and tell the jury that he was not the type of person who would commit such an offense. Since the petitioner had been convicted of stalking, Barkovic reasonably feared that such testimony would have opened the door to adverse character evidence. Barkovic explained that despite his repeated attempts to discourage the petitioner from making such statements if allowed to testify, he believed the petitioner to be a “loose cannon,” and he could not trust him. Hr’g Tr. at 23, Jan. 16, 2004. It appears that the petitioner ultimately acquiesced in the decision to remain silent. -29- All criminal defendants, including the petitioner, have a constitutional right to testify in their own behalf. Rock v. Arkansas, 483 U.S. 44, 49 (1987). This right is personal to the defendant and may be relinquished only by the defendant. United States v. Joelson, 7 F.3d 174, 177 (9th Cir. 1993). Relinquishment of the right must be knowing and intentional. Ibid. Defense counsel’s role is to advise the defendant whether to testify, but the ultimate decision is for the defendant to make. United States v. Hover, 293 F.3d 930, 933 (6th Cir. 2002). However, “when a tactical decision is made not to have the defendant testify, the defendant's assent is presumed.” United States v. Webber, 208 F.3d 545, 551 (6th Cir. 2000). This is so because the defendant’s attorney is presumed to follow the professional rules of conduct and is ‘strongly presumed to have rendered adequate assistance’ in carrying out the general duty ‘to advocate the defendant's cause and the more particular duties to consult with the defendant on important decisions and to keep the defendant informed of important developments in the course of the prosecution.’ Strickland v. Washington, , 688-90 (1984). Ibid. (footnote omitted). The state trial court concluded that trial counsel’s advice against the petitioner testifying on his own behalf was within the range of competence demanded of attorneys in criminal cases, and the court of appeals agreed. Those decisions are reasonable, supported by the record, and constitute a reasonable application of Strickland. The petitioner is not entitled to habeas relief on this part of his ineffective assistance of counsel claim. F. In his ninth claim, the petitioner contends that his sentence is cruel and unusual because it is disproportionately severe. The state court of appeals rejected that claim on the merits. A habeas petitioner who seeks to challenge the severity of a prison sentence on Eighth Amendment grounds faces a formidable challenge, since, as noted above, he may obtain relief only -30- by demonstrating that a state court decision contravened or misapplied “clearly established” Supreme Court precedent. The Supreme Court has acknowledged “that our precedents in this area have not been a model of clarity.” Lockyer v. Andrade, 538 U.S. 63, 72 (2003). “Indeed, in determining whether a particular sentence for a term of years can violate the Eighth Amendment, we have not established a clear or consistent path for courts to follow.” Ibid. The Supreme Court declared, therefore, that the general applicability of the proportionality standard to term-of-years sentences was clearly established, but confessed a lack of clarity as to the factors lower courts should consider in making that determination. Ibid. The Court concluded that “the only relevant clearly established law amenable to the ‘contrary to’ or ‘unreasonable application of’ framework is the gross disproportionality principle, the precise contours of which are unclear, applicable only in the ‘exceedingly rare’ and ‘extreme’ case.” Id. at 73. In Lockyer, the Supreme Court reversed the Ninth Circuit’s grant of habeas corpus on the ground that two twenty-five-years-to-life sentences imposed under California’s “three strikes” law, where the triggering felony was the theft of $150 worth of video tapes, violated the Cruel and Unusual Punishment Clause of the Eighth Amendment. The Court noted that the “thicket” created by its jurisprudence consisted primarily of its decisions in Solem v. Helm, 463 U.S. 277 (1983), Harmelin v. Michigan, 501 U.S. 957 (1991), and Rummel v. Estelle, 445 U.S. 263 (1980). The California state court observed that the proportionality rule set forth in Solem was cast into doubt by Harmelin and proceeded to analyze Andrade’s sentence under the approach taken in Rummel, where the Supreme Court rejected a claim that a life sentence imposed under Texas’s recidivist statute was grossly disproportionate to the theft felonies that formed the predicate for the sentence. The California court concluded that Andrade’s sentence was not disproportionate. The Supreme -31- Court held that this decision was not contrary to or an objectively unreasonable application of federal law that was clearly established by the Supreme Court. Lockyer, 538 U.S. at 72-77. A plurality of the Supreme Court has held that the Eighth Amendment does not require strict proportionality between the crime and sentence. See Harmelin, 501 U.S. at 965. As the Supreme Court observed in Lockyer, it is generally recognized after Harmelin that the Cruel and Unusual Punishment Clause of the Eighth Amendment forbids only an extreme disparity between crime and sentence, that is, sentences that are “grossly disproportionate” to the crime. Id. at 1001 (Kennedy, J., concurring); Coleman v. Mitchell, 268 F.3d 417, 453 (6th Cir. 2001) (citing Coker v. Georgia, 433 U.S. 584, 592 (1977 ; United States v. Hopper, 941 F.2d 419, 422 (6th Cir. 1991). “Outside the context of capital punishment, successful challenges to the proportionality of particular sentences have been exceedingly rare.” Rummel, 445 U.S. at 272. Rummel was convicted of obtaining $120.75 by false pretenses, a crime punishable by at least two years but not more than ten years in prison. He was sentenced as a recidivist to life imprisonment with the possibility of parole. His two prior felonies consisted of fraudulent use of a credit card to obtain $80 worth of goods and services, a felony punishable by two to ten years in prison, and passing a forged check for $28.36, a crime punishable by two to five years in prison. The Supreme Court held that Rummel’s life sentence under the state recidivist statute did not constitute cruel and unusual punishment. Similarly, in Harmelin, the Supreme Court upheld a life sentence without the possibility of parole for possession of more than 650 grams of cocaine for an offender with no prior felony convictions. The Supreme Court overturned a life sentence in Solem on the ground that it was significantly disproportionate to Helm’s crime and therefore prohibited by the Eighth Amendment. However, Helm had been sentenced to life imprisonment without the possibility of parole for -32- uttering a “no account” check for $100, and his prior felonies also were minor, nonviolent crimes. By contrast, in 2003, the Supreme Court reaffirmed Rummel and found constitutional a sentence of twenty-five years to life imposed upon a fifth felony conviction. See Ewing v. California, 538 U.S. 11, 24-31 (2003). The Michigan courts’ determination that a sentence of twenty-five to forty years for first’ degree criminal sexual conduct was not disproportionate is not an unreasonable application of this Supreme Court precedent. Michigan law allowed a prison term of life imprisonment or any number of years. Mich. Comp. Laws § 750.520b(2). The challenged sentence fell within the statutory limits. The state courts noted that the petitioner engaged in predatory behavior and had subsequent convictions for other criminal behavior. The trial court also found that the petitioner was not remorseful and posed a continuous threat. These circumstances were not unusual and did not overcome the presumption of proportionality. “[A] sentence within the statutory maximum . . . generally does not constitute ‘cruel and unusual punishment.’” United States v. Organek, 65 F.3d 60, 62 (6th Cir.1995) (citation omitted). “As long as the sentence remains within the statutory limits, trial courts have historically been given wide discretion in determining ‘the type and extent of punishment for convicted defendants.’” Austin, 213 F.3d at 301 (quoting Williams v. New York, 337 U.S. 241, 245 (1949 . The state courts’ conclusion that the trial court did not abuse its discretion at sentencing was not contrary to or an unreasonable application of Supreme Court precedent. G. -33- In his tenth claim, the petitioner asserts that the trial court judge violated his Sixth Amendment right to a trial by jury by using factors to score his sentencing guidelines that had not been submitted to a jury and proven beyond a reasonable doubt or admitted to by the petitioner. The petitioner believes that Blakely v. Washington, (2004), and Apprendi v. New Jersey, , 490 (2000), support his position. However, the claim that Michigan’s sentencing guideline system, wherein judge-found facts are used to establish the minimum sentence of an indeterminate sentence, violates the Sixth Amendment has been foreclosed by the Sixth Circuit’s decision in Chontos v. Bergius, No. 08-1031, __ F.3d __ (6th Cir. Nov. 10, 2009). This Court is bound by that decision. H. The Court finds that the petitioner’s third, sixth, and eighth claims are barred by procedural default. In his third claim, the petitioner contends that he was deprived of a fair trial by N.C.’s destruction of exculpatory evidence when she showered and cleaned the couch, and by the police officers’ failure to take steps to preserve that evidence. His sixth claim is that the prosecutor committed misconduct when he referred to N.C. as the victim and called the petitioner a “predatory animal” and “a monster.” In his eighth claim, the petitioner contends that he was denied the right to substitute counsel at sentencing. None of these alleged errors were objected to at trial, and the state court of appeals reviewed them for plain error. Under the procedural default doctrine, a federal habeas court will not review a question of federal law if the state court’s decision rests on a substantive or procedural state law ground that is independent of the federal question and is adequate to support the judgment. See Coleman v. Thompson, , 729 (1991). However, “a procedural default does not bar consideration -34- of a federal claim on either direct or habeas review unless the last state court rendering a judgment in the case ‘clearly and expressly’ states that its judgment rests on the procedural bar.” Harris, 489 U.S. at 263. Furthermore, “only a ‘firmly established and regularly followed state practice’ may be interposed by a State to prevent subsequent review . . . of a federal constitutional claim.” Ford v. Georgia, 498 U.S. 411, 423-24 (1991) (quoting James v. Kentucky, 466 U.S. 341, 348-51 (1984 ; see also Calderon v. United States Dist. Ct. for the E. Dist. of Cal., 96 F.3d 1126, 1129 (9th Cir. 1996) (internal quotation omitted) (“For the procedural default doctrine to apply, a state rule must be clear, consistently applied, and well-established at the time of the petitioner’s purported default.”). The last state court to issue a reasoned opinion on this claim, the Michigan Court of Appeals, held that these claims were not preserved because counsel failed to lodge a timely objection. Stadler, 2004 WL 2624741 at *3, 5-6, 8-9. In Michigan, the contemporaneous-objection rule was firmly established and regularly followed with respect to claims regarding the admission of evidence at the time of the petitioner’s trial. See People v. Grant, 445 Mich. 535, 545, 520 N.W.2d 123, 127- 28 (1994); People v. Aldrich, 246 Mich. App. 101, 113, 631 N.W.2d 67, 74-75 (2001); Mich. R. Evid. 103(a)(1). The petitioner asserts that his trial counsel was ineffective as cause to excuse his procedural default. This argument must fail. As noted above, the Court concludes that trial counsel was not constitutionally ineffective. Because the petitioner failed to demonstrate cause to excuse his procedural default, this Court may not review the claims unless he can establish a constitutional error resulting in a fundamental miscarriage of justice. Schlup v. Delo, 513 U.S. 298, 314-15 (1995). The Supreme Court has held that application of the “miscarriage of justice” exception to the procedural default rule should apply only to cases where there is a likelihood of convicting a person -35- who is actually innocent. Schlup, 513 U.S. at 321. “‘[A]ctual innocence’ means factual innocence, not mere legal insufficiency.” Bousley v. United States, 523 U.S. 614, 623 (1998). “To be credible, [a claim of actual innocence] requires [the] petitioner to support his allegations of constitutional error with new reliable evidence-whether it be exculpatory scientific evidence, trustworthy eyewitness accounts, or critical physical evidence-that was not presented at trial.” Schlup, 513 U.S. at 324. The petitioner has not done so here. In fact, the petitioner has pointed to no new evidence that the jury was not given. Therefore, his procedural default will not be excused on this ground. Moreover, even if these claims were not procedurally barred, they would fail on the merits. “Habeas review does not encompass state court rulings on the admission of evidence unless there is a constitutional violation.” Clemmons v. Sowders, 34 F.3d 352, 357 (6th Cir. 1994) (citing Fuson v. Jago, 773 F.2d 55, 59 (6th Cir. 1985 . An evidentiary ruling violates a criminal defendant’s due process rights only “when it is so egregious that it results in a denial of fundamental fairness.” Bugh v. Mitchell, 329 F.3d 496, 512 (6th Cir. 2003). In this case, the petitioner failed to demonstrate that a miscarriage of justice occurred on the basis of his actual innocence. Thus, these claims are procedurally defaulted and review of them is barred. III. The state court decisions in this case were not contrary to federal law, an unreasonable application of federal law, or an unreasonable determination of the facts. The petitioner has not established that he is presently in custody in violation of the Constitution or laws of the United States. -36- Accordingly, it is ORDERED that the petitioner’s petition for a writ of habeas corpus is DENIED. Dated: January 22, 2010 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 22, 2010. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -37-

=== Barbrasue Beattie, et. al. v. Centurytel, Incorporated ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION BARBRASUE BEATTIE and JAMES SOVIS, on behalf of themselves and others similarly situated, Plaintiffs, Case Number 02-10277 Honorable David M. Lawson v. CENTURYTEL, INCORPORATED, ______________________________________/ Defendant. OPINION AND ORDER DENYING DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT Before the Court is a motion for partial summary judgment filed by the defendant, in which it alleges that it is entitled as a matter of law to limit damages to the time period that extends backward for two years from the commencement of this lawsuit on October 29, 2002. The Court previously certified a class consisting of individuals who paid for certain inadequately-described services “during the period beginning October 29, 2000, or such earlier period if the charges were not known or reasonably could not have been known by October 29, 2000.” Opinion & Order Granting Pls.’ Mot. for Class Certif., at 27. The defendant argues that the undisputed facts compel the conclusion that a reasonable person could have discovered the unauthorized charges each time he or she received an ambiguous bill, and therefore the discovery rule cannot toll the two-year statute of limitations as a matter of law. The Court heard oral argument on the motion on November 19, 2009 and now rejects the defendant’s argument. The Court does not believe that receipt of a bill that contains a small charge for “Non-Regulated Services” would trigger the duty to investigate further as a matter of law. Certainly, in some cases an ambiguous billing description reasonably would provoke an inquiry, but there are factual inferences that are required to reach that conclusion. At the summary judgment stage, the non-moving party – here, the plaintiffs – are entitled to have those inferences drawn in their favor. Because disputed questions of fact preclude summary judgment on the defendant’s affirmative defense, the motion for partial summary judgment will be denied. I. The plaintiffs filed this class action alleging that the defendant violated the Federal Telecommunications Act, 47 U.S.C. 251 et seq., and regulations enacted thereunder, by billing for inside wire maintenance insurance and for charging for such optional service when it was not ordered. The facts are well known to the parties and need only be summarized here for the purpose of this motion. The complaint alleges that beginning in at least 1994, and perhaps before that time, defendant CenturyTel had been billing customers for the maintenance of internal wiring at a monthly rate of $.50 to $.99. The rate increased to $3.95 about May 2001. The defendant identified this charge on its phone bills only as one for “Non-Regulated Services.” However, in January 2002, CenturyTel reorganized its telephone bills and re-labeled the charge as “Inside Wire Maintenance Plan.” The plaintiffs claim that they had no idea they were being charged for this optional service until it was identified properly on the phone bill. The named plaintiffs in this case are Barbarasue Beattie and James Sovis. Ms. Beattie alleges that she was a residential telephone customer of defendant CenturyTel since November 1996. She subscribed to basic telephone service, and she received monthly bills through May 2001 that contained a charge ranging from $0.50 to $0.99 for an item described as “Non-Regulated Service.” The charge increased in May 2001 to $3.95; but in January 2002 the defendant changed its billing -2- format, revealing for the first time that the “Non-Regulated Service” actually was for an inside wire maintenance protection plan, which Beattie claims she never ordered or authorized. Mr. Sovis tells a similar story, except that he had been purchasing basic phone service from CenturyTel since 1994. Both insist that they never ordered this service. Over the course of their service relationship, Beattie received sixty-two phone bills with the ambiguous billing description and Sovis receive ninety-one such bills. Beattie testified that she first became aware of the unauthorized charge “[w]hen they changed the wording from nonregulated services to inside wire maintenance plan, and I knew I hadn’t ordered that.” Def.’s Mot. for Sum. J., Ex. 2, Beattie dep. at 11. She also testified that when she noticed the line item on her November 2000 phone bill, she did not know what the designation “non-regulated service” referred to, and she did not call CenturyTel to ask about the charge because “it’s always appeared on my bill, nonregulated service; nonregulated services has always been on my CenturyTel bill.” Id. at 39. Similarly, James Sovis testified that he received phone bills with the “Non-Regulated Service” description and did not call to inquire what it meant. In addition, on three occasions Sovis received from CenturyTel a form entitled “Confirmation of Services Ordered,” which included the legend “Maintenance Sngl Ln I/W.” These forms were offered as exhibits at Mr. Sovis’s deposition; only one bears a date, which is April 18, 2000. Def.’s Mot. for Sum. J., Ex. 4. Sovis acknowledged receiving these forms and stated that he did not call CenturyTel, although he did not understand what the legend meant. He said he did not pay much attention to the form because it began by declaring “THIS IS NOT A BILL. PLEASE DO NOT PAY.” Ibid. Sovis testified that the “Non-Regulated Services” line item was among other monthly charges, leading him to believe that “it’s part of basic service. It’s the price of doing business. If I want a telephone, I pay the basic monthly service.” -3- Def.’s Mot. for Sum. J., Ex. 5, Sovis dep. at 44. Both Sovis and Beattie testified that they were surprised when they learned the true nature of the charges. They spoke to friends and family members who bought telephone service from CenturyTel and learned that each one had been charged unknowingly for this optional service without having ordered it. As part of its motion presentation, CenturyTel attached a record of a call from a customer sometime in May 2001 questioning the “Non-Regulated Service” charge, which in fact was for the inside wire maintenance program. II. The defendant asks this Court to hold as a matter of law that the plaintiffs’ cause of action accrued whenever the customer received a phone bill with an inadequate billing description and the customer paid the bill. CenturyTel insists that no tolling doctrine can apply in this case because the billing description was so ambiguous that a reasonable person would have been put on notice and was obliged to make inquiry. The defendant contrasts this case with the hypothetical circumstance where a line item on a bill was clearly stated but false. Such a customer’s failure to inquire could be found reasonable, argues the defendant, because the biller’s action would mislead the customer and prevent discovery. The defendant believes that a non-compliant but ambiguous billing description can never support a claim that the statute of limitations should be tolled by the discovery rule because the ambiguity should put putative plaintiffs on inquiry notice as a matter of law. The standards for evaluating a motion for summary judgment are well known but bear repeating here. As the Sixth Circuit recently explained: Both claimants and parties defending against a claim may move for summary judgment “with or without supporting affidavits.” Fed. R. Civ. P. 56(a), (b). Such a motion presumes the absence of a genuine issue of material fact for trial. The court must view the evidence and draw all reasonable inferences in favor of the -4- non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record that demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). Once that occurs, the party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant's denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). Alexander v. CareSource, 576 F.3d 551, 557-58 (6th Cir. 2009). In addition, when “‘reviewing a summary judgment motion, credibility judgments and weighing of the evidence are prohibited. Rather, the evidence should be viewed in the light most favorable to the non-moving party. . . . Thus, the facts and any inferences that can be drawn from those facts[] must be viewed in the light most favorable to the non-moving party.’” Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 374 (6th Cir. 2009) (quoting Bennett v. City of Eastpointe, 410 F.3d 810, 817 (6th Cir. 2005) (citations omitted ; see also Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003) (“In evaluating the evidence, [the district court] ‘draw[s] all reasonable inferences therefrom in a light most favorable to the non-moving party.’”) (quoting PDV Midwest Refining, LLC v. Armada Oil & Gas Co., 305 F.3d 498, 505 (6th Cir. 2002 . The Court already has determined that the defendant’s billing practice of charging for its Wire Watch program but describing it on the phone bill as “Non-Regulated Services” violated section 201 of the Federal Telecommunications Act (FTA), which states: All charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is declared to be unlawful. . . . The Commission may prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this chapter. -5- 47 U.S.C. § 201(b). Under that statute, the Federal Communications Commission (FCC) promulgated a regulation declaring that an ambiguous bill is “unreasonable.” See 47 C.F.R. § 64.2401(b) (requiring that “[c]harges contained on telephone bills must be accompanied by a brief, clear, non-misleading, plain language description of the service [in language] . . . sufficiently clear in presentation and specific enough in content so that customers can accurately assess that the services for which they are billed correspond to those that they have requested and received . . .”). The Act authorizes suits against telephone service providers violating the Act “for the full amount of damages sustained in consequence of any such violation . . . together with a reasonable counsel or attorney’s fee.” 47 U.S.C. § 206. The Act contains a two-year statute of limitations that applies to “[a]ll complaints against carriers for the recovery of damages not based on overcharges.” 47 U.S.C. § 415(b). The two-year period begins to run “from the time the cause of action accrues.” Ibid. The statute is phrased in terms of complaints filed with the FCC, but courts apply it to private civil suits. See Ward v. N. Ohio Tel. Co., 381 F.2d 16, 16 (6th Cir. 1967). As a general rule, a cause of action accrues when the plaintiff “‘discovers that he has been injured, not when he determines that the injury was unlawful.” Amini v. Oberlin Coll., 259 F.3d 493, 499-500 (6th Cir. 2001) (quoting Thelen v. Marc’s Big Boy Corp., 64 F.3d 264, 267 (7th Cir. 1995 . This so-called “discovery rule” has been applied by other courts to claims under the FTA. See Commc’ns Vending Corp. of Ariz. v. FCC, 365 F.3d 1064, 1074 (D.C. Cir. 2004) (citing MCI Telecomms. Corp. v. FCC, 59 F.3d 1407, 1417 (D.C. Cir. 1995), MCI Telecomms. Corp. v. Teleconcepts, 71 F.3d 1086, 1100 (3d Cir. 1995), and Pavlak v. Church, 727 F.2d 1425, 1428 (9th Cir. 1984 ; see also Comcast of Illinois X v. Multi-Vision Electronics, Inc., 491 F.3d 938, 944 (8th -6- Cir. 2007) (“In federal question cases, the discovery rule applies in the absence of a contrary directive from Congress.”) (internal quotation marks and citations omitted). “Under the general formulation of the discovery rule, a claim accrues (and the statute of limitations begins to run) when the plaintiff discovers, or in the exercise of due diligence should have discovered, the injury which forms the basis for his claim.” Med. Mut. of Ohio v. K. Amalia Enters. Inc, 548 F.3d 383, 391 (6th Cir. 2008). “Once the prospective plaintiff is on notice that it might have a claim, it is required to make a diligent inquiry into the facts and circumstances that would support that claim.” Sprint Commc’ns Co. v. FCC, 76 F.3d 1221, 1228 (D.C. Cir. 1996). The discovery rule, therefore, calls for an assessment of two elements: first, whether the objective facts should have put the plaintiff on notice of a potential claim; and, second, whether the inquiry made by the plaintiff was reasonable. See Wyser-Pratt Mgmt. Co. v. Telxon Corp., 413 F.3d 553, 563 n.9 (6th Cir. 2005) (citing New England Health Care Employees Pension Fund v. Ernst & Young, LLP, 336 F.3d 495, 500 (6th Cir. 2003 . There is no dispute that the plaintiffs did not make any inquiry about the ambiguous line item on their phone bill until after the defendant changed its billing description in January 2002. The focus of the present motion is on the first element of the affirmative defense, that is, whether the phone bills the plaintiffs received before that date put them on inquiry notice as a matter of law. It has been observed that inquiry notice does not arise until the plaintiff possesses enough information that is “sufficiently probative” of wrongdoing, that is, when the facts are “advanced beyond the stage of a mere suspicion, sufficiently confirmed or substantiated – not only to incite the victim to investigate but also to enable him to tie up any loose ends and complete the investigation in time to file a timely suit.” Fujisawa Pharm. Co., Ltd. v. Kapoor, 115 F.3d 1332, 1335 (7th Cir. -7- 1997) (fraud action under Rule 10b-5). The Sixth Circuit has held that generally, that “is not a question the trial judge or this court can answer; it is a question for the jury.” Hill v. A.O. Smith Corp., 801 F.2d 217, 225 (6th Cir. 1986). Other courts have found inquiry notice to exist for claims under the FTA when commercial customers had constructive notice of a violation. See Davel Commc’ns, Inc. v.Qwest Corp., 460 F.3d 1075, 1091-92 (9th Cir. 2006) (pay phone service provider’s claim for overcharges against phone company accrued when the plaintiff knew that the phone company had not filed its fraud protection service rates withe the FCC); Sprint Communications Co., 76 F.3d at 1228 (long-distance telephone company’s cause of action against another long-distance carrier for excessive charges on private line communications service accrued when plaintiff’s customer complained of excessive charges, even though complaint was eventually dismissed as unsupported by facts). But see MCI Telecommunications Corp., 59 F.3d at 1417 (FTA claim did not accrue when carrier filed preliminary earnings report containing evidence of overcharges; claim accrued when final report was filed). However, the question of inquiry notice must include consideration of all the relevant circumstances, including the fact that the plaintiffs are residential customers and the degree of their sophistication, the type of services ordered and the plaintiffs’ reasonable expectations, and the presentation of the billing itself. There is no question that the defendant’s billing description was ambiguous. In fact, the FCC discussed an example in its rule making comments that is virtually identical to the facts of the present case, labeling a like billing description “inherently ambiguous”: We contemplate that sufficient descriptions will convey enough information to enable a customer reasonably to identify and to understand the service for which the customer is being charged. Conversely, descriptions that convey ambiguous or vague information, such as, for example, charges identified as “miscellaneous,” -8- would not conform to our guideline. Similarly, in our view, a charge described by what it is not, such as, for example “service not regulated by the Public Service Commission” is inherently ambiguous and does not disclose sufficient information. There is no way for a consumer to discern from this description that the charge refers to, for example, inside wiring maintenance insurance. First Report and Order and Further Notice of Proposed Rulemaking, FCC 99-72 at 26 (Apr. 15, 1999) (emphasis added) (quoted in Beattie v. CenturyTel, Inc., 234 F.R.D. 160, 166 (E.D. Mich. 2006 . That inherent ambiguity, however, does not necessarily compel a finding that the plaintiffs should have known enough to ask questions. The named plaintiffs were residential customers. They ordered basic telephone service, and they testified that is what they expected to receive. The billing format itself itemized the monthly charges each month from 1994 (for Sovis) and 1996 (for Beattie) through January 2002 in five lines listed as “LOCAL SERVICE IN ADVANCE,” “SUBSCRIBER LINE CHARGE – INTER,” “SUBSCRIBER LINE CHARGE – INTRA,” NON-REGULATED SERVICES,” and “OTHER CHARGES.” Def.’s Mot. for Sum. J., Exs. 3, 6. That description typically appeared on page three of the bill. Page one contained a recap listing “Non-Regulated” and “Regulated” charges. The Court cannot say that a residential telephone customer that had ordered basic service, when confronted with a phone bill in the format presented, should have been motivated to inquire. The plaintiffs acknowledged that they did not understand the charge on their bills, but that concession does not lead ineluctably to the conclusion that they should have known the billing “practice . . . [was] unjust or unreasonable” within the meaning of 47 U.S.C. § 201(b). The confirmation-of-service notices do not change the analysis. The description “Maintenance Sngl Ln I/W” conveys little information, and there is nothing that ties the charge to -9- the “Non-Regulated Services” item on the actual bill. Of course, a fact finder may draw the inference that a person confronted with this documentation knew enough to become inquisitive. But the standard under the discovery rule requires only reasonableness, not paranoia. See Heinrich v. Sweet, 44 F. Supp. 2d 408, 417 (D. Mass. 1999) (stating that reasonable diligence does not require a plaintiff to “scour medical journals . . . after their loved ones die of terminal brain cancer” and explaining that discovery rule does not exist to “encourage or reward simple paranoia”) (citation omitted). It also is worth noting that from this entire period, the defendant was able to produce only one record of an inquiry about the billing description. This, of course, is not dispositive. However, if the defendant’s premise is true – that the ambiguous billing description she received would have put a reasonable person on notice to inquire whether the billing practice was unreasonable – one would think that more reasonable people would have surfaced from among the defendant’s residential customers. Cf. Staton Holdings, Inc. v. MCI Worlddom Commc’ns, Inc., 19 F.C.C.R. 8699, 2004 WL 1066312 (FCC May 13, 2004) (holding where telephone servicer was billing business for servicing its toll-free numbers even though those numbers were no longer functional, business’s failure to realize that all of the toll-free numbers were out of service was not unreasonable, in part, because the service was an inbound service and no customers complained about not being able to reach the retailer). Based on the present record, the defendant has not established that the case is one that should fall outside the general rule that discovery of an injury for purposes of determining when a claim accrues “is a question for the jury.” Hill, 801 F.2d at 225. III. -10- The Court concludes that when the record is examined and all reasonable inferences are drawn in favor of the plaintiffs, the defendant has not established as a matter of law that its statute- of-limitations defense must succeed as a matter of law, which would limit damages to a two-year period preceding the commencement of this action. Accordingly, it is ORDERED that the defendant’s motion for partial summary judgment [dkt #217] is DENIED. Dated: December 7, 2009 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 7, 2009. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -11-

=== ETHEL M. OSLER vs HURON VALLEY AMBULANCE INCORPORATED ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ETHEL M. OSLER, individually and as Personal Representative of Viritha M. Osler, Plaintiff, v. HURON VALLEY AMBULANCE INCORPORATED, a Michigan corporation, KYLE NIZIOLEK, DAVID RENTON, DENNIS FOWLER, and DEAN LLOYD, individually and in their official capacities, __________________________________/ Defendants. Case Number 08-14272 Honorable David M. Lawson OPINION AND ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT The defendants’ motion for summary judgment raises the following issues: (1) whether a private ambulance company and its employees under exclusive contract to provide ambulance service to the county were engaged in state action when they injured the plaintiff’s decedent during normal operations; (2) whether a judgement of dismissal in a prior state court lawsuit between the plaintiff and some but not all of the defendants in this case bars the present action; and (3) whether the individual defendants are immune from liability under the Michigan Emergency Medical Services Act. The Court believes that the first question should be answered “no,” and the second “yes,” obviating the need to answer the third. The defendants’ motion for summary judgment, therefore, will be granted. I. The facts of the case are straightforward. On October 7, 2005, defendants Kyle Niziolek and David Renton were employed as ambulance drivers by defendant Huron Valley Ambulance, Inc. (HVA). They were on a low-priority run in Ypsilanti, Michigan at 10:03 p.m., when Niziolek noticed Viritha Osler “standing still” “just to the right of the hash marks in the curb lane” of Michigan Avenue. Response to Mot. for Sum. J., Ex. 1 (Niziolek dep.) at 174. Niziolek applied the brakes and swerved to the side, but he could not avoid a collision, and the ambulance struck the pedestrian, inflicting serious injuries. Hospital and autopsy records indicated that Ms. Osler was highly intoxicated at the time. When Niziolek approached Ms. Osler, she was unconscious and in critical condition. Defendant Dean Lloyd, Niziolek’s and Renton’s supervisor, arrived at the scene shortly after the accident. They made a joint decision not to transport the injured Ms. Osler to the hospital. They called another ambulance, and they testified that they started to work on Ms. Osler, although some of the documentation that would have confirmed their activity apparently never was completed. After another ambulance finally arrived, Ms. Osler was taken to St. Joseph’s Hospital where she was pronounced dead at 11:17 p.m. HVA is a private corporation, which has an exclusive contract to provide ambulance service to Washtenaw County and perform the county’s 911 emergency dispatch services. According to its president, Dale Berry, it also contracts with other public and private organizations such as nursing homes, hospitals, special events, Michigan International Speedway, the Compuware Arena, and managed care for health maintenance organizations. It performs all the Washtenaw County Medical Examiner’s investigations, all ambulance discharge services in the county, and interfacility patient transport services under a contract with St. Joseph Mercy Health System. Several HVA employees -2- are members or serve on boards of various governmental and quasi-governmental organizations that formulate policies and procedures governing emergency medical services. For instance, vice president Roger Simpson is a member of the Washtenaw-Livingston County Medical Control Authority Board, which drafts protocols and regulations governing emergency services for Washtenaw County (which, per its contract, would apply only to HVA) and Livingston County (where HVA performs no services). The Washtenaw County Board of Commissioners appointed Simpson and another HVA employee, Leslie Patterson, as county medical examiner investigators. Simpson and four other HVA employees also serve as members of other Washtenaw County advisory and oversight boards dealing with the provision of emergency medical services. Each of these boards, however, also is populated by individuals who are not affiliated with HVA. On June 30, 2006, the personal representative of Viritha Osler’s estate filed a lawsuit in the Washtenaw County, Michigan circuit court against HVA, Niziolek, and Renton alleging that the defendants were negligent in colliding with Ms. Osler and for delaying transporting her to the hospital. Following discovery, the defendants in state court filed a motion for summary judgment claiming, as they do here, that they were immune from liability under the Michigan Emergency Medical Services Act, and the undisputed facts demonstrated that the majority of fault for the accident must be ascribed to Ms. Osler. The state court judge foreshortened the plaintiff’s time to respond to the motion (while plaintiff’s counsel was out of the country on vacation), and plaintiff’s counsel’s motion to enlarge the time for filing his brief by one day was denied. The state judge ultimately struck the plaintiff’s brief after it was filed four hours late. However, it appears that some consideration was given to the response, since the ensuing order dismissing the case “for the reasons articulated by the Defendants in their brief” noted that “even reviewing Plaintiff’s late brief, Plaintiff -3- fails to articulate any law in response to Defendant’s November 23, 2009’s assertion that Michigan’s Emergency Medical Services Act (MCLA 333.20901 et seq.) bars Plaintiff’s claims.” Response to Mot. for Sum. J., Ex. 26. The plaintiff appealed the dismissal, but the Michigan Court of Appeals dismissed the appeal because the “plaintiff failed to pursue her appeal in conformity with the court rules.” Mot. for Sum. J., Ex. 12. It does not appear that the plaintiff pursued her state appellate remedies any further. On October 7, 2008, the personal representative filed the present action in this Court against the state court defendants plus shift supervisor Dean Lloyd and dispatcher Dennis Fowler. In four counts, the plaintiff alleges liability under 42 U.S.C. § 1983 for a violation of the decedent’s rights under the Fourth and Fourteenth Amendments (count I); supervisory liability under section 1983 against defendant Dean Lloyd (count II); violations of the Fourth and Fourteenth Amendments against Huron Valley Ambulance for failure to train and supervise its employees (count III); and ordinary and gross negligence under state law against all the defendants. After more discovery in this Court, the defendants filed a motion for summary judgment. The Court heard oral argument on November 24, 2009. II. A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an -4- integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics and Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). Thus a factual dispute which “is merely colorable or is not significantly probative” will not defeat a motion for summary judgment which is properly supported. Kraft v. United States, 991 F.2d 292, 296 (6th Cir. 1993); see also Int’l Union, United Auto., Aerospace and Agric. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record which demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). The party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. -5- Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp., 477 U.S. at 322-23. The party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). “[T]he party opposing the summary judgment motion must ‘do more than simply show that there is some “metaphysical doubt as to the material facts.”’” Highland Capital, Inc. v. Franklin Nat. Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir. 1994), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 586 (1986 . “Thus, the mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Ibid. (quoting Anderson, 477 U.S. at 252) (internal quotation marks omitted). A. Federal claims – state action Counts I, II, and III of the plaintiff’s complaint are based on 42 U.S.C. § 1983, inasmuch as the plaintiff alleges that the defendants deprived her decedent of various constitutional rights. It is well recognized, however, that the Constitution protects citizens from infringement of their rights by the government, not by private parties. Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 156 (1978) (recognizing that “most rights secured by the Constitution are protected only against infringement -6- by governments”) (citing Jackson v. Metro. Edison Co., 419 U.S. 345, 349 (1974); Civil Rights Cases, 109 U.S. 3, 17-18 (1883 . Consequently, to establish liability under section 1983, the plaintiff must prove that the deprivation of rights was caused by a person acting under color of state law. Wittstock v. Mark A. Van Sile, Inc., 330 F.3d 899, 902 (6th Cir. 2003). The evidence in this case plainly establishes that Huron Valley Ambulance, Inc. is a private corporation and its employees are private actors as well. However, there are exceptions to the state action requirement. And although the Supreme Court has acknowledged that its “cases deciding when private action might be deemed that of the state have not been a model of consistency,” Edmonson v. Leesville Concrete Co., Inc., 500 U.S. 614, 632 (1991) (O’Connor, J., dissenting), the exceptions tend to fall into two broad categories: the “public function exception,” and the “entanglement exception.” See Chemerinsky, Constitutional Law at 552 (3d ed. 2009). Under the public function exception, a private actor can be held accountable for a constitutional violation when it exercises “powers traditionally exclusively reserved to the State.” Jackson, 419 U.S. at 352. Under that exception, the Court has found constitutional liability against private entities administering elections, Terry v. Adams, 345 U.S. 461 (1953); Smith v. Allwright, 321 U.S. 649 (1944); Nixon v. Condon, 286 U.S. 73 (1932); operating a “company town,” Marsh v. Alabama, 326 U.S. 501 (1946); and administering private property used for a public purpose, Evans v. Newton, 382 U.S. 296 (1966). Significantly, the Court has found that a private utility company, even under circumstances of enjoying a state-conferred monopoly, does not perform a public function in furnishing electrical service to its customers. Jackson, 419 U.S. at 352-53 (“If we were dealing with the exercise by Metropolitan of some power delegated to it by the State which is traditionally associated with sovereignty, such as eminent domain, our case would be quite a -7- different one. But while the Pennsylvania statute imposes an obligation to furnish service on regulated utilities, it imposes no such obligation on the State. The Pennsylvania courts have rejected the contention that the furnishing of utility services is either a state function or a municipal duty.”). Likewise, several other courts have found that furnishing emergency medical services, even under an exclusive contract, is not a public function. See, e.g., McKinney v. West End Voluntary Ambulance Ass’n, 821 F. Supp. 1013, 1018-19 (E.D. Pa. 1992) (private ambulance association was not a state actor under public function test; plaintiff failed to establish that ambulance service is traditionally the exclusive prerogative of the Commonwealth); Krieger v. Bethesda-Chevy Chase Rescue Squad, 599 F. Supp. 770, 773-74 (D. Md. 1984) (rescue or ambulance service is not a public function), aff'd without opinion, 792 F.2d 139 (4th Cir. 1986); Eggleston v. Prince Edward Volunteer Rescue Squad, Inc., 569 F. Supp. 1344, 1350-51 (E.D. Va. 1983) (stating that emergency transportation services are “more akin to private functions that the State may be just beginning to assume than to public functions that are traditionally governmental”), aff’d without opinion, 742 F.2d 1448 (4th Cir. 1984); Williams v. Richmond County, Ga., 804 F. Supp. 1561 (S.D. Ga. 1992) (ambulance service operated by private nonpublic hospital corporation not state actor in caring for patient); Chasse v. Humphreys, No. 07-189-HU, 2009 WL 3334912, at *6 (D. Or. Oct. 13, 2009) (same). That same result must be found here. Michigan’s “emergency medical services act allows local units of government to provide ambulance services through contracts with ‘private corporations’ and ‘legal entities,’ which implicitly includes nonprofit corporations.” ETT Ambulance Serv. Corp. v. Rockford Ambulance, Inc., 204 Mich. App. 392, 399-400, 516 N.W.2d 498, 501 (1994) (citing Mich. Comp. Laws §§ 333.20948(1), 333.20908(6 . Ambulance service -8- does not carry with it a badge of sovereignty. It does not amount to a “power[] traditionally exclusively reserved to the State.” Jackson, 419 U.S. at 352-353. Under the entanglement exception, a private entity may be found to be a state actor if the state has affirmatively authorized, encouraged, or facilitated the private unconstitutional conduct, or otherwise permitted a private actor to “exercise[] power ‘possessed by virtue of state law and made possible only because the wrongdoer is clothed with the authority of state law.’” West v. Atkins, 487 U.S. 42, 49 (1988) (finding private physician under contract with state to provide medical services to prison inmates was a state actor) (quoting United States v. Classic, 313 U.S. 299, 326 (1941 . Within this exception, state action by private parties has been found when the executive or judicial arm of state government has provided assistance in perpetrating unconstitutional conduct. See, e.g., Shelley v. Kraemer, 334 U.S. 1 (1948) (state action found where private party resorted to state courts to enforce discriminatory private deed restrictions); Burton v. Wilmington Parking Auth., 365 U.S. 715 (1961) (finding state action based on the symbiotic relationship between restaurant and publicly-run parking facility leasing property to the restaurant); North Ga. Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601 (1975) (using state courts and bailiffs to enforce creditor’s remedies lacking in procedural due process); Fuentes v. Shevin, 407 U.S. 67 (1972) (same); Sniadach v. Family Finance Corp., 395 U.S. 337 (1969) (same). However, neither authorization of private conduct by law, Flagg Bros., 436 U.S. at 164-65, nor restriction by licensure or regulation alone, Moose Lodge No. 107 v. Irvis, 407 U.S. 163 (1972), will be sufficient to constitute state action. Instead, the Supreme Court has held that “a State normally can be held responsible for a private decision only when it has exercised coercive power or has provided such significant encouragement, either overt or covert, that the choice must in law be deemed to be that -9- of the State.” Blum v. Yaretsky, 457 U.S. 991, 1004 (1982) (holding that decisions of physicians and administrators of privately owned and operated nursing home to transfer Medicaid patients not state action); see also Rendell-Baker v. Kohn, 457 U.S. 830, 840 (1982) (employment discharge decisions of privately owned and operated school receiving nearly all revenue from state contracts not state action). Perhaps most significant here, a private corporation whose business depends primarily on public contracts with the state does not become a state actor simply because of its “significant or even total engagement in performing public contracts.” Id. at 840-41. Both sides in this case cite Brentwood Academy v. Tennessee Secondary School Athletic Association, 531 U.S. 288, 300 (2001), the Supreme Court’s most recent entanglement case, in support of their arguments. In that case, the Supreme Court found that a private state association that regulated nearly all of the state’s high school athletic competitions engaged in state action when it suspended a private school from interscholastic play-off competition for a rules violation. The Court found that the private association was a state actor because of “the pervasive entwinement of state school officials in the structure of the association.” Id. at 291. However, the Court found no entanglement in a similar case involving the National Collegiate Athletic Association, which performed the nearly identical function regulating intercollegiate athletics on a national scale. NCAA v. Tarkanian, 488 U.S. 179, 199 (1988). The difference may be this: in Brentwood Academy, eighty-four percent of the TSSAA’s members were public schools (the other members were private schools); the TSSAA was operated by two committees, the legislative council and the board of control; the members of the committees were administrators from the member schools; the TSSAA enacted rules that its member schools were required to follow; all the members of the board of control were administrators from public schools; its employees were eligible under the state -10- retirement system; and for decades the state board of education had delegated to the TSSAA the duty of “providing standards, rules and regulations for interscholastic competition in the public schools of Tennessee.” Brentwood Academy, 531 U.S. at 292. Because of all of this, the Court concluded that “[t]he nominally private character of the Association is overborne by the pervasive entwinement of public institutions and public officials in its composition and workings, and there is no substantial reason to claim unfairness in applying constitutional standards to it.” Id. at 298. Brentwood Academy provides no support for the plaintiff’s state action argument, for it is readily distinguishable. HVA is not a state-wide organization that consists predominantly of public entities or public employees acting in their official capacities. It does not derive its authority to act from any power conferred by the state or county government. It does not set rules of practice; instead it is governed by the regulations and protocols promulgated by the oversight boards. The presence of some of HVA’s officers and employees on the Washtenaw-Livingston Medical Control Authority Board does not convert HVA into a state actor. “Rather than looking to the number of public officials who serve on the governing board of a private institution, . . . the proper focus concerns whether the State has exercised ‘coercive power or has provided such significant encouragement, either overt or covert, that the choice must in law be deemed to be that of the State.’” Crowder v. Conlan, 740 F.2d 447, 452 (6th Cir. 1984) (citing Blum, 457 U.S. at 1004). HVA’s conduct arises solely from its private contract to provide ambulance services to its customer, which in this case happens to be a public body. Based on the undisputed facts in the record, the Court cannot conclude that the state or local government affirmatively authorized, encouraged, or facilitated HVA’s private conduct or otherwise clothed HVA with the authority of state law. -11- The Court finds, therefore, that the plaintiff has failed to carry her burden of proving state action as a matter of law. Consequently, the Court must dismiss counts I, II, and III of the complaint. B. Claim preclusion The plaintiff’s complaint in this Court contains three federal claims and one state law claim, all of which the defendants say are barred by the state court judgment of dismissal. “Section 28 U.S.C. § 1738 generally requires ‘federal courts to give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so.’” Haring v. Prosise, 462 U.S. 306, 313 (1983) (quoting Allen v. McCurry, 449 U.S. 90, 96 (1980 . Application of this statute depends on the state’s laws of issue preclusion and claim preclusion (although the Michigan Supreme Court “generally uses the terms ‘res judicata’ and ‘collateral estoppel’ rather than the phrases ‘claim preclusion’ and ‘issue preclusion.’” J.A.M. Corp. v. AARO Disposal, Inc., 461 Mich. 161, 168 n.7, 600 N.W.2d 617, 620 n.7 (1999 . Under Michigan law regarding claim preclusion, “[a] second action is barred when (1) the first action was decided on the merits, (2) the matter contested in the second action was or could have been resolved in the first, and (3) both actions involve the same parties or their privies.” Dart v. Dart, 460 Mich. 573, 586, 597 N.W.2d 82, 88 (1999). For issue preclusion to bar subsequent litigation, “‘a question of fact essential to the judgment must have been actually litigated and determined by a valid and final judgment. In addition, the same parties must have had a full opportunity to litigate the issue, and there must be mutuality of estoppel.’” Nummer v. Treasury Dep’t, 448 Mich. 534, 542, 533 N.W.2d 250, 253 (1995) (quoting Storey v. Meijer, Inc., 431 Mich. 368, 373 n.3, 429 N.W.2d 169, 172 n.3 (1988 . However, in Michigan, mutuality of estoppel is not required when claim preclusion is asserted -12- defensively. Monat v. State Farm Ins. Co., 469 Mich. 679, 691, 677 N.W.2d 843, 850 (2004) (holing that “the lack of mutuality of estoppel should not preclude the use of collateral estoppel when it is asserted defensively to prevent a party from relitigating an issue that such party has already had a full and fair opportunity to litigate in a prior suit”); see also Gilbert v. Ferry, 413 F.3d 578, 580-81 (6th Cir. 2005) (stating that “the Monat court held that mutuality was not required when collateral estoppel was being used defensively”). Issue and claim preclusion generally are questions of law. Stemler v. City of Florence, 350 F.3d 578, 585 (6th Cir. 2003). The party asserting preclusion bears the burden of proof. See Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 572 (6th Cir. 2008). The parties agree that the subject of the present lawsuit – the fatal auto/pedestrian accident of October 7, 2005 – is the same as in the prior state court action. The theories of liability overlap as well, especially with respect to count IV of the complaint in this case. There is no dispute that the state court would have had jurisdiction over the plaintiff’s section 1983 claims, had she filed them there, or that all of the present claims arise from the same transaction and occurrence as the state court claims. However, the plaintiff insists that the doctrine of claim preclusion does not operate as a bar to the present action because she never had a fair opportunity to litigate her case in state court. She says that the state court judge never reviewed the documents she submitted in opposition to the defendants’ summary judgment motion and never made any factual determinations, only because the plaintiff’s brief was filed four hours late. She contends that preclusion rules are to be applied sparingly and should be rejected where their application would contravene an overriding public policy or result in manifest injustice. -13- The plaintiff does have a valid point that the state court judge’s overweening insistence on compliance with his filing deadline elevated form over substance at the expense of a proceeding that enjoyed all the hallmarks of fairness. However, plaintiff’s counsel fails to explain how, after having been procedurally skewered in the trial court, he managed to misfire again (procedurally speaking) in the court of appeals. A review of the state trial court’s order leaves no doubt that the matter was decided on the merits under state law. See Kalamazoo Oil Co. v. Boerman, 242 Mich. App. 75, 79, 618 N.W.2d 66, 69 (2000) (stating, in a case where default judgment was entered as a penalty for the defendant’s failure to submit to a deposition, that the entry of a default “settles the question of liability with regard to all well-pleaded allegations and precludes the defaulting party from litigating that issue”) (citation omitted). The plaintiff had a right to challenge the trial court’s actions, but the appellate court likewise could insist that the plaintiff comply with its procedural rules. If plaintiff’s counsel believed his client did not get a fair shake in that court, the remedy would have been to pursue further appellate relief in the state court system, not file a mirror action in federal court. See Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983); see also Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005) (explaining that the Rooker-Feldman doctrine applies to “cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments”). The essence of the plaintiff’s claims here – that the defendants are at fault in running over the decedent and then failing promptly to transport her to a hospital – are the same as in the state court case, although the legal theories are somewhat different. There are added defendants in the -14- present action, but they are similarly situated to the original defendants in the state case. Since the defendants here assert a claim preclusion defense, lack of strict mutuality of estoppel is not an obstacle to the application of that theory. And since “the matter contested in [this] second action was or could have been resolved in the first,” Dart, 460 Mich. at 586, 597 N.W.2d at 88, the Court must conclude that the state court judgment bars the entire present action. III. The Court finds that the plaintiff has failed to establish a genuine issue of material fact on the question of state action. Therefore, the plaintiff’s federal claims in counts I, II, and III must be dismissed. In addition, the doctrine of claim preclusion bars all of the claims raised in the complaint. Accordingly, the defendants’ motion for summary judgment [dkt #36] is GRANTED, and the complaint is DISMISSED WITH PREJUDICE. Dated: November 30, 2009 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on November 30, 2009. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -15-

=== Curry et. al. v. SBC Communications ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION PERCY CURRY, RICK BANKS, III, and MARIE HILLARD, Plaintiffs, v. SBC COMMUNICATIONS, INC., a.k.a. AT&T, Inc., ____________________________________/ Defendant. Case Number 06-11728 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT Plaintiffs Percy Curry, Rick Banks, III, and Marie Hillard have filed an amended complaint against their employer SBC Communications, Inc., also known as AT&T, Inc., alleging violations of Title VII of the Civil Rights Act of 1964, section 1981 of Title 42 of the United States Code, and the Michigan Elliott-Larsen Civil Rights Act (ELCRA) based on disparate treatment on account of their race, retaliation, and a hostile work environment. The plaintiffs earlier filed a motion to certify their case as a class action, which the Court denied. The defendants now have filed a motion for summary judgment. The motion is opposed and fully briefed. The Court heard oral argument from the parties in open court on May 19, 2009. For the reasons fully explained below, the Court finds that the plaintiffs have failed to establish a jury-submissible claim on their disparate treatment and retaliation theories, but fact questions preclude summary judgment on their hostile work environment theory. Therefore, the Court will grant in part and deny in part the defendant’s motion for summary judgment. I. Facts SBC Communications, Inc., also known as AT&T, Inc., claims to be the largest telecommunications company in the United States. During the times relevant to this lawsuit, it operated a call center in a multistory building in Saginaw, Michigan. Plaintiffs Percy Curry and Rick Banks began working for the defendant as sales service specialists on June 1, 2004. It appears that a sales service specialist dealt with customers who wished to purchase and operate 800 telephone numbers. Marie Hillard has worked for the defendant since June 5, 2000 as a service representative, a position in which the employee helps customers establish and maintain 800 numbers and digital subscriber lines (DSL). Curry, Banks, and Hillard each are African-American, and they worked in AT&T’s small business division on the third floor of the defendant’s building in Saginaw. Hillard still works there, but Curry and Banks were terminated on May 13, 2005. In their amended complaint, they each complain that they suffered adverse employment action because of their race and they were subjected to a racially hostile work environment. Curry and Banks allege that when they complained about racially motivated conduct by their supervisor, the defendant retaliated against them. During their employment, the plaintiffs were members of the Communications Workers of America Local 4108. The union was named as a defendant, but the Court dismissed it with prejudice pursuant to the parties’ stipulation. The plaintiffs originally sought to certify the case as a class action. The Court denied the motion to certify. See Curry v. SBC Communications, Inc., 250 F.R.D. 301 (E.D. Mich. 2008). Curry alleges that he was subject to a number of discriminatory actions and treated differently than white employees. He says that: (1) he was criticized for working too slowly when -2- many white employees worked more slowly than he; (2) he was not allowed to keep a pet fish at his desk, but a white employee was permitted to do so; (3) a union official hung a noose in front of the SBC elevator banks and company officials allowed it to remain there for over fourteen hours; (4) he was reprimanded for speaking with other African American employees when white employees were able to speak with one another with impunity; (5) he was physically grabbed and forced back to his chair by one of his managers, Debra Akright, on numerous occasions; (6) he was separated from white employees and placed with African American employees near Akright’s office for monitoring purposes; (7) he was reprimanded in front of a union representative for minor mistakes that went overlooked when made by white employees; (8) he, along with other African Americans, was wrongfully accused by union representatives of insubordination because he was African American; (9) a white employee called an African American employee a “porch monkey,” but union officials took no action upon hearing the slur; (10) he was told by the local union president to stop documenting incidents of alleged discrimination that occurred at work; (11) he was denied the opportunity to become a “Service Leader,” a job carrying increased compensation, even though he was rightfully entitled to it; and (12) he was ultimately terminated on the pretext of “threats and violence in the workplace.” Banks’s allegations are much the same, including complaints about the conduct of manager Akright. In addition, Banks alleges that Akright failed to accommodate his allergy to bleach by making him work downwind of its odor, chastised him for getting up to simply perform his office duties, and denied him credit for an entire day of work. Marie Hillard contends that she has been deprived of serving as a service leader, which is a rotating position assigned to sales people that carries with it a pay enhancement. She also says that -3- she witnessed racially hostile conduct by coworkers and management, including the noose incident, graffiti scrawled on a stairway door with the words “Niggers go home,” racially derogatory remarks by coworkers that went unpunished by management, and white supremacist literature left in a common area on the third floor. The parties have completed extensive discovery. They offer the following facts from the record. A. Hostile work environment facts The plaintiffs contend that the defendant has engaged in a pattern of racially hostile conduct that began before Curry and Banks were hired. Hillard worked at the Saginaw office during the entire period and witnessed much of the conduct described below. 1. Noose incident Hillard was hired on June 5, 2000. Curry and Banks were hired on June 1, 2004. On August 31, 2004, a clothesline was hung in the office by managers John Racine and Nora Goodell at around 5:30 p.m. The clothesline allegedly was intended to display the relative sales progress of different sales teams. A short time later – sometime before 6:30 p.m. – Charles Carter (service leader and union steward) took a scrap piece of the clothesline and fashioned it into a noose above his desk. He brought it to the attention of Karen Bugeja (a supervisor), stating that he would have to kill himself because his sales numbers were down. Bugeja and Racine joked that the noose was not long enough for them to hang themselves. Bugeja testified that she thought of it as a joke and at the time did not see anything offensive about it. Not everyone thought it was a harmless joke, however. Ray Tucker, a service representative, saw the noose at 6:40 p.m. and reported it to union steward Travis Ruffin, who in turn contacted -4- “Keith XX,” chief union steward, who promised he would “get on it right away.” Pl.’s Resp., Ex. E (internal investigation). Area managers Andre Clark, who is African American, and Lori Ruthruff, who is white, were asked to take the noose down at some point but did not do so. Although Carter indicated that he intended to remove the noose before he left, the defendant’s personnel allowed it to remain up overnight. Hillard was one of the first people in the office at seven in the morning the next day and was upset by the noose. She interpreted it to “depict[] African-Americans that’s been hung by a noose just because of the color of their skin.” Def.’s Mot., Ex. D, Hillard Dep. at 118. She asked Sean Deloney, a union representative, to take it down, and he did so around 8 a.m. Curry and Banks said they saw the noose while Deloney took it down. Later that day, Hillard and Curry filed separate complaints with the defendant’s EEOC officer based on the incident, and Banks lodged a complaint with the union. Bugeja testified that she did not know which individuals complained about the noose. Carter received a final written disciplinary warning for hanging the noose; Clark, Racine, and Ruthruff received final written warnings and were docked three days pay. Bugeja received a written warning for “inappropriate judgment, basically, leadership,” and was docked five days pay. Def.’s Mot., Ex. H, Bugeja Dep. at 50. Bugeja stated that in response to the noose incident, “AT&T required all management and non-management employees to attend diversity training, which was held on December 7 and 8, 2004.” Def.’s Mot., Ex. F, Bugeja Decl. ¶ 7. However, Bugeja testified in her deposition that she “was out of the office on medical leave” during the training, so she “was not present while that training took place,” although she verified that it did take place for others. Pl.’s Resp., Ex. D, Bugeja Dep. at 81; see also Ex. G, Martin Dep. at 135 (union president did not -5- attend training). There was a second part to the training intended for a date in December that was not given, but it was conducted the next year following a later incident. Hillard testified that she was told the second part was not given in December “because of lack of participation.” Pl.’s Resp., Ex. C, Hillard Dep. at 311. 2. Racial remarks On March 3, 2005, employee Laicy Younkman, who is white, had a conversation with coworker Nicole Riley, who is African American. Riley told Younkman that she was just going to hang out after work. Younkman then stated something to the effect that Riley would be a “porch monkey.” This conversation was overheard by Curry and Banks. Younkman later apologized and explained that she did not perceive the statement to be a racial slur. Younkman was suspended for five days. Bugeja testified that only Riley complained about the incident to her; however, Curry testified that he “think[s]’” he reported the incident to the defendant’s internal complaint line. Pl.’s Resp., Ex. A, Curry Dep. at 134. Following her suspension, Younkman stated to Banks that “two can play at this game.” Pl.’s Resp., Ex. M, Banks Decl. ¶ 6. On June 27, 2005, Hillard overheard Kathy Mielke saying something over the managers’ communication system in reference to employee Kim Garrett. Hillard testified that Garrett was referred to as “a.k.a. Mr. Bojangles.” Pl.’s Resp., Ex. C, Hillard Dep. at 78-79. Hillard informed Bugeja of this incident in November 2005, during Bugeja’s investigation of an incident in which a racial slur was scrawled on a door, described next. Hillard asked Mielke about it, and Mielke stated that she did not make the statement. Instead, Mielke informed Bugeja that the managers had a nickname for Garrett – “Cuckoo” – and for each other – “Boo-Boo” and “Beau-Beau” – and that -6- Hillard must have misheard one of those names. Pl.’s Resp., Ex. D, Bugeja Dep. at 54. Bugeja testified that based on this “very logical explanation,” no disciplinary action was taken. Id. at 55. 3. Racial graffiti On November 16, 2005, coworker Pharrington Maxey informed Hillard of a racial epithet (Hillard testified that it said “no niggers,” while union president Bill Martin testified that it said “nigg” only, Pl.’s Resp., Ex. G, Martin Dep. at 137) that was “scratched” on the door on the west side of the building. Def.’s Mot., Ex. C, Hillard Dep. at 140. Hillard informed Bugeja, who called the maintenance department but was not able to reach anyone. Bugeja then returned to the door to cover the painting. In an e-mail submitted by the plaintiff, Bugeja claims that ten minutes elapsed between Hillard’s complaint and Bugeja heading down to the door to paint over it herself. See Pl.’s resp., Ex. H. However, union president Martin was already painting the door. He had received a call from a union steward indicating that there was a racial slur on a door, so he headed to the office, saw the slur, went to an auto parts store to buy spray paint, and returned to paint the door. According to Martin, the epithet had been on the door for a number of years but had been covered by a sign that recently had been removed in anticipation of a plan to paint the door. Following this incident, the union filed a group grievance and “asked that additional training be given” based on this incident and the “porch monkey” comment. Pl.’s Resp., Ex. G, Martin dep. at 135. The defendant obliged and required employees to complete the diversity training that had been started in December of 2004. -7- 4. White supremacy flyer On August 4, 2008, coworker April Banks brought to the attention of Hillard a flyer that had been found in the lunchroom. The flyer is entitled “I am Proud To Be White; Someone finally said it.” Pl.’s Resp., Ex. L. The flyer states in part: There are African Americans, Mexican Americans, Asian Americans, Arab Americans, Native Americans, etc. . . . And then there are just - Americans. You pass me on the street and sneer in my direction. You Call me 'White boy,' 'Cracker,' 'Honkey,' 'Whitey’ 'Caveman,’ . . . And that's OK. But when I call you Nigger, Kike, Towel head, Sand-nigger, Camel Jockey, Beaner, Gook, or, Chink, . . . You call me a racist. You say that whites commit a lot of violence against you, so why are the ghettos the most dangerous places to live? . . . If we had a White Pride Day ...You would call us racists. . . . You are proud to be black, brown, yellow and red, and you’re not afraid to announce it. But when we announce our white pride . . . You call us racists! You rob us, carjack us, and shoot at us. -8- But, when a white police officer shoots a black gang member or beats up a black drug-dealer who is running from the LAW and posing a threat to ALL of society . . . You call him a racist. I am proud. . . . But, you call me a racist. Why is it that only whites can be racists? Ibid. Hillard went to the lunchroom and found additional flyers in a trash can. She picked them out and went to see manager Jeanne Kline. Kline contacted the EEOC officer, who conducted an investigation. On August 8, 2008, the union sent a letter to all employees, stating that an “intolerable” incident had occurred. Ibid. The letter states that the union recommends that management review the code of business conduct policy with all employees, provide diversity training, provide diversity education once a year, and document attendance at the diversity training. The letter also requests anyone with information about the incident to contact the union. Kline stated that she sent an e-mail to all employees reminding them of company policy; however, Hillard denies ever receiving “any written communication from AT&T.” Pl.’s Resp., Ex. J, Hillard Decl. ¶ 6. C. Disparate treatment claims 1. Service leader issue The defendant has a rotating position known as “Service Leader,” where employees “perform[] special job functions, such as helping other employees or doing a special project.” Def.’s Mot., Ex. F, Bugeja Decl. ¶ 2. An employee who is a service leader is paid an extra fourteen dollars -9- per day. In 2003, Hillard was interested in the position, and asked her manager Lori Ruthruff about it. Ruthruff promised to look into it, but Hillard served as a service leader on only one occasion. Hillard complains that “white employees with less seniority were given information about service leading, they were service leading when African-American employees weren’t even told about the service leader list without inquiring about the list and how to get on it.” Pl.’s Resp., Ex. C, Hillard Dep. at 49. Hillard further states that she “should have been permitted to be a Service Leader at the rate of approximately ten days per month,” Pl.’s Resp., Ex. J, Hillard Decl. ¶ 10, but does not explain how she reaches that conclusion. Although Curry alleges in the amended complaint that he too was wrongfully deprived of time as service leader, Am. Compl. ¶ 51, the plaintiffs’ response to the motion for summary judgment makes no mention of this allegation. 2. Other complaints by Hillard The plaintiffs testified about the disparate treatment they witnessed in the office. At some point prior to 2004, Hillard complained to Lori Ruthruff, her boss, that someone was giving “hot leads” to Kelly Holiday, a white employee, which gave her an unfair competitive advantage in sales. Pl.’s Resp., Ex. C, Hillard Dep. at 31-32. An unknown amount of time later, Hillard was reprimanded based on an allegation that Holiday had been threatened by Hillard. Id. at 28-29. Hillard denies making any threats, and complains that she was never informed what the specific threat was and management failed to ask any questions or undertake an investigation of any sort. Hillard complains of two additional incidents. In 2000, Hillard’s manager, Nora Goodall- Bishop, who is white, told Hillard that she “looked like a French maid.” Pl.’s Resp., Ex. C, Hillard Dep. at 76. Hillard believed that this was discriminatory because “[i]t’s assuming that I’m a maid, -10- a housekeeper, someone cleaning someone’s home. . . .” Id. at 77. She says she mentioned it to a union steward but did not make a formal complaint. In 2005, Hillard was speaking with three African-American coworkers, when Goodall- Bishop, stated “this looks like trouble.” Id. at 71. Hillard interpreted this to be based on race: “She was just assuming because we were black that we were up to something.” Id. at 74. Hillard did not file a grievance or report the statement to the company’s EEOC officer. In September 2006, Hillard was suspended for six days based on suspected fraud. However, the union grieved the incident and it was reduced to a written warning, and she was compensated for her missed work. This is not mentioned in the plaintiffs’ response to summary judgment, and apparently is not a basis for their case. The defendant points out that Hillard currently runs a website at http://www.wakeupblackpeople.com. One of the pages is a list of the “Top ten things African Americans should not do in the Workplace.” Def.’s Mot., Ex. R. It advises against “Running to the elevator yelling ‘hold de do! Hold de dor!’” and “Give a back-rub to a white woman in the workplace.” Hillard testified that she does not believe this to be offensive to African Americans. 3. Banks’s and Curry’s supervisor’s conduct Both Banks and Curry testified that they were asked by their supervisor, Debra Akright (who is white) to move more quickly with their work, while Akright did not say anything to white employees who were working more slowly. Moreover, all three plaintiffs complained that Akright would “run off” African American workers who were talking together but would turn a blind eye -11- when it came to white workers. Def.’s Mot., Ex. B, Banks Dep. at 39; Pl.’s Resp., Ex. C, Hillard Dep. at 94. Banks testified that Akright sometimes would set production numbers for the employees, even though this was not an approved practice. On one instance, date unknown, Akright took a stack of call sheets after Banks had completed them, stating that he wouldn’t “get credit for that because it’s too easy.” Pl.’s Resp., Ex. B, Banks Dep. at 54. Akright then distributed the sheets to other workers for them to receive credit. Three or four times Akright told Curry that he was not allowed to assist other employees, although white employees were allowed to help one another. Curry also claims that he was asked to take home a small aquarium that he had on his desk because the water posed a hazard, but a white employee had a plastic cup of water with a fish in it and was never asked to take it home. Akright also would physically pull and push Curry and Banks when they got up from their seats, even for work-related tasks. See Def.’s Mot., Ex. A, Curry Dep. at 36 (“She would either grab me by my hand, she would grab me by my arm before and hoisted my arm up, she has pushed me in my back.”); Ex. B, Banks Dep. at 161 (“She put [her hands] on my lower back and she started pushing me.”). On the other hand, Akright did not physically harass – or even reprimand – white employees when they left their seats. Def.’s Mot., Ex. A, Curry Dep. at 66. Curry and Banks complained to supervisor Vitrina Johnson and eventually were interviewed by Karen Bugeja about the incidents. The plaintiffs did not indicate to Bugeja that they perceived Akright’s physical contact with them to be race-based. On May 10, 2005, Akright received a final written warning for touching employees. Bugeja states that “[m]any” employees, both black and white, complained -12- about Akright’s behavior. Def.’s Mot., Ex. F, Bugeja Decl. ¶ 5. Akright was informed not to retaliate against anybody for the complaints lodged against her. In early September 2004, Akright rearranged the seating of the office to place Banks, Curry, Chuck Townsel, and Kyle Jewel next to each other near Akright’s office. The plaintiffs believe that they were put close to Akright so that she could “monitor” them. Pl.’s Resp., Ex. A, Curry Dep. at 271. They complained to Bugeja, and they were moved away from Akright’s office. Curry testified that Akright had a “coaching” session with him about a mistake he had made on a job task in October or November of 2004. Pl.’s Resp., Ex. A, Curry Dep. at 117. According to Curry, coaching is “in a sense a corrective action,” where the manager “talk[s] to you about . . . a mistake you made,” and informs the employee that future mistakes can lead to disciplinary actions. Id. at 76. His coworkers Younkman and Brian Niemiec, who were white, told him that they had made similar mistakes but had not been reprimanded. He believes that the only other person who had been similarly reprimanded was Banks. On November 3, 2004, Banks was verbally reprimanded by Akright when he called then- President Bush an “idiot,” “but [Akright] said nothing when Kyle Jewel (Caucasian) referred to Senator Kerry as a ‘bastard’ in her presence.” Pl.’s Resp., Ex. M, Banks Decl. ¶ 4. On December 31, 2004, Curry was assigned to call customers to reschedule appointments. However, because it was New Years Eve, he was having difficulty reaching anyone and had low numbers. The following Monday, Akright gave Curry a verbal warning for low numbers. Curry felt that this was unfair because Younkman and John Bollman had lower numbers than Curry on New Years Eve. He appealed the decision to Lorraine McMillan, who was acting area manager in -13- Bugeja’s absence. McMillan removed the verbal warning after Akright admitted that other individuals with lower numbers were not given warnings. Banks liked to listen to rap music in his cubicle, but in early January of 2005, Akright required him to stop because she thought it was too loud. Banks attributes the directive to the fact that Akright “was a Christian lady, [so] she’d probably think [listening to Banks’s music is] a sin or something.” Def.’s Mot., Ex. B, Banks Dep. at 62. However, according to Banks, other employees on the floor were permitted to listen to music, including rap music, at louder volumes. Banks complained to Bugeja, who told Akright that she could not take Banks’s radio unless she took the radio of every employee. In March 2005, Akright told Curry that he needed to stop documenting incidents of racial discrimination. See Pl.’s Resp., Ex. N, Curry Decl. ¶ 5. Banks claims that at the same time, both Akright and Bugeja told him that he had to stop documenting these incidents. See Pl.’s Resp., Ex. M, Banks Decl. ¶ 5. Bugeja testified that she said their practice was fine as long as it was done on break time and not work time. Banks also complains that he was blamed when several employees teased a coworker who brought in taco salad that had a hair in it (date unknown). He claims that he was not teasing the coworker, and Akright was informed by a witness that Banks was not involved. Nevertheless, Akright had Banks and the two individuals who were involved were coached about the incident. D. Termination of Banks and Curry In the spring of 2005, management received complaints from workers of sexual harassment and inappropriate conduct by coworkers. The complaining persons were Laicy Younkman (white), -14- Nicole Riley (African American), and Stacey Reinke (white); and the objects of their complaints were Curry, Banks, Chuck Townsel, Pharrington Maxey (all African American), and Rick Zietz (white). The defendant conducted an investigation, which included over two dozen interviews, mostly conducted by Karen Bugeja. The complaints centered around unwelcome sexual comments, and in a few instances provocative touching, made by workers. In addition, Banks came into possession of a topless photograph of a female coworker, Naomi Walker, which he showed to others in the workplace. The defendant said it relied on the results of the investigation, memorialized in the interview notes, in deciding to terminate Curry and Banks. The following are excerpts from the defendant’s investigation, including a summary of witness statements: Naomi Walker 4/14/05 Another issue about a picture of Naomi on a cell phone. Naomi said she didn’t want to come forward. I was drunk at a party and someone got a hold of the picture that was on my cell phone. She said she was passed out at the party and someone got a hold of this nude picture of her. Karen asked did you show the picture to anyone. Naomi said she didn’t show it to anyone. She said she didn’t show the picture on the elevator. Naomi said Rick Banks was showing the picture to employees on his cell phone. She said Rick would come up to her and say why don’t you just tell people you sent me the picture. Naomi said the picture is inappropriate to show at work. Naomi said she asked Rick to erase the picture from his cell phone. This photo/drunken party incident happened in December of 2004. Rick Banks 4/14/05 Asked Rick if he knows Naomi and he said yes. He said they hung out a couple of times. He volunteered to tell us that Naomi bends the truth so he doesn’t talk to her anymore. He said they are co-workers and there was no personal relationship. I asked him about the picture of Naomi on his cell phone. He said, yes he has it, but she sent it to him. He said this happened sometime in October of 2004. He said he took a picture of her topless at her apartment. He said he had not showed it. He remembered showing it to Mary Tack Sheffer. Rick said he was in a car accident and was showing Mary pictures of his accident on his cell phone. He said Mary was -15- scrolling through pictures on his cell phone, she came across the picture of Naomi. Rick admitted to have the inappropriate picture on his cell phone in the workplace. He also said Mary did see it in the workplace. He said he and Naomi don’t talk anymore. He said he did not hear the rumor of Naomi and her name reference. Stacy Reinke 4/15/05 * * * Stacey said Percy [Curry] would verbally sexually harass certain women in the office. Stacey said Percy got friendly with team members. She said Percy would get friendly with certain women in the office. She said she often told Percy to stop it. She said Percy would touch women in the office and she wanted it to stop. She said that’s when she emailed Lori Martin about a month ago because Stacey wanted Percy to stop. She said the touching began in June of 2004. He would come around your torso and grab you and scare you. She said he was “high school like.” She said he would touch your face, leg and knee cap. She said she asked him to stop and he did. She said he said he was sorry. * * * She said Rick [Banks] and Percy would talk about their penis size. She said Rick and Percy would have a ruler and talk about their penis size. She said Chuck would sit there and laugh. She said Percy would talk about cheating on his wife and being unfaithful. She said she told him not to talk about that kind of stuff at work. Stacey talked about when all the sexual harassment started. She said it began back in training in June of 2004. She said Percy sat directly begin [sic] her and Rick was on the side. She said they would talk about their penis’, women’s behind and breasts. She said she told them to stop talking about it. * * * Stacey said Percy grabbed and touched, but Rick never touched. Laicy Younkman 4/15/2005 * * * She said two weeks ago Percy [Curry] came up to her while she was on the phone with customers. She said he came into her cube. She said he pressed his erected penis against her arm. She said she pushed him away. She said she didn’t know any of the witnesses. She said Percy made a comment about her being “camel toe.” * * * Laicy said Rick [Banks] and Percy made comments about girls in the office. She said they would make comments about girls bent over. She said they would say “wonder how she would like bent over.” She said she made a complaint to her coach, Deb Akright and to HR. * * * Laicy talked about additional comments made by Percy. She said he would ask her to touch him down there “pre-cum” to see how it tasted. He put his hand in her water and said see how my “pre-cum” tastes. Laicy said Chuck [Zietz] may have heard. -16- Asked Laicy about the threat allegedly made by Percy. Laicy said [she] and Stacey [Reinke] are friends. She said he would “lay her out in the parking lot.” Laicy said the threat was made on the elevator. Those on the elevator were Rick, Chuck, Percy, and Nicole. Laicy said Rick Banks shares all his weekend sex escapades with everyone in the center. She said Rick has not touched her. Nicole Riley 4/14/2005 * * * Nicole said she was on the elevator about three weeks ago with Percy Curry, Rick Banks. She said Percy said “the bitch better watch her back.” She said to them “Stacey is cool, she made no complaints. She said the two men started to laugh. * * * She said she heard Percy, Rick and Mark Epps talked about “anal beads.” She said they referred to themselves as the “beadmasters.” Mary Tack Sheffer 4/18/2005 * * * She said she did see the nude picture of Naomi Walker on Rick Banks[’] cell phone. She said she was viewing car accident pictures on Rick’s phone when she flipped to the picture. She said this happened in January of 2005 or December of 2004. * * * She said he didn’t purposely mean to show her the pictures. * * * * * * She said Percy [Curry] and Stacey [Reinke] were having a discussion in the workplace when they began to argue. She said she heard Percy say to her “nothing will happen here, but once you’re on the streets is a different story.” She said this comment was made in November of 2004. * * * Mary said Stacey told her the argument was about Percy and Chuck [Zietz] making remarks about homosexuals and women. Mary said Stacey got upset about the remarks. Mary said Stacey heard Percy make fun of John Bollman and his sexuality. * * * * * * she said she never saw Rick touch employees. Mary said she has heard Rick, Percy and Chuck make comments about women’s body parts in the office. Mary said she confronted Rick about his comments in the workplace. She said she told Rick he could get in trouble if anyone heard him. She said he know he could get in trouble. She said Rick made comments about women’s body parts in June of 2004 during training. * * * Rick sat behind Mary during training. * * * Mary said the comments included how the three men wanted to see “so and so bend over the desk.” Mary said the comments were all sexual in nature. Rick Banks 4/26/2005 -17- I asked Rick about the Mardi Gras beads and the discussion around the beads. He said he remembers the conversation. He said he is not sure how it got started. He said things just escalated. It happened around February of 2005. He said he remembers the comment about “beadmasters.” He said it was a joke. He said the following people were involved in the conversation: Rick, Percy [Curry], Mark Epps, Mary Tack Shaffer, Nicole Riley, Renee Cheatham and Lakesha Young. He said Chuck was not involved in the conversation. * * * Rick said African American men can’t have conversations in the office. He said the women can, but the men can. He said he feels he is being targeted. He said coaches double check his work. Rick claims he receives coaching from Deb Akright, but Laicy doesn’t. Bryan Niemic 4/27/2005 He said Chuck [Zietz], Percy [Curry] and Rick [Banks] would talk about individuals. No specifics. He said you could tell they were checking girls out by their body language. They would stare, gesture as though they were checking someone out. John Bollman 4/28/2005 I asked John if he recalls witnessing any threats in the center. He said he remembered four or five months ago Stacey [Reinke] and Percy [Curry] got into an argument. Percy said to Stacey “it’s one way at work, but different in the parking lot.” John said there were no managers present when this was said. John said Percy was always making random sexual comments about women in the office. He said Chuck and Rick would too. No specifics just random sexual comments. Justin Malone 4/28/2005 I asked him about employees making inappropriate comments in the office. He said he heard Percy [Curry] talking about what some women in the office were wearing. He would talk about how someone was wearing something “too revealing.” He said the last time he hear Percy make comments about women in the office was about three to four weeks ago. He said Percy was loud with his laugh. He said anyone could hear. Cheryl Griggs 4/28/2005 Cheryl then said she recalls when Laicy [Younkman] returned from her suspension, she said “if this is the way they will play the game, they should look out.” Cheryl said she heard Laicy said “if I got in trouble, others will pay.” Laicy did not use specifics [sic] names about who she would get in trouble, it was just in general, -18- Cheryl said. Cheryl said took Laicy’s comments as anybody who said anything would be in trouble. Def.’s Mot., Ex. G. Curry and Banks deny these allegations and filed declarations. Pl.’s Ans. to Mot., Ex. M & N. Following the investigation, Curry and Banks, as well as one African American coworker and one white coworker, were terminated. Def.’s Mot., Ex. F, Bugeja Decl. ¶ 10. Bugeja states that “Akright was not involved in the investigations of Percy Curry and Rick Banks. She was likewise not involved in the decision to terminate them.” Def.’s Mot., Ex. I, Bugeja Aff. ¶ 6. Banks and Curry observe that this same investigation revealed improper conduct by Younkman and Reinke, who are white, yet no disciplinary action was taken against them arising out of the investigation. During his investigation interview, Banks stated: Rick said Laicy and Stacey talked about sex. He said they talked about “dildos.” No one else, but Laicy and Stacey talked that way at work. Rick said Laicy and Stacey would call each other “les-boos.” He said they haven’t called themselves this nickname in probably two months. Def.’s Mot., Ex. G. The investigation notes contain the following information from Cheryl Griggs: Karen asked about Stacey or Laicy making sexual comments to each other. Cheryl said she hasn’t heard it in a long time. Cheryl said Stacey and Laicy would call each other a “special name.” Cheryl said they acted very “high school.” She said Stacey and Laicy don’t talk to each other much anymore. Ibid. E. Defendant’s motion In its motion, the defendant attacks each of the plaintiffs’ theories of liability. It argues that 1) there is no direct evidence of discrimination, so the McDonnell-Douglas burden-shifting framework applies; 2) Hillard has not shown that she suffered an adverse job action; 3) Hillard, Curry, and Banks have not shown that they were similarly situated to any person outside the protected class; 4) Curry and Banks have not shown that they engaged in protected activity -19- regarding their complaints about Debra Akright; 5) Curry and Banks cannot establish causation; 6) Curry and Banks have not shown that the reasons for their discharge was pretextual, and Hillard has not shown that the reasons for her written warning were pretextual; and 7) the plaintiffs’ hostile environment claim fails because the conduct was not sufficiently severe and the defendant took remedial action to prevent any harassment. II. Discussion A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics & Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a -20- whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). Thus a factual dispute which “is merely colorable or is not significantly probative” will not defeat a motion for summary judgment which is properly supported. Kraft v. United States, 991 F.2d 292, 296 (6th Cir. 1993); see also Int’l Union, United Auto., Aerospace & Agric. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record which demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). The party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp., 477 U.S. at 322-23. The party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). “[T]he party opposing the summary judgment motion must ‘do more than simply show that there is some “metaphysical doubt -21- as to the material facts.”’” Highland Capital, Inc. v. Franklin Nat’l Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir. 1994), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 586 (1986 . “Thus, the mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Ibid. (quoting Anderson, 477 U.S. at 252) (internal quotation marks omitted). A. Disparate treatment Title VII forbids an employer “to . . . discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” 42 U.S.C. § 2000e-2(a)(1). The Michigan Elliott-Larsen Civil Rights Act forbids like conduct. Claims of race discrimination under Title VII and the Michigan counterpart can be analyzed together because Michigan courts frequently “turn to federal precedent for guidance in reaching [their] decision” to determine whether a claim has been established in discrimination cases. Radtke v. Everett, 442 Mich. 368, 382, 501 N.W.2d 155, 162 (1993) (quoting Sumner v. Goodyear Co., 427 Mich. 505, 525, 398 N.W.2d 368 (1986 . For analytical purposes, Michigan’s Elliott-Larsen Act resembles federal law, and the same evidentiary burdens prevail as in Title VII cases. See In re Rodriguez, 487 F.3d 1001, 1008 n.2 (6th Cir. 2007); Humenny v. Genex Corp., 390 F.3d 901, 906 (6th Cir. 2004); Lytle v. Malady, 458 Mich. 153, 172-73, 579 N.W.2d 906, 914 (1998). Finally, 42 U.S.C. § 1981 prohibits racial discrimination in the making and enforcing of private contracts. See 42 U.S.C. § 1981. “The elements of [a] prima facie case as well as the allocations of the burden of proof are the -22- same for employment claims stemming from Title VII and § 1981.” Johnson v. Univ. of Cincinnati, 215 F.3d 561, 573 n.5 (6th Cir. 2000) (citing St. Mary’s Honor Ctr. v. Hicks, 509 U.S. 502 (1993 . “The ultimate question in every employment discrimination case involving a claim of disparate treatment is whether the plaintiff was the victim of intentional discrimination.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 153 (2000). All three plaintiffs contend they can establish that they suffered adverse employment action (Banks and Curry for their termination, Hillard based on not getting the service leader position) based on race. To withstand summary judgment on their disparate treatment claims, the plaintiffs must either “present direct evidence of discrimination or introduce circumstantial evidence that would allow an inference of discriminatory treatment.” Johnson v. Kroger Co., 319 F.3d 858, 864-65 (6th Cir. 2003). In the absence of direct evidence, the plaintiffs might prevail if they can establish an inferential case of discrimination under the familiar McDonnell-Douglas framework. 1. Direct evidence case The plaintiffs state that they “will be able to establish a prima facie case of disparate treatment through direct evidence of discrimination . . .” Pl.s’ Resp. at 30. However, they fail to develop this point or identify what they believe constitutes this direct evidence. “Direct evidence is that evidence which, if believed, requires no inferences to conclude that unlawful [discrimination] was a motivating factor in the employer’s action.” Imwalle v. Reliance Med. Prods., Inc., 515 F.3d 531, 543-44 (6th Cir. 2008). “‘Consistent with this definition, direct evidence of discrimination does not require a factfinder to draw any inferences in order to conclude that the challenged employment action was motivated at least in part by prejudice against members of the protected group.’” In re Rodriguez, 487 F.3d at 1007 (quoting Johnson, 319 F.3d at 865). Direct evidence is a manifestation -23- of actual discriminatory intent by a decision maker, “such as an explicit statement” that the employer was acting on the basis of a protected status. Imwalle, 515 F.3d at 544. “Evidence of discrimination is not considered direct evidence unless a[n improper] motivation is explicitly expressed.” Amini v. Oberlin College, 440 F.3d 350, 359 (6th Cir. 2006). Statements that require an inference to determine discriminatory motivation are not direct evidence. White v. Columbus Metro. Hous. Auth., 429 F.3d 232, 238-39 (6th Cir. 2005) (in gender discrimination case, interview committee member’s statement that they wanted a “grass roots guy” was not direct evidence). In this case, the plaintiffs have not pointed to what they believe constitutes direct evidence of discrimination, and the Court cannot discern any. A review of the record shows no statement “which, if believed, requires no inferences to conclude that unlawful [discrimination] was a motivating factor in the employer’s action.” See Imwalle, 515 F.3d at 543-44. There is no explicit statement by a decision maker that he or she was acting on illegal grounds. The plaintiffs cannot proceed under a direct evidence theory. 2. Circumstantial evidence case To establish an inferential case of disparate treatment based on race, the plaintiffs may proceed under the “the burden-shifting framework first set forth in McDonnell Douglas v. Green, 411 U.S. 792, 802-05 (1973).” Blair v. Henry Filters, Inc., 505 F.3d 517, 524 (6th Cir. 2007) (citing Rowan [v. Lockheed Martin Energy Sys., Inc., 360 F.3d 544, 547 (6th Cir. 2004)]; Town v. Mich. Bell Tel. Co., 455 Mich. 688, 695, 568 N.W.2d 64, 67-68 (1997 . That construct addresses proof of discriminatory intent by circumstantial evidence, and it requires the plaintiff to present a prima facie case, whereupon the defendant must offer a legitimate reason for its actions. If the defendant -24- does so, the plaintiff cannot proceed unless she offers some evidence that the defendant’s proffered justification is a pretext for unlawful discrimination. See Kline v. Tennessee Valley Auth., 128 F.3d 337, 342 (6th Cir. 1997). a. Prima facie case A plaintiff may establish a prima facie case of discrimination “by showing that: ‘(1) she is a member of a protected group, (2) she was subject to an adverse employment decision, (3) she was qualified for the position, and (4) she was . . . treated differently than similarly situated non-protected employees.’” Russell v. Univ. of Toledo, 537 F.3d 596, 604 (6th Cir. 2008) (internal citations omitted). Deprivation of increased compensation qualifies as an adverse employment action. White v. Baxter Healthcare Corp., 533 F.3d 381, 403 (6th Cir. 2008). i. Adverse action The parties agree that the plaintiffs were members of a protected group. They must also show that they were subject to adverse employment actions. “An adverse employment action is an action by the employer that ‘constitutes a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.’” White, 533 F.3d at 402 (quoting Burlington Indus. v. Ellerth, 524 U.S. 742, 761 (1998 . Hillard alleges that she was not allowed to serve as a service leader, even though she asked her supervisor to be placed on the list. The service leader position carried extra compensation, and therefore the failure to allow Hillard to act in that capacity can be considered an adverse employment action. -25- Curry and Banks were terminated. “An employer’s decision to discharge an employee is a classic example of an adverse employment action.” Vincent v. Brewer Co., 514 F.3d 489, 495 (6th Cir. 2007). However, Curry and Banks complain about other activity, such as Akright’s treatment of them in the workplace, including her practice of pulling and pushing them in their desks. This conduct does not rise to the level of an adverse employment action. In Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53 (2006), the Supreme Court interpreted the anti-retaliation provision of Title VII to encompass more injuries than were cognizable in disparate treatment claims. Even under that broader provision, “petty slights, minor annoyances, and simple lack of good manners” do not qualify as adverse action. Id. at 68. The fact that Akright pulled the plaintiffs by the arm or pushed them into their chair is undoubtedly rude and inappropriate; but it does not “discriminate . . . with respect to [their] compensation, terms, conditions, or privileges of employment.” 42 U.S.C. § 2000e-2(a). ii. Similarly situated The fourth element of the plaintiffs’ prima facie case is that similarly-situated persons outside the protected class were treated more favorably. “To satisfy the similarly-situated requirement, a plaintiff must demonstrate that the comparable employee is similar ‘in all of the relevant aspects.’” Martin v. Toledo Cardiology Consultants, Inc., 548 F.3d 405, 412 (6th Cir. 2008) (quoting Ercegovich v. Goodyear Tire & Rubber Co., 154 F.3d 344, 352 (6th Cir.1998) (emphasis in original ; see also McMillan v. Castro, 405 F.3d 405, 414 (6th Cir. 2005) (“The plaintiff need not demonstrate an exact correlation with the employee receiving more favorable treatment in order for the two to be considered ‘similarly-situated.’” (citation omitted . To be -26- “similarly situated,” employees generally must “have dealt with the same supervisor” and “have been subject to the same standards.” Mitchell v. Toledo Hosp., 964 F.2d 577, 583 (6th Cir. 1992). Marie Hillard has not identified any specific employees outside the protected class that were treated more favorably with respect to the Service Leader assignments. The closest she comes is with her testimony that “white employees with less seniority were given information about service leading, they were service leading when African-American employees weren’t even told about the service leader list without inquiring about the list and how to get on it.” Pl.’s Resp., Ex. C, Hillard Dep. at 49. However, she has not offered any evidence of who these white employees are, whether the ones with “less seniority” worked in the same job classification, whether they had similar performance numbers, or any other information about them. The record contains nothing more than Hillard’s conclusion that white employees were treated differently than her, with no basis to assess the propriety of the alleged comparators. This evidence is insufficient. See Hartsel v. Keys, 87 F.3d 795, 801 (6th Cir. 1996) (finding that “bald assertions and conclusory statements fail to provide any factual support” for a claim of disparate treatment based on race). Hillard has not made out a prima facie case for disparate treatment. Nor have Curry or Banks identified any employees who were similarly situated to them and were not terminated. Their argument is slightly different, however. They contend that there were white employees who did other things and were not subject to appropriate discipline, or at least that the discipline was not as severe as that meted out to Banks and Curry. For instance, they point to the fact that Younkman, Mielke, and Carter were not terminated, despite uttering racial slurs or hanging a noose. In Ladd v. Grand Trunk W. R.R., Inc., 552 F.3d 495 (6th Cir. 2009), the Sixth Circuit emphasized that an employer may choose to treat different rule violations more or less -27- severely without the employees being considered “similarly situated.” In Ladd, one employee was found guilty of filing a false injury report and was terminated. The other employee was found guilty of starting a truck before ascertaining whether it was safe to do so and was not terminated. The Court held: [W]e look to similarly situated employees not to evaluate the employer’s business judgment, but to inquire into the employer’s “motivation and intent” to determine whether the employer was “motivated by retaliation.” Wrenn v. Gould, 808 F.2d 493, 502 (6th Cir. 1987). Even though as outsiders, we may regard safety violations as severe as dishonesty, it is within the company’s business judgment to treat differently-situated parties differently. Without similarly situated parties, we cannot adjudge the intent of the employer as to retaliation. Id. at 503. The fact that other employees broke other rules – even ones perhaps appearing as serious as the ones with which the plaintiffs were charged – does not aid the plaintiffs in identifying a similarly situated individual. On the other hand, the plaintiffs suggest that Younkman and Reinke are similarly situated individuals because they too talked about sexual matters in the office but were not discharged. The evidence does show that complaints were made that Younkman and Reinke would refer to themselves as “les-boos,” and there is an allegation made by Banks that they also talked about “dildos.” However, this conduct was not nearly as severe as the conduct of which Banks and Curry were accused. Curry was accused of making a threat of physical violence against a coworker, and no one has alleged the same against Younkman or Reinke, or anyone else. Curry also made physical contact with women as part of his harassment; there is no similar allegation against anyone else. Curry is not similarly situated to Younkman or Reinke. With Banks, the issue is a bit closer. However, Banks’s conduct of talking about female coworkers’ body parts was confirmed by multiple witnesses and was directed towards coworkers -28- who did not welcome the comments, where Younkman’s discussion of “dildos” was not directed toward any of the male co-workers and her comments about “les-boos” were between herself and her friend. Even if two employees break the same rule, an employer can decide that one’s conduct is more severe than the other’s. See Ladd, 552 F.3d at 503 (citing Klepsky v. United Parcel Serv., Inc., 489 F.3d 264 (6th Cir. 2007), a case discussing pretext); Wright v. Murray Guard, Inc., 455 F.3d 702, 710 (6th Cir. 2006) (“In the disciplinary context, we have held that to be found similarly situated, the plaintiff and his proposed comparator must have engaged in acts of ‘comparable seriousness.’” (internal citations and emphasis omitted . Banks also has failed to establish that he is similarly situated to any white employee who committed an act of sexual harassment of comparable seriousness. The possibility that witnesses may have lied and the plaintiffs were not actually guilty is of no consequence, as long as their story is plausible. The defendant “is not liable if it acted upon an honest belief in its non-discriminatory reason and made a reasonably informed and considered decision.” Ladd, 552 F.3d at 503 (dismissing argument that all white witnesses lied). The Court concludes that neither Curry nor Banks has established a prima facie case of disparate treatment. b. Pretext Even if Banks and Curry had established a prima facie case, the defendant has identified serious misconduct committed by them, and neither has pointed to any fact that would suggest that the decision to terminate them was pretextual. In this Circuit, proof of pretext has been organized around three general propositions: “(1) that the proffered reasons had no basis in fact, (2) that the proffered reasons did not actually motivate his discharge, or (3) that they were insufficient to motivate discharge.” Manzer v. Diamond Shamrock Chems. Co., 29 F.3d 1078, 1084 (6th Cir. 1994) -29- (quoting McNabola v. Chicago Transit Auth., 10 F.3d 501, 513 (7th Cir. 1993 . Banks and Curry have focused on the first proposition, contending that they did not engage in the acts of which they were accused by their coworkers. They insist that the defendant’s reasons for firing were based on “unsubstantiated allegations,” Pl.’s Resp. at 30. The plaintiffs emphasize that “[t]he so called ‘witnesses’ to these alleged acts cannot provide specific details including the approximate dates of the alleged incidents.” Ibid. The argument is somewhat beside the point. “[I]n determining if the plaintiffs have raised a genuine issue of material fact as to pretext, [the Court] should consider not whether [the plaintiffs] actually breached [the defendant’s rules], but rather whether the [defendant] had an honestly held belief that they had committed [a violation of the rules].” Allen v. Highlands Hosp. Corp., 545 F.3d 387, 398 (6th Cir. 2008). [T]he key inquiry in assessing whether an employer holds such an honest belief is whether the employer made a reasonably informed and considered decision before taking the complained-of action. An employer has an honest belief in its rationale when it reasonably relied on the particularized facts that were before it at the time the decision was made. [W]e do not require that the decisional process used by the employer be optimal or that it left no stone unturned. Ibid. (quoting Michael v. Caterpillar Fin. Servs. Corp., 496 F.3d 584, 598-99 (6th Cir. 2007 . In this case, the defendant conducted a detailed and thorough investigation; there are records that included numerous witness interviews. The plaintiffs have raised no hearsay or authentication objections to the defendant’s investigation notes, and in fact themselves submitted the notes as an exhibit to their response. The fact that some of the witnesses were not able to point to exact dates does not mean that the employer was unable to rely on their information, particularly when other details were corroborated (such as the particular comments made by the plaintiffs) and the harassing conduct was ongoing, with the months the harassment commenced identified by some witnesses. -30- “The response by the plaintiffs failed to produce any evidence indicating that the process the [defendant] used to conduct the investigation was irregular or idiosyncratic.” Allen, 545 F.3d at 398. Viewing the evidence in the light most favorable to the plaintiffs, the Court has no trouble concluding that the investigation was reasonable as a matter of law. No reasonable juror could conclude otherwise. In a supplemental brief, the plaintiffs also reference a recent Sixth Circuit decision, Risch v. Royal Oak Police Dep’t, 581 F.3d 383 (6th Cir. 2009), but that case provides no support for the plaintiffs’ position. In Risch, the court reversed summary judgment against a female police officer on her Title VII gender-discrimination claim because factual questions existed as to whether the nondiscriminatory reason proffered by the department for its failure to promote the plaintiff was pretextual. The plaintiff was passed over for a promotion in favor of two male applicants who had lower scores than the plaintiff under the promotion system used by the defendant; she also was passed over for a promotion in favor of male officers on five other occasions between 2002 and 2005. The explanation for the male officers’ selection was that “the other officers in the eligibility list had better test scores, better performance evaluations and demonstrated more initiative and leadership qualifies, ” id. at 387; but the police chief in charge of promotion did not consider the plaintiff’s seniority, the criterion that lifted her score over the two male officers. In that case, the decision maker also had made remarks demonstrating hostility toward female officers advancing within the department. The facts of Risch are so remarkably distinct from the present matter that it is difficult to extract guidance from the decision in the circumstances of this case. B. Mixed motive claim -31- In a separate subsection, Title VII provides that “an unlawful employment practice is established when the complaining party demonstrates that race, color, religion, sex, or national origin was a motivating factor for any employment practice, even though other factors also motivated the practice.” 42 U.S.C. § 2000e-2(m). Under this statute, an employer whose adverse employment was motivated in part by illegal considerations may not avoid liability altogether, but it may seek to limit damages if it can show that it would have taken the same action despite the plaintiff’s protected status. See 42 U.S.C. § 2000e-5(g)(2)(B) (prohibiting damages awards and allowing only declaratory relief, injunctive relief, and attorney’s fees when the employer proves that it would have taken the same action in the absence of the impermissible motivating factor). A plaintiff may prove a claim under a mixed-motive theory by direct or circumstantial evidence. Desert Palace, Inc. v. Costa, 539 U.S. 90, 92 (2003). The Sixth Circuit has jettisoned the McDonnell-Douglas burden-shifting framework for analyzing circumstantial mixed-motive Title VII cases at the summary judgment stage. White, 533 F.3d at 400. In its place, the court has substituted the following test: a plaintiff “need only produce evidence sufficient to convince a jury that: (1) the defendant took an adverse employment action against the plaintiff; and (2) race, color, religion, sex, or national origin was a motivating factor for the defendant’s adverse employment action.” Ibid. (quotation marks and citations omitted). “The ultimate question for the court in making a summary judgment determination in such a case is . . . whether there are any genuine issues of material fact concerning the defendant’s motivation for its adverse employment decision, and, if none are present, whether the law – 42 U.S.C. § 2000e-2(m) – supports a judgment in favor of the moving party on the basis of the undisputed facts.” Id. at 402. -32- The plaintiffs have not satisfied their burden under a mixed-motive theory. Curry and Banks were fired by Karen Bugeja. They have not provided any evidence from which a reasonable jury could conclude that Bugeja was motivated in any part by the plaintiffs’ race. Even assuming that racial animus could be imputed to Bugeja because she did not respond appropriately to the hanging of the noose, under White, this is not sufficient. See White, 533 F.3d at 404 (finding clear evidence of racial animus on the part of the supervisor, but considering whether there was any evidence that the supervisor acted on this animus). In White, the Sixth Circuit considered a plaintiff’s supervisor who obviously harbored animus towards African-Americans, because he stated “nobody wants to be around a black man.” White, 533 F.3d at 404. Notwithstanding this statement, the court demanded some evidence that the supervisor’s “racial animus was a motivating factor in his evaluation of White’s 2004 job performance.” Ibid. The court found that evidence in the fact that the supervisor “applied the wrong standard to evaluate his 2004 performance.” Ibid. There is no comparable evidence in this case. Rather, the Court takes guidance from Wright v. Murray Guard, Inc., 455 F.3d 702 (6th Cir. 2006), where the Sixth Circuit held that an employee failed to survive summary judgment on the mixed-motive claim of race and sex discrimination. The employer undertook an investigation into charges of sexual harassment, and the employee claimed that the witness had motive to lie and did in fact lie. Wright’s criticisms of the rigor of Murray Guard’s investigation do not create an issue of fact regarding the company’s motives because the investigation was sufficiently thorough to foreclose the conclusion that it was insincere. That Murray Guard decided to credit the statements of Bradley, who Wright claims spread rumors and had a motive to lie, and the statements of Bennett, who Wright claims was acting defensively to prevent her own discharge, was within the company’s discretion and does not create an issue of fact as to whether Murray Guard considered race or sex in its decision to terminate Wright. -33- Id. at 713. As noted above, the thoroughness of the defendant’s investigation of the sexual harassment complaints against Curry and Banks (and others) simply does not permit an inference that race entered into the decision to terminate them in any way. The plaintiffs suggest that the termination followed by days the discovery that they were documenting instances of racially discriminatory behavior. Actually, the gap was a couple months. Nonetheless, the plaintiffs have not pointed to any similarly situated individual who was treated differently in the sexual harassment investigation. Their complaints that Debra Akright engaged in “racist behavior” – a questionable assertion – is entirely unhelpful to their case, because it does not establish that Karen Bugeja, a different supervisor, was influenced by racial animus in her firing decision. The same is true for other incidents of racial insensitivity around the office. A thorough investigation was completed by the defendant, Banks and Curry were allowed to respond to the investigation, and they were fired immediately afterwards. Here, like Wright, “[a]t most, [the plaintiff] has presented evidence as to why the allegations of sexual harassment made against him might not be credible, but he has presented no evidence that [the defendant] did not honestly believe they were true or that [the defendant] relied on unlawful motives in terminating [the plaintiff].” Wright, 455 F.3d at 714. Nor has Marie Hillard offered evidence that the failure to assign her to the service leader position more often was motivated in part by consideration of her race. In fact, she has not provided any evidence of the process by which service leaders were selected. Without some information about how service leaders are chosen, there is no evidence from which a reasonable jury could find that race was a motivating factor in the decision not to offer Hillard a service leader position. The Court will dismiss the claims of disparate treatment by all three plaintiffs. -34- C. Retaliation Title VII and ELCRA also prohibit retaliation against an employee for complaining about discrimination. See 42 U.S.C. § 2000e-3(a) (“It shall be an unlawful employment practice for an employer to discriminate against any of his employees . . . because he has opposed any practice made an unlawful employment practice by this subchapter, or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this subchapter.”); Mich. Comp. Laws § 37.2701(a) (making it unlawful to “[r]etaliate or discriminate against a person because the person has opposed a violation of this act, or because the person has made a charge, filed a complaint, testified, assisted, or participated in an investigation, proceeding, or hearing under this act.”). “In order to establish a prima facie case of retaliation, a plaintiff must establish that: (1) he engaged in activity protected by Title VII; (2) the exercise of his civil rights was known to the defendant; (3) thereafter, the defendant took an employment action adverse to the plaintiff; and (4) there was a causal connection between the protected activity and the adverse employment action.” Nguyen v. City of Cleveland, 229 F.3d 559, 563 (6th Cir. 2000). Protected activity “covers conduct such as ‘complaining to anyone (management, unions, other employees, or newspapers) about allegedly unlawful practices . . . .’” Niswander v. Cincinnati Ins. Co., 529 F.3d 714, 721 (6th Cir. 2008) (quoting Johnson v. Univ. of Cincinnati, 215 F.3d 561, 578 (6th Cir. 2000 ; see also Fox v. Eagle Distrib. Co., Inc., 510 F.3d 587, 591-92 (6th Cir. 2007) (requiring the substance of the complaint to management be that an employee was “discriminated against on the basis of his [protected status]”) (interpreting ADEA), Booker v. Brown & Williamson Tobacco Co., Inc., 879 F.2d 1304, 1313 (6th Cir. 1989) (holding that an employee must do more than make a “vague charge of discrimination,” and that an employee who sent a letter complaining -35- that charges against him were the product of “ethnocentrism” did not engage in protected activity under Title VII). The plaintiff also must show that the protected activity was “‘known to those who made [the adverse employment] decision.’” Cline v. BWXT Y-12, LLC, 521 F.3d 507, 513 (6th Cir. 2008) (quoting Fenton v. HiSAN, Inc., 174 F.3d 827, 832 (6th Cir. 1999 (alteration in original). The plaintiffs must offer some evidence of a causal connection between the complaints and the adverse action, which sometimes may consist of temporal proximity. As the Sixth Circuit explained last year: Where an adverse employment action occurs very close in time after an employer learns of a protected activity, such temporal proximity between the events is significant enough to constitute evidence of a causal connection for the purposes of satisfying a prima facie case of retaliation. But where some time elapses between when the employer learns of a protected activity and the subsequent adverse employment action, the employee must couple temporal proximity with other evidence of retaliatory conduct to establish causality. See [Little v. BP Exploration & Oil Co., 265 F.3d 357, 365 (6th Cir. 2001)] (“[T]emporal proximity, when considered with the other evidence of retaliatory conduct, is sufficient to create a genuine issue of material fact as to” a causal connection.). Mickey v. Zeidler Tool & Die Co., 516 F.3d 516, 525 (6th Cir. 2008). If the plaintiff establishes a prima facie case, then the defendant may offer a legitimate business justification for its actions, which the plaintiff must rebut with evidence of pretext. Michael v. Caterpillar Fin. Servs. Corp., 496 F.3d 584, 597 (6th Cir. 2007). The plaintiff may show pretext in the same manner as in a disparate treatment theory of discrimination. Imwalle v. Reliance Med. Prods., Inc., 515 F.3d 531, 545 (6th Cir. 2008). Only Banks and Curry allege retaliation. They claim that their protected activity consisted of 1) filing complaints about the noose; 2) Curry “think[ing]” that he reported Younkman’s “porch monkey” comment, Pl.’s Resp., Ex. A, Curry Dep. 146; and 3) Curry complaining to McMillan of “constant harassment” by Akright, id. at 85-87. The complaints about Akright never were based on -36- racial animus but simply bad management, and therefore they cannot be protected activity. Moreover, there is no evidence that Bugeja knew that the complaints about the noose were made by Curry or Banks. There is also little evidence of a causal connection between the complaints and the terminations, since the noose incident occurred in September 2004, the “porch monkey” remark happened in March 2005, and the plaintiffs were terminated on May 13, 2005. But even if Curry and Banks have proved a prima facie case of retaliation, they have not shown that the defendant’s stated reason for firing them was pretextual, as discussed earlier. The Court concludes, therefore, that the plaintiffs’ retaliation claim fails as a matter of law. D. Hostile work environment “Under Title VII, two types of actions may be brought: (1) ‘discrete discriminatory acts,’ and (2) claims alleging a ‘hostile work environment.’” Hunter v. Sec’y of U.S. Army, 565 F.3d 986, 993-94 (6th Cir. 2009) (citing Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 110 (2002 . “Hostile environment claims are different in kind from discrete acts. Their very nature involves repeated conduct.” Morgan, 536 U.S. at 115. Where the prohibition of discrete discriminatory acts guards against illegally motivated adverse employment action, a hostile work environment claim “offers employees protection from a ‘workplace[] permeated with discriminatory intimidation, ridicule, and insult that is sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment. . . .’” Barrett v. Whirlpool Corp., 556 F.3d 502, 514 (6th Cir. 2009) (quoting Harris v. Forklift Sys., Inc., 510 U.S. 17, 21 (1993 (alteration in original). “To prove that he was subject to a hostile work environment in violation of Title VII, plaintiff must prove: (1) he belongs to a protected group; (2) he was subject to unwelcome -37- harassment; (3) the harassment was based on race; (4) the harassment affected a term, condition, or privilege of employment and (5) defendant knew or should have known about the harassment and failed to take action.” Moore v. KUKA Welding Sys. & Robot Corp., 171 F.3d 1073, 1078-79 (6th Cir. 1999). Under Michigan law, the elements are substantially the same. See Quinto v. Cross & Peters Co., 451 Mich. 358, 368-69, 547 N.W.2d 314, 319-20 (1996). To be actionable, the harassment must be severe and pervasive in two aspects. “Both an objective and subjective test must be met; in other words, the conduct must be so severe or pervasive as to constitute a hostile or abusive working environment both to the reasonable person and the actual victim.” Randolph v. Ohio Dep’t of Youth Servs., 453 F.3d 724, 733 (6th Cir. 2006). The Supreme Court has suggested factors to consider in assessing whether a work environment is hostile: “the frequency of the discriminatory conduct; its severity; whether it is physically threatening or humiliating, or a mere offensive utterance; and whether it unreasonably interferes with an employee’s work performance.” Harris, 510 U.S. at 23. When the “workplace is permeated with ‘discriminatory intimidation, ridicule, and insult,’ that is ‘sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment,’” a hostile environment certainly exists. Id. at 21; see also Grace v. USCAR, 521 F.3d 655, 678-79 (6th Cir. 2008). The court “must consider the totality of the circumstances in determining whether the harassment was sufficiently severe and pervasive.” Randolph, 453 F.3d at 733. Although harassment must have “occurred because of the employee’s protected status,” Michael v. Caterpillar Fin. Servs. Corp., 496 F.3d 584, 600 (6th Cir. 2007) (citing Farmer v. -38- Cleveland Pub. Power, 295 F.3d 593, 605 (6th Cir. 2002 , conduct creating a hostile environment need not be focused specifically at the plaintiff. Instead: (1) offensive conduct need not be directed at the plaintiff; (2) the plaintiff need not be present at the time of the offensive conduct; instead, she or he can learn of the conduct second-hand; (3) racial or sexual animus can be inferred from conduct not overtly racial or sexual in nature when the context suggests it; and (4) blue collar work environments do not have more leeway when it comes to offensive conduct. Ladd v. Grand Trunk W. R.R., Inc., 552 F.3d 495, 500 (6th Cir. 2009) (internal citations omitted). “Depending upon whether the alleged harasser is a co-worker or a supervisor of the victim, there are slightly different standards for evaluating whether the employer as a whole is vicariously liable for the hostile work environment. In the case of a harassing co-worker, ‘[a]n employer is liable if it knew or should have known of the charged . . . harassment and failed to implement prompt and appropriate corrective action.’ [Hafford v. Seidner, 183 F.3d 506, 513 (6th Cir. 1999)] (internal quotation marks omitted). By contrast, ‘an employer is vicariously liable for an actionable hostile work environment created by a supervisor with immediate (or successively higher) authority over the employee.’ Jackson v. Quanex Corp., 191 F.3d 647, 663 (6th Cir. 1999) (emphasis added).” Clark v. United Parcel Serv., Inc., 400 F.3d 341, 348 (6th Cir. 2005). There are five incidents over four years in the evidence in this case, which the defendant endeavors to separate and isolate but which the plaintiffs insist must be viewed on a continuum. These incidents are the August 2004 noose incident; the March 2005 “porch monkey” comment; the November 2005 racial graffiti; the November 2005 “Mr. Bojangles” slur; and the August 2008 white supremacist lunch-room flyer. The plaintiffs have the better argument here. The Sixth Circuit has cautioned against separating such incidents and evaluating them individually, since that practice tends to ignore the totality of the circumstances, which must be considered, and “rob[s] the incidents -39- of their cumulative effect.” Williams v. Gen. Motors Corp., 187 F.3d 553, 561 (6th Cir. 1999). When determining hostility, context matters. See Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75, 81-82 (1998) (“The real social impact of workplace behavior often depends on a constellation of surrounding circumstances, expectations, and relationships which are not fully captured by a simple recitation of the words used or the physical acts performed. Common sense, and an appropriate sensitivity to social context, will enable courts and juries to distinguish between simple teasing or roughhousing among members of the same sex, and conduct which a reasonable person in the plaintiff's position would find severely hostile or abusive.”). Consequently, “where individual instances of [racial] harassment do not on their own create a hostile environment, the accumulated effect of such incidents may result in a Title VII violation.” Williams, 187 F.3d at 563. All plaintiffs allege a hostile work environment, and all plaintiffs witnessed the noose and overheard the “porch monkey” comment. Banks and Curry further allege that they were treated worse than their white peers by a manager, Debra Akright. Hillard relies on a number of additional incidents, including being called a “french maid,” viewing the “no niggers” graffiti on the door, and reading the racially derogatory flyer. The noose incident is undoubtedly among the most serious of the plaintiffs’ allegations, since it is pregnant with historical and cultural meaning. As the Tenth Circuit recently explained: [C]ourts have recognized that a noose may constitute part of a hostile environment claim. See [Hollins v. Delta Airlines, 238 F.3d 1255, 1256-58 (10th Cir. 2001)] (noting that “several hangman’s nooses dangling from the ceiling above [the plaintiff's] work area” coupled with racist jokes, including one about lynching, were sufficient to give rise to an inference of a hostile environment); see also Vance v. S. Bell Tel. & Tel. Co., 863 F.2d 1503, 1511 n.4 (11th Cir. 1989) (“It is hard to imagine an incident of this sort taking place in 1984. The grossness of hanging an object resembling a noose at the work station of a black female is self-evident.”), abrogated on other grounds by Harris, 510 U.S. at 21; Vance v. S. Bell Tel. & Tel., 983 F.2d 1573, 1583 (11th Cir. 1993) (Fay, J., dissenting) (“The noose in [the workplace] -40- context is a symbol not just of racial discrimination or of disapproval, but of terror. . . . Not less than the swastika or the Klansman’s hood, the noose in this context is intended to arouse fear.”); Williams v. New York City Housing Auth., 154 F. Supp. 2d 820, 824 (S.D.N.Y. 2001) (“Indeed, the noose is among the most repugnant of all racist symbols, because it is itself an instrument of violence.”). Like “a slave-masters whip,” the image of a noose is “deeply a part of this country’s collective consciousness and history, any [further] explanation of how one could infer a racial motive appears quite unnecessary.” Johnson v. Potter, 177 F. Supp. 2d 961, 965 (D. Minn. 2001); see also V[a.] v. Black, 538 U.S. 343, 388 . . . (2003) (Thomas, J., dissenting) (stating that “[i]n every culture, certain things [both “sacred” and “profane”] acquire meaning well beyond what outsiders can comprehend” and discussing cross burning as an example). Tademy v. Union Pac. Corp., 520 F.3d 1149, 1159 (10th Cir. 2008). A reasonable jury could discredit an employee’s race-neutral explanation for hanging a life-sized noose. Ibid. Here, all three plaintiffs witnessed a noose in their place of employment. Although there is evidence that the person who placed the noose did so for non-discriminatory reasons, a jury could reasonably find to the contrary. Ibid.; see also id. at 1162 (holding that “a jury could easily find that the noose was an egregious act of discrimination calculated to intimidate African-Americans”). It is true that the noose by itself is not as compelling a case for a hostile work environment as it would be with other racially-charged comments. Cf. id. at 1163 (“The noose incident must also be viewed in light of the fact that Mr. Tademy was aware of the ‘hang all niggers and jews’ graffiti, a fact that understandably intensified his reaction.”). But the evidence in this case included other racially significant events. The “porch monkey” comment, for instance, likely would not by itself rise to the level of severity to constitute a hostile work environment. See Ladd, 552 F.3d at 500. However, that comment is part of the circumstances, the totality of which must be considered in an assessment of the hostility of the workplace to the minority plaintiffs. -41- The noose incident takes on greater significance in the present case because it was witnessed by the regional manager Bugeja, who did not act promptly in taking it down, allegedly because she perceived it (remarkably) as a race-neutral joke. A supervisor allowing this symbol to be seen by others makes the defendant vicariously liable for the hostile work environment that symbol creates. See Clark, 400 F.3d at 348. Moreover, the defendant’s response to the noose incident – a thorough investigation, culminating in a reprimand to the person who put it up, and a “mandatory” diversity training that was not attended by Bugeja and possibly others – could be found by a jury to be an unsatisfactory response. With respect to all three plaintiffs, the Court finds that the record establishes a substantial question of material fact as to whether the work environment on the third floor of the defendant’s Saginaw facility was hostile to the plaintiffs because of their race. III. Conclusion The Court finds that the plaintiffs have not established jury-submissible fact questions on their disparate treatment claims under theories of direct evidence, circumstantial evidence, or mixed- motive. Nor have the plaintiffs produced proof that establishes a material fact question on their retaliation claims. There are material fact questions precluding summary judgment on the plaintiffs’ hostile work environment theory. Accordingly, it is ORDERED that the defendant’s motion for summary judgment [dkt #133] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that those parts of Counts I, II, and III of the amended complaint alleging disparate treatment and retaliation are DISMISSED WITH PREJUDICE. s/David M. Lawson -42- Dated: October 30, 2009 DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 30, 2009. s/Teresa Scott-Feijoo TERESA SCOTT-FEIJOO -43-

=== Michael Carter v. D. Dolce ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION MICHAEL CARTER, Plaintiff, v. D. DOLCE, ______________________________________/ Defendant. Case Number 08-14877 Honorable David M. Lawson Magistrate Judge Mona M. Majzoub ORDER ADOPTING IN PART AND REJECTING IN PART MAGISTRATE JUDGE’S REPORT, ADOPTING RECOMMENDATION, SUSTAINING IN PART AND OVERRULING IN PART PLAINTIFF’S OBJECTIONS, GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT, AND DISMISSING CASE This matter is before the Court on the plaintiff’s objections to a report issued by Magistrate Judge Mona M. Majzoub recommending that this Court grant the defendant’s motion for summary judgment because the plaintiff has not established an element of his prima facie case for unconstitutional retaliation and has not made out an Eighth Amendment violation. At the time of the events described in the complaint, the plaintiff was an inmate in the custody of the Michigan Department of Corrections. He filed a complaint alleging that the defendant retaliated against him by charging him with major misconduct when he threatened to file a grievance after the defendant ordered him to wash pots and pans in scalding water without protective gloves. The case was referred to Judge Majzoub to conduct all pretrial proceedings. The defendant then filed her summary judgment motion. On April 3, 2009 Judge Majzoub filed a report recommending that the motion be granted. The plaintiff filed timely objections. After a de novo review of the record in light of the plaintiff’s objections, the Court finds that the magistrate judge erred in concluding that the plaintiff did not offer sufficient evidence of causation as part of his prima facie case. However, the plaintiff has not offered any evidence to rebut the defendant’s assertion that she would have charged the plaintiff with major misconduct regardless of whether he threatened to file a grievance, and therefore the plaintiff has not sustained his burden on summary judgment. Nor has the plaintiff established an Eighth Amendment claim. The Court therefore will reject the magistrate judge’s report in part, adopt the recommendation, sustain in part and overrule in part the plaintiff’s objections, grant the defendant’s motion for summary judgment, and dismiss the case. I. Although the plaintiff is currently on parole, in June of 2007, he was incarcerated in the Adrian Correctional Facility serving a sentence for armed robbery. On June 1, 2007, he was working in the kitchen under the direction of the defendant, an employee of the Michigan Department of Corrections (MDOC). The defendant’s responsibilities included assigning the prison kitchen duties to prisoners. There is no dispute that the plaintiff was working as a relief worker in the food service area of the correctional facility when the defendant ordered him to wash the pots and pans. From there, however, the stories differ. The plaintiff asserts in a declaration attached to the complaint signed under penalty of perjury that he “attempted to do the work but was unable to find safety gloves to work in the hot water that[’]s above one hundred degrees temper[a]ture hot.” Pl’s Decl. at ¶ 2. The plaintiff avers that when he told the defendant he needed gloves, she told him that she would try to find him some. She left and came back a short time later and stated “I’m giving you a direct order to go wash pots and pans.” Ibid. The plaintiff responded, “I ain’t going to put my bare hands in that hot water.” Ibid. The plaintiff and the defendant began to argue, and he says that he told her, “I am writing a grievance on you if you keep trying to force me to wash pots and pans without gloves.” Ibid. The -2- defendant left the kitchen and reported the plaintiff to the kitchen officer, who then entered the kitchen and told the plaintiff to “take off his kitchen whites and leave the kitchen and that plaintiff is laid-in pending the outcome of the misconduct Dolce is writing.” Ibid. Later that day the defendant wrote a misconduct report charging the plaintiff with disobeying her direct order. The plaintiff alleges that the defendant retaliated against him by “falsifying a state document i.e., a major misconduct when Plaintiff informed Defendant that he will file a grievance complaint on her if she continue [sic] to try to make him wash pots and pans without gloves.” Ibid. The defendant remembers it differently. She submitted an affidavit that states, “[a]t no time did [the plaintiff] attempt to work this assignment. He became argumentative and tried to tell me what assignments he did not have to work on.” Def.’s Mot., Ex. A, Dolce Aff. at ¶ 5. The defendant maintains that after she again gave the plaintiff the direct order to wash the pots and pans, he refused, they argued, and the plaintiff then left the kitchen area. The defendant acknowledges that she issued a written charge against the plaintiff “for refusing to comply with the order and laid in from his assignment pending the hearing on the misconduct.” Id. at ¶ 7. The defendant states, “I would have written the ‘Disobeying a Direct Order’ misconduct against the plaintiff regardless of whether he was going to write a grievance because it is my belief that it is not an inmate relief worker’s prerogative to refuse to work an assigned task and walk off the assignment after being given a direct order to do so.” Id. at ¶ 9. The plaintiff was sent to his cell immediately after this incident, and the defendant wrote a major misconduct charge the same day. On June 20, 2007, a hearing officer found the plaintiff not guilty of the misconduct charge. He noted that the evidence did not plainly establish whether the water was dangerously hot. The -3- hearing officer concluded that Dolce’s explanation of the events was contradictory: at one point she stated that the plaintiff refused to work, but at another point she stated that the plaintiff had asked for gloves so that he could work. Because he could not determine on that record whether the water temperature was too hot for the plaintiff to work safely without gloves, he dismissed the misconduct charge. After exhausting his administrative remedies, the plaintiff filed his pro se complaint in this Court. He seeks damages for violation of his First Amendment constitutional right to free speech and his Eighth Amendment constitutional right not to be subjected to cruel and unusual punishment. In her summary judgment motion, the defendant argues that there is no evidence that the plaintiff engaged in protected conduct. She acknowledges that filing a grievance amounts to protected conduct under clear Sixth Circuit precedent; however, she insists that there is no precedent that clearly holds that threatening to file a grievance constitutes protected conduct. The magistrate judge evaluated the plaintiff’s retaliation claim by applying the three element test laid out in Thaddeus-X v. Blatter, 175 F.3d 378, 394 (6th Cir. 1999) (en banc). The magistrate judge assumed that the plaintiff engaged in protected conduct when he threatened to file a grievance, and also assumed that the major misconduct charge could deter a prisoner of ordinary firmness from exercising his First Amendment rights. However, she recommended that the claim be dismissed because the plaintiff “has advanced only conclusory allegations of retaliatory motive unsupported by material facts which are not sufficient to survive summary judgment,” and that the body of evidence available will not allow a jury to “reasonably find in [the plaintiff’s] favor on the causation element of his retaliation claim.” Rep. & Rec. at 5. The magistrate judge reasoned that the plaintiff “fails to cite any specific oral statement made by defendant supporting his allegation -4- that she charged him due at least in part to his threat,” ibid., there was no mention of this threat in the major misconduct hearing, and the defendant denies that he made it. However, because there is no dispute that the plaintiff refused an order, “[t]his refusal provides a logical basis for the misconduct charge and supports Defendant’s assertion that the charge was motivated solely by this refusal and in no part by Plaintiff’s alleged threat.” Ibid. The plaintiff objected to the magistrate judge’s conclusion that proof of specific oral statements were necessary to establish causation. The defendant has not filed objections. II. Objections to a report and recommendation are reviewed de novo. 28 U.S.C. § 636(b)(1). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller v. Currie, 50 F.3d 373, 380 (6th Cir. 1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). The defendant did not object to the magistrate judge’s conclusion that the plaintiff established the first two elements of his prima facie case. “[T]he failure to file specific objections to a magistrate’s report constitutes a waiver of those objections.” Cowherd v. Million, 380 F.3d 909, 912 (6th Cir. 2004). Since the defendant did not challenge those conclusions, the Court need not address those items, since those arguments are waived, see Thomas v. Arn, , 149 (1985) (holding that the failure to object to the magistrate judge’s report releases the Court from its duty to independently review the motion); Smith v. Detroit Fed’n of Teachers Local 231, 829 F.2d 1370, -5- 1373 (6th Cir. 1987). However, the issues are sufficiently important to warrant comment by this Court. The defendant moved for summary judgment. A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics & Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). Thus a factual dispute that “is merely colorable or is not significantly probative” will not defeat a motion for summary judgment that is properly supported. Kraft v. United States, 991 F.2d -6- 292, 296 (6th Cir. 1993); see also Int’l Union, United Auto., Aerospace & Agric. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record which demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). The party opposing the motion may not merely “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact,” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. If after sufficient opportunity for discovery the non-moving party is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp., 477 U.S. at 322-23. The party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). “[T]he party opposing the summary judgment motion must ‘do more than simply show that there is some “metaphysical doubt as to the material facts.”’” Highland Capital, Inc. v. Franklin Nat. Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir. 1994), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 586 (1986 . “Thus, the mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there -7- must be evidence on which the jury could reasonably find for the plaintiff.” Ibid. (quoting Anderson, 477 U.S. at 252) (internal quote marks omitted). Under Sixth Circuit law, A. [a] retaliation claim essentially entails three elements: (1) the plaintiff engaged in protected conduct; (2) an adverse action was taken against the plaintiff that would deter a person of ordinary firmness from continuing to engage in that conduct; and (3) there is a causal connection between elements one and two-that is, the adverse action was motivated at least in part by the plaintiff's protected conduct. Thaddeus-X v. Blatter, 175 F.3d at 394. As noted earlier, the defendant argues that the plaintiff did not engage in protected conduct by threatening to file a grievance, but agrees that “[a]n inmate has an undisputed First Amendment right to file grievances against prison officials on his own behalf.” Thomas v. Eby, 481 F.3d 434, 439 (6th Cir. 2007). Nonetheless, the defendant is correct that neither the Sixth Circuit nor the Supreme Court has addressed explicitly whether threatening to file a grievance constitutes protected conduct. See Harbin-Bey v. Rutter, 420 F.3d 571, 579 (6th Cir. 2005) (finding against the plaintiff who claimed his protected conduct was threatening to file a lawsuit because he had not shown that a prisoner of ordinary firmness would be deterred); Scott v. Kilchermann, 230 F.3d 1359, 2000 WL 1434456, at *2 (6th Cir. Sep. 18, 2000) (holding that a prisoner did not engage in protected conduct when he threatened to file a frivolous grievance). But see Bridges v. Gilbert, 557 F.3d 541, 555 (7th Cir. 2009) (suggesting without further explanation or citation that “it seems implausible that a threat to file a grievance would itself constitute a First Amendment-protected grievance”). The Court believes that when it comes to protecting First Amendment rights, including the right to petition the government for redress, there is little difference between retaliating against a -8- person for filing a grievance, and retaliating for threatening to file one. The right to file a grievance stems from the First Amendment right to free speech and to petition the state for redress of grievances. See Noble v. Schmitt, 87 F.3d 157, 162 (6th Cir. 1996). Once a prisoner makes clear his intention to resort to official channels to seek a remedy for ill treatment by a prison employee, retaliation against the prisoner by that employee implicates all the policies intended to protect the exercise of a constitutional right. It appears that the Sixth Circuit treats filing and threatening to file as categorically identical outside the prison context. See Jackson v. City of Columbus, 194 F.3d 737, 756-57 (6th Cir. 1999) (holding that an employee engages in protected activity under the First Amendment when he threatens to file a lawsuit on a matter of public concern), abrogated on other grounds by Swierkiewicz v. Sorema N. A., (2002); Polk v. Yellow Freight System, Inc., 801 F.2d 190, 200 (6th Cir. 1986) (noting that there is “‘no legal distinction . . . between the filing of a charge which is clearly protected . . . and threatening to file a charge’” under Title VII’s anti- retaliation provisions (quoting Gifford v. Atchison, Topeka & Santa Fe Ry. Co., 685 F.2d 1149, 1156 n. 3 (9th Cir. 1982 . Moreover, the MDOC policy directive applicable to prisoner grievances requires that a prisoner inform the person with whom he has a dispute about his complaint before filing a formal grievance. See MDOC PD 03.02.130, available at http://www.michigan.gov/documents/corrections/ 03_02_130_200872_7.pdf. So in a sense, threatening to resort to the formal grievance process is itself the first step in that process. But even if the threat to file a grievance is not viewed as part of the process, a clearly stated intention to file a grievance amounts to protected conduct within the meaning of Thaddeus-X. The plaintiff made out this element of his prima facie case through the sworn statements in his declaration. -9- The magistrate judge also assumed that the plaintiff had met the second prong. This conclusion is unavoidable. “Retaliation against a prisoner is actionable if it is capable of deterring a person of ordinary firmness from exercising his or her right to access the courts.” Thaddeus-X, 175 F.3d at 398. Not every action is an adverse action; de minimus slights and inconveniences do not qualify. Id. at 396. “Prisoners may be required to tolerate more than public employees, who may be required to tolerate more than average citizens, before an action taken against them is adverse.” Id. at 398. But the Sixth Circuit has held that charging an inmate with a major misconduct violation is sufficiently adverse to “deter a person of ordinary firmness’ from the exercise of the right at stake,” id. at 396, because conviction of such a violation could result in the prisoner’s segregation or loss of good time credits. Brown v. Crowley, 312 F.3d 782, 789 (6th Cir. 2002). In this case, the Court is satisfied that a jury could find for the plaintiff on the second element. The magistrate judge’s conclusion that the plaintiff failed to meet the third element is the target of the plaintiff’s objections. This argument was not advanced in the defendant’s motion for summary judgment. It is true that “the third element – a causal connection between the protected activity and the adverse action – needs to be established by the plaintiffs to complete their affirmative case.” Thaddeus-X, 175 F.3d at 399. However, “retaliation ‘rarely can be supported with direct evidence of intent.’” Harbin-Bey v. Rutter, 420 F.3d 571, 580 (6th Cir. 2005) (quoting Murphy v. Lane, 833 F.2d 106, 108 (7th Cir. 1987 . That is why “[c]ircumstantial evidence, like the timing of events or the disparate treatment of similarly situated individuals, is appropriate” to consider when determining whether a genuine issue of fact on the third prong has been established. Thaddeus-X, 175 F.3d at 399. The magistrate judge appears to have insisted upon direct evidence -10- of an improper motive, and she did not consider whether the plaintiff had come forward with other types of evidence. The Court believes that he did. Here, there is a factual dispute whether the plaintiff threatened to file a grievance. He asserts – in the form of a declaration, which is competent evidence for summary judgment purposes – that he told the defendant of his intent to file, and he immediately was “laid in” pending a major misconduct charge. The major misconduct charge was filed later that day. “[T]emporal proximity alone may be significant enough to constitute indirect evidence of a causal connection so as to create an inference of retaliatory motive.” Muhammad v. Close, 379 F.3d 413, 417-18 (6th Cir. 2004) (internal quotations omitted). Dealing with an analogous requirement in the Title VII context, see, e.g., Strouss v. Michigan Department of Corrections, 250 F.3d 336 (6th Cir. 2001) (citing a Title VII retaliation case in a First Amendment retaliation claim); Johnson v. University of Cincinatti, 215 F.3d 561 (6th Cir. 2000) (citing a Title VII retaliation case in a First Amendment retaliation claim), the Sixth Circuit has held that temporal proximity may be sufficient in some cases to establish causation, noting the anomalous outcome if the contrary were true: [I]f an employer immediately retaliates against an employee upon learning of his protected activity, the employee would be unable to couple temporal proximity with any such other evidence of retaliation because the two actions happened consecutively, and little other than the protected activity could motivate the retaliation. Thus, employers who retaliate swiftly and immediately upon learning of protected activity would ironically have a stronger defense than those who delay in taking adverse retaliatory action Mickey v. Zeidler Tool & Die Co., 516 F.3d 516, 525 (6th Cir. 2008). Here, the protected conduct and the defendant’s response occurred in the very same day, which is sufficient to give rise to an inference of retaliation. See ibid. -11- “Once the plaintiff has met his burden of establishing that his protected conduct was a motivating factor behind any harm, the burden of production shifts to the defendant. If the defendant can show that he would have taken the same action in the absence of the protected activity, he is entitled to prevail on summary judgment.” Thaddeus-X, 175 F.3d at 399 (citing Mt. Healthy City School Dist. Bd. of Educ. v. Doyle, 429 U.S. 274 (1977 . This issue was not addressed by the magistrate judge. The evidence in this case shows that the plaintiff refused the defendant’s direct order and that he would have been subjected to a misconduct charge regardless of his protected conduct. The plaintiff admits that the defendant gave him a direct order to wash the pots and pans, and he refused by responding “I ain’t going to put my bare hands in that hot water.” Pl.’s Decl. at ¶ 2. The plaintiff also admits that he “did in fact refuse Defendant’s continuing reckless disregard, callous order to harm himself by the putting his bare hands in scalding hot water without safety gloves on.” Pl.’s Resp. at 3. The defendant states in her affidavit that she would have “written the ‘Disobeying a Direct Order’ misconduct charge against the Plaintiff regardless of whether he stated he was going to write a grievance because it is my belief that it is not an inmate relief worker’s prerogative to refuse to work an assigned task and walk off the assignment after being given a direct order to do so.” Dolce Aff. ¶ 5. The plaintiff has pointed to no evidence contradicting the defendant’s claim that she would have filed the charge regardless of the plaintiff’s threatened grievance. Nor has the plaintiff requested an opportunity for discovery to present his claim, or otherwise suggested that he could somehow establish a contrary fact. See Fed. R. Civ. P. 56(f). Because there is no genuine dispute as to whether the defendant would have issued a major misconduct violation even in the -12- absence of the protected activity, the plaintiff has failed to produce evidence sufficient to defeat the motion for summary judgment on the First Amendment retaliation claim. B. The plaintiff claimed that the defendant violated his Eighth Amendment right by subjecting him to cruel and unusual punishment when she ordered him to wash the pots and pans without gloves. This claim was referenced in the body of the plaintiff’s response to the defendant’s motion for summary judgment, but the magistrate judge did not address it in the report and recommendation. The plaintiff’s sole argument on this claim is that the “violation of ‘disobeying a direct order’ was no more than him exercising his eighth amendment constitutional right not to be subjected to cruel and unusual punishment, i.e., scalding himself with hot water.” Pl.’s Obj. at ¶ 1. The Eighth Amendment imposes a constitutional limitation on the power of the states to punish those convicted of crimes. Punishment may not be “barbarous” nor may it contravene society’s evolving standards of decency. Rhodes v. Chapman, 452 U.S. 337, 345-46 (1981). However, “[n]ot every unpleasant experience a prisoner might endure while incarcerated constitutes cruel and unusual punishment within the meaning of the Eighth Amendment.” Ivey v. Wilson, 832 F.2d 950, 954 (6th Cir. 1987). “The Eighth Amendment does not outlaw cruel and unusual ‘conditions’; it outlaws cruel and unusual ‘punishments.’ An act or omission unaccompanied by knowledge of a significant risk of harm might well be something society wishes to discourage, and if harm does result society might well wish to assure compensation.” Farmer v. Brennan, 511 U.S. 825, 837-838 (1994). There are two general categories of Eighth Amendment claims in a prison setting: “excessive use of government force,” and unlawful “conditions of confinement.” Thaddeus-X v. Blatter, 175 -13- F.3d 378, 400-01 (6th Cir. 1999) (en banc). A conditions-of-confinement claim is one that involves the denial of basic human needs or unsafe conditions in prison, such as exposure to open electrical connections, unsafe drinking water, prolonged exposure to tobacco smoke, exposure to toxic substances, and denial of medical care. See Helling v. McKinney, 509 U.S. 25, 32-34 (1993). An excessive-use-of-government-force claim is one that involves “unnecessary and wanton pain and suffering.” Whitley v. Albers, 475 U.S. 312, 320 (1986). Although both categories involve a “wantonness” component, a key difference in the applicable legal standards is the state-of-mind element the plaintiff must allege and prove. Thaddeus-X, 175 F.3d at 401. A conditions-of- confinement claim requires proof that the defendant acted with deliberate indifference to an inmate’s serious needs. Estelle v. Gamble, 429 U.S. 97, 106 (1976). An excessive-use-of-force claim requires proof that the defendant acted with a malicious and sadistic intent. Thaddeus-X, 175 F.3d at 401. “In other words, the state-of-mind showing that a plaintiff must allege and meet in cases of excessive force is much higher than in conditions-of-confinement cases.” Ibid. According to the plaintiff, he was ordered by the defendant to stick his hands in scalding water. Surely, such a claim implicates the Eighth Amendment’s prohibition on excessive force against an inmate. However, the plaintiff has failed to produce any evidence that the defendant had the requisite state of mind when she issued that command. For instance, as the hearing officer observed, there is no evidence that the water in fact was hot, and there certainly is no evidence that the defendant knew that the water temperature was dangerously hot. The plaintiff has provided evidence that he informed the defendant that “he need[ed] gloves to do the work.” Pl.’s Decl. ¶ 2. However, the expressed desire for gloves does not communicate a risk of injury. The plaintiff also suggests that the Court could infer the defendant’s knowledge -14- from her statements. In the first statement “she told Plaintiff she would try to find him some gloves to wear while on the assignment” and in the second she stated that “he does not need gloves to ware [sic] in the dish tank.” Obj. at 3. Neither of the defendant’s conflicting statements in the record indicates that she realized there was a substantial risk of harm to the plaintiff. The plaintiff contends that the water temperature was over one hundred degrees; however he does not provide any evidence that the defendant knew that. The Court finds that there is no evidence in the record from which a fact finder could infer that the defendant’s state of mind was malicious and sadistic when she instructed the plaintiff to wash the pots and pans. His Eighth Amendment claim, therefore, must fail. III. After conducting a de novo review of the record in light of the parties’ objections, the Court is satisfied that the defendant’s motion for summary judgment should be granted. Although the magistrate judge did not correctly apply the law and one of the plaintiff’s objections has merit, the Court believes the plaintiff’s case ultimately must fail. Accordingly, it is ORDERED that the magistrate judge’s report is REJECTED IN PART, and the recommendation [dkt #15] is ADOPTED; and the plaintiff’s objections [dkt #18] are SUSTAINED IN PART AND OVERRULED IN PART. It is further ORDERED that the defendant’s motion for summary judgment [dkt #9] is GRANTED. -15- It is further ORDERED that the complaint is DISMISSED WITH PREJUDICE. Dated: August 19, 2009 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 19, 2009. s/Susan K. Pinkowski SUSAN K. PINKOWSKI -16-

=== Lynk v. Chase Home Finance ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION LYNDA LYNK, v. Plaintiff, Case No. 07-14772 Honorable David M. Lawson CHASE HOME FINANCE, LLC, ______________________________________/ Defendant. OPINION AND ORDER GRANTING PLAINTIFF’S MOTION TO AMEND HER COMPLAINT AND GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT The plaintiff filed a complaint in state court alleging that the defendant, a mortgage company, violated the Fair Credit Reporting Act and various state laws by falsely reporting to credit reporting agencies that the plaintiff had filed for bankruptcy. The effect of the erroneous information, the plaintiff alleges, was that the plaintiff was prevented for a time from refinancing her home mortgage with another lender, making her a captive to the onerous interest rates and payment schedules demanded by the defendant. After the case was removed to this Court, the plaintiff filed an amended complaint, and now she has filed a motion seeking leave to amend the complaint once again. Meanwhile, the defendant filed a motion to dismiss or for summary judgment and opposes the later-filed motion for leave to file a second amended complaint. On June 8, 2009, the Court heard oral argument on the motions. The Court now finds that the liberal amendment policy expressed in the Federal Rules of Civil Procedure favors the plaintiff’s motion to file a second amended complaint. However, even with the amendments, the plaintiff’s claims fail as a matter of law, except part of the claim stated in count I brought under the Michigan Collection Practices Act. Therefore, the Court will grant the motion to file a second amended complaint, grant in part and deny in part the defendant’s motion for summary judgment, and dismiss all counts of the second amended complaint except for a portion of count I. I. The plaintiff alleges that in 2002, dire family circumstances forced her to refinance her home mortgage: her husband was killed in a car accident in 2001, and she was left with two small children and began to struggle financially. She refinanced her home through Aegis Mortgage Corporation under an arrangement that allowed her to take some additional cash for home repairs, but she believed that her monthly payments would not change. A few days later, Aegis assigned the mortgage to Chase, the defendant in this case. The plaintiff soon realized that her payments under the new mortgage did not include escrow payments for taxes and insurance and her mortgage had an adjustable rate of interest. Although in December of 2002 she signed and initialed each page of the Adjustable Rate Note, which outlined the interest rate and monthly changes in upper case script, the plaintiff claims that she became aware of the added obligations for the first time in late 2005. The plaintiff contends that Chase attempted to collect additional payments to cover the escrow through a series of “repeated harassing phone calls” to the plaintiff. Second Am. Compl. ¶ 7. When the additional payments were not made, Chase adjusted the plaintiff’s mortgage to a rate of 12.299%, doubling the plaintiff’s mortgage payments from $1,200 to $2,400 a month, an amount well beyond her means. With her financial situation turning more difficult, the plaintiff says she considered filing for bankruptcy protection but did not do so because she could not afford to pay the filing fees. Mot. for Summ. J., Ex. 1 (Lynk Dep.) at 18-20. She testified that she spoke with numerous credit counseling agencies, but obtained no relief. Id. at 19. In the spring and summer of 2006, the plaintiff sought -2- to refinance yet again. She first contacted Access Mortgage, which refused to refinance her loan because the house was appraised at a lower than expected value. Next, in May of 2006, she contacted a company called Wilmington Mortgage (which she also referred to occasionally as “Remington” Mortgage), which also declined to refinance, informing her for the first time of a bankruptcy notation on her report. She also applied to Stratford Funding, which declined. Finally, in September of 2006, she contacted SurePoint Lending. A representative of SurePoint Lending advised her that “Chase is saying that you’re in bankruptcy,” and declined to assist with refinancing as well. Lynk Dep. at 37. The plaintiff testified that initially she dismissed the rumors of bankruptcy, but then noticed the recurring assertions of bankruptcy from different lenders. She described a conversation with a representative of Wilmington Mortgage in May of 2006, and with Stratford Funding in July: The guy’s name was Mike. Okay. He said something to the effect that, you know – I told him my credit score up front and he said that’s no problem. Then when he got my report, he said something to the effect bankruptcy will be a problem. You know, he was nasty and he basically hung up on me. . . . So I dismissed it, you know, I just dismissed it, you know. I’m not in bankruptcy, what is he talking about. So I tried to fix some more things on my credit – in my home, so I could get a higher appraisal. Then I tried again in July. This time it was Stratford Funding and the guy’s name was Brian, that’s G-I-E-R-I-N-G. Okay. He just snubbed me, you know. So I’m saying okay, what’s going on. Access in March and April, you know, eager, excited. I had two companies in March and April fighting over me. I can’t remember the name of the second company, but it would be on my phone records. Okay. So in July with Stratford I tried again. Again, this guy, after he gets my credit repots, he just blow [sic] me off. He just nasty, too; he just blows me off. I said something is wrong here. Lynk Dep. at 25-26. -3- The plaintiff states that she contacted Chase on September 26, 2006 to demand that it remove references to bankruptcy from her credit report. Before contacting Chase, the plaintiff had not contacted any of the reporting agencies, claiming that she had “no clue how to deal with a credit reporting agency,” and was skeptical that disputing the records directly with the credit reporting agency would bring any results. Lynk Dep. at 80. The plaintiff now seeks to qualify this statement in her proposed second amended complaint by alleging that a Chase employee discouraged her from contacting TransUnion (the only credit reporting agency that apparently reported the errant bankruptcy notation) directly. She states that she hired a law firm, Lexington Legal, that contacted TransUnion on her behalf, but the records of the company indicate that Lexington did not contact TransUnion until April 21, 2007, well after the plaintiff called Chase about the bad information. Pl.’s Response to Def.’s Mot. for Sum. Jmt., Ex. D (Letter from Lexington to Lynk). The plaintiff alleges that a Chase representative conceded that the mistake occurred because “Chase was under the impression that Plaintiff was ‘thinking’ or ‘talking about’ filing for bankruptcy.” Second Am. Compl. ¶ 12. However, it was not until March 2007 that Chase instructed the credit bureaus to remove the references to bankruptcy. Chase contends, however, that it had never supplied any report of bankruptcy to the reporting agencies, and the notation on the plaintiff’s credit report was TransUnion’s – and not the defendant’s – mistake. Chase states that its “detailed system notes, records, and policies” contain no reference to Lynk’s bankruptcy, and their own research into Lynk’s credit report did not reveal that Chase had furnished any information regarding bankruptcy to the credit bureaus. Chase produced a copy of the plaintiff’s credit reports from the three major credit reporting agencies, and only the TransUnion report contained a notation that the plaintiff’s loan with Chase was in bankruptcy. Chase argues that -4- if it provided any information to the credit reporting agencies, it would have provided this information uniformly to all three agencies. Further, Chase states that its internal practice is to refer the loan included in bankruptcy to a “specific bankruptcy department,” retain outside counsel to protect Chase’s interests, and make a special notation in its system notes. Mot. for Summ. J., Ex. 2 (Reardon Aff.) at ¶ 20. The bankruptcy-related routine is described as follows: 21. As for the system notes, if Chase were furnishing information to the credit reporting bureaus that a loan was “included in bankruptcy,” it would be Chase’s regularly conducted business to utilize and rely on the system notes by making the following notations: (a) an auto generated “BANKO” entry statement showing chapter (either chapter 7 or 13), case number, filing date, court of jurisdiction and the name of filer(s); and (b) an auto generated bankruptcy protection to populate the fields in the system to notify Chase employees to refrain from calls to the borrower and/or to stand down on foreclosure/eviction efforts (had such procedures been implemented) to avoid potential violations of the bankruptcy automatic stay. 22. Furthermore, in cases where a bankruptcy has been filed, the loans are moved into a special service module, Derivative Research Interface, where only default loan specialists (bankruptcy, foreclosure, REO, loss mitigation and litigated services) have access to the files. In other words, the loan is transferred to a separate system and a restricted set of system notes would be created. 23. Finally, any time that a Chase loan is associated with a bankruptcy filing, it would be Chase’s regularly conducted business activity to, much like it does with the system notes, memorialize that fact via the AUD. Specifically, the AUD would contain a conspicuous notation, an alpha character, as opposed to a number or "-,'" for any month that the loan was in bankruptcy and that Chase was furnishing that information to the credit reporting bureaus. Id. ¶¶ 21-23. The defendant claims that its system notes do not contain any reference to the bankruptcy either. Id. ¶ 24. -5- The plaintiff says she made multiple requests of Chase to correct the record and received notices that Chase was without power to amend any information because it had not furnished bankruptcy information in the first place. During that time, the parties communicated with each other on almost a hundred occasions – forty-seven times initiated by the plaintiff and forty-six times by the defendant – although only two out of forty-six calls from Lynk to Chase were about the bankruptcy notation. Reardon Decl. ¶ 16-17. Finally, on March 13, 2007, a Chase representative wrote to the plaintiff as follows: Thank you for your recent request that Chase received to update information on your credit report for your loan referenced above. Chase sent an electronic notification to the major credit agencies (Equifax, Experian, Innovis, and TransUnion) requesting that they remove all references to being included in bankruptcy from your credit history. This letter is confirmation that Chase requested the amendment to your credit profile. Please allow time for the credit agencies to update your information. I apologize that we did not meet your expectations. Chase’s goal is to provide the highest level of quality service to each of our customers. Compl., Ex. A (Letter from Theresa Ritzer to Linda Lynk, March 13, 2007). On the same day, another Chase employee sent an electronic notification to the major credit reporting bureaus asking them to remove all references to the bankruptcy. The defendant claims this was done “as a matter of courtesy and to appease Lynk’s request.” See Reardon Decl. ¶ 14. It appears that the plaintiff’s credit report no longer contains a reference to bankruptcy. Eventually, the plaintiff was able to refinance her loan with another bank. In February 2007, Lynk was able to obtain a thirty-year fixed loan with the interest rate of 10.9 percent (possibly reduced to nine percent in the future) through CitiFinancial. Ms. Lynk speculated that she was able to obtain a loan with CitiFinancial because CitiFinancial did not rely on the TransUnion’s report: -6- Q. When you were obtaining the loan did [CitiFinancial] ever tell you you would be able to obtain a lower interest rate but for the alleged bankruptcy notation? A. Okay. I don’t remember them saying anything like that. . . . Q. You don’t remember one way or the other? A. No, I can’t remember. But . . . . Q. But what? A. Okay. It wasn’t on all three reports. Okay. The bankruptcy wasn’t on all three reports, so it’s possible that they used a report that, you know, wasn’t on there. . . . . . . Q. Do you know what bureau was reporting the alleged bankruptcy? A. I believe it was TransUnion. Id. at 140-41. The plaintiff filed her complaint in the Oakland County, Michigan circuit court on September 26, 2007. The original complaint pleaded five counts: violation of the Michigan Collection Practices Act (count I), violation of the Fair Credit Reporting Act claim (count II), defamation(count III), intentional infliction of emotional distress claim (count IV), and violation of the Michigan Consumer Protection Act (count V). Her first amended complaint contains those same counts. In her proposed second amended complaint, she would dismiss count V. The defendant filed a motion alternatively seeking judgment on the pleadings, dismissal, and summary judgment. The defendant argues that the plaintiff has not pleaded all the necessary elements to support her federal claim in count II, and the state law claims are preempted by federal law and suffer from various other defects. II. The proposed second amended complaint attached to the plaintiff’s motion does not add new counts or theories for recovery. Instead, the plaintiff wants to add factual allegations in three general areas. First, Lynk would allege that a representative of Chase discouraged her from disputing the correctness of her credit report with credit reporting agencies and that she later hired Lexington -7- Legal, a law firm, which requested an investigation of the credit reporting agencies’ files regarding the plaintiff. The plaintiff’s amended complaint alleges: That during a subsequent telephone conversation between Plaintiff and a representative of the Defendant, the Defendant advised Plaintiff that she did not need to contact a Credit Bureau, that instead Chase would look into the matter and take care of it. That subsequently, Plaintiff did hire a law firm that contacted the credit reporting agencies to dispute the bankruptcy entry on Plaintiff’s credit report. Second Am. Compl. ¶¶ 13-14. Second, Lynk wants to eliminate the count of the complaint dealing with the Michigan consumer protection act stating that it is “not supported by current law.” Third, Lynk attempts to introduce facts about when she first learned about the bankruptcy notation on her record, but the new allegations conflict with her deposition testimony. At her deposition, she testified that she found out about the bankruptcy notation in May of 2006, but the second amended complaint would allege that she found out about the bankruptcy in September of 2006. Her second amended complaint suggests: In the course of attempting to refinance, Plaintiff learned in approximately September of 2006 that Defendant Chase has been falsely reporting to various credit reporting bureaus that Plaintiff has filed bankruptcy. . . . Second Am. Compl. ¶ 9. The defendant opposes the motion arguing that the amendment is futile, permitting amendment after the close of discovery would be prejudicial to the defendant, and the proposed amendments contradict Lynk’s own testimony. Motions to amend are governed by Federal Rule Civil Procedure 15(a), which states that a party may amend its pleadings at this stage of the proceedings only after obtaining leave of court. Although the Rule provides that “[t]he court should freely give leave when justice so requires,” -8- leave may be denied on the basis of undue delay, bad faith by the moving party, repeated failure to cure defects by previously-allowed amendments, futility of the proposed new claim, or undue prejudice to the opposite party. Forman v. Davis, , 182 (1962); Duggins v. Steak ‘N Shake, Inc., 195 F.3d 828, 834 (6th Cir. 1999); Fisher v. Roberts, 125 F.3d 974, 977 (6th Cir. 1997). “Notice and substantial prejudice to the opposing party are critical factors in determining whether an amendment should be granted.” Wade v. Knoxville Util. Bd., 259 F.3d 452, 458-59 (6th Cir. 2001). The Rule does not establish a deadline within which a party must file a motion to amend. See Lloyd v. United Liquors Corp., 203 F.2d 789, 793 (6th Cir. 1953) (reviewing a district court's denial of a motion to amend after the entry of summary judgment). Delay alone does not justify denial of a motion brought pursuant to Rule 15(a). Sec. Ins. Co. of Hartford v. Kevin Tucker & Assocs., Inc., 64 F.3d 1001, 1009 (6th Cir. 1995). However, the party seeking to amend should “act with due diligence if it wants to take advantage of the Rule’s liberality.” Parry v. Mohawk Motors of Mich., Inc., 236 F.3d 299, 306 (6th Cir. 2000) (citation omitted). Thus, where “amendment is sought at a late stage in the litigation, there is an increased burden to show justification for failing to move earlier.” Wade, 259 F.3d at 459. Under Rule 15(a), this Court has wide discretion to allow a party to amend a complaint. See Benzon v. Morgan Stanley Distribs., 420 F.3d 598, 613 (6th Cir. 2005). The defendant’s main argument against the amendment is that it would be prejudiced since discovery is closed. However, the Court offered to extend discovery, and at oral argument the defendant conceded that it needed nothing further. The delay in the plaintiff’s request to amend can be attributed to the poor performance of her prior attorney, who missed filing deadlines and court appearances and failed to communicate with her client. The allegation in the proposed second -9- amended complaint that conflicts with the plaintiff’s deposition testimony is largely meaningless, since the pleading is not verified and the deposition testimony will prevail for the purpose of the summary judgment motion. Even if the allegation were verified, a subsequent sworn statement that directly contradicts a party’s deposition testimony generally will be disregarded. See Aerel, S.R.L. v. PCC Airfoils, LLC, 448 F.3d 899, 907-08 (6th Cir. 2006). The Court, therefore, will allow the amendment, treat the second amended complaint as having been filed, and consider the defendant’s motion in the context of the second amended complaint, which deletes count V. III. A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) on the ground that the complaint does not state a cognizable claim is reviewed under the standards that govern motions brought under Rule 12(b)(6). See Fed. R. Civ. P 12(c); Vickers v. Fairfield Med. Ctr., 453 F.3d 757, 761 (6th Cir. 2006); Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 511-12 (6th Cir. 2001). The defendant has moved alternatively for judgment on the pleadings and for summary judgment. Because it has attached and referred to matters outside the pleadings, the Court will treat the motion as one for summary judgment under Rule 56. See Fed. R. Civ. P. 12(b) (stating that “if, on a motion . . . to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56”); Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 533 (6th Cir. 2002) (quoting Soper v. Hoben, 195 F.3d 845, 850 (6th Cir. 1999 ; Kennedy v. R.W.C., Inc., 359 F. Supp. 2d 636, 640 (E.D. Mich. 2005) (recognizing that “[i]f matters outside the pleadings must be considered in ruling on the merits of the claim, as here, the motion more properly should follow the standards and procedures of Rule -10- 56, and reviewing courts generally will treat the motion as one for summary judgment”); Coal. to Defend Affirmative Action v. Regents of Univ. of Mich., 539 F. Supp. 2d 924, 944 (E.D. Mich. 2008). The defendant has filed a number of exhibits with its motion. These documents plainly are relevant to the defendant’s motions and should be examined by the Court. Therefore, the Court will treat the motions as ones for summary judgment and apply the standards required by Rule 56. A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics and Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine -11- issue of material fact. Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). Thus a factual dispute which “is merely colorable or is not significantly probative” will not defeat a motion for summary judgment which is properly supported. Kraft v. United States, 991 F.2d 292, 296 (6th Cir. 1993); see also Int’l Union, United Auto., Aerospace and Agric. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record which demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). The party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp., 477 U.S. at 322-23. The party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). “[T]he party opposing the summary judgment motion must ‘do more than simply show that there is some “metaphysical doubt as to the material facts.”’” Highland Capital, Inc. v. Franklin Nat. Bank, 350 F.3d 558, 564 (6th Cir. -12- 2003) (quoting Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir. 1994), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 586 (1986 . “Thus, the mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Ibid. (quoting Anderson, 477 U.S. at 252) (internal quote marks omitted). A. Count I of the second amended complaint is brought under the Michigan Collection Practices Act (MCPA). The plaintiff alleges that the defendant violated that Act as follows: a) Making an inaccurate, misleading, untrue, or deceptive statement or claim in a communication or not revealing the purpose of a communication when it is made in connection with collecting a debt; b) misrepresenting in a communication with a Debtor the legal rights of the debtor, and c) using a harassing, oppressive, or abusive method to collect a debt, including causing a telephone to ring or engage a person in a telephone conversation repeatedly, continuously, or at unusual times or places. Second Am. Compl. ¶ 22. The complaint also alleges that the defendant’s acts were wilful and caused the plaintiff to “suffer[] the damages, including but not limited to, damage to her business and community reputation, extreme mental distress, aggravation, humiliation and embarrassment,” entitling the plaintiff to statutory damages, treble damages and attorney’s fees as provided in the MCPA. Second Am. Compl. ¶ 24. The defendant argues that this claim is preempted by section 625 of the Fair Credit Reporting Act, codified at 15 U.S.C. § 1681t(b)(1)(F). Further, according to Chase, the plaintiff lacks standing to bring an action under the act because the act requires that a plaintiff suffer “an injury, loss, or damage” as a predicate for asserting standing. See Mich. Comp. Laws § 445.257(1). Chase claims -13- that Lynk has not alleged damages or out-of-pocket loss and admitted that the evidence of a bankruptcy notation did not affect the terms of her loan with CitiFinancial. The defendant also contends that the plaintiff’s mental anguish does not satisfy the injury required to bring a suit under the collection practices act. Finally, the defendant asserts that Lynk simply does not have evidence of any misrepresentations to the credit bureaus or that Chase contacted Lynk excessively, or at unreasonable times. The Fair Credit Reporting Act (FCRA) contains two overlapping and potentially contradictory preemption provisions. Stafford v. Cross Country Bank, 262 F. Supp. 2d 776, 784-85 (W.D. Ky. 2003). Section 1681h restricts a consumer from bringing common-law actions for false or inaccurate credit reporting “except as to false information furnished with malice or willful intent to injure such consumer.” 15 U.S.C. § 1681h(e). In 1996, Congress amended the FCRA and added section 1681t(b)(1)(F), which provides, among other things, that “[n]o requirement or prohibition may be imposed under the laws of any State . . . with respect to any subject matter regulated under . . . section 1681s-2 of [the FCRA], relating to the responsibilities of persons who furnish information to consumer reporting agencies. . . .” 15 U.S.C. § 1681t(b)(1)(F). “The tension between these two provisions therefore results from the fact that § 1681h(e) permits state tort claims, but requires a higher standard of proof for those in the nature of defamation, slander, or invasion of privacy, while § 1681t(b)(1)(F) prohibits all state claims covered by § 1681s-2.” Stafford, 262 F. Supp. 2d at 785. The Sixth Circuit has not yet addressed the scope of the preemption in either of these statutes. The district courts have employed four approaches in reconciling the two preemption provisions, which are discussed at length in Wolfe v. MBNA Am. Bank, 485 F. Supp. 2d 874, 883-86 -14- (W.D. Tenn. 2007). For the purpose of the defendant’s motion directed at count I, however, it is enough to observe that the essence of the claim deals with collection practices, not credit reporting, and neither section 1681h(e) nor section 1681t(b)(1)(F) addresses that subject matter. Consequently, except for the allegation in paragraph 22(a) as to falsely reporting the bankruptcy, count I is not preempted by that federal legislation. The claim in paragraph 22(a) is preempted because there is no allegation that the report was made with malice or willful intent to injure Ms. Lynk. Moreover, the text of the MCPA does not address false communications made by a creditor to a credit reporting agency. The MCPA’s false communication provisions expressly refer to communications between a debtor and a creditor. See, e.g., Mich. Comp. Laws § 445.252(2)(a) (prohibiting “[c]ommunicating with a debtor in a misleading or deceptive manner”); § 445.252(2)(f) (prohibiting various misrepresentations, including misrepresentations about the legal status of a legal action “in a communication with a debtor”); § 445.252(2)(g) (prohibiting communicating with the debtor without disclosing caller’s identity); § 445.252(2)(h) (communicating with the debtor who is represented by an attorney). The MCPA is considered to be a “remedial statutory scheme designed to prohibit unfair practices in trade or commerce and must be liberally construed to achieve its intended goals.” Newton v. West, 262 Mich. App. 434, 437, 686 N.W.2d 491, 493 (2004) (citation and internal quotation marks omitted). But the text of the legislation makes clear that it is intended to protect consumers from harassment by creditors and third party collection agencies, and the statute expressly authorizes creditors’ communications with credit reporting agencies in some cases. See, e.g., Mich. Comp. Laws § 445.252(2)(l) (prohibiting “[p]ublishing, causing to be published, or threatening to publish lists of debtors, except for credit reporting purposes, when in response to a specific inquiry from a prospective credit grantor about a debtor”). In this case, if any -15- false communications occurred, they occurred between the creditor and TransUnion, a credit reporting agency. Although those communications are covered by the FCRA, they are not addressed by the MCPA. Therefore, the plaintiff’s claim based on Mich. Comp. Laws § 445.252(2)(f) fails as a matter of law. The remaining allegations that the creditor harassed the plaintiff with repeated calls and that the creditor failed to implement adequate procedures to safeguard consumers against abuse, Mich. Comp. Laws §§ 445.252(2)(n), (q), fall within the statute’s prohibitions. The record contains some evidence that Chase engaged in abusive collection practices. The plaintiff testified at her deposition that Chase’s employees were “nasty” in their efforts to collect on the plaintiff’s past due balances: Q. I understand that you’re not an attorney, but in your own words, can you explain what that means or what you’re alleging? A. Okay. They would call me every day, you know, I don’t even know if it was sometimes more than once a day. Some of them were nice, some of them were very nasty. You know, some, you know, it was almost like they were enjoying the situation, you know. That’s why I say that they did it on purpose, because some, you know, act like they were enjoying the power that they had over me. You know, I was at their mercy. You would be at their mercy. Okay, they could have called, you know, for the full amount or whatever at any time. They told me that all the time. I got a letter from them all the time saying, you know, you owe this much, you know, and we can demand, you know, at any time, you know, full amount. You know, so I was at their mercy, and some of them were sweet as pie, but some of them enjoyed, you know, me being at their mercy. And they let me know that, you know – Q. So in your own words, Chase would frequently contact you about the late payments or the payments that were due – overdue? A. Okay. No. Okay. It wasn’t the fact that they were contacting me; it was the – because you expect, you know, if you owe a debt for them to contact you. It was some of the way they contacted me, you know, it was their behavior in the way that they contacted me. Some of them acted like I said they were enjoying it, you know. I pleaded – I’m at their mercy and they were enjoying it. Q. So, it was the way – I’m sorry. A. Okay. It was the way in which they spoke to me. It was the way they act. You know, it was just, you know, just a nasty, like arrogant like way. Lynk Dep. at 143-45. -16- Although the plaintiff admitted that Chase did not contact her during the hours of 9 p.m. through 8 a.m., see Lynk Dep. at 146-47, and did not elaborate on the exact words which triggered her characterization of the defendant’s actions as “nasty,” see Lynk Dep. at 145 (“I can’t go back and recreate . . . what some of them said or how they were saying it. . . .”), the word “nasty” can relate to the quality of being “harassing, oppressive and abusive,” which violates the statute. In fact, the plaintiff elaborated that some Chase employee named Nicole screamed at her during one of the calls, although she admitted that she does not have any memories of Nicole cursing at her. Lynk Dep. at 159. The defendant is correct that having not shown that any of the calls were made during 9 p.m. through 8 a.m. period, the plaintiff does not benefit from the presumption of inconvenient time under Mich. Comp. Laws § 445.252(2)(n). However, the record, although sparse, creates a question of fact on the issue whether Chase employees violated MCPA’s prohibition on using abusive language. The plaintiff’s deposition testimony establishes that the defendant’s employees were nasty to her, yelled at her, and were in contact with her on more than ninety occasions per year. B. Chase argues that Lynk cannot prevail on count II of her amended complaint under the FCRA because there is no private right of action under section 1681s-2(a), and Lynk did not request an investigation of her credit with the credit bureaus to trigger liability under section 1681s-2(b). Chase also argues that section 1681s-2(b) of the FCRA does not create a private cause of action. -17- The FCRA was enacted to “require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit . . . in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this subchapter.” 15 U.S.C. § 1681(b). The duties imposed by the statute are twofold. Subsection (a) imposes responsibility upon furnishers of credit information to provide agencies with accurate credit information. 15 U.S.C. § 1681s-2(a). Subsection (b) of the statute imposes upon data furnishers the duty to conduct investigations and promptly report and correct inaccurate information upon the notice of dispute. 15 U.S.C. § 1681s-2(b) There can be no doubt that the duties imposed by section 1681s-2(a) can only be enforced by government agencies and officials. See 15 U.S.C. §§ 1681s-2(c)(1), (d) (such violations “shall be enforced exclusively as provided under section 1681s of this title by the Federal agencies and officials and the State officials identified in section 1681s of this title”). Therefore, no private right of action exists under subsection (a). See Stafford, 262 F. Supp. 2d at 782-83. Federal trial courts are split as to whether section 1681s-2(b) provides a private right of action. However, the Sixth Circuit in an unpublished decision held without discussion that there is a private right of action. Bach v. First Union Nat. Bank, No. 04-3899, 149 F. App’x 354, 358-59 (6th Cir. Aug. 22, 2005) (“While a consumer cannot bring a private cause of action for a violation of a furnisher’s duty to report truthful information, a consumer may recover damages for a willful violation of 15 U.S.C. § 1681s-2(b) (1)(A)-(D).”) (citing Stafford, 262 F. Supp. 2d at 782-83); see also Downs v. Clayton Homes, Inc., Nos. 03-5259, 03-6055, 88 F. App’x 851, 853 (6th Cir. Feb.9, 2004) (unpublished) (assuming for purposes of motion that private right of action existed under -18- subsection (b . The majority of courts that have addressed the issue have concluded that 15 U.S.C. § 1681s-2(b) created a private right of action by a consumer against a data furnisher. See Sweitzer v. Am. Express Centurion Bank, 554 F. Supp. 2d 788, 794 (S.D. Ohio 2008); Khalil v. TransUnion, LLC, No. 08-10303, 2008 WL 2782912, at *7 (E.D. Mich. July 17, 2008) (unpublished) (and cases cited therein). A district court in the Northern District of Ohio has adopted the minority position that section 1681s-2(b) only applies to consumer reporting agencies. See Zamos II v. Asset Acceptance, LLC, 423 F. Supp. 2d 777, 787-88 (N.D. Ohio 2006). But see Alarcon v. TransUnion Marketing Solutions, Inc., No. 5:07CV0230, 2008 WL 4449387, at *4 (N.D. Ohio Sept. 30, 2008) (“While a consumer cannot bring a private cause of action for a Data Furnisher’s violation of its duty to report truthful information, a consumer may recover damages if a Data Furnisher violates its obligations, once notified of a dispute, under 15 U.S.C. 1681s-2(b)(1)(A)-(D).”). After canvassing the authority, this Court is persuaded that there is a private right of action to enforce the provisions of section 1681s-2(b) of the FCRA. Under section 1681s-2(b), “[u]pon receiving notice from a credit reporting agency that a consumer disputes the information a furnisher has provided, the furnisher is required to (1) investigate the veracity of the disputed information; (2) review the information provided by the credit reporting agency; (3) report the results of the investigation; and (4) correct any inaccuracies uncovered by the investigation.” Bach, 149 F. App’x at 358 (citing 15 U.S.C. § 1681s-2(b)(1)(A)-(D . However, the Sixth Circuit has not yet addressed in a published opinion the question whether a data furnisher’s obligations under section 1681s-2(b) mature when it receives notice of a dispute from a person other than a credit reporting agency. -19- Section 1681s-2(b)(1) states: “After receiving notice pursuant to section 1681i(a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall . . . conduct an investigation with respect to the disputed information.” The specifics of the notice are described in section 1681i(a)(2): Before the expiration of the 5-business-day period beginning on the date on which a consumer reporting agency receives notice of a dispute from any consumer or a reseller in accordance with paragraph (1), the agency shall provide notification of the dispute to any person who provided any item of information in dispute, at the address and in the manner established with the person. The notice shall include all relevant information regarding the dispute that the agency has received from the consumer or reseller. 15 U.S.C. § 1681i(a)(2)(A). In an unpublished opinion, the Sixth Circuit interpreted these statutes to limit a data furnisher’s obligations to instances when notification comes from a credit reporting agency. Downs, 88 F. App’x at 853-54 (holding that to recover under § 1681s-2(b) “the plaintiff must show that the furnisher received notice from a consumer reporting agency, not the plaintiff, that the credit information is disputed”). The Fifth Circuit agrees. Young v. Equifax Credit Info. Servs., Inc., 294 F.3d 631, 639 (5th Cir. 2002) (holding that “any private right of action Young may have under § 1681s-2(b) would require proof that a consumer reporting agency, like Equifax or CBLC, had notified Penney pursuant to § 1681i(a)(2)”). Most district courts that have considered this issue have reached the same conclusion. See Stafford, 262 F. Supp. 2d at 783-84; Lowe v. Surpas Res. Corp., 253 F. Supp. 2d 1209, 1253-54 (D. Kan. 2003) (collecting cases); Aklagi v. Nationscredit Fin., 196 F. Supp. 2d 1186, 1193 (D. Kan. 2002); Jaramillo v. Experian Info. Solutions, Inc., 155 F. Supp. 2d 356, 363 (E.D. Pa. 2001); Yelder v. Credit Bureau of Montgomery, L.L.C., 131 F. Supp. 2d 1275, 1289 (M.D. Ala. 2001); Dornhecker v. Ameritech Corp., 99 F. Supp. 2d 918, 928-29 (N.D. -20- Ill. 2000); Larson v. Ford Credit, No. 06-CV-1811, 2007 WL 1875989, at *10 (D. Minn. June 28, 2007). Based on the statutory text, this Court as well adopts the conclusion that “a furnisher of credit information . . . has no responsibility to investigate a credit dispute until after it receives notice from a consumer reporting agency.” Stafford, 262 F. Supp. 2d at 783-84 (emphasis added). In this case, there is no evidence that Chase received notice of a dispute from TransUnion or any other credit reporting agency. In fact, there is not evidence that the plaintiff or anyone on her behalf contacted TransUnion about the erroneous information until Lexington Legal wrote on April 27, 2007, over a month after Chase had notified four credit reporting agencies, including TransUnion, of the erroneous information and effectuated a correction. Because the plaintiff has not offered proof that Chase violated any of its duties under 15 U.S.C. § 1681s-2(b)(1) after it received the notification required by the statute, the plaintiff’s claim under the FCRA fails as a matter of law. C. Chase also argues that the plaintiff’s defamation claim in count III is preempted by the FCRA and it was filed out of time. The Court need not address the preemption argument, because the Court agrees that the claim is barred by the statute of limitations. Under the applicable statute of limitations, the plaintiff had one year from the time the claim first accrued to bring a defamation action. Mich. Comp. Laws §§ 600.5805(1), (9). A defamation claim accrues when the defamatory statement is first made, and “[t]he statute does not contemplate extending the accrual of the claim on the basis of republication, regardless of whether the republication was intended by the speaker.” Mitan v. Campbell, 474 Mich. 21, 25, 706 N.W.2d 420, 422 (2005). This rule includes republication by a third party. The plaintiff learned of the -21- bankruptcy notation on her credit report file in May of 2006, when she contacted “Mike” of the Wilmington Mortgage. She had one year since that time to initiate her action. She did not file her complaint until September 26, 2007. The plaintiff has not developed any theory under which the statute of limitations could be tolled, such as fraudulent concealment, see Arent v. Hatch, 133 Mich. App. 700, 705-06, 349 N.W.2d 536, 539 (1984), and the record does not suggest one based on the information provided. Therefore, the Court concludes that the defamation claim is barred by the applicable statute of limitations. D. Finally, the defendant argues that the intentional infliction of emotional distress claim in count IV is preempted by the FCRA, and that its conduct was not so outrageous and extreme in degree as to go beyond all possible bounds of decency. Once again, the Court agrees with Chase’s second argument. To prevail on her claim of intentional infliction of emotional distress, the plaintiff must prove four elements: extreme and outrageous conduct, intent or recklessness on the part of the defendant, causation between the defendant’s actions and the plaintiff’s injuries, and severe emotional distress she suffered. Roberts v. Auto-Owners Ins. Co., 422 Mich. 594, 602, 374 N.W.2d 905, 908 (1985). Proof of extreme and outrageous conduct requires more than evidence of tortious or malicious actions, or even actions with criminal intent or those entitling the plaintiff to recovery of punitive damages. Rather, as the Restatement puts it, “[l]iability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community. Generally, the case is one in which the recitation of the facts to an average member of the -22- community would arouse his resentment against the actor, and lead him to exclaim, ‘Outrageous!’” Id. at 603, 374 N.W.2d at 908-09 (citing Restatement (Second) of Torts § 46). The liability clearly does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities. The rough edges of our society are still in need of a good deal of filing down, and in the meantime plaintiffs must necessarily be expected and required to be hardened to a certain amount of rough language, and to occasional acts that are definitely inconsiderate and unkind. There is no occasion for the law to intervene in every case where some one's feelings are hurt. There must still be freedom to express an unflattering opinion, and some safety valve must be left through which irascible tempers may blow off relatively harmless steam. Ibid. (quoting Restatement (Second) of Torts § 46, cmt. d., pp. 72-73). Considering the high degree of outrage traditionally required to meet the first element of the cause of action, the majority of courts have not found that conduct relating to debt collecting or credit reporting amounts to “extreme and outrageous conduct.” See, e.g., Arikat v. J.P. Chase & Co., 430 F. Supp. 2d 1013, 1027-28 (N.D. Cal. 2006); Jolly v. Acad. Collection Serv., Inc., 400 F. Supp. 2d 851, 867 (M.D.N.C. 2005); Richardson v. Fleet Bank of Mass., 190 F. Supp. 2d 81, 90 (D. Mass. 2001); Evans v. Credit Bureau, 904 F. Supp. 123, 127 (W.D.N.Y. 1995). Courts that do find extreme and outrageous conduct in the creditor’s false reporting usually deal with a situation in which a creditor knew that the debt has been satisfied but still reported negative information to credit reporting agencies and attempted to collect the paid balance through other efforts. See, e.g., Kindley v. Flagstar Bank, No. 04-0319, 2004 WL 5631084, at *3 (S.D. Cal. Oct. 28, 2004) (finding that a plaintiff stated a claim of intentional infliction of emotional distress where she alleged that the bank “engaged in a systematic and mean-spirited effort to collect a debt from plaintiff, even though [the bank] knew that plaintiff had already paid the debt”). Although Michigan courts have not dealt with this particular problem, one Michigan court has found that where school officials falsely identified several teachers as having criminal convictions based on the matches in the criminal history system, -23- the plaintiffs failed to state a claim for intentional infliction of emotional distress. See Frohriep v. Flanagan, 278 Mich. App. 665, 683, 754 N.W.2d 912, 924 (2008), rev’d on other grounds, 483 Mich. 920, 763 N.W.2d 279 (2009). In light of this standard, the Court concludes that the plaintiff has not demonstrated the existence of a material fact on the first element of her claim in count IV. The plaintiff did not allege that Chase engaged in a outrageous or illegal behavior to collect its debt. Chase’s allegedly erroneous report of her bankruptcy to credit reporting agencies does not qualify as “extreme and outrageous behavior” as a matter of law. Although the plaintiff posits that the bank’s behavior was “willful,” she has not produced any facts to support her conclusory incrimination. Nor has the plaintiff satisfied the last element of the cause of action requiring proof of severe emotional distress. Emotional distress passes under various names, such as mental suffering, mental anguish, mental or nervous shock, or the like. It includes all highly unpleasant mental reactions, such as fright, horror, grief, shame, humiliation, embarrassment, anger, chagrin, disappointment, worry, and nausea. It is only where it is extreme that the liability arises. Complete emotional tranquillity is seldom attainable in this world, and some degree of transient and trivial emotional distress is a part of the price of living among people. The law intervenes only where the distress inflicted is so severe that no reasonable man could be expected to endure it. Roberts, 422 Mich. at 608-09, 374 N.W.2d at 911 (quoting Restatement (Second) of Torts, § 46 cmt. j., p. 77). In the absence of a physical injury, the threshold is even higher, requiring distress “more in the way of outrage.” Ibid. (quoting Restatement (Second) of Torts, § 46, cmt. k, p. 78). The plaintiff described her reaction to her encounter with Chase in her deposition as follows: I went through Chase calling me every single day. Like I said, with several people on the line, listening as I groveled. . . . All of my utilities are up-to-date now, okay, but they were calling me. It’s like I had to grovel to them and please don’t turn this off, please don’t turn that off. It’s like a nightmare. It’s like, you know, just an unimaginable nightmare. -24- . . . . . . I don’t know to what extent, you know, my health – I have some health issues now that, you know, I don’t know to what extent, you know, I would – my, you know, my body was damaged because from just the sheer stress, I mean sheer – total stress in that situation. . . . Because, of course, there will always be emotional how dare you, how dare you. I couldn’t feed my kids. My kids were like three and six - no, not three and six, like - I can’t remember how old they were. Like four and - probably four and seven. I couldn’t feed them, you know, we just couldn’t eat, you know. I had to send Chase the money and we couldn’t eat and Chase was still calling me. And this wasn’t for one or two or three days, this was for a year. I mean, this was for a year that, you know, I’m looking at my kids, I can’t feed you because I'm sending to Chase two mortgage payments. . . . It’s no different than if I was, you know, if I was robbed. If somebody came into my home and robbed me, I would still have scars. I would still be, you know, thinking about all this happen and that happen, you know, scars would still be here. The fact that some of these people were grinning in my face, the fact that somebody put in my credit report that I was in bankruptcy, you know, how can you walk away from that and say, okay, that’s fine, okay. How can you just walk away from that. Lynk Dep. at 158-61. Plainly, the plaintiff experienced an emotionally difficult time, given the sudden loss of her husband and her severe financial hardship. It is not clear that all distress flowed from the bankruptcy notation on her record or Chase’s collection efforts. However, the Court is convinced that the level of distress required by the Michigan cases to establish that element of an intentional infliction of emotional distress claim is absent from this record. Therefore, the Court concludes that his claim fails as a matter of law. IV. The Court concludes that the plaintiff may file a second amended complaint. Reviewing that complaint, the Court finds that the part of count I brought under the Michigan Collection practices Act alleging that Chase made a false report to a credit reporting agency is preempted by federal law, -25- but fact questions precludes dismissal of the balance of that claim. The claims in counts II through IV must fail as a matter of law. The plaintiff has withdrawn count V. Accordingly, it is ORDERED that the plaintiff’s motion for leave to file a second amended complaint [dkt #38] is GRANTED, and the second amended complaint is deemed filed. It is further ORDERED that the defendant’s motion for summary judgment [dkt #19] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the allegation in paragraph 22(a) and counts II through IV of the second amended complaint are DISMISSED WITH PREJUDICE. It is further ORDERED that counsel for the parties shall appear for a status conference on August 18, 2009 at 10:00 a.m. to discuss further proceedings in this litigation. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 29, 2009 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 29, 2009. s/Lisa M. Ware LISA M. WARE -26-

=== Tribble v. Chuff et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 08-10813 Honorable David M. Lawson MARY ANNE TRIBBLE, Plaintiff, v. PHILIP CHUFF, JR. and CARPENTERS PENSION AND ANNUITY FUND OF PHILADELPHIA AND VICINITY, Defendants. and CARPENTERS PENSION AND ANNUITY FUND OF PHILADELPHIA AND VICINITY, Cross-plaintiff/counter-plaintiff, v. MARY ANNE TRIBBLE, Counter-defendant, PHILIP CHUFF, JR., _______________________________________________/ Cross-defendant. OPINION AND ORDER GRANTING IN PART PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT The plaintiff, Mary Anne Tribble, commenced this action in this Court in an effort to collect funds that she claims are owed to her by her former husband, Phillip Chuff, Jr., by virtue of a child support order entered in a Michigan divorce case. The case found its way into federal court because the funds were held by the Carpenters Pension and Annuity Fund of Philadelphia and Vicinity (the Fund), an entity governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq., which deposited those funds with our clerk under an interpleader order. Tribble and Chuff were married in Michigan in 1971. They had three children and moved to Pennsylvania, where apparently they separated. Tribble returned to Michigan with the children and commenced a support proceeding against Chuff, who remained in Pennsylvania; Tribble later filed for divorce. Due to the operation of certain uniform support statutes, support orders were entered in both Michigan and Pennsylvania, but over the years, inconsistent orders were entered by courts in those two states, giving rise to an underlying dispute over the amount of arrearage, if any, Chuff owes Tribble for child support for their children, who have long since attained majority. Tribble filed a motion for summary judgment, which was argued in open court on February 4, 2009. Chuff opposed the motion. To some extent, both parties ask this Court to resolve the dispute over two states’ support orders. The Court believes it may not resolve that contest, but it will and does determine the appropriate disposition of the Fund’s money that has been deposited under the interpleader order. The Court finds that the rules of claim preclusion compel a determination that the so-called “18-month rule,” 29 U.S.C. § 1056(d)(3)(H), does not compel a return of the deposited funds to Chuff; the September 2004 order entered by the Genesee County, Michigan circuit court qualifies as a Qualified Domestic Relations Order (QDRO); and the funds on deposit, therefore, are owed to the plaintiff, Mary Anne Tribble. However, the relief defendant Chuff seeks in his counterclaim is barred under the Rooker-Feldman doctrine and rules of res judicata or claim preclusion, and the Court has no jurisdiction to determine the propriety of future payments from the Fund. Therefore, the Court will grant in part the plaintiff’s motion for summary judgment; order the money on deposit to be disbursed to the plaintiff, subject to the Fund’s opportunity to file a -2- renewed motion for attorney’s fees; deny the motion in all other respects; and dismiss the defendant’s counterclaim. I. As mentioned above, Mary Anne Tribble and Phillip Chuff, Jr. were married in Michigan in 1971. Between 1971 and 1977, three children were born, and the couple moved to Pennsylvania. Early in 1977, Tribble moved back to Michigan with the children, and she filed a complaint for child support under the Uniform Reciprocal Enforcement of Support Act (URESA), codified in the Michigan code as Michigan Compiled Laws §§ 780.151-780.183. See 1952 Pub. Act No. 8, amended by 1985 Pub. Act No. 172. That complaint was transmitted to officials in Pennsylvania, and an order for child support was entered by a Pennsylvania court. Later that year, Tribble filed an action for divorce in Michigan, which was inadvertently dismissed during the parties’ reconciliation attempt, but which eventually resulted in a judgment following a trial in December 1978. The March 1979 judgment called for a child support payment from Chuff of $156 per week for the three minor children. Over the years, the parties have argued over which state’s support orders control. This dispute has been fueled by the inconsistent orders entered in each state. For instance, on October 31, 1977, the Genesee County, Michigan court entered an order in the divorce case for temporary child support of $45 per week. However, on November 12, 1977, the Bucks County, Pennsylvania court entered an order for child support in the amount of $33.20 per week. Meanwhile, Tribble engaged in efforts in Michigan through the uniform statutes to collect the child support awarded in the divorce judgment. On May 8, 1986, Tribble filed a support complaint in Genesee County seeking payment of the $152 per week plus arrearages. In mid-1986, the Genesee County prosecutor -3- forwarded the complaint to Bucks County, Pennsylvania officials, who treated it as a request for an increase in amount of support from the earlier order of $33.20 per week. Then, in October 30, 1986, a Genesee County official accepted an offer to increase child support to $70 per week. There were other orders entered in both states over the years, but the two states’ support orders were never harmonized. On April 29, 1994, Albert Fonash, Director of the Domestic Relations Office of Bucks County, Pennsylvania, sent a document to Friend of Genesee County that states: Enclosed please find a copy of Vacate Support Order regarding the aboved captioned parites. [sic] Please be advised that we are closing our case effective June 4, 1994 with NO ARREARS OR OVERPAYMENT ON THE ACCOUNT. We advise your office to COMPLY with this Order and do the same. Fund’s Ans., Ex. 7. Also in 1994, Tribble signed a stipulation to vacate a support order of $20 per week for one of the children and agreed that no arrearage was due on that order. The Genesee County court also dismissed support actions without prejudice to collecting arrearages. Meanwhile, the children were growing up. The youngest child attained majority on April 10, 1994. Apparently the parties were getting older as well, since Mr. Chuff became eligible to receive a pension from the interpleader defendant, Carpenters Pension and Annuity Fund of Philadelphia and Vicinity in the amount of $3,845.88 per month. None of these events resolved the dispute over the arrearages, however. In 2004, the Genesee County court issued an order for Chuff to show cause why he should not be held in contempt for failing to comply with the child support order in the judgment of divorce. At the show cause hearing on July 28, 2004, Chuff paid $11,041.27 to the Genessee County Friend of the Court against the arrearage owed Tribble for back child support. Then on September 10, 2004, the Genesee County court entered an income withholding order directing the Fund to withhold $473.50 per month from Chuff’s pension and pay -4- it to the Friend of the Court for Tribble’s benefit. On October 20, 2004, the Fund sent Chuff a letter stating that the September 2004 income withholding order constituted a QDRO, but in November 2004, Chuff sent a letter to administratively appeal that determination. Then on January 25, 2005, the Fund sent letters stating that it “will delay a determination on Mr. Chuff’s appeal until receipt by the Fund Office of documentation indicating that all appropriate action has been taken in this matter.” Fund’s Ans., Ex. 10. Chuff then turned to the Michigan court for relief and filed a motion to terminate arrearages in the Genesee County circuit court. He also sought an order requiring the Fund to hold in escrow the amount subject to the income withholding order until the dispute over the arrearage could be resolved. The latter request was granted via Genesee County circuit court order on February 27, 2007: This matter having come before the Court on motion of the Defendant, and the parties, and testimony having been presented in open Court, NOW, THEREFORE, IT IS HEREBY ORDERED that all monies withheld by Friend of the Court, Carpenter Pension and Annuity Plan of Philadelphia and Vicinity or any other source of Mr. Chuff’s income for purposes of child support withholding, via Qualified Domestic Relations Order or any other income withholding order, shall be held in escrow by the withholding party during the pendency of this action and until further order of this Court. Pl’s Mot., Ex. F. Three audits were performed on April 17, 2007 by the Genesee County Friend of the Court. The first audit was based on an accounting that the Friend of the Court apparently believed was erroneous; it showed that the defendant owed $54,916.68 by 1994 in support and $63,172.67 in surcharges since that time, which after credit for payments received reflected a total outstanding balance of $100,115.43. Chuff’s Ans., Ex. JJ. The Friend of the Court representative explained that -5- the account should have applied only the Michigan court orders and ignored those from Pennsylvania; under that method, the obligation was $61,988.06 for support, $94,113.92 for surcharges, for a total of $156,101.98. Ibid. Finally, an audit was prepared applying the Pennsylvania orders, which showed that the defendant overpaid approximately $17,401.92. Ibid. In the state court, Chuff maintained that the order entered by the Pennsylvania court in the URESA action governs because it was entered first in time, as now provided by the superseding interstate support legislation known as the Uniform Interstate Family Support Act. See 1996 Pub. Act No. 310, Mich. Comp. Laws §§ 552.1101-552.1901. Apparently relying on Michigan Compiled Laws section 552.1224, Chuff argued that the Michigan courts must calculate the support obligation of Chuff, a Pennsylvania resident, based on that state’s support order, which would leave him with no arrearage owing. That argument did not sell. The defendant’s request to terminate arrearage was denied by a written opinion and order filed on October 25, 2007 by the Genesee County, Michigan circuit court. In full, the opinion reads as follows: This matter was scheduled for hearing on August 23, 2007. Based on the pleadings, trial briefs and opening statement of Plaintiff's counsel, it became readily apparent that if this 1977 case was to be resolved in any sense, it was best to be done on briefs. The parties were to encapsulate a history of account activity spanning decades and two states. To do otherwise would be an inefficient use of the Court’s time as the outcome rests solely on the applicable law in effect at the time various child support orders were entered and charging. The Court was provided with little indication in movant Defendant’s opening statement as to what could be proven by material and competent evidence, only what Defendant, Phillip Chuff, Jr., ‘believed’ to be the case. The only concrete evidence available was the series of audits conducted by the Friend of the Court and specifically the audit, which considered Genesee County Orders only. Respective counsel put in a great deal of effort in presenting the Court with their version of what was done historically and what this Court should do by way of a determination. However, on balance Plaintiff’s position provides the more cogent analysis because the effective dates of pertinent legislation controls the outcome. Case No. 77-213075-DU was a Uniform Reciprocal Enforcement Support Act – URESA – Petition from Michigan to Pennsylvania to establish a support order -6- for the parties’ minor children. As a result, an order was entered in Pennsylvania. Case No. 77-123958-DM resulted in a Michigan Judgment of Divorce with a support order for the parties’ minor children. During the time the minor children were eligible for support, both states entered orders which modified the original order in the respective jurisdictions. The youngest child emancipated in 1994. Michigan adopted URESA in 1952. The Act remained the controlling interstate support legislation until the adoption of the Uniform Interstate Family Support Act – UIFSA – in Michigan in 1998. UIFSA created a remedy to an inherent URESA problem by providing a method for states to remove multiple states order conflicts. Here Michigan and Pennsylvania entered support orders. The obligation for current support ended in April of 1994. Enactment of Federal Full Faith and Credit occurred in October of 1994. UIFSA was not adopted in Michigan until 1998. Therefore, the support orders are governed by URESA. The Court must look to the URESA standard applied by the Friend of the Court audit wherein only Michigan orders were taken into consideration. The standard ignores any support order issued in Pennsylvania and credit any payments made in Pennsylvania to the Michigan obligation. Applying UIFSA standards retroactively would create error. Such action would constitute a retroactive modification of a support order. Likewise such action would be contrary to the URESA requirement that other states orders cannot modify Michigan support orders. The office of the Genesee County Friend of the Court conducted an audit of the Michigan support orders applying the URESA standards. The result is an arrearage calculated at $156,775.68 as of April 24, 2007. This figure is adopted by the Court and is due and owing by Defendant. Monies currently held in escrow by the Carpenters Pension and Annuity Fund of Philadelphia and vicinity are to be released and paid to Plaintiff, Mary A. Tribble forthwith. Thereafter, the previous payment schedule shall be reinstated. Pl.’s Mot., Ex. A. On June 27, 2008, the defendant filed a delayed application for leave to appeal in the Michigan Court of Appeals. The application was denied on December 16, 2008 in a short order with one judge dissenting. By then, $18,940 had accumulated in the escrow account held by the Fund. Despite the state court’s order, however, the Fund did not disburse the money, apparently due to litigation threatened by Chuff to challenge the Fund’s administrative determination that the income withholding order constituted a QDRO. In the meantime, the Genesee County court entered an amended order on -7- September 15, 2008 requiring income withholding of $1,922.69 per month. On October 24, 2008, Judith Sznyter, counsel for the Fund, wrote a letter acknowledging the order as “qualified under 29 U.S.C. § 1056(d)(3).” Complicating matters is a contrary determination from Pennsylvania. Nancy D. McLaurin, “a Domestic Relations Officer” with the Bucks County, Pennsylvania Domestic Relations Section, signed a letter to the various parties on March 24, 2008 stating: Enclosed please find the Determination of Controlling Order, pursuant to the Uniform Interstate Family Support Act (UIFSA), Section 207, titled “Determination of Controlling Child Support Orders.” After reviewing all pertinent documents (exhibits enclosed), it is the determination of the tribunal that jurisdiction for the issuance and enforcement of all support matters in Tribble vs. Chuff are vested in the Court of Common Pleas of Bucks County. A support action was originally initiated in Bucks County, Pennsylvania by petition of the plaintiff and the Genesee County, Michigan Prosecuting Attorney’s office under U.R.E.S.A. The plaintiff agreed to all modifications to the Bucks County order including the VACATE SUPPORT ORDER which states, “Vacate effective June 4, 1994 with no arrears or overpayment on the account.” There is no evidence that an action of any type transferred the Continuing Exclusive Jurisdiction of this tribunal (court) to Genesee County, Michigan; therefore, no arrearages are due the plaintiff. Chuff’s Countercl., Ex. PP. There is also a “NOTICE OF DETERMINATION OF CONTROLLING ORDER” dated March 24, 2008. It is not signed, but Nancy McLaurin’s name appears on the document. It states that: 1. On 3/24/08 (date) COUNTY OF BUCKS, BUCKS COUNTY, PA (Tribunal Name, County, State) determined which order to recognize for prospective enforcement. [The order then lists a number of Pennsylvania orders.] 2. The tribunal determined that order number 2 [a support agreement dated November 2, 1977] listed above in the table is the controlling order for prospective enforcement. -8- . . . 5. The tribunal calculated arrears to be $0.00 as of 6/4/94. . . . Chuff’s Countercl., Ex. OO. Tribble filed her complaint in this case on February 28, 2008, seeking a declaration from the Court on whether the “18-month rule” compels a return of the escrowed funds to Chuff, whether the September 15, 2004 order for support is a Qualified Domestic Relations Order (QDRO), and whether any subsequent support order entered by the Circuit Court is a QDRO. In his counterclaim, Chuff requests the following relief: a. That the Court review all child support orders issued by both States to determine that PA has the controlling law. b. That the Court determine that the PA child support order had continuing and exclusive jurisdiction. c. That the Court order Plaintiff-Counter Defendant to vacate her support order and waive all arrears in the Genesee County case. d. That the Court grant Full Faith and Credit to be given to any and all monies paid by the Defendant-Counter Plaintiff on his child support obligation, as paid through Pennsylvania and Genesee County. e. That the Court order reimbursement by the Plaintiff-Counter Defendant of any monies overpaid by the Defendant-Cross Plaintiff, in both States. f. That the Court determine Defendant-Counter Plaintiff’s full and complete child support obligation, if any. Chuff’s Countercl. at 23-24. The Fund was named as a defendant and filed cross- and counterclaims for interpleader. Last August, the Court entered an order discharging the Fund from liability for the escrowed money and ordering the funds to be paid into court. Tribble has moved for summary judgment. Chuff filed an untimely response in opposition, but he did not file a cross motion for summary judgment. -9- II. A motion for summary judgment under Federal Rule of Civil Procedure 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics and Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). Thus a factual dispute which “is merely colorable or is not significantly probative” will not defeat a motion for summary judgment which is properly supported. Kraft v. United States, 991 -10- F.2d 292, 296 (6th Cir. 1993); see also Int’l Union, United Auto., Aerospace and Agric. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999). Neither party suggests that there are material facts in dispute. The record presented to the Court consists primarily of notices, orders, and decrees from the courts of Michigan and Pennsylvania. The main disputes revolve around the competing states’ court orders and the effect of ERISA on the income withholding and support orders. Summary judgment under Rule 56, therefore, is a useful method of addressing an issue when the parties agree, as here, that there are no material facts in dispute and “the sole question at issue [is] a question of law.” United States v. Donovan, 348 F.3d 509, 511 (6th Cir. 2003); see also Wachovia Bank v. Watters, 431 F.3d 556, 559 (6th Cir. 2005); Progressive Corp. and Subsidiaries v. United States, 970 F.2d 188, 190-91 (6th Cir. 1992). A. The plaintiff first makes a challenge to the Court’s jurisdiction to hear the defendant’s counterclaim, characterizing it as an appeal of the state court’s order determining arrearages. The plaintiff, of course, does not challenge this Court’s jurisdiction to hear her complaint. E.g., Medical Mut. of Ohio v. k. Amalia Enterprises Inc., 548 F.3d 383, 389 (6th Cir. 2008) (holding that as long as action is not frivolous, court has federal question jurisdiction over claim brought under ERISA, 29 U.S.C. § 1132). Even without an additional basis for jurisdiction, the Court has supplemental jurisdiction over the defendant’s counterclaim pursuant to 28 U.S.C. § 1367. See Davet v. City of Cleveland, 456 F.3d 549, 553 (6th Cir. 2006). However, the Rooker-Feldman doctrine, a doctrine whose effect has been narrowed by appellate decisions over the years, does pose a substantial obstacle to consideration of the -11- defendant’s counterclaim in this case. The Rooker-Feldman doctrine is premised on the notion that only the Supreme Court has jurisdiction to review state court judgments. See 28 U.S.C. § 1257. The Rooker-Feldman doctrine, . . . is confined to cases of the kind from which the doctrine acquired its name: cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments. Rooker-Feldman does not otherwise override or supplant preclusion doctrine or augment the circumscribed doctrines that allow federal courts to stay or dismiss proceedings in deference to state-court actions. Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280, 284 (2005). The doctrine has been applied by the Supreme Court only twice – in the two cases that gave the doctrine its name. Id. at 283. Instead, the Supreme Court has directed that most actions should be dealt with on preclusion grounds, rather than jurisdiction. See id. at 293 (“Nor does § 1257 stop a district court from exercising subject-matter jurisdiction simply because a party attempts to litigate in federal court a matter previously litigated in state court. If a federal plaintiff ‘present[s] some independent claim, albeit one that denies a legal conclusion that a state court has reached in a case to which he was a party . . . , then there is jurisdiction and state law determines whether the defendant prevails under principles of preclusion.’” (quoting GASH Assocs. v. Rosemont, 995 F.2d 726, 728 (7th Cir. 1993 ; Todd v. Weltman, Weinberg & Reis Co., L.P.A., 434 F.3d 432, 437 (6th Cir. 2006) (holding that “even if the [plaintiff’s] independent claim was inextricably linked to the state court decision, preclusion law was the correct solution to challenge the federal claim, not Rooker-Feldman”). In his counterclaim, the defendant requests that the Court “review all child support orders issued by both States,” and he asks for a determination that the Pennsylvania orders control and the Michigan orders do not. He lost that very argument in state court. He does not raise any independent claim or legal theory to support these requests here, other than his request for a declaration that the -12- Michigan order was wrong. Instead, he argues that “[w]ithout relief of this Court the Defendant-Counter Plaintiff . . . maybe [sic] financially irrevocably [sic] harmed by a Michigan Circuit Court Opinion/Order.” Chuff’s Countercl. ¶ 1. In other words, he is “complaining of injuries caused by state-court judgments.” Exxon Mobil, 544 U.S. at 284. This Court’s jurisdiction does not extend to this sort of action, which is an ill-disguised attempt to appeal the determination of the Genesee County court. The Court concludes, therefore, that the Rooker-Feldman doctrine bars review by this Court of the Genesee County court’s determination of the amount of arrearage owed by Chuff to Tribble. Even if that were not the case, Chuff could not prevail on that issue here, because, as explained more fully below, the doctrine of res judicata, or claim preclusion, would defeat his request for relief in this Court. B. The plaintiff’s complaint seeks a judicial determination of the following three issues: a) Whether the 18-month rule compels a return of the escrowed funds to Chuff, notwithstanding the doctrines of estoppel and merger. . . b) Whether the Order for Support submitted dated September 10th, 2004 is a QDRO. c) Whether any subsequent QDRO entered by the Circuit Court, calling for a greater payment to Tribble, or dealing with a different ERISA-qualified retirement asset, is a QDRO. Compl. ¶ 32. The first two questions are relevant to determining whether she is entitled to the money that was held in escrow by the Fund while the matter was sorted out in Genesee County Circuit Court and subsequently deposited with the Court pursuant to the Interpleader Act, 28 U.S.C. § 1335. In an interpleader action, the Court must undertake a two stage analysis: During the first stage, the court determines whether the stakeholder has properly invoked interpleader, including whether the court has jurisdiction over the suit, whether the stakeholder is actually threatened with double or multiple liability, and -13- whether any equitable concerns prevent the use of interpleader. During the second stage, the court determines the respective rights of the claimants to the fund or property at stake via normal litigation processes, including pleading, discovery, motions, and trial. United States v. High Technology Products, Inc., 497 F.3d 637, 641 (6th Cir. 2007) (internal citations omitted). The Fund has deposited the funds and been discharged from the case, and therefore, the Court is now at the second stage, where it must determine the rights of Ms. Tribble and Mr. Chuff to this money. 1. ERISA The Employee Retirement Income Security Act of 1974 (“ERISA”) generally provides that “benefits provided under [a] plan [covered by the act] may not be assigned or alienated.” 29 U.S.C. § 1056(d)(1). However, “[i]n 1984, Congress amended ERISA through passage of the Retirement Equity Act (REA) of 1984, Pub. L. No. 98-397, 98 Stat. 1426, in an effort to guarantee that private retirement-income systems would provide fair treatment for women.” Metropolitan Life Ins. Co. v. Marsh, 119 F.3d 415, 419 (6th Cir. 1997). “Among the Act’s provisions were amendments to ERISA which insured that the statute’s antigarnishment and pre-emption provisions could not be used to block the enforcement of ‘qualified domestic relations orders’ – generally, court orders providing for child support and alimony payments by ERISA plan participants.” Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825, 838 (1988). Now, a QDRO may be enforced against a plan, provided it satisfies ERISA’s requirements. The requisites of a support order under ERISA are as follows: (B) For purposes of this paragraph-- (i) the term “qualified domestic relations order” means a domestic relations order– -14- (I) which creates or recognizes the existence of an alternate payee’s right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan, and (II) with respect to which the requirements of subparagraphs (C) and (D) are met, and (ii) the term “domestic relations order” means any judgment, decree, or order (including approval of a property settlement agreement) which– (I) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and (II) is made pursuant to a State domestic relations law (including a community property law). (C) A domestic relations order meets the requirements of this subparagraph only if such order clearly specifies– (i) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order, (ii) the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined, (iii) the number of payments or period to which such order applies, and (iv) each plan to which such order applies. (D) A domestic relations order meets the requirements of this subparagraph only if such order– (i) does not require a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan, (ii) does not require the plan to provide increased benefits (determined on the basis of actuarial value), and -15- (iii) does not require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another order previously determined to be a qualified domestic relations order. 29 U.S.C. § 1056(d)(3)(B). Looking at the terms of the income withholding order entered in the state court, it appears that the requirements of the statute have been satisfied. But the Court need not decide that question, because the state court has determined that its order is a QDRO, and that determination is entitled to preclusive effect, as explained below. ERISA further contains a provision that a plan must segregate funds pending a determination whether an order for payment of benefits to an alternate payee is a QRDO, but after eighteen months the segregated funds must be released. The statute reads: (H)(i) During any period in which the issue of whether a domestic relations order is a qualified domestic relations order is being determined (by the plan administrator, by a court of competent jurisdiction, or otherwise), the plan administrator shall separately account for the amounts (hereinafter in this subparagraph referred to as the “segregated amounts”) which would have been payable to the alternate payee during such period if the order had been determined to be a qualified domestic relations order. (ii) If within the 18-month period described in clause (v) the order (or modification thereof) is determined to be a qualified domestic relations order, the plan administrator shall pay the segregated amounts (including any interest thereon) to the person or persons entitled thereto. (iii) If within the 18-month period described in clause (v)– (I) it is determined that the order is not a qualified domestic relations order, or (II) the issue as to whether such order is a qualified domestic relations order is not resolved, then the plan administrator shall pay the segregated amounts (including any interest thereon) to the person or persons who would have been entitled to such amounts if there had been no order. -16- (iv) Any determination that an order is a qualified domestic relations order which is made after the close of the 18-month period described in clause (v) shall be applied prospectively only. (v) For purposes of this subparagraph, the 18-month period described in this clause is the 18-month period beginning with the date on which the first payment would be required to be made under the domestic relations order. 29 U.S.C. § 1056(d)(3)(H). The defendant did not raise the issue in the state court whether this statute compels disbursement of the impounded funds to him. 2. Res judicata This Court need not determine the application of ERISA to the interpleaded money, because Chuff is precluded by res judicata principles from raising the matter. “Section 28 U.S.C. § 1738 generally requires ‘federal courts to give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so.’” Haring v. Prosise, 462 U.S. 306, 313 (1983) (quoting Allen v. McCurry, 449 U.S. 90, 96 (1980 . Application of this statute depends on the state’s laws of issue preclusion and claim preclusion (although the Michigan Supreme Court “generally uses the terms ‘res judicata’ and ‘collateral estoppel’ rather than the phrases ‘claim preclusion’ and ‘issue preclusion.’” J.A.M. Corp. v. AARO Disposal, Inc., 461 Mich. 161, 168, 600 N.W.2d 617, 620 (1999 . Under Michigan law regarding claim preclusion, “[a] second action is barred when (1) the first action was decided on the merits, (2) the matter contested in the second action was or could have been resolved in the first, and (3) both actions involve the same parties or their privies.” Dart v. Dart, 460 Mich. 573, 586, 597 N.W.2d 82, 88 (1999). For issue preclusion to bar subsequent litigation, “a question of fact essential to the judgment must have been actually litigated and determined by a valid and final judgment. In addition, the same parties must have had a full opportunity to litigate the issue, and there must be mutuality of estoppel.” -17- Nummer v. Treasury Dept., 448 Mich. 534, 542, 533 N.W.2d 250, 253 (1995). For an administrative decision to have preclusive effect, the decision must have been adjudicatory in nature with a right to appeal, and the legislature must have intended to make the decision final absent an appeal. Ibid. The party asserting preclusion bears the burden of proof. See Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 572 (6th Cir. 2008). The doctrine of res judicata gives preclusive effect to the Genesee County court’s October 2007 opinion and order disposing of the escrowed funds, as all three elements required under Michigan law are present. See Dart, 460 Mich. at 586, 597 N.W.2d at 88. That court decided the disposition of the money on the merits, and not on some procedural ground, satisfying the first element. Equally obvious is the fact that the same parties exist in both the state and federal actions. (Of course, the Fund was not a party to the state case; however, as the stakeholder, it was discharged from this case, and does not claim an interest in the money. See 28 U.S.C. § 2361. Therefore, its presence in the litigation does not change matters.) The only questionable element is the second: whether “the matter contested in the second action” – which state’s orders controlled; whether the order was a QDRO; and did the 18-month rule compel return of the escrowed funds to Chuff – “was or could have been resolved in the first.” Dart, 460 Mich. at 586, 597 N.W.2d at 88. Michigan “uses a transactional test to determine if the matter could have been resolved in the first case.” Washington v. Sinai Hosp. of Greater Detroit, 478 Mich. 412, 420, 733 N.W.2d 755, 760 (2007). Under this approach, “‘the assertion of different kinds or theories of relief still constitutes a single cause of action if a single group of operative facts give rise to the assertion of relief.’” Ibid. (quoting Adair v. Michigan, 470 Mich. 105, 124, 680 N.W.2d 386, 397 (2004 . The Genesee County court considered the disposition of the funds placed -18- in escrow. If Chuff wished to prevent the money going to Tribble, he could have – and should have – raised the argument that the 2004 court order was not a QDRO, or that ERISA requires that the issue be resolved within eighteen months. He either failed to do so, or did so but lost the argument. The state court was of competent jurisdiction to adjudicate the matter, so Chuff’s failure to raise the issues is not excused. Although it is true that “ERISA’s express grant of exclusive jurisdiction to the federal courts divests state courts of jurisdiction to hear claims brought under ERISA,” Thiokol Corp. v. Department of Treasury, State of Mich., Revenue Div., 987 F.2d 376, 379 (6th Cir. 1993) (emphasis in original), state courts have jurisdiction to determine whether their orders are QDROs, Geiger v. Foley Hoag LLP Retirement Plan, 521 F.3d 60, 67 (1st Cir. 2008) (collecting cases); Scales v. General Motors Corp. Pension Adm'r, 275 F. Supp. 2d 871, 876-77 (E.D. Mich. 2003) (“The state courts have concurrent jurisdiction regarding the interpretation of QDROs, and are fully competent to adjudicate whether their own orders are QDROs.” (internal citations omitted . In his answer, Chuff asserts that he was not given a fair opportunity to litigate before the state court. It is true that due process requires that the first decision was entered only after a “full and fair opportunity” to litigate the issue was provided to the parties. See Kremer v. Chemical Const. Corp., 456 U.S. 461, 480-81 (1982) (holding that “the judicially created doctrine of collateral estoppel does not apply when the party against whom the earlier decision is asserted did not have a ‘full and fair opportunity’ to litigate the claim or issue”); Restatement (Second) of Judgments § 2. However, the defendant has not provided this Court with any evidence that he was limited in his argument. Nor does it appear that Chuff could support such a claim. After all, he was the one who raised the issue with the motion he filed in state court. The Genesee County court’s order acknowledged that the judge considered the pleadings and brief submitted by Chuff, but was -19- persuaded by the plaintiff’s legal reasoning. Without any evidence showing that Chuff was denied the opportunity to argue the matter, the state court order is presumptively valid. Chuff’s challenge appears to be little more than a complaint that the judge decided contrary to his legal position. This, of course, does not undermine the finality of the earlier decision. Chuff asks why the Pennsylvania support orders should not be given preclusive effect, particularly the determination by Domestic Relations Officer Nancy D. McLaurin that “that jurisdiction for the issuance and enforcement of all support matters in Tribble vs. Chuff are vested in the Court of Common Pleas of Bucks County” and “no arrearages are due the plaintiff.” Chuff’s Countercl., Ex. PP. But that matter is easily resolved. The principles of claim preclusion apply in the Pennsylvania courts. Turner v. Crawford Square Apartments III, L.P., 449 F.3d 542, 548 (3d Cir. 2006) (quoting Balent v. City of Wilkes-Barre, 542 Pa. 555, 563, 669 A.2d 309, 313 (1995 . Similar to Michigan, Pennsylvania courts also insist that four factors be present for a finding of issue preclusion: “1) the issue decided in the prior adjudication was identical with the one presented in the later action, 2) there was a final judgment on the merits, 3) the party against whom the plea is asserted was a party or in privity with a party to the prior adjudication, and 4) the party against whom it is asserted has had a full and fair opportunity to litigate the issue in question in a prior action.” Tucker v. Philadelphia Daily News, 577 Pa. 598, 607 n. 11, 848 A.2d 113, 119 n. 11 (2004). The Pennsylvania notices by Ms. McLaurin have no preclusive effect in this litigation. The “notice” was not obviously produced by a court, but by a “Domestic Relations Officer.” Domestic Relations Officers engage in conduct that is “ judicial in nature,” but their duties are to “assist[]” the Pennsylvania courts in preparing support orders. See McKinney v. Carolus, 430 Pa. Super. 450, 457, -20- 634 A.2d 1144, 1147 (1993). They make recommendations that are then considered, and possibly adopted, by the court. See Thomas v. Thomas, 760 A.2d 397, 398 (Pa. Super. Ct. 2000). Thus, their role can be analogized to that of a United States probation officer, or pretrial services officer, or a state Friend of the Court attorney. Without diminishing the importance of their duties, a notice signed by such an officer hardly qualifies as a judgment of a court worthy of preclusive effect. Moreover, there is no evidence that the plaintiff had any notice the matter was being contested in the Pennsylvania forum. To the contrary, an affidavit filed by the plaintiff’s attorney states that neither he nor his client had any notice that the domestic relations officer was asked to make this determination. Pl.’s Mot., Ex. E, Streby Aff. ¶ 2-3. Pennsylvania courts recognize that notice is necessary before action can be taken by domestic relations officers. See McKinney, 430 Pa. Super. at 457, 634 A.2d at 1147. As noted above, due process requires that notice and an opportunity to litigate must be shown before a prior decision can be afforded preclusive effect. See Kremer, 456 U.S. at 480-81; Restatement (Second) of Judgments § 2. Therefore, in the absence of any notice or any order entered by a court, there is no Pennsylvania order that is entitled to preclusive effect in this litigation. The Court finds, therefore, that the Michigan court’s determination that Chuff owes a substantial child support arrearage to Tribble, that the income withholding order directing payment of a portion of Chuff’s pension benefits to Tribble is a QDRO, and that Tribble is entitled to the segregated funds is entitled to preclusive effect. Chuff’s request in his counterclaim for a contrary determination by this Court must be denied, and his resistance to an order directing the funds on deposit to be disbursed to Tribble lacks a sound legal basis. 3. Whether future orders entered by the Genesee County court will constitute QDROS -21- The plaintiff also requests that the Court determine “[w]hether any subsequent QDRO entered by the Circuit Court, calling for a greater payment to Tribble, or dealing with a different ERISA-qualified retirement asset, is a QDRO.” Compl. ¶ 32. The Court will not address that claim because it is not ripe. “As a rule, we do not allow litigation on premature claims to ensure that courts litigate ‘only existing, substantial controversies, not hypothetical questions or possibilities.’” Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 582 (6th Cir. 2008) (quoting City Comm., Inc. v. City of Detroit, 888 F.2d 1081, 1089 (6th Cir. 1989 . In considering whether a claim is ripe, courts consider two questions: “(1) is the claim ‘fit[ ] . . . for judicial decision’ in the sense that it arises in a concrete factual context and concerns a dispute that is likely to come to pass? and (2) what is ‘the hardship to the parties of withholding court consideration’?” Warshak v. United States, 532 F.3d 521, 525 (6th Cir. 2008) (en banc) (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 149 (1967 ; see also Kentucky Press Ass’n, Inc. v. Kentucky, 454 F.3d 505, 509 (6th Cir. 2006) (describing the first question as two separate questions). The plaintiff must establish that each claim brought is ripe for judicial resolution. National Rifle Ass'n of America v. Magaw, 132 F.3d 272, 284 (6th Cir. 1997). It appears that a complaint that is not ripe can become ripe during the litigation. Blanchette v. Connecticut General Ins. Corporations, 419 U.S. 102, 140 (1974) (“Whatever may have been the case at the time of the District Court decision, there can be little doubt, for reasons to be detailed, that some of the ‘conveyance taking’ issues can and must be decided at this time. And, since ripeness is peculiarly a question of timing, it is the situation now rather than the situation at the time of the District Court’s decision that must govern.”); Casden v. Burns, 306 F. App’x 966, 972 (6th Cir. Jan. 16, 2009) (noting uncertainty on the point). But that is not the case here. -22- Although the Genesee County court entered an amended QDRO after the plaintiff filed her complaint in this case, any contest over that order presently is merely hypothetical. The plaintiff has not shown, either presently or in the past, any imminent injury related to the Genesee County circuit court’s entry of an order garnishing Chuff’s pension. It is possible that the Plan will find that the 2008 order or some future order is not a QDRO and deny payment to the plaintiff on that basis. However, this concern is speculative at this point. In fact, the Plan has indicated that it believes the 2008 order to be a QDRO. Moreover, the injury of which the plaintiff would complain in such an instance would be caused by the Plan, which is no longer a party to this case. Therefore, the Court concludes that any contest over the future effect of the present or possible later-entered orders is not ripe. III. The plaintiff seeks an award of attorney’s fees under ERISA, which provides: In any action under this subchapter (other than an action described in paragraph (2 by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party. 29 U.S.C. § 1132(g)(1). The first question is whether the plaintiff’s claim qualifies as “any action under this subchapter. . .” See ibid. Section 1132(a) authorizes the following actions: A civil action may be brought– (1) by a participant or beneficiary– (A) for the relief provided for in subsection (c) of this section, or (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan; . . . (3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan; -23- 29 U.S.C. § 1132(a). The Sixth Circuit has held that an interpleader action qualifies under section 1132(a)(3)(B) as one seeking equitable relief, while noting that an action seeking a declaration of liability does not. Metropolitan Life Ins. Co. v. Marsh, 119 F.3d 415, 418 (6th Cir. 1997). And “[a] person who is an alternate payee under a qualified domestic relations order shall be considered for purposes of any provision of this chapter a beneficiary under the plan.” 29 U.S.C. § 1056(d)(3)(J); Boggs v. Boggs, 520 U.S. 833, 847 (1997) (“In creating the QDRO mechanism Congress was careful to provide that the alternate payee, the ‘spouse, former spouse, child, or other dependent of a participant,’ is to be considered a plan beneficiary.”). The Sixth Circuit has articulated a number of factors for a court to consider when presented with a request for attorney’s fees under this provision: (1) the degree of the opposing party’s culpability or bad faith; (2) the opposing party’s ability to satisfy an award of attorney's fees; (3) the deterrent effect of an award on other persons under similar circumstances; (4) whether the party requesting fees sought to confer a common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA; and (5) the relative merits of the parties’ positions. Moon v. Unum Provident Corp., 461 F.3d 639, 642 (6th Cir. 2006). These factors are “not dispositive,” but merely are “considerations representing a flexible approach.” Ibid. “[I]n our Circuit, there is no presumption that attorney’s fees will be awarded.” Ibid. The plaintiff, who is considered to be a beneficiary because she was asserting her rights under a QDRO, seeks equitable relief in her complaint, asking that the Court order the Fund to deposit money with the Court. However, that relief ultimately was not awarded to the plaintiff, as the Fund brought its own interpleader action. Moreover, the plaintiff did not seek any equitable relief against Chuff, against whom she presumably seeks the attorney’s fee award. Instead, she -24- sought a declaration of various legal issues against Chuff, which does not qualify her for relief under section 1132(g)(1). The plaintiff also seeks an award of attorney’s fees as a party in an interpleader action. Although “[t]he interpleader statute does not contain an attorney’s fee provision,” “‘modern federal practice follows the traditional equity rule that gives the trial court discretion to allow a disinterested stakeholder to recover attorney’s fees and costs from the stake itself.’” First Trust Corp. v. Bryant, 410 F.3d 842, 856 (6th Cir. 2005) (quoting 4 Moore’s Federal Practice § 22.06, at 22-98 to 22-99 & n. 4). Nonetheless, in First Trust Corp., the Sixth Circuit reversed a district court that awarded attorney’s fees to a fund under an ERISA statutory provision and the interpleader statute. The Court first applied the five-part test applicable to ERISA actions, laid out above, id. at 851, and found that all factors weighed against the award of fees to the fund. The Court found that the fund had acted in bad faith by inexplicably failing to join a required party and filing in the wrong venue; no deterrent effect was needed against the plan participant because she “did nothing wrong,” and the fund lost on every significant legal issue it raised. Id. at 854-55. The Court then found that the fund was not entitled to attorney’s fees under the interpleader statute because “for all the reasons discussed in this opinion, equity does not favor an award of attorney's fees to [the fund],” and “such a result on equitable grounds would be inconsistent with our decision that [the fund] is not entitled to attorney’s fees under an express statutory provision that authorizes fees in certain circumstances.” Id. at 856. The Sixth Circuit has failed to provide further guidelines in published cases. However, in a 2005 decision, the Sixth Circuit announced the following standard for attorney’s fees in interpleader actions: -25- “[A] federal court has discretion to award costs and counsel fees to the stakeholder in an interpleader action, whether brought under Rule 22 or the interpleader statute, whenever it is fair and equitable to do so.” [7 Wright, Miller & Kane, Federal Practice and Procedure: Civil § 1719 (3d ed. 2001).] An interpleading party is entitled to recover costs and attorney's fees when it is (1) a disinterested stakeholder, (2) who has conceded liability, (3) has deposited the disputed funds into court, and (4) has sought a discharge from liability. Septembertide Publishing v. Stein and Day, 884 F.2d 675 (2d Cir. 1989). The only limiting principle is reasonableness, and it is at the discretion of the Court to determine what award is appropriate. 7 Wright, Miller & Kane, supra, § 1719. Holmes v. Artists Rights Enforcement Corp., 148 F. App’x 252, 259 (6th Cir. Jul. 13, 2005). Applying this standard, the Sixth Circuit held that attorney’s fees were appropriate, writing: “In this case, UMG was a disinterested stakeholder that conceded liability, offered to deposit the funds into court, and sought discharge. UMG warned the Vandellas it would seek attorneys’ fees and costs if forced to file an interpleader action.” Ibid. The plaintiff does not qualify as the stakeholder in an interpleader action, and would not qualify for attorney’s fees from Chuff on that basis. The plaintiff has not argued any other legal basis for attorney’s fees against Chuff, and the Court finds none. Therefore, her request will be denied. IV. The Court concludes that Philip Chuff’s request that this Court review and reject the state court’s order determining arrearages (in which the state court preferred the Michigan support orders over the Pennsylvania support orders) is barred by the Rooker-Feldman doctrine, since the relief requested amounts to an appeal of a state court judgment. Moreover, the other issues that Chuff raises as an obstacle to the disbursement over the disputed funds to Tribble have either been decided against Chuff by the Michigan court, or they are barred from consideration by the doctrine of res judicata. The Court determines therefore that Chuff’s counterclaim has no merit as a matter of law. -26- The plaintiff is entitled to the funds on deposit, subject to the Fund’s right to renew its request for attorney’s fees. The plaintiff’s request for a determination of the Fund’s future obligation to disburse as a result of present or future orders is not ripe. Accordingly, it is ORDERED that the plaintiff’s motion for summary judgment [dkt. #43] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the plaintiff is entitled to the funds on deposit with this Court under the interpleader order [dkt #15] subject to the Fund’s renewal of its motion for attorney’s fees. If the Fund wishes to renew its motion, it shall do so on or before August 25, 2009. It is further ORDERED that the defendant’s counterclaim is DISMISSED WITH PREJUDICE. It is further ORDERED that the balance of the plaintiff’s complaint is DISMISSED WITHOUT PREJUDICE. Dated: July 28, 2009 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 28, 2009. s/Lisa M. Ware LISA M. WARE -27-

=== Robinson v. United States of America ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION REX R. ROBINSON, Petitioner, v. UNITED STATES OF AMERICA, ______________________________________/ Respondent. Civil No. 06-15381 Criminal No. 99-20011 Honorable David M. Lawson OPINION AND ORDER GRANTING MOTION TO VACATE SENTENCE The petitioner, Rex Robinson, was convicted by a jury of one count of conspiracy to violate the Controlled Substances Act and one count of violating the Travel Act and sentenced to 121 months in prison. He filed a post-trial motion for judgment of acquittal under Federal Rule of Criminal Procedure 29, but his attorney never filed a motion for new trial under Rule 33. The Court harbored grave doubt about the propriety of Robinson’s conviction, but applying the standard that the law requires for Rule 29 motions, the Court reluctantly denied it. The conviction was affirmed on appeal. The petitioner now has filed a motion under 28 U.S.C. § 2255 to vacate his sentence, alleging ineffective assistance of counsel. After careful and extended consideration, the Court now finds that trial counsel’s performance fell below the standard required by the Sixth Amendment when he failed to move for a new trial under Rule 33, and the deficient performance resulted in prejudice to the petitioner because such a motion would have been meritorious, and the Court would have granted it. Therefore, for the reasons explained more fully below, the Court will grant the motion to vacate sentence. I. Facts and proceedings The petitioner, Rex Robinson, was indicted with his two brothers (Marcus and Chad Robinson) and several others on February 10, 1999, and a superseding indictment was filed on March 28, 2001, charging the defendants with conspiracy to manufacture 1,000 or more marijuana plants or to distribute or possess 1,000 or more kilograms of marijuana in Michigan and elsewhere between 1991 and June 1998, plus various counts of traveling in interstate commerce with intent to promote, manage, and carry on an unlawful activity, that is, a business enterprise involving marijuana. The underlying facts of the case, as they were adduced at trial, were set forth in the Court’s opinion and order denying the petitioner’s motion for judgment of acquittal. Many of those facts, as pertinent to the present motion, are set forth again here. In the fall of 1996, a police officer investigating a complaint that a horse had broken free of its corral in rural Sanilac County discovered the remnants of a sophisticated operation for growing, harvesting, and processing large amounts of marijuana. The farm on which this operation was based was titled in the name of co-defendant Marcus Robinson, Rex’s brother. Throughout the trial, Marcus steadfastly disavowed any knowledge of or connection with the marijuana operation, and insisted that he had leased the property to a person named John Hunt, whose identity or existence actually was never established. The trial evidence established that Rex Robinson came to Michigan in 1995 and looked at the farm on Argyle Road in Sanilac, Michigan before his brother purchased it. This farm later became the site of a marijuana manufacturing operation in 1995 and 1996. After the cash purchase of this farm by Marcus Robinson, James Austin Mattingly came to Michigan in 1995 along with Dennis Miles, Ralph Kough, and Greg Edelen. The group examined the Argyle Road property and subsequently set up a marijuana production site. During this time, each member of the group used -2- aliases. The farm was cleaned up, a secret space was created to cultivate and dry marijuana, a marijuana crop was planted in between rows of corn, and a large crop was harvested. The original indictment in this case was returned on February 10, 1999 (unsealed on February 25, 1999) and was superseded three times. The final superseding indictment charged six people in count one, including Rex, Chad and Marcus Robinson, with a drug conspiracy in violation of 21 U.S.C. § 846. The alleged purpose of the conspiracy was to manufacture and distribute one thousand or more marijuana plants and to distribute one thousand or more kilograms of marijuana. The indictment alleged that Rex Robinson and others traveled in interstate commerce to promote “the marijuana growing and processing operation in the Eastern District of Michigan.” The indictment also alleged that Rex and Marcus Robinson “attempted to conceal activities previously conducted in connection with the purchase and attempted purchase of real estate in Sanilac County, Michigan.” Also charged in the conspiracy count were Francis Darrell Hayden, Dennis Keith Miles, James Michael Everett, Ralph Michael Kough, Barbara L. Kough, and James Austin Mattingly. The Koughs and Mr. Mattingly entered into Rule 11 plea agreements prior to trial. Ralph Kough and Mattingly testified at trial for the government. Count six charged Marcus and Rex Robinson with a Travel Act violation contrary to 18 U.S.C. § 1952. The indictment alleged that on or about January 18, 1997, Marcus and Rex Robinson traveled between Indiana and Sanilac County, Michigan with the intent to promote a business enterprise involving marijuana by attempting to conceal the true purpose of the “purchase and attempted purchase of real estate in Sanilac County.” The evidence at trial established without much doubt that Hayden, Miles, Everett, and Mattingly participated in the manufacturing operation at the Argyle Road farm in 1995 and 1996. -3- The connection of the Robinson brothers to the Sanilac County activities was less direct. As to Rex Robinson, evidence was presented that he assisted one of his brothers, Chad, in a marijuana growing operation in Indiana from 1991 until 1993. Frances Robinson, Chad’s ex-wife, testified that Chad purchased a farm in Sullivan, Indiana but titled it in Rex’s name in 1991. She stated that the farm was purchased as a site for marijuana manufacturing, and that a man named Kerry was supposed to run the farm for Rex and Chad. Kerry did not do a very good job, however, and Rex took over production on the farm in 1992. Frances explained that this was a family operation, and that Marcus, the older brother, owned a car lot in Indiana called R Motors where the marijuana was ultimately sold. R Motors also transported drivers and marijuana across the state lines to Kentucky at certain times. During this time period, Frances admitted, she assisted in the marijuana operation by helping harvest crops. She also explained that she saw marijuana plants growing at Rex’s home, overheard conversations between her husband and Rex regarding their plans for the Sullivan farm, and knew that the two brothers went “coon hunting” to look for other locations to grow their crops. Her knowledge of these activities spanned from 1991 until 1994, when she divorced Chad. The transcript recites testimony discussing a 30-acre farm in Sullivan, Indiana, Trial Tr. vol. VI, 25, May 23, 2001, and a house in Selvin, Indiana, id. at 27. However, the transcript reflects a number of questions and answers about a farm in Selvin. Id. at 32, 33, 35, 43. This discrepancy likely reflects mis-speaking on the part of the trial participants or error on the part of the court reporter. The evidence at trial, viewed in the light most favorable to the government, showed that Rex engaged in marijuana growing activities from 1991 to 1994. Frances Robinson testified that the land Chad bought in Sullivan, Indiana to grow marijuana was put in Rex’s name. Trial Tr. vol. -4- VI, 21, May 23, 2001. Frances also testified that Rex grew marijuana in the closet of a house trailer’s bedroom in 1991. Id. at 31. Later in 1991, Rex and his wife moved into a house in Selvin, Indiana. During this time, marijuana continued to be grown at the farm. Id. at 32. According to Frances Robinson, in 1992 and 1993, Rex and Chad made plans for Rex to move to the farm to help with the marijuana growing operations. Id. at 33-34. However, Frances never testified that Rex actually did move to the farm. The testimony establishes only that Rex and Chad talked about it. This gap, once again, could be due to errors in the transcript regarding Selvin and Sullivan. For instance, Frances answered “yes” when asked, “Was there a time period then when Rex Robinson and his wife took up residence at that property in Selvin?” Trial Tr. vol. VI, 31, May 23, 2001. If this question was intended to ask about “Sullivan, Indiana,” then there was testimony that Rex moved to the Sullivan farm. Frances testified that, as far as she knew, marijuana was only being grown at the farm in 1992, but she never saw that marijuana. Id. at 35-36. She then testified, however, that marijuana was being grown in a bedroom of the Selvin house in 1992, where Rex may have been living. Id. at 36. Again, Frances never saw the plants but somehow knew they were there. Ibid. Frances admitted that she never saw any marijuana growing activity in 1992. Id. at 38. Frances also “hear[d] conversations between Rex and Chad regarding growing marijuana in a room in Rex Robinson’s residence,” but she had no idea how many plants were involved. Id. at 46-47. It appears that this occurred sometime in 1993. Id. at 47. Frances said she saw marijuana plants in a basement room at Rex Robinson’s home in 1994. Id. at 48. She did not testify to the number of plants she saw. Regarding amounts, Frances testified that Chad grew at least 200 plants in 1993 in a room in -5- the basement of their house. Id. at 38-41. However, she never testified that Rex was involved in that activity. The only trial testimony indicating that Rex Robinson ever went to the Argyle Road farm in Michigan came from Sanilac County deputy sheriff Mark Ruggles. Trial Tr. vol. VIII, 65-66, May 30, 2001. Ruggles testified that Rex came to Michigan in 1997 to be interviewed. At that interview, Rex told Ruggles that he had visited the farm in February 1995 with Marcus Robinson. Id. at 67. The government believes Rex lied to Deputy Ruggles since his work records do not show absences in February 1995, although they do show absences during the week ending January 29, 1995. It seems likely that this discrepancy of a week was a reasonable mistake and not an intentional prevarication. The thousands of plants were grown at the Argyle Road farm in 1995 and 1996 during the growing seasons. Rex Robinson contended that this evidence was insufficient to support his conviction because the principal witness against him, his brother’s ex-wife Frances Robinson, was a liar. After observing the witness’s demeanor on the witness stand and listening to her testimony on direct and cross-examination, the Court finds merit to the defendant’s contention. In addition, Candida Tremper, a person with no ties to the defendants, testified that she heard Frances Robinson brag to friends at a Wal-Mart store in Indiana that she had lied at trial to get even with the Robinson brothers. Tremper testified: A. The first thing I heard her say was that she had been to Michigan, and that she had told enough lies to get even with Chad and his brothers and send them to the big house. Q. Put them in the big house? A. Um humm. Q. And what else did you hear her say? A. Well then she said that Mark Robinson’s lawyer wouldn’t be so cute after he got about 50 phone calls in the middle of the night. -6- Trial Tr. vol. XII, 184, June 11, 2001. Ms. Tremper further testified that Frances Robinson’s reputation for truth and veracity was “[n]ot truthful.” Id. at 186. Although the evidence specifically relating to Rex was not verified through another witness, certain elements of Frances’s testimony were supported in a general way by other witnesses. For example, government witness Dennis Steger, a Saginaw County deputy sheriff, verified that legitimate businesses often exist to conceal the profits of drug operations. Additionally, the testimony of some of the government witnesses was consistent with much of Frances’s testimony relating to the methods for manufacturing and cultivating a marijuana crop. Evidence was also presented to suggest that R Motors did not do much business, but that Marcus was earning a lot of money – indeed, enough to purchase an $89,000 farm in a cash deal even though he was earning less than $40,000 per year in his position with ALCOA. The testimony of another government witness, Deputy Ruggles, established that Rex assisted in the purchase of what became the location of the marijuana growing operation in Michigan on Argyle Road for Marcus in 1995. Ruggles also said that he executed a search warrant on the Argyle Road property in late 1996, and he met Rex and Marcus Robinson in Michigan on January 18, 1997. He testified that the three of them went to the Argyle Road property, where Rex informed him that many things on the farm looked different than they did when he first saw the place back in February of 1995. Coconspirator-turned-government-informant Mattingly testified regarding the identification of the financiers of the operation: Q. Did he say who it was that had purchased the farm and who it was that was financing the [drug] operation? -7- A. He had mentioned something about Robinsons, that’s who he told me. He didn’t specifically name a specific name, but he said Robinsons. Q. Did he indicate anything about where the Robinsons were from? A. No, he didn’t. Q. Did somebody else at some other time? A. Yeah, Dennis Miles had talked to neighbors, one of the neighbors was talking and they mentioned something about who purchased the farm, a Mr. Bullock. Trial Tr. vol. V, 83, May 22, 2001. In addition, a scanner along with codes for the local police and conservation authorities as well as papers that appeared to be a ledger with names and dollar figures with calculations in excess of $30,000 were seized from Rex Robinson’s Indiana residence during a search on May 19, 1998. However, Lisa Robinson, Rex Robinson’s ex-wife, testified as a defense witness and identified as hers a Bearcat police scanner, Exhibit 131, which the police took in the May 1998 police raid. She also alleged that Exhibit 132, a list of scanner codes including one signaling a drug bust, was hers. She claimed that she listened to police broadcasts as a hobby. Finally, Gloria Robinson, another ex- wife of Rex, identified Exhibit 128, a piece of paper referring to “Gord, Neff, Whitehead, and Thomas,” and which had the figure of $15,150 written on it, as describing her divorce settlement. She clarified that her nickname was Gord, Neff was Rex’s attorney, Whitehead was her attorney, and Thomas was the mediator. The trial began on May 15, 2001 and the case went to the jury around noon on June 14, 2001. Despite a month-long trial, a large volume of testimony and exhibits, and the need to consider the case against each of six defendants, the jury deliberated less than four hours and found each of the defendants guilty as charged. -8- During trial, the petitioner moved for a judgment of acquittal under Federal Rule of Criminal Procedure 29. The Court took the motion under advisement, and on August 31, 2001 the petitioner filed a brief in support of the motion. In his motion, the petitioner argued that the evidence presented at trial was not sufficient to find the petitioner guilty of participating in the conspiracy. The petitioner’s attorney never filed a motion for a new trial, nor did he challenge the sufficiency of the evidence regarding the quantity of marijuana the jury found he conspired to manufacture. On August 30, 2004, the Court denied the motion in a written opinion. On November 9, 2004, the petitioner was sentenced to 121 months on count one and 60 months on count six, in accordance with the then-mandatory Sentencing Guidelines. Because of the quantity of marijuana alleged, the conviction on court one carried a statutory mandatory minimum sentence of 120 months. On November 15, 2004, the petitioner simultaneously filed a notice of appeal and a motion to vacate his sentence. The motion to vacate was eventually denied as premature. On appeal, the petitioner argued that there was not sufficient evidence at trial to permit a reasonable jury to find every element of the charged offenses beyond a reasonable doubt. On January 4, 2006, the Sixth Circuit affirmed the convictions. United States v. Robinson, 161 F. App’x 541 (6th Cir. January 4, 2006) (unpublished). On December 4, 2006, the petitioner filed a motion to vacate or set aside his sentence arguing that his attorney was ineffective for failing to (1) file a Rule 33 motion for a new trial and (2) challenge the jury’s finding that the petitioner conspired to possess or distribute more than 1000 plants or kilograms of marijuana as against the great weight of the evidence. The government filed a timely response arguing that the petitioner’s claims have no merit, and the petitioner has filed a reply brief. -9- Along with his motion to vacate, the petitioner has submitted an affidavit from his trial attorney, Robert Canada. Mr. Canada swears that he was not aware of Rule 33 during his representation of the petitioner: 1. I am an attorney and I represented Rex Robinson at trial in the case of USA vs. Rex Robinson, Eastern District of Michigan #99-20011-3 BC. 2. On June 14, 2001 a jury found Defendant Rex Robinson guilty of violations of 18 USC § 1952 and 21 USC § 846. 3. During trial I made an oral motion for a directed verdict of acquittal and I supplemented it with a written submission. Among other things, I argued in connection with the Rule 29 motion that witness Frances Robinson’s testimony was not credible. 4. At the time of the verdict and during the week which followed I was not familiar with F.R. Crim. Pro. 33 which allows a judge to both consider the credibility of witnesses and the weight of the evidence to insure that the verdict does not constitute a miscarriage of justice. 5. Had I been aware of F.R. Crim. Pro. 33 and the fact that it empowers a trial judge to consider whether a new trial should be ordered on the basis that the verdict was against the great weight of the evidence, I would have filed such a motion within seven (7) days of the verdict. Mot. to Vacate, Canada Aff. [dkt # 564]. The government states this affidavit should not be construed as indicating that Mr. Canada was unaware of the existence of new trial motions in general because new trial motions were mentioned twice by the Court on the last day of trial. The record bears out the government’s contention, although it is apparent that those comments by the Court were directed to the attorneys of other defendants in the case while discussing detaining those defendants pending sentencing. A new trial was mentioned in the context of the defendants’ burden of establishing a substantial likelihood that a motion for acquittal or new trial will be granted. The Court stated to Thomas Loeb, who represented Marcus Robinson, the following: Well the ground – frankly, I think I can tell you that the heart of the issue in the case is whether or not there’s a substantial likelihood that a motion for acquittal or judgment – I’m sorry, motion for acquittal or new trial will be granted. -10- Trial Tr. vol. XIV, 74, June 13, 2001. Mr. Loeb indicated he “would be making such a motion.” Ibid. A similar comment was made by the Court to Russell Perry, who was representing Dennis Miles. Id. at 75-76. Although Mr. Canada was in the courtroom at the time, the Court was directing its comments to other attorneys who represented other defendants. II. Discussion “A prisoner seeking relief under 28 U.S.C. § 2255 must allege either: ‘(1) an error of constitutional magnitude; (2) a sentence imposed outside the statutory limits; or (3) an error of fact or law that was so fundamental as to render the entire proceeding invalid.’” Short v. United States, 471 F.3d 686, 691 (6th Cir. 2006) (quoting Mallett v. United States, 334 F.3d 491, 496-97 (6th Cir. 2003 . The petitioner asserts that his attorney provided ineffective assistance in violation of the Sixth Amendment. A claimed violation of the right to effective assistance of counsel states a constitutional violation cognizable under section 2255. The two-prong test set forth in Strickland v. Washington, (1984), governs claims of ineffective assistance of counsel. Towns v. Smith, 395 F.3d 251, 258 (6th Cir. 2005). To show a violation of the Sixth Amendment right to effective assistance of counsel, a petitioner must establish that his attorney’s performance was deficient and that the deficient performance prejudiced the defense. Strickland, 466 U.S. at 687. An attorney’s performance is deficient if “counsel’s representation fell below an objective standard of reasonableness.” Id. at 688. The defendant must show “that counsel made errors so serious that counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment.” Id. at 687. “Counsel . . . has a duty to bring to bear such skill and knowledge as will render the trial a reliable adversarial testing process.” Strickland, 466 U.S. at 688. “Judicial scrutiny of counsel’s -11- performance must be highly deferential.” Id. at 689. The Court has “declined to articulate specific guidelines for appropriate attorney conduct and instead [has] emphasized that the proper measure of attorney performance remains simply reasonableness under prevailing professional norms.” Wiggins v. Smith, , 521 (2003) (quoting Strickland, 466 U.S. at 688) (internal quotes omitted). An attorney’s deficient performance is prejudicial if “counsel’s errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable.” Strickland, 466 U.S. at 687. The petitioner must show “a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.” Id. at 694. Unless the petitioner demonstrates both deficient performance and prejudice, “it cannot be said that the conviction [or sentence] . . . resulted from a breakdown in the adversary process that renders the result unreliable.” Id. at 687. A. Failure to move for a new trial The petitioner alleges first that his attorney’s performance was constitutionally deficient for failing to file a motion for a new trial under Federal Rule of Criminal Procedure 33. The petitioner contends that the Rule 29 motion filed by his attorney “was doomed to failure” because the Court was required to view the evidence in the light most favorable to the government’s position. He contrasts that with a Rule 33 motion, which permits a court to consider the credibility of witnesses, including Frances Robinson. The petitioner’s trial attorney maintained that he was not familiar with Rule 33. The petitioner contends that trial counsel’s failure to file a Rule 33 motion was deficient performance, and he was prejudiced since the Court expressed doubt about the weight of the evidence and Frances’s credibility. -12- The government contends that failing to make a Rule 33 motion is not inconsistent with objective standards of reasonableness. Rather, the government relegates the decision to forego filing a motion for new trial to trial counsel’s strategic choice, observing generally that Rule 29 motions are made in almost every case, and Rule 33 motions are rarely made. The government attributes the rarity of Rule 33 motions to its view that such motions, when based on the weight of the evidence, are not favored and are granted only in exceptional cases, which this case is not. i. Performance As a general rule, trial counsel’s strategic decisions on how the trial is to be conducted are afforded great deference. As the Supreme Court explained: It is all too tempting for a defendant to second-guess counsel’s assistance after conviction or adverse sentence, and it is all too easy for a court, examining counsel’s defense after it has proved unsuccessful, to conclude that a particular act or omission of counsel was unreasonable. A fair assessment of attorney performance requires that every effort be made to eliminate the distorting effects of hindsight, to reconstruct the circumstances of counsel’s challenged conduct, and to evaluate the conduct from counsel’s perspective at the time. Because of the difficulties inherent in making the evaluation, a court must indulge a strong presumption that counsel’s conduct falls within the wide range of reasonable professional assistance; that is, the defendant must overcome the presumption that, under the circumstances, the challenged action might be considered sound trial strategy. Strickland, 466 U.S. at 689 (internal quotes and citations omitted). “[A] lawyer’s acts and omissions must be judged on the basis of what he knew, or should have known, at the time his tactical choices were made and implemented.” Ouber v. Guarino, 293 F.3d 19, 25 (1st Cir. 2002) (citing Bell v. Cone, 535 U.S. 685 (2002 . It is equally true that “errors of tactics or omission do not necessarily mean that counsel has functioned in a constitutionally deficient manner.” Greer v. Mitchell, 264 F.3d 663, 676 (6th Cir. 2001). -13- However, “strategic” choices that have no hope of succeeding, are made without adequate investigation or preparation, or actually imperil the defendant’s case cannot be considered “sound.” For instance, in Wiggins, 539 U.S. at 527-28, a death penalty case, the Supreme Court held that the state court of appeals unreasonably applied Strickland’s governing principles in rejecting the petitioner’s ineffective assistance claim because the state court of appeals’ conclusion that counsel’s performance was within professional norms was objectively unreasonable. Counsel did not present evidence at the penalty phase on the petitioner’s personal background – a valid strategic choice under some circumstances – but counsel had failed to make a reasonable investigation into the petitioner’s social history. Ibid. (noting that under Strickland, “strategic choices made after less than complete investigation are reasonable precisely to the extent that reasonable professional judgments support the limitations on investigation” (citation and internal quotation marks omitted . This failure reasonably to investigate, in turn, rendered the state court’s deference to counsel’s strategic decision not to present mitigating evidence of the petitioner’s social history objectively unreasonable as well. Ibid. (stating that “counsel chose to abandon their investigation at an unreasonable juncture, making a fully informed decision with respect to sentencing strategy impossible”). A “decision . . . cannot be according the normal deference to strategic choices [where] it was uninformed.” Rolan v. Vaughn, 445 F.3d 671, 682 (3d Cir. 2006). Other “strategic” choices by counsel, such as the failure to object to obviously tainted and inadmissible evidence, Ege v. Yukins, 485 F.3d 364, 378-79 (6th Cir. 2007), and the failure to cross- examine a key prosecution witness, Higgins v. Renico, 362 F. Supp. 2d 904, 916-17 (E.D. Mich. 2005), have been found to be so unsound as to negate the finding that counsel’s performance tracked “prevailing professional norms.” Wiggins, 539 U.S. at 521. -14- Moreover, acts or failures that do not constitute strategic decisions are not afforded deference. “Only choices made after a reasonable investigation of the factual scenario are entitled to a presumption of validity.” Rolan v. Vaughn, 445 F.3d 671, 682 (3d Cir. 2006) (citation omitted). An obviously defective choice is “not a reasonable strategic decision entitled to deference.” Moss v. Hoffbauer, 286 F.3d 851, 865 (6th Cir. 2002) (finding that defense counsel’s reliance on the cross-examination of an eyewitness by a co-defendant unreasonable when the two defendants’ interests were not aligned). As the Seventh Circuit has put it: [I]f as in this case there is only one argument that could be made on the defendant’s behalf, and it is not frivolous, the lawyer may have a professional obligation to make it. Keys v. Duckworth, 761 F.2d 390, 392 (7th Cir. 1985) (per curiam); cf. Fortenberry v. Haley, 297 F.3d 1213, 1226-27 (11th Cir. 2002) (per curiam); Tejeda v. Dubois, 142 F.3d 18, 25 (1st Cir. 1998). It is not suggested that Rezin’s lawyer had a tactical reason not to make the argument that we are about to examine; he could not have, since he had no other basis for knocking five years off his client’s sentence. “The spectrum of counsel’s legitimate tactical choices does not include abandoning a client’s only defense.” United States ex rel. Barnard v. Lane, 819 F.2d 798, 805 (7th Cir. 1987). There was nothing to lose and something to gain, though only in a probabilistic sense, from making the argument. United States v. Rezin, 322 F.3d 443, 446 (7th Cir. 2003). A decision based on a misunderstanding of the law is not a strategic decision. Dando v. Yukins, 461 F.3d 791, 799 (6th Cir. 2006) (“The evidence in this case suggests that the attorney’s decision was not an exercise in professional judgment because it reflected a misunderstanding of the law regarding the availability of a mental health expert.”); see also United States v. Span, 75 F.3d 1383, 1390 (9th Cir. 1996) (“Counsel’s errors with the jury instructions were not a strategic decision to forego one defense in favor of another. They were the result of a misunderstanding of the law.”) (citing Martinez-Macias v. Collins, 810 F. Supp. 782, 786 (W.D. Tex. 1991 ; Cox v. Donnelly, 432 F.3d 388, 390 (2d Cir. 2005) (finding deficient performance where trial attorney admitted that “he did not challenge the -15- trial court’s intent instructions because he did not then know that they were illegal under state and federal law . . . [and] had he been aware of the unconstitutional nature of the instruction, he would have lodged an objection to it”); Hardwick v. Crosby, 320 F.3d 1127, 1163 (11th Cir. 2003) (“[A] tactical or strategic decision is unreasonable if it is based on a failure to understand the law.”); United States v. Streater, 70 F.3d 1314, 1321 (D.C. Cir. 1995) (“While this court remains unwilling to second-guess ‘reasonable strategic or tactical judgments,’ [trial counsel]’s erroneous legal advice to Streater on a critical point cannot be excused as a strategic or tactical judgment, but could have sprung only from a misunderstanding of the law.” (internal citation omitted . In Kimmelman v. Morrison, 477 U.S. 365 (1986), a criminal defendant’s attorney failed to file a motion to suppress evidence challenging a search and seizure within the time allowed under state law. The evidence was admitted at trial. The Supreme Court held that the defendant’s constitutional right to effective assistance of counsel was violated by his attorney’s failure to move to suppress the evidence. The attorney in that case was not aware of the search until the first day of trial because he failed to request any discovery from the state. That failure “was not based on ‘strategy,’ but on counsel’s mistaken beliefs that the State was obliged to take the initiative and turn over all of its inculpatory evidence to the defense.” Id. at 385. The Court found that the attorney’s failures “betray a startling ignorance of the law.” Ibid. In House v. Balkcom, 725 F.2d 608 (11th Cir. 1984), the Eleventh Circuit found a defendant’s attorneys ineffective for committing a variety of errors, including a failure to file a motion for a new trial based on newly discovered evidence. The court stated: The Atkinses failed to file a motion for a new trial based on evidence submitted to them by House’s neighbors. The district court, although not finding counsel ineffective, acknowledged the curiousness of the situation: -16- Both Schumacher and Mrs. Atkins have testified that they did not pursue the matter because they ultimately decided the Ramsey- Patterson testimony could have been discovered in the exercise of due diligence prior to trial. However, that explanation does not make sense. House v. Balkcom, 562 F. Supp. at 1132. While it is not the function of this court to second-guess the decisions of counsel as to whether or not counsel should file motions in particular cases, the explanation given here for not doing so has no realistic basis. Bobby Patterson approached the Atkinses because of what she had heard at the recently concluded trial. She could not have come forward prior to trial. Failure to file a motion for new trial based on newly discovered evidence, standing alone, does not automatically constitute ineffective counsel. In the totality of the other failures of the Atkinses, it adds to the already ripe impression that no real representation occurred. Id. at 619. The explanation given in the present case for trial counsel’s failure to move for a new trial under Rule 33 is trial counsel’s ignorance of the law. He avers that he did not know a new trial could be granted on the ground that the verdict was against the great weight of the evidence. The government questions Mr. Canada’s affidavit, since, as noted above, new trial motions were mentioned in Mr. Canada’s presence at least twice on the last day of trial during discussion of the bond revocation motion. Trial Tr. vol. XIV, 74, 76, June 13, 2001. However, the comments about new trial motions were not directed to Mr. Canada. Moreover, there was no discussion of the legal proposition that the verdict was against the weight of the evidence. It is obvious to the Court that counsel’s failure to file the motion was not a strategic choice; it was based on ignorance of the law. Mr. Canada’s affidavit states that he “was not familiar with F.R. Crim. Pro. 33” at the time of the verdict. Mot. to Vacate, Canada Aff. at ¶ 4. The government’s citation to parts of the record where the Court mentioned a motion for a new trial while speaking to the attorneys of the petitioner’s co-defendants does not provide a reason to dismiss this testimony. A decision based on a misunderstanding of the law is not a strategic decision. See Dando v. Yukins, -17- 461 F.3d 791, 799 (6th Cir. 2006); United States v. Span, 75 F.3d 1383, 1390 (9th Cir. 1996); Cox v. Donnelly, 432 F.3d 388, 390 (2d Cir. 2005). The failure was “not a reasonable strategic decision entitled to deference.” Moss v. Hoffbauer, 286 F.3d 851, 865 (6th Cir. 2002). Nor was counsel’s failure to file the motion objectively reasonable, even when viewing Mr. Canada’s performance “on the basis of what he knew, or should have known, at the time his tactical choices were made and implemented.” Ouber, 293 F.3d at 25. After the petitioner’s conviction, Mr. Canada continued to represent him. Once a criminal defendant has been convicted by a jury, there were limited options available to challenge the conviction. One of those ways is through a Rule 33 motion. Mr. Canada was required to conduct a reasonable investigation and make a professional judgment as to the best course of action. Wiggins, , 521 (2003) (“[C]ounsel has a duty to make reasonable investigations or to make a reasonable decision that makes particular investigations unnecessary.” (quoting Strickland, 466 U.S. at 690-91 . The petitioner’s trial counsel in this case failed to do so, and his failure to file the Rule 33 motion was unreasonable. “There was nothing to lose and something to gain, though only in a probabilistic sense, from making the argument.” Rezin, 322 F.3d at 446. The Court concludes, therefore, that trial counsel’s failure to file a motion for a new trial amounted to constitutionally deficient performance. ii. Prejudice The government insists that even if Mr. Canada’s ignorance of Rule 33 is irrelevant because the petitioner incurred no prejudice as a result of Mr. Canada’s failure to file the motion, since the motion should not have been granted, in the government’s view. At the time of the petitioner’s trial in 2001, Federal Rule of Criminal Procedure 33 read as follows: -18- Rule 33. New Trial On a defendant’s motion, the court may grant a new trial to that defendant if the interests of justice so require. If trial was by the court without a jury, the court may – on defendant’s motion for new trial – vacate the judgment, take additional testimony, and direct the entry of a new judgment. A motion for new trial based on newly discovered evidence may be made only within three years after the verdict or finding of guilty. But if an appeal is pending, the court may grant the motion only on remand of the case. A motion for a new trial based on any other grounds may be made only within 7 days after the verdict or finding of guilty or within such further time as the court may fix during the 7-day period. Fed. R. Crim. P. 33 (2001). “The decision whether to grant a new trial is left to the sound discretion of the district court.” United States v. Pierce, 62 F.3d 818, 823 (6th Cir. 1995). “A reversal based on the verdict being against the manifest weight of the evidence is proper when the government has presented sufficient evidence to convict, but the judge disagrees with the jury’s resolution of conflicting evidence.” United States v. Lutz, 154 F.3d 581, 589 (6th Cir. 1998). “A district judge, in considering the weight of the evidence for purposes of adjudicating a motion for new trial, may act as a thirteenth juror, assessing the credibility of witnesses and the weight of the evidence.” United States v. Hughes, 505 F.3d 578, 593 (6th Cir. 2007) (quoting Lutz, 154 F.3d at 589). As another judge of this court explained, A Motion for Acquittal and a Motion for New Trial based on the ground that the verdict is against the great weight of the evidence are governed by very different standards. The Motion for New Trial involves a much broader standard of review than a Motion for Acquittal. A verdict may well be against the great weight of the evidence, but, nevertheless, be substantial enough to permit reasonable jurors to draw an inference of guilt. In a Motion for New Trial, the trial judge can consider the credibility of the witnesses and the weight of the evidence to insure that there is not a miscarriage of justice. It has often been said that he/she sits as a thirteenth juror. Nevertheless, granting a Fed. R. Crim. P. 33 Motion for New Trial attacking the weight of the evidence is a discretionary matter. The Court should exercise such discretion only in the extraordinary circumstances where the evidence preponderates heavily against the verdict. -19- United States v. Turner, 490 F. Supp. 583, 593 (E.D. Mich. 1979) (citing 2 C. Wright & A. Miller, Federal Practice and Procedure § 553, at 487 & n. 31), aff’d, 633 F.2d 219 (6th Cir. 1980). “Turner does, indeed, disclose the appropriate standard for district courts to follow in ruling on motions for new trials based on the verdict’s being against the great weight of the evidence.” United States v. Ashworth, 836 F.2d 260, 266 (6th Cir. 1988). The government cites a number of cases from other circuits stating that the credibility of witnesses is to be decided by the jury except in exceptional circumstances, United States v. Kuzniar, 881 F.2d 466, 470-71 (7th Cir. 1989) (“In general, conflicting testimony or a question as to the credibility of a witness are not sufficient grounds for granting a new trial.”); United States v. Sanchez, 969 F.2d 1409, 1414 (2d Cir. 1992) (“It long has been our rule that trial courts ‘must defer to the jury’s resolution of the weight of the evidence and the credibility of the witnesses.”); United States v. Polin, 824 F. Supp. 542, 551 (E.D. Pa. 1993) (“I could not simply substitute my own judgment for that of the jury without seriously undermining the integrity of our trial system.”), and stating that “motions for new trials based on the weight of the evidence are not favored,” United States v. Martinez, 763 F.2d 1297, 1313 (11th Cir. 1985). One Sixth Circuit case does state that “[m]otions for a new trial are not favored and are granted only with great caution.” United States v. Garner, 529 F.2d 962, 969 (6th Cir. 1976). However, Garner involved a motion based on newly discovered evidence and cited United States v. Hoffa, 382 F.2d 856, 862 (6th Cir. 1967), which states that “[m]otions for a new trial on newly discovered evidence are not favored and should be granted only with great caution.” (Emphasis added.) A different standard applies in Rule 33 motions based on newly discovered evidence. See United States v. Blackwell, 459 F.3d 739, 768-69 (6th Cir. 2006). -20- The Court concludes that the present case represents one those extraordinary matters in which a motion for a new trial would have been appropriately considered and granted. It is true that the Court denied a motion under Rule 29, finding that the evidence was sufficient to convict; but that does not prevent a new trial in those cases where “the judge disagrees with the jury’s resolution of conflicting evidence.” Lutz, 154 F.3d at 589. That is exactly what happened here. As the Court noted in its decision denying the Rule 29 motion, The Court harbored grave doubt about the validity of the conviction of Rex Robinson because the evidence of his involvement in the Indiana operation came largely from Frances Robinson, Rex’s former sister-in-law, whose testimony the Court views as highly suspect and likely false; the evidence connecting Rex Robinson to the Michigan operation is weak; and the likelihood of the existence of two separate conspiracies – one in Michigan and one in Indiana at an earlier time – is quite strong. However, after considering the transcript of proceedings carefully for an inordinately lengthy time, and applying the indulgent standard that must be employed when reviewing a criminal jury verdict, the Court concludes that the trial evidence is sufficient to support the verdict. Opinion on Mot. to Vacate, 99-20011 (Aug. 30, 2004). The Court believes that “the evidence lack[ed] that degree of persuasiveness without which there should be no conviction.” Bain v. United States, 262 F. 664, 666 (6th Cir. 1920). This case involves “the extraordinary circumstances where the evidence preponderates heavily against the verdict.” Turner, 490 F. Supp. at 593 (approved of by Ashworth, 836 F.2d at 266). Because the motion for a new trial would have been granted if made, counsel’s deficient performance in failing to file such a motion resulted in prejudice to the petitioner. The Court finds that the petitioner has satisfied Strickland’s two-pronged test and has established a constitutional violation entitling him to a vacation of his sentence under 28 U.S.C. § 2255. B. Failure to challenge sufficiency of evidence of drug quantity -21- The petitioner’s second claim is that his trial attorney was ineffective by failing to challenge the sufficiency of the evidence regarding the quantity of drugs the jury found he conspired to manufacture. The prosecution did not present any evidence that the petitioner was actively involved in the Michigan growing operations, had observed the active operations in Michigan, or knew the extent of the Michigan operation. The jury’s finding that the petitioner conspired to manufacture or distribute more than 1000 plants or kilograms, the petitioner believes, is against the weight of the evidence, and the petitioner’s trial attorney should have made that argument. The government states the petitioner cannot show that his attorneys (different ones at trial and on appeal) were both ineffective for failing to raise this issue. The government catalogs the evidence presented at trial and concludes that the record shows Rex Robinson was a participant in a major manufacturing and distributing conspiracy that spanned multiple states from 1991 to 1998, which is sufficient to allow the jury to infer that Rex Robinson was responsible for 1000 or more plants or kilograms of marijuana. The petitioner replies that without any evidence that he came to Michigan in 1995, a finding that he was responsible for 1000 plants or kilograms of marijuana is against the great weight of the evidence. He reasons that even if there was only a single conspiracy, the individual responsibility of each member of the conspiracy must be shown. However, the petitioner continues to dispute that the evidence shows that he was involved in one large conspiracy involving both Michigan and Indiana, and he suggests that the court of appeals’ decision involving the petitioner’s co-defendants held only that the evidence viewed in the light most favorable to the government was sufficient to establish one conspiracy in both states involving those co-defendants. i. Performance -22- This issue presents a closer question since the attorney did, in fact, file a motion challenging the sufficiency of the evidence. However, the Court concludes that trial counsel was also ineffective for his failure to challenge the sufficiency of the evidence of the drug quantity attributable to the petitioner. Again, it does not appear that it could have been a strategic decision to challenge guilt but not the amount for which the petitioner was to be held accountable. The statutory mandatory minimum sentence in this case was tied directly to the amount of drugs charged. By arguing that there was insufficient evidence that the petitioner was responsible for over 1000 kilograms or plants, trial counsel, if successful, could have reduced the petitioner’s sentence exposure by half. See 21 U.S.C. §§ 841(b)(1)(A)(vii), (b)(1)(B)(vii). “It is not suggested that [the petitioner’s] lawyer had a tactical reason not to make the argument . . .; he could not have, since he had no other basis for knocking five years off his client’s sentence.” Rezin, 322 F.3d at 446. On direct appeal, the Sixth Circuit took note of the oddity of counsel’s omission: In denying the Criminal Rule 29 motion, the district court did not address the possible issue that the jury finding that Rex Robinson’s involvement in the marijuana conspiracy exceeded 1,000 plants and 1,000 kilograms of marijuana was not supported by the evidence. The district court acted properly as the issue was not raised in the Criminal Rule 29 motion. On appeal, Rex Robinson’s replacement counsel attempted to argue that the Criminal Rule 29 motion challenged the jury finding which required the mandatory minimum sentence of 120 months. The Criminal Rule 29 motion stated in part that “there was absolutely no evidence which established that Rex Robinson had entered into an agreement to distribute more than 1000 kilograms of marijuana or had entered into an agreement to manufacture more than 1000 plants, as charged in the indictment.” (emphasis added). JA 57. That challenge questioned the issue of guilt but did not raise the sentencing issue as to whether there was sufficient evidence to support the jury’s separate finding as to Rex Robinson. The appeal in this case does not raise that issue. United States v. Robinson, 161 F. App’x 541, 543, n.4 (6th Cir. January 4, 2006). The Court agrees that counsel’s failure precluded consideration of a viable issue – potentially beneficial to the -23- petitioner – in post-judgment proceedings and on direct appeal. The failure to raise that issue amounted to deficient performance under Strickland. ii. Prejudice The petitioner was also likely prejudiced by this failure, as the Court probably would have granted relief on the basis of this argument. The testimony suggests that Rex Robinson was involved in marijuana crimes in 1991, 1992, and 1993. If Frances Robinson is to be believed, the evidence indicated that the petitioner grew marijuana in the closet of a house trailer in 1991, in a bedroom in 1992, and in a bedroom and a basement room in 1993. Trial Tr. vol. VI, 31, 36, 46-48, May 23, 2001. Furthermore, the testimony showed that Rex Robinson and Chad Robinson discussed Rex moving to the Sullivan, Indiana farm to take care of the plants. No evidence was presented about the number of plants that Rex was involved in growing there. Of course, “[a] defendant found guilty of conspiracy is accountable for all quantities of drugs for which he was directly involved, and all reasonably foreseeable quantities.” United States v. Caver, 470 F.3d 220, 246-47 (6th Cir. 2006); see also United States v. Robinson, 547 F.3d 632, 639- 40 (6th Cir. 2008) (holding that a defendant must be found to have participated in a conspiracy to be held accountable for the drug quantities attributed to the conspiracy as a whole); United States v. Gill, 348 F.3d 147, 152 -153 (6th Cir. 2003) (holding that “the key factor in determining the quantity of drugs for which an individual conspirator will be held accountable at sentencing is foreseeability” (citing United States v. Page, 232 F.3d 536, 541-42 (6th Cir. 2000 . However, absent proof connecting Rex Robinson to the Michigan operation, this evidence is entirely insufficient to support a finding that Rex was involved in growing over 1000 kilograms or plants of marijuana, or that those quantities were foreseeable to him. The failure to raise that issue in a mid- -24- or post-trial motion, therefore, caused the petitioner prejudice and resulted in a violation of his Sixth Amendment right to the assistance of competent counsel. III. Conclusion The Court concludes that the petitioner’s trial counsel’s failure to file a motion for a new trial and to challenge the sufficiency of the drug quantity evidence amounted to deficient performance that prejudiced the petitioner. Therefore, he has established an error of constitutional magnitude warranting relief under 28 U.S.C. § 2255. Accordingly, it is ORDERED that the petitioner’s motion to vacate his sentence [dkt #564] is GRANTED. It is further ORDERED that the petitioner’s sentence and judgment of sentence [dkt #473] are VACATED. It is further ORDERED that the petitioner is granted a new trial. It is further ORDERED that the order setting unsecured bond with conditions [dkt #23] and the petitioner’s bond [dkt #24] are REINSTATED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 22, 2009 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 22, 2009. s/Lisa M. Ware LISA M. WARE -25-

=== Robinson v. United States of America ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION MARCUS ROBINSON, Petitioner, v. UNITED STATES OF AMERICA, ______________________________________/ Respondent. Civil No. 06-14431 Criminal No. 99-20011 Honorable David M. Lawson Magistrate Judge Charles E. Binder OPINION AND ORDER SUSTAINING IN PART AND OVERRULING IN PART OBJECTIONS TO MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION, REJECTING REPORT, ADOPTING RECOMMENDATION, AND DENYING MOTION TO VACATE SENTENCE The petitioner, Marcus Robinson, was convicted of violating the Controlled Substances Act and the Travel Act and sentenced to 130 months in prison. He filed a motion under 28 U.S.C. § 2255 to vacate his sentence, which the Court referred to Magistrate Judge Charles E. Binder for a report and recommendation. Judge Binder filed a report recommending that the motion be denied, and the petitioner filed timely objections. The Court has conducted a de novo review of the matter and concludes that the petitioner’s objections criticizing the magistrate judge’s treatment of his claims have merit, the magistrate judge incorrectly decided the issues regarding the procedural and substantive bars to relief, but the petition should be denied nonetheless because Sixth Circuit precedent requires a finding that the petitioner’s appellate counsel’s performance was not deficient. I. The main issue raised by the section 2255 motion in this case is whether appellate counsel rendered ineffective assistance by failing to anticipate the Supreme Court’s holding in United States v. Booker, 543 U.S. 220 (2005), thereby preserving a claim that mandatory application of the United States Sentencing Guidelines to Robinson was unconstitutional. Two Sixth Circuit decisions indicate that such a failure does not amount to deficient performance. See Nichols v. United States, 563 F.3d 240, 253 (6th Cir. 2009) (en banc) (“Nichols has not shown that his counsel was constitutionally ineffective for failing to anticipate or foresee a change in the law and raise an Apprendi-based challenge at sentencing or on direct appeal, for failing to move the appellate court for reconsideration on a Blakely-based claim in post-appellate proceedings, or for failing to petition the Supreme Court for certiorari based on Booker.”); Dunham v. United States, 486 F.3d 931, 934 (6th Cir. 2007) (rejecting argument that decision in Apprendi v. New Jersey, (2000), should have “put [petitioner’s] counsel on notice to argue that his sentence was similarly unconstitutional . . . because this court specifically rejected this type of Apprendi-based argument in the period before Booker was decided” (citing United States v. Koch, 383 F.3d 436 (6th Cir. 2004) (en banc . The magistrate judge recommended denial of the motion on different grounds, which the Court believes are incorrect. The procedural history of the case is as follows. On February 10, 1999, a federal grand jury returned a multi-count indictment charging the petitioner and several others with conspiracy to manufacture marijuana, and traveling in interstate commerce to advance the conspiracy. Superseding indictments were returned on December 7, 1999 and March 28, 2001. A jury trial commenced against the petitioner and five other defendants on May 15, 2001. On June 14, 2001, the jury returned its verdict finding the petitioner guilty of conspiracy to manufacture 1000 kilograms or more of marijuana or 1000 or more marijuana plants and the Travel Act violations. At sentencing, the petitioner was held accountable for 3,347.5 kilograms of marijuana, and based on that finding the presentence report recommended a base offense level of 32, citing U.S.S.G. -2- § 2D1.1(c)(4) (2000). That reference was erroneous, however, inasmuch as that quantity of marijuana falls within U.S.S.G. § 2D1.1(c)(3), which calls for a base offense level of 34. This mistake was overlooked by the Court and the government, which did not object to that finding, and after the Court rejected an enhancement for the petitioner’s role in the offense, the sentencing guideline range was determined to be 121 to 151. The petitioner was sentenced at the lower end of that range, receiving 130 months in custody. The petitioner filed a direct appeal, alleging five errors: (1) this Court admitted hearsay statements that were not in furtherance of the conspiracy and where there was no independent proof that the petitioner was a member of the conspiracy; (2) the evidence was insufficient because the circumstantial evidence of the petitioner’s participation in the conspiracy was equally consistent with innocence; (3) there was insufficient evidence to support the Travel Act convictions; (4) the defendant was denied due process when the Assistant United States Attorney improperly argued the evidence in closing; and (5) the government knowingly presented false testimony. Prior to oral argument in the court of appeals, the Supreme Court handed down its decision in Blakely v. Washington, (2004), which invalidated the statutory sentencing scheme of the State of Washington. The petitioner’s appellate counsel did not raise a sentencing issue or cite Blakely as precedent to challenge the petitioner’s sentence under the United States Sentencing Guidelines. The court of appeals affirmed the petitioner’s convictions in November 2004. United States v. Robinson, 116 F. App’x 646 (6th Cir., Nov. 19, 2004). In January 2005, the Supreme Court decided United States v. Booker, 543 U.S. 220 (2005), which avoided a determination that the United States Sentencing Guidelines were unconstitutional by severing a portion of the legislation that made them mandatory. Thereafter, federal sentencing -3- courts were to consider the Sentencing Guidelines in an advisory capacity only. In February 2005, the petitioner filed a petition for writ of certiorari in the Supreme Court challenging the reasonableness of his sentence in light of Booker. In March, the Supreme Court issued an order granting certiorari, vacating the judgment of the court of appeals, and remanding for reconsideration in accordance with Booker. Robinson v. United States, 544 U.S. 945 (2005). However, on remand the court of appeals found that the petitioner had waived the right to reconsideration of his sentence by failing to raise a sentencing issue earlier in his appeal to that court. United States v. Marcus Robinson, No. 01-2395, slip. op. (6th Cir. Dec. 20, 2005). As it turns out, a co-defendant, Dennis Miles, pursued an appellate path similar to Robinson’s, but Miles’s appellate counsel did raise a sentencing issue in the court of appeals, filed a petition for certiorari, and was successful on remand having his sentence reduced at a re-sentence hearing. Noting the crucial difference between the two – the absence of a sentencing issue in Robinson’s original appeal – the court of appeals refused to remand the petitioner’s case for re-sentencing and simply dismissed his appeal. A subsequent certiorari petition was denied. Robinson v. United States, 547 U.S. 1021 (2006). The petitioner then filed the present motion to vacate his sentence under 28 U.S.C. § 2255. He alleges that he received ineffective assistance of counsel at trial and on direct appeal because (1) trial counsel failed to move for a mistrial on the ground that the petitioner’s Sixth Amendment right to confront witnesses was violated by admission of out-of-court statements of co-conspirators under Federal Rule of Evidence 801(d)(2)(E); and (2) at sentencing, counsel failed to challenge the base offense level determination that was computed on an amount of drugs found by the Court based on a preponderance of evidence and not by the jury, and appellate counsel failed to raise this issue and the corresponding unconstitutionality of the United States Sentencing Guidelines, thereby -4- anticipating the Supreme Court’s decision in United States v. Booker, especially as Booker was foreshadowed by the Court’s decision in Blakely v. Washington. The magistrate judge recommended that the petitioner’s motion be denied on both procedural and substantive grounds. Procedurally, Judge Binder concluded that this Court is barred from reviewing the petitioner’s motion because the petitioner is merely attempting to re-litigate an issue that was previously decided by the court of appeals by characterizing it as an instance of ineffective assistance of counsel. Substantively, Judge Binder concluded that Booker and Blakely cannot apply retroactively to cases on collateral review, even in the guise of an ineffective assistance of counsel claim. The petitioner filed timely objections to the report and recommendation. He insists that the sentencing issue was never raised or decided by the court of appeals, so no procedural bar can operate here. And he notes that since the argument is that appellate counsel was ineffective for failing to raise the constitutionality of the Sentencing Guidelines on direct appeal, the question of Booker’s retroactivity is irrelevant. In a reply to the government’s response to the petitioner’s objections, the petitioner withdrew his claim that counsel was ineffective for not asserting a Confrontation Clause argument at trial concerning the co-conspirator statements. Reply Br. [doc. #593] at 2. II. Objections to a report and recommendation are reviewed de novo. 28 U.S.C. § 636(b)(1). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” -5- Miller v. Currie, 50 F.3d 373, 380 (6th Cir.1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). “A prisoner seeking relief under 28 U.S.C. § 2255 must allege either: ‘(1) an error of constitutional magnitude; (2) a sentence imposed outside the statutory limits; or (3) an error of fact or law that was so fundamental as to render the entire proceeding invalid.’” Short v. United States, 471 F.3d 686, 691 (6th Cir. 2006) (quoting Mallett v. United States, 334 F.3d 491, 496-97 (6th Cir. 2003 . The petitioner was sentenced under a mandatory sentencing guideline regime, which has since been invalidated. Booker, 543 U.S. at 250-51. The petitioner cannot benefit directly from this change in the law, however. The Sixth Circuit has held that Booker “does not apply retroactively to cases already final on direct review.” Humphress v. United States, 398 F.3d 855, 857 (6th Cir. 2005). The court reaffirmed the holding of Humphress in Lang v. United States, 474 F.3d 348, 353- 57 (6th Cir. 2007). The magistrate judge so observed in his report. But that observation misses the point of the petitioner’s main argument. He says that he lost the opportunity to benefit from Booker as precedent because his appellate counsel failed to raise an appropriate challenge to the constitutionality of the United States Sentencing Guidelines on direct appeal, which would have taken his case out of the prohibition described by the magistrate judge and his citation to Humphress. His objection to the magistrate judge’s report on this ground, therefore, is well taken. It is also true that a court may not conduct a collateral review of a judgment where the issues for review have been decided on direct appeal. DuPont v. United States, 76 F.3d 108, 110-11 (6th -6- Cir. 1996). Nor, in most circumstances, may a court conduct collateral review of an issue that has been procedurally defaulted by the petitioner’s failure to raise the grounds for review on direct appal. Massaro v. United States, 538 U.S. 500, 504 (2003). A claim that could have been raised on direct appeal generally is not reviewable in a section 2255 motion. Bousley v. United States, 523 U.S. 614, 621 (1998) (holding that “even the voluntariness and intelligence of a guilty plea can be attacked on collateral review only if first challenged on direct review”); Regalado v. United States, 334 F.3d 520, 528 (6th Cir. 2003) (reaffirming that “[s]ection 2255 is not a substitute for a direct appeal, and thus a defendant cannot use it to circumvent the direct appeal process”). In United States v. Frady, 456 U.S. 152 (1982), the Supreme Court observed: Once the defendant’s chance to appeal has been waived or exhausted, however, we are entitled to presume he stands fairly and finally convicted, especially when, as here, he already has had a fair opportunity to present his federal claims in a federal forum. Our trial and appellate procedures are not so unreliable that we may not afford their completed operation any binding effect beyond the next in a series of endless postconviction collateral attacks. To the contrary, a final judgment commands respect. For this reason, we have long and consistently affirmed that a collateral challenge may not do service for an appeal. Id. at 164-65. Accord Elzy v. United States, 205 F.3d 882, 884 (6th Cir. 2000) (stating that “respect for the finality of judgments demands that collateral attack generally not be allowed to do service for an appeal”). Where a defendant fails to assert claims on direct appeal and attempts to raise them in a § 2255 motion, “he also must show either that (1) he had good cause for his failure to raise such arguments and he would suffer prejudice if unable to proceed, or (2) he is actually innocent.” Regalado, 334 F.3d at 528. Once again, however, the sentencing issue raised by the petitioner does not fall within these prohibitions because the gravamen of his argument is that counsel’s ineffectiveness prevented him from presenting a genuine issue – and a meritorious one, as it turns out – to the appellate court. -7- “Ineffective assistance claims are more properly raised in a post-conviction proceeding brought pursuant to 28 U.S.C. § 2255, where the record regarding counsel's performance can be developed in more detail. Th[e court of appeals] typically will not review a claim of ineffective assistance on direct appeal except in rare cases where the error is apparent from the existing record.” United States v. Lopez-Medina, 461 F.3d 724, 737 (6th Cir. 2006) (citation omitted). This rule is well established in this Circuit. See United States v. Winkle, 477 F.3d 407, 421 (6th Cir. 2007); United States v. Bradley, 400 F.3d 459, 461-62 (6th Cir. 2005); United States v. Long, 190 F.3d 471, 478 (6th Cir. 1999); United States v. Pruitt, 156 F.3d 638, 646 (6th Cir.1998); United States v. Daniel, 956 F.2d 540, 543 (6th Cir.1992). The ineffective-assistance-of-counsel claim was not and could not have been raised and decided on direct appeal, as the magistrate judge suggested. The Court must conclude, therefore, that the grounds upon which the magistrate judge recommend denial of the section 2255 motion are flawed, and the petitioner’s objections to those grounds must be sustained. That conclusion, however, does not mean that the petitioner is entitled to relief. A claimed violation of the right to effective assistance of counsel does state a constitutional violation cognizable under section 2255. But the two-prong test set forth in Strickland v. Washington, (1984), governs claims of ineffective assistance of counsel. Towns v. Smith, 395 F.3d 251, 258 (6th Cir. 2005). To show a violation of the Sixth Amendment right to effective assistance of counsel, a petitioner must establish that his attorney’s performance was deficient and that the deficient performance prejudiced the defense. Strickland, 466 U.S. at 687. An attorney’s performance is deficient if “counsel’s representation fell below an objective standard of reasonableness.” Id. at 688. The defendant must show “that counsel made errors so serious that -8- counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment.” Id. at 687. “Judicial scrutiny of counsel’s performance must be highly deferential.” Id. at 689. The Court has “declined to articulate specific guidelines for appropriate attorney conduct and instead [has] emphasized that the proper measure of attorney performance remains simply reasonableness under prevailing professional norms.” Wiggins v. Smith, , 521 (2003) (quoting Strickland, 466 U.S. at 688) (internal quotes omitted). An attorney’s deficient performance is prejudicial if “counsel’s errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable.” Strickland, 466 U.S. at 687. The petitioner must show “a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.” Id. at 694. Unless the petitioner demonstrates both deficient performance and prejudice, “it cannot be said that the conviction [or sentence] . . . resulted from a breakdown in the adversary process that renders the result unreliable.” Id. at 687. The right to effective assistance of counsel includes the right to effective assistance of appellate counsel. Evitts v. Lucey, 469 U.S. 387, 396 (1985); Carpenter v. Mohr, 163 F.3d 938, 946 (6th Cir.1998), rev’d on other grounds sub nom. Edwards v. Carpenter, 529 U.S. 446 (2000). These standards apply to claims of ineffective assistance of appellate counsel raised in a motion under section 2255. Ballard v. United States, 400 F.3d 404, 407-08 (6th Cir. 2005). In this case, it is tempting to point to the conduct of the co-defendant’s attorney and reason that if Robinson’s appellate counsel had mimicked the arguments made by defendant Miles, Robinson may have received a reduction in his sentence as well, and therefore his own lawyer’s “mistake” foreclosed that opportunity. The Sixth Circuit adopted a similar approach in Ballard. In -9- that case, the Sixth Circuit did find that appellate counsel rendered ineffective assistance for failing to raise arguments on direct appeal that rested on a case decided during the pendency of the appeal. Id. at 408-09. The appellate lawyer in Ballard declined to pursue colorable challenges to the petitioner’s sentence based on Apprendi v. New Jersey, (2000), and United States v. Dale, 178 F.3d 429 (1999). The court noted that “while we do not require attorneys to foresee changes in the law, once a change – particularly an important and relevant change – does come about, we expect counsel to be aware of it.” Ballard, 400 F.3d at 408. Although the court suggested that such an omission alone could conceivably render the appellate counsel’s performance deficient, the court’s unreasonableness determination was strongly influenced by the fact that the petitioner’s co-defendant briefed and won on those same issues on appeal. Similarly, in Hicks v. United States, 122 F. App’x 253 (6th Cir. 2005), the Sixth Circuit again found ineffective assistance in appellate counsel’s failure to raise an Apprendi argument where Apprendi was decided after the appellate briefs were filed but before oral argument. Id. at 258. The Hicks court noted that several Sixth Circuit decisions handed down during the pendency of Hicks’s appeal granted resentencing in cases with substantially similar facts. Ibid. Given such clear precedent, counsel’s omission was unreasonable. However, a criminal defendant has no constitutional right to demand that appellate counsel raise every possible colorable issue on appeal. Jones v. Barnes, , 751 (1983). “‘[W]innowing out weaker arguments on appeal and focusing on’ those more likely to prevail, far from being evidence of incompetence, is the hallmark of effective appellate advocacy.” Smith v. Murray, , 536 (1986) (quoting Jones, 463 U.S. at 751-52). The Sixth Circuit has -10- identified several factors to be considered in assessing the constitutional adequacy of the performance of appellate counsel. Those factors include: 1. Were the omitted issues “significant and obvious?” 2. Was there arguably contrary authority on the omitted issues? 3. Were the omitted issues clearly stronger than those presented? 4. Were the omitted issues objected to at trial? 5. Were the trial court’s rulings subject to deference on appeal? 6. Did appellate counsel testify in a collateral proceeding as to his appeal strategy and, if so, were the justifications reasonable? 7. What was the appellate counsel’s level of experience and expertise? 8. Did the petitioner and appellate counsel meet and go over possible issues? 9. Is there evidence that counsel reviewed all the facts? 10. Were the omitted issues dealt with in other assignments of error? 11. Was the decision to omit an issue an unreasonable one which only an incompetent attorney would adopt? Mapes v. Coyle, 171 F.3d 408, 427-28 (6th Cir. 1999); see also Franklin v. Anderson, 434 F.3d 412, 429 (6th Cir. 2006). An attorney who has presented strong but unsuccessful claims on appeal may nonetheless deliver a deficient performance by omitting an issue that obviously would have resulted in reversal on appeal. Clemmons v. Delo, 124 F.3d 944, 954 (8th Cir.1997); United States v. Cook, 45 F.3d 388, 395 (10th Cir.1995); see also Banks v. Reynolds, 54 F.3d 1508, 1515 (10th Cir.1995) (failure to raise a “dead-bang winner” claim on appeal constitutes ineffective assistance of appellate counsel even though counsel may have raised other strong but ultimately unsuccessful claims); Matire v. Wainwright, 811 F.2d 1430, 1438 (11th Cir.1987) (appellate counsel may be ineffective where the trial error is obvious from the record and “must have leaped out upon even a casual reading of the transcript”). Although appellate counsel need not raise every nonfrivolous argument on direct appeal, he must exercise reasonable professional judgment. Joshua v. DeWitt, 341 F.3d 430, 441 (6th Cir. 2003) (citing Jones, 463 U.S. at 751-52). -11- It is easy to conclude now that raising the Blakely issue in Robinson’s direct appeal amounts to the “dead-bang winner” referred to in Banks. But that is apparent only in retrospect. At the time of the petitioner’s direct appeal, the issue was far from settled. The petitioner filed his claim of appeal on October 2, 2001. His conviction was affirmed by opinion filed November 19, 2004. In Blakely’s immediate wake, and during the pendency of the petitioner’s appeal, multiple circuits declined to extend the decision to federal sentencing. See United States v. Hammoud, 378 F.3d 426 (4th Cir. 2004) (en banc); United States v. Mincey, 380 F.3d 102 (2d Cir. 2004); United States v. Pineiro, 377 F.3d 464 (5th Cir. 2004). Meanwhile, on July 9, 2004, the Seventh Circuit had applied Blakely to invalidate the United States Sentencing Guidelines, see United States v. Booker, 375 F.3d 508 (7th Cir. 2004), and by July 21, 2004, the government had petitioned for certiorari and expedited review. The Supreme Court granted certiorari on August 2, 2004, and heard argument on October 4, 2004. But on August 26, 2004, the Sixth Circuit had issued an en banc decision, United States v. Koch, 383 F.3d 436, 438 (6th Cir. 2004), holding that “Blakely does not compel the conclusion that the Federal Sentencing Guidelines violate the Sixth Amendment.” The Supreme Court did not decide Booker until January 12, 2005. So was appellate counsel’s performance deficient because he did not preserve the sentencing issue later validated by Booker? Considering the Mapes factors, the issue was significant, but it was not “obvious” in light of Koch. For instance, in Poindexter v. Mitchell, 454 F.3d 564 (6th Cir. 2007), the Sixth Circuit applied the Mapes factors to an appellate counsel’s failure to challenge the trial court’s jury instructions on direct appeal and found that the omission was reasonable. Id. at 584-85. The court noted that the issue could not have been “significant and obvious” at the time of appeal because the crucial supporting precedent – a decision by the Supreme Court of Ohio – wasn’t -12- delivered until after the appellate brief was filed. Koch, an en banc decision of the Circuit, was contrary authority in Robinson’s case. The sentencing issue probably was stronger than the other appellate issues raised in Robinson’s direct appeal, but that conclusion likewise is obvious only in retrospect. There was no objection to the application of the sentencing guidelines in this Court, although a ruling on the constitutional issue would not have been entitled to deference on review. The petitioner has not presented any evidence of appellate counsel’s level of experience, nor is there any testimony about appellate strategy. However, in Poindexter, the court of appeals implied that appellate counsel is not necessarily ineffective for failing to raise a colorable claim on direct appeal, even where a particular omission was a mere oversight and not a strategic decision. Id. at 584-85. Finally, the omission of the sentencing issue cannot be found to be unequivocably referable to incompetence. Certainly it would have been prudent to raise the issue, given the pending review by the Supreme Court of the Seventh Circuit’s decision in Booker. But Circuit precedent was squarely against the petitioner, and therefore appellate counsel’s failure to raise the issue cannot be found to have fallen below prevailing professional norms. If appellate counsel’s performance could be deemed deficient, this Court would have no trouble finding prejudice. The petitioner argues that, but for his counsel’s failure to raise a Blakely challenge to sentencing on appeal, the court of appeals would have remanded the case for re- sentencing following the mandate of the Supreme Court, as it did in the co-defendant’s case. Thus, it is of no moment that the court of appeals initially would have rejected the petitioner’s Blakely argument under Koch. The petitioner need only demonstrate that it is reasonably probable that the court of appeals would have remanded the case following the decision of the Supreme Court. But the Court does not find that appellate counsel’s performance was deficient in a constitutional sense, -13- guided in part by the decisions in Nichols v. United States and Dunham v. United States. Both of those cases could be distinguished here. In Nichols, for example, the petitioner’s main complaint was that his appellate attorney did not file a certiorari petition to extend the direct appeal and preserve the sentencing issue. The thrust of the court’s decision was that “the Constitution does not entitle a criminal defendant to the assistance of counsel for the filing of a petition for certiorari, so counsel’s failure to file that petition cannot amount to constitutionally ineffective assistance.” 563 F.3d at 249-50. In Dunham, the court noted that the petitioner was sentenced five years before Booker was decided in 2005 and his conviction was affirmed in 2002. The court stated that “there is no way Dunham could have obtained Booker relief on direct appeal, even if his attorney had raised the issue.” 486 F.3d at 934. Nonetheless, the court in both cases expressed the view that the Constitution did not require appellate counsel to anticipate and preserve the issue. Nichols, 563 F.3d at 253; Dunham, 486 F.3d at 934. In light of this precedent, the Court will not hold otherwise. Because the petitioner cannot establish that appellate attorney’s performance was deficient, as is required to sustain a Sixth Amendment claim under Strickland v. Washington, he cannot show that his sentence results from an error of constitutional magnitude. III. The Court concludes that the petitioner’s objections to the magistrate judge’s report and recommendation are meritorious and will be sustained. However, on de novo review of the motion to vacate the sentence, the Court does not find that the petitioner has established that his appellate counsel’s performance was constitutionally deficient. Accordingly, it is ORDERED that the petitioner’s objections to the magistrate judge’s report and recommendation [dkt #587] are SUSTAINED IN PART. -14- It is further ORDERED that the report [dkt #582] is REJECTED; but the recommendation is ADOPTED. It is further ORDERED that the petitioner’s motion to vacate his sentence [dkt #555] is DENIED. Dated: July 14, 2009 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 14, 2009. s/Lisa M. Ware LISA M. WARE -15-

=== Final Judgment Under Rule 54(b) Denying Comerica Bank's Motion ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION IN RE: SEIZURE OF $143,265.78 FROM COMERICA CHECKING ACCOUNT NO. 1851349546 AND $28,687,40 FROM CHECKING ACCOUNT NO. 1080022185. ________________________________________/ Case Number 07-50329 Honorable David M. Lawson FINAL JUDGMENT UNDER RULE 54(b) DENYING COMERICA BANK’S MOTION In accordance with the Opinion entered this date, It is ORDERED AND ADJUDGED that judgment is entered against Comerica Bank on its motion to set aside forfeiture. Comerica Bank’s motion to set aside declaration of forfeiture is DENIED. Dated: May 18, 2009 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 18, 2009. s/Lisa M. Ware LISA M. WARE

=== Opinion on Final Judgment Denying Comerica Bank's Motion to Set Aside Forfeiture ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION IN RE: SEIZURE OF $143,265.78 FROM COMERICA CHECKING ACCOUNT NO. 1851349546 AND $28,687,40 FROM CHECKING ACCOUNT NO. 1080022185. ________________________________________/ Case Number 07-50329 Honorable David M. Lawson OPINION ON FINAL JUDGMENT DENYING COMERICA BANK’S MOTION TO SET ASIDE FORFEITURE On December 1, 2008, Comerica Bank filed a motion to set aside forfeiture. The motion was docketed in the case number opened for the underlying seizure warrant. On May 14, 2009, the Court entered an opinion and order denying Comerica Bank’s motion to set aside declaration of forfeiture. The matter is now before the Court on whether to enter a judgment in this case. Federal Rule of Civil Procedure 54(b) provides that “[w]hen an action presents more than one claim for relief . . . or when multiple parties are involved, the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay.” Fed. R. Civ. P. 54(b). This rule imposes two requirements before a judgment may be entered on less than all claims or parties: 1) the decision must “entirely resolve[]” an individual claim or the dispute as to one party, and 2) there must be “no just reason for delay.” Lowery v. Federal Exp. Corp., 426 F.3d 817, 821 (6th Cir. 2005). In this case, the Court has “entirely resolved” the dispute as to Comerica Bank. Yet it is possible that another party will bring a motion to set aside the declaration of forfeiture. However, this motion would have no bearing on the Court’s decision as to Comerica. The Court also finds that there is “no just reason for delay.” This requires consideration of the following factors: “(1) the relationship between the adjudicated and unadjudicated claims; (2) the possibility that the need for review might or might not be mooted by future developments in the district court; (3) the possibility that the reviewing court might be obliged to consider the same issue a second time; (4) the presence or absence of a claim or counterclaim which could result in set-off against the judgment sought to be made final; (5) miscellaneous factors such as delay, economic and solvency considerations, shortening the time of trial, frivolity of competing claims, expense and the like.” Lowery, 426 F.3d at 822 (quoting Gen. Acquisition, Inc. v. GenCorp, Inc., 23 F.3d 1022, 1030 (6th Cir. 1994 . All of the factors favor entry of judgment as to Comerica Bank, or are neutral. There is no relationship between Comerica’s effort to set aside the forfeiture and that potentially advanced by other claimants. Although it is unlikely that Comerica’s appeal, if it chooses to take one, would be mooted by future developments, it is unknown whether any other claimant will step forward, delaying Comerica’s right to appeal indefinitely, or perhaps permanently. There is no possibility that the court of appeals will be forced to review this legal issue again, and there is also no possibility of a set-off or other alteration to the decision against Comerica. Finally, although there is no indication of solvency issues, the potential that Comerica could be denied a right to appeal altogether strongly favors entry of a judgment against Comerica Bank in accordance with the Opinion and Order entered on May 14, 2009. Therefore, the Court will enter a final judgment as to Comerica’s claim under Rule 54(b). s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 18, 2009 -2- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 18, 2009. s/Lisa M. Ware LISA M. WARE -3-

=== Opinion and Order Denying Comerica Bank's Motion to Set Aside Forfeiture ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION IN RE: SEIZURE OF $143,265.78 FROM COMERICA CHECKING ACCOUNT NO. 1851349546 AND $28,687,40 FROM CHECKING ACCOUNT NO. 1080022185. ________________________________________/ Case Number 07-50329 Honorable David M. Lawson OPINION AND ORDER DENYING COMERICA BANK’S MOTION TO SET ASIDE FORFEITURE The government seized nearly $200,000 from the bank accounts of Global Consulting Group, Inc. and its principal, Raghu Vupputuri, alleging that the funds were proceeds from an illegal money laundering and visa forgery operation. The accounts were held by Comerica Bank, which claims an interest in the funds by virtue of a security agreement with its customers, Global Consulting and Vupputuri. Comerica filed a formal claim with the government, which was rejected as untimely and procedurally defective. Comerica now asks the Court to set aside the forfeiture, arguing that its claim was both timely and properly presented, and insisting that the notice given was not “proper” within the meaning of the applicable statute because the bank’s attorneys were not given notice simultaneously as they had requested previously. The Court heard oral argument from the parties on May 11, 2009, and now finds that Comerica failed to file its claim in accordance with the formal requirements of the administrative forfeiture statute, 18 U.S.C. § 983. The claim was properly rejected by the government, and this Court finds no grounds on which to set aside the forfeiture. Comerica’s motion, therefore, will be denied. I. Global Consulting Group, Inc. and its principal, Raghu Vupputuri, had deposited funds in two Comerica Bank accounts. The United States Bureau of Immigration and Customs Enforcement obtained a seizure warrant from a United States magistrate judge on October 10, 2007 and executed the warrant the next day, according to the search warrant docket. The affidavit prepared in support of the seizure warrant claimed violations of laws prohibiting money laundering, 18 U.S.C. § 1956, and the forgery of visas, passports, and other entry documents, 18 U.S.C. § 1546, as the offenses that justified the forfeiture. The money allegedly was proceeds of those offenses. Pursuant to the warrant, cash under the control of Comerica Bank was seized from the following accounts: $28,687.40 from trust account number 108022185; and $143,265.78 from checking account number 1851349546. Comerica Bank claims that it had no knowledge that Global Consulting or Vupputuri were engaged in illegal activity, and for the purpose of the present motion the government does not contest that point. On October 17, 2007, an e-mail was sent from Sandra Jasinski, who purported to be an attorney representing Comerica, to Assistant United States Attorney (AUSA) Julie Beck concerning the seizure warrant. The message reads: From: Sent: To: Subject: Jasinski, Sandra Wednesday, October 17, 2007 3:35 PM ‘[email protected]’ Global Consulting Hello Julie: Thank you for taking my call yesterday regarding the order served on my client, Comerica Bank. As I indicated, Comerica Bank has a security interest in the seized funds as a result of its loan agreements with Global Consulting. My client is in the process of gathering/organizing the loan documents in anticipation subsequent forfeiture proceedings. I will forward them to your attention as soon as I receive them. I would appreciate it if, to the extent you can, you would be so kind to keep me in the loop on how this matter progresses. -2- Is ICE handling this? Is there anything that you are liberty to share about the underlying investigation? From a review of PACER, it appears that there were some proceedings earlier this year against the Company’s principal in connection with visa fraud, but that they were dismissed without prejudice. Again, thanks for taking my call and being so helpful. Regards, Sandy Jasinski Mot., Ex. B. A few days later, a follow-up letter was sent: November 8, 2007 Julie Beck, Esq. Assistant United States Attorney United States. Attorney’s Office 211 W. Fort Street, Suite 2001 Detroit, Michigan 48226 Re: Global Consulting Group, Inc. Dear Ms. Beck: I am following up to our telephone conversation regarding Global Consulting Group, Inc. and the seizure of sums in the company’s deposit accounts that it maintained at Comerica Bank. For your information, I am enclosing the following documents regarding the loan between Comerica Bank and Global Consulting Group: 1. 2. 3. 4. 5. Master Revolving Note dated September 7, 2006 in the amount of $500,000.00; Security Agreement (All Assets) dated September 7, 2006; Personal Guaranty signed by Raghu Vupputuri dated September 7, 2006; UCC Financing Statements field on September 13, 2006; and Automatic Loan Payment Authorization. -3- Pursuant to the terms of the loan documents, Comerica Bank has a perfected security interest in, among other things, the deposit accounts Global Consulting maintained at the Bank, including the funds described in the order served on the Bank on October 17. Please consider this letter a request that I be provided with notice of any and all proceedings involving the funds seized from Comerica Bank in order for the Bank to protect its interest in the collateral securing its loan. Regards, [Signature] Sandra L. Jasinski Mot., Ex. C. There apparently was no written response from the United States Attorney’s Office or any acknowledgment that courtesy copies of forfeiture paperwork would be sent to the bank’s attorney. On November 29, 2007, Wanda Vela, an agent with the United States Customs and Border Protection (CPB) agency, sent the following notice addressed to Comerica Bank at their branch at 17111 North Laurel Park Drive in Livonia, Michigan: This is to officially notify you that on October 17, 2007, Special Agents from the Bureau of Immigration and Customs Enforcement in Detroit, Michigan seized $28,687.40 in U. S. Currency from Comerica trust account number 1080022185 and $143,265.78 in U. S. Currency from Comerica checking account number 1851349546 (Account holder: Global Consulting Group). The currency was seized and is now subject to criminal forfeiture pursuant to title 18, United States Code, section 982(a) for violation of title 18, United States Code, sections 1546 and 1946. The facts available to U.S. Customs and Border Protection indicate that you might have an interest in the seized property. The purpose of this letter is to advise you of the legal options available to you concerning this seizure. Important documents are attached to this letter. Please do not ignore them. . . . If you take no action within thirty-five (35) days from the date of this notice . . . your right to contest forfeiture will be extinguished. -4- Govt’s Resp., Ex. 2. The notice outlines options that the claimant may utilize, including abandoning the property or filing a claim. The government claims that the notice was sent by certified mail on November 29, 2007. Comerica concedes that the letter was sent and delivered, although at oral argument counsel stated that the bank cannot locate a copy of the document. The government has the return-receipt from the certified mailing. All parties agree that no notice was sent to Ms. Jasinski. A few weeks passed with no claim being filed, so CBP served general notice of forfeiture by publication in the Detroit Legal News on January 24, 2008, January 31, 2008 and February 7, 2008. On February 22, 2008, the bank filed a petition for remission of the funds. The petition identifies the property as “$171,953.18 in funds from Account Nos. 1851349546 and 1080022185 held in the name of Global Consulting Group, Inc. at Comerica Bank, 39200 Six Mile Road, Livonia MI, 48152-2689.” Mot., Ex. E. It asserts a claim “because Comerica has a valid, good faith, and legally cognizable interest in the seized property as lien holder the loan documents [sic] and had no knowledge of any illegal activities on the part of its borrowers,” and attaches several pages of loan documents. Ibid. The petition is signed by two individuals. One is Barbara Utterback, a vice president, who signed underneath the statement “Unless otherwise stated, Comerica Bank has retained the above-named attorney to represent Comerica Bank in this matter. I have reviewed the foregoing petition and found that its contents are accurate to the best of my information and belief. I affirm that if Comerica receives any compensation for its losses, it will immediately notify the official who grants this petition (if it is granted) of that fact. I understand that this petition will be governed by the regulations, including definitions of terms such as “victim” and “related offense,” set forth in 28 C.F.R. § 9.1, et. seq..” Ibid. On the next page, Ms. Jasinski signed her name -5- underneath the statement, “I hereby declare under penalty of perjury that upon information and belief the foregoing petition, including any attachments thereto, is true and correct in every respect.” Ibid. On July 11, 2008, Wanda Vela of CBP sent Jasinski a letter denying the petition as untimely and because it “does not meet the standards for a proper claim . . .” Mot., Ex. D. On December 1, 2008, Comerica filed a motion to set aside the forfeiture in this Court, to which the government responded. II. Section 981 of title 18 authorizes the forfeiture of “[a]ny property, real or personal, involved in a transaction or attempted transaction in violation of section 1956 . . . or any property traceable to such property.” 18 U.S.C. § 981(a)(1)(A). The government has alleged that the funds that had been on deposit at Comerica Bank in the accounts of Global Consulting Group, Inc. and Raghu Vupputuri were the proceeds of money laundering, 18 U.S.C. § 1956, and the forgery of visas, passports, and other entry documents, 18 U.S.C. § 1546. There appears to be no dispute to those allegations, so the money is subject to forfeiture. Section 983 of title 18, enacted as part of the Civil Asset Forfeiture Reform Act (“CAFRA”), provides procedures that govern “all civil forfeitures under federal law unless the particular forfeiture statute is specifically exempted in 18 U.S.C. § 983(i)(2).” United States v. One TRW, Model M14, 7.62 Caliber Rifle, 441 F.3d 416, 418 (6th Cir. 2006) (quoting Deep Sea Fisheries, Inc. v. 144,774 Pounds of Blue King Crab, 410 F.3d 1131, 1134 (9th Cir. 2005 ; see also 18 U.S.C. § 983(a)(1)(A)(i) & (i)(1) (stating that it applies to “any nonjudicial civil forfeiture proceeding under -6- a civil forfeiture statute” subject to certain exceptions). None of the exceptions applies here, and the parties agree that section 983 applies to this case. Comerica claims that it has an interest in the deposited funds because it loaned money to Global and Vupputuri, and the accounts were pledged as security for the loans. The bank says it is entitled to the funds because it had no knowledge of its customers’ illegal activities. According to the applicable statute, “[a]n innocent owner’s interest in property shall not be forfeited under any civil forfeiture statute. The claimant shall have the burden of proving that the claimant is an innocent owner by a preponderance of the evidence.” 18 U.S.C. § 983(d). Comerica’s security interest brings it within the definition of statutory “owner,” 18 U.S.C. § 983(d)(6); however, to challenge the forfeiture, Comerica must make a claim to the government within a prescribed time limit after it is notified of the forfeiture, see 18 U.S.C. § 983(a)(2)(B). Under the statutory procedure, the notice of forfeiture by the government agency starts the claim period. Section 983 requires that in non-judicial civil forfeiture proceedings, the government must provide notice to interested parties “in a manner to achieve proper notice as soon as practicable, and in no case more than 60 days after the date of the seizure.” 18 U.S.C. § 983(a)(1)(A)(i). Any person who wishes to file a claim over the property may do so “with the appropriate official after the seizure.” 18 U.S.C. § 983(a)(2)(A). This claim “may be filed not later than the deadline set forth in a personal notice letter (which deadline may be not earlier than 35 days after the date the letter is mailed), except that if that letter is not received, then a claim may be filed not later than 30 days after the date of final publication of notice of seizure.” 18 U.S.C. § 983(a)(2)(B). In this case, CBP sent its forfeiture notice to the Comerica Bank branch on November 29, 2007, notifying the bank that it had 35 days to file a petition for relief from the seizure. Comerica -7- did not file its petition until February 22, 2008, well after the 35-day period expired. Since no claim was filed within the allowable period, the government entered a declaration of forfeiture. Comerica’s claim to the funds was rejected as untimely, among other reasons. Comerica now seeks to set aside the forfeiture. A forfeiture can be upset only by bringing a motion under 18 U.S.C. § 983(e), which states: (1) Any person entitled to written notice in any nonjudicial civil forfeiture proceeding under a civil forfeiture statute who does not receive such notice may file a motion to set aside a declaration of forfeiture with respect to that person's interest in the property, which motion shall be granted if-- (A) the Government knew, or reasonably should have known, of the moving party’s interest and failed to take reasonable steps to provide such party with notice; and (B) the moving party did not know or have reason to know of the seizure within sufficient time to file a timely claim. 18 U.S.C. § 983(e). This motion “shall be the exclusive remedy for seeking to set aside a declaration of forfeiture under a civil forfeiture statute.” 18 U.S.C. § 983(e)(5). The Court lacks jurisdiction to review the merits of the forfeiture determination, but can only review the procedures followed. Mesa Valderrama v. United States, 417 F.3d 1189, 1196 (11th Cir. 2005). Comerica’s argument is this: it was entitled to written notice of the forfeiture because of its interest in the accounts (which is undisputed); section 953(a)(1)(A)(i) requires the notice to interested parties to be “proper notice”; the notice CPB sent to the branch was not “proper notice” because a copy was not sent to the bank’s attorney as previously requested; the bank did not receive proper written notice; therefore the bank is entitled to relief under section 983(e). Comerica also argues alternatively that its claim was timely either because the letter Ms. Jasinski sent on November -8- 8, 2007 amounted to a claim, or the formal claim it filed on February 22, 2008 was made within 35 days of the last publication date. The Court finds merit in none of these arguments. First, Comerica has not established all the elements for relief under the terms of the statute. Section 983(e) allows the Court to grant relief from forfeiture after expiration of the claim period if the movant shows (1) it is entitled to written notice of the forfeiture; (2) it did not receive notice; (3) the government knew or should have known of the movant’s interest in the property; (4) the government failed to take reasonable steps to provide notice; and (5) “the moving party did not know or have reason to know of the seizure within sufficient time to file a timely claim.” 18 U.S.C. § 983(e). Comerica cannot satisfy the last element because it had actual knowledge of the seizure; the government took the money from the accounts in the possession of the bank even before the forfeiture notice was sent. Moreover, Comerica does not deny receipt of the forfeiture letter, and it admits its attorney was in contact with a government attorney within a week of the seizure of the funds. Comerica also claims that the request made by Comerica’s counsel that the AUSA “keep [her] in the loop on how this matter progresses” and that the attorney “be provided notice” constitutes a binding requirement on the United States Attorney (a different agency than the one pursuing the forfeiture) to provide notice to the bank’s attorney, and the failure to do so renders any notice sent to Comerica improper. It bears repeating that Ms. Jasinski’s request was only for a courtesy copy of any notices sent to the bank itself (“I would appreciate it if, to the extent you can, you would be so kind to keep me in the loop on how this matter progresses.”). Comerica cites no authority in the statute or elsewhere that allows a potential claimant to impose enhanced notice -9- requirements on the United States. And there is no indication that the United States agreed to this request or misled Comerica in any way. To find legal support, Comerica points to other statutes and rules, which it claims provides persuasive analogous obligations for service upon counsel. They do not. Comerica notes that under the Bankruptcy code, creditors may designate an address for notices to be sent. 11 U.S.C. § 342(e). Indeed, that statute allows individuals to restrict the types of notice that will suffice. If Congress intended to create a similar right to forfeiture contestants, it is evident that it knew how to do it. The absence of such a provision in the Civil Asset Forfeiture Act suggests that the failure to serve a forfeiture notice on the attorney for a represented claimant does not undermine the fact that the notice was “sent in a manner to achieve proper notice.” See 18 U.S.C. 983(a). Comerica also states, without explanation, that sending a certified letter to Comerica was insufficient under the federal rules, presumably relying on Federal Rule of Civil Procedure 5’s edict that “[i]f a party is represented by an attorney, service under this rule must be made on the attorney unless the court orders service on the party.” Fed. R. Civ. P. 5(b)(1). That argument ignores the fact that the forfeiture in this case was non-judicial, well outside the purview of the Federal Rule of Civil Procedure. The requirements of the civil litigation rules do not establish or even augment the statutory procedures for administrative forfeiture. Finally, Comerica argues that the Michigan Rules of Professional Conduct forbid a lawyer from contacting a client that the lawyer knows is represented. Mich. R. Prof. Conduct 4.2. However, Rule 4.2 permits contact when “authorized by law,” such as when an attorney must serve notice directly on a client. See 9A Wright & Miller, Federal Prac. & Proc. 3d § 2454 (noting that Rule 45 subpoenas must be served directly on individual, and service on attorney is insufficient); -10- Rest. (Third) Law Governing Lawyers § 99 comment g. Moreover, the notice was provided by Wanda Vela, a forfeiture officer with CBP, who does not appear to be an attorney, and therefore the Michigan Rules of Professional Conduct do not apply to her. Although this has not been raised by the parties, notice also must satisfy the requirements of Constitutional due process. See United States v. Dusenbery, 201 F.3d 763, 766 (6th Cir. 2000); see also Lobzun v. United States, 422 F.3d 503, 507 (7th Cir. 2005). “An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Central Hanover Bank & Trust Co., , 314 (1950); see also Dusenbery v. United States, 534 U.S. 161, 167 (2002). “The ‘reasonably calculated’ standard is now widely accepted as the benchmark for resolving questions about the constitutionality of notice procedures.” Karkoukli’s, Inc. v. Dohany, 409 F.3d 279, 283 (6th Cir. 2005). The use of certified mail to a claimant’s last known address – which apparently was done here – typically satisfies due process, even in the absence of actual notice. Dusenbery, 534 U.S. at 171; Lobzun, 422 F.3d at 507 (noting that “[a]bsent exceptional circumstances, written notice of forfeiture by certified mail to the claimant’s residence satisfies due process, even if the claimant does not receive actual notice”). One exception to this rule is “when initial personal notice letters are returned undelivered, the government must make reasonable additional efforts to provide personal notice.” United States v. Ritchie, 342 F.3d 903, 911 (9th Cir. 2003) (collecting cases). Yet there is no indication that the letter was returned and marked as undeliverable. -11- Certainly, it would have been courteous, and even perhaps desirable, for the government to provide notice in accordance with Comerica’s request; however, claimants’ requests for convenience do not determine what is required under the due process clause. The mere fact that more could have been done does not make the effort at notice constitutionally suspect. See Karkoukli’s, 409 F.3d at 284 (“For due process purposes, the focus must be on the constitutional adequacy of the statutory procedure and not on whether some additional effort in a particular case would have in fact led to a more certain means of notice.”). The Court need not determine the limits of the concept of “proper notice” within the meaning of 18 U.S.C. § 953(a)(1)(A)(i). The evidence indicates that Comerica received actual notice of the seizure and an actual copy of the forfeiture letter. However, “proper notice” is defined, actual notice surely must fall within that definition. The notice, therefore, was valid when it was sent to the client rather than the attorney. Comerica intimates briefly that “Comerica Bank’s petition was timely because it was sent to ICE within 30 days of the last publication.” Br. at 5. Although the statute does allow a claim to be filed within thirty days of the final publication of notice of seizure, this provision does not apply to a claimant who received other notice, unless “that letter is not received.” 18 U.S.C. § 983(a)(2)(B). Comerica concedes that it received the letter at its Livonia, Michigan branch, so the fact that the formal petition was filed within thirty days of the last day of publication is irrelevant. Comerica then advances the theory that its correspondence from Jasinski in October and November 2007, when “read together,” constituted a claim. Although “[a] claim need not be made in any particular form,” 18 U.S.C. § 983(a)(2)(D), each claim must: “(i) identify the specific property being claimed; (ii) state the claimant’s interest in such property; and (iii) be made under -12- oath, subject to penalty of perjury.” 18 U.S.C. § 983(a)(2)(C). The most obvious defect in the correspondence was that it was not “made under oath, subject to penalty of perjury,” and therefore cannot constitute a valid claim. See ibid. Nor is the set of letters signed by someone with personal knowledge. See United States v. Currency $267,961.07, 916 F.2d 1104, 1108 (6th Cir. 1990) (holding that the requirement of verification makes the “notarized signature of an attorney . . . insufficient . . .”). “The purpose of [the oath] requirement is to prevent the danger of false claims in forfeiture proceedings by informing the court on oath or affirmation that the claimant is entitled to contest the forfeiture action by virtue of his interest in the defendant property.” Id. at 1107. Although this case interprets a different procedure for contesting a forfeiture action, the Court believes it applies with equal force to the oath requirement of section 983. The Court must conclude, therefore, that Comerica has not filed a timely and proper claim within the statutory period. Therefore, it is not entitled to relief under 18 U.S.C. § 983(e). III. The Court must conclude that the government served proper notice of forfeiture upon Comerica Bank, and Comerica’s claim against the forfeited assets was untimely. Moreover, the correspondence from counsel filed in October and November 2007 did not amount to a proper claim. Accordingly, it is ORDERED that Comerica Bank’s motion to set aside forfeiture [dkt #5] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge -13- Dated: May 14, 2009 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 14, 2009. s/Lisa M. Ware LISA M. WARE -14-

=== Bradford v. Wurm et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION BRIAN BRADFORD, v. Plaintiff, ANDREW WURM and VINCENT PALAZZOLO, ________________________________________/ Defendants. Case No. 08-11365 Honorable David M. Lawson OPINION AND ORDER DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Plaintiff Brian Bradford alleges that he was injured during a pursuit and arrest by the defendants, who are police officers of the City of Ferndale, Michigan. Bradford had exited the vehicle he was driving and was on foot, when the defendants, each in a separate police vehicle, maneuvered their cars to impede Bradford’s escape, resulting in Bradford being pinned between the bumpers of the two cars. Bradford suffered serious injuries to his leg and filed the present lawsuit alleging five counts in his amended complaint: state law claims for assault and battery, gross negligence, statutory non-economic liability for negligent operation of a motor vehicle under Michigan’s No-Fault law, and statutory economic liability in excess of the statutory three-year limitation; and violation of federal constitutional rights to be free from an illegal seizure, invasion of privacy, and equal protection under 42 U.S.C. § 1983. The defendants have moved for partial summary judgment, not on the federal claims as one might expect, but arguing that the plaintiff fails to meet the “serious injury” threshold under the state’s No-Fault law, and the common law claims must be dismissed because the police officers owe no duty to a fleeing motorist. The Court has reviewed the submissions of the parties and finds that the relevant law and facts have been set forth in the motion papers and that oral argument will not aid in the disposition of the motion. Accordingly, it is ORDERED that the motion be decided on the papers submitted. See E.D. Mich. LR 7.1(e)(2). The Court finds that material fact questions preclude summary judgment on the grounds raised by the defendants. Therefore, the motion for partial summary judgment will be denied. I. Under Michigan’s No-Fault law, which governs the right of a person to sue in tort for injuries arising from motor vehicle accidents, a party at fault for causing the accident cannot be held liable unless the injured person can prove that he or she has “suffered death, serious impairment of body function, or permanent serious disfigurement.” Mich. Comp. Laws § 500.3135(1). In determining whether the plaintiff has met the statutory threshold defining the seriousness of an injury, the Michigan courts require an assessment of “the course or trajectory of the plaintiff’s normal life.” Kreiner v. Fischer, 471 Mich. 109, 131, 683 N.W.2d 611, 625 (2004). Based on the parties’ submissions, it does not appear that the trajectory of the plaintiff’s life has propelled him toward the stratosphere. The plaintiff was forty-six years old on the date of the accident. At the time of his deposition, the plaintiff was homeless. He had completed the ninth grade before he was kicked out of school for drug use. The plaintiff has been diagnosed with bipolar disorder and paranoid schizophrenia, but is currently taking medicine to control these conditions. The plaintiff has worked in various low-skill jobs during his life. A few years before the accident, he started Bradford’s Pooper Scooper company. His friends “would hire [the plaintiff’s] services to come in and do their pooper scooping for their dogs and their kennels and what they have and so forth.” Def.s’ Mot., Ex. B, Bradford Dep. at 23. He testified that he was in the process of -2- expanding his business beyond his friends in early 2005. The last day he worked was on October 1, 2005. He never reported any income to the government for tax purposes. The plaintiff has used crack cocaine throughout his life. Within a week and a half to two weeks prior to his deposition, he had used crack cocaine. He said that was the first time in forty days he had used it, although before that he used it “real often. Every other day, every couple of days or so.” Def.s’ Mot., Ex. B, Bradford Dep. at 18. The events on the day of the accident (or the day before, or two days before – the plaintiff cannot remember exactly) began when the plaintiff met a woman at a liquor store who was driving her vehicle into another person’s vehicle in the parking lot. According to the plaintiff’s deposition testimony, it appears that the plaintiff struck up a conversation with her and befriended her. They drove in her truck, parked, and started smoking crack cocaine and engaging in sexual activity. The plaintiff perceived that the woman was drunk and was unable to drive. So, according to the plaintiff, the woman gave him the keys to the vehicle and gave him permission to drive it. They then proceeded to the home of a drug dealer named Dwight. Dwight sold them some crack cocaine, and the plaintiff went to get money for the drugs from his son who lived nearby. When he returned, the woman he had met had become interested in another man. The plaintiff explained that several men “tried to start jumping” the plaintiff, so he ran to the woman’s truck, and drove off. Id. at 45. The plaintiff came to a stop some distance away and fell asleep in the truck. When he woke up, the date was October 4, 2005. The plaintiff says he went looking for the woman, returning to Dwight’s house. When he could not find her, he left and found some of his -3- other friends, Kristen and “big booty Judy,” who had a motel room. He showered and changed his clothes, and also got “buzzed,” presumably on cocaine. Id. at 55. The plaintiff and Kristen then decided to drive to the home of the plaintiff’s son. As they exited the motel parking lot, the plaintiff testified that he was pursued by a Ferndale police vehicle driven by defendant Vincent Palazzolo. Palazzolo, a sergeant with the Ferndale Police Department, had checked the truck’s license tag as it was parked in the hotel. The law enforcement information network’s (LEIN) records reported it as stolen in a carjacking by two black males. The plaintiff admits that “I guess you could say I was trying to get away” from officer Palazzool. Id. at 56. While underway, Kristen opened the door twice, demanding that the plaintiff pull over or she was going to jump, but the plaintiff refused to do so. The plaintiff’s deposition testimony is unclear on what happened next, but he states that when he tried to get away, “[t]he car wasn’t running. See, on the impact of the car, the car’s fuel system cut off.” Ibid. It likewise is not clear to what impact the plaintiff refers, as it does not appear to be in his deposition testimony. However, Palazzolo’s deposition testimony sheds some light on this. It appears that upon being approached by the police car, the plaintiff’s vehicle made a right turn, and hit a curb with such force that it appeared to damage the vehicle. The vehicle then proceeded into a subdivision, where according to Palazzolo it was going about fifteen or twenty miles per hour. The plaintiff perceived that the car was “coasting at about six miles an hour.” Id. at 56. Defendant Ferndale Wurm, a Ferndale police officer who was summoned to assist, approached in his vehicle around this time. The stories diverge a bit at this point. The plaintiff testified that he directed the car onto the grass, put it into park, and then exited the vehicle. He does not remember what happened next, but he “woke up” with a police car “over top” of him. Id. at 58. There were two police vehicles at the -4- scene, with one officer in each. The officer then backed up the car that was on top of the plaintiff, and the plaintiff got up and began running away again. When the plaintiff ran, one officer, presumably Palazzolo, moved one car toward the plaintiff, who was running by the other police car, and the plaintiff dove to the ground. When he dove, his left leg was in the air, and it became pinned between the police car that had moved towards the plaintiff and the one that was parked. Palazzolo described the incident differently. He testified that the plaintiff maneuvered the vehicle off the road, and when it slowed to five or ten miles per hour, the plaintiff exited the vehicle. The plaintiff tripped and fell because he could not run as fast as the car was going. Palazzolo testified: I was angling away from his vehicle, so it would have been straightening out more towards Officer Wurm. . . . We slid into each other, Officer Wurm and I, and Mr. Bradford got pinched in between the bumpers. Pl.’s Resp., Ex. B, Palazzolo Dep. at 20. Palazzolo testified that he “remember[s] sliding,” which is why he was unable to stop the car before pinching the plaintiff. Id. at 21. However, he also testified that he intended to place his vehicle between the plaintiff and the south in order to trap him and prevent him from running away. The plaintiff was brought to the Beaumont Hospital in Royal Oak, Michigan in an ambulance, and spent six days in the hospital. He was diagnosed with a left open (compound) femur fracture and was brought into surgery the same day to clean out the wound. Three days later he was brought into surgery again to repair the broken bone. An intramedullary rod was inserted, which apparently has never been removed. The plaintiff claims he spent four or five months in physical therapy. He also claims that two additional surgeries are required. -5- Upon his discharge from the hospital, the plainitff was arrested and brought to court on a charge of fleeing and eluding police, to which he pleaded no contest. Apparently no carjacking charges were ever filed. The Beaumont Hospital records submitted by the plaintiff show frequent complaints of pain in the months and years following the surgery, mostly attributable to the hardware still being in place. The plaintiff went to the hospital for a recheck of his leg in April and July 2006. In each visit the plaintiff complained of pain, but the examination showed the surgical incision to be well healed. The plaintiff was given medication for his pain. On March 22, 2007, the plaintiff went to the Beaumont Hospital for a recheck of his leg. The examination “show[ed] the previous surgical incision to be well healed.” Pl.’s Resp., Ex. D. Consistent with the earlier visits, the report states: There is some minimal crepitus in the knee, no significant effusions. Knee remains stable, no signs of infections, no RSD or DVT signs. X-rays of the right femur, multiple views, show status post iron rod fixation, healed fracture, hardware maintained in position. Ibid. The report notes that the plaintiff complained of pain, and the plaintiff was offered surgery to remove the hardware. The plaintiff indicated his desire to undergo this surgery, but apparently has not yet scheduled the surgery. On May 10, 2007, the plaintiff returned for another recheck. The report states: “No new problems. Exam is unchanged. X-rays is unchanged.” Ibid. Emmanuel Obianwu, M.D., evaluated the plaintiff on November 25, 2008 at the defendants’ request. He notes that the plaintiff told him that he went to regular check-up appointments with the surgeon, but has not gone in the past year due to lack of funds. He has gone to various emergency departments complaining of severe pain in his left thigh and is usually given pain medication. At -6- his evaluation with Dr. Obianwu, the plaintiff complained of “constant pain.” Dr. Obianwu concluded that “the injury has healed and he can return to whatever type of work he needs.” Pl.’s Resp., Ex. E. The plaintiff complains that there are “[l]ots of things” that he can no longer do since his injury. Def.’s Mot., Ex. 2, Bradford Dep. at 73. He states that he has to limp when he walks, he is “in constant pain,” and he cannot sit for longer than forty minutes without having to get up and stretch. Ibid. He can no longer go for five mile runs, like he used to every morning during the periods when he was not using crack cocaine. He cannot play and run around with any of his 53 grandchildren, teaching the younger grandchildren how to ride the bicycle like he did for many of their older cousins. And he “can’t squat down to do [the] pooper scooping,” that is required by that job, so he does not operate his business anymore. Id. at 77. Since the accident, the plaintiff has “[s]ort of” been looking for a job, which he describes as calling around and looking in the newspaper. Id. at 13. He called less than ten places in the three months preceding his deposition and has not sought governmental assistance to find a job. As noted, the defendants filed a motion challenging only some of the state law counts of the amended complaint. The defendants do not identify specifically the counts they want dismissed, but their arguments are directed only to the No-Fault claims in particular (counts III and IV) and the state law negligence-based claims in general (counts II, III, IV). II. A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient -7- disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics and Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). Thus a factual dispute which “is merely colorable or is not significantly probative” will not defeat a motion for summary judgment which is properly supported. Kraft v. United States, 991 F.2d 292, 296 (6th Cir. 1993); see also Int’l Union, United Auto., Aerospace and Agric. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record which demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover -8- Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). The party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp., 477 U.S. at 322-23. The party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). “[T]he party opposing the summary judgment motion must ‘do more than simply show that there is some “metaphysical doubt as to the material facts.”’” Highland Capital, Inc. v. Franklin Nat. Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir. 1994), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 586 (1986 . “Thus, the mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Ibid. (quoting Anderson, 477 U.S. at 252) (internal quote marks omitted). A. The defendants first mount a broad attack upon the plaintiff’s two claims under Michigan’s No-Fault Insurance Act and his claim for gross negligence. The defendants argue that they owed -9- no duty to the plaintiff because the injuries resulted when the plaintiff was attempting to flee from a lawful arrest. Because all three of those claims are based on some level of negligence (although the No-Fault claims require additional proofs to establish liability), the absence of a legal duty would be fatal to each of those claims. The defendants do not discuss the other theories – battery and federal constitutional violations – in their motion, and they do not ask for summary judgment against those theories of liability. The elements of a common law claim of negligence in Michigan are: (1) that the defendant owed the plaintiff a duty; (2) that the defendant breached that duty; (3) that the defendant’s breach caused the plaintiff’s harm, which includes (a) cause in fact and (b) legal, or proximate, cause; and (4) damages to the plaintiff. Hunley v. DuPont Automotive, 341 F.3d 491, 496 (6th Cir. 2003) (citing Case v. Consumers Power Co., 463 Mich. 1, 7 & n.6, 615 N.W.2d 17, 20 & n.6 (2000 ; see also Riddle v. McLouth Steel Products Corp., 440 Mich. 85, 96 n. 10, 485 N.W.2d 676, 681 n. 10 (1992). “Questions of duty are generally for the court to decide.” Jackson v. Oliver, 204 Mich. App. 122, 125, 514 N.W.2d 195, 196 (1994). The burden of a plaintiff to establish a legal duty of governmental employees, such as the defendant police officers here, has been increased by the Michigan legislature, which has provided “governmental employees with immunity from tort liability for injuries they cause during the course of their employment so long as the employee’s conduct ‘does not amount to gross negligence that is the proximate cause of the injury or damage.’” Livermore ex rel Rohm v. Lubelan, 476 F.3d 397, 408 (6th Cir. 2007) (quoting Mich. Comp. Laws § 691.1407(2)(c . “‘Gross negligence’ means conduct so reckless as to demonstrate a substantial lack of concern for whether an injury results.” Mich. Comp. Laws § 691.1407(7)(a). This rule has been analogized to the doctrine of qualified -10- immunity existing in section 1983 claims. See Lanman v. Hinson, 529 F.3d 673, 690 (6th Cir. 2008). In Fiser v. Ann Arbor, 417 Mich. 461, 339 N.W.2d 413 (1983), overruled on other grounds by Robinson v. City of Detroit, 462 Mich. 439, 613 N.W.2d 307 (2000), the Michigan Supreme Court held that officers owed a duty to the public not to operate their vehicles in a manner that unreasonably endangers the lives of others. In that case, the police had initiated a car chase after the plaintiff failed to stop at a flashing red light. The vehicles traveled at speeds up to thirty miles over the posted speed limit. The chase ended when the motorist attempting to elude police did not stop at a stop sign and collided with the plaintiff’s vehicle. The Court found that the officers could be held liable for operating their vehicles in a reckless manner, and their pursuit could be a proximate cause of the plaintiff’s injuries. In Jackson v. Oliver, 204 Mich. App. 122, 514 N.W.2d 195 (1994), the Michigan Court of Appeals considered a case where the plaintiff’s decedent was killed while he fled from the defendant police officers who pursued him. The plaintiff was riding a motorcycle and led the police on a chase after they saw him exceeding the speed limit. The plaintiff crashed when he lost control of his motorcycle because he was traveling too fast. The Court held as follows: The Fiser rule is that police officers owe a duty to innocent bystanders to avoid operating their police vehicles in a negligent manner and that emergency vehicles must be driven with due regard for the safety of others. We do not believe that the Fiser decision applies in a case where injuries were suffered by a fleeing wrongdoer. The trial court’s decision to grant summary disposition was based on public policy grounds: that a fleeing wrongdoer should not be able to recover money damages from the officers who were pursuing him. We agree. Out of concern for public safety, police must sometimes allow fleeing suspects to get away. However, it would be absurd to conclude that the police, out of concern for the safety of a fleeing criminal suspect, must cease pursuit of the fleeing suspect or risk possible -11- civil liability. . . . A criminal suspect who defies police authority does not thereby trigger some enhanced duty or obligation on the part of the police. The only limitation on the part of the police is the obligation not to use excessive force when apprehending or attempting to apprehend the suspect. Here, the police did not shoot at the decedent or at his vehicle, they did not set a trap designed to make him lose control of his vehicle, and they did not intentionally ram his vehicle. They did not establish the speed of the chase and did not control the route, they simply attempted to prevent the decedent’s escape. This is not the use of excessive force, it is the use of minimal force. . . . Police officers in pursuit of a suspect do not owe the suspect a duty to refrain from chasing the suspect at speeds dangerous to the suspect. Jackson, 204 Mich. App. at 126-27, 514 N.W.2d at 197. The reasoning of Jackson has been ratified by the Michigan Supreme Court. In 2000, the Michigan Supreme Court stated that “[c]onsistent with the reasoning in Fiser and Jackson, whatever [the victim’s] location [in the vehicle], there is a duty to innocent persons, but not to wrongdoers” owed by police during the pursuit of a fleeing vehicle. Robinson v. City of Detroit, 462 Mich. 439, 451, 613 N.W.2d 307, 314 (2000). However, the court curtailed the expansive understanding of proximate cause articulated in Fiser, holding that [The] pursuit of the fleeing vehicles was not, as a matter of law, “the proximate cause” of the injuries sustained by the plaintiffs. The one most immediate, efficient, and direct cause of the plaintiffs’ injuries was the reckless conduct of the drivers of the fleeing vehicles. Id. at 462, 613 N.W.2d at 319. The plaintiffs in that case were passengers in vehicles that were the object of the chase, and they were injured when their drivers lost control during the high-speed pursuit and collided with other vehicles. The court limited its holding that the chase initiated by the police was not the cause of the accident to circumstances “where the police cars did not hit the fleeing car or physically cause another vehicle or object to hit the vehicle that was being chased or -12- physically force the vehicle off the road or into another vehicle or object.” Id. at 445, 613 N.W.2d at 311. The question presented is whether under these cases, the defendant police officers had a duty not to operate their cars in a grossly negligent manner after the car chase had ended and the plaintiff was proceeding on foot. Despite broad language, the Jackson and Robinson opinions are readily distinguishable on the facts. In Jackson, the plaintiff caused his own injuries by undertaking excessive speeds in response to the police officers’ pursuit. The court made much of this fact, noting that “What endangered, and ultimately took, the life of the decedent was his own speeding and reckless conduct. He lost control of his motorcycle because he was going too fast, not because the police were.” See Jackson, 204 Mich. App. at 126-27, 514 N.W.2d at 197. Robinson contains similar reasoning. In fact, the court in that case engrafted a new requirement upon the passangers in the fleeing cars, now requiring that a “passenger who seeks to recover for injuries allegedly caused by a negligent police pursuit [must prove] personal innocence as a precondition to establishing the duty element of a cause of action.” Robinson, 462 Mich. at 444, 613 N.W.2d at 311. The case presented by Mr. Bradford is different because Bradford did not cause his injuries; the defendants’ alleged gross negligence in the operation of a motor vehicle was the cause. Bradford was on foot when he was impacted by the police vehicle. His physical contact with the defendants’ vehicles takes his case within the exception to the rule articulated in Robinson. The defendants ask the Court to overlook the particular facts of Jackson and announce a categorical rule that the police may do whatever they like to a wrongdoer who is fleeing. The Court declines to do so; there is no support in the Michigan cases for that proposition. Cf. Scott v. Harris, -13- 550 U.S. 372 (2007) (noting that a violation of the Constitution may occur when police officers cause a fleeing vehicle to crash). Implicitly, Jackson foresaw a duty under different circumstances against officers who engaged in other conduct against fleeing individuals resulting in injuries other than those self-inflicted. The facts of Bradford’s case resemble more closely the hypothetical situations that the opinion excepts from its general rule. The risk of injury from the defendants’ navigation of a vehicle towards a pedestrian was great; and the defendants had a duty to avoid grossly negligent conduct that caused an impact with the plaintiff. B. The defendants focus an attack on the No-Fault counts of the amended complaint, alleging that the plaintiff has failed as a matter of law to establish the other elements of those claims beyond the defendants’ gross negligence. Although the No-Fault Act abolished most tort liability “arising from the ownership, maintenance, or use within this state of a motor vehicle,” Mich. Comp. Laws § 500.3135(3); see Stephens v. Dixon, 449 Mich. 531, 541, 536 N.W.2d 755, 759 (1995), the Act preserves tort liability under narrow circumstances, two of which are relied upon by the plaintiff in this case. The first claim is under section 3135(1), which allows for tort liability “for noneconomic loss caused by his or her ownership, maintenance, or use of a motor vehicle only if the injured person has suffered . . . serious impairment of body function. . . .” Mich. Comp. Laws § 500.3135(1). The second claim is under section 3135(3), which states that “tort liability arising from the ownership, maintenance, or use within this state of a motor vehicle with respect to which the security required by section 3101 was in effect is abolished except as to: . . . [d]amages for . . . work loss . . . as defined in sections 3107 to 3110 in excess of the daily, monthly, and 3-year limitations contained in those sections.” Mich. Comp. Laws § 500.3135(3). -14- 1. The statute defines “serious impairment of body function” as “an objectively manifested impairment of an important body function that affects the person’s general ability to lead his or her normal life.” Mich. Comp. Laws § 500.3135(7). In determining whether a plaintiff qualifies under this section, the Michigan Supreme Court suggests a three-step inquiry. First, a court must determine that there is no factual dispute concerning the nature and extent of the person’s injuries; or if there is a factual dispute, that it is not material to the determination whether the person has suffered a serious impairment of body function. . . . Second, if a court can decide the issue as a matter of law, it must next determine if an “important body function” of the plaintiff has been impaired. It is insufficient if the impairment is of an unimportant body function. Correspondingly, it is also insufficient if an important body function has been injured but not impaired. If a court finds that an important body function has in fact been impaired, it must then determine if the impairment is objectively manifested. Subjective complaints that are not medically documented are insufficient. Kreiner, 471 Mich. at 131-33, 683 N.W.2d at 625. In determining the nature of the impairment, “[t]he focus. . . is not on the plaintiff’s subjective pain and suffering, but on injuries that actually affect the functioning of the body. For instance, ‘[s]elf-imposed restrictions,’ even if based on real pain, are not sufficient to establish residual impairment; rather, the restrictions must be ‘physician-imposed.’” Netter v. Bowman, 272 Mich. App. 289, 295-96, 725 N.W.2d 353, 357 (2006) (quoting Kreiner, 471 Mich. at 133 n. 17, 683 N.W.2d at 625 n. 17). Based on Kreiner and cases that follow it, the Michigan Court of Appeals held that “‘objectively manifested’ . . . requires that a plaintiff’s injury must be capable of objective verification by a qualified medical person either because the injury is visually apparent or because it is capable of detection through the use of medical testing.” Id. at 305, 725 N.W.2d at 362. Finally, -15- [i]f a court finds that an important body function has been impaired, and that the impairment is objectively manifested, it then must determine if the impairment affects the plaintiff’s general ability to lead his or her normal life. In determining whether the course of the plaintiff’s normal life has been affected, a court should engage in a multifaceted inquiry, comparing the plaintiff’s life before and after the accident as well as the significance of any affected aspects on the course of the plaintiff’s overall life. Once this is identified, the court must engage in an objective analysis regarding whether any difference between the plaintiff’s pre- and post-accident lifestyle has actually affected the plaintiff's “general ability” to conduct the course of his life. Merely “any effect” on the plaintiff’s life is insufficient because a de minimis effect would not, as objectively viewed, affect the plaintiff’s “general ability” to lead his life. Kreiner, 471 Mich. at 133, 683 N.W.2d at 625-26. In deciding the third prong, the supreme court suggested a nonexhaustive list of factors to consider: (a) the nature and extent of the impairment, (b) the type and length of treatment required, (c) the duration of the impairment, (d) the extent of any residual impairment, and (e) the prognosis for eventual recovery. Id. at 133, 683 N.W.2d at 626. “A negative effect on a particular aspect of an injured person’s life is not sufficient in itself to meet the tort threshold, as long as the injured person is still generally able to lead his normal life.” Id. at 137, 683 N.W.2d at 628. There is no dispute that in 2005 the plaintiff suffered an injury to his leg, and the injury was objectively confirmed. The defendants do not argue that the injury affected an important body function that prevented him from walking, at least for a time. See Kreiner, 471 Mich. at 136, 683 N.W.2d at 628 (holding that an injury to lower back, hip, and leg constituted an impairment of an important body function). The defendants argue, however, that this impairment did not affect the plaintiff’s general ability to lead his life. The Court finds, however, that fact issues exist in the record that preclude judgment on this point as a matter of law. The plaintiff testified that the injury has changed his life in two ways: it has interfered with his ability to play with his grandchildren and has prevented him -16- from running his biological waste removal business. Before the injury he could work as a “poop scooper,” and afterwards he cannot; before the injury he could teach his grandchildren how to ride their bikes and go for runs, and now he cannot. Unlike one of the plaintiffs in Kreiner, who was prevented from working for a few months, the plaintiff’s inability to work his previous job removing pet waste has continued to this date. Unlike the other plaintiff in Kreiner, who lost the ability to perform one aspect of his job but who did not miss a single day of work due to his injuries, the plaintiff has lost the ability to engage in his business. Mr. Bradford is now unemployed and living in a homeless shelter, hardly evidence that his life “in general” has remained unchanged. Summary judgment on this ground, therefore, must be denied. The defendant also suggests the possibility that the plaintiff’s claim is barred by his comparative negligence under Michigan Compiled Laws § 500.3135(2)(b). This statute bars a claim for noneconomic damages by “a party who is more than 50% at fault.” Mich. Comp. Laws § 500.3135(2)(b). However, because the defendants do not develop this argument, the Court finds that it is waived. Moreover, the question of a plaintiff’s comparative negligence is a question for the jury, as is the question of the proximate cause of that negligence. Rodriguez v. Solar of Michigan, Inc., 191 Mich. App. 483, 488, 478 N.W.2d 914, 918 (1991). Here, a reasonable jury could conclude that the plaintiff was not negligent by running away across a yard. The determination of comparative fault in this case is not appropriate for resolution on summary judgment. 2. -17- The defendants also argue that the plaintiff has not offered evidence to prove “[d]amages for . . . work loss . . . in excess of the daily, monthly, and 3-year limitations” otherwise applicable to such claims under the No Fault Act. Mich. Comp. Laws § 500.3135(3)(c). Work loss is defined by section 3107 of the Act as “loss of income from work an injured person would have performed during the first 3 years after the date of the accident if he or she had not been injured.” Mich. Comp. Laws § 500.3107(1)(b). The defendants’ challenge to the plaintiff’s claim for damages under this provision is that the plaintiff has not provided any solid evidence of his pre-accident work income. The defendants’ challenge fails for two reasons. First, nothing in the Act requires that the person be employed before his injury in order to be entitled to work loss. See Sullivan v. North River Ins. Co., 238 Mich. App. 433, 437, 606 N.W.2d 383, 385 (1999) (noting that the Michigan Supreme Court “clearly recognized that a claimant’s entitlement to work-loss benefits is not dependent on being employed at the time of the accident”). To the contrary, the Act contemplates that an award of work loss can occur even if a person is “temporarily unemployed at the time of the accident.” Mich. Comp. Laws § 500.3107a. Temporary unemployment “refers to the unavailability of employment, not the physical inability to perform work.” Popma v. Auto Club Ins. Ass’n, 446 Mich. 460, 468, 521 N.W.2d 831, 835 (1994). There is no evidence that the plaintiff’s lack of work (if any) was the result of his physical inability to work before his accident. In cases where the plaintiff was temporarily unemployed, the Act provides that the work loss should be calculated based on the “earned income for the last month employed full time preceding the accident.” Mich. Comp. Laws § 500.3107a. Summary judgment may not be granted solely on the basis that the plaintiff was not working immediately preceding the accident. -18- The second reason the defendants’ argument fails is that it ignores the plaintiff’s testimony that he ran a business before the accident. The defendants point to the absence of certain corroborating records, such as tax forms or business receipts. That certainly is a valid point for a jury. However, the plaintiff does not have to produce documentary evidence supporting his claims in order to defeat summary judgment as a matter of law. The plaintiff relies on his sworn deposition testimony, which is all that is required by Rule 56. III. Based on the parties’ submissions, there is reason to doubt the likelihood of success of the plaintiff’s claims that the officers committed gross negligence or violated his civil rights. But the grounds raised by the defendants in their motion do not justify summary judgment. Accordingly, it is ORDERED that the defendants’ motion for partial summary judgment [dkt #15] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: April 6, 2009 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on April 6, 2009. s/Lisa Ware LISA WARE -19-

=== USA v. $464,479.72, et al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, Case No. 08-11564 Hon. David M. Lawson OPINION AND ORDER GRANTING IN PART GOVERNMENT’S MOTION TO STAY PROCEEDINGS v. FOUR HUNDRED SIXTY THREE THOUSAND FOUR HUNDRED NINETY SEVEN DOLLARS AND SEVENTY TWO CENTS ($463,497.72) IN U.S. CURRENCY FROM BEST BANK ACCOUNT # XXX2677, NINETEEN THOUSAND NINE HUNDRED THIRTY SIX DOLLARS AND SEVENTY SEVEN CENTS ($19,936.77) IN U.S. CURRENCY FROM BEST BANK ACCOUNT # XXX8558, ONE HUNDRED ONE THOUSAND FIVE HUNDRED EIGHTY THREE DOLLARS AND NINETY EIGHT CENTS ($101,583.98) IN U.S. CURRENCY FROM COUNTRYWIDE BANK ACCOUNT # XXX5890, NINETEEN THOUSAND NINE HUNDRED EIGHTY SEVEN DOLLARS AND SEVEN CENTS ($19,987.07) IN U.S. CURRENCY FROM COMERICA BANK ACCOUNT # XXX0766, BEST BUY BANK ACCOUNT # 259207438, ONE HUNDRED ONE THOUSAND SEVEN HUNDRED AND THREE DOLLARS AND TEN CENTS ($101,703.10) IN U.S. CURRENCY FROM COUNTRYWIDE BANK ACCOUNT # XXX5890, NINETEEN THOUSAND NINE HUNDRED TWELVE DOLLARS AND SEVEN CENTS ($19,912.07) IN U.S. CURRENCY FROM COMERICA BANK ACCOUNT # XXX0766, FIFTY ONE THOUSAND THREE HUNDRED SEVENTEEN DOLLARS AND SIX CENTS ($51,317.06) IN U.S. DOLLARS FROM COUNTRYWIDE BANK ACCOUNT # XXX7528, and SAFESCRIPT PHARMACY # 19, LLC, Defendants, and STACEY HOGAN GIANOPLOS, RONALD G. CARSON, and HG SMITH WHOLESALE DRUG COMPANY, INC., _________________________________________/ Claimants. OPINION AND ORDER GRANTING IN PART GOVERNMENT’S MOTION TO STAY PROCEEDINGS This matter is before the Court on the government’s motion to stay this forfeiture proceeding. The government seeks this relief pursuant to 18 U.S.C. § 981(g)(1), which authorizes a stay where discovery in a civil forfeiture case would adversely affect the government’s ability to investigate or prosecute a related criminal action. The defendant funds belong to two of the claimants in this case, Stacey Hogan Gianoplos and Ronald G. Carson, owners of a pharmacy that was allegedly involved in illegally furnishing prescription drugs. The other claimant, H.D. Smith Wholesale Drug Company (H.D. Smith), holds a security interest in the subject funds. All three claimants oppose the stay motion. The Court held a hearing on the motion on August 6, 2008, after which it directed the government to file under seal information supporting its claim that permitting discovery will interfere with an ongoing criminal investigation. The Court has reviewed those materials and concludes that the government should be allowed a reasonable amount of time to complete its investigation. However, much time has passed since the investigation commenced, and the Court will allow a stay of only limited further duration. Therefore, the Court will grant the government’s motion to stay in part and establish a deadline to allow further proceedings in this case. I. The government commenced this civil forfeiture proceeding against the defendant funds, totaling some $650,000.00, on April 11, 2008. The FBI seized the funds two days earlier, on April -2- 9, 2008. Previously, on May 10, 2007, DEA agents executed search warrants at Safescript Pharmacy in Farmington Hills, Michigan. See Case No. 07-51008. In its civil complaint, the government alleges that the seized assets constitute or are derived from proceeds traceable to illegal distribution of controlled substances (in violation of 21 U.S.C. § 841); use of a fictitious registration number in the distribution of controlled substances (in violation of 21 U.S.C. § 843); or money laundering (in violation of 18 U.S.C. § 1956). Therefore, the government reasons, they are forfeitable under 21 U.S.C. § 881(a)(6) and 18 U.S.C. § 981(a)(1)(A). According to the amended complaint, the Safescript Pharmacy in Farmington Hills is owned by Safescript Pharmacy # 19, LLC. Stacey Gianoplos is registered with the state as the resident agent of that pharmacy. She is also the wife of Ronald G. Carson, the registered agent of parent corporation Safescript Pharmacies of Michigan, LLC. The government does not allege that Gianoplos and Carson were overtly involved in the prescription scheme; rather, the person driving the scheme supposedly was one George Scott. Scott somehow acquired a prescription pad with Dr. Mohsen Djamali’s name on it. Dr. Djamali is registered as a practitioner with the DEA and is assigned DEA # BD9266924. He has the authority to prescribe various controlled substances, including schedule II to schedule V drugs. When DEA agents executed the May 2007 warrant, they found 18 prescriptions written on Djamali’s prescription pad. However, these prescriptions bore a different DEA number (BD9374911), and Djamali stated the handwriting was not his. Although the DEA number was valid, it had not been assigned to any person or pharmacy. The prescriptions (all dated May 8, 2007), called for a total of 1,920 OxyContin pills and 240 Methadone pills. The government alleges further that after speaking with Dr. Djamali, agents interviewed Safescript pharmacist Richard Riozzi. Riozzi stated that the prescriptions were presented and filled -3- by George Scott. Agents confirmed this statement with Sara Deringer, a pharmacy technician who had the most interaction with Scott. Deringer allegedly explained that Scott told her the prescriptions were for patients at a group home, and he presented patient identification along with the prescriptions. However, Scott paid large quantities of cash, and “[e]vidence seized during the execution of the search warrant indicates that Gianoplos received significant sums of cash in exchange for fulfilling fraudulent prescriptions with the unassigned DEA number.” Amend. Compl. at ¶ 8(j). During the time of the prescription scheme, large amounts of cash were deposited in an account at Best Bank, registered to Safescript Pharmacy, Ms. Gianoplos, and Mr. Carson. The government believes that those funds were then transferred to various other accounts in an attempt at money laundering. Claimants Gianoplos and Carson, answering the amended complaint on May 23, 2008, disputed the forfeiture conclusion and noted that the government had no evidence showing they had knowledge of the illegal activity. H.D. Smith appeared in this case as a claimant on May 9, 2008, but it did not respond to the forfeiture complaint until June 26, 2008. In its answer, H.D. Smith asserted that it had a “prior, perfected” security interest in the seized assets flowing from Safescript’s debt to H.D. Smith in the amount of $540,049.10. H.D. Answer [dkt # 37], at 3. Accordingly, H.D. Smith averred that it was “entitled to immediate possession [of] the collateral securing the debt owed to it which includes the deposit accounts of Safescript # 19 of which the Defendants in rem are a part.” Id. at 4. Along with its answer, H.D. Smith filed a cross-claim against Gianoplos, Carson, and Safescript, and a counterclaim against the government. However, H.D. Smith subsequently agreed to dismiss the counterclaim. -4- The government filed the present motion to stay on May 29, 2008. Mot. to Stay [dkt # 27]. On June 12, 2008, the Court met with the parties for a scheduling conference. The Court entered an order explaining that formal discovery would await adjudication on the motion to stay. Nevertheless, the Court encouraged the parties to engage in informal discovery in the meantime. In January, H.D. Smith filed a motion for summary judgment. That motion remains pending. From the materials furnished by the government, it appears that the government commenced its investigation in the spring of 2006 and arrested Scott in December 2007. As of August 14, 2008, the government’s agent averred in an affidavit that she anticipated presentment to a grand jury “soon.” The government has not furnished the Court with any additional information since that time. II. The government requests a stay of this civil forfeiture proceeding pursuant to 18 U.S.C. § 981(g)(1). That statute is part of the Civil Asset Forfeiture Reform Act of 2000 (CAFRA), and it directs entry of a stay “whenever a court determines that civil discovery will adversely affect the ability of the United States to investigate or prosecute a related criminal case.” United States v. GAF Financial Servs., Inc., 335 F. Supp. 2d 1371, 1373 (S.D. Fla. 2004); see also 18 U.S.C. § 981(g)(1) (“Upon the motion of the United States, the court shall stay the civil forfeiture proceeding if the court determines that civil discovery will adversely affect the ability of the Government to conduct a related criminal investigation or the prosecution of a related criminal case.”). When requesting a stay under section 981(g)(1), the “the government must make an actual showing regarding the anticipated adverse affect that civil discovery will have on the criminal investigation.” GAF Financial, 335 F. Supp. 2d at 1373. As to the relatedness of the criminal and civil cases, “neither -5- the parties nor the facts in the civil and criminal case need to be identical for the two cases to be considered related.” Ibid. (citing United States v. All Funds Deposited in Account No. 200008524845, 162 F.Supp. 2d 1325, 1329-30 (D. Wyo. 2001 . In contrast to pre-CAFRA proceedings, the government need not file an information or indictment before obtaining a stay. Ibid. Generally, the court of appeals reviews a lower court’s decision on a stay motion for abuse of discretion. Alley v. Little, 447 F.3d 976, 977 (6th Cir. 2006). Section 981 is not an all-or-nothing statute, however. If a court determines that a stay is not warranted but there is still cause for some concern, section 981(g)(3) authorizes entry of a protective order. Subsection (g)(3) provides that the court may determine that a stay is unnecessary if a protective order limiting discovery would protect the interest of one party without unfairly limiting the ability of the opposing party to pursue the civil case. In no case, however, shall the court impose a protective order as an alternative to a stay if the effect of such protective order would be to allow one party to pursue discovery while the other party is substantially unable to do so. 18 U.S.C. § 981(g)(3). Based on the information furnished by the government in camera, the Court is satisfied that permitting discovery in the present asset forfeiture case may adversely affect the related criminal investigation. The government has indicated that information likely to come to light as relevant to the present proceeding may compromise its ability to establish violations of the controlled substances and money laundering statutes. However, having seized a substantial amount of money, the government is not entitled to protect its information indefinitely. The investigation concerns events that occurred nearly three years ago, and the government’s submission does not detail an investigation that is particularly far-reaching or complicated. Therefore, the Court believes that a -6- stay of a limited duration will satisfy the Congressional concern expressed in 18 U.S.C. § 981(g)(1) while allowing the claimants to pursue the return of the seized assets. III. The Court accepts the government’s representation that it needs time to complete its investigation, but that time reasonably is drawing to a close. Allowing discovery in the meantime may adversely affect the related criminal investigation, but the danger of that adverse effect will dissipate over time. Accordingly, it is ORDERED that the government motion to stay proceedings [dkt #27] is GRANTED IN PART. It is further ORDERED that proceedings in the present matter are STAYED until June 1, 2009. Dated: March 31, 2009 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 31, 2009. s/Lisa M. Ware LISA M. WARE -7-

=== Haynor v. General Motors ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION GERALD A. HAYNOR, Plaintiff, v. GENERAL MOTORS CORPORATION, _________________________________________/ Defendant. Case Number 07-13888 Honorable David M. Lawson OPINION AND ORDER DENYING DEFENDANT’S MOTION TO AFFIRM PLAN ADMINISTRATOR’S DECISION AND GRANTING IN PART PLAINTIFF’S MOTIONS FOR SUMMARY JUDGMENT The dispute in this case arises from the plaintiff’s claim against defendant General Motors Corporation for total and permanent disability (T&PD) benefits under GM’s Hourly-Rate Employees Pension Plan (HRP). Under the plan, an hourly worker may obtain such benefits if he becomes totally and permanently disabled prior to attaining age 65 and has at least ten years of credited service. The defendant’s Pension Committee rejected the plaintiff’s application for benefits because it found that the plaintiff had not accumulated sufficient credited service. The plaintiff does not dispute that he only actually worked as a GM hourly worker for about fourteen months; but he says he stopped working due to a work-related injury in 1978 for which he has been receiving workers’ compensation benefits, and under a collective bargaining agreement in effect the plaintiff would continue to accumulate years of service while disabled. The defendant says that, according to company records, the plaintiff left employment in 1978 because he voluntarily quit, and therefore he has accumulated no credited service over the past three decades. The plaintiff filed his present complaint under section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B), asking the Court to overturn the decision of GM’s Pension Committee – the plan administrator of the HRP – denying T&PD benefits. The plaintiff since has filed two motions for summary judgment. GM has filed a motion for summary judgment to affirm the plan administrator’s decision, arguing that the complaint is preempted by section 301 of the Labor Management Relations Act (LRMA), 29 U.S.C. § 185(a), and the plaintiff has failed to exhaust a series of administrative remedies required under collective bargaining agreements. The parties presented oral argument on October 23, 2008. The Court now finds that the LMRA does not bar the present action under ERISA, the plaintiff has exhausted his remedies in accordance with the plan provisions, the decision of the plan administrator that the plaintiff voluntarily quit his job instead of leaving work due to a disability is arbitrary and capricious, and the plaintiff is entitled to T&PD benefits, although the amount must be calculated. Therefore, the Court will deny the defendant’s motion for summary judgment, grant the plaintiff’s motions for summary judgment in part, and direct the defendant to calculate the plaintiff’s benefits in accordance with this opinion within sixty days. I. Facts Plaintiff Gerald Haynor, now 62, was an hourly employee at GM’s now-closed Buick Fisher Body Plant in Flint, Michigan from August 26, 1977 through October 20, 1978. The circumstances of Haynor’s departure from GM are the source of the benefits dispute in the present case. Haynor asserts that he never quit his job with the company and therefore accumulated twenty-seven years of service at GM after suffering a disabling work-related injury in 1978 and winning a workers’ compensation claim filed in the Michigan Department of Labor, Bureau of Workers’ Disability Compensation on June 28, 1979. GM vigorously but unsuccessfully contested the worker’s compensation claim through all administrative tribunals and the Michigan courts. GM, on the other -2- hand, insists that Haynor quit his job voluntarily on October 20, 1978 “due to his failure to report to work.” Mot. of GM to Affirm the Bd. of Administration’s Decision [dkt # 27], ¶ 1. In supporting this position, GM relies on the single computer entry in Haynor’s employee personnel file made on October 20, 1978, which listed Haynor’s employment status as “Voluntary Quit – Gave Notice.” A.R. 1. The author of the computer entry in question remains unidentified. GM has taken the position that Haynor is not eligible for T&PD benefits because he has not met the stated criteria; to be eligible, an employee would have to be “totally and permanently disabled prior to attaining age 65” and have “at least 10 years of credited service.” Dep. of Preston Crabill, A.R. 259, p. 10. The defendant says that Haynor does not meet the second requirement. GM officials – James LaLonde, assistant director for arbitration on contract administration for General Motors, and Preston Crabill, director of pension plans and savings plans for GM – insist that to challenge his status as “voluntary quit,” the petitioner would have to go through the grievance procedure under the 1976 GM-UAW Agreement, which was never utilized. As an hourly employee of GM, Haynor was a member of the International Union, United Auto Workers, and the terms and conditions of his employment and benefit entitlements were governed by the GM-National Agreement and certain supplemental agreements. At the time Haynor stopped working for the defendant, the 1976 GM-UAW National Agreement was in force, so the substantive requirements for eligibility of an employee for pension benefits are contained in that Agreement and the 1976 Supplemental Agreement Covering Pension Plan, which establishes the GM Pension Plan and sets forth the procedure for administration of the Plan. A.R. 125-29. The Supplemental Agreement Covering Pension Plan, a part of the 2003 Agreement between General -3- Motors Corporation and UAW, lays out the current procedure for exhausting administrative remedies with respect to GM pension benefits. However, GM points to other agreements, which, it contends, must govern the procedure the plaintiff must follow for challenging the company’s computer records designating him as a “voluntary quit,” thereby terminating his seniority. GM insists that the plaintiff must exhaust remedies under at least two other procedures to reverse the designation before taking his claim to the Pension Committee. A. GM-UAW Agreement The 1976 GM-UAW National Agreement is the principal agreement governing the relationship between a member of the UAW and GM. Among other things, it sets forth the seniority accumulation rules and the company’s policy regarding sick leaves of absence. The Agreement states: “In compensable injury and legal occupational diseases cases, sick leave will be granted automatically and seniority will accumulate for the full period of legal temporary disability.” A.R. 55. The GM-UAW Agreement provides for a four-step grievance procedure for adjudicating employees’ grievances. The employee first must take up the matter with his foreman. If the foreman does not adjust the grievance, the employee must go to the Shop Committee. The third step involves consideration by the Appeal Committee consisting of the UAW Regional Director, the UAW Chairman of the Shop Committee, and two members of local or divisional management. The final step is arbitration before an impartial umpire. 1976 GM-UAW Nat’l Agreement ¶¶ 28-55, A.R., 27-35. “There shall be no appeal from the Umpire’s decision, which will be final and binding on the Union and its members, the employee or employees involved and the Corporation.” A.R. 34. -4- B. Intra-Union Remedy under Article 33 of the UAW Constitution Article 33 of the UAW Constitution sets forth a mandatory procedure for union members’ appeals of disputes with their union: It shall be the duty of any individual or body, if aggrieved by any action, decision or penalty imposed, to exhaust fully the individual or body’s remedy and all appeals under this Constitution and the rules of this Union before going to a civil court or governmental agency for redress. Article 33(5) of UAW Constitution, A.R. 204. The appeals process described in Article 33 covers appeals of “any action, decision, or penalty by . . . (a) The International Union, its International Executive Board or any of its Officers, Regional Directors or International Representatives; (b) Any administrative arm of the International Union . . . , (c) A Local Union, or any of its units, committees, officers, committeepersons or stewards; or (d) Any other subordinate body of the International Union.” Article 33(1) of UAW Constitution, A.R. 199. The process for challenging the way a union official handles a member’s grievance requires an “appeal . . . first to the unit of an Amalgamated Local Union, then to the Union; then to the International Executive Board and then to the Convention Appeals Committee or where appropriate the Public Review Board.” A.R. 90. C. 1976 Supplemental Agreement Covering Pension Plan The 1976 GM-UAW National Agreement contains a Supplemental Agreement Covering Pension Plan, the most recent version of which was signed on September 18, 2003. That agreement describes the HRP and related administrative procedures. Section 3(a) of the Supplemental Agreement Covering Pension Plan establishes a central Board of Administration composed of six members, “three appointed by the Corporation and three by the Union” to adjudicate employees’ claims for benefits under the Plan. A.R. 125-27. The Board is directed to -5- work out matters such as but not limited to: (1) procedures for establishing Local Pension Committees at the Divisions or plants involved; (2) the authority and duties of such Local Pension Committees; (3) the procedures for reviewing applications for pensions; (4) the handling of complaints regarding determination of age, service credits, and computation of benefits; (5) procedures for making appeals to the Board; (6) means of verifying service credits to which employees are entitled under the Plan; (7) methods of furnishing information to employees regarding past and future service credits; (8) the amount of time the Union members of the local committees may be permitted to leave their work to attend meetings of the Local Pension Committees; (9) how disputes over total and permanent disability claims will be handled, including disputes, if any, with respect to whether a disabled pensioner engages in gainful employment; (10) the review of pertinent information about the Plan for dissemination to employees; (11) how pension payments will be authorized by the Board. A.R. 128. The appeals procedure under this Agreement is discussed in Section 3(c): Any employee who disputes a determination with respect to such employee’s (i) age, (ii) credited service under the Pension Plan, (iii) computation of pension benefits or supplements under the Pension Plan, (iv) partial or complete suspension of supplements, or (v) whether such employee is engaged in gainful employment except for purposes of rehabilitation, may file with the Center a written claim on form BA 1, “Employee Claim to Pension Committee.” Such claim shall be filed within 60 days, including 60th day of receipt of such determination. A.R.194. The Agreement further provides that, “[i]f the employee is denied a T&PD retirement for reasons other than medical disqualification, the employee may appeal by initiating the procedure set forth in Section K of this Appendix D within 180 day period. . . .” A.R. 185 (see Ex. D to GM’s Mot. for Summary Jmt. [dkt # 27]). In turn, section K provides: “When such claim is filed, the Pension Committee shall review such claim with the employee, return one copy of the BA 1 form to the employee with a written answer to the claim, and, if the claim is rejected, the reasons therefor.” A.R. 195 (Section K of the 3(c) Agreement). If the employee is not satisfied with the Committee’s decision, he may request the Committee to refer the matter to the Board of -6- Administration for decision, provided that he makes his request in writing. Ibid. The Board must keep the Pension Committee apprised of the decision in the referred case. Mot. of Def. General Motors to Affirm [dkt # 27], at 6. The Supplemental Agreement at section 3(a)(9) provides that the decisions by the Pension Board of Administration are “final and binding.” A.R. 196. However, that language is subject to a further proviso that allows a judicial remedy under ERISA: In the event the employee’s appeal is denied, in whole or in part, the employee may follow the Voluntary Appeal Process under Appendix D, Paragraph B(3)(e)(3) of the Plan or the employee has the right to bring civil action under Section 502(a) of the Employee Retirement Income Security Act (ERISA) of 1974. Appx. D, B, 3(e)(2), A.R. 186. D. Procedures followed by the plaintiff The plaintiff first challenged the denial of pension benefits in 2004 when he filed a lawsuit in this Court alleging the same claims as in the present action. When GM pointed out that the plaintiff had administrative remedies available to him, he agreed to dismiss the case voluntarily without prejudice for failure to exhaust administrative remedies. Haynor v. General Motors Corp., No. 04-10223 (E.D. Mich. 2006). In motions filed in that case, the defendant raised all the same preemption and exhaustion issues raised here. Without specifying the exact basis of his concession, the plaintiff agreed that he had not exhausted his claim, and on February 28, 2006, the Court entered an order of dismissal without prejudice. Following the dismissal of the plaintiff’s 2004 lawsuit, the plaintiff’s attorney sent a letter to GM with Mr. Haynor’s application for disability benefits, a copy of the Statement of Employee’s Physician Form, and other documents intended to show that Haynor did not voluntarily quit his job at GM but rather suffered a permanent work-related disability. Having received no response, -7- Haynor’s attorney contacted the Pension Board of Administration to seek total permanent disability retirement. The plaintiff’s attorney contacted the Board first on October 17, 2006, then on December 29, 2006, and then again, on January 26, 2007 to request the “BA-1” form entitled “Employee Claim to Pension Committee” that had to be filled out to initiate the Board’s review. In response to these inquiries, Lucy McDermott-Contreras, GM’s client services manager at the GM Benefit & Services Center, admonished: The nature of the documents you provided suggest [sic] that you might be contending that Mr. Haynor is eligible for credited service due to Workers Compensation payments. I do not see that he was ever on an approved Workers Compensation leave of absence as required by the HRP in order for credited service toward retirement to accrue. Letter from Lucy McDermott-Contreras, Dec. 29, 2006, Ex. 3 to Pl.’s Cross Mot. for Summary Jmt. [dkt # 18]. However, in response to Haynor’s third request for a BA-1 form, Preston M. Crabill, director of Pension & Savings Plans with GM, finally wrote to Haynor’s attorney, attaching the requested form, explaining: You may, of course[,] arrange for Mr. Haynor to prepare and submit the form BA-1. However, this matter is not at the point that such a Claim to Pension Committee is necessary. We are still in the process of investigating whether or not Mr. Haynor’s status was correctly reflected with his employment record. The answer to this question lies with the Workers Compensation Activity and Labor Relations. Once we have the answer to this question, you will be advised in by [sic] letter from me as the Plan Administrator. Once you receive this final response and if there is still disagreement with regard to the eligibility of Mr. Haynor to apply for a T&PD retirement, then would be the appropriate time to file the BA-1 form. Letter to Russell C. Babcock from Preston M. Crabill, Jan. 25, 2007, Ex. 4 to Pl.’s Cross Mot. for Summary Jmt. [dkt # 18] (emphasis added). -8- On March 5, 2007, Crabill finally completed the “investigation” of Haynor’s status and wrote that Haynor was a “voluntary quit” as of October 20, 1978, and that as such, his rights under the pension plans had not vested. Crabill advised Haynor of his rights of appeal to the Pension Committee within sixty days of the receipt of the letter: “The appeal process under the HRP allows an employee to file an appeal when they dispute credited service under the HRP provisions of computation of pension or supplements.” Letter to Russell C. Babcock from Preston M. Crabill, March 5, 2007, Ex. 7 to Pl.’s Cross Mot. for Summary Jmt. [dkt # 18]. Following Crabill’s advice, the plaintiff filed a BA-1 form to contest his employment status and his eligibility for disability benefits on April 13, 2007. Because the facility in Flint was closed, GM and UAW agreed that GM-UAW Pension Board of Administration would hear the claim. On June 19, 2008, the Board affirmed the Pension Committee’s decision on the ground that the plaintiff had accumulated only one year of credited service. The Board wrote: The Board of Administration, after reviewing form BA-1 with supporting documents, and applicable provisions of the Plan, affirms the Pension Committee’s decision. The Pension Board of Administration administers the appeal procedure set forth in Appendix D, Section K of the Supplemental Agreement Covering Pension Plan and has no authority to alter or reinstate seniority. Rather, the grievance procedure set forth in the GM-UAW National Agreement would be the proper avenue for addressing seniority or the loss of seniority. GM-UAW Bd. of Administration, June 19, 2008, A.R. 206. In justifying its decision, the Board explained: On August 25, 2004, Mr. Haynor filed a lawsuit seeking entitlement to total and permanent disability benefits under the HRP. The Motion to Affirm the Administrator’s Decision or in the Alternative for Summary Judgment filed by General Motors explained that because Plaintiff’s employment status was a “voluntary quit,” he must first file a grievance under the GM-UAW National Agreement to contest this status before he could claim benefits under the HRP. It further appears that the Court, on February 28, 2006, dismissed Mr. Haynor’s lawsuit because of his failure to exhaust administrative remedies. -9- Id., A.R. 205. The administrative record before the Board consisted of Haynor’s employment history showing his status as “Voluntary Quit,” GM’s Motion to Dismiss or Affirm the Administrator’s Decision filed in the 2004 case, affidavits from James W. LaLonde (to the effect of “Voluntary Quit – Gave Notice” entry), Preston M. Crabill (testifying to various administrative remedies in place), depositions of the same people, some other documents from the record of this Court’s 2004 case, and the workers’ compensation determinations at various levels of the Michigan administrative and court proceedings. A.R. 207-305. The plaintiff did not take up the invitation to file a grievance or pursue an intra-union appeal. Instead, once he received the denial from the Board of Administration, he brought the present lawsuit seeking redress under ERISA. The parties then filed their cross-motions for summary judgment. II. LMRA preemption GM argues that the plaintiff’s claim is completely preempted under section 301 of the Labor Management Relations Act (“LMRA”). Citing DeCoe v. General Motors Corp., 32 F.3d 212 (6th Cir. 1994), and Jones v. General Motors Corp., 939 F.2d 380, 383 (6th Cir. 1991), the defendant asserts that the present dispute implicates the terms of the collective bargaining agreement, which triggers LMRA preemption and bars suit in court unless the plaintiff also pleads and proves that the union breached its duty to the plaintiff of fair representation. The Court disagrees. It is true that Labor Management Relations Act governs “[s]uits for violation of contracts between an employer and a labor organization representing employees.” 29 U.S.C. § 185(a); see -10- Brittingham v. General Motors Corp., 526 F.3d 272 (6th Cir. 2008). And “[c]omplete preemption occurs in cases that fall within the scope of the LMRA.” Loftis v. United Parcel Service, Inc., 342 F.3d 509, 515 (6th Cir. 2003) (citing Miller v. Norfolk and Western Ry. Co., 834 F.2d 556, 564 (6th Cir. 1987). However, “not every dispute concerning employment, or tangentially involving a provision of a collective-bargaining agreement, is pre-empted by § 301 or other provisions of the federal labor law.” It is only “when resolution of a state-law claim is substantially dependent upon analysis of the terms of an agreement made between the parties in a labor contract, that [the] claim must either be treated as a § 301 claim . . . or dismissed as pre-empted by federal labor-contract law.” Brittingham, 526 F.3d at 278 (quoting Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 211, 220 (1985 . The Brittingham court explained the rationale behind federal preemption of state law claims relating to collective bargaining agreements as founded on the necessity of having nationally uniform “labor-law principles” govern such disputes. Ibid. (quoting Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 405-06 (1988). In light of this precedent, the Sixth Circuit has formulated a two-step approach for determining whether such claims are preempted by section 301. “‘First, the district court must examine whether proof of the state law claim requires interpretation of collective bargaining agreement terms.’” Ibid. (quoting DeCoe v. General Motors Corp., 32 F.3d 212, 216 (6th Cir. 1994 . “The second step requires a court to ‘ascertain whether the right claimed by the plaintiff is created by the collective bargaining agreement or by state law.’” Ibid. Both criteria must be satisfied to avoid preemption. The plaintiff’s claim plainly arises under the HRP, which was created by the collective bargaining agreement. The problem with the defendant’s argument is that the plaintiff has brought no state law claims. His argument for relief is based solely on ERISA, a federal statute that itself contains express preemption provisions based on the need for national uniformity. See 29 U.S.C. -11- § 1144(a); Allis-Chalmers Corp., 471 U.S. at 210-13. The Sixth Circuit has held that a claim for the denial of benefits under an ERISA plan that is established by a collective bargaining agreement may be brought under either ERISA, the LMRA, or both statutes. Biros v. Spalding-Evenflo Co., Inc., 934 F.2d 740, 742 (6th Cir. 1991 . Therefore, the defendant’s argument that the plaintiff’s ERISA claim is preempted by the LMRA is without merit. The cases cited by the defendant that find LMRA preemption of state law claims and those dealing with hybrid section 301 claims do not provide guidance on this issue because they do not involve claims asserted under ERISA. See DeCoe v. General Motors Corp., 32 F.3d 212 (6th Cir. 1994) (holding that LMRA preempted plaintiff’s state law claims against employer for sexual harassment, slander, tortious interference with economic relations, conspiracy, and intentional infliction of emotional distress); Jones v. General Motors Corp., 939 F.2d 380 (6th Cir. 1991) (holding that an employee’s state law claim against employer for breach of settlement agreement arrived at by virtue of grievance process established by the collective bargaining agreement was preempted by Labor Management Relations Act). The LMRA does not preempt the plaintiff’s present claim. III. Exhaustion of other contractual remedies Citing Clayton v. UAW, 451 U.S. 679 (1981), the defendant argues that the principle of exhaustion of administrative remedies in the context of grievance procedure and intra-union remedy bars the plaintiff’s claim for HRP benefits. The Sixth Circuit has held that in most cases remedies provided by the UAW Constitution and grievance procedure provided under the GM-UAW National Agreement must be exhausted before bringing a suit in federal court. See Monroe v. Int’l Union, UAW, 723 F.2d 22 (6th Cir. 1983). And in the context of ERISA claims such as the present one, the law is well settled that ERISA imposes a requirement of exhaustion of administrative remedies before commencing litigation in court. Costantino v. TRW, Inc., 13 F.3d 969, 974 (6th Cir. 1994); -12- see 29 U.S.C. § 1133. However, “[w]hile ‘application of the administrative exhaustion requirement in an ERISA case is committed to the sound discretion of the district court,’ Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 418 (6th Cir. 1998), that discretion must be exercised ‘to excuse nonexhaustion where resorting to the plan's administrative procedure would simply be futile,’ id. at 419; see id. at 420 (‘[W]hen resort to the administrative review process would be an exercise in futility, the exhaustion of remedies doctrine shall not apply.’).” Dozier v. Sun Life Assur. Co. of Canada, 466 F.3d 532, 534 (6th Cir. 2006). There is no question that the plaintiff exhausted the administrative remedies required by the HRP. The first step calls for claim adjudication by the plan administrator after the employee submits form HRP-15, “Application for Total and Permanent Disability Benefits.” Suppl. Agr. at 95, A.R. 184. Next, “[i]f the employee is denied a T&PD retirement for reasons other than medical disqualification, the employee may appeal by initiating procedure set forth in Section K of this Appendix D.” Id. at 97, A.R. 195. That language refers to the appeal procedure through the Pension Committee, where “[a]ny employee who disputes a determination with respect to such employee’s . . . (ii) credited service under the Pension Plan, (iii) computation of pension benefits or supplements under the Pension Plan . . . may file with the Center a written claim on form BA 1, “Employee Claim to Pension Committee.” Id. at 117, A.R. 195. Then, the procedure described in Section K directs the aggrieved employee to the Board of Administration by completing form BA 2. And after that, the employee may either follow the Voluntary Appeal Process or bring a civil action under Section 502(a) of the ERISA. Id. at 98, A.R. 186. Haynor did all of that, and then filed his lawsuit. GM now contends that it advised the plaintiff on multiple occasions that first, he must exhaust his remedies under the 1976 GM-UAW Nation Agreement, and then, to the extent he charges that his union unfairly represented him or did -13- not properly bring a grievance on his behalf, he must pursue his intra-union remedy under Article 33 of the UAW Constitution. After that, presumably he would have to exhaust his remedies under 1976 Supplemental Agreement Covering Pension Plan. The affidavits of Preston Crabill and James LaLonde attest, although without any references to controlling sources, that while the Board of Administration is the correct place to pursue the claims for pension benefits, it is not an appropriate forum to dispute factual issues underlying one’s entitlement to such benefits on the basis of seniority. The Court cannot accept the defendant’s argument for several reasons. First, the plaintiff has exhausted his remedies as far as the ERISA claim is concerned. Second, based on the Plan documents and the defendant’s conduct, it appears that the Pension Board actually had the authority to determine issues relating to credited service, which forms the basis of this dispute. Third, as explained in more detail below, GM already has had the opportunity to litigate the question whether the plaintiff voluntarily walked away from his job in October 1978 when it contested – and lost – the plaintiff’s worker’s compensation claim. Therefore, pursuing that same issue through several internal and administrative procedures would serve no useful purpose. It is true that many courts insist on strict adherence to the administrative procedures set forth under a particular plan, see, e.g., Phipps v. Metro. Life Ins. Co., 625 F. Supp. 1038 (S.D. Ohio 1985) (holding that employee could not sue due to failure to exhaust administrative remedies, even though the employee’s request for internal review had become bogged down due to parties’ inability to jointly agree on a doctor to perform another evaluation); however, compliance with all administrative procedures is not absolute. Ruzicka v. General Motors Corp., 523 F.2d 306 (6th Cir. 1975); Gray v. Int’l Ass’n of Heat & Frost Insulators & Asbestos Workers, 447 F.2d 1118, 1124 (6th Cir. 1971). In the case of a dispute by a member with his union, “[t]he primary benefit of requiring -14- initial submission of employee complaints against a union that refuses to help process a grievance against a company is that internal machinery can settle difficulties short of court action.” Ruzicka, 523 F.2d at 311. There is no such dispute here between the plaintiff and the UAW. Haynor does not allege wrongful discharge or violation of fiduciary duties by the union, so as to require exhaustion of intra-union remedy or mandate the grievance procedure for wrongful termination disputes. Moreover, it is unclear how an Umpire or any other decision maker in the hierarchical chain designated in the 1976 GM-UAW Agreement would be better equipped to determine Haynor’s employment status after the workers’ compensation appeal board’s determination, when the Board of Administration is expressly entrusted with the responsibility of working out matters such as “the handling of complaints regarding the determination of age, service credits, and computation of benefits” and “means of verifying service credits to which employees are entitled under the Plan.” Suppl. Agr. Covering Plan, A.R. 128. In fact, the evidence indicates that the Pension Board actually undertook the investigation and determination of this issue itself. For instance, in his letter on January 25, 2007, Crabill advised the plaintiff’s counsel that the Committee is “still in the process of investigation whether or not Mr. Haynor’s status was correctly reflected in his employment record.” Letter to Russell C. Babcock from Preston M. Crabill, Jan. 25, 2007, Ex. 4 to Pl.’s Cross Mot. for Summary Jmt. [dkt # 18]. “Once we have the answer to this question,” wrote Crabill, “you will be advised in by [sic] letter from me as the Plan Administrator.” Ibid. Crabill added that Lucy McDemott-Contreras is “leading this investigation and is familiar with the case.” Ibid. Further, Crabill wrote in his next correspondence to the plaintiff’s counsel that, “[t]he appeal process under the HRP allows an employee to file an appeal when they dispute credited service under the HRP provisions of computation of pension or supplements. If Mr. Haynor wishes to file an appeal, he -15- should do than [sic] within 60 days of receipt of this letter.” Letter to Russell C. Babcock from Preston M. Crabill, March 5, 2007, Ex. 7 to Pl.’s Cross Mot. for Summary Jmt. [dkt # 18]. Furthermore, requiring an employee to go through a four-step grievance procedure now (and potentially, through yet another intra-union procedure later) contravenes the Department of Labor policy expressed in 29 C.F.R. § 2560.503-1, which states: “The claims procedures of a plan that provides disability benefits will be deemed to be reasonable only if . . . the claims procedures do not contain any provision, and are not administered in a way, that requires a claimant to file more than two appeals of an adverse benefit determination prior to bringing a civil action under section 502(a) of the Act.” 29 C.F.R. §§ 2560.503-1(c)(2)-(d). According to the Secretary, reasonable claim procedures “do not contain any provision, and are not administered in any way, that unduly inhibits or hampers the initiation or processing of claims for benefits.” 29 C.F.R. § 2560.503-1(b)(3); see Menz v. Procter & Gamble Health Care Plan, 520 F.3d 865 (8th Cir. 2008) (holding that procedural irregularity resulting in more than two appeals during processing of ERISA participant’s medical benefits claim and stemming from confusion as to which of two claims processors was responsible for administering claim, and which plan attempted to remedy by giving participant an additional appeal, did not warrant less deferential standard of review in ERISA benefits denial case). “A primary goal of ERISA was to provide a method for workers and beneficiaries to resolve disputes over benefits inexpensively and expeditiously.” See Perry v. Simplicity Eng’g, 900 F.2d 963, 967 (6th Cir.1990). That goal would be hindered, rather than advanced, by subjecting the petitioner to new rounds of administrative grievances. The Court finds that the plaintiff’s efforts to exhaust his administrative remedies have been adequate. IV. Review of Pension Board’s decision -16- Turning to the merits of the Pension Board’s decision to deny T&PD benefits, the parties agree that the plan documents call for an “arbitrary-and-capricious” standard of review. “The arbitrary or capricious standard [of review] is the least demanding form of judicial review of administrative action. When it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, that outcome is not arbitrary or capricious.” Davis v. Kentucky Fin. Cos. Ret. Plan, 887 F.2d 689, 693 (6th Cir. 1989) (internal quotes and citation omitted). An administrator’s decision will be upheld under the arbitrary and capricious standard “if it is the result of a deliberate, principled reasoning process, and is rational in light of the plan’s provisions.” Cooper v. Life Ins. Co. of North America, 486 F.3d 157, 165 (6th Cir. 2007) (internal citations omitted). A decision reviewed according to this standard must be upheld if it is supported by “substantial evidence.” Baker v. United Mine Workers of Am. Health & Ret. Funds, 929 F.2d 1140, 1144 (6th Cir. 1991). Substantial evidence supports an administrator’s decision if the evidence is “rational in light of the plan’s provisions.” See Smith v. Ameritech, 129 F.3d 857, 863 (6th Cir. 1993). Nevertheless, the administrator’s decision may be arbitrary and capricious if it relies on an interpretation of the plan that found no support in the text. See Haus v. Bechtel Jacobs Co., 491 F.3d 557, 564 (6th Cir. 2007). “[T]he arbitrary-and-capricious standard of review is not a ‘rubber stamp [of] the administrator’s decision.’” Cooper v. Life Ins. Co. of North America, 486 F.3d 157, 165 (6th Cir. 2007) (quoting Jones v. Metro Life Ins. Co., 385 F.3d 654, 661 (6th Cir. 2004 . In Rochow v. Life Insurance Company of North America, 482 F.3d 860 (6th Cir. 2007), the Sixth Circuit found that an administrator had acted arbitrarily and capriciously where he failed to “‘review . . . the quality and quantity of the . . . evidence and the opinions on both sides of the issues.’” Id. at 865 -17- (quoting McDonald v. W.S. Life Ins. Co., 347 F.3d 161, 172 (6th Cir. 2003 . The court held that the administrator’s denial of benefits failed under this standard. Contrary to the plaintiff’s assertion, the existence of a conflict of interest that arises from a plan administrator deciding issues in which the company has a financial interest does not require a different standard, although the conflict “shapes” the application of the arbitrary and capricious standard of review. Miller v. Metro. Life Ins. Co., 925 F.2d 979, 984 (6th Cir.1991) (holding that where a company pays plan beneficiaries from its own assets, its “perpetual conflict with its profit-making role as a business” must “shape[]” the “application of the [arbitrary and capricious] standard”) (citing Brown v. Blue Cross & Blue Shield of Alabama, Inc., 898 F.2d 1556, 1561-63 (11th Cir. 1990 ; see also Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) (“Of course, if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a facto[r] in determining whether there is an abuse of discretion.”) (internal quotation and citations omitted). The sole ground upon which the Pension Board denied the plaintiff’s T&PD benefits application was his failure to accumulate ten years of credited service. However, the HRP plan documents specifically provide that service can be credited for the time an employee is absent from work because of occupational injury for which an employee receives workers’ compensation: An employee who after October 1, 1950 shall be absent from work because of occupational injury or disease incurred in the course of such employee’s employment with the Corporation, and on account of such absence receives Workmen’s Compensation while on Corporation approved leave of absence shall be credited with 40 hours for each complete calendar week of such absence after September 1, 1961. The GM Hourly-Rate Employees Pension Plan § 2(b)(2), A.R. 147. No approval of the Company is required for a grant of sick leave if an employee suffers “compensable injury” or “legal occupational disease”: -18- In compensable injury and legal occupational disease cases, sick leave will be granted automatically and seniority will accumulate for the full period of legal temporary disability. Temporary employees disabled by compensable injury or legal occupational disease shall be given credit for the period of such disability toward acquiring seniority. 1976 GM-UAW Nat’l Agr. § 108, A.R. 55. James LaLonde, Assistant Director of Arbitration and Contract Administration, opined that the compensable injury is not defined anywhere in the agreement, but rather, it is defined by the administrative agencies of the state, LaLonde’s Dep., A.R. 251-52, that is, the workers’ compensation bureau. Another section of the GM-UAW National Agreement provides different treatment for workers absent due to sick leave due to illness, limiting accumulation of seniority “[i]f the employee is laid off for a continuous period equal to the seniority he had acquired at the time of such layoff period or eighteen (18) months whichever is longer. . . .” 1976 GM-UAW Nat’l Agr. § 64(e); see also 1976 GM-UAW Nat’l Agr. § 106, A.R. 55. Preston Crabill, who administers the provisions of the pension plan, explained the difference between injured workers and those absent due to illness: Under the terms of the 1976 agreement, that as long as the employee’s status is that they’re absent from work due to a compensable injury, then they continue to receive credited service on a 40-hour per week basis as is specified in the plan. If their status is sick leave of absence, then they only receive credited service in accordance with the provisions of the plan, which would be a maximum of 11 months of credited service [in the plaintiff’s case]. Dep. of Preston Crabill, A.R. 261-62. Crabill confirmed that a person may accumulate years of service even while absent due to a work-related injury: If the person continued to be an employee, continued to be absent from work because of a compensable injury and their status continued to be off work and receiving -19- workers’ compensation due to a compensable injury, then, yes, they would continue to receive 40 hours of credited service for each week while absent. Dep. of Preston Crabill, A.R. 262. The Pension Board found that none of these provisions applied to the plaintiff because, according to a computer record, the plaintiff voluntarily quit and did not leave work due to a compensable injury. The plaintiff’s receipt of workers’ compensation benefits is well documented; it is therefore puzzling that, having undertaken the investigation into Haynor’s status at first, and having engaged Ms. Contreras to inquire into the controversy surrounding the computer entry, the defendant then abandoned these efforts and simply denied Haynor’s request because “his contention that he should have seniority reinstated is not a proper topic for the Pension Board of Administration,” and it has “no authority to alter or reinstate seniority.” A.R. 206. Although the Pension Committee claims to have considered only the “Memorandum of Law filed by General Motors in support of its Motion to Affirm the Administrator’s Decision, the Affidavits and deposition testimony of James W. LaLonde and Preston M. Crabill, the Statement of General Motors for the Case Management Status and Scheduling Conference, and the Order of Dismissal entered on February 28, 2006,” A.R. 206, the administrative record before the Board was much more comprehensive than that. Apart from the documents named in the decision, it included a complete file of decisions of various-level administrative agencies and of the Michigan Court of Appeals on the issue of workers’ compensation, the decisions that unanimously concluded that Haynor suffered a work-related injury and entitled him to an open award of workers’ compensation benefits. That evidence shows that the plaintiff was injured in February 1978 when he fell down stairs at work and in October 1978 when he suffered a repetitive motion injury. After the injury in -20- October of 1978, the plaintiff filed a workers’ compensation claim with the Michigan Department of Labor Bureau of Workers’ Disability Compensation complaining that the injury or disablement occurred at Flint, Genesee County, Michigan, and in the following manner: Repetitive, strenuous standing, lifting, twisting, bending and stooping caused and/or precipitated and/or accelerated and/or aggravated claimant’s left shoulder, left cervical area, low back and both lower extremities to a condition of disability prior to and at the time of claimant’s last day worked. Compl., Ex. # 1; Petition for Hrg., Bureau of Workers’ Disability Compensation. According to the plaintiff, his congenital and developmental spinal defects were aggravated when, during a contract dispute, he had to work with welding guns that were positioned too far down the assembly line and the plaintiff had to “fight the guns” that would spring back “constantly hitting plaintiff’s back, causing back and left shoulder problems” and “severe pain underneath [his] shoulder blade.” Compl., Ex. # 3; Workers’ Compensation Appeal Bd. Decision, at 5. The plaintiff also claims to have suffered back problems when “[o]n February 6, 1978, plaintiff stepped on a bolt as he descended a steel staircase, caught his shoe, and fell down five or six steps, landing first on his buttocks and then fell on his back.” Id. at 6. As a result of these incidents, Haynor began to complain increasingly about numbing of his feet and experiencing intolerable pain in his back and shoulders. When, on the day of his alleged resignation, the plaintiff was at work (he returned to work from a leave of absence on October 16, 1978, and his alleged resignation took place on October 20, 1978), defendant was short of help. Plaintiff was having a lot of physical difficulty but, first, could not get treatment at the medical facility, and, second, could not get relief later to go back to the medical facility. Even the help of the committee man was enlisted. After hours back and forth, he punched out. . . Plaintiff went immediately to the emergency room of Flint Osteopathic Hospital. After examination, he was sent home, and went to Dr. Buchanan the next day. The doctor’s records contained a note, the significance of which he could not state, that, on January 29, 1979, plaintiff went back to defendant and was refused -21- work. The return to work was not Dr. Buchanan’s idea; “Now, whether this means he wanted to go back or thought maybe he would go back or wanted to try it if they would give him a different job or something, I don’t know.” Thus, for all we do know, the application would well have been for favored work. According to testimony recorded on page 20 of the transcript of Dr. Buchanan’s deposition, sick leave was extended, in January 1979, to February 26, 1979. This does not, however, mean that plaintiff in fact recovered by the end of February . . . . Id. at 8-9. The plaintiff was diagnosed with lumbar spinal stenosis causing nerve root irritation. In the opinion of the plaintiff’s doctor, “acute attacks [of the petitioner’s condition] can be avoided by avoiding repetitive motion.” Id. at 11. The workers’ compensation bureau granted the plaintiff’s request and on April 22, 1980 awarded the plaintiff retroactive “compensation at the rate of $159.00 per week for partial/total disability to said employee from 10-19-1978 to 4-22-1980 inclusive. . . .” Compl., Ex. # 2; Decision, Bureau of Workers’ Disability Compensation. In addition to an award of retroactive compensation, the defendant was ordered to pay an open award – i.e., “compensation at the rate of $159.00 until further order of the Bureau. . . .” Ibid. GM appealed to the Workers’ Compensation Appeal Board. The defendant’s primary arguments were that Haynor walked away from work within his capacity, after which he engaged in the “activities with excavation and home remodeling while earning an estimated $7,500 after October, 1978”; that Dr. Buchanan released plaintiff to return to work without any restrictions on February 26, 1979; and that the plaintiff’s health issues stem from his congenital and developmental anomalies and traumas that occurred prior to his employment at the defendant’s plant. Compl., Ex. # 3; Decision of Workers’ Compensation Appeal Bd. at 2. But the majority of the board’s members disagreed, and affirmed an award, stating [t]his could well all have been true before plaintiff came to defendant but no work or accident before the employment had resulted in any but temporary symptoms, if -22- that. Work and injury at defendant, on the other hand, did result in permanent symptomatology of varying degrees and, moreover, appear to have elevated him to a greater level of vulnerability. Id. at 11. The appeal board described the plaintiff’s complaint, confirming the plaintiff’s diagnosis of lumbar stenosis as a work-related injury: Plaintiff claimed that bending, twisting and lifting during production relief duties for the defendant included grasping for suspended welding guns that hit his upper back, with increasing shoulder pains and making the use of his left arm uncomfortable. . . . After falling five to six steps on his buttocks and back at defendant’s plant in February, 1978, plaintiff continued working through April, 1978, with increasing low back and leg symptoms that promoted wearing support hose and special shoes, with little relief of his symptoms. Although initially testifying to working continuously, plaintiff clarified that he was off on sick leave after April, 1978 until working four to five days in October, 1978, then leaving after being unable to tolerate increased symptoms from swinging the welding guns down and under shelf panels. . . . I find this record consistent with a nondisabling prior leg injury during strenuous construction activities by plaintiff prior, during and after his period of employment by defendant. . . We find that plaintiff’s February, 1978 injury from falling down several steps increased his lumbar-cervical-leg symptoms prior to his taking sick leave in April, 1978. Decision on Review, Workers’ Compensation Appeal Board, A.R. 291-93. The defendant then appealed to the Michigan Court of Appeals, which denied the application for leave to appeal “for lack of merit in the grounds presented.” Compl., Ex. 4, Haynor v. General Motors Corp., No. 81539, March 20, 1985. On December 17, 1985, the appellate court denied the defendant’s motion for reconsideration. Haynor v. General Motors Corp., No. 81539, Dec. 17, 1985. In light of the defendant’s acknowledgment through its representatives LaLonde and Crabill that a “compensable injury” is defined by the workers’ compensation laws (“‘compensable injury’ is not defined anywhere in the agreement, but rather, it is defined by the administrative agencies of the state,” LaLonde’s Dep., A.R. 251-52; “[t]he answer to this question [of whether Mr. Haynor’s -23- status was correctly reflected in his employment record”] lies with the Workers Compensation Activity and Labor Relations,” Letter to Russell C. Babcock from Preston M. Crabill, Jan. 25, 2007, Ex. 4 to Pl.’s Cross Mot. for Summary Jmt. [dkt # 18]), it is virtually incomprehensible why the defendant would rely on an anonymous computer entry to determine that the plaintiff voluntarily quit instead of the administrative and judicial determinations of the State of Michigan that the plaintiff left work due to a work-related injury. GM’s argument that the plaintiff walked away from his job was rejected by the workers’ compensation appeal board. Common law doctrines of collateral estoppel and res judicata apply to final determinations by administrative agencies acting in judicial capacity, see Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104, 107-08 (1991). The failure of the Pension Board to recognize the force of those decisions would be irrational in light of the plan’s provisions even if they were not binding. See Glenn v. MetLife, 461 F.3d 660, 669 (6th Cir. 2006) (holding that the plan administrator’s failure to address the Social Security Administration’s finding of the claimant’s disability rendered the decision arbitrary and capricious); Bennett v. Kemper Nat’l Servs., Inc., 514 F.3d 547, 553 (6th Cir. 2008) (holding that a failure of an ERISA plan administrator to address the Social Security Administration’s determination that claimant is “totally disabled” is “yet another factor that can render the denial of further long-term disability benefits arbitrary and capricious”). As noted earlier, the Pension Committee and the Board of Administration are expressly authorized to determine issues of credited service for the purposes of pension determination, and they would certainly not hesitate to reduce the amount of pension benefits by the amount of workers’ compensation payments. See Suppl. Agr. App’x D (G), A.R. 194. The defendant attempts to portray the issue as one of “seniority,” but to the extent there is any difference between “seniority” and “credited service,” it is the latter that governs eligibility for benefits and the determination of -24- which is expressly included within the powers of the pension committee. The GM Hourly-Rate Employees Pension Plan, Eligibility for Retirement § 4(a), A.R. 133. The Court finds, therefore, that the decisions of the Pension Committee and the Board of Administration denying the plaintiff’s application for T&PD benefits on the basis of want of sufficient years of credited service is arbitrary and capricious. The evidence in the administrative record plainly shows that the plaintiff suffered a work-related injury, he left work due to that injury, he was determined to have a compensable injury by the State of Michigan’s administrative and judicial departments, and Plan documents provide that he was accumulating more than ten years of credited service during his period of disability while he was receiving an open award. V. Conclusion Because the decision of the defendant’s HRP plan administrator was arbitrary and capricious, it will be reversed. The parties have not furnished information to the Court, and the Court cannot discern from the administrative record, the amount of benefits to which the plaintiff is entitled. That information will be required before a judgment can be entered. Therefore, the Court will direct the defendant to calculate the total and permanent disability benefits under GM’s Hourly-Rate Employees Pension Plan benefits owed to the plaintiff through the current date and going forward. Accordingly, it is ORDERED that the defendant’s motion to affirm the plan administrator’s decision [dkt #27] is DENIED. It is further ORDERED that the plaintiff’s motions for summary judgment, construed as motions to reverse the plan administrator’s decision and award benefits [dkt #18, 32], are GRANTED. It is further ORDERED that the defendant shall determine the amount of past due and current monthly benefits owed to the plaintiff under GM’s Hourly-Rate Employees Pension Plan in -25- accordance with this opinion and order and file a statement with the Court on or before May 15, 2009. Dated: March 30, 2009 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 30, 2009. s/Lisa M. Ware LISA M. WARE -26-

=== Pucci v. 19th District Court and Chief Judge Mark W. Somers ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JULIE A. PUCCI, v. Plaintiff, Case No. 07-10631 Honorable David M. Lawson 19TH DISTRICT COURT and CHIEF JUDGE MARK W. SOMERS, Defendants. ________________________________________/ OPINION AND ORDER GRANTING PLAINTIFF’S MOTION FOR SANCTIONS, DENYING DEFENDANTS’ MOTION TO STRIKE FIRST MOTION FOR SANCTIONS, ANS DISMISSING DEFENDANTS’ THIRD MOTION FOR SUMMARY JUDGMENT The plaintiff, a former deputy court administrator in the Nineteenth District Court in Dearborn, Michigan, brought this action against that court and its chief judge alleging that she was fired as a result of unlawful discrimination and in retaliation for exercising her First Amendment rights. After a period of discovery, the defendants filed a motion for summary judgment. While the motion was pending, the parties agreed to submit the case to facilitative mediation by a privately- retained facilitator, and the Court entered an order setting forth the terms and procedures for mediation. Although the parties reached a tentative agreement, that settlement ultimately was rejected by the City of Dearborn, which is the Nineteenth District Court’s funding unit and apparently has final settlement approval authority. The plaintiff filed a motion alleging that the defendants failed to follow the court-ordered mediation procedures because they did not secure the personal attendance of an individual with settlement authority at the mediation session and otherwise failed to participate in good faith. The plaintiff attached a copy of the proposed settlement agreement to her motion, which was later withdrawn. The plaintiff now has renewed her motion for sanctions, and the defendants filed a motion for sanctions and to strike the image of the settlement agreement in the first motion from the electronic docket. The defendant also filed a third motion for summary judgment. The Court finds that it has no jurisdiction to entertain the latest summary judgment motion because the defendants filed a notice of appeal of the denial of the first summary judgment motion. However, the Court has jurisdiction to adjudicate the plaintiff’s motion for sanctions and the defendants’ motion to strike the exhibit. The Court finds that the defendants violated a key provision of the order for facilitation and the plaintiff therefore is entitled to recover her costs and attorney’s fees expended on that procedure. The Court also finds no grounds to strike the exhibit from the public record. Therefore, the Court will dismiss the latest summary judgment motion for want of jurisdiction, grant the plaintiff’s motion for sanctions, and deny the defendant’s motion for sanctions and to strike the exhibit. I. The facts of this case are thoroughly recounted in the Court’s opinion and order denying the defendants’ first motion for summary judgment. To summarize, the plaintiff began her employment with the Nineteenth District Court in 1991 and through promotions became a deputy court administrator in 1998. In 2001, she began a romantic relationship with Judge Hultgren of that court. This relationship was opposed by Judge Somers, one of the other judges, leading to tension amongst the judges and between the plaintiff and Somers. The plaintiff was in line for promotion to the court administrator position upon the retirement of the incumbent, but Somers blocked that advancement. The plaintiff also had complained to one of the state’s regional court administrators that Judge Somers sent religious messages on court stationery and was proselytizing from the bench. When -2- Judge Somers became chief judge, he eliminated the plaintiff’s position and obtained from the Michigan Supreme Court a letter that states that the plaintiff should not become the court administrator. After the plaintiff’s deputy court administrator position was eliminated and she was fired, she brought the present lawsuit. The Court has ruled previously that there was evidence sufficient to defeat summary judgment that Judge Somers caused the plaintiff to be discharged, the discharge was in retaliation for the plaintiff’s complaints about a matter of public concern, and Judge Somers’s reorganization plan was pretextual. The Court also ruled that, because the City of Dearborn (and not the State of Michigan) is the funding unit for the Nineteenth District Court and would be responsible for satisfying any judgment against the defendants, the defendants are not entitled to sovereign immunity. Earlier in the litigation, after conferring with the Court, the parties agreed to submit their case to facilitative mediation. The Court has an established procedure implemented in the spirit of the Civil Justice Reform Act, see 28 U.S.C. § 473(b)(4), for litigants that choose that form of alternate dispute resolution. The parties recommended and the Court selected as their mediator Peter Houk, the former chief judge of the Ingham County Circuit Court, who is well respected and experienced in the conciliation process. The Court entered an order on January 22, 2008 that set forth the terms, conditions, and requirements of that process. One provision of the order directed the parties to share the mediator’s fee equally. Another provision required the following: All parties or individuals with settlement authority are required to attend the facilitative mediation sessions. All parties are directed to attend all scheduled mediation session(s) with their respective counsel of record. Corporate parties must be represented by an agent with authority to negotiate a binding settlement. Order [dkt. #29] at 1. -3- On March 4, 2008, the defendants filed their first motion for summary judgment. The next day, on March 5, 2008, the plaintiff, plaintiff’s attorneys, defendant Mark Somers, and assistant attorney general Karen Kuchek attended the mediation session with Judge Houk. Kim Craig, the chief labor negotiator for the City of Dearborn, did not attend the facilitation despite a written request from Kuchek to do so. She reportedly was available by telephone. The facilitation lasted nearly eight hours, and a tentative settlement was reached and reduced to writing and signed by the parties present. On March 12, 2008, the Dearborn city council held a closed session, and, according to the plaintiff, Kuchek was instructed not to attend. Instead, Kim Craig attended the session and, the plaintiff believes, recommended that the city council reject the settlement. The settlement was rejected. The plaintiff states that the city council has a policy not to accept a settlement before the dispositive motions have been decided by the court. The defendants have not disputed that allegation. This fact was revealed to the plaintiff only after the settlement was rejected. On May 16, 2008, the plaintiff filed a motion for sanctions alleging that the defendants violated the Court’s order for facilitative mediation by failing to bring a representative with settlement authority and failing to participate in the process in good faith. The plaintiff and her attorneys believe that the mediation session was an act of futility and a waste of time and expense, because the defendants had no intention of consummating a settlement. They attached a copy of the settlement letter as an exhibit to their motion. On May 29, 2008, the parties stipulated to withdraw their motion and strike it from the record. The Court dismissed the motion without prejudice, but did not alter the public record. -4- On July 10, 2008, the Court filed an opinion and order granting in part and denying in part the defendants’ motion for summary judgment. On July 15, 2009, the plaintiff renewed her motion for sanctions. Joel Sklar, an attorney for the plaintiff, states that he spent fourteen hours related to the facilitation, as follows: Review conference with client: Draft Facilitation Summary: Attend Facilitative Mediation: Travel to and from Lansing 2.0 hours 1.5 hours 8.0 hours 2.5 hours At $250/hour, Mr. Sklar’s fees total $3,500. Sanford Plotkin, co-counsel for the plaintiff, spent twelve hours on the mediation: Review/Prep: Attend session: Travel to/from Lansing 1.5 hours 8.0 hours 2.5 hours Mr. Plotkin’s fees, at $250/hour, total $3,000. In addition, the plaintiff seeks to recoup their share of the fee paid to Mr. Houk in the amount of $900. On August 5, 2008, the defendants filed a notice of appeal of the order denying the summary judgment motion. Later that month, the defendant filed two more motions for summary judgment, the latest of which remains pending. The defendants also filed a motion to strike the settlement agreement from the record. Defendant Somers submitted an affidavit where he states that a local news reporter spoke to him on October 9, 2008 and told him that the plaintiff informed the reporter that the parties had entered into a tentative settlement. He also says that in a debate with Candyce Ewing-Abbatt, a candidate running against Somers in the November election, Ewing-Abbatt referenced the settlement agreement, admitting that she had obtained the information from the docket. -5- The Court heard argument on the motions on November 5, 2008. There has been no action taken on the notice of appeal yet. II. The defendants’ first summary judgment motion raised issues of sovereign and qualified immunity, which the Court rejected. As noted above, the defendants filed a notice of appeal from that decision. The filing of a notice of appeal from the denial of immunity generally divests the district court of jurisdiction. Dickerson v. McClellan, 37 F.3d 251, 252 (6th Cir. 1994). However, if a district court certifies the appeal as frivolous, it retains jurisdiction. Yates v. City of Cleveland, 941 F.2d 444, 449 (6th Cir. 1991). The defendants’ appeal of the qualified immunity ruling is highly suspect, as any error “in finding a genuine issue of fact for trial is not the type of legal question which [the Court of Appeals] may entertain on an interlocutory basis.” Gregory v. City of Louisville, 444 F.3d 725, 743 (6th Cir. 2006); see also Johnson v. Jones, 515 U.S. 304, 313 (1995). The Court found that fact questions were material to the qualified immunity determination and summary judgment was precluded. The Court believes that the appeal of that determination is frivolous. However, the defendants also may appeal an adverse determination of sovereign immunity. Kelly v. Great Seneca Financial Corp., 447 F.3d 944, 948 (6th Cir. 2006). On that issue, two other judges in this district have reached an outcome different than this Court in similar but distinguishable cases against state district courts, suggesting that an appeal is not frivolous. Englar v. 41B Dist. Court, 2006 WL 2726986 (E.D. Mich. Sept. 22, 2006); Geller v. Washtenaw County, 2005 WL 3556247 (E.D. Mich. Dec 29, 2005); Smith v. Oakland County Circuit Court, 344 F. Supp. 2d 1030, 1056 (E.D. Mich. 2004). -6- However, the Court’s jurisdiction is only divested as to “those aspects of the case involved in the appeal.” Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982). Consequently, “[t]he district court retains jurisdiction to resolve a motion for attorneys fees or sanctions even while an appeal of the merits is pending in the court of appeals.” Regional Refuse Systems, Inc. v. Inland Reclamation Co., 842 F.2d 150, 156 (6th Cir. 1988), superseded by Rule on other grounds as stated in Vance, by and through Hammons v. United States, 182 F.3d 920, 1999 WL 455435, at *6 (6th Cir. Jun. 25, 1999). The Court concludes, therefore, that it has jurisdiction to resolve the sanctions motions and the motion to strike. It has no jurisdiction to adjudicate the defendants’ third motion for summary judgment, which will be dismissed. III. In her renewed motion for sanctions, the plaintiff argues that she participated in the settlement in good faith, but the defendant did not. The plaintiff contends that the defendant breached its obligations under the Court’s order in three respects. First, Ms. Craig, the purported representative of the funding unit, was available by telephone, but the Court’s order required personal attendance. Second, the plaintiff believes that Ms. Craig argued against the settlement to the city council. Third, the city council has a firm policy of not settling prior to resolution of dispositive motions. The defendants argue against the sanctions motion, but also make some telling concessions in their response. The defendants point out that the City of Dearborn was dismissed from the lawsuit, so Kim Craig was not required to attend the session. But the defendants also concede, “Ms. Craig is an employee of the City of Dearborn, and has no authority to decide settlement proposals in this case.” Def.s’ Resp. at ¶ 4. They also acknowledge, “The Dearborn City Council is the sole -7- decision-maker for settlement agreements. Accordingly, the terms of any proposed settlement are premised upon the approval of the Dearborn City Council.” Id. at ¶ 5. The assistant attorney general denies that she was told not to attend the city council session. Congress has recognized that alternative dispute resolution (ADR) options are valuable tools that district courts may utilize to promote the speedy, just, and economical resolution of civil disputes. See Alternative Dispute Resolution Act of 1998, 28 U.S.C. §§ 651-658. Among the recommended “litigation management and cost and delay reduction techniques” approved by Congress is “a neutral evaluation program for the presentation of the legal and factual basis of a case to a neutral court representative selected by the court at a nonbinding conference conducted early in the litigation.” 28 U.S.C. § 473(b)(4). Although the statutory authorization for such programs contemplates the use of the local rules process for implementation, the Court has the inherent power to order parties to mediate a case in appropriate circumstances even when the parties do not consent to such procedure. In re Atlantic Pipe Corp., 304 F.3d 135, 145 (1st Cir. 2002) (“[W] e hold that it is within a district court’s inherent power to order non-consensual mediation in those cases in which that step seems reasonably likely to serve the interests of justice.”). This Court has adopted the practice of encouraging parties to consider the nonbinding process of facilitative mediation as a preferred form of ADR in civil cases. Because that process carries with it some expense in time and mediator fees, the Court has put in place some ground rules intended to maximize the efficaciousness of the process and increase the likelihood of settlements. For instance, the Court’s order referring a case to mediation contains provisions for confidentiality to protect the discussions and the negotiation process, allowing the facilitator flexibility in the manner of conducting negotiations but prohibiting coercion, limiting communications by the -8- facilitator with the Court to reporting on the settlement if one is reached and reporting only the names of attendees if one is not reached, and allocating the payment of expenses. Through the Court’s own research and experience, the Court has determined that effectiveness declines if the decision-makers in a case do not personally attend the sessions. Although there is some disagreement with that premise, there is considerable supporting authority. See Julie Barker, International Mediation-A Better Alternative for the Resolution of Commercial Disputes: Guidelines for a U.S. Negotiator Involved in an International Commercial Mediation with Mexicans, 19 Loy. L.A. Int’l & Comp. L.J. 1, 31 (1996) (noting the role of nonverbal communication in settlement discussions); Joseph A. Torregrossa, Appellate Mediation in the Third Circuit - Program Operations: Nuts, Bolts and Practice Tips, 47 Vill. L. Rev. 1059, 1070 (2002) (stating that after serving as Third Circuit mediation director, his “experience suggests that in-person mediations are preferable and more productive”); see also First Circuit, Settlement Program, http://www.ca1.uscourts.gov/campgeninfo.htm (last visited March 5, 2009) (stating that “in-person conferences are preferred because experience demonstrates that in-person conferences are much more likely to produce positive results”); Shawn P. Davisson, Note, Privatization and Self-Determination in the Circuits: Utilizing the Private Sector Within the Evolving Framework of Federal Appellate Mediation, 21 Ohio St. J. on Disp. Resol. 953, 982 (2006) (“common sense would again dictate a justifiable presumption in favor of in-person mediation”); Robert J. Niemic, Mediation & Conference Programs in the Federal Courts of Appeals (Fed. Judicial Center 1997) (surveying the circuits and noting that “[p]roponents of in-person conferences maintain that face-to-face interactions between the parties may contribute to the settlement efforts”), available at http://www.fjc.gov/public/pdf.nsf/lookup/mediconf.pdf/$File/mediconf.pdf. Therefore, the Court -9- also has included a requirement of in-person attendance by all of the parties to the case and “[a]ll parties or individuals with settlement authority,” Order [dkt. #29] at 1, as a condition of participating in that form of ADR. The defendants insist that they complied with this provision of the order since the City of Dearborn had been dismissed as a party to the case and they made suitable arrangements with a representative of the City of Dearborn to participate by telephone. The defendants point to a provision in Federal Rule of Civil Procedure 16 to support their claim that participation by telephone is sufficient. See Fed. R. Civ. Pro. 16(c)(1) (allowing the court to order attendance at a pretrial conference and stating, “[i]f appropriate, the court may require that a party or its representative be present or reasonably available by other means to consider possible settlement”). The problem with this argument is that it ignores the language of this Court’s order. In their response, the defendants admitted that its representatives in attendance did not have settlement authority, and the City of Dearborn was the entity that would pay any settlement. They also admit that the person with whom they were in telephone contact had no such authority. It is plain, therefore, that the defendants entirely disregarded this Court’s order for them to have decision- makers present at the mediation session before Judge Houk. When coupled with the apparent policy that the City of Dearborn will not settle a case until dispositive motions are decided, the conclusion is unavoidable that the defendants did not participate in the mediation in good faith and the session ultimately was a waste of time and expense by the plaintiff. When a party disobeys the pretrial orders of a federal court, the Federal Rules provide: On motion or on its own, the court may issue any just orders, including those authorized by Rule 37(b)(2)(A)(ii)-(vii), if a party or its attorney: (A) fails to appear at a scheduling or other pretrial conference; -10- (B) is substantially unprepared to participate – or does not participate in good faith – in the conference; or (C) fails to obey a scheduling or other pretrial order. Fed. R. Civ. P. 16(f)(1). The “just orders” authorized by Rule 37(b)(2)(A)(ii)-(vii) are: (ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence; (iii) striking pleadings in whole or in part; (iv) staying further proceedings until the order is obeyed; (v) dismissing the action or proceeding in whole or in part; (vi) rendering a default judgment against the disobedient party; or (vii) treating as contempt of court the failure to obey any order except an order to submit to a physical or mental examination. Fed. R. Civ. P. 37(b)(2)(A). “Instead of or in addition to any other sanction, the court must order the party, its attorney, or both to pay the reasonable expenses – including attorney’s fees – incurred because of any noncompliance with this rule, unless the noncompliance was substantially justified or other circumstances make an award of expenses unjust.” Fed. R. Civ. P. 16(f)(2). Under this rule, “[t]he district court has discretion to impose whichever sanction it feels appropriate under the circumstances.” Clarksville-Montgomery County School System v. U.S. Gypsum Co., 925 F.2d 993, 998 (6th Cir. 1991). When applying the substantially similar Rule 37, the Sixth Circuit employs a four-factor test to determine whether a sanction (even one other than dismissal) is appropriate: The first factor is whether the party's failure to cooperate in discovery is due to willfulness, bad faith, or fault; the second factor is whether the adversary was prejudiced by the party's failure to cooperate in discovery; the third factor is whether the party was warned that failure to cooperate could lead to the sanction; and the fourth factor in regard to a dismissal is whether less drastic sanctions were first imposed or considered. -11- Doe v. Lexington-Fayette Urban County Government, 407 F.3d 755, 766 (6th Cir. 2005) (quoting Freeland v. Amigo, 103 F.3d 1271, 1277 (6th Cir. 1997 . The party seeking to avoid a sanction “has the burden of showing that his failure to comply was due to inability, not willfulness or bad faith.” United States v. Reyes, 307 F.3d 451, 458 (6th Cir. 2002). The Sixth Circuit has affirmed the denial of a Rule 60(b)(6) motion made by an insurer who was subjected to default judgment as a sanction for not sending a representative to a settlement conference. Frontier Ins. Co. v. Blaty, 454 F.3d 590, 593 (6th Cir. 2006). The insurer in that case did not object to the magistrate judge’s report and recommendation recommending entry of the default judgment, but did object to the denial of his Rule 60(b)(6) motion. The Sixth Circuit concluded that “the Magistrate’s attempts to continue settlement proceedings were neither unusual nor extreme” and found no reason to reopen the judgment. Id. at 598. To the extent that the defendants argue that sanction is inappropriate due to wrongdoing on the part of their funding unit, this argument is undercut by Frontier. Other courts allow sanctions under Rule 16(f) when a party violates a Court’s order to make available representatives with settlement authority. See F.T.C. v. Freecom Communications, Inc., 401 F.3d 1192, 1208 n. 9 (10th Cir. 2005); Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1396 (9th Cir. 1993) (affirming award of attorney’s fees as sanctions against party who appeared without authority to settle, in contravention of Court order). Courts have noted the problem of government entities gaming the system and not sending appropriate authorities to settlement conferences. See generally Schwartzman, Inc. v. ACF Industries, Inc., 167 F.R.D. 694 (D. N.M. 1996). -12- In this case, the plaintiff seeks a very modest sanction – an award of money damages to make her whole – to remedy the various misbehavior surrounding the mediation conference. The defendants’ attendance at the settlement conference in violation of the Court’s order constitutes sanctionable conduct. Here, the defendants have not offered anything to suggest that they were substantially justified in their noncompliance with the Court’s order. An award of the “reasonable expenses - including attorney’s fees - incurred” is appropriate. See Fed. R. Civ. P. 16(f)(2). The plaintiff’s attorney’s fees are reasonable: time spent in the conference plus a reasonable time preparing and commuting. Using the lodestar method and a rate of $250 per hour, which the Court finds as appropriate for the experience of the attorneys involved, the amount sought is justified. The plaintiff also will be reimbursed her portion of the facilitator’s fee. Applying the factors suggested in cases under Rule 37, the Court finds that the sanction sought is adequate. It is unclear whether the refusal to comply with the Court’s order was willful or constitutes bad faith, but the burden is on the defendants to disprove any such showing, and they have not done so. The second factor favors an award of costs, as the plaintiff suffered prejudice in the form of attorney’s fees and facilitator fees, but there is no allegation of any prejudice beyond that. The third factor does not favor a severe sanction as the parties were not explicitly warned (other than the general notice provided by the Rules) that noncompliance with the Court’s order would create the risk of default judgment or other similar sanction. Finally, sanctions other than the most severe allowed are sufficient to remedy this misconduct. The plaintiff’s motion for sanctions, therefore, will be granted. -13- IV. The defendant argues that the first motion for sanctions and supporting exhibit should be stricken and removed from the record, and the plaintiff should be sanctioned for disclosing the tentative settlement. The defendants assert that the disclosure violated this Court’s order referring the case to facilitative mediation, and they suffered prejudice because a candidate running against Judge Somers for that judgeship had access to the terms of the proposed settlement. The Court disagrees. The confidentiality provision in this Court’s facilitation order protects “information disclosed during the facilitative mediation session, including the conduct and demeanor of the parties and their counsel during the proceedings.” Order at 2. It does not make confidential the terms of the settlements that are reached or the information that the session did not result in a settlement. The defendants also cite Federal Rule of Evidence 408 in support of their argument to strike the image of the motion exhibit. However, that rule only governs admissibility of evidence at trial; it does not support their position. Perhaps the more serious aspect of the defendants’ motion is the request to strike from the docket the image of the tentative settlement agreement involving the district court and Judge Somers. If the recent misadventures of Detroit’s former mayor has taught anything, it is that the public is not served by the suppression of evidence of settlements in cases involving public bodies and officials. “[T]he courts of this country recognize a general right to inspect and copy public records and documents, including judicial records and documents.” Nixon v. Warner Communications, Inc., 435 U.S. 589, 597 (1978) (footnotes omitted); Brown & Williamson Tobacco Corp. v. F.T.C., 710 F.2d 1165, 1180 (6th Cir. 1983) (“The public has a strong interest in obtaining -14- the information contained in the court record.”); see also In re Perrigo Co., 128 F.3d 430, 446 (6th Cir. 1997) (Moore, J., concurring in part and dissenting in part) (declaring that “[s]ealing court records . . . is a drastic step, and only the most compelling reasons should ever justify non-disclosure of judicial records”). This creates a “presumptive right” of open judicial records. In re Knoxville News-Sentinel Co., Inc., 723 F.2d 470, 474 (6th Cir. 1983). However, “trial courts have always been afforded the power to seal their records when interests of privacy outweigh the public’s right to know.” Ibid. In exercising its discretion to seal judicial records, the Court must balance the public’s common law right of access against the interests favoring nondisclosure. See Nixon, 435 U.S. at 599, 602 (stating that Court must consider “relevant facts and circumstances of the particular case”); Belo Broadcasting Corp. v.. Clark, 654 F.2d 423, 434 (5th Cir. 1981); see also Bank of Am. Nat'l Trust & Sav. Ass'n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 344 (3d Cir. 1986) (court has a duty to “balance the factors favoring secrecy against the common law presumption of access”); Newman v. Graddick, 696 F.2d 796, 803 (11th Cir. 1983) (“The historic presumption of access to judicial records must be considered in the balance of competing interests.”). “Only the most compelling reasons can justify non-disclosure of judicial records.” In re Knoxville News-Sentinel Co., Inc., 723 F.2d at 476. Courts have been permitted to seal documents that could be “used to gratify private spite or promote public scandal through the publication of the painful and sometimes disgusting details of a divorce case,” contain “reservoirs of libelous statements for press consumption,” or contain “business information that might harm a litigant’s competitive standing.” Nixon, 435 U.S. at 598. “The mere fact that the production of records may lead to a litigant’s embarrassment, incrimination, or exposure to further litigation will not, without -15- more, compel the court to seal its records.” Kamakana v. City and County of Honolulu, 447 F.3d 1172, 1179 (9th Cir. 2006). The information in this case is entirely factual. It is not particularly sensitive – it merely shows that an agreement was reached and the terms of the settlement. Even the facilitator’s report was to contain information about whether the parties settled. The Court believes that the interest of the public in having access to the records of this case outweighs any conceivable interest of privacy that the defendants have in their rejected settlement agreement. V. The Court concludes that it has no jurisdiction to adjudicate the defendants’ latest motion for summary judgment, the plaintiff is entitled to the payment of costs and attorney’s fees to compensate her for the defendants’ conduct in violating the facilitation order and frustrating the mediation process, and there is no basis to strike any filings from the docket in this case. Accordingly, it is ORDERED that the defendants’ third motion for summary judgment [dkt #54] is DISMISSED for want of jurisdiction. It is further ORDERED that the plaintiff’s renewed motion for sanctions [dkt #s 42, 44] is GRANTED. The defendants shall pay to the plaintiff the sum of $7,400 on or before March 20, 2009. It is further ORDERED that the defendants’ motion to strike and for sanctions [dkt # 58] is DENIED. Dated: March 6, 2009 s/David M. Lawson DAVID M. LAWSON United States District Judge -16- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 6, 2009. s/Felicia M. Moses FELICIA M. MOSES -17-

=== Pucci v. Michigan Supreme Court, et. al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JULIE A. PUCCI, v. Plaintiff, Case No. 08-10557 Honorable David M. Lawson MICHIGAN SUPREME COURT, JUSTICES CLIFFORD W. TAYLOR, MICHAEL F. CAVANAGH, ELIZABETH A. WEAVER, MAURA D. CORRIGAN, ROBERT P. YOUNG, JR., STEPHEN J. MARKMAN, MARILYN KELLY, ______________________________________/ Defendants. OPINION AND ORDER DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT This is the second lawsuit filed by the plaintiff, Julie Pucci, arising from the loss of her job as a deputy court administrator in the Michigan nineteenth district court located in the ity of Dearborn. The first lawsuit is aimed at that court and its chief judge, who fired the plaintiff, she claims, under the pretext of an administrative reorganization. The plaintiff alleged in that case that in fact she was fired, among other reasons, in retaliation for complaining about the chief judge’s religious proselytizing from the bench and because he was upset by the plaintiff’s intimate relationship with another judge in that court. The present case names the state supreme court and its justices (in their individual and official capacities) as defendants for sending a directive to the nineteenth district court that prohibited the plaintiff from advancement to the position of court administrator because she was cohabiting with the other judge out of wedlock, and therefore was in violation of the “spirit” of the supreme court’s anti-nepotism policy. In a single-count complaint, the plaintiff alleges that the defendants’ actions violated her First and Fourteenth Amendment rights because (1) the actions interfere with the plaintiff’s right of association, affiliation, and intimate relationship; (2) they violate her right to equal protection of law; (3) they violate her substantive due process rights, and perhaps procedural due process rights because the plaintiff did not have a hearing on the interpretation of the rule; (4) the court’s interpretation of the rule is vague, overbroad, arbitrary, and capricious; and (5) the defendants selectively applied the rule. The plaintiff seeks damages and various forms of injunctive and declaratory relief. The defendants have filed a poorly- drafted motion to dismiss or for summary judgment alleging that they are entitled to Eleventh Amendment, judicial, and qualified immunity, the plaintiff lacks standing, and the Court should exercise its discretion to refuse jurisdiction under the Declaratory Judgment Act. The plaintiff has filed a motion for summary judgment contending that she is entitled to the relief she requests as a matter of law. The Court heard oral argument from the parties on August 11, 2008. The Court now finds that the defendants are not entitled to judicial or sovereign immunity except in their official capacity, the plaintiff has no standing to sue these defendants for her termination from employment as deputy court administrator but has standing to seek redress for her failure to obtain a promotion, the plaintiff has no protectable property interest in a promotion to the position of court administrator, and the plaintiff’s First and Fourteenth Amendment rights were not violated by the action of the state supreme court or its justices. Therefore, the defendants’ motion to dismiss or for summary judgment will be granted, the plaintiff’s motion for summary judgment will be denied, and the case will be dismissed. -2- I. Facts and Proceedings Julie Pucci first became employed by the nineteenth district court in March 1991 as a court typist, and she rose through the ranks to the position of assistant court administrator in 1995. That position was reclassified to Deputy Court Administrator in 1998. The Court Administrator was Doyne Jackson. In 2001, the plaintiff entered into a live-in relationship with William C. Hultgren, one of the court’s judges. In the fall of 2002, Mark W. Somers was elected to replace a retiring judge of the court, and he took office in January 2003. The bench then consisted of Judges Hultgren, Wygonik, and Somers. It appears that Judge Somers and Judge Hultgren were antagonistic toward each other over Hultgren’s relationship with the plaintiff and the prospect of her advancement to the court administrator position. The state supreme court selects the chief judge of the local courts, but due to the unrest among the Dearborn court’s members, the supreme court appointed Judge Leo K. Foran, a judge of a neighboring district court, to serve as the chief judge of the Dearborn court. His tenure as chief judge began in March 2005 and concluded in January 2006, when Judge Somers was appointed chief judge. On March 30, 2005, Judge Foran announced his intention to reorganize the court’s administrative structure by moving the plaintiff to court administrator to replace the retiring Doyne Jackson, and not filling the position of deputy court administrator. Judge Somers, who vigorously opposed the plaintiff’s elevation to the court administrator position because of her relationship with Judge Hultgren, embarked upon a campaign to have the plaintiff removed as a court employee. On April 4, 2005, Somers wrote to regional court administrator Deborah Green asking her to reverse Judge Foran’s decision and prevent the plaintiff from becoming the court administrator. On April -3- 14, 2005, Somers wrote a letter to state court administrator Carl Gromek, asking him to reverse Judge Foran’s appointment of the plaintiff as court administrator, remove Judge Foran as chief judge, and expand the terms of Administrative Order 1996-11 (the state court’s anti-nepotism rule) to include “domestic partners” among those disqualified from court employment, which would result in the plaintiff’s termination from her court position. Apparently, Judge Somers’s complaints attracted the supreme court’s attention. Anne Boomer, administrative counsel to the supreme court, submitted an affidavit outlining the procedures taken by the court when dealing with such an issue: 5. When an issue is brought to the Court’s attention, it is considered at its weekly administrative conference. The reports or memoranda are distributed the week prior to consideration, and there is often email traffic on specific proposals. Sometimes, the Court asks for more information or background on an issue. 6. The Court’s action can range from declining to act and closing the file, to circulating the proposal to a specific group for comment, or publishing for comment. In some cases, the Court adopts an amendment with immediate effect. 7. Enforcement of administrative orders is handled by the state court administrator and its regional administrators. Def.s’ Mot. to Dismiss, Ex. K, Boomer Aff. In light of Somers’s letter, the supreme court discussed altering the policy to prohibit the hiring or retention of domestic partners. Pl.’s Mot. for Summ. J., Ex. F, Green Dep. 52. The policy was not amended because the court “had a hard time defining domestic partners and, quite frankly, we were afraid of getting into the whole homosexual relationship realm, and so it was just a door that we thought was way too complicated to open.” Id. at 52-53. At some point, Carl Gromek visited Judge Foran. According to Foran, Gromek began “yelling and screaming at the top of his voice” that Foran had “screwed up” by not posting the -4- position of court administrator publicly before appointing Pucci. Pl.’s Mot., Ex. B. Foran Dep. 34- 36. On May 10, 2005, Gromek sent Judge Foran a letter that states: I referred this matter to the Court, and the Justices have concluded that Ms. Julie A. Pucci’s romantic partnership with Judge Hultgren is a violation of the spirit of its antinepotism rule. While the Court is of the view that Ms. Pucci may remain employed with the 19th District Court in the capacity that predated her romantic relationship with Judge Hultgren, she cannot be advanced or otherwise be advantaged after the beginning of her romantic relationship with Judge Hultgren. Accordingly, Ms. Pucci will not succeed Doyne E. Jackson as Court Administrator. Pl.’s Mot. for Summ. J., Ex. G. In response to Gromek’s letter, then-Chief Judge Foran amended his reorganization plan by appointing court clerk Sharon Langen as court administrator and retaining the plaintiff as the deputy court administrator. On July 7, 2005, Regional Court Administrator Deborah Green requested confirmation that Pucci’s appointment as court administrator had been revoked. A short time later, Judge Somers became chief judge. On October 10, 2006, Judge Somers sent out a memo announcing another administrative reorganization. He proposed to retain one court administrator and one clerk of the court and eliminate the position of deputy court administrator, held by the plaintiff. Sharon Langen was to continue as the court administrator until a new one was hired, and then she would be reassigned to the clerk of court position. On October 25, 2006, the plaintiff applied for the position of court administrator. One day later, Chief Judge Somers responded via letter: As you know, by letter dated May 10, 2005, the State Court Administrator advised all concerned parties that the Justices of the Michigan Supreme Court have concluded you are not eligible to assume the position of court administrator for the 19th District Court by virtue of your romantic domestic partnership with Judge Hultgren as the relationship “is a violation of the spirit of its antinepotism rule”. A copy of Mr. Gromek’s letter is attached. To my understanding, this conclusion was not dependent upon the fact Judge Hultgren was chief judge pro tem at that time. Although I was certainly not privy to their discussion, the Justices’ decision was -5- given in response to a written inquiry which stated the issue presented as “Whether the live-in fiancé of a sitting judge can/should be permitted to assume the position of court administrator in the same court in which the judge is sitting?” The antinepotism rule referenced by Mr. Gromek is Administrative Order 1996-11 which provides in pertinent part that “Relatives of justices, judges or court administrators shall not be employed within the same court or judicial entity.” No distinction is made between “chief” and other justices/judges. I would again encourage you to apply for the open court administrator position with the 40th District Court and wish you the very best. Pl.’s Resp., Ex. 3, Somers Dep., Ex. Judge Somers followed through with his plan and fired the plaintiff from her position as deputy court administrator. He did not hire her as the court administrator. Meanwhile, the plaintiff’s attorney wrote to the supreme court to inquire about the procedure and rationale it used to make its determination that the plaintiff could not advance within the court unit. Carl Gromek replied with a letter that states: “In response to your letter of January 11, 2008, there is no formal opinion or order of the Court. The Justices discussed this matter administratively.” Pl.’s Mot. for Summ. J., Ex. H. The plaintiff’s attorney sent another letter, to which no reply was received. The plaintiff filed her first lawsuit against the city of Dearborn, the nineteenth district court, and Mark Somers on February 12, 2007. As part of his defense to the discrimination and retaliation charges, Judge Somers took the position that he eliminated the plaintiff’s job as part of a reorganization plan, and he could not hire her for the new job because the supreme court would not let him. The plaintiff then filed the present action on February 7, 2008 alleging that the supreme court’s pronouncement in its May 10, 2005 letter violated her constitutional rights. The plaintiff’s complaint seeks the following remedies: Equitable relief: A. A declaration that Defendants [sic] interpretation and application of Administrative Order No. 1996-11 to Plaintiff is unconstitutional; -6- B. C. D. A temporary restraining order, a preliminary injunction, after final hearing, a permanent injunction precluding the Michigan Supreme Court, or any of its agencies, from applying Administrator [sic] Order No. 1996-11 to any class of persons other than those specifically defined and identified in Administrator [sic] Order No. 1996-11; An Order that restores Plaintiff to the position of Court Administrator, a position for which Plaintiff had been designated and selected prior to the unconstitutional conduct of Defendants. Any other equitable relief to which Plaintiff may be entitled, including the payment of attorney fees, interest and costs. Legal Relief: A. Awards Plaintiff all past and future lost wages and economic losses and/or damages incurred and suffered by Plaintiff as a result of Defendants’ violation of Plaintiff’s constitutional rights. Awards Plaintiff compensation for her past and future non-economic injuries incurred and suffered by Plaintiff as a result of Defendants’ violation of Plaintiff’s constitutional rights. Awards Plaintiff punitive damages as provided in 42 USC § 1983, and other applicable statutes including damages available to her under 42 USC § 1985. All other relief to which Plaintiff may be entitled, including payment of attorney fees, interest and costs. B. C. D. Compl. at 12-13. The present motions followed. II. Discussion Although the defendants have styled their motion in the alternative as one to dismiss or for summary judgment, they have attached affidavits to their motion papers addressing the merits of the plaintiff’s claim. Since they ask the Court to consider matters outside the pleadings, the motion will be considered under Federal Rule of Civil Procedure 56. See Fed. R. Civ. P. 12(d) (stating that “if, on a motion . . . [to dismiss for failure of the pleading to state a claim upon which relief can be granted,] matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment under Rule 56”); Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 533 (6th Cir. 2002) (quoting Soper v. Hoben, 195 F.3d 845, 850 (6th -7- Cir. 1999 ; Coalition to Defend Affirmative Action v. Regents of University of Mich., 539 F. Supp. 2d 924, 944 (E.D. Mich. 2008). Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact.” Fed. R. Civ. P. 56(c). The fact that the parties have filed cross motions for summary judgment does not automatically justify the conclusion that there are no facts in dispute. Parks v. LaFace Records, 329 F.3d 437, 444 (6th Cir. 2003) (“The fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate.”). Instead, the Court must apply the well-recognized standards when deciding such cross motions: when this Court considers cross motions for summary judgment, it “must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party.” Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003). A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 587 (1986). -8- A. Standing The defendants argue that the plaintiff lacks standing to seek an injunction reinstating her to her former position because that relief cannot be given by the supreme court, which is not her immediate employer. They also argue that the supreme court did not force Judge Somers to fire the plaintiff; these defendants simply prohibited her promotion. The plaintiff contends, however, that the wrongs she suffered all can be traced to these defendants, since they barred her promotion to the court administrator position, and that led to her eventual termination as deputy court administrator. It appears, then, that the plaintiff seeks relief from the present defendants for two wrongs: the reversal of her promotion, and the loss of her original job. Although the court administrator position is filled, the plaintiff asks for injunctive relief that upsets the debarment in the event the position should become vacant in the future and she seeks to reapply. “‘[A] plaintiff must demonstrate standing separately for each form of relief sought.’” DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006) (quoting Friends of Earth, Inc. v. Laidlaw Environmental Services, Inc., , 185 (2000 ; see also Johnson v. Turner, 125 F.3d 324, 338 (6th Cir. 1997). “To establish Article III standing, a litigant must show (1) an injury in fact; (2) a causal connection between the injury and the conduct complained of; and (3) that the injury will likely be redressed by a favorable decision.” Barnes v. City of Cincinnati, 401 F.3d 729, 739 (6th Cir. 2005) (citing Lujan v. Defenders of Wildlife, , 560-61 (1992 . The injury must be “actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560 (internal quotations and citations omitted). “[A] plaintiff is not entitled to injunctive or declaratory relief ‘[a]bsent a sufficient likelihood that [s]he will again be wronged in a similar way,’ City of Los Angeles v. Lyons, (1983), unless the plaintiff is subject to “continuing, present adverse -9- effects,” O’Shea v. Littleton, , 496 (1974).” Schultz v. United States, 529 F.3d 343, 349 (6th Cir. 2008); see also Fieger v. Ferry, 471 F.3d 637, 643 (6th Cir. 2006) (“In the context of a declaratory judgment action, allegations of past injury alone are not sufficient to confer standing. The plaintiff must allege and/or ‘demonstrate actual present harm or a significant possibility of future harm.’” (quoting Peoples Rights Org., Inc. v. City of Columbus, 152 F.3d 522, 527 (6th Cir. 1998 . For example, the Sixth Circuit has held that a plaintiff who has repeatedly attempted to obtain employment with a municipality had standing to challenge certain hiring practices. Cleveland Branch, N.A.A.C.P. v. City of Parma, OH, 263 F.3d 513, 528 (6th Cir. 2001). The injury also must be “fairly traceable” to the defendants’ conduct. However, intervening acts of a third-party may break the causal connection between the injury and the allegedly illegal action. Compare Lambert v. Hartman, 517 F.3d 433, 437 (6th Cir. 2008) (holding that a plaintiff had standing to challenge a municipal’s website that made public her social security number and driver’s license number, where the plaintiff’s personal information was used by a third-party to steal her identity, notwithstanding the intervening criminal act of the third-party, because the plaintiff has “alleged sufficient facts to show that her injuries were fairly traceable to the publication of her personal information by the Clerk”) with Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 41-42 (1976) (“In other words, the ‘case or controversy’ limitation of Art. III still requires that a federal court act only to redress injury that fairly can be traced to the challenged action of the defendant, and not injury that results from the independent action of some third party not before the court.”); Alston v. Advanced Brands and Importing Co., 494 F.3d 562, 565 (6th Cir. 2007) (holding that parents lacked standing to sue advertisers of alcohol for the injury to their children from their children illegally purchasing alcohol, noting that “the causal connection between -10- the defendants’ advertising and the plaintiffs’ alleged injuries is broken by the intervening criminal acts of the third-party sellers and the third-party, underage purchasers”); American Canoe Ass’n, Inc. v. City of Louisa Water & Sewer Com’n, 389 F.3d 536, 542 (6th Cir. 2004) (“The causation requirement of the constitutional standing doctrine exists to eliminate those cases in which a third party and not a party before the court causes the injury.”). This Court’s found in Pucci v. Nineteenth Dist. Court, 565 F. Supp. 2d 792 (E.D. Mich. 2008), that it was Judge Somers and not the supreme court that caused the plaintiff’s termination. The facts are undisputed that Judge Somers had the authority under Michigan law to act in matters of personnel for the local court unit. The district court is an administrative unit unto itself, and although it is subject to superintending control by the state supreme court, Mich. Comp. Laws § 600.8101(1), the administrative duties of the court, including the authority to hire and fire court employees, fall to the chief district court judge. Mich. Ct. R. 8.110(C)(3) (2008). Neither the supreme court nor any of its justices played any role in the plaintiff’s termination from her job. In fact, the court’s letter to Judge Forhan stated that the plaintiff could “remain employed with the 19th District Court in the capacity that predated her romantic relationship with Judge Hultgren.” Pl.’s Mot. for Summ. J., Ex. G. The plaintiff’s termination is not “fairly traceable” to the conduct of these defendants. The same conclusion must be reached for the plaintiff’s claim for prospective injunctive and declaratory relief. The plaintiff’s relevant injury scenario for standing purposes would be that she obtains the position of court administrator in the nineteenth district court at some time in the future, but she is barred from occupying it because the supreme court forbids it. This injury is not “actual or imminent”; rather it is “hypothetical.” See Lujan, 504 U.S. at 560. The court administrator -11- position is currently filled. The position would have to open up, and the plaintiff would have to desire to apply for it. Only then will the interpretation of the administrative order be relevant prospectively. The plaintiff suggests that one of her injuries could be addressed by an order from this Court reinstating her to the position of Court Administrator. However, the Court is not aware of authority authorizing it to redress discrimination by Judge Somers with an order directed to separate defendants to “reinstate” the plaintiff to a position that she had not held during Somers’s entire tenure. If this Court were to strike down the state court’s interpretation of its anti-nepotism rule in full and enjoin the supreme court from applying the rule against the plaintiff, there still would be no redress of the plaintiff’s claimed injury because there is no likelihood that the circumstance will recur. And the Court cannot order the supreme court or the justices to reinstate the plaintiff as a deputy court administrator because those defendants did not fire her in the first place. On the other hand, in reversing the promotion to the court administrator position, Judges Foran and Somers complied with the supreme court’s interpretation of the administrative order. Although the law is clearly established (notwithstanding Lambert v. Hartman, 517 F.3d 433, 437 (6th Cir. 2008 that the intervening act of a third party that causes an injury is not “traceable” to the original conduct, it was the decision of the defendants that led directly to the plaintiff’s loss of promotion. To the extent that the May 10, 2005 directive was a wrongful act, the plaintiff has standing to seek redress for the lost promotion, which the directive plainly caused. B. Eleventh Amendment Immunity The defendants contend that they are entitled to sovereign immunity under the Eleventh Amendment because they are an arm of the State. The plaintiff concedes that her damages claim against the supreme court and its justices in their official capacity is barred by the Eleventh -12- Amendment, but she contends that the individual capacity claims and the claims for prospective injunctive and declaratory relief are not barred. The Michigan Supreme Court is an arm of the State, and therefore it is entitled to sovereign immunity. See Dubuc v. Michigan Bd. of Law Examiners, 342 F.3d 610, 615 (6th Cir. 2003). However, “the State’s sovereign immunity does not preclude suits against state officials in their individual capacities for damages under § 1983.” Skinner v. Govorchin, 463 F.3d 518, 524 (6th Cir. 2006). Moreover, the sovereign immunity bar does not apply when a plaintiff seeks declaratory or injunctive relief against a public official that is “‘properly characterized as prospective.’” Dubuc, 342 F.3d at 616 (quoting Verizon Maryland, Inc. v. Public Service Commission of Maryland, 535 U.S. 635, 645 (2002 ; see also Johnson v. Unknown Dellatifa, 357 F.3d 539, 545 n. 1 (6th Cir. 2004). That exception to the Eleventh Amendment bar was recognized in Ex parte Young, , 155-56 (1908). “The test for determining whether the Ex parte Young exception applies is a ‘straightforward’ one. The court considers whether the complaint alleges an ongoing violation of federal law and seeks relief properly characterized as prospective. . . . The focus of the inquiry remains on the allegations only; it does not include an analysis of the merits of the claim.” League of Women Voters of Ohio v. Brunner, 548 F.3d 463, 474 (6th Cir. 2008) (internal quotes and alterations omitted). The parties agree that the Michigan Supreme Court and its justices in their official capacity are entitled to sovereign immunity for monetary damages. However, the plaintiff may proceed against the justices in their individual capacities without running afoul of sovereign immunity. The plaintiff’s request for an injunction against the individual justices prohibiting an enforcement of an -13- unlawful rule or requiring her reinstatement would not be barred by the doctrine of sovereign immunity, but, as noted earlier, the plaintiff has no standing to seek redress for this speculative injury. The defendants’ arguments on the loss-of-promotion claim must be rejected, except that the Michigan Supreme Court is entitled to dismissal. C. Judicial Immunity The defendants argue that the justices are entitled to absolute judicial immunity because the function they performed in disqualifying the plaintiff from advancement within the local court unit was a judicial act. The law does not support that argument, however, since it is apparent that the justices acted in an administrative capacity. “It is well-established that judges enjoy judicial immunity from suits arising out of the performance of their judicial functions.” Brookings v. Clunk, 389 F.3d 614, 617 (6th Cir. 2004) (citing Pierson v. Ray, 386 U.S. 547, 553-54 (1967) and Mann v. Conlin, 22 F.3d 100, 103 (6th Cir. 1994 . Officials entitled to such immunity are immune from suits for money damages, in particular claims brought under section 1983. Barrett v. Harrington, 130 F.3d 246, 254 (6th Cir. 1996). However, the burden is on the official to establish immunity. Id. at 255. A judge is not entitled to judicial immunity for performing non-judicial acts or acting completely without jurisdiction. Mireles v. Waco, 502 U.S. 9, 11-12 (1991). The Sixth Circuit has explained: In Stump, the Supreme Court established a two-prong test to determine whether an act is “judicial.” [Stump v. Sparkman, 435 U.S. 349, 362 (1978)]. First, the court must consider whether the act in question is a function that is “normally performed by a judge.” Id. This court has previously referred to this inquiry as the functional approach. Under this inquiry, a court is required to examine the nature and function of the act, not the act itself. The Supreme Court reformulated this inquiry in Mireles by establishing that, even if a particular act is not a function normally performed by -14- a judge, the court must look to the particular act’s relation to a general function normally performed by a judge. Id. at 13. Second, in determining whether an act is “judicial,” the court must assess whether the parties dealt with the judge in his or her judicial capacity. Id. at 12. In examining the functions normally performed by a judge, this court has recognized that “paradigmatic judicial acts,” or acts that involve resolving disputes between parties who have invoked the jurisdiction of a court, are the touchstone for application of judicial immunity. Barrett v. Harrington, 130 F.3d 246, 255 (6th Cir. 1997) (citing Antoine [v. Byers & Anderson], 508 U.S. [429,] 435-36 [(1993)]). Conversely, whenever an action taken by a judge is not an adjudication between the parties, it is less likely that it will be deemed judicial. Cameron v. Seitz, 38 F.3d 264, 271 (6th Cir. 1994). Brookings, 389 F.3d at 617-18. “Administrative decisions, even though they may be essential to the very functioning of the courts, have not similarly been regarded as judicial acts.” Forrester v. White, , 228 (1988). A judge who swore out a criminal complaint against a former litigant for conduct of that litigant in her court was acting in a judicial capacity. Brookings, 389 F.3d at 622. And a judge who set dates for hearings for litigants before him acted in a judicial capacity. Mann v. Conlin, 22 F.3d 100, 104 (6th Cir. 1994). Yet a judge who chose to discharge a probation officer was not entitled to absolute immunity, even though only judges may undertake such action under state law. Forrester, 484 U.S. at 229. A presiding judge who, under Michigan law was authorized to “issue any writs, directives, and mandates that it judges necessary and expedient to effectuate its determinations, and to take any action it deems proper to facilitate the proper administration of justice,” Mich. Comp. Laws § 600.219, was found to be acting in an administrative capacity when he prohibited the clerk’s office from issuing writs of restitution. Morrison v. Lipscomb, 877 F.2d 463, 465-67 (6th Cir. 1989). -15- By privately “interpreting” an administrative order dealing with employment issues, the justices were not acting in a judicial capacity. The fact that they reached this decision without the usual incidents of judging – providing opportunity for both sides to be heard, a written decision articulating the reasons, or briefing from opposing parties asking the court to resolve a dispute – makes it “less likely that [their act] will be deemed judicial.” See Brookings, 389 F.3d at 618. This case most resembles the cases where a judge makes an employment decision, Forrester, 484 U.S. at 229, or tries to undertake supervisory control of the lower courts under Mich. Comp. Laws § 600.219, Morrison, 877 F.2d at 465-67, where neither legislative or judicial immunity applied. The court itself described the decision as handled “administratively.” Pl.’s Mot. for Summ. J., Ex. H. The defendants’ informal handling of an employment dispute is an administrative act for which they may not invoke judicial immunity. D. Qualified Immunity The defendants also argue that they are entitled to qualified immunity. “To overcome a qualified-immunity defense in the setting of a constitutional tort, a plaintiff must establish (1) that the defendant violated a ‘constitutional right’ and (2) that the right ‘was clearly established.’” Leary v. Livingston County, 528 F.3d 438, 441 (6th Cir. 2008) (quoting Saucier v. Katz, , 201 (2001 . Qualified immunity is an affirmative defense that protects officers from liability for civil damages when their conduct does “not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982). The Supreme Court has held that a claim of qualified immunity must be examined in two stages, see Saucier, 533 U.S. at 200, although the Sixth Circuit sometimes expands the inquiry into a three-step sequential analysis, stating: “The first inquiry is whether the [p]laintiff has shown a violation of a -16- constitutionally protected right; the second inquiry is whether that right was clearly established at the time such that a reasonable official would have understood that his behavior violated that right; and the third inquiry is ‘whether the plaintiff has alleged sufficient facts, and supported the allegations by sufficient evidence, to indicate that what the official allegedly did was objectively unreasonable in light of the clearly established rights.’” Tucker v. City of Richmond, Ky., 388 F.3d 216, 219 (6th Cir. 2004) (quoting Higgason v. Stephens, 288 F.3d 868, 876 (6th Cir. 2002); see also Champion v. Outlook Nashville, Inc., 380 F.3d 893, 901 (6th Cir. 2004) (citing Feathers v. Aey, 319 F.3d 843, 848 (6th Cir. 2003 . That court later explained that although the Supreme Court had continued to use the two-step approach, see Brosseau v. Haugen, 543 U.S. 194, 197 (2004) (per curiam), “‘the three-step approach may in some cases increase the clarity of the proper analysis.’” Swiecicki v. Delgado, 463 F.3d 489, 498 (6th Cir. 2006) (quoting Estate of Carter v. City of Detroit, 408 F.3d 305, 311 n. 2 (6th Cir. 2005 . It appears that when the state actor’s conduct is obviously “objectively unreasonable” and violates a constitutional right, the court will “collapse[]” the last two steps. Ibid. (quoting Caudill v. Hollan, 431 F.3d 900, 911 n.10 (6th Cir. 2005 . Where a more exacting analysis of the facts may be necessary, the court tends to employ the third step, since “[i]t is important to emphasize that [the step-two] inquiry must be undertaken in light of the specific context of the case, not as a broad general proposition.” Brosseau, 543 U.S. at 198 (internal quotes and citation omitted). The Supreme Court has retreated recently from that protocol, see Pearson v. Callahan, 129 S. Ct. 808, 818 (2009) (“On reconsidering the procedure required in Saucier, we conclude that, while the sequence set forth there is often appropriate, it should no longer be regarded as mandatory. The judges of the district courts and the courts of appeals should be permitted to exercise their sound -17- discretion in deciding which of the two prongs of the qualified immunity analysis should be addressed first in light of the circumstances in the particular case at hand.”), but the Court finds it useful in cases where, as here, there is a serious question whether the plaintiff’s constitutional rights were violated at all. Once the defense is raised, the plaintiff has the burden of demonstrating a violation of a constitutional right and showing that the right was clearly established. Barrett v. Steubenville City Sch., 388 F.3d 967, 970 (6th Cir. 2004). 1. Vagueness The plaintiff first argues that her constitutional rights were violated because the supreme court’s anti-nepotism rule and the defendants’ interpretation of it are vague. She explains that the rule plus the interpretation failed to give her fair notice of the prohibited conduct. In fact, the plaintiff acknowledges that the rule, contained in an administrative order, “draws an explicit demarcation” of who constitutes a relevant “relative.” The plaintiff understood that she did not fall within the definition, but when the supreme court applied the order’s “spirit” to her, she lacked the required notice. The plaintiff complains that she was deprived of prior notice that her conduct would come at the expense of career advancement. The Sixth Circuit has explained: “[A]n enactment is void for vagueness if its prohibitions are not clearly defined.” Grayned v. City of Rockford, 408 U.S. 104, 108 (1972) (holding that Rockford's antinoise ordinance was not unconstitutionally vague). Vague laws are problematic because they (1) “may trap the innocent by not providing fair warning,” (2) fail to “provide explicit standards for those who apply them,” and (3) threaten “to inhibit the exercise of [First Amendment] freedoms.” Id. at 108-09 (quotation marks and footnote omitted). A law must therefore “give the person of ordinary intelligence a reasonable opportunity to know what is prohibited, so that he may act accordingly.” Id. at 108. The Supreme Court has explained that, “[c]ondemned to the use of words, we can never expect mathematical certainty from our language.” Id. at 110. -18- Deja Vu of Cincinnati, L.L.C. v. Union Tp. Bd. of Trustees, 411 F.3d 777, 798 (6th Cir. 2005) (en banc). “A more stringent test applies [for vagueness] if the provision interferes with constitutional rights, and a less stringent test applies if the provision concerns civil rather than criminal penalties.” Ass’n of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 551 (6th Cir. 2007). However, standards governing public employment are not required to set forth standards with the precision required of criminal statutes. Arnett v. Kennedy, 416 U.S. 134, 159 (1974) (plurality opinion) (holding that the law allowing the federal government to fire employees for “such cause as will promote the efficiency of the service” survives vagueness and overbreadth challenges); id. at 164 (opinion of Powell, J.) (same); id. at 177 (opinion of White, J.) (same); Fowler v. Board of Educ. of Lincoln County, Ky., 819 F.2d 657, 665-66 (6th Cir. 1987) (holding that prohibition for “conduct unbecoming a teacher” could not be challenged on vagueness or overbreadth grounds by teacher who was terminated for conduct clearly falling within scope of prohibition); see also Piscottano v. Murphy, 511 F.3d 247, 281 (2d Cir. 2007) (holding that “generalized language may appropriately be used to set out standards of conduct for employees”). Another concern underlying the vagueness doctrine is that the statute must provide explicit standards to prevent arbitrary enforcement. Morrison v. Colley, 467 F.3d 503, 508 (6th Cir. 2006) (“In addition, the statute ‘must provide explicit standards for those who apply them.’” (quoting Grayned v. City of Rockford, 408 U.S. 104, 108 (1972 . However, if discretion is vested in the body promulgating the rules, the concerns of discriminatory enforcement are inapplicable. Ass’n of Cleveland Fire Fighters, 502 F.3d at 553. The fundamental flaw in the plaintiff’s vagueness argument is that the administrative order was not used as the basis for the supreme court’s action. The order itself plainly states: “Relatives -19- of . . . judges or court administrators shall not be employed within the same court.” Pl.’s Mot., Ex. D (Administrative Order No. 1996-11). It then defines “relative” specifically as a “spouse, child, parent, brother, sister, grandparent, grandchild, first cousin, uncle, aunt, niece, nephew, brother-in- law, sister-in-law, daughter-in-law, son-in-law, mother-in-law, and father-in-law, whether natural, adopted, step or foster.” Ibid. As the plaintiff points out, her relationship with Judge Hultgren did not fall within that definition, but she was barred from promotion anyway. So the plaintiff’s claim is not really that the order was vague, but that the order was clearly defined and its clear meaning was not followed. Moreover, Mr. Gromek’s letter is not vague. The application of an order in violation of its terms may give rise to a challenge on due process grounds (discussed below) or a challenge that the employment was wrongfully terminated under state law, but does not allow a vagueness challenge to the enactment itself. See Northland Family Planning Clinic, Inc. v. Cox, 487 F.3d 323, 341 (6th Cir. 2007) (dicta) (“It would in some ways seem that Plaintiffs’ argument that the statutory language is clearly unconstitutional and that the Attorney General’s Opinion cannot be read as a reasonable interpretation cuts against their void for vagueness argument.”). Nor can the plaintiff challenge the “spirit” of the administrative order as being vague. Although the rationale for the defendants’ action made reference to the undefined “spirit” of their administrative order, the defendants’ action plainly was ad hoc and not tied to a particular text. Moreover, this dispute arises in the employment context, where the plaintiff’s only loss was a chance at a particular job. As noted above, courts have been quite hostile to vagueness challenges in this context. The plaintiff’s vagueness claim must be rejected, and no constitutional violation can be premised on that argument. -20- 2. Overbreadth The plaintiff’s overbreadth argument suffers from the same defect. Here, she contends that the administrative order is overbroad “as applied to her” because she is not a “relative” under the definition of the rule. Pl.’s Mot. 10. She seems to contend that the manner in which the order was applied is more broad than the language of the text would permit. And, of course, she is right in one respect: her relationship did not fit the definition of “relative” stated in the administrative order. However, the overbreadth doctrine is a rule that “recognize[s] that ‘some broadly written statutes may have such a deterrent effect on free expression that they should be subject to challenge even by a party whose own conduct may be unprotected.’” Prime Media, Inc. v. City of Brentwood, 485 F.3d 343, 348 (6th Cir. 2007) (quoting Members of City Council of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789, 798 (1984 . “[I]n an appropriate First Amendment overbreadth claim, a plaintiff whose conduct is regulated by a rule of law is permitted to challenge the constitutionality of that particular rule of law regardless of the fact that a more circumscribed version of that rule of law could be applied in a constitutional fashion to prohibit the plaintiff's conduct.” Id. at 349-50. The plaintiff’s claim here cannot be characterized properly as one for overbreadth for a few reasons. First, she claims the order is overbroad as applied to her, where the overbreadth doctrine simply allows individuals whose conduct is admittedly proscribed in a constitutional manner by a law to challenge that law because it may be unconstitutional when applied to others. Since the plaintiff is outside the regulated group, not inside, the overbreadth theory does not apply to her. Second, the plaintiff argues not that the law regulates some conduct in a manner that offends the First Amendment, but that it has been applied beyond its terms. That does not constitute an overly broad application of a law within the meaning of the overbreadth doctrine. Finally, the -21- administrative order in this case was not applied to the plaintiff, who, the defendants concede, does not fall within its scope. Rather, the defendants made an ad hoc decision to disqualify the plaintiff from promotion precisely because the administrative order, fairly read, did not include her. There was no danger that the administrative order could be interpreted to reach protected conduct. It is conceded that the rule did not reach the plaintiff, a circumstance that necessitated the defendants’ sui generis pronouncement. The overbreadth doctrine has no application here. 3. Right of Association and Substantive Due Process The plaintiff also alleges in her complaint that the defendants violated her right of association by prohibiting her promotion based on her relationship with Judge Hultgren. She finds the source of this right in both the First and Fourteenth Amendments. By mentioning the concept of substantive due process, the plaintiff also argues that the defendants lacked the authority to do what they did. “The Constitution protects . . . [the] freedom of intimate association, a privacy interest derived from the Due Process Clause of the Fourteenth Amendment but also related to the First Amendment.” Anderson v. City of LaVergne, 371 F.3d 879, 881 (6th Cir. 2004) (citing Roberts v. United States Jaycees, 468 U.S. 609, 617-18 (1984 . “A ‘direct and substantial interference’ with intimate associations is subject to strict scrutiny, while lesser interferences are subject to rational basis review.” Ibid. (quoting Akers v. McGinnis, 352 F.3d 1030, 1035 (6th Cir. 2003 . What qualifies as protected “intimate association” is very broad, and certainly covers the plaintiff’s relationships: [T]he right to “intimate association” is not limited to familial relationships but includes relationships characterized by “relative smallness, a high degree of selectivity in decisions to begin and maintain the affiliation, and seclusion from others in critical aspects of the relationship.” Roberts v. United States Jaycees, 468 -22- U.S. 609, 620 (1984); see also Anderson v. City of LaVergne, 371 F.3d 879, 881-82 (6th Cir. 2004) (for summary judgment purposes, a dating relationship between a police officer and an administrative assistant for the police department qualified as an intimate association because the two were monogamous, had lived together, and were romantically and sexually involved); Akers v. McGinnis, 352 F.3d 1030, 1039- 40 (6th Cir. 2003) (personal friendship is protected as an intimate association). Beecham v. Henderson County, Tennessee, 422 F.3d 372, 375 (6th Cir. 2005). The right to substantive due process prohibits the government from infringing on “fundamental rights” without sufficient justification. Rendell-Baker v. Kohn, 457 U.S. 830, 837-38 (1982). “To state a cognizable substantive due process claim, the plaintiff must allege ‘conduct intended to injure in some way unjustifiable by any government interest’ and that is ‘conscience-shocking’ in nature.” Mitchell v. McNeil, 487 F.3d 374, 377 (6th Cir. 2007) (quoting County of Sacramento v. Lewis, 3, 848 (1998 . “What seems to be required is an intentional infliction of injury . . . or some other governmental action that is ‘arbitrary in the constitutional sense.’” Stemler v. City of Florence, 126 F.3d 856, 869 (6th Cir. 1997) (quoting Lewellen v. Metropolitan Gov't of Nashville & Davidson County, 34 F.3d 345, 351 (6th Cir. 1994 . However, substantive due process protects only against state action that is not otherwise proscribed by the plain text of other constitutional amendments and for which no adequate mechanism for deprivation can exist. See Ciminillo v. Streicher, 434 F.3d 461, 465 (6th Cir. 2006) (reasoning that “[a]lleged conduct that does not implicate a constitutional right protected by another amendment will be analyzed under the substantive due process component of the Fourteenth Amendment”). Where a plaintiff has recourse to an “explicit textual source of constitutional protection,” Graham v. Connor, 490 U.S. 386, 395 (1989), such as here with her right-to-association claim, a more general claim of substantive due process is not available. See County of Sacramento v. Lewis, 3, 842 (1998). -23- In this case, the defendants’ actions did not directly interfere with the plaintiff’s intimate relationship; no one prevented the plaintiff from living with Judge Hultgren. Rather, the action of the defendants only “directly” affected the plaintiff’s chance at a promotion. The interference with the plaintiff’s association with Judge Hultgren, therefore, is indirect, requiring a rational basis to justify government action. Our standards for accepting a justification for the regulatory scheme are far from daunting. A proffered explanation for the [state action] need not be supported by an exquisite evidentiary record; rather we will be satisfied with the government’s “rational speculation” linking the regulation to a legitimate purpose, even “unsupported by evidence or empirical data.” FCC v. Beach Communications, Inc., 508 U.S. 307, 313 (1993). Under rational basis review, it is “‘constitutionally irrelevant [what] reasoning in fact underlay the legislative decision.’” Railroad Retirement Bd. v. Fritz, 449 U.S. 166, 179 (1980) (quoting Flemming v. Nestor, 363 U.S. 603 (1960 . Craigmiles v. Giles, 312 F.3d 220, 224 (6th Cir. 2002). In issuing its directive, the state supreme court customized its anti-nepotism stance to fit the plaintiff’s circumstance, which admittedly did not fit within its prior rule. That action itself need only have a rational basis to be constitutional. “Virtually every court to have confronted a challenge to an anti-nepotism policy on First Amendment, substantive due process, equal protection, or other grounds has applied rational basis scrutiny.” Montgomery v. Carr, 101 F.3d 1117, 1126 (6th Cir. 1996). Although the state supreme court did not terminate the plaintiff, even when an employee is terminated due to an intimate relationship, the Sixth Circuit applies rational basis review. Beecham v. Henderson County, 422 F.3d 372, 374, 378 (6th Cir. 2005). “The Supreme Court has held that rational-basis review is satisfied ‘so long as there is a plausible policy reason’ for the decision, Nordlinger v. Hahn, 505 U.S. 1, 11 (1992), and it is ‘entirely irrelevant for constitutional purposes’ whether the plausible reason in fact motivated the -24- policymaker, FCC v. Beach Communications, Inc., 508 U.S. 307, 315 (1993).” Beecham, 422 F.3d at 378. The Court has little difficulty discerning a plausible reason in this case for the supreme court’s determination that allowing the plaintiff to appear to have gained an advantage through her intimate relationship with a judge of the court where she was employed would not advance the court’s interest. The state judiciary apparently does not want couples in a committed, romantic relationship to hold leadership positions within the same unit of the court, perhaps to avoid the appearance of impropriety, reduce the potential for compromising administrative and judicial functions, preserve a clear chain of command, or ensure that advancement is based solely on merit. These reasons need not be articulated nor constitute the court’s actual reasons for its action. But the fact that such plausible reasons exist provides a rational basis that justifies the state’s action in this case. The Court concludes, therefore, that the plaintiff has not demonstrated a violation of her right to freedom of association under the several provisions of the Constitution she cites. 4. Equal Protection Next, the plaintiff argues that she was treated differently from others in familial-type relationships in other courts, and therefore she has been denied the equal protection of the laws. She poses this argument from several different angles. First, she refers to the testimony of regional court administrator Green that the supreme court did not expand the anti-nepotism rule to cover domestic partners such as the plaintiff because of a desire to avoid “getting into the whole homosexual relationship realm.” Pl.’s Mot. for Summ. J., Ex. F, Green Dep. 52-53. She then reasons that she has been treated differently than homosexual couples. She does not contend that heterosexual couples comprise a discrete class. Rather, she looks to the cases that provide relief to “a class of one.” The plaintiff also offers evidence that two brothers, Jeffrey and Richard Page, were both -25- employed in the same unit of another district court. Jeffrey was a court officer when Richard was elected judge. Since both of them were allowed to remain in their jobs, the plaintiff reasons that she has been treated differently. The defendants counter the domestic partner argument with a claim that there is no evidence that the justices actually discussed that feature of a proposed amendment, and there is no evidence that homosexual domestic partners were ever treated more favorably. The defendants explain that the situation with the two brothers was allowed because the administrative rule “grandfathered” relatives working in the same court as of the effective date of the order. The later argument is not supported by the record, since the administrative order became effective in 1996 and Judge Page took office in 2005. However, the plaintiff’s equal protection claim fails for another reason. “The Equal Protection Clause of the Fourteenth Amendment commands that ‘no State shall deny to any person within its jurisdiction the equal protection of the laws,’ which is essentially a direction that all persons similarly situated should be treated alike.” City of Cleburne, 473 U.S. at 439 (citing Pyler v. Doe, 457 U.S. 202, 216 (1982 . “The general rule is that legislation is presumed to be valid and will be sustained if the classification drawn by the statute is rationally related to a legitimate state interest.” Id. at 440 (citing Schweiker v. Wilson, 450 U.S. 221, 230 (1981 . “Isolated instances of state action” should not be treated differently than “broad-ranging state policies.” Beecham v. Henderson County, 422 F.3d 372, 377 (6th Cir. 2005). So once again, the “classification” that results from the defendants’ directive affecting the plaintiff need be supported only by a rational basis. -26- Although equal protection jurisprudence typically involves a plaintiff’s allegations that she has been arbitrarily classified as members of an “identifiable group,” in Village of Willowbrook, 528 U.S. 562, 564 (2000), the Supreme Court recognized a “class of one” equal protection claim “where the plaintiff alleges that she has been intentionally treated differently from others similarly situated and that there is no rational basis for the difference in treatment.” “A ‘class of one’ plaintiff may demonstrate that a government action lacks a rational basis in one of two ways: either by ‘negativ[ing] every conceivable basis which might support’ the government action or by demonstrating that the challenged government action was motivated by animus or ill-will.” Warren v. City of Athens, 411 F.3d 697, 711 (6th Cir. 2005) (citing Klimik v. Kent County Sheriff's Dept., 91 F. App’x. 396, 400 (6th Cir. 2004 . However, in Engquist v. Oregon Department of Agriculture, 128 S. Ct. 2146, 2151 (2008), the Supreme Court, noting the distinction between the government acting as a lawmaker and the government acting “as proprietor, to manage [its] internal operation,” held that the “class of one” theory does not apply in the public employment context. The case involved a state employee that was laid off after his employing agency was reorganized. The Court stated, “we are guided . . . by the ‘common-sense realization that government offices could not function if every employment decision became a constitutional matter.’” Id. at 2156 (citing Connick v. Myers, , 143 (1983 . The plaintiff’s first argument, that the defendants treated her less favorably than homosexual couples and others not identified as “Relatives” under the anti-nepotism order, fails because she cannot identify any homosexuals or others not identified as “Relatives” who were treated any differently under the order than she was. In fact, Deborah Green testified that the subject of homosexual domestic partners had not been considered, explaining, “[w]e may come to the same -27- conclusion in a homosexual relationship. We just haven’t crossed that bridge yet.” Pl.’s Mot. for Summ. J., Ex. F, Green Dep. 125-26. Although the defendants did not amend the order to include domestic homosexual couples, they did not amend it to cover the plaintiff either. The defendants’ action toward the plaintiff must be evaluated as a discrete order directed to her alone. That leaves the “class of one” claim. Equal protection claims can be brought by a “class of one” “where the plaintiff alleges that she has been intentionally treated differently from others similarly situated and there was no rational basis for the difference in treatment.” Village of Willowbrook, 528 U.S. at 564. Despite the questionable application of the theory in the employment context, there is a rational basis for treating the Page brothers differently than the plaintiff and Judge Hultgren. Section 7 of the administrative order provides that “This policy shall not apply to any person who is an employee of the state court system on December 1, 1996, except that from December 1, 1996, forward, no person shall be transferred or promoted or enter into a nepotic relationship in violation of this policy.” Because Judge Page was elected into office, he was not transferred or promoted, nor did he “enter into a nepotic relationship” with his brother when he assumed office. Whether this section of the order covers this situation is a matter of interpretation. Moreover, one of the Page brothers – employed as a court officer – was protected by a union, and the other was elected into office, which suggests that the defendants did have a rational basis to allow them to continue to work together. Also, neither of the Page brothers were advanced or promoted since their working relationship began. Similarly, the plaintiff was not fired, but was denied a promotion. Because the Sixth Circuit has recognized anti-nepotic policies as serving a legitimate government interest, and the plaintiff cannot negate every conceivable basis which might support the disparity in treatment, she cannot prove lack of a rational basis for the defendants’ -28- action. Additionally, unlike her case against Judge Somers, the plaintiff has not alleged or offered any evidence that actions of the defendants in this case were motivated by animus or ill will. The Court concludes, therefore, that the plaintiff cannot establish a violation of her constitutional rights based on the Equal Protection Clause. 5. Procedural Due Process Finally, the plaintiff contends that she was deprived of a property interest without the procedural protections required by the Due Process Clause. She reasons that she had a property interest in the court administrator position because Judge Foran had put his intention to promote her in a memo. The defendants then caused her to lose her promotion without a hearing because she violated the “ephemeral, subjective and non-descript ‘spirit’ of the anti-nepotism rule.” Pl.’s Mot. at 18. She contends that the defendants failed to provide her even the most minimal of procedural protections. Because the Fourteenth Amendment prevents the States from “depriv[ing] any person of . . . property, without due process of law,” the plaintiff must prove that she has a property interest on her way to establishing a constitutional violation. Such “property interests are not created by the Constitution[;] ‘they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law. . . .’” Cleveland Bd. of Educ. v. Loudermill, , 538 (1986) (quoting Board of Regents v. Roth, , 577 (1972 . Federal courts have recognized that state civil servants may have a property interest in continued employment under certain circumstances and must be afforded due process before being discharged. See, e.g.,ibid.; Relford v. Lexington-Fayette Urban County Government, 390 F.3d 452, 460 (6th Cir. 2004) (stating that “[u]nder state law, government and civil service employees may have a property -29- right in their continued employment”). The Sixth Circuit has also suggested that a promotion that was contractually-entitled under the state’s civil service system may be a property interest for procedural due process purposes. Charles v. Baesler, 910 F.2d 1349, 1352 (6th Cir. 1990). There was no contract or other entitlement ensuring the plaintiff a promotion in this case. There is proof that Judge Foran had a clear intention to promote the plaintiff, but there is no binding agreement, rule, regulation, or contract that conferred a right to the promotion upon the plaintiff. Nor can the plaintiff point to any conduct, custom or practice that implied a contractual or regulatory right to a promotion. See Paskvan v. City of Cleveland Civil Service Comm’n, 946 F.2d 1233, 1235- 36 (6th Cir. 1991). The plaintiff therefore has failed to show that she had a protected property interest in her promotion to court administrator. At most, she has shown that it was intended that she take the position. This is insufficient to establish a property interest protected by the Constitution. The plaintiff, therefore, has not shown that the defendants’ action caused a deprivation of her right to procedural due process. * * * * * * * Viewing the evidence in the light most favorable to the plaintiff, the Court finds that the plaintiff has not established a violation of her constitutional rights at the hands of these defendants. Because the plaintiff’s rights were not violated by these defendants, “there is no necessity for further inquiries concerning qualified immunity.” Causey v. City of Bay City, 442 F.3d 524, 531 (6th Cir. 2006) (quoting Saucier, 533 U.S. at 201). III. The Court concludes that the plaintiff has standing to advance her claim that her constitutional rights were violated by the reversal of her promotion, the institutional defendant and -30- the justices in their official capacities are immune from the damage claim under the Eleventh Amendment, the justices are not entitled to judicial immunity, and because the plaintiff has not established a violation of her constitutional rights, the individual defendants are entitled to qualified immunity. Because of the failure to establish a constitutional violation, the plaintiff is not entitled to summary judgment in her favor, and the complaint must be dismissed. Accordingly, it is ORDERED that the plaintiff’s motion for summary judgment [dkt. #16] is DENIED. It is further ORDERED that the defendants’ motion for summary judgment [dkt #17] is GRANTED. It is further ORDERED that the complaint is DISMISSED WITH PREJUDICE. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 3, 2009 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 3, 2009. s/Felicia M. Moses FELICIA M. MOSES -31-

=== Allen v. Howes ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Petitioner, Case Number: 05-10304 Honorable David M. Lawson JOHNELL ALLEN, v. CAROL HOWES, _________________________________/ Respondent. OPINION AND ORDER DENYING PETITION FOR WRIT OF HABEAS CORPUS Petitioner Johnell Allen, presently incarcerated at the Lakeland Men’s Correctional Facility in Coldwater, Michigan, has filed through counsel a petition for writ of habeas corpus pursuant to 28 U.S.C. § 2254. The petitioner, originally charged with open murder, Mich. Comp. Laws § 750.316, and possession of a firearm in the commission of a felony, Mich. Comp. Laws § 750.227b, was convicted by a jury in the Genesee County, Michigan circuit court of second-degree murder, Mich. Comp. Laws § 750.317, and the firearm charge. The jury apparently rejected his claim of accident. Although the petition raises several issues, the claim common to all of them is a challenge to the Michigan appellate courts’ rejection of the petitioner’s complaint of ineffective assistance of appellate counsel based on the failure to raise an issue concerning the exclusion of evidence of the murder victim’s violent tendencies. The petitioner also claims that exclusion of that evidence at trial deprived him of the right to present a defense. The Court finds that the decision of the state court of appeals did not unreasonably apply or contravene clearly established federal law as determined by the Supreme Court when it concluded that no prejudice resulted from these errors. Therefore, the petition will be denied. I. John McMullen was fatally shot on June 11, 1990 in Flint, Michigan. At the time, McMullen was dating Sharon Hunter, the petitioner’s ex-girlfriend and mother of his twin children. The children were eighteen months old then and were both present at the scene of the shooting. The petitioner confronted McMullen in Hunter’s apartment after hearing that McMullen threatened to beat Hunter and her friend, Wendy Shepherd. In the process, the petitioner pointed a shotgun in McMullen’s direction, and he claimed that the gun discharged accidently when McMullen jumped off the top shelf of the closet where McMullen was hiding in anticipation of the petitioner’s arrival. The trial in this case began on October 4, 1990, and several witnesses described the events that led to the encounter between McMullen and the petitioner. Wendy Denise Shepherd testified that on the day in question, she was at Hunter’s apartment, where she witnessed Hunter and McMullen arguing. She witnessed McMullen grab Hunter’s face and push her down. Shepherd testified that she told Hunter she should see other men and that in response, McMullen told her: “I ought to fuck you up and I ought to beat your ass and all this.” Trial Tr. Vol. II, p. 34. Shepherd said that McMullen then told Hunter to come upstairs where, she believed, he was going to “jump” on Hunter. Shepherd was afraid that McMullen might “jump” on her, too. Trial Tr. Vol. II, pp. 33, 36. When Shepherd tried to call for help, McMullen ripped out the phone cord. Shepherd then called her boyfriend Hodo (who is the petitioner’s cousin), but she was unable to reach him on his cell phone. She then left the apartment and ran into Hodo, accompanied by the petitioner. Shepherd told Hodo and the petitioner what had occurred. Hodo and the petitioner then left in the petitioner’s truck and went to Hunter’s apartment. Shepherd testified that the petitioner had a shotgun in his -2- possession. She said that she followed them back to the apartment because she was afraid that something bad was going to happen. When she arrived at the apartment she heard a gunshot, and a few minutes later, she saw the petitioner come out of the apartment carrying a shotgun. Shepherd testified that Hunter and the petitioner’s twin children were present during the incident. Demond Pryor testified that he was outside playing basketball when he noticed a speeding truck. The truck pulled up to the apartment complex and a man carrying a long gun jumped out. Pryor said the man ejected a shell from the gun and said, “why did you mess with my . . . ,” but Pryor could not discern the end of the phrase. Pryor subsequently heard a gunshot and a woman screaming. Officer Thomas Ridley and his partner of the Flint Police Department responded to a radio call and were the first officers to arrive at the scene of the shooting. When they arrived, they went upstairs and saw two women in the bedroom crying, and a man in the closet, lying on the back of a shelf, with a “gunshot wound to the side of his neck and it looked like a wound to his chest.” Trial Tr. Vol. III, p. 6. Ridley saw that the closet doors were off their hinges and lying on the floor near the closet. Douglas Hodo, the petitioner’s cousin, testified Shepherd called his pager that day but he did not return her call. Shortly thereafter, while he and the petitioner were driving down the street, they came upon Shepherd, who had tears in her eyes. Shepherd told them that McMullen had been “beating on” Hunter in front of the kids and then “messing” with the kids – “I don’t know what kind of way.” Trial Tr. Vol. III, p. 14. Hodo testified that he and the petitioner then went to Lynn Gordon’s house (where the petitioner would sometimes stay) to try to call Hunter. When no one answered the phone, they drove over to Hunter’s apartment. -3- Hodo said that he did not see the petitioner with a shotgun until the petitioner got out of the truck in front of Hunter’s apartment. Hodo said that when they entered the apartment, Hunter told him to grab the babies. It was Hodo’s testimony that Hunter tried to stop the petitioner from going upstairs but could not. Hodo then heard a shot. Darlene Burkett, another witness for the prosecution, testified that on that day she and her children were visiting with a couple of other friends outside of her house close to where Hunter lived. Burkett saw the petitioner drive up in a black-and-white truck and, in some time, come out of another person’s apartment with a shotgun, placing it in the front seat of the truck. Burkett said that the petitioner then drove to the back of Hunter’s apartment. When Burkett approached Hunter’s apartment, she heard some yelling and cursing, followed by the sound of a gunshot. Burkett said that when she entered the building and went upstairs, she saw Hunter, who was hysterical, and McMullen lying in the closet on a shelf with blood gushing from his throat. Sharon Hunter testified that she had been dating McMullen for about a month prior to his murder. She said that on the date of the murder, she had gotten into an argument with him, and that Shepherd also got involved in the argument. Hunter said that McMullen grabbed her by her face and pushed her down. She confirmed that when Shepherd attempted to use the phone, McMullen pulled the phone cord from the wall. Hunter apparently left the apartment, and testified that McMullen then wanted her to come upstairs to finish the argument; he even tried to pick her up to carry her upstairs. At that point, Hunter gave in and walked upstairs, and the argument between them was settled. -4- Hunter recounted that the petitioner showed up at her apartment about twenty minutes later. She remembered that she was sweeping the floor when she saw the petitioner come into the apartment with a gun in his left hand. Hunter told the petitioner to get out, but he pushed her away, yelling, “Where is John McMullen,” and, “Why was he messing with my children.” Trial Tr. Vol. III, pp. 72, 103. Hunter testified that the petitioner appeared to be very upset and angry. Hunter testified that the petitioner found McMullen hiding on a shelf in the closet. She said that the petitioner was pulling at McMullen’s shirt and yelling at him, expressing concern for his two eighteen-month-old children. She testified that as the petitioner was pulling on McMullen to come out of the closet, McMullen grabbed the gun and the gun went off. Hunter said that one of the twins was in the room during the shooting, although she did not realize that until she heard the child crying. Hunter also testified that McMullen had been physically abusive with her on previous occasions, including attempting to choke her once, and that she had asked the petitioner for a gun so that she could protect herself. However, the prosecutor objected to the testimony and the trial court sustained the objection. Defense counsel, nevertheless, argued to the trial court: Your Honor, my client’s state of mind is going to be a substantial issue in this case in terms of what he had in mind when he went to the scene with the gun. Part of his state of mind is influenced by what he had learned from this witness and what he discussed with her relative to her safety and the safety of his children. Trial Tr. Vol. III, p. 95. Hunter testified as follows on redirect examination: Q. [By the prosecutor] You testified on cross-examination that you had told Johnell Allen in the past that you had been physically assaulted by John McMullen, is that right? A. Yes. -5- Trial Tr. Vol. III, p. 114. The petitioner’s first witness was Davina Donhee, a friend of Sharon Hunter. Donhee testified that Hunter told her that the gun went off when McMullen jumped down from the shelf in the closet. The petitioner testified in his own defense, explaining that his former girlfriend, Sharon Hunter, had told him that the decedent, McMullen, had been abusive to her. The prosecutor objected and the trial court ruled that it would not allow that testimony because there was no way of testing its veracity. Nevertheless, the petitioner proceeded to testify that on the day of the shooting, he and Hodo came upon Shepherd walking down the street while driving near Hunter’s apartment. Apparently, Shepherd told them that McMullen had beaten Hunter and that he was “messing” with Hunter’s children. The petitioner said that he then had a terrible feeling that something was wrong. He tried to phone Hunter to see what was happening, but no one answered the phone. The petitioner stated that he panicked and grabbed his shotgun and headed over to Hunter’s apartment, yelling, “Where is he and why is he messing with my babies.” Trial Tr. Vol. IV, p. 42. The petitioner testified that when he got to Hunter’s apartment, he ran up the stairs and found McMullen in the closet on a shelf. He said that he grabbed him by the shirt and said, “Man, are you crazy? . . . why are you fucking with my kids?” Trial Tr. Vol. IV, p. 46. The petitioner said that he told McMullen to come out of the closet, and, as McMullen was jumping off the ledge, McMullen put his hand on the barrel of the gun, the barrel hit him, and the gun went off. The petitioner yelled, “Oh my God,” and walked out of the house, throwing the gun down. Trial Tr. Vol. IV, p. 48. The petitioner, who is right-handed, claims to have been holding the shotgun only with his left hand or under his arm. -6- The petitioner then testified about McMullen’s prior abusive conduct, but the prosecutor objected to introduction of that testimony, which the court sustained. Defense counsel made the following argument outside the jury’s presence: May it please the Court, the state of mind of my client as of the time of the incident on June 11th is very significant in terms of his conduct and his state of mind impacted by knowledge that was given to him by any other person. His knowledge of the conduct and character of the decedent is significant in terms of his state of mind when he acted as he did on June the 11th. Trial Tr. Vol. IV, p. 25. Defense counsel then made an offer of proof that the petitioner would testify that on a previous occasion, he received a telephone call from Hunter indicating that McMullen had threatened to kill her and the petitioner’s children. The petitioner would also testify that after his discussion with Hunter, he instructed her to call the police. The petitioner would testify that on another occasion, Hunter called him and told him that McMullen had “pinned her and her babies up.” Trial Tr. Vol. IV, pp. 27-28. At that time, the petitioner suggested to Hunter that she obtain an injunction against McMullen. The trial court ruled that the testimony would be inadmissible hearsay and barred the petitioner from testifying about his knowledge of McMullen’s prior abusive behavior. During trial, the prosecution acknowledged that the only testimony from the eyewitnesses – the petitioner himself and Hunter – suggested that the gun discharged when McMullen fell into it and grabbed it as he jumped off the shelf. That testimony was consistent with the prosecution’s forensic expert who opined that the gun barrel was in contact with McMullen when it went off. Nevertheless, the prosecutor argued during the closing arguments as follows: Now, Mr. O’Rourke said that Allen had been told that McMullen was a violent person. Allen had been told that McMullen was a violent person. You’re the person that has to correct me, but I really don’t remember any witness, Sharon Hunter, Hodo, Wendy Shepherd, any of those people using the term violent. I really don’t. -7- . . . I don’t remember any of them [sic] people talking about him as a violent person. Now, just because he throws this – Mr. O’Rourke got this from his own client and he’s able to argue that or go over that with you. But you have to remember he got [sic] the right to argue that with you. And legally he got that position from his client, nobody else. Because his client is the only person that said that. So don’t be fooled by that. Remember none of those other people talked about violence. Trial Tr. Vol. IV, pp. 131-132. Following the jury’s guilty verdict, the trial court sentenced the petitioner as a second habitual offender to thirty to sixty years’ imprisonment on the second-degree-murder count and a consecutive two-year prison term for the felony firearm conviction. The petitioner appealed to the Michigan Court of Appeals, which affirmed the conviction on June 2, 1993. People v. Allen, No. 136139 (Mich. Ct. App. June 2, 1993) (unpublished). He then filed an application for leave to appeal in the state supreme court but missed the deadline, and the supreme court returned the petitioner’s application as being untimely filed. On April 23, 1997, one day before the statute of limitations would have run on his habeas petition, the petitioner filed a motion for relief from judgment in the trial court under Michigan Court Rule 6.500 et seq. On February 6, 2003, the state trial court granted the petitioner’s motion, concluding that the petitioner received ineffective assistance of appellate counsel in violation of the Sixth Amendment. People v. Allen, No. 90-43372-FC (Genesee County Cir. Ct. Feb. 7, 2003). That court vacated the petitioner’s convictions and sentences on the ground that the petitioner’s appellate counsel was ineffective for failing to challenge the trial court’s ruling prohibiting testimony that the petitioner knew of the victim’s past violent history and conduct. The trial court acknowledged, however, that there was testimony before the jury from the petitioner and his former girlfriend, Sharon Hunter, that the petitioner had some knowledge of the victim’s violent character and conduct before the murder. -8- The State then appealed to the court of appeals; its appeal was denied on May 12, 2003 for lack of merit in the grounds presented. People v. Allen, No. 247621 (Mich. Ct. App. May 12, 2003). The State then appealed to the Michigan Supreme Court, which remanded the case to the court of appeals “for consideration as on leave granted.” People v. Allen, 469 Mich. 853, 666 N.W.2d 665 (2003). Upon reconsideration by another panel, the Michigan Court of Appeals reversed the trial court’s grant of relief, People v. Allen, No. 249788, 2005 WL 1106498 (Mich. Ct. App. May 10, 2005) (unpublished), and on November 29, 2005, the Michigan Supreme Court denied leave to appeal. People v. Allen, 4747 Mich. 936, 706 N.W.2d 15 (2005). The petitioner filed a motion for reconsideration, which also was denied. People v. Allen, 474 Mich. 1023, 708 N.W.2d 424 (2006). In the habeas corpus petition filed November 30, 2005, the petitioner raised two issues: the exclusion of evidence of his knowledge of the victim’s violent tendencies violated the petitioner’s right to present a defense, contrary to the Due Process Clause and the Sixth Amendment; and his right to the effective assistance of appellate counsel was violated. In a brief filed later, the petitioner expanded on the second issue as follows: I. Whether counsel on direct appeal was constitutionally ineffective for failing to argue error in the state trial court’s exclusion of evidence, relevant to [the petitioner’s] state of mind, that would have allowed the jury to infer that [the petitioner] did not have the “malice” necessary for a conviction of murder when: A. B. Preclusion of that evidence constituted error under the Constitution and state evidentiary law; and A constitutionally adequate attorney would have presented these argument and, thereby, would have obtained reversal of [the petitioner’s] conviction. II. Whether the Michigan Court of Appeals’ conclusion of a lack of prejudice to the trial proceedings as a sufficient basis for denying a claim of ineffective -9- assistance of appellate counsel is contrary to and/or an unreasonable application of United States Supreme Court precedent. III. Whether there is no deference to the state court fact finding under the AEDPA where the Michigan Court of Appeals’ conclusion that the precluded evidence, involving [the petitioner’s] state of mind based on his knowledge of the decedent’s prior death threats and other violent behavior that occurred well before the date of the incident herein, was cumulative when there was no other evidence of the decedent’s violent behavior – other than his behavior immediately prior to the incident leading to his death. IV. Whether there is no deference, with regard to the competence prong of Strickland, to the state court proceedings where none of the state courts presented any analysis with regard to this issue. The respondent has filed an answer asserting that the claims lack merit because the decision of the Michigan Court of Appeals did not result in an objectively unreasonable application of clearly established Supreme Court law. II. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the standard of review federal courts must apply when considering applications for a writ of habeas corpus raising constitutional claims, including claims of ineffective assistance of counsel. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) imposes the following standard of review for habeas cases: An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim – (1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or -10- (2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding. 28 U.S.C. § 2254(d). Therefore, federal courts normally are bound by a state court’s adjudication of a petitioner’s claims unless the state court’s decision was contrary to or involved an unreasonable application of clearly established federal law. Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Mere error by the state court will not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) (internal quotes omitted . Additionally, this Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). The Supreme Court has explained the proper application of the “contrary to” clause as follows: A state-court decision will certainly be contrary to [the Supreme Court’s] clearly established precedent if the state court applies a rule that contradicts the governing law set forth in our cases. . . . A state-court decision will also be contrary to this Court’s clearly established precedent if the state court confronts a set of facts that are materially indistinguishable from a decision of this Court and nevertheless arrives at a result different from [the Court’s] precedent. Williams, 529 U.S. at 405-06. -11- The Supreme Court has held that a federal court should analyze a claim for habeas corpus relief under the “unreasonable application” clause of § 2254(d)(1) “when a state-court decision unreasonably applies the law of this Court to the facts of a prisoner’s case.” Id. at 409. The Court defined “unreasonable application” as follows: [A] federal habeas court making the “unreasonable application” inquiry should ask whether the state court’s application of clearly established federal law was objectively unreasonable. . . . [A]n unreasonable application of federal law is different from an incorrect application of federal law. . . . Under § 2254(d)(1)’s “unreasonable application” clause, then, a federal habeas court may not issue the writ simply because that court concludes in its independent judgment that the relevant state-court decision applied clearly established federal law erroneously or incorrectly. Rather, that application must also be unreasonable. Id. at 409-11; see also Murphy v. Ohio, 551 F.3d 485, 493-94 (6th Cir. 2009); Eady v. Morgan, 515 F.3d 587, 594-95 (6th Cir. 2008); Davis v. Coyle, 475 F.3d 761, 766-67 (6th Cir. 2007); King v. Bobby, 433 F.3d 483, 489 (6th Cir. 2006); Rockwell v. Yukins, 341 F.3d 507, 512 (6th Cir. 2003) (en banc). Although the petitioner has separated his claims into a number of discrete arguments, the petition actually presents two general issues. The first is whether the trial court’s evidentiary rulings deprived the petitioner of his constitutional right to present a defense. The second is whether the performance of his appellate attorney deprived the petitioner of his right to the effective assistance of appellate counsel guaranteed by the Sixth Amendment, since the lawyer failed to raise these evidentiary issues on direct appeal. Based on the state courts’ resolution of these issues, the petitioner’s claims here are reduced to a single issue: whether the Michigan Court of Appeals’s determination that the petitioner suffered no prejudice from the exclusion of the evidence reasonably applies Supreme Court law. The reason this single issue remains is straightforward. Both the state -12- trial court and court of appeals determined that the ruling that excluded the evidence of the victim’s past violent tendencies was erroneous. Consequently, whether the petitioner suffered a constitutional deprivation, either from the exclusion of the evidence itself or from his appellate lawyer’s miscue, depends on whether he suffered prejudice. The petitioner also argues that the state courts’ finding of no prejudice was incorrect and is not entitled to deferential review. However, the Court does not necessarily apply the AEDPA when undertaking such review. In Fry v. Pliler, 551 U.S. 112, 127 S. Ct. 2321 (2007), the Supreme Court held that a federal habeas court “must assess the prejudicial impact of constitutional error in a state- court criminal trial under the ‘substantial and injurious effect’ standard set forth in Brecht [v. Abrahamson, 507 U.S. 619 (1993)], whether or not the state appellate court recognized the error and reviewed it for harmlessness under the ‘harmless beyond a reasonable doubt’ standard set forth in Chapman [v. California , 386 U.S. 18 (1967)].” 127 S. Ct. at 2328. Fry overruled Eddleman v. McKee, 471 F.3d 576, 583 (6th Cir. 2006), where the Sixth Circuit concluded that “AEDPA replaced the Brecht standard with the standard of Chapman plus AEDPA deference when, as here, a state court made a harmless-error determination.” Wilson v. Mitchell, 498 F.3d 491, 503 (6th Cir. 2007) (quoting Eddleman, 471 F.3d at 583). Therefore, to resolve the petitioner’s claim that he was deprived of an opportunity to present a defense, the Court must determine whether the exclusion of the evidence “had substantial and injurious effect or influence in determining the jury’s verdict.” Brecht, 507 U.S. at 623 (internal quotations omitted). To resolve the claim of ineffective assistance of appellate counsel, the Court must determine whether the deficient performance prejudiced the petitioner’s direct appeal, that is “but for his counsel’s unreasonable failure [to raise an appellate issue], [the petitioner] would have -13- prevailed on his appeal.” Smith v. Robbins, 528 U.S. 259, 285-286 (2000); Strickland, 466 U.S. at 687; Mapes v. Coyle, 171 F.3d 408, 427-28 (6th Cir. 1999); see also Franklin v. Anderson, 434 F.3d 412, 429 (6th Cir. 2006). A. Turning to the first category of issues, the petitioner believes that the exclusion of the following evidence prevented him from presenting a valid defense to the murder charge: testimony from Sharon Hunter that John McMullen had been physically abusive to her on previous occasions, including attempting to choke her once, and that she had asked the petitioner for a gun so that she could protect herself; and the petitioner’s own testimony that Sharon Hunter had told him that McMullen had been abusive to her; that on a previous occasion he received a telephone call from Hunter indicating that McMullen had threatened to kill her and the petitioner’s children, and he instructed her to call the police; and that on another occasion Hunter called him and told him that McMullen had “pinned her and her babies up,” after which the petitioner suggested to Hunter that she obtain an injunction against McMullen. The trial judge excluded the evidence on hearsay grounds, but the petitioner maintained that he offered the evidence to show his state of mind to negate the State’s allegation of malice, an essential element of murder. The trial court also held that the petitioner’s counsel could not elicit such testimony regarding McMullen’s general reputation for violence. The state courts determined that these evidentiary rulings were incorrect. Commenting on the circuit court’s decision on the petitioner’s post-conviction motion, the court of appeals stated: The circuit court found that the trial judge erred in excluding evidence of what defendant heard about decedent’s violent propensities because the evidence was offered to show defendant’s state of mind, and not for the proof of the matter offered. -14- In this regard, the circuit court was correct. The evidence should have been admitted for the reasons stated by the circuit court. People v. Allen, 2005 WL 1106498, at * 1. However, the bad evidence call by the trial court does not necessarily entitle the petitioner to habeas relief. To be sure, errors in state evidence law will not support the issuance of the writ unless those errors rendered the trial fundamentally unfair. See Clemmons v. Sowders, 34 F.3d 352, 357 (6th Cir. 1994) (holding that “[h]abeas review does not encompass state court rulings on the admission of evidence unless there is a constitutional violation”). The Court of Appeals for the Sixth Circuit has explained that “[e]rrors in the application of state law, especially rulings regarding the admission or exclusion of evidence, are usually not to be questioned in a federal habeas corpus proceeding.” Cooper v. Sowders, 837 F.2d 284, 286 (6th Cir. 1988). Generally, state- court evidentiary rulings cannot rise to the level of due process violations unless they “offend[] some principle of justice so rooted in the traditions and conscience of our people as to be ranked as fundamental.” Montana v. Egelhoff, , 43 (1996) (quoting Patterson v. New York, 432 U.S. 197, 202 (1977 ; see also Spencer v. Texas, 385 U.S. 554, 563-64 (1967). Seymour v. Walker, 224 F.3d 542, 552 (6th Cir. 2000) (second alteration in original). However, the petitioner has raised an issue of constitutional dimension when he alleged that the exclusion of the evidence actually contravened his right to present a defense, incorporated in the Sixth Amendment. The Compulsory Process Clause of the Sixth Amendment provides an accused with the right to “compulsory process for obtaining witnesses in his favor,” U.S. Const. amend VI, a crucial part of the Constitution’s more basic guarantee of “a meaningful opportunity to present a complete defense.” California v. Trombetta, 467 U.S. 479, 485 (1984). As applied to the states by the Due Process Clause of the Fourteenth Amendment, the accused has the right at trial to present testimony that is “relevant,” “material,” and “vital to the defense.” Washington v. Texas, 388 U.S. 14, 23 -15- (1967); see also Crane v. Kentucky, 476 U.S. 683, 690 (1986) (“Whether rooted directly in the Due Process Clause of the Fourteenth Amendment, or in the Compulsory Process or Confrontation clauses of the Sixth Amendment, the Constitution guarantees criminal defendants ‘a meaningful opportunity to present a complete defense.’”) (internal citations omitted). The “right to present relevant evidence is not unlimited,” and “is subject to reasonable restrictions” imposed by the criminal process. United States v. Scheffer, , 308 (1998). As a result, state and federal rulemakers have broad latitude under the Constitution to establish rules excluding evidence from criminal trials. Such rules do not abridge an accused’s right to present a defense so long as they are not “arbitrary” or “disproportionate to the purposes they are designed to serve.” Moreover, we have found the exclusion of evidence to be unconstitutionally arbitrary or disproportionate only where it has infringed upon a weighty interest of the accused. Ibid (internal citations and quotation omitted). In Washington v. Texas, the petitioner was convicted of malicious murder arising from the shooting of the mother of his ex-girlfriend. Both Washington and one Charles Fuller were present when the gun was fired. Washington testified at his trial that he did not shoot the deceased, and had in fact been running back to his vehicle when he heard a shot ring out, presumably discharged by Fuller. Fuller was not allowed to corroborate this version of events at trial because he had earlier been convicted of the same murder, and under Texas evidence law persons charged as accomplices in the same crime were not permitted to testify on behalf of one another. The petitioner’s conviction was upheld by the Texas courts, but the Supreme Court reversed, finding that “the right to present . . . witnesses to establish a defense . . . is a fundamental element of due process of law.” Washington v. Texas, 388 U.S. at 19. The Court found the Texas rule that prohibited the accomplice from testifying for his co-participant, but not the prosecution to be “absurd” and “arbitrary,” ruling that -16- “[t]he Framers of the Constitution did not intend to commit the futile act of giving to a defendant the right to secure the attendance of witnesses whose testimony he had no right to use.” Id. at 23. A similar problem arose in Chambers v. Mississippi, 410 U.S. 284 (1973), where the defendant was tried for the murder of a police officer. The defendant was accused after evidence established that the slain deputy had discharged his firearm at his likely assailant and that Chambers had been struck by one of the bullets. Chambers insisted that he was innocent, and demanded to call at trial one Gable McDonald, who initially confessed to the shooting to Chambers’s attorneys, but later recanted at a preliminary examination. At trial, Chambers sought to prove not only that he did not shoot the officer, but that McDonald did. Although he was able to present testimony that McDonald was in fact the shooter, he was not able to call McDonald to the stand himself because of Mississippi’s common-law “voucher” rule, which provided that a party could not impeach his own witness. Furthermore, the trial court refused to permit Chambers to call three witnesses who would have testified that McDonald confessed to them as well because Mississippi did not recognize a hearsay exception for statements against penal interest. The Supreme Court concluded that Chambers’s inability to call and cross-examine McDonald, combined with the trial court’s prohibition on the introduction of the witnesses’ hearsay testimony, violated Chambers’s due process rights. With regard to the requested testimony of McDonald, the Court recognized that “the right to confront . . . is not absolute and may, in appropriate cases, bow to accommodate other legitimate interests in the criminal trial process.” Id. at 295. As an example of such an interest, the Court cited to Mancusi v. Stubbs, 408 U.S. 204 (1972), in which the Court held that the trial court’s inability to compel the attendance of a foreign national did not abridge the defendant’s right under the Confrontation Clause. Nonetheless, the “denial or significant diminution” -17- of this right “calls into question the ultimate ‘integrity of the fact-finding process’ and requires that the competing interest be closely examined.” Chambers, 410 U.S. at 295 (quoting Berger v. California, 393 U.S. 314 (1969 . Because “the right to confront and to cross-examine those who give damaging testimony against the accused has never been held to depend” on who actually called the witness, the Supreme Court concluded that the voucher rule “plainly interfered with Chambers’ right to defend against the State’s charges.” Id. at 298. The Court found that it need not decide whether the Confrontation Clause violation itself would be enough to reverse the conviction, as Chambers had argued that it was the combination of his inability to cross-examine and his inability to call witnesses that violated his due process rights. Ibid; see also Davis v. Jabe, 824 F.2d 483, 486 (6th Cir. 1987). Proceeding to the exclusion of the three hearsay witnesses, the Court recognized the State’s interest in prohibiting introduction of hearsay generally, but found that such a rule must yield to the defendant’s due process interests when sufficient indicia of reliability suggest that the statements were actually made. Chambers, 410 U.S. at 302 (noting that because “[t]hat testimony was also critical to Chambers’ defense, . . . the hearsay rule may not be applied mechanistically to defeat the ends of justice”). The reliability of the statements was supported by their spontaneity to close acquaintances, their corroboration by other evidence, and the reality that the statements were manifestly against McDonald’s penal interest. Id. at 300-01. Together “with the State’s refusal to permit Chambers to cross-examine McDonald,” “the exclusion of this critical evidence” denied Chambers due process of law. Id. at 302; see also Crane v. Kentucky, 476 U.S. at 689-91 (holding that the state deprived the defendant of his right to due process by denying him the opportunity to present evidence at trial concerning the voluntariness of -18- his confession on the basis of a state rule permitting such evidence only to be introduced at pretrial hearings). In Rock v. Arkansas, 483 U.S. 44 (1987), the Supreme Court explained that the defendant’s right to present a defense at trial trumped not only “arbitrary” state procedural rules, but also those “disproportionate to the purposes they are designed to serve. In applying its evidentiary rules a State must evaluate whether the interests served by a rule justify the limitation imposed on the defendant’s constitutional right to testify.” Id. at 55-56. In Rock, the Court addressed an Arkansas rule of evidence that categorically excluded testimony that was derived from hypnosis sessions. Applying the rule, the trial judge had forbidden the defendant from providing any testimony other than that which she had recalled prior to her hypnosis sessions. Although it recognized that several other states applied a similar rule, the Court found that the effect of the rule was to “prevent[] her from describing any of the events that occurred on the day of the shooting, despite corroboration of many of those events by other witnesses.” Id. at 57. In light of the evidence corroborating the details of the defendant’s hypnotically refreshed testimony, the tape recordings of the hypnosis sessions, and the trial court’s finding that the hypnotist did not use leading questions, the trial court erred by not weighing the defendant’s right to present testimony against the interests advanced by the hypnosis rule. Id. at 61-62. Accordingly, the Court vacated the conviction and remanded the matter for further proceedings. It is clear that the defendant’s right to present evidence is not absolute, and that the State may place reasonable limitations on the introduction of evidence in criminal proceedings. See, e.g., United States v. Scheffer, 523 U.S. at 305 (holding that the proscription against the introduction of polygraph examination results contained in Military Rule of Evidence 707 did not violate the Due -19- Process Clause). However, the unavoidable conclusion to be drawn from the Supreme Court’s cases is that the “the right to present . . . witnesses to establish a defense” is clearly established as “a fundamental element of due process of law.” See Washington, 388 U.S. at 19. State evidence rules must yield to this fundamental right when they “plainly interfere[] with [the defendant’s] right to defend against the State’s charges,” Chambers, 410 U.S. at 298, particularly when such rules are “disproportionate to the purposes they are designed to serve.” Rock, 483 U.S. at 56. However, under Supreme Court authority, a violation of the fundamental right to present a defense is not established merely by showing that the trial court excluded evidence relevant to a defense. Rather, a petitioner must show that the exclusion of evidence “significantly undermined fundamental elements of the accused’s defense.” Scheffer, 523 U.S. at 315. Put another way, the exclusion of evidence is unconstitutionally arbitrary or disproportionate “only where it infringed upon a weighty interest of the accused.” Id. at 308 (citing Rock v. Arkansas, 483 U.S. at 58). Applying this standard in a habeas corpus case, the Sixth Circuit has held that the right to present a defense is abridged by an evidentiary ruling excluding defense evidence “[o]nly if ‘an evidentiary ruling is so egregious that it results in denial of fundamental fairness.’” Baze v. Parker, 371 F.3d 310, 324 (6th Cir. 2004) (quoting Bugh v. Mitchell, 329 F.3d 496, 512 (6th Cir.2003 ; accord Alley v. Bell, 307 F.3d at 394-95 (exclusion of evidence unconstitutional only when it eviscerates a defense). Therefore, even if exclusion of evidence was erroneous under state law, the constitutional right to present a defense is not abridged unless the evidence was so material that it deprived the defendant of a fair trial. In this case, the petitioner never presented the defenses of self-defense or defense of others, where evidence of his awareness of the victim’s past violent tendencies would have been more -20- relevant. For those defenses under state law, a defendant must show that he had an honest and reasonable belief that he would suffer death or serious injury at the hands of the victim, see People v. Riddle, 467 Mich. 116, 119, 649 N.W.2d 30, 34 (2002), or that the victim was the first aggressor, see People v. Peoples, 75 Mich. App. 616, 620-22, 255 N.W.2d 707, 709-10 (1977), abrogated on other grounds by People v. Carines, 460 Mich. 750, 597 N.W.2d 130 (1999). Evidence that a defendant knew of a victim’s violent acts or reputation would be relevant to show a state of mind consistent with self-defense, and proof of the victim’s violent character – regardless of the defendant’s knowledge – would be relevant to show that the victim acted in conformity. People v. Harris, 458 Mich. 310, 314-20, 583 N.W.2d 680, 683-85 (1998). But neither of those defenses appeared to be the focus of the petitioner’s theory at trial, and therefore the exclusion of the challenged evidence did not prohibit the petitioner from offering either of these defenses. Instead, the petitioner’s defense was that he did not intend to shoot McMullen, and the shotgun he was carrying when he confronted McMullen discharged accidently. Therefore, he theorizes, he did not shoot McMullen with “malice,” and he is not guilty of murder. Under Michigan law, malice, as an element of murder, consists of the intent to kill, the intent to do great bodily harm, or the wanton and willful disregard of the likelihood that the natural tendency of actor’s behavior is to cause death or great bodily harm. People v. Aaron, 409 Mich. 672, 728, 299 N.W.2d 304, 326 (1980). Malice may be inferred from the use of a firearm. See People v. Fletcher, 260 Mich. App 531, 562, 679 N.W.2d 127, 146 (2004). So apparently the petitioner sought to negate the inference that he intended to kill or seriously injure McMullen by showing he had a different reason for bringing his shotgun with him when he initiated the confrontation in Sharon Hunter’s apartment – that is, to protect himself if McMullen turned violent. -21- But unlike Washington v. Texas, Chambers v. Mississippi, and Crane v. Kentucky, in this case there was other evidence in the record to establish that proposition. Wendy Shepherd testified that she communicated McMullen’s violent character to the petitioner on the very day of the shooting. Sharon Hunter testified that she had described to the petitioner McMullen’s violent conduct, which in turn led the petitioner to confront McMullen. Hunter testified that on the day in question, McMullen pushed her down by her face, and that he had choked her in the past. And Douglas Hodo testified that when he and the petitioner came upon Shepherd, Shepherd told them that McMullen had been “beating on” Hunter in front of the kids and had been “messing” with the kids. Hodo also testified that, on several occasions, he saw McMullen walking around with a metal exercise bar. The petitioner himself testified about his knowledge of Hunter’s turbulent relationship with McMullen. He said that on the day of the shooting, he and Hodo were driving in his truck when they came upon the crying Shepherd who flagged them down; and that Shepherd told them that McMullen had beaten Hunter and that he was messing with his children. The petitioner explained that he felt “like something was wrong,” Trial Tr. Vol. IV, p. 38, which was the reason he then went into his house and grabbed his twelve-gauge shotgun, got back in the truck, and drove to Hunter’s house. The petitioner testified to the following: Q. A. Q. A. Q. A. Why did you grab the gun? Well, because I was scared. Scared of what? I was scared that something had happened bad. And everything just started piling up into me, what was going on. Like what? All the conversations I’ve had with Sharon. All of it started to come to me. And then I thought about what W[e]ndy said I just thought I just thought it was something definitely wrong. Trial Tr. Vol. IV, p. 40. -22- This evidence permitted defense counsel to advance the theory of accident during his closing argument. He described the petitioner’s state of mind to the jury in order to persuade them that the shooting was the result of an accident. He argued that when the petitioner heard what Shepherd had to say about the events at Hunter’s apartment – where his children were present – the petitioner did not go there immediately, but rather went to Lynn’s house, got a gun, and made a phone call. Defense counsel emphasized that the petitioner did not become excited or anxious at that time; it was not until Hodo was unable to reach Hunter by phone. Defense counsel argued that the petitioner’s feeling was understandable at that point, given the prior relationship between Hunter and McMullen coupled with Shepherd’s reported fear that McMullen was going to beat Hunter. Defense counsel stated that the petitioner then armed himself with the gun “[e]ither to protect himself from the man he had been told was a violent person or just to frighten that person out of the residence,” Trial Tr. Vol. IV, p. 119, and he described McMullen’s death as an accident. With the quantum of evidence on the defense theory in the record, the Court must conclude that the petitioner was afforded “a meaningful opportunity to present a complete defense.” Crane, 476 U.S. at 690 (citation and internal quotations omitted). The state court of appeals held that although the exclusion of the other evidence of McMullen’s prior abuse of Hunter was erroneous, the [circuit] court erred in concluding that defendant demonstrated the requisite prejudice. Defendant was permitted to introduce ample evidence that he had been made aware that decedent had been physically abusive to Hunter and has been “messing with” the children, and that Hunter wanted to get a gun to protect herself. The additional evidence would have been cumulative. People v. Allen, 2005 WL 1106498, at *1. After reviewing the full record, this Court also finds that exclusion of the evidence did not have a “substantial and injurious effect or influence in determining -23- the jury’s verdict.” Brecht, 507 U.S. at 623 (internal quotations omitted). Therefore, the petitioner is not entitled to a writ of habeas corpus as a result of the trial court’s erroneous evidence ruling. B. Next, the petitioner alleges that he was denied effective assistance of appellate counsel because appellate counsel failed to raise on direct appeal the arguments that the evidence ruling was erroneous and resulted in the abridgment of his right to present a defense. The right to effective assistance of counsel includes the right to effective assistance of appellate counsel. Evitts v. Lucey, 469 U.S. 387, 396 (1985); Carpenter v. Mohr, 163 F.3d 938, 946 (6th Cir. 1998), rev’d on other grounds sub nom. Edwards v. Carpenter, 529 U.S. 446 (2000). To prevail on a claim of ineffective assistance of appellate counsel, the petitioner must demonstrate that appellate counsel’s performance was deficient and that the deficient performance prejudiced the appeal. Strickland v. Washington, , 687 (1984). A criminal defendant has no constitutional right to demand that appellate counsel raise every possible colorable issue on appeal. Jones v. Barnes, , 751 (1983). “‘[W]innowing out weaker arguments on appeal and focusing on’ those more likely to prevail, far from being evidence of incompetence, is the hallmark of effective appellate advocacy.” Smith v. Murray, , 536 (1986) (quoting Jones, 463 U.S. at 751-52). Although the Sixth Amendment right to counsel does not require an appellate attorney to raise every non-frivolous issue on appeal, an attorney who has presented strong but unsuccessful claims on appeal may nonetheless deliver a deficient performance by omitting an issue that obviously would have resulted in reversal on appeal. Clemmons v. Delo, 124 F.3d 944, 954 (8th Cir. 1997); United States v. Cook, 45 F.3d 388, 395 (10th Cir. 1995); see also Banks v. Reynolds, 54 F.3d 1508, 1515 (10th Cir. 1995) (failure to raise a “dead-bang winner” claim on appeal constitutes ineffective -24- assistance of appellate counsel even though counsel may have raised other strong but ultimately unsuccessful claims); Matire v. Wainwright, 811 F.2d 1430, 1438 (11th Cir. 1987) (appellate counsel may be ineffective where the trial error is obvious from the record and “must have leaped out upon even a casual reading of the transcript”). Although appellate counsel need not raise every nonfrivolous argument on direct appeal, he must exercise reasonable professional judgment. Joshua v. DeWitt, 341 F.3d 430, 441 (6th Cir. 2003) (citing Jones, 463 U.S. at 751-752). The determination of whether appellate counsel performed deficiently is assessed in light of the familiar eleven factors set forth in Mapes v. Coyle, 171 F.3d at 427-28. The state circuit court found that appellate counsel’s performance was deficient because he omitted the excluded-evidence issue. This Court has little quarrel with that proposition; the issue was “significant and obvious,” “clearly stronger than those presented,” “objected to at trial,” and “the decision to omit [the] issue [was] an unreasonable one which only an incompetent attorney would adopt.” See ibid. It is not so certain, however, that including the issue would have resulted in a reversal and new trial. See Smith v. Robbins, 528 U.S. at 285 (requiring the petitioner to show that “but for his counsel’s unreasonable failure . . ., he would have prevailed on his appeal”). It is true that the petitioner preserved his objection to the exclusion of evidence by a timely objection. However, in Michigan, a preserved evidentiary error warrants reversal only where the defendant overcomes the presumption that the error was harmless, that is, it is more probable than not that the error affected the outcome. Mich. R. Evid. 103; People v. Lukity, 460 Mich. 484, 495-496, 596 N.W.2d 607, 612-13 (1999). The Michigan courts are reluctant to find reversible error in the exclusion of defense evidence when the evidence is “cumulative,” that is, when the proposition -25- has been proved by other evidence admitted at trial. See People v. McLaughlin, 258 Mich. App. 635, 652-57, 672 N.W.2d 860, 872-74 (2003). In this case, the Michigan Court of Appeals found that the excluded evidence was cumulative. The petitioner argues that this conclusion is not entitled to deference. However, this Court has reviewed the evidence presented at trial, as discussed above, and concluded that the state court of appeals’s conclusion does not amount to an unreasonable determination of the facts. Therefore, there is no certainty that admission of the excluded evidence would have influenced the jury’s verdict, or that the evidentiary error was “prejudicial,” as that term is understood by the state appellate courts. Because the error in excluding the evidence likely would not have led to a reversal of the conviction on direct appeal, the petitioner is not able to establish the prejudice prong for ineffective assistance of appellate counsel. Therefore, he is not entitled to a writ of habeas corpus on that ground. III. The Court finds that the state courts’ decisions in this case were not contrary to federal law, an unreasonable application of federal law, or an unreasonable determination of the facts. Therefore, the petitioner has not established that he is presently in custody in violation of the Constitution or laws of the United States. Accordingly, it is ORDERED that his petition for a writ of habeas corpus [dkt # 1] is DENIED. Dated: February 25, 2009 s/David M. Lawson DAVID M. LAWSON United States District Judge -26- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 25, 2009. s/Felicia M. Moses FELICIA M. MOSES -27-

=== Galka v. Caruso ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION EDWARD CHRISTOPHER GALKA, Petitioner, v. PAT CARUSO, ________________________________________/ Respondent. Case No. 08-13800 Honorable David M. Lawson ORDER TRANSFERRING SECOND OR SUCCESSIVE HABEAS PETITION TO THE UNITED STATES COURT OF APPEALS The petitioner, Edward Christopher Galka, presently on parole from the Michigan Department of Corrections, has filed a pro se petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 challenging his guilty-plea-based conviction of attempting to pass a false title to a motor vehicle. The petitioner was convicted of that crime in the Oakland County, Michigan circuit court and was sentenced to a prison term of seven months to twenty years. He alleges that his rights under the Fourteenth Amendment were violated when the state judge refused to allow him to withdraw his guilty plea, and his custody sentence violates the Eighth Amendment. Because the petitioner filed a prior habeas corpus petition in this District arising from this sentence, his pending petition will be transferred to the court of appeals as a second or successive petition. On January 26, 2006, the petitioner pleaded guilty to giving a false statement in an application for certificate of title to a motor vehicle in violation of Michigan Compiled Laws section 257.254. On February 16, 2006, the Oakland County circuit judge who accepted the guilty plea sentenced the petitioner as a habitual offender, fourth offense, to imprisonment for seven months to twenty years. The petitioner sought leave to appeal from the Michigan Court of Appeals on grounds of plea agreement violations, improper venue, and ineffective assistance of counsel, which that court denied “for lack of merit in the grounds presented.” See People v. Galka, No. 276324 (Mich. Ct. App. Apr. 6, 2007). On September 10, 2007, the Michigan Supreme Court denied leave to appeal because it was not persuaded that the questions presented should be reviewed by the court. See People v. Galka, 480 Mich. 858, 737 N.W.2d 700 (2007). It appears that the incident in the present case spanned the jurisdictions of two Michigan counties. The petitioner leased a vehicle under an alias in Wayne County and applied for title to this vehicle in Oakland County. He argued in the state court of appeals that his attorney was incompetent for failing to seek a change of venue to Wayne County, where, the petitioner believes, he would not have been incarcerated for his crime. That belief also nourishes his argument that his Oakland County sentence of custody violates the Eighth Amendment. Besides the conviction in Oakland County, the petitioner was also convicted of another violation of Michigan Compiled Laws section 257.254 in the Macomb County, Michigan circuit court in 2006. He was sentenced to a term of nine-months to ten years for that conviction. Then, on June 22, 2006, the Michigan Parole Board decided to release the petitioner on parole for a period of eighteen months, beginning on July 20, 2006. However, on July 28, 2006, the Parole Board rescinded its earlier decision to release the petitioner, citing as the reason a pending investigation into the petitioner’s alleged violations of certain federal statutes. In 2007, the petitioner filed a habeas corpus petition challenging the Michigan Parole Board’s decision to rescind his parole. The petitioner did not attack the underlying convictions, one of which is the one under attack here, but there is no apparent reason that he could not have done so in that case. Then-Chief United States District Judge Bernard A. Friedman denied the habeas -2- petition on the merits. See Galka v. Booker, No. 07-12271 (E.D. Mich. Nov. 7, 2007). The United States Court of Appeals for the Sixth Circuit denied the petitioner’s request for a certificate of appealability. See Galka v. Booker, No. 07-2471 (6th Cir. July 21, 2008). The petitioner filed the present habeas corpus petition on September 4, 2008. An individual seeking to file a second or successive habeas petition must first ask the appropriate court of appeals for an order authorizing the district court to consider the petition. See 28 U.S.C. § 2244(b)(3)(A); Stewart v. Martinez-Villareal, 523 U.S. 637, 641 (1998). Congress has vested in the court of appeals a screening function that the district court would have performed otherwise. Felker v. Turpin, 518 U.S. 651, 664 (1996). When a habeas petitioner files a second or successive petition for habeas corpus relief in the district court without preauthorization from the court of appeals, the district court must transfer the document to the court of appeals. See 28 U.S.C. § 1631 (directing that “[w]henever a civil action is filed in a court . . . and that court finds that there is a want of jurisdiction, the court shall, if it is in the interest of justice, transfer such action . . . to any other such court in which the action . . . could have been brought at the time it was filed”); Sims v. Terbush, 111 F.3d 45, 47 (6th Cir. 1997) (holding that “when a prisoner has sought § 2244(b)(3) permission from the district court, or when a second or successive petition for habeas corpus relief or § 2255 motion is filed in the district court without § 2244(b)(3) authorization from this court, the district court shall transfer the document to this court pursuant to 28 U.S.C. § 1631.”). The term “second or successive petition” has been found to be a term of art, which is not to be interpreted literally. See Slack v. McDaniel, 529 U.S. 473, 486 (2000). Rather, the term is intended to implement the abuse-of-the-writ doctrine. In re Bowen, 436 F.3d 699, 704 (6th Cir. 2006). A petition is considered successive if it “raises a claim that could have been raised in the first -3- petition but was not so raised, either due to deliberate abandonment or inexcusable neglect.” Ibid. Therefore, if the prisoner could have discovered the factual predicate to his new claim at the time he filed his first petition, the petition is successive within the meaning of 28 U.S.C. § 2244(b)(3)(A). In re Siggers, 132 F.3d 333, 338 (6th Cir. 1997). The petitioner could have challenged his conviction and raised his pending claims in his prior habeas petition. At the time of his first petition, his guilty plea and sentence in the Oakland County court and any complaint about counsel’s performance were all – or should have been – apparent to the petitioner and could have been raised along with the parole decision issue in the first habeas petition. Instead, the petitioner chose not to address these matters in his first petition, discussing only the parole rescission. Courts have held generally that where the first habeas petition challenges a conviction and sentence, the subsequent petition that challenges the parole decision is considered “second or successive” habeas petition requiring the transfer to the court of appeals. See Benchoff v. Colleran, 404 F.3d 812, 817-18 (3d Cir. 2005) (holding that a petition challenging the denial of parole was a “second and successive” petition where the claim was ripe and could have been raised in an earlier habeas petition challenging the underlying conviction); Crone v. Cockrell, 324 F.3d 833, 837 (5th Cir. 2003) (regarding as “successive” the prisoner’s habeas petition alleging that his sentence should have been credited for out of custody period following his erroneous early release where the prisoner’s first petition challenged his underlying convictions). A stronger basis for finding a “successive petition” exists when the reverse is true, as here, when the first petition challenges a parole decision and fails even to mention alleged defects in the underlying conviction. These are just the sort of serial filings that the abuse-of-the-writ doctrine was meant to prohibit, see -4- McCleskey v. Zant, 499 U.S. 467, 493-95 (1991), and which were formalized in 28 U.S.C. § 2244(b)(3)(A). The petitioner cannot proceed with the issues raised in the present petition without first acquiring permission to file a second or successive habeas petition from the court of appeals. Accordingly, the Clerk of Court is ordered to transfer the habeas petition to the court of appeals pursuant to Sims and 28 U.S.C. § 1631. Accordingly, it is ORDERED that the petition for writ of habeas corpus is DENIED without prejudice for want of jurisdiction. It is further ORDERED that the Clerk shall transfer the petition to the United States Court of Appeals for the Sixth Circuit pursuant to 28 U.S.C. § 1631. Dated: February 18, 2009 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 18, 2009. s/Felicia M. Moses FELICIA M. MOSES -5-

=== Al-Timii v. Jackson ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ALI AL-TIMIMI, Petitioner, v. ANDREW JACKSON, _________________________________/ Respondent. Civil No. 05-10266 Hon. David M. Lawson Magistrate Judge Charles E. Binder OPINION AND ORDER ADOPTING MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION, OVERRULING PETITIONER’S OBJECTIONS IN PART, AND DENYING PETITION FOR WRIT OF HABEAS CORPUS Petitioner Ali Al-Timimi currently is confined in a Michigan prison serving a fifteen-to- twenty-five-year sentence for second-degree murder. Through counsel, he filed a petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254, alleging that he is unlawfully confined because his rights under the Confrontation Clause were violated during his jury trial in the Wayne County, Michigan circuit court. This matter was referred to Magistrate Judge Charles E. Binder, who issued a report on July 5, 2006 recommending that the petition be denied. The petitioner timely filed his objections to the Report and Recommendation, and this matter is now before the Court for de novo review. The focus of the habeas petition is on the manner in which the state court dealt with the unusual circumstances surrounding the unavailability at trial of an important State witness. The witness, Zamen Al-Kasid (“Zamen”), was the petitioner’s teenage sister-in-law and the apparent romantic interest of the murder victim, Waheed Al-Alyawi (“Waheed”). Waheed was killed when the motorcycle he was riding was struck by an automobile driven by the petitioner. The State’s theory was that the petitioner intentionally caused this collision because the petitioner’s family was upset at the relationship between Zamen and Waheed. Zamen provided crucial testimony at the preliminary examination establishing this motive, but she could not be located for trial. The major complication arose when it was discovered that the magistrate’s recording equipment malfunctioned, the court reporter had died, and only a few pages of Zamen’s prior testimony were preserved. The state trial judge permitted the prosecutor to call witnesses present during Zamen’s testimony to repeat what she said at the preliminary examination. Although the petitioner had the opportunity to cross-examine Zamen at the preliminary examination, he contends that the trial witnesses’ account of Zamen’s testimony did not do justice to the full range of questioning during the prior testimony, and his right to confront Zamen was violated. The magistrate judge concluded in his report that the petitioner’s claim lacked merit. He applied the Supreme Court’s watershed Confrontation Clause decision of Crawford v. Washington, (2004), which was handed down just a few weeks before the state court of appeals issued its opinion in the petitioner’s direct appeal, and concluded that there was not much of a contest that Zamen was unavailable at trial, she gave prior statements under oath that properly are characterized as testimonial, and the witness was subject to cross-examination. So he found that the petitioner’s real challenge went to the manner in which the testimony was presented to the jury, which did not contravene any clearly establish Supreme Court precedent. Therefore, the magistrate judge suggested, the petitioner was not entitled to a writ of habeas corpus. The petitioner’s objections challenge several factual determinations by the magistrate judge, which the petitioner believes are erroneous and lead to the incorrect conclusion about the fairness of the presentation of the secondary evidence of Zamen’s prior testimony. He also disagrees with the magistrate judge’s ultimate conclusion that the petitioner was able to confront the witness -2- adequately within the meaning of the Sixth Amendment. After reviewing record, the magistrate judge’s report, and the parties’ submissions, the Court concludes that although the magistrate judge made some mistakes in his factual account, his ultimate conclusion is compelled by the rigid standard applied to habeas cases in the wake of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996). The state courts’ decision to permit secondary evidence of a State witness’s prior testimony – where the petitioner had the opportunity to cross-examine the witness fully during the prior proceeding – was not “contrary to,” nor did it “involve[] an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States.” 28 U.S.C. § 2254(d)(1). Therefore, the Court will deny the petition. I. Because the petitioner takes issue with the facts as summarized by the magistrate judge, the Court will review the evidence in some detail. The traffic collision causing Waheed Al-Alyawi’s death occurred on October 3, 2001, in Dearborn, Michigan. Waheed was riding a motorcycle when he was struck and killed by an automobile driven by the petitioner. The petitioner fled the scene, but his license-plate number was recorded by two eyewitnesses. When police located and questioned the petitioner, he initially denied having any knowledge of the accident. Eventually, he admitted that he was in an accident but claimed that he did not know Waheed, the victim. The police later learned of the romantic liaison between twenty-six-year-old Waheed and Zamen, the petitioner’s sixteen-year-old sister-in-law, which ran counter to the family’s wishes. The petitioner was charged with first-degree murder, and Zamen was taken into protective custody before the petitioner’s preliminary examination, which was held on October 26, 2001 before the Honorable -3- Virginia Sobotka of the Nineteenth District Court for the City of Dearborn. Zamen escaped but was found prior to the hearing, where she testified under oath as a witness for the prosecution. The petitioner was bound over to circuit court on a charge of first-degree murder. Zamen continued to be held in protective custody until she again escaped in December 2001. The police department became aware of the disappearance in March or April 2002 and began to search for her. They placed flyers along Seven Mile Road, and interviewed her family and friends, but were unable to find her. When the petitioner’s trial commenced on October 7, 2002, Zamen could not be located. The trial court found that the prosecution had undertaken diligent efforts to locate her and declared her an unavailable witness. In the meantime, it was discovered after the preliminary examination that the court reporter’s equipment had malfunctioned during Zamen’s testimony. Only five pages could be transcribed. In addition, the court reporter died and a transcript of the remainder of the hearing could not be produced. The transcript remnant from Zamen’s testimony reads: Q: [state prosecutor]: Could you please tell us your name? A: Zamen Al-Kasid. Q: Do you know someone by the name of Ali Al-Timimi? A: Yes, I do. Q: Is he present in the courtroom today? A: Yes, he is. Q: Could you please tell us where he’s seated and what he’s wearing? A: He’s sitting – you want me to point him out? [Q]: Yes. A: right over there wearing a blue shirt. I believe that has red stripes on it. [Prosecutor]: Let the record reflect that the witness has pointed to the defendant, Ali Al-Timimi and has described what he’s wearing. Q: . . . Could you tell us how old you are, please? A: Sixteen years old. Q: Back in the month of October, even September of the year 2001, did you have a boyfriend? A: October what, 2001? Q: Yes; of this year. -4- A: Yes, I did. Q: Would you tell us your boyfriend’s name, please? A: Waheed Alalyawi. Q: Back in September of the year 2001 can you tell us where you were living? A: In September? Q: Yes. A: At home. Q: And where was your home? A: On Steadman near Ford Road. Q: While you were living at home on Steadman, were you living with your parents? A: Yes, I was. Q: Were you also living on Steadman with anybody else? A: Yeah. Q: Who else was living at your house on Steadman besides you and your parents? A: Ali Al-Timimi and my sister. Q: You said the defendant, Ali Al-Timimi was living with you as well as your sister? A: Yes. Q: Is the defendant, Ali Al-Timimi, somehow related to you? A: He is my brother-in-law. Q: He’s married to your sister? A: Yes. Q: Which sister is that? A: Nakla (phonetic). Q: You said your sister and the defendant were living with you in the house on Steadman; is that correct? A: Yes, because our house on Emmenon was burned and they used to live in the upstrairs [sic] house, because it was a two-story house. Q: Okay. How long have they been living at your house with you and your parents? A: I can’t remember. Q: Would it be more than a few months? A: Yes. Q: Would it be more than a year? A: Probably. Q: Okay. You said that you – you said that your boyfriend’s name was Waheed. What was his last name? A: Alalyawi Q: His name was Waheed Alalyawi? A: Right. Q: Okay. Did there come a point in time when his family and your family became involved in at least some kind of an arrangement between the two of you? A: Kind of. Q: When you say kind of, can you tell us about that? A: Well, when he came he sent his mother and his mother’s friend to engage me. Q: When you say engage me, what does that mean? -5- A: To ask for my hand. Q: You mean to ask for your hand in marriage? A: Yes. Q: Okay. When his mother came to your family who did she speak to? A: My family. Q: Yes, but who specifically in your family did she speak to? A: My mother. Q: Okay. Did that result in an arrangement, a marriage arrangement between the mothers? A: Yes. Q: Okay. During the time that this arrangement was going on, was that also during the time that the defendant was living with you and your family on Steadman? A: Yes. Q: Okay. And did something happen to this marriage agreement that caused it to fall apart? A: Yeah. Q: Okay. And what was that? A: They said no because he was bad; he used to drink and go out with girls. That’s what they told me. Q: Okay. Who ultimately told you they weren’t going to let the arranged marriage happen? A: My mother and father. Q: Okay. Your mother and father told that you [sic] this arranged marriage was not going to happen. Were you ever told not to see Waheed after that? A: Yes, I was. Q: Okay. And did you follow that? A: No, I didn’t. Q: Okay. And what did you do after having been told not to have any contact with Waheed? A: I kept in contact with him. Q: Did there come a time when the defendant in this case, Ali Al-Timimi, prior to October 3, 2001 wanted to have a conversation with you regarding your relationship with Waheed? A: Yes. Q: Okay. What can you tell us about that? A: He had come to my school that day. Q: Okay. Which date did he come to your school? A: October 3rd. Q: What school is that? A: Fordson High School. Q: And what happened when the defendant, Ali Al-Timimi, came to Fordson High School on October 3, 2001? A: [nothing further written] -6- State Court Transcript of Proceedings held on 10/26/01, at 81-86. After that testimony was read to the jury, the trial court permitted the parties to call witnesses who were in the courtroom during the preliminary examination to tell the trial jury what they remembered of Zamen’s testimony. The first witness called for this purpose was Judge Sobotka herself, although she was not identified as a judge, but merely as a person who was in the courtroom during the preliminary examination. Judge Sobotka had taken two pages of notes during Zamen’s testimony, two-thirds of which were from the direct examination and one-third from the cross-examination. She testified that the testimony was not very long, and that she took notes “[v]ery briefly” on the cross-examination. Tr., 10/9/02 at 63-64, 66. Judge Sobotka referred to her notes as she testified. She told the jury that Zamen had testified that Zamen’s sister’s husband (the petitioner) had talked to her three times about her relationship with Waheed. During the second of these conversations, which occurred on the way to school, the petitioner had told her that “the marriage would be off and that she would be forbidden to see him” because “[h]e was bad and she would ruin the family.” Id. at 59. The third conversation occurred on the day of the accident, and Judge Sobotka described Zamen’s testimony as follows: A: She [Zamen] was using the cell phone talking to Waheed when her father discovered her. And he started beating her. She started screaming. The family came into her room. Q: When you say that she said he started beating her, who was she describing as he? A: Her father. Q: Her father was beating her. A: And at that time when she started screaming then the other members of the family came into her room. Q: Okay. Let me back up another second. Did [Zamen] testify about where she had gotten this cell phone that she was caught with? A: From Waheed. Q: Did she describe the purpose for why Waheed had given this cell phone? A: So that he could keep in touch with her. -7- Q: All right. After the family or after her father – she testified that her father found her talking on this cell phone and beat her, what did she describe happened next? A: Her screaming brought the other members of the family into the room. Q: What did she then describe happened? A: After the other family members left, her brother-in-law [the petitioner] remained. . . . Q: Did she say what it was that Mr. Ali Al-Timimi said to her after he remained to talk to her? A: It started out with that, you cannot marry him. He is bad. You will ruin the family. Then he said that he would take care of him. [H]e would kill him. [A]nd I Haider would kill her. Q: Haider? A: Her brother, Haider. Q: All right. So specifically did she testify that the Defendant said that he would kill Waheed? A: Yes. Q: Did she say – Did she testify as to when he said he would do that? A: He said today he would take care of him. He would kill him and Haider would take care of you and kill you. Id. at 60-62. Judge Sobotka testified that she wrote down twice exactly what Zamen testified was said by her brother: “‘You’ll see what I’ll do to deceased. He won’t be alive. Haider will kill you. . . . I will kill decease[d]. . . . Today you will see what I will do. I will kill. And your brother will kill you.’” Id. at 63. The second witness to recount Zamen’s preliminary examination testimony was Anne Kanitra, a detective with the Dearborn Police Department. She told the jury that Zamen had testified that Waheed was her boyfriend and that she was engaged to marry him, although her family disapproved. Id. at 73. Kanitra remembered Zamen testifying that the petitioner had gone to her school and pulled her out of class, pulled her out of school and told her or asked her are you seeing Waheed, and she denied it to him, saying, no I’m not seeing him, although she was seeing him. Id. at 74. -8- Kanitra said that Zamen recounted the following events that occurred during her final contact with her brother-in-law on the day of Waheed’s death: Q: And what did she say happened after Mr. Al-Timimi got her out of school that day? A: When they had went [sic] home to the house, she was on her cell phone talking to Waheed, and I believe her father walked in and caught her on the phone talking to him and became upset. Q: Did she say where it was that she got this cell phone? A: I believe it was from Waheed. It was not from her family. Waheed bought it for her. Q: And after her father discovered her on her cell phone, what did she say happened? A: He became very upset and I think struck her. Q: Did she say what happened after that? A She was kept in a room, in her room, made to stay in her room. And then Ali [Al- Timimi] came in. . . . He came in and told her that you better not see him, and if you – I’m going to kill Waheed and Haider, Haider is her brother. Is Zamen’s brother. Will kill you. Q: Do you specifically remember Zamen Al-Kasid testifying under oath that Mr. Ali Al-Timimi told her that he was going to kill Waheed? A: Yes. Id. at 75-76. Kanitra admitted on cross-examination that she did not take notes during the preliminary examination, and she was recalling Zamen’s testimony strictly from memory. She also stated that she did not remember which facts were brought out during the direct examination as opposed to those elicited on cross-examination. She did not recall Zamen testifying that Waheed has told her that he was going to kill himself. The final witness who related Zamen’s preliminary examination testimony for the jury was Paul Keiper, also a detective with the Dearborn Police Department. He testified without notes, from memory, and said: A: She testified that Ali Al-Timimi had gone to Fordson High School where she’s a student. He got permission to remove her from the school. He took her home. He -9- had discussed with her about the fact that she was not to see Waheed, because she was disgracing the family. Q: Did she indicate what happened after Mr. Al-Timimi took her home? A: Eventually she was in her room. And she had a cell phone that Waheed had given to her so that they could keep in touch with each other. She was talking with Waheed on the phone when her father came into the room. He caught her on the phone, took the phone away from her. He slapped her and that was it at that point in time. . . . Q: Did she indicate what happened after her father slapped her after finding the cell phone? A: A short time later, Ali Al-Timimi came into the room. He was again upset with her over not listening to what the family had said and he told her that he was going to kill Waheed and that her brother Haider was going to kill her. Id. at 91-93. The defense elected not to call any witnesses who were in the courtroom during the preliminary examination to testify as to their recollection of Zamen’s testimony, and the defense claimed that no other person in the courtroom had a full recollection of the cross-examination testimony. The prosecution also called other witnesses who described the relationships, as did the defense. One defense witness, Rafah Al-Kasid, testified that she brought Zamen clothing before the preliminary examination, and asked her about the incident. She testified that she asked Zamen you going to be testifying today, you know that? she said, yes. And I said, are you going to say something about Ali, like he killed Waheed or anything else? And she said, Ali not killed Waheed. Waheed killed himself. And I said, what do you mean by that? And she said, Waheed told me that if I won’t marry you I will kill myself. . . . and when I say what are you going to testify about? She said, what they want me to say. Tr., 10/9/2002, at 116. She testified that Zamen told her that the officers were preventing her from contacting the family. Rafah testified that after the preliminary examination, Zamen said that she only testified that way because she was threatened with being put in a mental hospital or jail for fifteen years by a police officer. -10- Emad Al-Kasid, Zamen’s brother, also testified for the defense. He testified that the petitioner was not involved with disciplining Zamen, and it would be against the family’s religious beliefs to have the petitioner alone with Zamen at any point. Nahla Al-Kasid, the petitioner’s wife, testified that she did not hear any fighting between Zamen and her father, and the petitioner did not enter Zamen’s room because it would have been against their religious beliefs. Ahmed Alkhalidi, a longtime friend of the petitioner, testified that the petitioner was at his house on October 3 from 2:00 or 2:15 in the afternoon until 5:30 or 6:00. Each side called an accident reconstruction expert witness. Gordon McIntosh, a corporal with the accident reconstruction division of the Dearborn Police Department, testifying for the prosecution, said that there were oil droplets on the road that, he believed, were from the motorcycle because they followed the gouge marks in the pavement. The oil droplets were in a straight line, which was “inconsistent” with a motorcycle veering sharply. Tr., 10/8/2002, at 148. McIntosh also testified that there were no skid marks, as would be expected if there was hard breaking. Sammie Hall, a professional Traffic Accident Reconstructionist, testified for the defense that, based on the damage to both vehicles, the motorcyclist was eventually impacted from the rear. But what happened, because the difference in speed was at or about ten miles per hour, that motorcycle made contact with the right side of the vehicle, continued in front of the car, and it is my assumption, it is my opinion, that the motorcyclist was out of control and once the vehicle is out of control, it’s basically my opinion again, that he was decelerating. Tr., 10/10/2002, at 24. He also challenged Mr. McIntosh’s conclusion regarding the oil spots, noting that the vehicle was probably traveling 35 miles per hour, or 51 feet per second, and it would “ha[ve] to be a rather distinctive or a steady stream of oil coming out.” Id. at 40. He also noted that there was an oil-change establishment nearby that also could have contributed to the oil spots on the road. -11- At the conclusion of the five-day trial, the jury found the petitioner guilty of second-degree murder, and he was subsequently sentenced to fifteen to twenty-five years in prison. On direct appeal, the petitioner raised his Sixth Amendment issue and argued that the attempt to reconstruct Zamen’s preliminary examination testimony was “grossly incomplete” and “failed to include all of the substance of that witness testimony, including that given on cross-examination.” The court of appeals, applying Crawford v. Washington, rejected this argument. The court noted: [D]efendant fails to demonstrate that the witnesses at issue lacked knowledge about Al-Kasid’s testimony on cross-examination at the preliminary examination. Our review of the witnesses’ testimony reveals that these witnesses’ recollections were not limited to only the direct examination portion of Al-Kasid’s testimony. Moreover, defendant had the opportunity to interview and present any other witnesses that may have been present during Al-Kasid’s cross-examination. People v. Al-Timimi, 2004 WL 1254271, at *3, (Mich. Ct. App. Jun. 8, 2004) (unpublished). Over the dissent of two justices, the Supreme Court of Michigan denied leave to appeal on March 31, 2005. People v. Al-Timimi, 472 Mich. 882, 693 N.W.2d 822 (Mar. 31, 2005 (table). Thereafter, the petitioner filed a timely petition for a writ of habeas corpus in this Court, alleging a violation of his Sixth Amendment right to confront and cross-examine a witness because Zamen was not produced for trial and the secondary evidence of her prior testimony was inadequate to satisfy the Confrontation Clause. The respondent filed an answer in opposition, and Judge Binder issued a report recommending that the petition be denied. II. The petitioner objects to several of Judge Binder’s factual findings, including a statement in the report that Judge Sabotka had taken six pages of notes during Zaman’s testimony, an assertion that “the defense elected not to call any witnesses who were in the courtroom during the preliminary examination to testify as to their recollection of Zamen’s testimony,” R & R at 6, and Judge Binder’s -12- deference to the factual determinations of the state court. The petitioner also objects to Judge Binder’s substantive characterization as a “state law question,” R & R at 16, the issue of the mode in which an absent witness’s prior statements are presented. Finally, he takes issue with Judge Binder’s assertion that the petitioner cited only dicta in California v. Green, 399 U.S. 149 (1970) for the proposition that the manner of presentation of an out-of-court statement can run afoul of the Confrontation Clause. The petitioner believes that Crawford, which he cited frequently, also stands for this proposition, and he cited Dutton v. Evans, 400 U.S. 74 (1970), and Mattox v. United States, 156 U.S. 237 (1895), for this same proposition. Objections to a report and recommendation are reviewed de novo. 28 U.S.C. § 636(b)(1). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller v. Currie, 50 F.3d 373, 380 (6th Cir. 1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). The petitioner is correct on one of his factual challenges, but this error does not necessarily change the legal analysis. The petitioner is correct that Judge Sobotka took only two pages of notes on the testimony of the critical witness, not six pages as stated by the magistrate judge. However, the petitioner has not provided evidence to support his other factual challenges. For example, the petitioner points to arguments made by his counsel in the trial court for the proposition that “not a single person known to have been present claimed any knowledge of the substance of the cross- examination testimony.” Petr.’s Obj. at 4 (citing Tr. 10/3/02, 14-15, 19-12). But the testimony he -13- references is inconclusive on the point. For instance, he points to Judge Sobotka’s testimony that she took some notes on the petitioner’s cross-examination, but did not record certain dates or times discussed during the examination. However, the record indicates that about one-third of Judge Sobtka’s notes related to the defense cross-examination. Nonetheless, no one ever asked Judge Sobtka to separate the information she received on direct examination from that revealed on cross- examination. Judge Sobtka’s trial testimony does not establish that the defense cross-examination could not have been explored at trial. Detective Kanitra testified that she did not take any notes, and stated that she did not know whether the testimony she remembered was elicited on direct or cross- examination. Dearborn detective Paul Keiper was never even asked about the information he remembered from the direct as opposed to the cross-examination. And trial counsel, who also was the cross-examiner at the preliminary examination, never suggested that the record was incomplete or made an offer of proof of cross-examination evidence that was omitted from the witness accounts. This showing does not establish that there were no witnesses that could describe Zamen’s testimony on cross-examination. Turning to the substantive objections, the petitioner disputes the magistrate judge’s characterization of the passage from California v. Green relied upon as dicta, and he disagrees with the ultimate determination that using secondary evidence of an absent witness’s prior testimony satisfies the Confrontation Clause. Although the petitioner’s arguments have some persuasive force, they do not carry the day. The development of the rights preserved by the Confrontation Clause, chronicled to some extent in Crawford, 541 U.S. at 54-57, parallels (but does not duplicate) the evolution of the rule against hearsay. As the source of proof in trials at common law evolved from the private knowledge -14- or results of investigation by jurors themselves to the testimony of witnesses in open court, a premium was placed on procedures intended to ensure the reliability of the evidence presented to disinterested fact finders. The reliability of a witness’s testimony depends in large measure on the witness’s ability to perceive, remember and relate events, and the witness’s sincerity. See 2 McCormick on Evidence, § 245, p. 93 (5th ed. 1999). In order to encourage witnesses to put forth their best efforts and to expose inaccuracies that might be present with respect to any of the foregoing factors, the Anglo-American tradition evolved three conditions under which witnesses ordinarily are required to testify: oath, personal presence at trial, and cross-examination. The rule against hearsay is designed to insure compliance with these ideal conditions, and when one of them is absent, the hearsay objection becomes pertinent. Ibid. (footnote omitted). In hearsay jurisprudence, these testimonial guarantees historically have not been viewed as ends in themselves, but rather as means intended to achieve the ultimate goal: reliability of the evidence considered by disinterested fact finders. Thus, where there are functional substitutes for the testimonial guarantees which ensure reliability, rendering them “a work of supererogation,” 5 J. Wigmore, Evidence § 1420, at 251 (J. Chadbourn rev. 1974), they are comfortably dispatched and exceptions to the rule against hearsay are recognized. See, e.g. Idaho v. Wright, 497 U.S. 805, 820 (1990) (explaining rationale behind excited utterance, dying declaration, and medical treatment hearsay exceptions). The Confrontation Clause was intended to import these same protections assuring reliability into American criminal procedure. As the Supreme Court explained over a century ago: The primary object of the constitutional provision in question was to prevent depositions or ex parte affidavits, such as were sometimes admitted in civil cases, being used against the prisoner in lieu of a personal examination and cross-examination of the witness, in which the accused has an opportunity, not only of testing the recollection and sifting the conscience of the witness, but of compelling -15- him to stand face to face with the jury in order that they may look at him, and judge by his demeanor upon the stand and the manner in which he gives his testimony whether he is worthy of belief. Mattox v. United States, 156 U.S. 237, 242-243 (1895). The purpose of the Confrontation Clause, then, was to “constitutionalize” the common-law testimonial guarantees by which an accused could test a witness’ perception, memory, ability to relate or communicate, and, perhaps most importantly, his sincerity. Confrontation: (1) insures that the witness will give his statements under oath – thus impressing him with the seriousness of the matter and guarding against the lie by the possibility of a penalty for perjury; (2) forces the witness to submit to cross-examination, the “greatest legal engine ever invented for the discovery of truth” [Wigmore, § 1367]; (3) permits the jury that is to decide the defendant’s fate to observe the demeanor of the witness in making his statement, thus aiding the jury in assessing his credibility. California v. Green, 399 U.S. 149, 158 (1970) (footnote omitted). Although the interests embraced by the hearsay rule and the Confrontation Clause are similar, the reach of the two provisions is not conterminous. Crawford, 541 U.S. at 51 (noting that “not all hearsay implicates the Sixth Amendment’s core concerns”). “The Confrontation Clause . . . bars the admission of some evidence that would be otherwise admissible under an exception to the hearsay rule.” Wright, 497 U.S. at 814. Likewise, the Supreme Court has never read the Clause literally to require the exclusion of all hearsay. Ohio v. Roberts, 448 U.S. 56, 63 (1980) (noting that to do so would effectuate “a result long rejected as unintended and too extreme”), overruled by Crawford, . In Ohio v. Roberts, the Supreme Court likewise viewed the procedural protections of the Confrontation Clause as a means to an end, and, although re-emphasizing the judicial preference for face-to-face confrontations, focused on reliability as the touchstone for admissibility of out-of-court -16- statements against an accused. “First, in conformance with the Framers’ preference for face-to-face accusation, the Sixth Amendment establishes a rule of necessity. [Generally,] the prosecution must either produce, or demonstrate the unavailability of, the declarant whose statement it wishes to use against the defendant.” Id. at 65. Second, if a witness is shown to be unavailable, “his statement is admissible only if it bears adequate ‘indicia of reliability.’” Id. at 66. The Supreme Court rejected that approach in Crawford, declaring that the prior line of cases was flawed because the standard they applied was unpredictable. It criticized conditioning the fulfillment of confrontation rights on the judicial determination of reliability on the grounds that “[r]eliability is an amorphous, if not entirely subjective, concept. There are countless factors bearing on whether a statement is reliable.” Crawford, 541 U.S. at 63. However, the Court’s decision to opt for a clear-cut procedural ultimatum over the Roberts balancing test rested on its desire to not “admit core testimonial statements that the Confrontation Clause plainly meant to exclude,” and not the prior test’s “unpredictability.” See ibid. The Court was not satisfied with Roberts’s reliance on determinations of reliability in the absence of a concrete procedural safeguard. The Court repeatedly emphasized that the Constitution favors cross-examination as the vehicle for testing a witness’s credibility: [T]he Clause’s ultimate goal is to ensure reliability of evidence, but it is procedural rather than a substantive guarantee. It commands, not that evidence be reliable, but that reliability be assessed in a particular manner: by testing in the crucible of cross- examination. The Clause thus reflects a judgment, not only about the desirability of reliable evidence (a point on which there could be little dissent), but about how reliability can best be determined. Cf. 3 Blackstone, Commentaries, at 373 (“This open examination of witnesses . . . is much more conducive to the clearing up of truth”); M. Hale, History and Analysis of the Common Law of England 258 (1713) (adversarial testing “beats and bolts out the Truth much better”). -17- Id. at 61-62. The prior opportunity to cross-examine, therefore, is a necessary condition for admitting out-of-court statements. Id. at 55. The Court described the “evil” against which the Confrontation Clause was meant to protect: “the civil-law mode of criminal procedure, and particularly its use of ex parte examinations as evidence against the accused.” Id. at 50. The Crawford Court, however, did not require the opportunity for cross-examination to take place at the time of trial. See id. at 53-54 (holding that the Confrontation Clause only prohibits the “admission of testimonial statements of a witness who did not appear at trial unless he was unavailable to testify, and the defendant had had a prior opportunity for cross-examination”) (emphasis added). And although the Sixth Circuit has expressed some doubt over the admissibility of preliminary hearing testimony of an absent witness under pre-Crawford law, see Vasquez v. Jones, 496 F.3d 564, 577 (6th Cir. 2007) (stating that “we doubt that the opportunity to question a witness at a preliminary examination hearing satisfies the pre-Crawford understanding of the Confrontation Clause’s guarantee of ‘an opportunity for effective cross-examination’ . . . when the witness does not appear at trial”) (quoting Delaware v. Fensterer, 474 U.S. 15, 20 (1985) (per curiam , that point does not appear to be in contention in the present case. The Supreme Court has found no Confrontation Clause violation by the admission of prior testimony of an absent witness when there was an opportunity for cross-examination at the prior proceeding. Mattox v. United States, 156 U.S. 237, 244 (1895). Although the prior testimony in Mattox was given at the first trial of the case, the Supreme Court has allowed that preliminary hearing testimony may suffice as well. See Barber v. Page, 390 U.S. 719, 725-726 (1968) (noting that although the preliminary hearing is ordinarily a less searching exploration into the merits of a case than a trial, “there may be some justification for holding that the opportunity for cross-examination of a witness as a preliminary -18- hearing satisfies the demand of the confrontation clause where the witness is shown to be actually unavailable”); Pointer v. Texas, 380 U.S. 400, 407 (1965) (finding Confrontation Clause violation by admission of preliminary hearing testimony, but noting that “[t]he case before us would be quite a different one had Phillips’ statement been taken at a full-fledged hearing at which petitioner had been represented by counsel who had been given a complete and adequate opportunity to cross-examine”). But the petitioner insists that the Confrontation Clause regulates not only the manner in which prior testimony may be obtained – in a judicial proceeding where the accused has the right and opportunity for cross-examination – but also the manner in which that prior testimony may be reproduced at the trial later on. Although the petitioner cites Crawford and Dutton v. Evans for this proposition, his main source of Supreme Court law for this point is California v. Green, where the Court held that a witness’s preliminary hearing testimony was admissible, although the witness also was present at trial. The Court wrote: We also think that Porter’s preliminary hearing testimony was admissible as far as the Constitution is concerned wholly apart from the question of whether respondent had an effective opportunity for confrontation at the subsequent trial. For Porter’s statement at the preliminary hearing had already been given under circumstances closely approximating those that surround the typical trial. Porter was under oath; respondent was represented by counsel – the same counsel in fact who later represented him at the trial; respondent had every opportunity to cross-examine Porter as to his statement; and the proceedings were conducted before a judicial tribunal, equipped to provide a judicial record of the hearings. Under these circumstances, Porter’s statement would, we think, have been admissible at trial even in Porter’s absence if Porter had been actually unavailable, despite good-faith efforts of the State to produce him. That being the case, we do not think a different result should follow where the witness is actually produced. California v. Green, 399 U.S. 149, 165 (1970) (emphasis added). -19- The petitioner points to the emphasized language as setting forth a constitutional minimum standard for the admission of former testimony. The magistrate judge dismissed this language as dicta, but it is not readily apparent that such is the case. Dictum, or obiter dictum, is “[a] judicial comment made while delivering a judicial opinion, but one that is unnecessary to the decision in the case and therefore not precedential (although it may be considered persuasive).” United States v. Hardin, 539 F.3d 404, 439-440 (6th Cir. 2008) (Bachelder, J., dissenting) (quoting Black’s Law Dictionary (8th ed. 2004). Since the witness in Green was present at the trial, the pronouncement regarding the prior testimony’s admissibility had the witness been unavailable is not necessary to the decision. However, it is not clear that the four-part analysis constitutes dictum. The Court did not address directly which of its two holdings – that Green’s confrontation rights were vindicated because the witness was present at trial, and his rights also were satisfied because of the procedures used at the prior hearing – was primary, and which was secondary. To conclude that the holding that comes first in the opinion is the basis for the decision while the second one is mere dictum would be arbitrary. Nonetheless, the Court does not believe that the Supreme Court intended the four factors set forth in Green – oath; prior representation by counsel; opportunity to cross-examine; and proceedings before a judicial tribunal equipped to provide a judicial record – to be the irreducible minimum requirements for prior testimony to pass muster under the Confrontation Clause. It is more likely that the Court cited those factors in support of its finding that procedures were adequate to ensure reliability – a criterion later rejected by Crawford as a sufficient condition. In fact, the historical record does not suggest that a verbatim record is a necessary prerequisite for the admission of prior testimony at all, although certainly there is a preference for -20- it. In Toledo Traction Co. v. Cameron, 137 F. 48, 57-62 (6th Cir. 1905), the court held that prior testimony of an absent witness was admissible in a civil case. The court reviewed the body of law on the subject, citing Burton v. Driggs, 87 U.S. (20 Wall.) 125 (1873), in which the plaintiff offered to prove the contents of a deposition of an absent witness, but which had been lost. The Supreme Court found no error, stating: ‘In Harper v. Cook, 1 Car. & Payne, 139, it was held that the contents of a lost affidavit might be shown by secondary evidence. The necessity of re-taking it was not suggested. In the present case the witness lived in another state, and more than one hundred miles from the place of trial. The process of the court could not reach him. For all jurisdictional purposes, he was as if he were dead.‘ Toledo Traction, 137 F. at 60-61 (quoting Burton, 87 U.S. at 134). The court also cited Ruch v. Rock Island, 97 U.S. 693 (1878), in which the Supreme Court approved the admission of an absent witness’s former testimony through the oral evidence of witnesses who heard the deceased witness testify and had taken notes of it. Dean Wigmore writes that the preferred manner of preserving an accused person’s statement to an English magistrate was the magistrate’s report. 3 Wigmore, Evidence § 1326, at 1616 (1904). However, when that report was unavailable, secondary evidence was accepted. Id. § 1327, at 1621 (“[I]f the preferred testimony is unavailable, either because it is lost or otherwise inaccessible, or because it never existed, the requirement of its use ceases. The magistrate’s report, then, is not required, and any other testimony to what was said may be used, if the magistrate’s report is lost or otherwise inaccessible, or if it was irregularly taken so as to be inadmissible, or if it was never taken in writing at all. But the party wishing to use such other testimony must show that the preferred testimony is unavailable.”). According to the cases that preceded present-day technology, “[t]he general rule, in [the case of an absent witness], seems always to have been to prove the evidence of the deceased witness by some one who heard it on the -21- former occasion and could testify to the substance of it.” Anderson v. Reid, 10 App. D.C. 426, 1897 WL 17677, at *3 (D.C. Cir. 1897) (citing 1 Greenleaf Evidence, §§ 155, 156; Ruch v. Rock Island, 97 U. S. 693, 694 (1878 . These cases do not directly impact Confrontation Clause jurisprudence. However, they do demonstrate the acceptance of secondary evidence on occasions where prior testimony is permitted but for some reason was not available in a verbatim record. And they do reflect that acceptance at or near a time when the Sixth Amendment was ratified. In the petitioner’s case, assuming as true the petitioner’s claim that no witness could recount the prior cross-examination of Zamen at the preliminary examination, the question whether the petitioner’s Confrontation Clause rights were abridged depends on two propositions: 1) the significance and continued viability of the Green list of factors, including Green’s observation that “the proceedings were conducted before a judicial tribunal, equipped to provide a judicial record of the hearings;” and 2) the extent to which Crawford implicitly demands the preservation of prior cross-examination verbatim. Crawford rejected the “indicia of reliability” test in favor of a more predictable requirement that there be cross-examination. The “four-factor” analysis in Green could be read as one application of the analysis that the Court used later in Roberts but then rejected entirely in Crawford. Under this view, the Court’s decision in Crawford eviscerates any viability of Green’s emphasis on “judicial record,” and there is no other Supreme Court case that demands that result. Under another view, however, Crawford merely set the floor for admissibility and did not intend to permit a court to admit obviously unreliable testimony, such as testimony that did not meet the criteria laid out in Green or otherwise would have failed the Roberts test. Both of these positions are plausible. -22- However, in order for the writ to issue, the petitioner must establish that the state court’s adjudication of his Sixth Amendment claim “resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States.” 28 U.S.C. § 2254(d)(1). Mere error by the state court will not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins v. Smith, , 520-21 (2003) (quoting Williams v. Taylor, , 409 (2000) (internal quotes omitted . The Michigan Court of Appeals held that the petitioner’s rights under the Confrontation Clause were not violated because he had an opportunity to cross-examine Zamen at the preliminary examination, and, although that court found the secondary witnesses were reliable reporters of the testimony, that court did not read Crawford as requiring such a finding. Nor did that court find that Crawford or other Supreme Court precedent required that prior testimony be preserved verbatim. As noted above, that is a plausible, if not a desirable, reading of Crawford, which, unfortunately for the petitioner, means the resolution by the Michigan Court of Appeals was not unreasonable. See Bell v. Cone, 535 U.S. 685, 694 (2002) (“[A] federal habeas court may not issue a writ under the unreasonable application clause simply because that court concludes in its independent judgment that the relevant state-court decision applied clearly established Federal law erroneously or incorrectly.” (internal quotations omitted ; Ruimveld v. Birkett, 404 F.3d 1006, 1010 (6th Cir. 2005) (“the ‘unreasonable’ requirement is a high bar”). This Court must conclude, therefore, that the procedure used in this case to present the out- of-court statements of Zamen Al-Kasid to the jury did not violate clearly established federal law. -23- III. Although the Court finds that some of the petitioner’s procedural objections have merit, their resolution does not change the magistrate judge’s ultimate conclusion that the petitioner has not shown that he is presently in custody in violation of the Constitution or the clearly established laws of the United States as determined by the Supreme Court. Accordingly, it is ORDERED that the petitioner’s objections to the magistrate judge’s report and recommendation [dkt # 30] are OVERRRULED in part. It is further ORDERED that the magistrate judge’s recommendation [dkt #29] is ADOPTED. It is further ORDERED that the petition for a writ of habeas corpus is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 17, 2009 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 17, 2009. s/Felicia M. Moses FELICIA M. MOSES -24-

=== David Maguire and Carole Maguire v. Genesee Couty Sheriff, et .al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION DAVID MAGUIRE and CAROLE MAGUIRE, Plaintiffs, v. GENESEE COUNTY SHERIFF, MICHIGAN SECRETARY OF STATE, AMERICAN COORDINATORS, INC. d/b/a AMERICAN CLASSIC CARS, INC. and RICHARD S. HUTTO, ________________________________________/ Defendants. Case No. 08-15264 Honorable David M. Lawson ORDER GRANTING PLAINTIFFS’ MOTION TO REMAND The matter is before the Court on the plaintiffs’ motion to remand. The plaintiffs seek remand of the case to the state court on several procedural and substantive grounds. Procedurally, the plaintiffs point out that not all of the defendants joined in the removal, and removal was accomplished too late. The plaintiffs also allege a lack fo subject-matter jurisdiction because of the absence of complete diversity and the failure to meet the amount-in-controversy requirements of 28 U.S.C. § 1332(a). The Court finds that the removal notice was not filed within the thirty-day period prescribed by 28 U.S.C. § 1446(b). Therefore, the Court will grant the motion to remand. The plaintiffs commenced this action in the Genesee County, Michigan circuit court on September 3, 2008, naming as defendants the Genessee County Sheriff, the Michigan Secretary of State, American Coordinators, Inc., d/b/a American Class Cars, Inc., and Richard S. Hutto. Mr. Hutto, the defendant who initiated the removal, was served on September 5, 2008. Hotto did not file his first notice of removal until December 23, 2008; he filed a supplemental notice of removal on January 21, 2009. Only one of the three other defendants – American Coordinators, Inc., d/b/a American Classic Cars, Inc. – joined in Mr. Hutto’s notice of removal. A removal notice must be filed “within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based.” 28 U.S.C. § 1446(b). “If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable,” provided that cases based on diversity jurisdiction must be removed within one year after the commencement of the action. Ibid. The plaintiffs filed their motion to remand thirty days after the removal notice was filed. The Court struck the motion because of technical defects, but an amended motion was filed shortly thereafter. The Court deems the motion timely under 28 U.S.C. § 1447(c). Cf. Fed. R. Civ. P. 15(c)(1) (relation back of amendments). Defendant Hutto offers little explanation for the tardy removal notice. He states that his new attorney did not receive the pleadings in the case from Hutto’s insurance carrier until after the thirty- day period elapsed, and he notes that the non-removing defendants – the sherif and secretary of state – were fraudulently joined. Neither of these excuses cures the defect in the removal procedure here. Mr. Hutto’s change of counsel does not furnish an adequate explanation for his previous counsel’s failure to comply with the thirty-day requirement. See Link v. Wabash R.R. Co., 370 U.S. 626, 633- 34 (1962) (a litigant is bound by the errors of his or her attorney). And the issue of fraudulent joinder of non-diverse defendants should have been apparent from the outset based on the -2- allegations of the complaint. If it was not, then the defendant received a clue to the issue on November 14, 2008, when the plaintiffs and the Michigan Secretary of State stipulated to an order allowing the Secretary of State not to appear in the case. Yet, the defendant still did not move to remove the case until December 23, 2008, more than thirty days later. “A defendant’s failure to comply with the thirty-day limitation set forth in Section 1446(b) is an absolute bar to removal regardless of whether the removal would have been proper if timely filed.” Groesbeck Invs., Inc. v. Smith, 224 F. Supp.2d 1144, 1148 (E.D. Mich. 2002). Another defect in the removal notice is its failure to comply with the rule of unanimity. Section 1446 requires the unanimous consent of all defendants to the removal. Loftis v. U.S. Parcel Serv., Inc., 342 F.3d 509, 516 (6th Cir. 2003). Therefore, all defendants who have been served must either join in the removal or file their written consent to the removal. Ibid. The petition that fails to explain the absence of co-defendants’ consent to the removal is equally defective for violating the rule of unanimity. See Northern Illionois Gas Co. v. Airco Industrial Gases, 676 F.2d 270, 273 (7th Cir. 1982); Shadley v. Miller, 733 F. Supp. 54, 55-56 (E.D. Mich. 1990). Only two of the four defendants – Mr. Hutto and American Coordinators, Inc., d/b/a American Classic Cars, Inc. – joined in the notice of removal. Neither the Michigan Secretary of State nor the Genesee County Sheriff concurred in the removal, and the notice failed to account for the lack of their consent. In fact, the Michigan Department of State filed a notice in which it informed the Court that it had never consented to removal. Defendant Hugo now explains his failure to comply with the unanimity requirement by claiming that the joinder of the two non-diverse defendants was fraudulent from the beginning. Some courts have excused the removing party from having to comply with the unanimity -3- requirement with respect to fraudulently joined defendants. See, e.g., Emrich v. Touche Ross & Co., 846 F.2d 1190, 1193 n1. (9th Cir. 1988) (stating that all defendants must join in the removal except for “nominal, unknown or fraudulently joined parties”); Hernandez v. Seminole County, 334 F.3d 1233, 1237 (11th Cir. 2003) (implying the same); Albert v. Bayerische Motorenwerke, 45 F. App’x 170, 172 (3d Cir. 2002) (same). However, the fact that a party might have been joined fraudulently does not explain the delay in filing a motion for remand. “[T]here is no reason to allow a defendant additional time if the presence of grounds for removal are unambiguous in light of the defendant’s knowledge and the claims made in the initial complaint.” Mielke v. Allstate Ins. Co., 472 F. Supp. 851 (E.D. Mich. 1979); Groesbeck Invs., Inc. v. Smith, 224 F. Supp.2d 1144, 1150 (E.D. Mich. 2002). The removal notice was untimely and at least one of the defendants specifically withheld consent to removal. Therefore, the removal is procedurally defective and cannot withstand the plaintiffs’ motion. The plaintiffs also request an award of costs and attorney’s fees pursuant to 28 U.S.C. § 1447(c), which provides that “[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” The defendant has not addressed that request. Morris v. Bridgestone/Firestone, Inc., 985 F.2d 238, 240 (6th Cir.1993), holds that an award of costs is discretionary with the Court and often turns on whether the removal lacked merit. In General Electric Capital Auto Lease, Inc. v. Mires, 788 F.Supp. 948, 951 (E.D. Mich. 1992), the court observed that cases rejecting attorney’s fees cite novel questions of law that have not otherwise been fully addressed. -4- The Court does not view this motion as presenting a close case. The removing defendant made no effort to secure the consent to remove from the other defendants, and he missed the filing deadline by a factor of three. These are rudimentary procedural concepts, and the misguided attempt at removal only delayed the resolution of the merits of the case and increased the expenses of the litigants. The Court concludes, therefore, that an award of costs is appropriate. However, the plaintiff has presented no evidence of her “just costs and . . . actual expenses, including attorney fees,” and this Court will not speculate as to what they might be. Therefore, the Court will permit the parties to address that issue with additional filings. See Mehney-Egan v. Mendoza, 130 F. Supp. 2d 884 (E.D. Mich. 2001). Accordingly, it is ORDERED that the plaintiffs’ motion to remand [dkt # 11] is GRANTED. It is further ORDERED that this matter be REMANDED to the Genesee County, Michigan circuit court. It is further ORDERED that the plaintiffs may submit evidence in writing of their costs on or before February 24, 2009, and the defendant may submit evidence or argument in opposition thereto on or before March 3, 2009. The failure of the plaintiffs to make a timely and proper submission will constitute a waiver of costs and fees. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 17, 2009 -5- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 17, 2009. s/Felicia M. Moses FELICIA M. MOSES -6-

=== Warrior Sports, Inc., v. STX, L.L.C ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION WARRIOR SPORTS, INC., Plaintiff, Case No. 07-14995 Honorable David M. Lawson v. STX, L.L.C., ____________________________________/ Defendant. ORDER DISMISSING CASE FOR WANT OF SUBJECT-MATTER JURISDICTION On November 24, 2007, the plaintiff filed a complaint in this Court alleging that the defendant has sold a model of lacrosse gloves that infringes on the plaintiff’s valid patents. The defendant filed an answer denying the material allegations of the complaint and a counterclaim seeking a declaration of noninfringement and invalidity of the patent. The Court entered a scheduling order that, among other things, set a date by which the defendant must notify the Court and the plaintiff of its intention to assert an advice-of-counsel defense. When the defendant did not comply, the Court issued an order to show cause. In response to that show cause order, defendant STX filed a paper in this Court asserting that it has entered into a partial settlement agreement with the plaintiff whereby the plaintiff will not seek damages for sales occurring on or before July 31, 2009. It appeared to the Court that the partial settlement agreement rendered the controversy moot; therefore, the Court directed the parties to show cause why the case should not be dismissed for want of jurisdiction. Plaintiff Warrior responded, agreeing that the Court no longer had jurisdiction over the case. STX responded by arguing that the Court has jurisdiction under the Declaratory Judgment Act by virtue of its counterclaim seeking a declaration that Warrior’s patents are invalid and unenforceable and do not apply to STX’s products. After considering the parties submissions, the Court must conclude that there is presently no justiciable controversy between the parties at this time. The partial settlement has mooted the plaintiff’s infringement claim, and STX’s plan to market products months into the future is neither sufficiently immediate nor real to establish a ripe controversy and allow the Court to exercise jurisdiction over the case. Therefore, the Court will dismiss the case without prejudice. I. According to the complaint, plaintiff Warrior Sports, Inc. owns at least three patents covering the design of hockey gloves that it manufactures and sells. Defendant STX is a competitor of Warrior and markets a current product line of lacrosse gloves, which Warrior believes infringes one or more of its design patents. The resulting lawsuit was not the first between the parties; another one was pending in this court involving different patents when the present action was filed. In the present case, Warrior sued for infringement and sought damages to be measured by STX’s sales of the allegedly infringing products. STX’s counterclaim sought a declaration that the patents are invalid, or alternatively that its products do not infringe the patents. On October 8, 2008, the parties signed a settlement agreement that fully resolved the other lawsuit in this court and also resolved Warrior’s claim in the present case for damages for past infringement. According to the settlement document, STX agreed to pay to Warrior $275,000, and Warrior agreed to dismiss any claim for past damages for alleged infringement as of the date of the agreement. Additionally, Warrior agreed to provide STX “with a grace period,” which is not further defined, up until July 31, 2009 for gloves sold during that period. As far as the Court can tell, there is no covenant not to sue and no agreement for payment of royalties for future sales. This settlement -2- agreement came to the Court’s attention when, in response to an order directing STX to explain why it had not complied with the deadline for announcing its intention to rely on the advice-of-counsel defense, STX cited the settlement agreement and asserted that the factual basis for the defense presently is unknown and “will not come into existence . . . until after July 31, 2009.” Def.’s Resp. To Show Cause [dkt #27] at ¶ 2. STX explained further that it would rely on such a defense only as to sales of infringing products after July 31, 2009, “if, indeed, there are any such sales.” Id. at ¶ 6. STX acknowledged that the settlement amounted to “recently changed circumstances in the case.” Id. at ¶ 11. STX’s response provoked the Court’s latest show cause order due to a concern over subject- matter jurisdiction. In response to that order, Warrior asserts that the Court lacks subject-matter jurisdiction over the case, and invites the Court to dismiss the case without prejudice. It states that it has not made any threat of litigation for products that STX might sell starting in August 1, 2009, because no one knows what gloves will be included in STX’s product line and whether these gloves will infringe Warrior’s patents. STX does not dispute that the claims in the plaintiff’s complaint have been mooted by the settlement. However, it insists that its declaratory judgment counterclaim presents a live controversy, since, according to the affidavit of its general manager, STX intends to produce the accused models “until and after July 31, 2009,” and models marketed after July 31, 2009 will have identical or similar features to those found in the accused models. II. “[A] federal court has a continuing duty to ensure that it adjudicates only genuine disputes between adverse parties.” Libertarian Party of Ohio v. Blackwell, 462 F.3d 579, 584 (6th Cir. 2006). “If ‘the issues presented are no longer live or the parties lack a legally cognizable interest -3- in the outcome,’ then the case is moot and the court has no jurisdiction.” Ibid. (quoting Los Angeles County v. Davis, 440 U.S. 625, 631 (1979 . “The mootness inquiry must be made at every stage of a case.” McPherson v. Michigan High School Athletic Ass’n, Inc., 119 F.3d 453, 458 (6th Cir. 1994) (en banc). “[R]ipeness ‘is drawn both from Article III limitations on judicial power and from prudential reasons for refusing to exercise jurisdiction.’ . . . The ripeness doctrine serves to ‘avoid[] . . . premature adjudication’ of legal questions and to prevent courts from ‘entangling themselves in abstract’ debates that may turn out differently in different settings.” Warshak v. United States, 532 F.3d 521, 525 (6th Cir. 2008) (quoting Nat’l Park Hospitality Ass’n v. Dep’t of Interior, 538 U.S. 803, 807-08 (2003 . The Sixth Circuit has explained that “‘“a claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all.”’ Cooley v. Granholm, 291 F.3d 880, 883-84 (6th Cir.2002) (quoting Texas v. United States, 523 U.S. 296 (1998 . As a rule, we do not allow litigation on premature claims to ensure that courts litigate ‘only existing, substantial controversies, not hypothetical questions or possibilities.’ City Commc’ns, Inc. v. City of Detroit, 888 F.2d 1081, 1089 (6th Cir.1989).” Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 581-82 (6th Cir. 2008). Another factor in the ripeness consideration is whether there is sufficient “hardship to the parties [in] withholding court consideration” until there is a legal action for damages. See Abbott Laboratories v. Gardner, 387 U.S. 136, 149 (1967). The burden of establishing jurisdiction is on the party seeking to invoke jurisdiction. DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342 (2006). -4- As noted above, STX, the only party still claiming that the Court has jurisdiction, premises its argument for jurisdiction on its claim for relief under the Declaratory Judgment Act. The Declaratory Judgment Act states that “[i]n a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party.” 28 U.S.C. § 2201(a). The Supreme Court has made clear in patent litigation that “the phrase ‘case of actual controversy’ in the Act refers to the type of ‘Cases’ and ‘Controversies’ that are justiciable under Article III.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 126 (2007) (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937 . Consequently, a party bringing a claim under the Declaratory Judgment Act must establish that it has standing to sue, and there exists a controversy between the parties that is not moot and is ripe. These considerations often “boil down to the same question.” See id. at 128 n.8. Before 2007, the Federal Circuit applied a two-part test for determining justiciability of a declaratory judgment action: There must be both (1) an explicit threat or other action by the patentee, which creates a reasonable apprehension on the part of the declaratory plaintiff that it will face an infringement suit, and (2) present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity. Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1058 (Fed. Cir. 1995) (quoting BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 978 (Fed. Cir. 1993 . Applying this test, the Federal Circuit has held that a patentee’s covenant not to sue divests the court of jurisdiction. In Super Sack, cited by STX, the court considered a covenant not to sue for current products that left open the possibility of suit against future products. It rejected the alleged infringer’s claim of jurisdiction because there was no allegation of “present activity” that might subject it to liability for infringement. The defendant had not expressed its intention to sell -5- a product that could be accused of infringing the patent. “The residual possibility of a future infringement suit based on Chase’s future acts is simply too speculative a basis for jurisdiction over Chase’s counterclaim for declaratory judgments of invalidity.” Super Sack, 57 F.3d at 1059-60. The court of appeals held that “[t]he only proper course for the trial court was to dismiss the case for lack of jurisdiction, as it did.” Ibid. Four years later, the Federal Circuit reiterated its rule that “a covenant not to sue for any infringing acts involving products ‘made, sold, or used’ on or before the filing date is sufficient to divest a trial court of jurisdiction over a declaratory judgment action.” Amana Refrigeration, Inc. v. Quadlux, Inc., 172 F.3d 852, 855 (Fed. Cir. 1999). In that case, the court again rejected the claim that the possibility of an infringement suit against future product lines vested the court with jurisdiction: Amana argues that the Quadlux covenant did not remove Amana’s reasonable apprehension of being sued with regard to its new products “in the pipeline,” but not advertised, manufactured, marketed, or sold before the filing date. However, an actual controversy cannot be based on a fear of litigation over future products. The Quadlux covenant ensures that Quadlux is forever estopped from asserting liability against Amana in connection with any products that Amana advertised, manufactured, marketed, or sold before July 31, 1997, and that resolves the controversy. Amana, 172 F.3d at 855-56. In 2007, the Supreme Court decided MedImmune, Inc. v. Genentech, Inc., rejecting the Federal Circuit’s rule announced in Gen-Probe Inc. v. Vysis, Inc., 359 F.3d 1376 (Fed. Cir. 2004), that a licensing agreement will prevent a finding of an actual controversy over the validity of the underlying patent until the licensee stops paying royalties. In MedImmune, the plaintiff sought a declaration that the defendant’s patent was invalid after the parties had entered into a licensing agreement. The defendant argued that as long as the royalties were paid, the plaintiff did not have -6- any apprehension that it would be sued by the defendant, so there was no controversy between the parties. Noting that a purpose of the Declaratory Judgment Act was to provide parties a vehicle for determining legal relationships without exposing themselves to serious risk, the Supreme Court found that there was an actual controversy between the parties because the licensee was paying royalties only under threat of a treble damages lawsuit. Moreover, the Supreme Court noted, the licensing agreement would not require the payment of royalties if the patent was declared invalid, and nothing in the agreement prevented a challenge to the patent’s validity. So the Court concluded that the plaintiff did not have to terminate or breach its licensing agreement before challenging the validity of the patent, since the potentially accused products already were at market and the alleged infringing conduct could be easily ascertained. Along the way, the Court found that the Federal Circuit’s requirement that the putative infringer must face a “reasonable apprehension of imminent suit” contradicted its precedents. MedImmune, 549 U.S. at 132 n.11. The Court held the proper measure of ripeness is whether the alleged facts, “under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Id. at 127 (quoting Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941 . Although neither Super Sack nor Amana had been expressly overruled, they applied a test that the Federal Circuit believed had been disapproved by the Supreme Court. See Benitec Australia, Ltd. v. Nucleonics, Inc., 495 F.3d 1340, 1346 (Fed. Cir. 2007). Nevertheless, following MedImmune, the Federal Circuit has applied the totality of circumstances test articulated in MedImmune, which looks to factors from its earlier test to determine whether a controversy is “of sufficient immediacy and reality.” And although the Federal Circuit has acknowledged that the -7- Supreme Court abrogated the first prong of its previous test as a requirement, it noted that “proving a reasonable apprehension of suit is one of multiple ways that a declaratory judgment plaintiff can satisfy the more general all-the-circumstances test to establish that an action presents a justiciable Article III controversy.” Prasco, LLC v. Medicis Pharmaceutical Corp., 537 F.3d 1329, 1336 (Fed. Cir. 2008). Moreover, the court continues to adhere to its consideration of whether there has been potentially infringing activity as an “important element in the totality of circumstances which must be considered in determining whether a declaratory judgment is appropriate.” Cat Tech LLC v. TubeMaster, Inc., 528 F.3d 871, 880 (Fed. Cir. 2008). When considering infringing activity, the Federal Circuit still requires a certain immediacy to the infringement. Immediacy is defined as follows: A party may not “obtain a declaratory judgment merely because it would like an advisory opinion on whether it would be liable for patent infringement if it were to initiate some merely contemplated activity.” [Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 736 (Fed. Cir. 1988)]. Thus, although a party need not have engaged in the actual manufacture or sale of a potentially infringing product to obtain a declaratory judgment of non-infringement, there must be a showing of “meaningful preparation” for making or using that product. Id. at 881 (citations omitted). Then, perhaps stating the obvious, the court declared, “In general, the greater the length of time before potentially infringing activity is expected to occur, ‘the more likely the case lacks the requisite immediacy.’” Ibid. (quoting Sierra Applied Scis., Inc. v. Advanced Energy Indus., Inc., 363 F.3d 1361, 1379 (Fed. Cir. 2004 . The court then surveyed its precedents, discussing cases that fell short of the mark. E.g., Benitec Austl., Ltd. v. Nucleonics, Inc., 495 F.3d 1340, 1346-50 (Fed. Cir. 2007) (dismissing declaratory judgment counterclaim in 2005 where party anticipated infringing activity to take place in “at least 2010-2012, if ever,” and current activities consisted of developing and submitting preliminary information to FDA); Sierra Applied Scis., Inc. -8- v. Advanced Energy Indus., Inc., 363 F.3d 1361 (Fed. Cir. 2004) (finding sufficient immediacy lacking where declaratory plaintiff presented no evidence that it had built a prototype of its device until a year after commencement of suit); Telectronics Pacing Sys., Inc. v. Ventritex, Inc., 982 F.2d 1520, 1527 (Fed. Cir. 1992) (dismissing defibrillator component manufacturer’s claim for future patent infringement where accused product was in clinical trials and “years away” from potential FDA approval); Lang v. Pac. Marine & Supply Co., 895 F.2d 761, 764 (Fed. Cir. 1990) (claim unripe where accused infringing ship hull would not be ready for at least nine months after complaint was filed); Jervis B. Webb Co. v. S. Sys., Inc., 742 F.2d 1388, 1399 (Fed. Cir. 1984) (finding no ripeness where accused device had never been used and there was insufficient evidence to show it would be used in the future). In this case, there is presently no dispute between the parties arising from STX’s activity to date. The question becomes, then, whether STX’s planned activity, to the extent it has been willing to describe it, and which will not occur for over six months, is “of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune, 549 U.S. at 127. The Court finds that it is not. First, it is useful to point out that this case is readily distinguishable from MedImmune. In MedImmune, the allegedly infringing party was coerced into paying royalties under a licensing agreement that would cease to apply if the patent were declared invalid. Here, in contrast, nothing that STX can do would subject it to suit from Warrior for infringement before August 2009. STX is not forced to make a choice between paying royalties and facing litigation – the threat of litigation has been completely eliminated for the time being. -9- To be sure, STX has an interest in determining whether its product infringes Warrior’s patent as of August 2009. However, there is no clear description of STX’s new product line, and the Court is left with nothing more than the conclusion of STX’s general manager that the new gloves may include similar features to those found in the accused models. That conclusion does not provide much factual sustenance for the claim that a new lawsuit from Warrior – or even lawsuit-provoking behavior by STX – is immediate and real. Indeed, in an earlier filing, the defendant acknowledged the possibility that sales of the allegedly infringing product might not even occur. See Def.’s Resp. to First Order to Show Cause [dkt. #27] at ¶ 6 (“While STX certainly anticipates relying on the defense of counsel with respect to sales of alleged infringing product occurring after July 31, 2009 -- if, indeed, there are any such sales. . .”) (emphasis added). The Federal Circuit has indicated that immediacy may be shown if there is “‘meaningful preparation’ for making or using [the infringing] product.” See Cat Tech LLC, 528 F.3d at 881. Nevertheless, that court has rejected challenges to products that, although in production, were temporally distant from actually being marketed or sold. For example, a product accused of infringement that was nine months away from completion did not give rise to a justiciable dispute. See ibid. (citing Lang, 895 F.2d at 764). It bears repeating that in this case, at least six months will pass before any infringement could take place. Without hard facts, the Court is left with nothing but speculation and hypothesis that STX might offer a product that allegedly infringes Warrior’s patent, and even then, not before several months elapse. Leaving the Court to render “an opinion advising what the law would be upon a hypothetical state of facts,” see MedImmune, 549 U.S. at 127 (internal quotations omitted), the -10- conclusion is unavoidable that the present “dispute” fails to satisfy Article III’s actual controversy requirement. Finally, although the parties have not addressed this point, it bears noting that the exercise of jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), is not mandatory, Brillhart v. Excess Ins. Co., 316 U.S. 491, 494 (1942), and at times the better exercise of discretion favors abstention, “[e]ven assuming that the immediacy and reality prerequisites for declaratory judgment relief have been met.” Cat Tech, 528 F.3d at 883 (citing SanDisk, 480 F.3d at 1383; Cardinal Chem. Co. v. Morton, Int'l, Inc., 508 U.S. 83, 95 n. 17 (1993 . “By the Declaratory Judgment Act, Congress sought to place a remedial arrow in the district court’s quiver; it created an opportunity, rather than a duty, to grant a new form of relief to qualifying litigants.” Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 969 (6th Cir. 2000) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995 . “In deciding whether to entertain a declaratory judgment request, a court must determine whether resolving the case serves the objectives for which the Declaratory Judgment Act was created.” Cat Tech, 528 F.3d at 883 Cat Tech, 528 F.3d at 883 (citing Capo, Inc. v. Dioptics Med. Prods., Inc., 387 F.3d 1352, 1355 (Fed. Cir. 2004); EMC Corp. v. Norand Corp., 89 F.3d 807, 813-14 (Fed. Cir. 1996 . The Declaratory Judgment Act was designed to prevent cases where an individual must choose between “abandoning his rights or risking prosecution.” MedImmune, 549 U.S. at 129. At this time, given the settlement agreement, STX faces no risk of litigation for its present conduct, and its risk of suit in the distant future rests within its immediate control. Even if the dispute were sufficient to bestow jurisdiction on the Court, the Court would decline to exercise this jurisdiction under the Declaratory Judgment Act at this time. -11- III. The Court finds that the facts of the present case do not establish an actual or imminent dispute between the parties. Therefore, the defendant and counterclaimant has not established that its counterclaim meets the case-or-controversy requirements of Article III or 28 U.S.C. § 2201(a). Accordingly, it is ORDERED that the action is DISMISSED without prejudice. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: January 30, 2009 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 30, 2009. s/Felicia M. Moses FELICIA M. MOSES -12-

=== SUPPLEMENT TO OPINION AND ORDER CONDITIONALLY GRANTING PETITION FOR WRIT OF HABEAS CORPUS ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION SCOTT WYNNE, v. PAUL RENICO, Petitioner, ________________________________________/ Respondent. Case No. 01-10247-BC Honorable David M. Lawson SUPPLEMENT TO OPINION AND ORDER CONDITIONALLY GRANTING PETITION FOR WRIT OF HABEAS CORPUS In 1995, the petitioner was convicted in a Michigan state court of murdering Philip Timmerman in a dispute over a piece of land the petitioner’s family owned and Mr. Timmerman leased. The petitioner filed a petition for writ of habeas corpus in this Court through counsel, arguing, among other things, that his constitutional rights were violated because the state court refused to allow him to introduce certain evidence that tended to show that Mark Peckham, the State’s principal witness against the petitioner, actually committed the murder and framed the petitioner. The Court conditionally granted the petition. The Court observed that the right to present witnesses in one’s defense was clearly established as a fundamental element of due process to which certain state evidentiary rules must yield. The Court then held that the state trial court violated the petitioner’s right by excluding exculpatory evidence based on its application of state evidence rules, which the trial court did not apply correctly, and that the excluded evidence would have substantially influenced the jury’s decision. Shortly after the opinion granting the writ was filed, the Court was notified that the petitioner’s first brief contained factual inaccuracies that may have influenced the Court’s decision. The Court stayed the order granting the writ and permitted the parties to submit supplemental briefs addressing the factual inaccuracies. The Court has carefully examined the record again in light of the parties’ supplemental submissions. The Court concludes that although there are discrepancies between the description of the facts in the petitioner’s brief and the record (to which the respondent originally acquiesced), the Court remains convinced that evidence excluded from the petitioner’s trial resulted in a denial of his constitutional rights under the Due Process Clause and the Sixth Amendment, and the state courts’ conclusions otherwise constituted an unreasonable application of clearly established federal constitutional law as determined by the Supreme Court. I. The facts of the case are recounted in the Court’s original opinion, Wynne v. Renico, 279 F. Supp. 2d 866, 868-75 (E.D. Mich. 2003). These facts were taken from the record, viewed through the lens of the petitioner’s brief drafted by his attorney, who continues to represent him. The respondent, represented by the state attorney general, filed a response to the petition, which took no issue with the factual representations in the opening brief. In fact, it appears that the attorney general merely copied the statement of facts from the state prosecutor’s brief filed in the state appellate court, and it was not until the Court filed its opinion that the respondent read the record. Thereafter, the petitioner’s attorney acknowledged the inaccuracies in his representations to the Court, which focus primarily on four areas. The respondent contends that some additional arguments by the petitioner misapprehends the State’s trial theory and did not represent the record in the light most favorable to the State. First, the initial brief stated that Mark Peckham showed an unregistered gun to his ex- girlfriend, Melissa Hill, and threatened to kill her if she told her family about the gun. In fact, -2- Peckham threatened to kill himself, not Ms. Hill, if she told her family about the gun. However, he did threaten to kill her on another occasion. Hill testified: Q. Okay. Did he [Peckham] ever show you a hand gun that he had? A. Yes, he did. Q. Did he tell you that he got it from anyone? Who did he tell you that he got it from? A. I recall a hitchhiker, that’s what I have in my mind. Q. What did he say when he showed you the gun? A. He had told me that he picked it up from a hitchhiker and I was going to tell his family that he had it and he told me that if I told anyone that he had it that he would kill himself. Q. Did he ever threaten to kill you? A. Yes. Q. On more than one occasion? A. Yes. . . . Q. Was there another thing that he told you never to tell and if you told that he would kill you? A. Yes. Q. What is that? A. He– Q. What did he do? A. He took females’ underwear. Trial Tr. vol. IX, 297-98, Oct. 30, 1995. Second, the initial brief stated Peckham confessed to Melissa Hill that he had burned down their trailer after they broke up. This is not true. Peckham did not admit that he burned down the trailer. Rather, it was Hill who suspected him of doing so. Hill testified as follows: Q. Now Missy, at some point you broke up with Mark [Peckham]. Is that correct? A. Yes, I did. Q. Within 24 hours of breaking up with him what happened? A. I recall it within 24 hours, that’s what it seems like to me. Q. Okay. A. His trailer, the trailer that we stayed at, burnt down. Q. Did he ever admit to you that he burned the trailer down? A. No, he did not. Trial Tr. vol. IX, 301, Oct. 30, 1995. -3- Third, the initial brief stated that Peckham was at the petitioner’s house the day of the murder. Actually it was two days before the murder. Peckham testified at the trial: A. . . . Then on Tuesday the following week I stopped and looked at the lawn mower again, to just look at it. Q. The lawn mower was at the Wynne residence when stopped on Tuesday? A. Yes. Q. Was that two days before the shooting? A. The shooting happened on–yes, it was two days. Q. The shooting happened on the 18th, a Thursday, just to help you. A. It was on the 16th that I had stopped there. . . . Trial Tr. vol. VI, 51, 53, Oct. 24, 1995. The respondent makes much of this discrepancy, arguing that the difference in those facts severely weakens one pillar supporting the theory that Peckham framed the petitioner. The respondent states the petitioner told the police during an interview that his .45 pistol was “definitely” in his bedroom two nights prior to the murder. Detective O’Reilly did testify that the petitioner “stated that it [the gun] had definitely been there two nights before.” Trial Tr. vol. IV, 15, Oct. 19, 1995. This would directly contradict the petitioner’s claim that Peckham stole the gun from the petitioner’s house on the day of the murder since Peckham was not there that day, or that he stole it on his visit two days prior since the gun was still there after Peckham’s visit. On this point, it appears that it is the respondent that is taking creative license with the record. The petitioner denied telling Detective O’Reilly that the .45 was “definitely” on his bed post two nights before the murder. Although Detective O’Reilly did, in fact, testify that the petitioner made such a statement, a transcript of the interview reveals that Detective O’Reilly was wrong. O’Reilly said several times that the petitioner saw the gun two nights before, but the petitioner never made that statement. The interview transcript reads: -4- WYNNE: My forty[-]four is on the right and my forty[-]five is on the left, right by the night stand. O’REILLY: Up by your head? WYNNE: Yep, there’s one on each side. (O’REILLY exits a moment) (pause for a few minutes) (DETECTIVE O’REILLY re-enters) O’REILLY: Excuse me, I don’t know how to tell you this partner, but you’re [sic] gun isn’t there. WYNNE: It was there, I don’t know if it was there last night, but it was there this weekend, this last weekend. O’REILLY: That forty[-]four is there, the forty[-]five isn’t. WYNNE: It was hanging right on the left side of the bed post. That’s where it always hangs. I take it over to NOR, I spend the weekends over at my girlfriend’s house, and I take it over to her house sometimes on the weekend. O’REILLY: You’re sure it’s not there? WYNNE: Yep. . . . O’REILLY: Two nights ago you know for a fact it was there, you don’t remember within the last day, taking the forty[-]five in a shoulder rig, doing something with it? WYNNE: I, I never do anything with it. Like I said, I take it over to NORMA’S on the weekends. . . . WYNNE: O.K., well I’ve got a lot of other guns. I can give you a detailed list of every gun I’ve got. It was there PAT. I, I had it at NORMA’S. I don’t remember if I had it last weekend, but I know I had it the weekend before. O’REILLY: When was the last time you had it at NORMA’S? WYNNE: It was either last weekend or the weekend before. O’REILLY: But you also said that two nights ago, it was hanging on your bed post. WYNNE: I’m fairly certain it was. I always check to make sure there’s a gun hanging on my bed post, before I go to bed. O’REILLY: So, did you check last night? WYNNE: I don’t know if I did last night. App. 11 to Pet. for Writ at 82, 84-85. Fourth, and perhaps most importantly, the initial brief represented that after Timmerman wads killed, Peckham told Kathy Hinson that he had done something so wrong that if the police ever found out he would go to prison for life and that hunting men was more fun that hunting animals. However, in fact Ms. Hinson would have testified that Peckham made these statements to her six months before the murder, not after the murder, and therefore they could not have been a reference -5- to the murder of Mr. Timmerman. Ms. Hinson was prepared to testify that she worked with Peckham in November or December 1994, six months before the murder, and that Mark Peckham has said to her that he has done something so bad in his past that if the police ever found out about it he would go to prison for life. He also has made statements to her that if – that he plays paintball because it’s more fun to hunt men than animals. He repeated the statement about going to prison for life twice to her. Trial Tr. vol. X, 92-93, Oct. 31, 1995. It is not clear from the record when Peckham made the statements to her. The trial court sustained the State’s objection to the introduction of that evidence. The petitioner’s attorney asked to have Ms. Hinson testify to these facts outside the jury’s presence, but the judge ruled that this was not necessary: “Let’s conserve time here and I’ll accept your statement as to what her testimony will be. You can go on without objection. Why don’t you just state it on the record.” Id. at 92. Next, the respondent states the petitioner’s brief mis-stated the prosecution’s theory of motive, which concerned the terms of the land lease between the victim and the petitioner’s family. However, the Court was not misled by that argument. The respondent also claims that Peckham has an alibi for the Timmerman murder. He says that Amy and Jack Madelinski, Peckham’s sister-in- law and father-in-law, testified that Peckham was at their house the night of the murder, leaving between 10:30 p.m. and 10:35 p.m. to go to work. Peckham is seen on his employer’s security camera arriving at work at 10:50 p.m. The murder was committed between 10:22 and 10:37 p.m. However, Ms. Madelinski’s testimony about Peckham’s departure time was equivocal. She testified that he “probably” left around 10:35 p.m. because “he usually just didn’t leave very early” and he didn’t have to be to work until 11 p.m. Trial Tr. vol. XI, 274, Nov. 1, 1995. Likewise, Mr. Madelinski testified that Peckham “generally leaves to work about I’d say 10:30 or twenty-five -6- minutes to 11:00.” Id. at 276-77. Mr. Madelinski did not know what time Peckham left for work that specific night. The respondent also states that the petitioner failed to discuss evidence that inculpated him. For instance, the respondent points to evidence that the petitioner and the victim had an argument the day of the murder. Benny Koteras testified that he stopped by the petitioner’s house the night of the murder and found the petitioner target practicing in the yard. Mr. Koteras told the petitioner he had just seen the victim working in the field. The petitioner told Mr. Koteras that he had “words” with the victim earlier that day. The petitioner appeared angry, and Mr. Koteras believed he was angry about the disputed land. Mr. Koteras testified that the petitioner was using a .22 pistol. The victim was shot one time with a .22. However, the petitioner states all of his firearms were accounted for, including the .22 he was shooting that day, and none were found to match the .22 bullet recovered from the victim’s body. Detective O’Reilly testified as follows: Q. When did you become aware that a .22 that apparently was used in the shooting had not been recovered by the Sheriff’s Department? A. After Mr. – or Sergeant Michael Burritt came out from the Michigan State Police Crime Lab and had analyzed the guns that had been provided to him via a search warrant. We were then advised that the bullets that were recovered–let me revise that–Sergeant Burritt did an analysis; shortly after he did an analysis we were informed that he did not have the .22 that was used to shoot Mr. Timmerman. Q. Did you testify yesterday that you got all of Scott’s long guns that he told you about; is that what I heard you testify? A. It’s my understanding that we got all the long guns that were there that night. Q. None of those generated the .22 that was used to shoot Mr. Timmerman? A. That is correct. Trial Tr. vol. IV, 30-31, Oct. 19, 1995. The respondent also states that the petitioner did not mention evidence that placed him at the murder scene. The respondent makes reference to the testimony of Beau Preston, who lived near the murder scene, who testified that he saw a truck driving very quickly down 118th Avenue towards -7- the petitioner’s house sometime after 10 p.m. the night of the murder. The witness identified a picture of the petitioner’s truck as possibly the truck he saw: Q. Something happened that night, right? That got your attention? A. Yeah. Q. Okay. What was it that got your attention? A. What do you mean? What I gave a statement about? Q. Yeah, that’s – you made a statement about this before to some other people, right? A. Yeah, it was – well, my mom was upstairs at this time and we heard acceleration from an automobile truck. We looked up and we saw a truck or whatever. . . . Q. And, do you have any idea about what time it was that this happened? A. Not really. It was past ten o’clock. . . . Q. Did you tell Detective O’Reilly that originally you didn’t think – when he showed you this picture [of the petitioner’s truck], originally you didn’t think that that was the pickup? A. No, I said that could possibly be the pickup or it could – it might not be the pickup. Q. Okay. A. The same thing – Q. Pardon? A. The same thing I’m saying. It could possibly ‘cause it’s got the same features as I’ve explained, but it might not be the pickup. Trial Tr. vol. VI, 225, 227, 238, Oct. 24, 1995. However, Beau Preston and his mother Sharon Bellingar originally told Officer Ross that the truck went by around 9:30 p.m.: Q. And, did you interview or speak with a Beau Preston at that time? A. Yes. Q. Did you recall that he believed he saw a brown truck around 9:30 p.m.? A. On the evening before he saw the truck, yes. Q. Do you recall the time that he said? A. He believed it was around that time because it was just getting kind of twilight, dusk. Q. Did you recall writing 9:30 in your police report? A. Yes. . . . Q. Did you later interview a Mrs. Sharon Bellingar? -8- A. Yes, I did. Q. And, in talking to her do you recall her stating that approximately 9:30 or shortly thereafter she and her son were upstairs in her house and saw a truck? A. Yes. Q. So, you recall the time that she said as well would be 9:30. A. Yes. Trial Tr. vol. IX, 200-02, Oct. 30, 1995. The petitioner further notes that Beau Preston’s testimony was that the petitioner’s truck might or might not be the truck he saw. The respondent concludes by contending that all of the petitioner’s issues ought to be relegated to disputes over state evidentiary rulings. Those, he insists, are too insubstantial to justify the issuance of a writ under 28 U.S.C. § 2254(d), and he believes that the Sixth Circuit’s decision in Rockwell v. Yukins, 341 F.3d 507 (6th Cir. 2003), controls. II. Certainly, mere errors in state evidence law will not support a claim that a prisoner is in custody in violation of the Constitution or laws of the United States. This Court acknowledged that rule in its original opinion, when it stated: To be sure, errors in state evidence law will not support the issuance of the writ unless those errors rendered the trial fundamentally unfair. See Clemmons v. Sowders, 34 F.3d 352, 357 (6th Cir. 1994) (holding that “[h]abeas review does not encompass state court rulings on the admission of evidence unless there is a constitutional violation”). The Court of Appeals for the Sixth Circuit has explained that “[e]rrors in the application of state law, especially rulings regarding the admission or exclusion of evidence, are usually not to be questioned in a federal habeas corpus proceeding.” Cooper v. Sowders, 837 F.2d 284, 286 (6th Cir. 1988). Generally, state-court evidentiary rulings cannot rise to the level of due process violations unless they “offend[ ] some principle of justice so rooted in the traditions and conscience of our people as to be ranked as fundamental.” Montana v. Egelhoff, , 43 (1996) (quoting Patterson v. New York, 432 U.S. 197, 202 (1977 ; see also Spencer v. Texas, 385 U.S. 554, 563-64 (1967). -9- Seymour v. Walker, 224 F.3d 542, 552 (6th Cir. 2000), cert. denied, 532 U.S. 989 (2001) (second alteration in original). However, this Court finds that the petitioner has raised an issue of constitutional dimension that was neither properly addressed nor correctly decided by the state courts: the right to present a defense incorporated in the Sixth Amendment. Wynne v. Renico, 279 F. Supp. 2d at 879. However, the thrust of the Court’s earlier opinion was on the Sixth Amendment’s basic guarantee of “a meaningful opportunity to present a complete defense.” California v. Trombetta, 467 U.S. 479, 485 (1984). This Court observed that an accused has the right at trial to present testimony that is “relevant,” “material,” and “vital to the defense.” Washington v. Texas, 388 U.S. 14, 16 (1967). See also Crane v. Kentucky, 476 U.S. 683, 690 (1986) (“whether rooted directly in the Due Process Clause of the Fourteenth Amendment, or in the Compulsory Process or Confrontation clauses of the Sixth Amendment, the Constitution guarantees criminal defendants ‘a meaningful opportunity to present a complete defense’”) (internal citations omitted). The Court also discussed the point that the “right to present relevant evidence is not unlimited,” and “is subject to reasonable restrictions” imposed by the criminal process. United States v. Scheffer, , 308 (1998). As a result, state and federal rulemakers have broad latitude under the Constitution to establish rules excluding evidence from criminal trials. Such rules do not abridge an accused’s right to present a defense so long as they are not “arbitrary” or “disproportionate to the purposes they are designed to serve.” Moreover, we have found the exclusion of evidence to be unconstitutionally arbitrary or disproportionate only where it has infringed upon a weighty interest of the accused. Ibid (citations and quotation omitted). The state courts’s opinions in this case never addressed the concept of proportionality established by the Supreme Court. And it is that point that distinguishes this case from Rockwell v. Yukins and a later case on the same point, Varner v. Stovall, 500 F.3d 491 (6th Cir. 2007). -10- Rockwell v. Yukins held that a state’s decision to exclude evidence that a victim of a crime had sexually abused his children because its probative value was outweighed by the possibility of unfair prejudice was not an unreasonable application of Supreme Court case law. The petitioner in that case was convicted of conspiring with her sons to kill her husband, their father. The trial court excluded evidence that the victim had sexually abused his sons, the petitioner’s alleged co- conspirators. The district court granted the writ on the grounds that the petitioner’s Sixth Amendment right to present a complete defense had been violated. The Sixth Circuit, en banc, reversed the grant of the writ, with four judges dissenting. The actual attempt to murder the victim was committed by one of the sons and two of his friends. However, the petitioner had “engaged in discussions with one or more of her sons about killing Mr. Rockwell. On the strength of these discussions, the State of Michigan charged Mrs. Rockwell with conspiracy to commit murder.” Rockwell, 341 F.3d at 509. The petitioner’s defense was that the talk of killing the victim was “some sort of talk therapy” to help her sons deal with their hatred of their father, not any agreement to actually murder him. The state trial court held that the evidence of abuse was not material under state evidentiary rules. The state court of appeals affirmed, stating that the probative value of the abuse was substantially outweighed by the danger of unfair prejudice. On appeal to the Sixth Circuit, the petitioner did not argue that the state court decision was “contrary to” Supreme Court case law. Instead, she argued that the state court decision was an “unreasonable application” of the law. The Sixth Circuit rejected this argument, noting the difference between an unreasonable application of the law and a mere incorrect or erroneous application of the law. The court did not believe the Michigan Court of Appeals decision finding -11- that the probative value of the evidence was outweighed by its prejudice was objectively unreasonable: A defendant’s right to present a “complete” defense, in other words, does not automatically trump state evidentiary rules. The competing interests must be balanced, and “a defendant’s interest in presenting . . . evidence may [have to] bow to accommodate other legitimate interests in the criminal trial process.” Id. (Internal quotation marks and citations omitted.) It was not objectively unreasonable, in our view, for the Michigan court to conclude that “other legitimate interests in the criminal trial process” outweighed Mrs. Rockwell’s interest in presenting evidence of her husband’s prior conduct. The evidence of sexual abuse posed a substantial danger of unfair prejudice–a risk that the jury would be tempted to acquit Mrs. Rockwell not because of any sense that she was innocent of conspiring with her sons to kill Mr. Rockwell but because of a sense that killing would be too good for such a man. Rockwell, 341 F.3d at 513. Rockwell cites United States v. Scheffer, (1998), the case noted above. In my original opinion, I summarized the Michigan Court of Appeals decision in the present case, dealing with evidentiary matters that the State does not challenge presently, as follows: In this case, the state court of appeals held that evidence of Peckham’s conduct toward his former girlfriend and her new boyfriend, and the evidence of his theft of women’s undergarments, was impermissible propensity evidence excludable under the first sentence of Michigan Rule of Evidence 404(b), which states: “Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith.” Wynne v. Renico, 279 F. Supp. 2d 866, 883 (E.D. Mich. 2003). I concluded that the state court decision was an unreasonable application of Supreme Court law and conditionally granted the petition, stating: It is clear that the defendant’s right to present evidence is not absolute, and that the State may place reasonable limitations on the introduction of evidence in criminal proceedings. See, e.g., United States v. Scheffer, (1998) (holding that the proscription against the introduction of polygraph examination results contained in Military Rule of Evidence 707 did not violate the Due Process Clause). However, the unavoidable conclusion to be drawn from the Supreme Court’s cases is that the -12- “the right to present . . . witnesses to establish a defense” is clearly established as “a fundamental element of due process of law.” See Washington, 388 U.S. at 19. State evidence rules must yield to this fundamental right when they “plainly interfere[] with [the defendant’s] right to defend against the State’s charges,” Chambers, 410 U.S. at 298, particularly when such rules are “disproportionate to the purposes they are designed to serve.” Rock, 483 U.S. at 56. A state court’s interpretation of its evidence rules that results in the denial of the defendant’s right to present a defense, most notably the defense of third-party culpability as in Chambers, especially when the state court interprets the evidence rules incorrectly, is an unreasonable application of this clearly established constitutional rule. Wynne v. Renico, 279 F. Supp. 2d at 882. As the Sixth Circuit noted in Rockwell, a state must balance the defendant’s right to present a complete defense against “other legitimate interests in the criminal trial process.” Rockwell, 341 F.3d at 513. Only if the state’s balancing is unreasonable can a habeas petition be granted. It would be objectively unreasonable for the Michigan courts to conclude that the state’s interest in enforcing Michigan Rule of Evidence 404(b) outweighed the defendant’s right to present evidence that a third person, namely the prosecution’s chief witness, committed the crime. The state’s interest in enforcing Rule 404(b) is much weaker in this case than the interest of the state in Rockwell. In Rockwell, the state’s interest was in preventing jury nullification or the sanctioning of vigilante justice against a child molester or abuser. The court found that the state could reasonably conclude that this interest “outweighed Mrs. Rockwell’s interest in presenting evidence of her husband’s prior conduct.” Ibid. In Wynne, however, the State’s interest in preventing the admission of information about Mr. Peckham will not withstand the counterweight of the Sixth Amendment and the Due Process Clause. It would be unreasonable for the State to conclude that this interest outweighed Mr. Wynne’s right to present evidence that Mr. Peckham was the actual murderer. Moreover, the state courts’ decisions also are “contrary to” clearly established federal law. When the Michigan courts excluded the evidence on state law grounds, they applied Michigan law -13- in a manner that is inconsistent with federal law. It is clearly established that state evidentiary rules must yield to constitutional rights and that state courts must balance the interests of the rule against the interests of the defendant. The state courts failed to do that in this case. The state court decisions therefore are contrary to federal law. Nor does the case of Varner v. Stovall, 500 F.3d 491 (6th Cir. 2007), require a different result. In that case, the petitioner was convicted of assault with attempt to murder her boyfriend when she hired another man, who shot the victim for her. Prior to the trial, the state trial court ruled that the petitioner could not present a defense of self-defense or any evidence of battered woman syndrome to support this defense. The court reasoned that, because the petitioner had used a third- party to commit the acts, she was not entitled to rely on self-defense or battered woman syndrome. The Michigan Court of Appeals affirmed, citing state-law precedent and holding that “rationale behind self-defense or mitigating circumstances does not apply to a gun-for-hire situation such as occurred here.” People v. Varner, 2002 WL 741531, at *1 (Mich. App. April 23, 2002). The Sixth Circuit agreed with the district court that the petitioner was not entitled to habeas relief, first noting that “[a]ny right to present a theory of self-defense requires at a minimum that the theory be ‘supported by the evidence.’” Varner, 500 F.3d at 499 (quoting Taylor v. Withrow, 288 F.3d 846, 852 (6th Cir. 2002 . “‘[S]tate and federal rulemakers have broad latitude under the Constitution to establish rules excluding evidence from criminal trials’ so long as the rules do not ‘infring[e] upon a weighty interest of the accused’ and are not ‘arbitrary or disproportionate to the purposes they are designed to serve.’” Ibid. (quoting United States v. Scheffer, , 308 (1998) (alterations in original . -14- The court found that the petitioner simply had not alleged facts that would fall within the definition of self-defense or provocation under Michigan law, since under state law a self-defense theory requires proof of a belief that the defendant’s life is in “imminent danger.” Ibid. (quoting People v. Heflin, 434 Mich. 482, 500-01, 456 N.W.2d 10, 18 (1990 . The Court observed that hiring a contract killer is not consistent with being faced with imminent danger. The Court then concluded that “the confinement of self-defense instructions to cases of ‘imminent danger’ does not unreasonably apply Supreme Court precedent, and neither does the state courts’ conclusion that a scheme to hire a contract killer does not involve such an imminent danger.” Id. at 500. The court further reasoned that because the Michigan courts were permitted to limit the petitioner’s ability to raise a provocation defense, a theory of provocation was not “material to the dispute” because “hiring a contract killer . . . [was not an] ‘act out of passion’” based on an event that would “cause a reasonable person to lose control,” as required under Michigan law. Ibid. (quoting People v. Sullivan, 231 Mich. App. 510, 517, 586 N.W.2d 578, 582 (1998) (internal quotations omitted . The Court noted, “Whether it is a question of self-defense or a question of provocation, Varner fails to explain why an individual who faces a nonimminent threat is not just as capable of calling the authorities as of hiring a contract killer.” Ibid. “Allowing the state courts to define the scope of provocation in this way was not ‘arbitrary or disproportionate,’ did not ‘infringe [ ] upon a weighty interest of the accused,’ and did not violate a right that is ‘so rooted in the traditions and conscience of our people as to be ranked as fundamental.’” Ibid. (quoting Scheffer, 523 U.S. at 308 (internal citations omitted) and Montana v. Egelhoff, , 43 (1996 . -15- None of these factors come into play here. The petitioner’s defense at trial was the well- established plea that someone else committed the murder. The State has no interest in limiting the proof of such a proposition, especially when the defense theory pointed to the State’s main witness. The factors that rendered the balance of interests close in Rockwell and vitiated state policy reflected in the State’s definition of self-defense in Varner are absent here. The mistakes in the petitioner’s initial briefing are serious. But the only material misstatement is the representation that Mark Peckham’s oblique confession post-dated Mr. Timmerman’s murder. Exclusion of that evidence alone likely would not have a substantial and injurious effect on the jury’s verdict. However, the removal of that potential evidence from the equation does not alter the Court’s conclusion that the state court’s failure to allow the other excluded evidence was contrary to and an unreasonable application of federal law as clearly established by the Supreme Court. III. Except as modified herein, the Court adheres to its earlier opinion conditionally granting the writ of habeas corpus. Accordingly, it is ORDERED that the orders staying the judgment granting a conditional -16- writ of habeas corpus [dkt. #33, 34] are VACATED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: January 23, 2009 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 23, 2009. s/Felicia M. Moses FELICIA M. MOSES -17-

=== Sidney High, personal representative of the Estate of Vunies B. High, deceased v. Capital Senior Living Properties 2 - Heatherwood, Inc., ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION SIDNEY HIGH, personal representative of the Estate of VUNIES B. HIGH, deceased, v. Plaintiff, Case Number 08-13066 Honorable David M. Lawson CAPITAL SENIOR LIVING PROPERTIES 2 – HEATHERWOOD, INC., _______________________________________/ Defendants. OPINION AND ORDER DENYING DEFENDANT’S MOTION TO DISMISS Relying on an unsigned agreement containing arbitration and choice-of-forum clauses, the defendant has moved to dismiss this wrongful death case for failure to state a claim, want of subject- matter jurisdiction and improper venue. The parties presented oral argument on the motion in open court on December 11, 2008. Because the record casts considerable doubt over the question whether the plaintiff’s decedent knowingly and intentionally waived her right to adjudicate disputes in court or assented to those terms in the defendant’s contract, the motion to dismiss must be denied. I. The case arises out of the death of the plaintiff’s decedent, Vunies High, who at the time was a resident of the assisted-living facility operated by the defendant, Capital Senior Living Properties 2 – Heatherwood, Inc. (“Heatherwood”), in Southfield, Michigan. According to the amended complaint, High was promised twenty-four-hour-a-day staffing and emergency call support at Heatherwood. At 10:30 a.m. on February 18, 2008, she was found frozen to death outside of the facility, with her face stuck to the ice on the ground. Her caregiver, Gloria Williams, claims to have placed High into bed on February, 17, 2008 at around 8:10 p.m., which means that sometime between 8:10 p.m. on that evening and 10:30 a.m. on the next day, High wandered outside without anybody ever noticing her exit the facility. The defendant answered the complaint and raised in its affirmative defenses the claim that the Court lacks subject-matter jurisdiction because the parties agreed to arbitrate their dispute. The answer makes reference to a document entitled Heatherwood Resident Agreement. The Agreement contains an arbitration clause phrased as follows: ARBITRATION. To the extent allowed by law, You and the Provider agree that, with regard to any dispute whatsoever between You, your agent, or Your legal representatives, heirs, executors and/or administrators or any other person acting on Your behalf and the Community, Provider or Provider’s agents, . . . including but not limited to, a Dispute pertaining to: (i) the interpretation and enforcement of this Agreement, the Attachments, and/or the Resident Handbook, including but not limited to, any dispute alleging breach of contract; (ii) the goods and services provided to You by the Provider and its employees; or (iii) the maintenance of the physical environment of the Community (including but not limited to the Premises), the Provider has the right, at the Provider’s sole and unfettered option, to require that the Dispute be settled by arbitration, which shall be conducted at a location chosen by the Provider in accordance with, at Provider’s election, either the rules of the American Arbitration Association or of the American Health Lawyers Association Alternative Dispute Resolution Service Rules of Procedure for Arbitration, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The decision of the arbitrator shall be binding on both parties. Subject to the terms of this Agreement including the limitation of liability provision, the award, cost and expenses of the arbitration shall be awarded at the discretion of the arbitrator. Notwithstanding the foregoing, the Provider maintains the right to institute an action with regard to any Dispute in any court of competent jurisdiction and YOU HEREBY WAIVE YOUR RIGHT TO A TRIAL BY JURY IN SUCH A COURT PROCEEDING. Heatherwood Resident Agr. ¶ 7, at 11, Ex. 3, Pl.’s Response [dkt # 9]. The next paragraph of the agreement contains a waiver of trial by jury for actions that are not subject to arbitration by law. Agr. ¶ 8, at 11, Ex. 3, Pl.’s Response [dkt # 9]. A forum-selection clause included in the agreement restricts venue to the county in which the Community is located. It states: -2- VENUE. If any action is brought by You, Your family, Your legal representatives, heirs, executors or administrators, Your responsible party or Your estate, against the Community, its owner(s), its management or other agents, directors, officers, assigns or successors, venue will only be proper in the county in which the Community is located. Heatherwood Resident Agr. ¶ 10, at 12, Ex. 3, Pl.’s Response [dkt # 9]. The last page of the Agreement contains places for names to be printed and signatures affixed. The Agreement in this case is fully signed by Heatherwood’s representative, but neither the plaintiff’s decedent nor a representative on her behalf signed it, although she apparently printed her name under the signature line. The plaintiff explains that on January 19, 2002, Ms. High and her daughter, Lisa Wells, visited the defendant’s assisted-living facility with the view to place then-eighty-five-year-old High there as a resident. During that walk-in visit, Wells filled out a Resident Inquiry Card, on which she responded to a question about her mother’s mental status with a phrase “some confusion.” Resident Inquiry Card, Ex. 1, Pl.’s Response. The card indicates that at that time, High was in need of safety checks and assistance with administering the three types of medication she was on. Three days later, on January 22, 2002, the two women returned to the facility and completed the application for residency, with the move-in date scheduled for January 25, 2002. On the date of the move-in, High and Wells were presented with the Heatherwood Resident Agreement. The defendant does not dispute the plaintiff’s assertion that Ms. High did not sign the document, even though she may have “printed her name” on it. See Def.’s Reply [dkt # 10], at 1 Instead, the defendant argues that the Court should infer Ms. High’s intention to be bound by the Agreement because she lived by its terms for seven years after printing her name on it, paid the rent, and received the services mentioned in it. -3- On December 23, 2007, Lisa Wells signed a Renewal Addendum, which extended the Heatherwood Resident Agreement for a one-year period and adjusted the rent. Also, on February 14, 2006, after the decedent had lived at the facility for four years, Kathy Ostrowski, the defendant’s agent, contacted Lisa Wells about the concern that Ms. High could no longer maintain her own personal hygiene. As a result of that contact, Wells enrolled Ms. High into a program that, for an additional fee, would provide assistance with personal hygiene, including a twenty-four-hour-per- day staffing and an emergency call system and the “Personal Care Program,” which involved regular safety checks, dressing and undressing, transportation within the building itself, shower assistance, medication reminders, and other services consistent with those provided by assisted-living facilities. There is no documentation in the record, however, that Lisa Wells had the authority to sign contracts on behalf of Ms. High. Sidney High, the personal representative of Vunies High’s estate, commenced the present action on July 16, 2008. After answering the complaint, the defendant filed the present motion to dismiss for want of subject-matter jurisdiction premised on the arbitration clause in the unsigned Agreement. II. A motion attacking the court’s subject-matter jurisdiction is governed by Federal Rule of Civil Procedure 12(b)(1). “A Rule 12(b)(1) motion can either attack the claim of jurisdiction on its face, in which case all allegations of the plaintiff must be considered as true, or it can attack the factual basis for jurisdiction, in which case the trial court must weigh the evidence and the plaintiff bears the burden of proving that jurisdiction exists.” Abbott v. Michigan, 474 F.3d 324, 328 (6th Cir. 2007) (citing DLX, Inc. v. Kentucky, 381 F.3d 511, 516 (6th Cir. 2004 . It appears that the -4- defendant is proceeding under the first option. It has been said, however, that a motion to dismiss grounded on an arbitration clause is more properly brought under Rule 12(b)(6) than Rule 12(b)(1) because the existence of a valid arbitration clause does not technically deprive the Court of subject matter jurisdiction. Moore v. Ferrellgas, Inc., 533 F. Supp. 2d 740 (W.D. Mich. 2008) (citing Liveware Publishing, Inc. v. Best Software, Inc., 252 F. Supp. 2d 74, 78 (D. Del. 2003); Nationwide Ins. Co. v. Patterson, 953 F.2d 44, 45 n.1 (3d Cir. 1991 . The Court believes this is the better view, since the existence of an arbitration agreement does not undermine the authority of the Court to proceed. After all, under the Federal Arbitration Act, the Court retains the authority to stay a case pending arbitration and then enter judgment on the award afterward. See 9 U.S.C. §§ 3, 9. The Sixth Circuit has admonished courts to be more exacting when addressing challenges that are phrased as an attack on jurisdiction: implicate subject-matter In two very recent decisions, the Supreme Court has admonished courts to use the term “jurisdiction” with more precision, describing the term as “a word of many, too many, meanings,” Kontrick v. Ryan, , 453 (2004) (quoting Steel Co. v. Citizens for a Better Env’t, , 90 (1998 . In Kontrick, a unanimous Court held that time requirements of Federal Rules of Bankruptcy Procedure 4004 and 9006 did not instead “claim-processing rules.” Id. at 455. Just over one year later, in Eberhart v. United States, (2005) (per curiam), the Supreme Court similarly described Federal Rule of Criminal Procedure 33 with its time limitations as a nonjurisdictional “claim-processing rule.” “Clarity would be facilitated,” the Supreme Court remarked, “if courts and litigants used the label ‘jurisdictional’ not for claim-processing rules, but only for prescriptions delineating the classes of cases (subject-matter jurisdiction) and the persons (personal jurisdiction) falling within a court’s adjudicatory authority.” Id. at 405 (quoting Kontrick, 540 U.S. at 455). “Characteristically, a court’s subject-matter jurisdiction cannot be expanded to account for the parties’ litigation conduct. . . .” Kontrick, 540 U.S. at 456. jurisdiction, but were Primax Recoveries, Inc. v. Gunter, 433 F.3d 515, 518-19 (6th Cir. 2006). Rule 12(b)(6) authorizes dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test -5- whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). When deciding a motion under that Rule, “[t]he court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief.” Cline v. Rogers, 87 F.3d 176, 179 (6th Cir. 1996). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Ibid. “In practice, ‘a . . . complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.’” In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir. 1993) (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (1984 . Consideration of a motion to dismiss under Rule 12(b)(6) is confined to the pleadings. Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008). “[A] court may accept ‘matters outside the pleadings,’ but in doing so it generally must treat the motion ‘as one for summary judgment under Rule 56.’” Ibid. (citing Fed. R. Civ. P. 12(d . However, “documents attached to the pleadings become part of the pleadings and may be considered on a motion to dismiss. . . . In addition, when a document is referred to in the pleadings and is integral to the claims, it may be considered without converting a motion to dismiss into one for summary judgment.” Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 335-336 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c); Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir.1999), abrogated on other grounds by Swierkiewicz v. Sorema, N.A., (2002 . -6- The plaintiff argues that the arbitration clause in this case should not be enforced because the Agreement in which it is contained is unsigned, its terms are unconscionable because there is no mutuality of obligation to arbitrate, no consideration supports that provision in the Agreement, there is no proof that the plaintiff’s decedent intended to waive her rights to resolve her disputes in court, and the arbitration clause violates public policy. The plaintiff objects to the forum-selection clause on similar grounds. The present motion requires the Court to apply the Federal Arbitration Act (FAA). That legislation was enacted in 1925, and then was reenacted and codified as Title 9 of the United States Code in 1947. EEOC v. Waffle House, Inc., 534 U.S. 279, 288 (2002). Congress’s purpose in enacting the FAA “was to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts.” Ibid. (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991 . The Act states that every written provision in a contract “evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA requires a federal court to stay an action when an issue in the proceeding is referable to arbitration, see 9 U.S.C. § 3, and to compel arbitration when one party fails or refuses to comply with the provisions of an enforceable arbitration agreement. See 9 U.S.C. § 4; Highlands Wellmont Health Network, Inc. v. John Deere Health Plan, Inc., 350 F.3d 568, 573 (6th Cir. 2003) (observing that “any doubts regarding arbitrability must be resolved in favor of arbitration”). -7- Supreme Court cases have found that these provisions “manifest a ‘liberal federal policy favoring arbitration agreements.’” EEOC, 534 U.S. at 289. This does not mean, however, that a federal court faced with an arbitration provision must find that it always governs the resolution of a dispute between parties or applies to the claims that they present. The language of the contract defines the scope of disputes subject to arbitration. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 57 (1995) (stating that “the FAA’s proarbitration policy does not operate without regard to the wishes of the contracting parties”). The language of the FAA and public policy operate in some cases to render an arbitration agreement unenforceable. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 115 (2001) (finding that the FAA does not allow arbitration of employment disputes involving transportation workers); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.19 (1985) (observing that language in arbitration agreements that effectively deprives a claimant of statutory remedies violates public policy and is unenforceable). Resolution of these questions requires resort to both federal and state law. “In determining whether the parties have made a valid arbitration agreement, ‘state law may be applied if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally,’ although the FAA preempts ‘state laws applicable only to arbitration provisions.’” Great Earth Cos. v. Simons, 288 F.3d 878, 889 (6th Cir. 2002) (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686-87 (1996 . “[S]tate law governs ‘generally applicable contract defenses [to an arbitration clause], such as fraud, duress, or unconscionability.’” Id. at 889 (quoting Casarotto, 517 U.S. at 687). The parties agree that the law of the State of Michigan applies. -8- As a general rule, the enforceability of an arbitration clause depends on the validity of the contract in which it is contained. Amtower v. William C. Roney & Co., 232 Mich. App. 226, 233-34, 590 N.W.2d 580, 583 (1998) (“Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he had not agreed so to submit.”) (internal quotation marks and citations omitted). Forum selection clauses are subject to the same rule. Offerdahl v. Silverstein, 224 Mich. App. 417, 420, 569 N.W.2d 834, 836 (1997) (“A contractual forum-selection clause, though otherwise valid, may not be enforced against one not bound by the contract.”). This basic requirement – the existence of an actual agreement to arbitrate – is the first of several determinations a district court must make before compelling arbitration. As the Sixth Circuit explained, “first, [the district court] must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the action are subject to arbitration, it must determine whether to stay the remainder of the proceedings pending arbitration.” Fazio v. Lehman Bros., Inc., 340 F.3d 386, 392 (6th Cir. 2003) (citation omitted). Under Michigan law, the elements of a valid contract are (1) parties competent to enter into a contract, (2) a proper subject matter; (3) legal consideration; (4) mutuality of agreement; and (5) mutuality of obligation. Thomas v. Leja, 187 Mich. App. 418, 422, 468 N.W.2d 58, 60 (1991). “In order to form a valid contract, there must be a meeting of the minds on all the material facts.” Kamalnath v. Mercy Memorial Hosp. Corp., 194 Mich. App. 543, 548, 487 N.W.2d 499, 503 (1992). “‘Meeting of the minds’ is a figure of speech for mutual assent.” Id. at 548-49, 487 N.W.2d at 503. “A contract is made when both parties have executed or accepted it, and not before.” Id. at 549, 487 -9- N.W.2d at 503. The party seeking to enforce the contract has the burden to show the existence of the contract. Ibid. A principal point of contention in this case is whether Ms. High ever agreed to arbitration in the first place, since she never signed the document. The absence of a signature is not necessarily fatal to a finding of an agreement. Michigan law permits an inference that an offeree accepted the terms of the agreement when she signaled her assent through conduct. Pakideh v. Franklin Commercial Mortgage Group, Inc., 213 Mich. App. 636, 640, 540 N.W.2d 777, 780 (1995) (“If an offer does not require a specific form of acceptance, acceptance may be implied by the offeree’s conduct.”) (citation omitted); see also Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 974 (6th Cir. 2007) (holding that under Tennessee law, the plaintiff’s continued employment with the company constituted a valid acceptance of the agreement containing an arbitration clause, even though an employee never signed such an agreement). On the other hand, the absence of a signature deprives the defendant of a presumption that it otherwise might enjoy: that one who signs a written agreement is presumed to know the nature of the document and to understand its contents. See Watts v. Polaczyk, 242 Mich. App 600, 604, 619 NW2d 714, 717 (2000). In the absence of such a presumption, it is difficult for the Court to conclude as a matter of law that the plaintiff assented to the arbitration and venue provisions in the Agreement, since there is no allegation or evidence that those provisions were ever discussed or that the plaintiff’s decedent otherwise even knew of them. The plaintiff also attacks the arbitration provisions on the grounds of lack of mutuality and lack of consideration. Citing Floss v. Ryan’s Family Steak Houses, Inc., 211 F.3d 306 (6th Cir. 2000), the plaintiffs contend that because the arbitration clause compels only the tenant to arbitrate and creates no corresponding obligation on Heatherwood, there is no mutuality of obligation, and -10- therefore there is no consideration flowing from Heatherwood to the tenant to support an agreement to arbitrate. Floss does not provide much guidance here, however, because it dealt with a stand- alone arbitration agreement between the defendant’s employees and a third-party provider of dispute resolution services. The only consideration for the employees’ promise to submit their dispute to arbitration was the provider’s return promise to furnish an acceptable forum. But since the provider remained free to change the format of arbitration and had complete discretion over arbitration rules and procedures, the court found that the provider’s “promise [was] illusory,” “[t]he purported arbitration agreement therefore lack[ed] a mutuality of obligation,” and “[w]ithout a mutuality of obligation, the agreement lack[ed] consideration and, accordingly, [did] not constitute an enforceable arbitration agreement.” Id. at 315-16. In this case, the arbitration clause was contained in a contract that contained several promises by both sides. Under Michigan law, “[w]here there is no specific recitation of separate consideration for the [contractual provision], but it is part of a larger contract involving multiple promises, the basic rule of contract law is that whatever consideration is paid for all of the promises is consideration for each one.” Hall v. Small, 267 Mich. App. 330, 334, 705 N.W.2d 741, 743-44 (citing Rowady v. K Mart Corp., 170 Mich. App. 54, 59, 428 N.W.2d 22, 25 (1988 . It is a fundamental principle of contract law that one consideration can support many promises. See 3 Williston on Contracts § 7:51 (4th ed.) (“In many contracts, there is more than one promise on a side. If each promise on one side is supported by a promise or performance allotted to it exclusively as its consideration, the contract is divisible.”). The Sixth Circuit has rejected the argument that an arbitration clause requires a separate mutuality of consideration apart from the consideration supporting the rest of the contract. See Wilson Elec. Contractors, Inc. v. Minnotte Contracting -11- Corp., 878 F.2d 167, 169 (6th Cir. 1989). The one-sided nature of the arbitration agreement in this case, although a factor to consider in determining whether the plaintiff agreed to it, does not render it unenforceable as a matter of law. The plaintiff also argues that the arbitration clause is unconscionable because it is contained in a contract of adhesion. Michigan law suggests that in order for the contract to be considered unconscionable, both procedural and substantive unconscionability must be present. Clark v. DaimlerChrysler Corp., 268 Mich. App. 138, 143-44, 706 N.W.2d 471, 474-75 (2005). Procedural unconscionability exists where the weaker party has no realistic alternative to acceptance of the term. Clark, 268 Mich. App. at 144, 706 N.W.2d at 475. Procedural unconscionability is present where the challenged provision is buried in the text of a document, appears in small font, or is not otherwise conspicuous. Krupp PM Eng’g, Inc. v. Honeywell, Inc., 209 Mich. App. 104, 108, 530 N.W.2d 146, 149 (1995). Determining procedural unconscionability requires the court to focus on the “real and voluntary meeting of the minds” of the parties at the time that the contract was executed and consider factors such as: (1) relative bargaining power; (2) age; (3) education; (4) intelligence; (5) business savvy and experience; (6) the drafter of the contract; and (7) whether the terms were explained to the “weaker” party.” Johnson v. Mobil Oil Corp., 415 F. Supp. 264, 266 (E.D. Mich. 1976). Although contracts of adhesion have greater potential of being found procedurally unconscionable, courts will not invalidate adhesion contracts as a matter of law as long as the challenged provision is reasonable. Rembert v. Ryan’s Family Steak Houses, Inc., 235 Mich. App. 118, 157, 596 N.W.2d 208, 226 (1999). Contracts of adhesion are “characterized by standardized forms prepared by one party which are offered for rejection or acceptance without opportunity for bargaining and under the circumstances that the second party cannot obtain the -12- desired product or service except by acquiescing in the form agreement.” Morris v. Metriyakool, 418 Mich. 423, 440, 344 N.W.2d 736, 742 (1984) (declining to strike down as unconscionable agreements to arbitrate medical malpractice claims). However, a contract is not one of adhesion where an individual has an option to obtain the desired goods or services elsewhere. Ibid. Because there is no suggestion in the record that the plaintiff was pressured into acquiescing in the arbitration provision, or that she was unable to find assisted-living arrangements elsewhere, the present record does not permit a finding of unconscionability as a matter of law. In addition to establishing an enforceable contract under state law, a party seeking to compel arbitration also must show that the opposite party waived her right to a jury trial. See Cooper v. MRM Investment Co., 367 F.3d 493, 507 (6th Cir. 2004) (observing that “[i]f the claims are properly before an arbitral forum pursuant to an arbitration agreement, the jury trial right vanishes.”) (internal quotations omitted). The issue of one’s right to a jury trial, even where that right has been addressed through a contractual provision, is governed by federal and not state law. K.M.C. Co., Inc. v. Irving Trust Co., 757 F.2d 752, 755 (6th Cir. 1985). Where there is a clear, express waiver of the right to a jury trial, the party seeking to avoid that waiver must demonstrate that she did not knowingly and voluntarily agree to the provision. Ibid. In other cases, the courts’ approach is fact-intensive. See Walker v. Ryan's Family Steak Houses, Inc., 400 F.3d 370, 381-83 (6th Cir. 2005). In the arbitration context, the Sixth Circuit requires proof that the waiver was “knowing and voluntary.” Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 668 (6th Cir. 2003) (en banc). In evaluating whether a waiver has been knowingly and voluntarily executed, we look to (1) plaintiff’s experience, background, and education; (2) the amount of time the plaintiff had to consider whether to sign the waiver, including whether the -13- employee had an opportunity to consult with a lawyer; (3) the clarity of the waiver; (4) consideration for the waiver; as well as (5) the totality of the circumstances. Ibid. (internal quotations and alterations omitted). Applying these factors in Morrison, the Court found that the waiver was enforceable against the plaintiff because “Morrison was a highly educated managerial employee who was capable of understanding the terms of the agreement,” “the waiver . . . was plain,” and “Morrison had three days in which to withdraw her consent to the agreement, which advised applicants that they may wish to consult an attorney before signing it.” Ibid. The law with respect to forum-selection clauses in the present context is similar. The defendant argues that by agreeing to sue in the county where the facility is located, i.e, Oakland County, the decedent waived her right to a federal forum because there is no federal courthouse located within Oakland County’s boundaries. However, the Sixth Circuit has held that the waiver of the statutory right to remove a suit from state to federal court must be clear and unequivocal. Regis Assocs. v. Rank Hotels (Mgmt.) Ltd., 894 F.2d 193, 195 (6th Cir. 1990). Turning to the case at hand, the task of this Court is to “carefully reconcile the liberal federal policy favoring arbitration agreements with the important rights created and protected by federal civil rights legislation.” Morrison, 317 F.3d at 652-53 (internal quotation marks and citations omitted). Applying the factors laid out in Morrison, the Court must conclude on the present record that the arbitration clause contained in Heatherwood’s preprinted contract is not enforceable. The first factor – Ms. High’s experience, background and education – favors the plaintiff. According to the amended complaint, at the time of signing the contract, the plaintiff’s decedent was taking several medications, she was confused, and perhaps suffered some dementia. The decedent was eighty-five years old when she was handed the document, and she required assistance with tasks of daily living. There is no evidence in the record indicating that Ms. High ever read the document -14- or that anyone explained the effect of a waiver. The second factor – the amount of time the decedent had to consider the waiver, including the opportunity to consult an attorney – also augurs in favor of the plaintiff. It also appears that at no time during an initial visit were the decedent and her daughter told about the arbitration and venue provisions in the Agreement. They were handed the document after Ms. High already moved in. The arbitration clause is on page eleven of a thirteen- page document. It does not appear that Ms. High was given a copy of the Agreement prior to her residency there, which would have enabled her to consult with an attorney in the meantime. The third Morrison factor does not favor the defendant. The language referring to arbitration is clear, but the Agreement never mentions that by agreeing to arbitration, the decedent agreed to waiver her right to a jury trial. In fact, waiver-of-right-to-jury language is used only in the context of Heatherwood itself electing to go to Court. The rest of the clause is rather cumbersome. There is nothing in the present record indicating that any employee of Heatherwood mentioned, much less explained, the significance of the arbitration or forum-selection provisions to her. Fourth, there is no separate consideration for the arbitration and forum-selection provisions, although that alone does not render the clauses invalid. Other considerations counsel against finding the arbitration clause enforceable as well. The relative unequal bargaining positions of the parties, see Chesterfield Exchange, LLC v. Sportsman’s Warehouse, Inc., 528 F. Supp. 2d 710, 715-15 (E.D. Mich. 2007) (noting the fact that the parties were in equal bargaining position as one of the decisive factors in the analysis), the lack of discussion of the provision, Ms. High’s obvious limitations, the unilateral nature of the arbitration obligation, and the context of presenting the Agreement in an elder-care facility, see Howell v. NHC Healthcare-Fort Sanders, Inc., 109 S.W.3d 731, 735 (Tenn. Ct. App. 2003), all weigh against a -15- finding of a voluntary and consensual relinquishment of the right to resolve disputes in a federal court. Because there is an absence of proof that the plaintiff’s decedent signed the Agreement or otherwise assented to surrender her right to trial in a forum of her choice, the Court must conclude that the defendant has not established its affirmative defense premised on the want of subject-matter jurisdiction, and the plaintiff has stated a cognizable claim in this Court. III. The Court finds that the defendant has not established a right to arbitration, and therefore its motion fails under both Federal Rule of Civil Procedure 12(b)(1) and Rule 12(b)(6). At oral argument, however, defense counsel stated that he had concentrated most of his time reviewing the arbitration issue and asked for more time for discovery to address the merits of the case in the event his motion were denied. The plaintiff had no objection. The Court will enter an order today amending the Case Management and Scheduling Order to enlarge the present deadlines. Accordingly, it is ORDERED that the defendant’s motion to dismiss [dkt #3] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: December 17, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 17, 2008. s/Felicia Moses FELICIA MOSES -16-

=== Coalition to Defend Affirmative Action, et. al. v. The Regents of the University of Michigan, et. al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case No. 06-15024 Hon. David M. Lawson OPINION AND ORDER DENYING CANTRELL PLAINTIFFS’ MOTION TO ALTER OR AMEND JUDGMENT COALITION TO DEFEND AFFIRMATIVE ACTION, INTEGRATION AND IMMIGRATION RIGHTS AND FIGHT FOR EQUALITY BY ANY MEANS NECESSARY (BAMN), UNITED FOR EQUALITY AND AFFIRMATIVE ACTION LEGAL DEFENSE FUND, RAINBOW PUSH COALITION, CALVIN JEVON COCHRAN, LASHELLE BENJAMIN, BEAUTIE MITCHELL, DENESHA RICHEY, STASIA BROWN, MICHAEL GIBSON, CHRISTOPHER SUTTON, LAQUAY JOHNSON, TURQOISE WISE- KING, BRANDON FLANNIGAN, JOSIE HUMAN, ISSAMAR CAMACHO, KAHLEIF HENRY, SHANAE TATUM, MARICRUZ LOPEZ, ALEJANDRA CRUZ, ADARENE HOAG, CANDICE YOUNG, TRISTAN TAYLOR, WILLIAMS FRAZIER, JERELL ERVES, MATTHEW GRIFFITH, LACRISSA BEVERLY, D’SHAWNM FEATHERSTONE, DANIELLE NELSON, JULIUS CARTER, KEVIN SMITH, KYLE SMITH, PARIS BUTLER, TOUISSANT KING, AIANA SCOTT, ALLEN VONOU, RANDIAH GREEN, BRITTANY JONES, COURTNEY DRAKE, DANTE DIXON, JOSEPH HENRY REED, AFSCME LOCAL 207, AFSCME LOCAL 214, AFSCME LOCAL 312, AFSCME LOCAL 836, AFSCME LOCAL 1642, AFSCME LOCAL 2920, and the DEFEND AFFIRMATIVE ACTION PARTY, Plaintiffs, v. THE REGENTS OF THE UNIVERSITY OF MICHIGAN, the BOARD OF TRUSTEES OF MICHIGAN STATE UNIVERSITY, the BOARD OF GOVERNORS OF WAYNE STATE UNIVERSITY, the TRUSTEES of any other public college or university, community college, or school district, ATTORNEY GENERAL MICHAEL COX, and ERIC RUSSELL, Defendants, CONSOLIDATED CASES Case No. 06-15637 Hon. David M. Lawson -and- CHASE CANTRELL, M.N., a minor child, by Karen Nestor, Mother and Next Friend, KAREN NESTOR, Mother and Next Friend of M.N., a minor child, C.U., a minor child, by Paula Uche, Mother and Next Friend, PAULA UCHE, Mother and Next Friend to C.U., a minor child, JOSHUA KAY, SHELDON JOHNSON, MATTHEW COUNTRYMAN, M.R., a minor child, by Brenda Foster, Mother and Next Friend, BRENDA FOSTER, Mother and Next Friend of M.R., a minor child, BRYON MAXEY, RACHEL QUINN, KEVIN GAINES, DANA CHRISTENSEN, T.J., a minor child, by Cathy Alfaro, Guardian and Next Friend, CATHY ALFARO, Guardian and Next Friend of T. J., a minor child, S. W., a minor child, by Michael Weisberg, Father and Next Friend, MICHAEL WEISBERG, Father and Next Friend of S. W., a minor child, CASEY KASPER, SERGIO EDUARDO MUNOZ, ROSARIO CEBALLO, KATHLEEN CANNING, EDWARD KIM, M.C.C. II, a minor child, by Carolyn Carter, Mother and Next Friend, CAROLYN CARTER, Mother and Next Friend of M.C.C., II, a minor child, J.R., a minor child, by Matthew Robinson, Father and Next Friend, MATTHEW ROBINSON, Father and Next Friend of J.R., a minor child, Plaintiffs, v. ATTORNEY GENERAL MICHAEL COX and ERIC RUSSELL, _____________________________________________________/ Defendants, OPINION AND ORDER DENYING CANTRELL PLAINTIFFS’ MOTION TO ALTER OR AMEND JUDGMENT On March 18, 2008, the Court entered summary judgment in favor of the State in these consolidated cases, thereby rejecting the plaintiffs’ claims that Proposal 2 – which amended Michigan’s state constitution by prohibiting affirmative action programs in public education, employment, and contracting – offended the United States Constitution. The Cantrell plaintiffs now -2- ask the Court to alter or amend the judgment on the theory that the Court relied upon an untenable distinction between prohibiting “preferential treatment” and withholding “equal protection” in rejecting their arguments based on their Hunter/Seattle theory. The Court, however, will abide by its original decision. Federal Rule of Civil Procedure 59(e) authorizes a district court to “alter or amend a judgment” in the case of a clear error of law, newly discovered evidence, an intervening change in controlling law, or manifest justice. Henderson v. Walled Lake Consol. Schs., 469 F.3d 479, 496 (6th Cir. 2006) (quoting Intera Corp. v. Henderson, 428 F.3d 605, 620 (6th Cir. 2005 ; GenCorp., Inc. v. Am. Int’l Underwriters, 178 F.3d 804, 834 (6th Cir. 1999) (citing Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir. 1998 . The Cantrell plaintiffs cite three bases of perceived legal error, although they all entail the distinction this Court drew between a state constitutional amendment that prohibits “preferential” treatment and one that denies “equal” treatment. There is no disputing that the Court found this difference important, reasoning that legislation making it more difficult for certain groups to achieve preferential treatment is significantly different than legislation that burdens efforts to achieve parity. See Coal. to Defend Affirmative Action v. Regents of the Univ. of Mich., 539 F. Supp. 2d 924, 956-57 (E.D. Mich. 2008) (citing Coal. for Econ. Equity v. Wilson, 122 F.3d 692, 707-08 (9th Cir. 1997 . The Cantrell plaintiffs submit that this distinction is “inconsistent with the process-based nature of the Hunter-Seattle principle,” Br. in Supp. at 3; conflicts with precedent, id. at 7; and is “judicially unmanageable,” id. at 9. The plaintiffs contend that the Court misapplied Hunter v. Erickson, (1969), Washington v. Seattle Sch. Dist. No. 1, (1982), and Romer v. Evans, -3- (1996), by failing to understand that those cases recognized a right to fairness in the political process, as opposed to entitlement to a particular outcome. The plaintiffs submit that to consider differently legislation that burdens, on the one hand, a group’s interest in preferential treatment and, on the other, its interest in equal treatment is to inject a substantive component into the analysis that is inconsistent with the Supreme Court’s jurisprudence. This Court respectfully disagrees. To acknowledge that there are limits to the Hunter/Seattle doctrine based on the nature of the legislative agenda that is burdened is not to tear the doctrine from its moorings; in fact, the Supreme Court’s decisions placed substantial weight on this variable. In Hunter, the Court not only stressed that the challenged ordinance “treat[ed] racial housing matters differently from other racial and housing matters,” Hunter, 393 U.S. at 389, but also that it facilitated a community’s tendency to discriminate, see id. at 391 (“[A]lthough the law on its face treats Negro and white, Jew and gentile in an identical manner, the reality is that the law’s impact falls on the minority. The majority needs no protection against discrimination and if it did, a referendum might be bothersome but no more than that.”). In Romer, the Court addressed the constitutionality of an amendment to Colorado’s Constitution that prohibited “all legislative, executive or judicial action at any level of state or local government designed to protect . . . gays and lesbians” from discrimination. Romer, 517 U.S. at 624. The Court found this repugnant to the Equal Protection Clause because it “withd[rew] from homosexuals, but no others, specific legal protection from the injuries caused by discrimination, and it [forbade] reinstatement of these laws and policies,” save by another amendment. Id. at 627. Seattle admittedly creates an unevenness in this line of thought, which the plaintiffs seek to exploit. In that case, a statewide initiative was passed that effectively prohibited desegregative -4- busing. Seattle, 458 U.S. at 462. As in Hunter, the Court held that the initiative effectuated a racial classification by “remov[ing] the authority to address a racial problem – and only a racial problem – from the existing decisionmaking body, in such a way as to burden minority interests.” Id. at 474. That selective restructuring of school board authority burdened future attempts to integrate (and thus minority interests) “by lodging decision-making authority over the question at a new and remote level of government.” Id. at 483. Because prohibiting integration (when it is not constitutionally mandated) is not tantamount to discrimination, the plaintiffs make a fair point: the Court in Seattle did not (and could not) rely on the notion that the restructuring at issue impeded efforts to secure equal treatment. But this does not mean that any political restructuring with a racial focus that happens to burden minority interests is unconstitutional. The initiative in Seattle is still fundamentally different than Proposal 2 in that racial integration programs do not presumptively offend the Equal Protection Clause, whereas affirmative action programs might. The Ninth Circuit keyed in on this concept in Coalition for Economic Equity v. Wilson, writing as follows: The district court perceived no relevant difference between the busing programs at issue in Seattle and the racial preference programs at issue here. We have recognized, however, that “‘stacked deck’ programs [such as race-based ‘affirmative action’] trench on Fourteenth Amendment values in ways that ‘reshuffle’ programs [such as school desegregation] do not.” Associated Gen. Contractors of Cal. v. San Francisco Unified Sch. Dist., 616 F.2d 1381, 1387 (9th Cir.), cert. denied, 449 U.S. 1061 603 (1980). Unlike racial preference programs, school desegregation programs are not inherently invidious, do not work wholly to the benefit of certain members of one group and correspondingly to the harm of certain members of another group, and do not deprive citizens of rights. Id. Coalition for Economic Equity, 122 F.3d at 708 n.16. Although certain aspects of the Ninth Circuit’s discussion have been undermined – the Supreme Court held in Grutter v. Bolinger, 539 U.S. 306, 334-35 (2003), that racial preferences may be necessary to further a compelling state -5- interest in certain circumstances, and implied in Parents Involved in Community Schools v. Seattle School District No. 1, 127 S.Ct. 2738, 2751 (2007), that desegregation programs may deprive individuals of legal rights – the core principle remains sound. Desegregation is constitutionally required in certain instances, see, e.g., Columbus Bd. of Educ. v. Penick, 443 U.S. 449, 453-55 (1979); Davis v. Bd. of School Comm’rs of Mobile Cty., 402 U.S. 33, 37-38 (1971); Green v. School Bd. of New Kent Cty., 391 U.S. 430, 441-42 (1968); Brown v. Bd. of Educ., 347 U.S. 483, 493-96 (1954); but the Supreme Court has never held that affirmative action is required, and Grutter made clear that it is barely tolerated. See Grutter, 539 U.S. at 341-43 (confirming that “[a] core purpose of the Fourteenth Amendment was to do away with all governmentally imposed discrimination based on race,” and explaining in light of that, “We expect that 25 years from now, the use of racial preferences will no longer be necessary to further the interest approved today”) (internal quotation marks omitted). It is reasonable to take account of this circumstance in interpreting the scope of the Hunter/Seattle doctrine. The Court also must reject the plaintiffs’ argument that distinguishing between an amendment that prohibits “preferential” treatment and one that denies “equal” treatment is “judicially unmanageable.” As an initial matter, this argument is premised on a faulty assumption about the nature of adjudication. The Court does not render decisions by assessing how useful they may prove to future practitioners or judges. The Court’s role is limited to ascertaining the law and applying it to the facts presented. Policy may inform the law in certain respects, but it cannot displace it. The Court will not contradict its view of the law simply because the plaintiffs perceive that this view may be difficult to apply. -6- The Court also disagrees with the plaintiffs’ assertion that the distinction is too nice to understand and that it is mired in subjectivity. Courts, just like individuals, may disagree on the propriety of affirmative action in public education for a host of reasons. In cases such as this, a court’s objective assessment of the legal issues may even be at odds with its subjective analysis of sound policy. But the idea that affirmative action constitutes race-based preferential treatment is well established by Supreme Court precedent. Gratz v. Bollinger, 539 U.S. 244, 270 (2003); Grutter, 539 U.S. at 326; Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 227 (1995). Granted, it may not be so clear in other contexts whether the burdened legislative agenda calls for preferential (as opposed to equal) treatment. But courts deal with tough calls on a daily basis, and there is little doubt here that they will be equal to the tasks to come. Finally, it bears noting that the challenges in this case were brought barely before the ink on Proposal 2 was dry. There is little in the record addressing the impact the legislation has had, or the difficulty in securing equal treatment it may cause. If objective facts ultimately demonstrate that the plaintiffs’ worst fears are coming to pass, then an as-applied challenge may be appropriate. The Court concludes that the Cantrell plaintiffs are not entitled to alteration or amendment of the judgment pursuant to Rule 59(e). The Court did not commit a clear error of law in determining that Proposal 2 facially passes muster under Hunter and progeny. Accordingly, it is ORDERED that the motion to alter or amend the judgment by the Cantrell plaintiffs [dkt #253] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: December 11, 2008 -7- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 11, 2008. s/Felicia M. Moses FELICIA M. MOSES -8-

=== Anglers or the Au Sable, et. al. v. United States Forest Service, et. al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ANGLERS OF THE AU SABLE, TIM MASON, and SIERRA CLUB (MACKINAC CHAPTER), Plaintiffs, v. UNITED STATES FOREST SERVICE, and UNITED STATES BUREAU OF LAND MANAGEMENT, ______________________________________/ Defendants. Case Number 05-10152 Honorable David M. Lawson Magistrate Judge Charles E. Binder OPINION AND ORDER DENYING MOTION TO INTERVENE BY SAVOY ENERGY, L.P. On July 10, 2008, this Court filed an opinion, order, and judgment in this case declaring that the United States Forest Service and the United States Bureau of Land Management did not comply with the National Environmental Policy Act when they found that a proposal that allowed Savoy Energy, L.P. to drill for oil and gas in an environmentally sensitive area of the Huron-Manistee National Forest would have no significant environmental impact. The lawsuit, which was commenced by environmental groups and a descendant of the donor of the Mason Tract – a 4,700- acre tract of old-growth forest designated as a semi-primitive non-motorized area – had been pending for over three years, with the full knowledge of Savoy Energy. Savoy took no steps to intervene in the case or even seek to file an amicus brief while the case was pending in this Court. Then, almost two months after the judgment was entered, Savoy filed the present motion to intervene. Under the present circumstances, the Court believes that Savoy’s motion is untimely, and because the defendants have filed a notice of appeal, the Court has no jurisdiction to grant the motion. Therefore, the motion to intervene will be denied. I. Savoy Energy, L.P. holds three federal and three state oil and gas leases for approximately 640 acres of the land in the Huron-Manistee National Forest in Crawford County, Michigan. In May 2003, Savoy filed an application with the Bureau of Land Management to drill a directional gas well into one of its lease holdings, which involved clearing, grading, and leveling a 3.5-acre well pad, preparing a production facility approximately 1.5 miles from the well, and constructing a pipeline connecting the two locations. Savoy withdrew its initial application in September 2003, responding to public pressure over the environmental effects of its proposed project, but it filed a second application for drilling in the same area shortly thereafter. In August 2004, the Forest Service issued an Environmental Assessment and a Biological Assessment, and on January 1, 2005 Forest Supervisor Leanne M. Martin issued a Decision Notice and Finding of No Significant Impact, explaining that the environmental impact of the project was not expected to be significant. The Bureau of Land Management approved Savoy’s application for drilling on August 4, 2005. Before that, however, the plaintiffs in this case, Anglers of the Au Sable, Tim Mason, and the Mackinac Chapter of the Sierra Club, commenced the present action on June 8, 2005. On December 2, 2005, the plaintiffs filed a motion for a preliminary injunction, asking this Court to halt the commencement of the drilling project pending a final decision. On December 7, 2005, the Court granted preliminary injunctive relief. Anglers of the Au Sable v. United States Forest Serv., 402 F. Supp. 2d 826 (E.D. Mich. 2005). Following that decision, the Court referred the matter back to Magistrate Judge Charles E. Binder for further proceedings consistent with an -2- original order of reference. The parties’ cross motions for summary judgement followed, and the magistrate judge issued his report on June 20, 2006 recommending a ruling in favor of the plaintiffs. The defendants filed timely objections to the magistrate judge’s report, and the Court held the case under advisement until the July 2008 final decision. During all this time, Savoy was not heard from, although the case received considerable public attention, and the preliminary injunction prevented Savoy from proceeding with its drilling project. Then, once the smoke of battle cleared, Savoy emerged from the woods on September 4, 2008 to file its motion to intervene, seeking to urge an appellate court to walk through the battlefield, as the saying goes, and shoot the wounded. Savoy also filed a notice of appeal that day, and the government filed one of its own the next day. II. Rule 24(a) of the Federal Rules of Civil Procedure entitles certain parties to intervene in a lawsuit as of right. Pursuant to Rule 24, there are two types of intervention: intervention as of right and permissive intervention. Rule 24(a), dealing with intervention by right, states: Upon timely application anyone shall be permitted to intervene in an action ... when the applicant claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant’s ability to protect that interest, unless the applicant’s interest is adequately represented by existing parties. Fed. R. Civ. P. 24(a). With respect to both types of intervention, the Sixth Circuit has held that “Rule 24 should be ‘broadly construed in favor of potential intervenors.’” Stupak-Thrall v. Glickman, 226 F.3d 467, 472 (6th Cir. 2000) (quoting Purnell v. Akron, 925 F.2d 941, 950 (6th Cir. 1991 . Of course, “this does not mean that Rule 24 poses no barrier to intervention at all.” Ibid. [The Sixth Circuit has] explained that a proposed intervenor must establish four factors before being entitled to intervene: (1) the motion to intervene is timely; (2) -3- the proposed intervenor has a substantial legal interest in the subject matter of the case; (3) the proposed intervenor’s ability to protect their interest may be impaired in the absence of intervention; and (4) the parties already before the court cannot adequately protect the proposed intervenor’s interest. Coalition to Defend Affirmative Action v. Granholm, 501 F.3d 775, 779 (6th Cir. 2007) (citing Grutter v. Bollinger, 188 F.3d 394, 397-98 (6th Cir. 1999 . Savoy argues that it satisfies all four factors and it should be permitted to join the case on appeal. The Court disagrees. Although some courts have allowed intervention in a case after the final judgment has been entered, see Hill v. Western Elec. Co., 672 F.2d 381, 387 (4th Cir. 1982), the better practice requires an assessment of five timeliness factors identified by the Sixth Circuit “in the context of all relevant circumstances.” Stupak-Thrall, 226 F.3d at 472 (internal quotation marks omitted). The Sixth Circuit considers: (1) the point to which the suit has progressed; (2) the purpose for which intervention is sought; (3) the length of time proceeding the application during which the proposed intervenors knew or should have known of their interest in the case; (4) the prejudice to the original parties due to the proposed intervenors’ failure to promptly intervene after they knew or reasonably should have known of their interest in the case; and (5) the existence of unusual circumstances militating against or in favor of intervention. Id. at 473-74. Considering these factors, the Court concludes that Savoy’s delay in making its decision to join this lawsuit has worked a disservice to the litigants, including the government, and the Court. It is unquestionably true that Savoy’s interest in the case is narrower and more focused than the government’s in defending the finding of no significant environmental impact. It is obvious that Savoy has a direct pecuniary stake in the outcome of that dispute; it argues that delay in allowing it to drill works an economic disadvantage upon it. That makes it all the more baffling that Savoy would wait in the wings until the matter is decided, given the length of time the case remained -4- pending in this Court, only now seeking to advance its arguments. By taking that course, Savoy presumably endeavors to present fresh arguments to an appellate court, which will have been unreviewed by the lower court. This Court will have been deprived of any new information from Savoy that could have shed light on the dispute. The parties to the case will not have the opportunity to confront the arguments in the trial court or seek to expand the record in this administrative review. Savoy’s tardiness does not serve the interests of justice. And the delay has resulted in a jurisdictional problem with Savoy’s request. Although it is well-established that would-be intervenors may ask for permission to intervene from a district court at this stage of the proceedings, see United Airlines v. McDonald, 432 U.S. 385 (1977); Wright & Miller, 15A Fed. Practice & Procedure, § 3902.1 (“Many cases establish that intervention can be sought in the district court for the purpose of appealing a judgment that has an adverse effect on the intervenor. Intervention is permitted both when no party is appealing and when an appeal is being taken by some party.”), the filing of a notice of appeal divests a district court of jurisdiction over the case, except for matters in aid of appeal, Dixon v. Clem, 492 F.3d 665, 679-80 (6th Cir. 1997); Post v. Bradshaw, 422 F.3d 419 (6th Cir. 2005). The rationale behind divestiture of jurisdiction of the district court once a notice of appeal is filed is that two different courts should not have simultaneous jurisdiction over the same matter, and the district court should not alter the scope of the judgment which is before an appellate court. Advey v. Celotex Corp., 962 F.2d 1177, 1180 (6th Cir. 1992). Nevertheless, Rule 4 of the Federal Rules of Appellate Procedure allows a district court to retain jurisdiction over a limited range of proceedings after a notice of appeal is filed: (i) for judgment under Rule 50(b); -5- (ii) to amend or make additional factual findings under Rule 52(b), whether or not granting the motion would alter the judgment; (iii) for attorney’s fees under Rule 54 if the district court extends the time to appeal under Rule 58; (iv) to alter or amend the judgment under Rule 59; (v) for a new trial under Rule 59; or (vi) for relief under Rule 60 if the motion is filed no later than 10 days after the judgment is entered. Fed. R. App. P. 4(a)(4)(A). A district court may opt to resolve these motions pending at the time of filing an appeal. Dixon v. Clem, 492 F.3d at 679 (noting that when “the district court affirmatively opts to maintain jurisdiction even after the filing of the notice of appeal for the purpose of resolving still-pending motions, its jurisdiction expires following the resolution of the last motion.”). However, a motion to intervene is not mentioned in Rule 4’s list of motions. The Sixth Circuit has held that a notice of appeal divests a district court of jurisdiction to decide a motion to intervene. See Bowling v. Pfizer, Inc., No. 92-4287, 14 F.3d 600, 1993 WL 533620 (6th Cir. Dec. 21, 1993) (unpublished); see also Avoyelles Sportsmen’s League, Inc. v. Marsh, 715 F.2d 897, 928 (5th Cir. 1983) (holding that a notice of appeal divests a district court of jurisdiction to consider a motion for intervention). In a case with procedural facts similar to the case presently before the Court, the Seventh Circuit also found that a district court was without jurisdiction to rule on a motion to intervene when the original plaintiff filed notice of appeal on the same day as the applicant moved for intervention. See Roe v. Town of Highland, 909 F.2d 1097 (7th Cir. 1990). In Roe, the applicant moved to intervene one day before the time limit for lodging an appeal expired. The Seventh Circuit suggested that the moving party “should allow the district court sufficient time to rule on the motion” by waiting to file a notice of appeal, and that the court was without jurisdiction to hear the matter after the would-be intervenor filed its notice of appeal. -6- Id. at 1099. The Court elaborated on a few procedural mechanisms to preserve an opportunity for appeal and yet adjudicate the motion for intervention at the district court level: It is possible, however, that a timely motion may not have been acted upon by the time an appeal must be filed. The district court’s non-action places the putative intervenor in a difficult situation. Nevertheless, several avenues of relief remain open. The putative class member can file an emergency motion with the district court detailing the need for a ruling so that a timely appeal may be taken. Indeed, the district court may enlarge the time for filing an appeal (up to 30 days), as permitted by Fed. R. App. P. 4(a)(5). Finally, if the motion to intervene has not been acted upon within the time to appeal, the putative class member should nonetheless file a timely notice of appeal. Although the filing of the notice would deprive the district court of power to act on the motion to intervene, “the cause may be remanded for that purpose.” 9 Moore's Federal Practice ¶ 203.06 at 3-24 n. 10 (2d ed. 1990). In short, a putative intervenor has several viable options for preserving the right of appeal until the district court rules on the intervention motion. Id. at 1099-1100. In this case, Savoy did not take advantage of any of the suggested procedural devices. Savoy had plenty of opportunities to intervene before it or any one else filed a notice of appeal. It is doubtful that this Court may grant that relief now. Another difficulty in allowing Savoy to intervene is doubt about whether Savoy has a protectable legal interest, given the posture of this case. As noted above, there can be no question that Savoy had a financial stake in the outcome. But there exists a division in the circuits over whether private parties can intervene by right in cases brought against the government under the National Environmental Policy Act (NEPA). Some courts have held that because NEPA requires action only by the government, only the government is a proper defendant under the statute, and private parties cannot intervene in a suit. See, e.g., Portland Audubon Soc'y v. Hodel, 866 F.2d 302, 309-10 (9th Cir.1989) (affirming denial of Rule 24(a) motion); Wetlands Action Network v. U.S. Army Corps of Engineers, 222 F.3d 1105, 1114 (9th Cir. 2000) (limiting private party’s intervention -7- in a NEPA action to a remedial stage); Wade v. Goldschmidt, 673 F.2d 182, 186 (7th Cir. 1982) (holding that “[i]n a suit such as this, brought to require compliance with federal statutes regulating governmental projects, the governmental bodies charged with compliance can be the only defendants.”). Other circuits have adopted a more flexible standard without a per se rule that private parties cannot intervene in a NEPA action. See, e.g., Sierra Club v. Espy, 18 F.3d 1202, 1208 (5th Cir.1994) (reversing denial of Rule 24(a) motion), and Kleissler v. United States Forest Serv., 157 F.3d 964, 974 (3d Cir.1998) (Becker, J. concurring) (articulating a more flexible standard of private parties’ intervention); Natural Res. Defense Council, Inc. v. U.S. Nuclear Regulatory Comm’, 578 F.2d 1341 (10th Cir. 1978) (allowing intervention as of right for a potential recipient of a license for operation of a uranium mill in a NEPA action). The Sixth Circuit has not confronted the issue expressly, although it has reviewed cases in which private litigants have intervened as defendants. See Save Our Cumberland Mountains v. Kempthorne, 453 F.3d 334 (6th Cir. 2006) (noting, without any objections, that the trial court allowed intervention of a regulated coal company as a defendant). Allowing Savoy to intervene at this late date, when its basic right to do so remains in doubt, is imprudent. The third factor – that the proposed intervenor’s ability to protect its interest may be impaired in the absence of intervention – is not difficult to meet. See Northeast Ohio Coalition for the Homeless v. Blackwell, 467 F.3d 999, 1009 (6th Cir. 2006) (noting that “a would-be intervenor must show only that impairment of its substantial legal interest is possible if intervention is denied.”) (quoting Mich. State AFL-CIO v. Miller, 103 F.3d 1240, 1247 (6th Cir. 1997 ; see also Linton v. Comm'r of Health & Env't, 973 F.2d 1311, 1319 (6th Cir.1992) (holding that potential stare decisis effects of the decision are sufficient for finding an impairment of interest). Nonetheless, the -8- genuineness of that argument is cast into doubt in this case, where Savoy was content to observe the lawsuit from the sidelines and avoid involvement when the issues were under active consideration in this Court. Savoy also makes the point that the parties already before the Court cannot protect its interest adequately. The case law tends to support that proposition when the party before the court is the government. Although the government’s interest in the outcome of the dispute might advance the interests of a private entity to a substantial degree, the case may still call for some arguments that the government must abandon under a sense of public duty, whereas the prospect of losing millions of dollars will compel the private entity to advance them. See Utah Ass’n of Counties v. Clinton, 255 F.3d 1246, 1255 (10th Cir. 2001) (citing Mausolf v. Babbitt, 85 F.3d 1295, 1302-04 (8th Cir. 1996) (“When managing and regulating public lands, to avoid what economists call the ‘tragedy of the commons,’ the Government must inevitably favor certain uses over others.”); Sierra Club v. Glickman, 82 F.3d 106, 110 (5th Cir.1996) (per curiam) (government representation of broad public interest will not necessarily coincide with would-be intervenor’s narrower interest even though they share common ground); Conservation Law Found. v. Mosbacher, 966 F.2d 39, 44-45 (1st Cir. 1992) (“a governmental entity charged by law with representing the public interest of its citizens might shirk its duty were it to advance the narrower interest of a private entity”); In re Sierra Club, 945 F.2d 776, 779-80 (4th Cir.1991) (although a would-be intervenor and a government entity share objectives, the governmental entity does not represent the private company’s interests adequately due to an obligation to represent interests of general public including those members of the public whose interests may not coincide with the private entity’s interests). -9- On balance, however, the Court believes that Savoy Energy may not intervene by right in the lawsuit after it is over. Since Savoy made no arguments in this Court as to merits of the case, a request to file an amicus brief in the court of appeals that supports the government’s position would serve essentially the same purpose as intervention, since advancing new arguments in the appellate court is discouraged. See St. Marys Foundry, Inc. v. Employers Ins. of Wausau, 332 F.3d 989, 996 (6th Cir. 2003) (observing that “propounding new arguments on appeal in attempting to prompt us to reverse the trial court – arguments never considered by the trial court – is not only somewhat devious, it undermines important judicial values”) (quoting Estate of Quirk v. Comm’r, 928 F.2d 751, 756-57 (6th Cir.1991 . Nor is permissive intervention appropriate. Under Rule 24(b), the requirements for permissive intervention are that the application be timely, the applicant’s claim or defense shares a common question of law or fact with the main action, and the intervention does not unduly delay or prejudice the adjudication of the rights of the original parties. As noted above, Savoy’s motion to intervene is untimely, it is doubtful that the Court has jurisdiction to allow it after the notices of appeal and cross-appeal have been filed, and Savoy’s delay has prejudiced the parties before the Court. III. The Court does not find that Savoy Energy, L.P. ought to intervene in this case at the present stage of proceedings, that is, after the lawsuit has been adjudicated by final judgment and the case is pending on appeal. Accordingly, it is ORDERED that the motion to intervene filed by Savoy Energy, L.P. [dkt # 69] is DENIED. -10- s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: December 8, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 8, 2008. s/Felicia M. Moses FELICIA M. MOSES -11-

=== James Perry and Dominque Yarbro v. City of Pontiac, et. al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JAMES PERRY and DOMINQUE YARBRO, Plaintiff, Case. No. 07-14036 Hon. David M. Lawson v. CITY OF PONTIAC, a municipal corporation, VAL GROSS, Chief of Police Pontiac Police Department, POLICE OFFICER WILLIAM OLSEN and POLICE OFFICER DARRYL COSBY, Defendant. ______________________________________________/ OPINION AND ORDER DENYING DEFENDANTS’ MOTION FOR PROTECTIVE ORDER This 42 U.S.C. § 1983 excessive force case is before the Court on the defendants’ motion for a protective order that would prevent plaintiffs’ counsel from interviewing certain police officers from the Pontiac, Michigan police department. The defendants base their motion on a provision in the Michigan Rules of Professional Conduct that prevents attorneys from having conversations with the clients of another attorney without consent of that lawyer. Based on the positions of the potential interviewees within the police department and the proposed scope of the interview, the Court finds the interviewees will not fit within the definition of “a person . . . represented by another lawyer” as that term is used within Mich. R. Prof. C. 4.2 or as understood in the context of the attorney-client privilege. Of course, other employees of the Pontiac Police Department may well fit within that definition, but the Court believes that the Michigan attorney disciplinary rules and the plaintiffs’ counsel’s professional judgment will deter expansion of the class of potential interviewees or the scope of the interviews, rendering a protective order unnecessary. Therefore, the motion for a protective order will be denied. I. Although the merits of the case are not at issue in the present motion, it is necessary to review the plaintiffs’ allegations to provide context to the informal discovery the plaintiffs seek. According to the amended complaint, on October 12, 2006, the plaintiffs were inside a residence located at 66 Henderson Street in Pontiac, Michigan. Officers from the Pontiac Police Department (including defendants Olsen and Cosby; it is unclear if there were others) burst into the home. It is not clear whether the officers had a search warrant but the plaintiffs do not contend that the search itself was unlawful. Evidently, the officers suspected the residence to be a drug house of sorts, so they executed the raid aggressively. When the officers encountered the plaintiffs, the plaintiffs “followed every command, raising their hands and lying face down on the ground.” Amend. Compl. at ¶ 12. After the plaintiffs were handcuffed and lying face down on the ground, officer Cosby and other unknown officers “kicked, punch[ed], and pepper sprayed the [p]laintiffs” for no apparent reason whatsoever. Id. at ¶ 13. Olsen and Cosby then slammed the plaintiffs against a wall and interrogated them without the benefit of Miranda warnings. Meanwhile, certain officers conducted a search of the residence, and they found a gun underneath the livingroom sofa. Olsen began to question the plaintiffs about the gun, but when neither plaintiff responded, Olsen threatened them by stating, “If you don’t tell me who[se] gun this is I will tase you!” Id. at ¶ 19. The plaintiffs’ refusal to capitulate proved costly. Olsen took a taser from another officer and proceeded to tase plaintiff Perry in the chest. Olsen then moved on to Yarbro, tasing him in the chest as well. The plaintiffs both fell and hit their heads. However, the officers did not take the plaintiffs to a hospital; they drove them directly to the police station and then to the Oakland County Jail. -2- As a result of Olsen’s actions, he was immediately suspended and later fired. He was also charged with aggravated assault, which proceedings remain pending in the Michigan courts. Cosby, on the other hand, received no discipline, and Chief Gross “stopped the internal investigation regarding . . . Cosby’s actions.” Id. at ¶ 27. According to the plaintiffs, the City of Pontiac “as a matter of practice, policy and custom, has, with deliberate indifference failed to sanction or discipline police officers, including the Defendants in this case, who concealed violations of the constitutional rights of citizens by other police officers, thereby causing and encouraging police officers . . . to engage in unlawful and unconstitutional conduct.” Id. at ¶ 31. Further, the City “was deliberately indifferent to, and permitted and tolerated a pattern and practice of excessive and unreasonable beatings and uses of force by police officers . . . , although such beatings and uses of force were improper, the officers involved were not prosecuted, disciplined or subjected to re- training.” Id. at ¶ 32. The plaintiffs filed their case in this Court on September 25, 2007. After the defendants answered the complaint, the Court held a status conference and entered an order limiting discovery and granting a stay of proceedings as to defendant Olsen. The Court agreed that the criminal proceedings against Olsen raised Fifth Amendment concerns, thus warranting a partial stay. Further, the Court limited discovery in general pending the next scheduling conference. That conference was held on April 8, 2008, after which the Court entered an order allowing for general discovery, although the stay with respect to Olsen remains intact. The plaintiffs filed their amended complaint on March 25, 2008, and they now wish to interview certain employees of the Pontiac Police Department. Although the plaintiffs do not seek to conduct formal depositions, the defendants ask this Court to issue a protective order prohibiting -3- the plaintiffs from conducting these interviews. In the defendants’ view, the rules of professional conduct dictate this result. II. Federal Rule of Civil Procedure 26 allows broad discovery in civil litigation, including “any nonprivileged matter that is relevant to any party’s claim or defense.” Fed. R. Civ. P. 26(b)(1). Discovery may be informal – by means of private investigation, witness interviews, and so forth – or it may employ the formal methods prescribed by the Federal Rules of Civil Procedure. See Dorsey v. City of Detroit, 858 F.2d 338, 341-42 (6th Cir. 1988). But Rule 26’s “desire to allow broad discovery is not without limits and the trial court is given wide discretion in balancing the needs and rights of both plaintiff and defendant.” Scales v. J.C. Bradford & Co., 925 F.2d 901, 906 (6th Cir. 1991). Upon good cause shown, Federal Rule of Civil Procedure 26(c)(1) authorizes entry of protective orders “to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.” A court may fashion a protective order to limit discovery in a number of ways, including “forbidding the disclosure or discovery”; “specifying terms . . . for the disclosure or discovery”; “prescribing a discovery method other than the one selected by the party seeking discovery”; and “forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to certain matters.” Fed. R. Civ. P. 26(c)(1)(A)-(D). District courts must use their sound discretion in deciding whether (and in what fashion) to issue protective orders. See Surles ex rel. Johnson v. Greyhound Lines, Inc., 474 F.3d 288, 306 (6th Cir. 2007). The defendants contend that Michigan Rule of Professional Conduct 4.2 prohibits the plaintiffs’ counsel from interviewing certain employees of the Pontiac Police Department. The -4- defendants’ request for a protective order is broadly worded. They seek “[a] Protective Order prohibiting any further contact between Plaintiffs’ counsel and employees of the City of Pontiac.” Defs.’ Mot. at 10. However, based on the plaintiffs’ brief, it appears that the potential interviewees are rank-and-file police officers, not persons in supervisory positions. Rule 4.2, made applicable to attorneys practicing in this Court by way of Local Rule 83.20(j), provides as follows: In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order. Mich. R. Prof. C. 4.2; see also E.D. Mich. LR 83.20(j); E.D. Mich. LR 83.22(b); Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Alticor, Inc., 472 F.3d 436, 438 (6th Cir. 2007) (applying the Michigan Rule of Professional Conduct to regulate the conduct of attorneys in federal courts). The application of Rule 4.2 is straightforward when the client of the other lawyer is an individual. In keeping with the ABA Rules, Rule 4.2 prohibits a lawyer from communicating about the subject of the representation with a party whom the lawyer knows to be represented by another lawyer in connection with the same case. When the client is an organization comprised of several individuals with differing duties and levels of responsibility, however, defining the reach of this rule is not so simple. The official comment to Rule 4.2 indicates that an employee of an organization can be considered a person “represented by another lawyer in the matter” when he or she is a “person[] having a managerial responsibility” and “any other person whose act or omission in connection with the matter may be imputed to the organization . . . or whose statement may constitute an admission on the part of the organization.” Cmt. 7 to Mich. R. Prof. C. 4.2 -5- The import of the Commentary, therefore, suggests that Rule 4.2 incorporates the definition of “client” formulated by the Supreme Court in Upjohn Co. v. United States, 449 U.S. 383 (1981), and cases following in its wake. In Upjohn, the Court redefined the concept of who is the client within the attorney-client relationship (and therefore whose communications are protected by the attorney-client privilege) in the case of a corporate party. Before Upjohn, courts often had applied the “control-group test.” Although recognizing that the corporate entity was the client for the purpose of the attorney-client privilege, that test dictated that communications between senior-level officers and corporate counsel were privileged on the rationale that they “possess an identity analogous to the corporation as a whole.” Upjohn, 449 U.S. at 390 (internal quotes omitted). The Upjohn Court rejected the control-group test, concluding that it “overlooks the fact that the privilege exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice.” Ibid. The bilateral aspect of the privilege can create problems in the context of a corporate client that do not arise in the case of an individual. As the Court explained: In the case of the individual client the provider of information and the person who acts on the lawyer’s advice are one and the same. In the corporate context, however, it will frequently be employees beyond the control group as defined by the court below – “officers and agents . . . responsible for directing [the company’s] actions in response to legal advice” – who will possess the information needed by the corporation’s lawyers. Middle-level – and indeed lower-level – employees can, by actions within the scope of their employment, embroil the corporation in serious legal difficulties, and it is only natural that these employees would have the relevant information needed by corporate counsel if he is adequately to advise the client with respect to such actual or potential difficulties. Id. at 391. With this idea in mind, the Court held that when a corporation’s managers require its employees to give information to its attorneys in the course of providing legal advice, those communications also are protected. Id. at 396. The Upjohn Court therefore advised against a -6- mechanical approach to determining the scope of the privilege, although it simultaneously stressed the need for a strong measure of predictability. See id. at 393 (“[I]f the purpose of the attorney-client privilege is to be served, the attorney and client must be able to predict with some degree of certainty whether particular discussions will be protected.”). Because the attorney-client privilege only inheres in a represented party, Upjohn and its progeny provide a useful framework to determine the reach of professional rules that define the duties of confidentiality by a lawyer toward a “client” and limit the contacts by one lawyer with the “client” of another. That is, Upjohn speaks to who qualifies as a represented party when the actual client is a corporation. Although Upjohn specifically dealt with private corporations, the Sixth Circuit has extended its rationale to municipal corporations as well. See Ross v. City of Memphis, 423 F.3d 596, 602 (6th Cir. 2005) (reasoning that since one purpose of the attorney-client privilege is to encourage uninhibited disclosure between attorney and client, there is “no reason that that function is no longer served simply because the corporation is a municipality or, more broadly, that the organization or agency is a government entity”). The defendants argue that the proposed interviewees fit Rule 4.2’s definition of “represented person” as informed by the Upjohn line of cases, and they cite Massa v. Eaton Corp., 109 F.R.D. 312 (W.D. Mich. 1985), and Lorillard Tobacco Co. v. Kamposh, LLC, No. 05-71324, 2006 WL 3497311 (E.D. Mich. Dec. 1, 2006), to support their position that the proposed interviews are impermissible. Massa is easily distinguished from the situation at hand. In that case, one of the plaintiffs in an age discrimination suit against his former employer conducted ex parte interviews of several managerial-level employees regarding the subject matter of the litigation. Although the interviews were conducted by the plaintiff himself, this conduct received counsel’s blessing. The -7- court held this to be in violation of Michigan’s Rules of Professional Conduct. Even though Rule 4.2 was not yet in place, the court observed that things had changed since Upjohn, and it was only reasonable to interpret the then-applicable rule in accordance with that decision. Lorillard Tobacco differs significantly from Massa in that it did not involve communications with managerial-level employees. In Lorillard Tobacco, Lorillard sued Kamposh, LLC alleging that the latter had distributed counterfeit cigarettes bearing the former’s brand. The plaintiff also alleged that defense counsel made improper contact with one of the plaintiff’s sales representatives, questioning her about matters related to the lawsuit without permission by the plaintiff or its counsel. Because the facts were ambiguous, the court did not determine that defense counsel actually made this contact. However, the court did find that the sales representative “is an individual who may fall within the definition of ‘a party whom the lawyer knows is represented’” within the meaning of Rule 4.2. 2006 WL 3497311 at *4. Therefore, the court entered a protective order “precluding any ex parte contact with Lorillard employees.” Id. at *3. For their part, the plaintiffs have asked the Court to consider Polycast Technology Corp. v. Uniroyal, Inc., 129 F.R.D. 621 (S.D.N.Y. 1990), and McCallum v. CSX Transportation, Inc., 149 F.R.D. 104 (M.D.N.C. 1993). The court in Polycast denied a motion for a protective order wherein attorneys for Uniroyal sought to preclude counsel for Polycast from having ex parte communications with the former director of one of Uniroyal’s divisions, a man who reported to Uniroyal’s vice president, also a named defendant in the case. See id. at 622-23. At first blush, the court’s decision would seem to support the plaintiff’s narrow interpretation of Rule 4.2. However, Polycast is inapposite because it involved a former employee, and the court drew heavily on that circumstance. See id. at 625-28. -8- In McCallum, the court actually granted the defendant’s motion for a protective order prohibiting ex parte contacts with certain railroad employees who had knowledge of the accident that gave rise to the plaintiffs’ negligence case (e.g., the brakeman). Nevertheless, the court observed that the prohibition on ex parte contacts is not as broad as it might seem, and it is this discussion on which the plaintiffs would have the Court focus. In making this observation, the McCallum court provides useful guidance for determining when a lower-level employee of an organization may be contacted by an opposing lawyer. Observing that the rule restricts contacts with employees “whose statement may constitute an admission on the part of the organization,” McCallum, 149 F.R.D. at 109, the court emphasized the relationship between North Carolina’s professional ethics rule (identical to Michigan’s) and Federal Rule of Evidence 801(d)(2)(D), dealing with party admissions. Rule 801(d)(2)(D) governs when an employee’s statement may operate as an admission by the employer, and provides that this is so in the case of “a statement by the party’s agent or servant concerning a matter within the scope of the agency or employment, made during the existence of the relationship.” The McCallum court noted that although the Rules of Evidence allow an employee’s statement to constitute an admission of the employer without proof of specific authority to speak on the employer’s behalf, “the statement still must be within the scope of the agency or employment of the employee.” McCallum, 149 F.R.D. at 111 (citing 12 Michael H. Graham, Federal Practice and Procedure § 6722, p. 508 (Interim Ed.1992 . Certainly lower-level employees can make admissions that bind their employer, but not “unless their job function has something to do with the issue at hand.” Ibid. The court applied these principles to the professional ethics rule (Rule 4.2’s analog), reasoning as follows: -9- Turning to the concerns of the instant case, if the employee is somehow involved in a matter which is the subject of dispute between the parties, the employee’s statements may constitute an employer admission and an attorney should not interview the employee without permission. This may even include employees who have not been directly involved in the decision, but are involved in similar decisions. For example, if a truck driver is involved in the accident, he can bind the employer by making statements about his driving actions or instructions given him. 12 Graham, supra. He should not be contacted without the corporation’s counsel being present. The same rule would apply, for example, to the driver’s training instructor, if that were an issue in the case. On the other hand, some employees may have witnessed the accident. Those who merely observed may be interviewed as to those matters without constituting employer admissions. Polycast Technology Corp. v. Uniroyal, Inc., 129 F.R.D. at 628; Frey v. Dep[‘t] of Health and Human Serv[s.], 106 F.R.D. 32, 37 n.2 (E.D.N.Y.1985). Their statements would be important fact information, but would not be employer admissions. In conclusion, the ethical rule concerning contact with an opponent’s employees during litigation imposes burdens and requires counsel to proceed with extreme caution if ex parte interviews are attempted. But it does not stretch too far by covering employees who make Fed. R. Evid. 801(d)(2)(D) admissions. Ibid. The lessons McCallum teaches are that the determination whether employees of a party may be contacted by opposing counsel turns on whether their statements or conduct can be attributed to the employer itself, and the Federal Rules of Evidence in general, and Rule 801(d)(2)(D) in particular, furnish a principled method by which to resolve that question. A statement by an employee of an organization can bind the employer vicariously only if the opposite party can establish the necessary foundation. A sufficient foundation to support the introduction of vicarious admissions therefore requires only that a party establish (1) the existence of the agency relationship, (2) that the statement was made during the course of the relationship, and (3) that it relates to a matter within the scope of the agency. See, e.g., United States v. Pilarinos, 864 F.2d 253, 257 (2d Cir. 1988); Davis v. Mobil Oil Exploration & Producing Southeast, Inc., 864 F.2d 1171, 1173-74 (5th Cir. 1989); Northern Pacific Ry. v. Herman, 478 F.2d 1167, 1171 (9th Cir. 1973). The authority granted in the agency relationship need not include authority to make damaging statements, but -10- simply the authority to take action about which the statements relate. See J. Weinstein & M. Berger, Weinstein's Evidence ¶ 801(d)(2)(D)[01] (1991). Pappas v. Middle Earth Condo. Ass’n, 963 F.2d 534, 537-538 (2d Cir. 1992). The Sixth Circuit tends to take a narrow view of the scope of an employee’s agency, even when the employee occupies a managerial position. For instance, in Jacklyn v. Schering-Plough Healthcare Products Sales Corp., 176 F.3d 921 (6th Cir. 1999), an employment discrimination case, the plaintiff sought to offer the statement of her former supervisor, a district manager, as an admission of the defendant-employer. The court rejected the evidence because the manager did not supervise the plaintiff at the time of her separation and did not conduct any of her performance reviews at that time. The court concluded that the “[p]laintiff failed to show that [the manager]’s statement concerned matter within the scope of his agency or employment.” Id. at 927-928. Similarly, in Hill v. Spiegel, Inc., 708 F.2d 233 (6th Cir. 1983), the plaintiff, who sued for age discrimination, sought to introduce the testimony of a subordinate that “three other managers told him that the plaintiff was discharged because of his age.” Id. at 236. The court acknowledged that under Rule 801(d)(2)(D), for an employee’s statement to be received as an admission of the employer, “it is not necessary to show that the declarant had authority to make the statement. But it is necessary, we repeat, to show, to support admissibility, that the content of the declarant’s statement concerned a matter within the scope of his agency.” Id. at 237. The court observed that although the three employees held managerial positions, they were not involved in any decisions regarding Hill, the plaintiff. The court held: The mere fact that each of these men was a “manager” within the expansive Spiegel organization is clearly insufficient to establish that matters bearing upon Hill’s discharge were within the scope of their employment. Their statements to Baker concerning Hill’s discharge cannot, on this record, be considered as vicarious admissions by Spiegel. Cf. Oreck Corp. v. Whirlpool Corp., 639 F.2d 75, 80-81 . . -11- . n. 3 (2d Cir. 1980), cert. denied, 454 U.S. 1083 (1981); see also Notes of Advisory Committee on Proposed Rules, Fed. R. Evid. 801. We conclude that the admission of this evidence on this record was reversible error. Ibid. In light of this authority, the Court finds it unlikely that the proposed interviewees can be considered “person[s] . . . represented by another lawyer” within the meaning of Michigan Rule of Professional Conduct 4.2. The interviewees are not managerial-level employees or persons whose acts or omissions in connection with the present matter may be imputed to the organization, and the topics of inquiry are unlikely to lead to statements that may constitute admissions on the part of the City of Pontiac. It is clear at this point that the plaintiffs wish to speak only with rank-and-file police officers, so the first category of prohibited contact under Rule 4.2 – communications with managerial-level employees – is not implicated. The question then becomes whether acts or omissions by these officers could be imputed to the municipality or their statements could amount to admissions by the City. Plaintiffs’ counsel states that she wants to question Pontiac police officers about (1) “retaliation for complaints made about police officers by police officers,” and (2) the “‘golden boy’ reputation of [d]efendant Daryl Cosby.” Pls.’ Response to Mot. at 5. If those police officers inform counsel of their own acts or omissions, it is unlikely that they will relate to the subject matter of the case. For instance, if counsel questions a police officer whether he or she has seen or been subject to retaliation for complaining about another police officer, his or her acts or omissions would not be the subject of discussion. Similarly, police officers’ views of the reputation of Daryl Cosby simply do not qualify as acts or omissions; certainly their opinions of Cosby’s reputation could not be imputed to the City of Pontiac. -12- Nor are the interviews likely to generate statements that amount to admissions by the City. The plaintiffs ultimately hope to prove that the City of Pontiac has a practice, custom, or policy of allowing officers to beat suspects with impunity. But officer discipline, or the lack thereof, is not something that falls within the scope of employment or agency of rank-and-file police officers. It would be different, of course, if plaintiffs’ counsel sought to interview the chief, the manager of human resources, or perhaps even a sergeant. Matters of officer discipline would fall within the scope of their employment, and their statements could serve as admissions by the City. On the other hand, rank-and-file officers’ statements of their observations and impressions of discipline at the City of Pontiac Police Department “would be important fact information, but would not be employer admissions.” See McCallum, 149 F.R.D. at 111. The same goes for their impressions of Cosby’s reputation. The Court finds, therefore, that the proposed interviews will not offend MRPC 4.2. The defendants also make reference to a potential violation of Michigan Rule of Professional Conduct 1.6, which prevents an attorney from disclosing confidential communications of clients and potential clients. Reliance on that rule is misplaced, however, because the plaintiffs’ attorney does not purport to be using these interviews to recruit the interviewees as clients or otherwise establish an attorney-client relationship wiht them. Rule 1.6 has no application to the present dispute. III. The Court concludes that the potential interviewees will not fall within the range of represented persons of an organization, based on their position within the organization and the scope of the interviews as represented by the plaintiffs’ counsel. Of course, if the interview touches on other matters dealing with the transactions in this case, or there is an attempt to interview the -13- supervisors of the individual defendants, a violation of Michigan Rule of Professional Conduct 4.2 may occur. However, based on the representation of the plaintiffs’ counsel as to the limitations on the interviews, the Court does not believe a protective order is necessary. Accordingly, it is ORDERED that the defendants’ motion for a protective order [dkt # 13] is DENIED. Dated: December 8, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 8, 2008. s/Felicia M. Moses FELICIA M. MOSES -14-

=== USA v. Burston ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. ROBERT BURSTON, _____________________________________/ Defendant. Case Number 07-20513 Honorable David M. Lawson ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT BURSTON’S MOTION IN LIMINE Defendant Robert Burston is charged in two counts of an indictment alleging conspiracy and uttering counterfeit securities arising from a scheme to steal motor vehicles by using counterfeit bank checks to make purchases from individual sellers. The matter is before the Court on the defendant’s motion in limine to prevent the government from introducing at trial evidence of or expert testimony regarding a check that was negotiated by a person going by the name of “Joseph Goode.” The government believes that “Joseph Goode” was a false name used by defendant Burston, who cashed the check at a bank to liquidate proceeds of one of the car thefts. However, the check has been destroyed, and Burston argues that it would be unfair to allow the government to use it when Burston no longer can have it analyzed by a handwriting expert to show that he was not the endorser. The government opposes the motion. The Court heard oral argument on November 24, 2008, and now finds that the motion should be granted in part. I. On January 10, 2003, a vehicle was purchased with a forged Comerica Bank check in the amount of $12,000. This vehicle (Burston says that it was a 1998 Chrysler Town and Country; the government says that it was a 1999 Lexus) was then sold to Bi-Lo Auto Sales (doing business as Wiegands Auto World) on the same date. Bi-Lo issued two checks for this purchase: one to Dennis Goode in the amount of $6,000 and one to Joseph Goode in the amount of $5,000. Dennis Goode and his companion – whom the government believes is Burston – went to Huntington Bank in the Detroit Metropolitan Area to cash the checks. Bank policy apparently required that individuals who did not have accounts with the bank leave inked fingerprint impressions on the check, and that was done at the time. During the investigation of this fraud by state authorities, the fingerprint on the “Joseph Goode” check was checked through the Automatic Fingerprint Identification System (AFIS), which was unable to produce a match. The government cannot say what happened to the original check, but apparently it was destroyed, since all parties agree that it is not available now. However, a photocopy had been made. The front of the check apparently contains two fingerprints, and the back of the check contains an endorsement by “Joseph Goode.” In September 2008, at the request of case agent Darren Dodd, the check fingerprint was reexamined (using the photocopy) and compared to Burston’s fingerprint as taken at the time of his arrest. This time, an expert found a match. Defendant Burston argues that no evidence of the check or its use in the transactions of January 10, 2003 should be allowed. Burston reasons that questioned document experts generally agree – as does the government, apparently – that handwriting analysis to determine whether a specific individual was the one who wrote words on paper must be performed on the original document. A photocopy will not do. Since the original of the check is no longer available, Burston -2- says he is deprived of the right to prove through an expert that someone other than him endorsed the back of the check. II. The defendant’s argument raises two separate issues: the admissibility of the photocopy of the check under the rules of evidence; and the fairness of using the evidence under the Due Process Clause. Turning to the first issue, it appears that the government will offer the check in evidence to prove what is contained in the writing, including the fingerprint impressions. The rules of evidence provide: “To prove the content of a writing, . . . the original writing . . . is required, except as otherwise provided in these rules or by Act of Congress.” Fed. R. Evid. 1002. Duplicates – such as photocopies – may be admitted in place of an original “unless (1) a genuine question is raised as to the authenticity of the original or (2) in the circumstances it would be unfair to admit the duplicate in lieu of the original.” Fed. R. Evid. 1003. Secondary evidence of the contents of an original document may be received if the original is lost or destroyed “unless the proponent lost or destroyed them in bad faith.” Fed. R. Evid. 1004(1). According to the Advisory Committee, “[l]oss or destruction of the original, unless due to bad faith of the proponent, is a satisfactory explanation of nonproduction.” Commentary to 1972 Amendments to Rule 1004. The photocopy of the check constitutes a “duplicate” within the meaning of Rule 1003. See Fed. R. Evid. 1001(4). There does not appear to be any challenge to the check’s authenticity or to the premise that the photocopy is an accurate reproduction of the original. See United States v. Rose, 522 F.3d 710, 715 (6th Cir. 2008). And although there is no evidence in the record of what happened to the original check, there is no suggestion that it was destroyed in bad faith. -3- Consequently, the only obstacle to receiving the photocopy in lieu of the original check is if under the circumstances it would be unfair to defendant Burston to do so. Fed. R. Evid. 1003(2). The government cites United States v. Bakhtiar, 994 F.2d 970 (2d Cir. 1993), for the proposition that the defendant cannot raise the issue of unfairness on the eve of trial. In that case, the Second Circuit held that a photocopy of a check could be received in evidence in lieu of the original in the face of the defendants’ objection that they needed to examine the original for latent fingerprints to prove they did not handle the check. But in that case, the defendants waited until two weeks before trial to make the request for testing, despite having the evidence considerably earlier and knowing that the examination they sought would take several weeks. The court reasoned that “the late request thus demonstrated that the defendants were not serious about needing fingerprint analysis or other expert analysis of the checks, but simply looking for a way out of the trial.” Id. at 979. The Sixth Circuit relied on Bakhtiar in an unpublished decision, suggesting that the original writings rule embodied in Rule 1002 focuses on the contents of the writing, not the opportunity for forensic testing. See United States v. Atman, 145 F.3d 1333, 1998 WL 211767, at *5 (6th Cir. Apr. 22, 1998); see also United States v. Moore, 30 F.3d 135, 1994 WL 276898, at *2 (6th Cir. Jun. 21, 1994). This case is somewhat different, however. Information that the fingerprint on the check matched Burston’s came to the defendant relatively late in the process. His present objection based on an inability to test the evidence cannot be written off to an effort to delay the trial. Even then, it appears that the fingerprint can be analyzed from the photocopy (it is not a latent print but rather an inked impression, and there has been no request to test for latent prints); it is the signature on the -4- back of the check that is the focus of the defendant’s concern. That signature is part of the contents of the writing. Under those circumstances, the Court believes that it would not be unfair to receive a photocopy of the front of the check into evidence. The contents of that part of the document are not in dispute, and the defendant makes no claim that he cannot test or analyze the inked fingerprint based on the photocopy. However, the Court also believes that the loss of the original puts the defendant at a disadvantage when it comes to confronting the signature on the back of the check. If the government argues that the defendant endorsed the name “Joseph Goode” on the back of the check, the defendant has no way of disputing that conclusion with forensic evidence. The counterpart (photocopy) is useless for testing of that sort. The defendant expands the argument to assert that the entire check should be excluded, reasoning that if he could prove that someone else wrote the name “Joseph Goode” on the check, he could distance himself from the transaction. That argument ignores the fingerprint on the front of the check. If the jury believes the government’s expert that it matches Burston’s known print (and accepts the evidence of the bank’s custom of requiring check presenters to affix their fingerprint on the instrument), it doesn’t much matter who signed the name on the back. The government asserts that the back of the check contains other relevant information, such as the date of the transaction and other encoded information. The contents of the back of the check are not in dispute as to those items. It seems sensible, therefore, to allow the government to offer a photocopy of the front and back of the check, but forbid any argument suggesting that the signature on the back was placed there by defendant Burston. The defendant may even be entitled -5- to a jury instruction, upon request, that there is no evidence that the defendant signed Goode’s name to the check. The remedy of allowing the exhibit but limiting its evidentiary use is bolstered by the cases addressing the second issue raised by the defendant’s motion – whether using the photocopy is fundamentally unfair and therefore violative of the Due Process Clause. The Sixth Circuit recently noted: The failure to preserve material exculpatory evidence violates the defendant’s right to due process regardless of whether the government acted in bad faith. California v. Trombetta, 467 U.S. 479, 489 (1984); Arizona v. Youngblood, 488 U.S. 51, 58 (1988); United States v. Wright, 260 F.3d 568, 570-71 (6th Cir. 2001). Constitutional materiality means that the evidence possesses both “an exculpatory value that was apparent before the evidence was destroyed and . . . [is] of such a nature that the defendant would be unable to obtain comparable evidence by other reasonably available means.” Trombetta, 467 U.S. at 488-89. United States v. Branch, 537 F.3d 582, 589-90 (6th Cir. 2008). In this case, however, there is no certainty that testing the signature by a questioned documents expert would be helpful to the defendant. Under those circumstances, there is a different test that applies to the evidence, as the court explained in an earlier decision: In [Arizona v.] Youngblood, 488 U.S. at 57, the Court held that “the Due Process Clause requires a different result when we deal with the failure of the State to preserve evidentiary material of which no more can be said than that it could have been subjected to tests, the results of which might have exonerated the defendant.” The government does not have “an undifferentiated and absolute duty to retain and to preserve all material that might be of conceivable evidentiary significance in a particular prosecution.” Id. at 58. For the failure to preserve potentially useful evidence to constitute a denial of due process, a criminal defendant must show bad faith on the part of the government. See id. “The presence or absence of bad faith by the [government actor] for the purposes of the Due Process Clause must necessarily turn on the [government actor's] knowledge of the exculpatory value of the evidence at the time it was lost or destroyed.” Id. at 56 n. *. Because the Youngblood court found that police did not act in bad faith by failing to preserve potentially useful evidence, it rejected Youngblood's due process claim without further analysis. -6- United States v. Wright, 260 F.3d 568, 571 (6th Cir. 2001). As noted earlier, there has been no allegation of bad faith, and it does not appear that the evidence is clearly exculpatory. Although it would be unfair to allow the government to claim that the signature on the back of the check belonged to Burston, in the absence of such an argument, receipt of the photocopy would not violate Burston’s rights under the rules of evidence or the Due Process Clause. III. The Court finds that the use of a photocopy of check number 11512 issued by Bi-Lo Auto Sales, Inc. to Joseph Goode, would not be unfair to the defendant, provided that the use of the evidence is limited in scope as described above. The defendant may propose an appropriate limiting instruction pursuant to Federal Rule of Evidence 105 prior to the start of trial. Accordingly, it is ORDERED that defendant Burston’s motion in limine [dkt #209] is GRANTED IN PART AND DENIED IN PART. The government may use the photocopy of the subject check, but may not argue that the signature of “Joseph Goode” on the back was made by the defendant. Dated: November 26, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on November 26, 2008. s/Felicia M. Moses FELICIA M. MOSES -7-

=== United States of America v. Bryan Ross ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. BRYAN ROSS, _____________________________________/ Defendant. Case Number 07-20513 Honorable David M. Lawson ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT ROSS’S MOTION IN LIMINE Defendant Bryan Ross is charged in seven counts of an indictment alleging conspiracy and uttering counterfeit securities arising from a scheme to steal motor vehicles by using counterfeit bank checks to make purchases from individual sellers. The matter is before the Court on the defendant’s motion in limine to prevent the government from introducing at trial statements Ross allegedly made on two separate occasions. The government opposes the motion, although it is willing to make certain concessions to limit the use of the statements. The Court heard oral argument on November 24, 2008, and now finds that the motion should be granted in part. I. The first set of statements allegedly were made in the summer of 2003, sometime after Ross was arrested on a complaint charging him with bank fraud on July 3, 2003. Ross contends that those statements were made as part of plea negotiations, and therefore they are inadmissible under Federal Rule of Evidence 410. The government takes the position that the statements were made during a proffer session that was preliminary to plea negotiations, and therefore Rule 410 does not apply. The record on exactly how the meeting came together is quite sketchy. It appears that after Ross’s arrest, an attorney from the Federal Defender Office was appointed to represent him. A few days after that, July 8, 2003, defendant Ross, his attorney Jill Price, and Special Agent Darren Dodd gathered for a meeting. The government contends that Secret Service agent Steven Skipworth was also present; Ross claims that Blondell Morey, an attorney in the United States Attorney’s Office, was present, although “[t]he best recollection of Ms. Price is that Blondell Morey was not present at the meeting.” Def.’s Reply at 2. Everyone agrees that Ross was not in custody or under arrest during this meeting. Either before the meeting or shortly afterward, AUSA Morey presented Ross and Ms. Price with a so-called Kastigar letter, as is the custom in this district, used to avoid the problems described by the Supreme Court in Kastigar v. United States, 406 U.S. 441 (1972). The letter was signed by counsel for the government, Mr. Morey. The letter reads, in part: As you know, a meeting between your client, you and federal law enforcement agents will be scheduled for the purpose of receiving a proffer regarding certain subjects known by your client. The provisions of this letter are necessary to avoid the necessity of a Kastigar hearing at which the government would have to prove that its evidence was not tainted by a statement made by your client in this proffer discussion. In order to eliminate this necessity as well as any misunderstanding about the ground rules of this meeting, the undersigned parties acknowledge the following understandings: . . . Subject to paragraph (4) below, no statement made by you or your client during this proffer discussion will be offered in the government's case-in-chief in a criminal prosecution of your client. However, the government may use such statements for the purpose of cross-examination should your client testify in such a case, or for the purpose of a rebuttal case against your client. This provision is necessary in order to insure that your client does not abuse the opportunity for this proffer discussion and future cooperation by making false statements either at the discussion or at a trial. -2- The government may make derivative use of, and may pursue any investigative leads suggested by any information provided by you or your client and may use any information so derived as evidence against your client without restriction. . . . The above-stated provisions act as a modification, and express waiver, of F.R.E. 410 and F.R.Crim.P. 11. In the event that your client knowingly makes a false statement or that your representations concerning your client’s role are not substantially accurate, the promises by the government in this letter are null and void, and there will be no restrictions on how any information generated by this agreement can be used. Def.’s Mot., Ex. B. The letter was dated July 14, 2003. Under most circumstances, this letter would establish the contractual rights of the parties to the use at trial of statements made at the meeting. However, there is no evidence that the letter was ever counter-signed by Ross or Ms. Price. The copy of the letter in Ms. Price’s file bears Mr. Morey’s signature and none other; the government cannot locate its copy of the letter. According to the government, Ross made some inculpatory statements at this meeting, memorialized in a police report: On 7/8/03, SA Stephen Skipworth and I conducted an interview with Bryan Ross in the presence of his attorney based upon a proffer agreement proposed by the United States Attorney’s office. In that interview, Ross denied being significantly involved with the group engaging in these purchases. Rather, he admitted to having knowledge of their activities, but stated that he only participated on one occasion. Ross told us that the only time he assisted in the purchase of a vehicle occurred in Shelby Twp. He said that he accompanied Aliska Walton to the Wells’ residence with the intention of buying their Chevy Corvette that was listed for sale. Walton negotiated the deal and they paid for the car with a counterfeit check she got from Gabriel Lemus. Ross stated that they drove Walton’s grey Jaguar to pick up the car. Ross also told us during the interview that he went with Dewayne Eli and Tiesha Faulkner to sell a BMW the other two had bought in Livonia. He stated that they sold the car to a dealership on Woodward between 7 & 8 mile. Def.’s Mot., Ex. A. In the government’s response brief, the government contends that Mr. Ross asserted that he learned about the Corvette from an advertisement in a “Trade & Times” magazine -3- in his car. However, the Corvette purchase was made in April, and the magazine was not published until June. When this fact was brought up, Ross’s counsel terminated the interview. According to the defendant’s motion (filed through counsel), Ms. Price does not remember what occurred at the meeting except that its purpose was for settlement discussions. It does not appear that the 2003 complaint matured into an indictment before the present case was commenced in the summer of 2007. Ross insists that the statements were made during plea negotiations and are barred by Rule 410, even though an attorney for the government was not present. The government characterizes the meeting differently, describing the session as an opportunity for the defendant to reveal information he may know under the protection of limited immunity to see if plea negotiations would be fruitful. The government concedes that the discussion with agents Dodd and Skipworth was authorized by AUSA Morey. “The admissibility or inadmissibility of a plea, a plea discussion, and any related statement is governed by Federal Rule of Evidence 410.” Fed. R. Crim. P. 11(f). Federal Rule of Evidence 410 states: Except as otherwise provided in this rule, evidence of the following is not, in any civil or criminal proceeding, admissible against the defendant who made the plea or was a participant in the plea discussions: . . . (4) any statement made in the course of plea discussions with an attorney for the prosecuting authority which do not result in a plea of guilty or which result in a plea of guilty later withdrawn. However, such a statement is admissible (i) in any proceeding wherein another statement made in the course of the same plea or plea discussions has been introduced and the statement ought in fairness be considered contemporaneously with it, or (ii) in a criminal proceeding for perjury or false statement if the statement was made by the defendant under oath, on the record and in the presence of counsel. -4- Fed. R. Evid. 410. The history of Rule 410 is bound up with procedural rule governing guilty pleas – Federal Rule of Criminal Procedure 11 – and tracks a course toward the requirement that guilty plea discussions may enjoy some measure of confidentiality only if they involve an attorney for the government; conversations initiated by federal agents are not protected under that regime. Originally, the Sixth Circuit held that statements made to a law enforcement agent as part of an offer to plea bargain were not admissible at trial. United States v. Brooks, 536 F.2d 1137, 1139 (6th Cir. 1976). Federal Rule of Criminal Procedure 11 was amended in 1979 specifically to overturn cases such as Brooks. See, e.g., Fed. R. Crim. P. 11(e)(6) (1999) (“Except as otherwise provided in this paragraph, evidence of the following is not, in any civil or criminal proceeding, admissible against the defendant who made the plea or was a participant in the plea discussions: . . . (D) any statement made in the course of plea discussions with an attorney for the government which do not result in a plea of guilty or which result in a plea of guilty later withdrawn.”); United States v. Marks, 209 F.3d 577, 582 (6th Cir. 2000); see also Advisory Committee Notes to 1979 Amendments to Fed. R. Crim. P. 11(e)(6) (stating intention to overrule Brooks). At the same time, Federal Rule of Evidence 410 was modified in 1979 to “conform” to the amendments made to Fed. R. Crim P. 11. See Advisory Committee Notes to 1979 Amendments to Rule 410. Ultimately, in 2002 Fed. R. Crim P. 11 was reduced to its present form, which simply refers to Evidence Rule 410. But some of the earlier cases that discuss former Criminal Rule 11(e)(6) and the committee notes at the time of the amendments shed light on the present interpretation of the limits of Evidence Rule 410. -5- Although the language of the respective rules require the involvement of a state or government lawyer in plea discussions as a condition of protecting a defendant’s statements from disclosure, from the outset the rules were not viewed as rendering the simple absence of the prosecuting attorney from the room during discussions as dispositive. The Advisory Committee notes emphasized that the change “does not compel the conclusion that statements made to law enforcement agents, especially when the agents purport to have authority to bargain, are inevitably admissible.” Advisory Committee Notes to 1979 Amendments to Fed. R. Crim. P. 11(e)(6). In an unpublished opinion, the Sixth Circuit has held that “[t]his rule can be fairly read to apply to statements made to a government attorney during the course of plea discussions or to an agent whom the government attorney has authorized to engage in plea discussions.” United States v. O’Neal, 992 F.2d 1218, 1993 WL 133807, at *9 (6th Cir. Apr. 28, 1993) (per curiam) (citing United States v. Serna, 799 F.2d 842, 849 (2d Cir. 1986); United States v. Swidan, 689 F. Supp. 726, 728 (E.D. Mich. 1988 (emphasis added); see also United States v. Sikora, 635 F.2d 1175, 1178 (6th Cir. 1980) (Wiseman, J., dissenting). In United States v. Cross, 956 F.2d 1164, 1992 WL 48009, at **4- 5 (6th Cir. Mar. 13, 1992), the Sixth Circuit once again relied heavily on the Second Circuit’s decision in United States v. Serna, in which that court explained: The Notes of the Advisory Committee on Rules to the 1979 amendments indicate that the requirement of an attorney’s presence was added to prevent the exclusion of statements made to government agents when there had been no participation of a government attorney. See, e.g., United States v. Herman, 544 F.2d 791 (5th Cir. 1977). We think the rule can be fairly read to require the participation of a government attorney in the plea discussions, but not necessarily his physical presence when a particular statement is made to agents whom the attorney has authorized to engage in plea discussions. Serna, 799 F.2d at 849. -6- This Court adopts that reasoning as well. It is the involvement of a government attorney in the negotiation process, not his physical presence at the debriefing, that triggers the application of Rule 410. See United States v. Swidan, 689 F. Supp. 726 (E.D. Mich. 1988) (holding that defendant’s statements to agent protected by Fed. R. Evid. 410 where investigating agent found to be middleman between prosecutor and defendant). From the language of Mr. Morey’s Kastigar letter, it is apparent that an AUSA authorized and approved the meeting. In addition, the police report notes that the defendant’s participation in the meeting was “based upon a proffer agreement proposed by the United States Attorney’s office.” There is little doubt that the discussion was sanctioned – and maybe even initiated – by an attorney for the government. But the government suggests that the purpose of the meeting was not to negotiate a plea; rather it was to see if the defendant had enough information to interest the government in starting plea negotiations, or possibly he might convince the government to abandon its case against him. Perhaps there is a distinction between a meeting in the nature of plea negotiations and one in which the parties’ interest in embarking on plea discussions is assessed. However, if a line can be drawn between the two, it is not bold enough to withstand Rule 410’s effect. The Court believes that such meetings, characterized as “preliminary discussions” and “proffers” by the government, constitute plea negotiations, albeit, perhaps, only in their nascent stages. Nonetheless, admissions, concessions, revelations, or confessions made by a defendant (or a putative defendant) during such a conference fairly are characterized as “statement[s] made in the course of plea discussions” within the meaning of Rule 410, and as such the defendant enjoys immunity from the use of those statements within the limits of Rule 410. -7- The government proposes that it will not use Ross’s alleged statements from July 2003 in its case-in-chief, but it may use them to impeach Ross or in rebuttal. That proposal tracks the terms of the “Kastigar letter.” “The Supreme Court’s decision in Kastigar v. United States, 406 U.S. 441 (1972), provides the applicable framework for evaluating a claim that the government used immunized testimony to secure a conviction.” United States v. Orlando, 281 F.3d 586, 594 (6th Cir. 2002). The letter in this case apparently was intended to lay out the scope of immunity and the accepted uses for the testimony. The problem, of course, is that the letter was never signed, or at least the government has no proof that it was. Letters of this nature have been characterized as offers of “pocket immunity,” not statutory immunity for which a Kastigar hearing was required, and the parties “can only seek contractual remedies” for enforcement. United States v. Mendizabal, 214 F. App’x 496, 502 (6th Cir. Dec. 20, 2006). There is no proof of a parallel oral agreement, and the unsigned letter is no more enforceable than an unsigned contract. The Court concludes, therefore, that the government may not offer in evidence statements allegedly made by defendant Ross during his meeting with government agents in July 2003. II. The second group of statements were made by Mr. Ross during the booking procedure that followed the arrest on the current indictment. On October 18, 2007, Ross was arrested for the present case. He was given his Miranda warning and was transported to the Detroit field office for processing. According to the agent’s report, during processing, Ross made the following statements: 1. Ross made statements to the effect of hoping federal prison was better than state prison and that he hoped they sold protein supplements in federal prison like they did in state prison. 2. When asked where he worked Ross stated that he was unemployed and that we knew what he did. -8- 3. Ross stated that he wanted to hurry up and get to Milan so he could start lifting weights. Def.’s Mot., Ex. C (December 18, 2007 arrest report). Ross argues that the 2007 booking statements also should be excluded because they are unfairly prejudicial. Statements 1 and 3, he says, suggest that the defendant has knowledge of the criminal justice system, inviting a forbidden inference under Fed. R. Evid. 404. He contends that this improper purpose outweighs the meager probative value these statements would furnish. To a lesser extent, he argues that statement 2 is prejudicial as well. The government concedes that the reference in statement 1 to Ross’s prior state prison experience should not be related to the jury. But it insists that Ross’s suggestion that he was headed to federal prison indicates guilty knowledge, and the evidence should be received on that basis. Although “evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence” is relevant, Fed R. Evid. 401, such “evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence,” Fed R. Evid. 403. “Probative value and need for the evidence are separate considerations that weigh in favor of admission under the Rule 403 balancing test.” See Fed. R. Evid. 403 advisory committee’s note (stating that the rule involves ‘balancing the probative value of and need for the evidence against the harm likely to result from its admission’) (emphasis added .” United States v. Stout, 509 F.3d 796, 800 (6th Cir. 2007). “‘Unfair prejudice’ does not mean the damage to a defendant’s case that results from the legitimate probative force of the evidence.” United States v. Bonds, 12 F.3d 540, 567 (6th Cir. 1993) -9- (internal quotes and citation omitted); see also Koloda v. General Motors Parts Div., General Motors Corp., 716 F.2d 373, 378 (6th Cir. 1983) (stating “[o]f course, ‘unfair prejudice’ as used in Rule 403 is not to be equated with testimony simply adverse to the opposing party. Virtually all evidence is prejudicial or it isn’t material. The prejudice must be ‘unfair’” (internal quotations omitted . Instead, the concept of “unfair prejudice” is comprised of two distinct notions: First, when the evidence may tend to prove more than one proposition and thus could be considered for both a proper and an improper purpose, unfair prejudice can result when the improper purpose overwhelms or substantially overshadows any legitimate basis for receiving the evidence. See United States v. Vandetti, 623 F.2d 1144, 1149 (6th Cir. 1980) (quoting Advisory Comm. Note to R. 403, stating, “ ‘Unfair prejudice’ within its context means an undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one”). Second, unfair prejudice can result when evidence that is only marginally probative tends to be given preemptive weight by the jury substantially out of proportion to its logical force. See Sutkiewicz v. Monroe Cnty. Sheriff, 110 F.3d 352, 360 (6th Cir. 1997) (stating that “[o]therwise relevant evidence may permissibly be excluded if it serves to inflame the passions of the jury”); Vandetti, 623 F.2d at 1149 (observing that evidence of a witness's invocation of his Fifth Amendment right before the jury raised “a real danger that . . . [it] may be given undue weight” to the evidence “although it is entitled to none in the law”). Dresser v. Cradle of Hope Adoption Center, Inc., 421 F. Supp. 2d 1024, 1030 (E.D. Mich. 2006); see also Old Chief v. United States, , 180 (1997) (quoting Advisory Committee’s Notes on Fed. R. Evid. 403). The Court agrees with the government that evidence tending to show the defendant’s guilty knowledge is relevant, especially in light of the low threshold for relevance established by Federal Rule of Evidence 401. Cf. United States v. Jackson, 55 F.3d 1219, 1226 (6th Cir. 1995) (holding that guilty knowledge can be inferred from fleeing from police officers and giving an implausible story). The probative value of such evidence is not particularly compelling, however, and its relevance depends upon a chain of inferences. See United States v. Dillon, 870 F.2d 1125, 1127 (6th -10- Cir. 1989) (considering evidence of flight, and observing that “the probative value of flight evidence depends upon the degree of confidence with which four inferences can be drawn: (1) from the defendant's behavior to flight; (2) from flight to consciousness of guilt; (3) from consciousness of guilt to consciousness of guilt concerning the crime charged; and (4) from consciousness of guilt concerning the crime charged to actual guilt of the crime charged” (internal quotations omitted . The defendant points to the general prohibition against evidence of a character trait offered to prove conduct embodied in Rule 404(a) (“Evidence of a person’s character or a trait of character is not admissible for the purpose of proving action in conformity therewith on a particular occasion”), and contends that evidence that Ross was in prison before would allow the jury to infer that he is not law abiding and therefore more likely to have committed the crime charged. See United States v. Lattner, 385 F.3d 947, 956 (6th Cir. 2004) (stating that “the law is clear that evidence of past criminal activity is inadmissible to show criminal propensity”). He argues that not only the direct reference to state prison should be prohibited, but the reference to lifting weights should be excluded as well because a juror who has seen popular (?) television shows about prison life would know that weigh-lifting was a pastime of prison inmates. The Court agrees that evidence that Ross was in state prison is unfairly prejudicial because it could be used for an improper purpose. Such evidence has no legitimate probative value. But evidence that Ross was predicting his own trip to federal prison – either to gain access to protein supplements or to commence his personal weight training program – does not suggest past involvement with a prison system or past criminal activity. That evidence is not unfairly prejudicial. Likewise, statement 2 indicates that the defendant has no legitimate employment and that the agents -11- know of the defendant’s other – perhaps illicit – activities. Although the reference to unemployment might suggest improperly that poverty is a motive for the thefts in this case, see United States v. Zipkin, 729 F.2d 384, 390-91 (6th Cir. 1984), the Court does not believe the possibility that the jury would draw such an inference substantially outweighs the probative value of the evidence. If the defendant detects that the jury might draw an improper inference from that evidence, the defendant may propose a limiting instruction under Rule 105. Finally, the Court previously granted the government’s motion in limine to bar the defendant from offering evidence of alleged police misconduct at the time of his arrest at his house in October 2007 because the government did not intend to offer any evidence arising from that arrest. The defendant points out that his mention of protein supplements during booking referenced an earlier conversation that took place at the time of the arrest. If that is the case and the government offers statement 1, then the Court will permit the defendant to inquire about the full circumstances of the statement so that it may be considered in its proper context. III. The Court finds that the defendant’s statements from July 2003 were made in the course of plea discussions with the government. They are inadmissible. References made in the booking statements in October 2007 to the defendant’s past prison encounters are more prejudicial than probative. The remainder of the statements are allowable. Accordingly, it is ORDERED that defendant Ross’s motion in limine [dkt #208] is GRANTED IN PART AND DENIED IN PART. The government may not offer evidence of the defendant’s statements during the July 2003 meeting with agents of the government, and the government may not offer portions of the October 2007 booking statements that reference state -12- prison or past incarceration of the defendant. If the government chooses to offer other parts of the booking statements, it shall redact them to comply with this order and caution its witnesses to honor the limitations described in this opinion and order. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: November 25, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on November 25, 2008. s/Felicia M. Moses FELICIA M. MOSES -13-

=== Crockett Opinion on Motions in limine ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. VINCENT L. CROCKETT, __________________________________/ Defendant. Case Number 07-20477 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART AND DENYING IN PART GOVERNMENT’S MOTION IN LIMINE AND GRANTING IN PART AND DENYING WITHOUT PREJUDICE IN PART DEFENDANT’S MOTION IN LIMINE Defendant Vincent Crockett is a former Detroit police officer charged in this case with several counts arising out of the apparent theft of cocaine from the department’s evidence room. On May 30, 2008, the government filed a motion to exclude evidence of wrongdoing committed by the firearms unit of the Detroit police crime laboratory, evidence of cocaine theft committed by other narcotics officers, and character witness testimony regarding the absence of misconduct by the defendant and on the ultimate issue of guilt or innocence. The defendant also filed a motion in limine: to exclude the laboratory test results that indicated the substance initially lodged in the property room was cocaine, because the chemist who conducted the test is now deceased. The Court held a hearing on the motions on June 25, 2008 and ordered the parties to file supplemental briefs. Those filings have been received. The Assistant United States Attorney also stated an intention to seek a second superseding indictment adding more charges, which may have an impact on the pending motions. However, that has not been forthcoming, and the motions are ready for decision. The Court finds that evidence of irregularities in the firearms unit of the Detroit police crime laboratory ought not to be admitted, evidence suggesting alternate suspects is relevant, and the defendant’s proposed character evidence is admissible, provided it is in the proper form. In addition, evidence consisting of the laboratory printouts from the gas chromatography and mass spectrometry will be admissible if the government can establish a proper foundation at trial. Although the prospect of the government being able to establish such a foundation without a Confrontation Clause violation is far from assured, the Court cannot rule out that possibility at this time. Therefore, the Court will grant in part and deny in part the government’s motion in limine and grant part of the defendant’s motion in limine and deny the balance without prejudice. I. According to the indictment, it appears that the government’s theory of the case is that defendant Vincent Crockett removed a large quantity of cocaine from the Detroit Police Department property room and several weeks later returned a non-controlled substance in its place. In July 2005, officers from the Detroit Police Department seized from Lindell Brown a substance weighing over six kilograms and logged the evidence into the property room, placing it in a bag with identification number NO1906205. The substance was conveyed by Officer Rydell Smith to the Detroit Police Department forensics laboratory on June 13, 2005. Laboratory tests were performed by chemist Michael Williams, who determined that the substance was cocaine. After testing was completed, Mr. Smith picked up the bag and returned it to the evidence room. The government alleges that the defendant signed out the substance in item NO1906205 on March 27, 2007, and he returned the bag on July 13, 2007. Thereafter, the substance was retested by Mr. Williams, who determined that the substance was not cocaine but rather a different compound. -2- George Chirackal, another forensic chemist with the Detroit Police Department, reviewed Mr. Williams’s initial report pursuant to department policy, although he did no testing himself, nor did he witness Williams perform his work. According to an FBI interview, Mr. Chirackal merely reviewed the findings of Williams and had not conducted an analysis on his own. Chirackal reviewed the analysis report and confirmed lab numbers were consistent on each laboratory analysis document related to Lock Seal# N01906205. Chirackal reviewed the lab charts, and weights that confirmed the sample was cocaine. Chirackal advised that the report showed that Williams had conducted three presumptive tests: the Cobalt Thiocyanate test, Travinkoff’s Reagents test and the Micro Crystal test. All three test [sic] indicated positive for the presence of cocaine. Chirackal advised that the analysis report showed Williams then conducted two confirmatory tests which included the Gas Chromography – Mass Spectrometer test and the Infrared Spectrometer test. Again the analysis report confirmed the tested sample was cocaine. Chirackal stated it is policy that after a sample is analyzed the source of where the sample was drawn from is secured in the lab’s vault. After reviewing the analysis’ report of Lock Seal# N01906205, Chirackal agreed with Williams’ analysis report and advised that nothing unusual stood out or was out of the ordinary when reviewing the analysis report. Def.’s Resp. to Govt’s Request, Ex. A. Mr. Chirackal did not participate in the retesting of the substance. Instead, senior forensic chemist Gayle O’Neal reviewed Mr. Williams’s second test protocols. Notes from a June 2, 2008 FBI interview discuss the response taken after the substance was returned: O’NEAL learned that there were concerns that the drugs had been tampered with and that a re-analysis of the evidence had been ordered. MICHAEL WILLIAMS, who had performed the initial testing of the evidence, Lab Number N05-2253, was assigned to complete the re-analysis. . . . O’NEAL conducted the peer review on WILLIAMS’ re-analysis. WILLIAMS concluded, and O’NEAL concurred, that CROCKETT had returned an inert substance to the property room. O’NEAL performed the peer review on another lock seal folder that CROCKETT had handled. O’NEAL concurred with WILLIAMS’ findings that the drugs had been reduced slightly in weight and had changed in appearance. O’NEAL concluded that the drugs had been “stepped on” or diluted. -3- O’NEAL described WILLIAMS as a very thorough and very competent chemist. Def.’s Resp. to Govt’s Request, Ex. C. The defendant points out that there apparently are three other questionable incidents involving missing cocaine from the Detroit Police Department property room. The first incident involves evidence bag NO396185. In December 2006, Rydall Smith delivered this bag to the Detroit Police Department forensic lab, where the substance was tested by Christopher Kiyak, who concluded that it was cocaine. At the time, it weighed 375.42 grams. On July 13, 2007, Mr. Crockett returned the bag to the property room (presumably having checked it out at an earlier time, which is not reported in the record). On July 18, 2007, the bag was conveyed from the property room to the forensic lab by Mr. Smith. The substance was retested by Mr. Kiyak, and found to weigh 373.26 grams. In another incident, Mr. Smith delivered evidence bag NO2840805 containing three substances to the Detroit Police Department forensic laboratory, where it was tested by Mr. Williams. Mr. Williams found that each of the substances was cocaine, and the substances weighed 1014.73 grams, 623.19 grams, and 4.32 grams, respectively. The defendant checked out this evidence on March 22, 2007 and returned it on July 13, 2007. Mr. Smith reconveyed the bag to the forensic laboratory on July 17, 2007, where Mr. Williams found that the substances only weighed 980.50, 612.70, and 3.80 grams, and they were diluted. The third incident involves evidence bag NO2840905. On January 12, 2007, Mr. Smith delivered the bag containing seven substances to the DPD forensic lab. Mr. Williams tested the substances and discovered that substances “A,” “B-1,” “B-2,” and “C” were cocaine, and weighed 40 grams, 2.64 grams, 3.44 grams, and 62.06 grams, respectively. Substances “D-1” and “D-2” did -4- not contain any cocaine, and substance “E” contained an insufficient amount to run an analysis. Mr. Crockett removed the evidence bag and returned it on July 13, 2007. On July 17, 2007, Mr. Smith took the evidence bag to the forensic lab, where Mr. Williams retested and reweighed the contents. Substance “A,” “B-1,” “B-2,” and “C” were still cocaine, but now weighed 34.74 grams, 2.60 grams, 3.33 grams, and 60.73 grams, respectively. Substances “D-1” and “D-2” still contained no controlled substance, and substance “E” did not contain an amount sufficient to analyze. The government reports that Mr. Williams passed away recently, and there is nothing in the record to suggest that Mr. Crockett was involved in his demise. It appears that the Detroit Police Department crime laboratory has been plagued with difficulty in the form of inaccurate test results and misconduct by some of its employees. At the time the present motions were filed, most of that misconduct was attributed to the laboratory’s firearms unit. The defendant intends to introduce evidence of that misconduct, evidence of other police officers stealing cocaine, and character witnesses in his favor. To overcome the difficulty of its deceased expert witness, Michael Williams, the government seeks to introduce the testimony of Chirackal, Hartzell, and O’Neal, who were involved in some manner with reviewing William’s reports of testing the cocaine. Each side has filed motions in limine directed at the other side’s evidence. II. The government seeks to exclude three types of evidence: evidence of bad acts by other officers, evidence of specific good conduct by the defendant, and any witness’s opinion as to the guilt or innocence of the defendant. -5- A. The government’s concern over evidence of other officers’ misconduct falls into three categories: allegations appearing in recent media reports of inaccuracies involving the firearms unit of the Detroit Police Department’s crime laboratory; the facts and circumstances involved in another prosecution in this District involving Detroit Police Officers accused of stealing drugs from the property room; and any other allegation of misconduct involving Detroit Police Officers, including narcotics officers. The government contends that this evidence is irrelevant to the charges in the indictment, but if relevant it is only marginally so, and the relevance is substantially outweighed by the danger of unfair prejudice to the government. The defendant disputes each of these points. Although “evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence” is relevant, Fed R. Evid. 401, such “evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence,” Fed R. Evid. 403. “Probative value and need for the evidence are separate considerations that weigh in favor of admission under the Rule 403 balancing test.” See Fed. R. Evid. 403 advisory committee’s note (stating that the rule involves ‘balancing the probative value of and need for the evidence against the harm likely to result from its admission’) (emphasis added .” United States v. Stout, 509 F.3d 796, 800 (6th Cir. 2007). The concept of “unfair prejudice” is comprised of two distinct notions: First, when the evidence may tend to prove more than one proposition and thus could be considered for both a proper and an improper purpose, unfair prejudice can result when the improper purpose overwhelms or substantially overshadows any legitimate basis for receiving the evidence. See United States v. Vandetti, 623 F.2d 1144, 1149 -6- (6th Cir. 1980) (quoting Advisory Comm. Note to R. 403, stating, “ ‘Unfair prejudice’ within its context means an undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one”). Second, unfair prejudice can result when evidence that is only marginally probative tends to be given preemptive weight by the jury substantially out of proportion to its logical force. See Sutkiewicz v. Monroe Cnty. Sheriff, 110 F.3d 352, 360 (6th Cir. 1997) (stating that “[o]therwise relevant evidence may permissibly be excluded if it serves to inflame the passions of the jury”); Vandetti, 623 F.2d at 1149 (observing that evidence of a witness's invocation of his Fifth Amendment right before the jury raised “a real danger that . . . [it] may be given undue weight” to the evidence “although it is entitled to none in the law”). Dresser v. Cradle of Hope Adoption Center, Inc., 421 F. Supp. 2d 1024, 1030 (E.D. Mich. 2006); see also Old Chief v. United States, , 180 (1997) (quoting Advisory Committee’s Notes on Fed. R. Evid. 403). As the defendant pointed out, the Sixth Circuit has suggested that “[t]he prejudice envisioned by Rule[] 403 . . . is prejudice to a criminal defendant,” and the Court should be aware that the overriding concern of the Sixth Circuit’s development of factors to guide the 403 inquiry is to “ensure[] that the defendant will receive a fair trial.” United States v. Smith, 736 F.2d 1103, 1107 (6th Cir. 1984) (emphasis in original). However, other considerations allow the Court to limit the defendant’s evidence, such as confusion of the issue or waste of time. See United States v. Blackwell, 459 F.3d 739, 753 (6th Cir. 2006). The defendant argues that evidence of inaccuracies reported in the firearms unit is relevant because it tends to show that the Detroit Police crime laboratory has failed to exercise appropriate oversight and supervision over property and laboratory testing, which in turn may support an inference that someone other than Mr. Crockett could have taken the cocaine. Although the firearm unit is a different unit, the defendant points out that it is part of the same crime laboratory. In a supplemental brief, the government furnished the organizational structure of the forensics laboratory, which confirmed that Michael Williams and other forensic chemists report to -7- Gayle O’Neal. The other forensic units at the crime laboratory appear to have different forensic personnel who report to their own respective supervisors. None of the personnel in the units, including direct supervisors, overlap. However, Ms. O’Neal and the supervisor of the firearms laboratory fall under the ultimate authority of Paula Lytle, the Third Deputy Chief of Police. They also appear to report to Sergeant Paul Hartzell and Lieutenant Bilal Muhammad in Administration. The link between workers in the drug laboratory and the firearms unit is quite tenuous. Different individuals work in each laboratory, and each laboratory has a distinct supervisor. The only way that evidence of wrongdoing in one division can be imputed to the other is through the laboratory supervisors’ common supervisor. The inference the defendant appears to rely upon is that wrongdoing in the firearms unit demonstrates a willingness to tolerate sloppiness by the administration, which then implies there is carelessness or even misconduct in the chemistry laboratory. During oral argument, defense counsel described this link as “incompetence, lack of accountability, lack of oversight.” Even if “lack of accountability” is established in the firearms unit, however, the defendant must rely on an inference that Ms. O’Neal, the drug laboratory supervisor, then permitted “incompetence” in her unit, which somehow translates into a breakdown of security measures relating to the storage of controlled substances. The relevance of this evidence is only marginal at best, and the danger that the jury would be confused by a presentation of this tangential proof substantially outweighs any proper purpose for which the evidence might be offered. Therefore, the Court will grant the government’s motion as to evidence of irregularities in the firearms unit of the crime laboratory. Proof that other officers may have taken the cocaine from the property room or at other waypoints as the evidence traveled along the chain of custody, however, certainly is relevant. In -8- fact, it appears to be the heart of the defense. Evidence from which a jury could infer that other officers stole the cocaine – including evidence that others had access to it, had stolen cocaine in the past, or had committed irregularities in handling drug evidence – is relevant, and its relevance is not outweighed by the danger of jury confusion or unfair prejudice. B. In seeking to exclude evidence of past honest behavior by the defendant, the government acknowledges that evidence of a pertinent character trait of the accused offered to show that he likely did not commit the crime is expressly allowed by Federal Rule of Evidence 404(a)(1). The government points out, however, that the defendant is limited in its method of proving such a character trait. The government is correct. Character evidence may be introduced for this purpose only “by testimony as to reputation or by testimony in the form of an opinion.” Fed R. Evid. 405(a). “On cross-examination, inquiry is allowable into relevant specific instances of conduct.” Ibid. The defendant will not be permitted to prove a pertinent character trait by offering evidence of specific instances of good conduct. However, to support the character witness’s opinion or testimony of the defendant’s reputation, the witness may testify that the defendant is a good person and the witness was unaware of the defendant committing any illegal activities. See United States v. Matthews, 440 F.3d 818, 825 (6th Cir. 2006); United States v. Green, 305 F.3d 422, 431 (6th Cir. 2002). C. Finally, the government contends that the defendant’s witnesses should not be permitted to offer their opinion that the defendant is innocent of the charged crimes. Testimony by character witnesses as to whether they believe Mr. Crockett is the type of person who would take drugs from -9- the police evidence room is proper character testimony. However, the opinion of such witnesses as to whether the defendant is actually guilty or innocent does not advance the inquiry at all. Such evidence does not meet the very low threshold for relevance established by Federal Rule of Evidence 401. III. The defendant objects to certain evidence of drug test results, first addressing any government attempt to introduce the testimony of police officer John Dembinski, who performed a field test known as a “presumptive test” or “Travnikoff test” performed on the cocaine. Officer Dembinski presumably would testify as to his opinion that the substance field-tested contained cocaine, but the defendant contends testimony about the “Travnikoff test” would be expert testimony that is not reliable and will fail to satisfy Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., (1993). However, the government stated at the motion argument that it has no intention to rely upon the Travnikoff test and will make no argument as to its admissibility. Therefore, the Court will grant the defendant’s motion in limine as to that evidence. The more interesting argument by the defendant is that surrogates should not be able to give evidence of the results of Michael Williams’s testing. The government notes that in United States v. Moon, 512 F.3d 359 (7th Cir. 2008), the Seventh Circuit approved testimony that is very similar to that proposed here. An expert witness who did not perform the drug analysis testified that the substance was cocaine based on a former chemist’s gas chromatograph and infrared spectrometer data. Similarly, in United States v. Washington, 498 F.3d 225 (4th Cir. 2007), the court approved the admission of expert testimony from a toxicologist who relied on the defendant’s toxicology tests -10- results, finding that the data generated by the laboratory’s diagnostic machines were not testimonial statements. The defendant argues that laboratory data is testimonial under the Sixth Circuit’s broad definition in United States v. Cromer, 389 F.3d 672, 674 (6th Cir. 2004). He suggests that Moon and Washington were wrongly decided and conflict with the Supreme Court’s instruction in Crawford v. Washington, (2004), and notes that the Supreme Court has granted certiorari in a case raising a related issue. See Melendez-Diaz v. Massachusetts, 128 S. Ct. 1647 (2008) (argued November 10, 2008). Apparently, in this case the government proposes to have another expert witness testify after examining the printouts from the laboratory instruments Mr. Williams used to test certain drug samples and interpret those readings for the jury. That course of action raises potential issues implicating the rule against hearsay and the Confrontation Clause. One aspect of the matter is whether there is a bar to the use of the printouts themselves. Other courts have had no trouble concluding that readings from laboratory instruments implicate neither the hearsay rule nor the Confrontation Clause. See Washington, 498 F.3d at 231; Moon, 512 F.3d at 362; United States v. Richardson, 537 F.3d 951, 959-960 (8th Cir. 2008). This Court agrees. The instrument readouts and printouts are not “statements” within the meaning of the Federal Rule of Evidence 801(a), which defines the term to mean “an oral or written assertion or . . . nonverbal conduct of a person.” Fed. R. Evid. 801(a) (emphasis added). Laboratory instruments and machines are not “persons,” and their readouts and indications are not “statements.” See United States v. Hamilton, 413 F.3d 1138, 1142-43 (10th Cir. 2005) (concluding that the computer-generated header information accompanying pornographic images retrieved from the Internet was not a hearsay statement because there was no “person” acting as a declarant); United States v. Khorozian, 333 F.3d 498, 506 (3d Cir. -11- 2003) (concluding that an automatically generated time stamp on a fax was not a hearsay statement because it was not uttered by a person). Consequently, admitting the laboratory test results of Mr. Williams’s mass spectrometer and gas chromatograph would not violate the hearsay rule (by definition) or the Confrontation Clause (by implication). See Washington, 498 F.3d at 231 (holding that “the raw data generated by the machines do not constitute ‘statements,’ and the machines are not ‘declarants.’ As such, no out-of-court statement implicating the Confrontation Clause was admitted into evidence through the testimony of Dr. Levine”). For a similar reason, allowing a qualified witness to interpret those readouts for the jury would not run afoul of either the rule against hearsay or the Confrontation Clause because the witness would be in court giving testimony and subject to cross-examination. See United States v. Goosby, 523 F.3d 632, 638 (6th Cir. 2008) (“There is also no Confrontation Clause violation because Gibeault did not make statements that would be characterized as testimonial hearsay.”); United States v. Hunt, 521 F.3d 636, 644 (6th Cir. 2008) (“[T]he purpose of the Confrontation Clause is to guarantee defendants an opportunity to cross-examine and attack the credibility of witnesses and hearsay declarants.”). That is not the end of the matter, however. In order for the laboratory printouts to be received in evidence, they would have to be authenticated. The government would have to establish that they are “what its proponent claims.” Fed. R. Evid. 901(a). Two more potential issues arise from that requirement: whether the laboratory equipment produced scientifically sound results; and whether the substance tested actually was the substance that the defendant later checked out of the property room. -12- Addressing the first issue, Federal Practice and Procedure neatly lays out the distinction between authentication rules and expert witness rules: Whether Rule 901 or Rule 702 governs the admissibility analysis is a function of the type of reliability problem posed by the evidence. Rule 901 normally controls where there is no question as to the general reliability of the technology employed by the machine and the only question is whether the machine is in good working order. Rule 702 applies where the question is not whether the machine is in good working order but, rather, whether the technology employed by the machine is valid and the data produced by the machine is reliable evidence of the fact it is offered to prove. 31 Fed. Prac. & Proc. § 7103. There is no challenge to the technology here. Gas chromatography and infrared spectrometry have long been recognized as valid technological methods for determining the composition of physical substances. See United States v. Distler, 671 F.2d 954, 962 (6th Cir. 1981) (applying pre-Daubert standard to find that gas chromatography was admissible); United States v. Metzger, 778 F.2d 1195, 1203-04 (6th Cir. 1985) (holding that use of thin-layer chromatography to determine presence of a chemical satisfied Rule 702 and noting that “Defendant does not dispute that thin-layer chromatography is an accepted scientific technique”); see also Skinner v. Railway Labor Executives’ Ass’n, 489 U.S. 602, 610 n. 3 (1989) (opining that “gas chromatography/mass spectrometry . . . if properly conducted, identify the presence of alcohol and drugs in the biological samples tested with great accuracy”); United States v. Law, 528 F.3d 888, 913 (D.C. Cir. 2008); United States v. Vitek Supply Corp., 144 F.3d 476, 485-86 (7th Cir. 1998). How the government will prove that Mr. Williams actually tested the substance that was lodged in the property room is not readily apparent, however. This issue was not discussed in the cases dealing with admission of laboratory test results through an expert who did not do the testing. See, e.g., Washington, 498 F.3d at 230 (“The value of cross-examination might relate to authentication or to a description of the machine or to the chain of custody, but none of these were -13- issues at trial, nor are they issues on appeal.”) The government’s new expert might rely on the laboratory report prepared by Mr. Williams, but that reliance raises hearsay and Confrontation Clause concerns. In 2004, the Supreme Court held that the Confrontation Clause prohibited the admission of out-of-court testimonial statements absent “unavailability and a prior opportunity for cross-examination.” Crawford v. Washington, , 68 (2004). Two years later, the Court clarified the definition of “testimonial” statements in Davis v. Washington, 547 U.S. 813 (2006), stating: Statements are nontestimonial when made in the course of police interrogation under circumstances objectively indicating that the primary purpose of the interrogation is to enable police assistance to meet an ongoing emergency. They are testimonial when the circumstances objectively indicate that there is no such ongoing emergency, and that the primary purpose of the interrogation is to establish or prove past events potentially relevant to later criminal prosecution. Id. at 822. Applying these guidelines, the great majority of legal commentators subscribe to the view that laboratory reports ought to be deemed testimonial. See, e.g., Edward J. Imwinkelried, “ This is Like Deja Vu All Over Again”: The Third, Constitutional Attack on the Admissibility of Police Laboratory Reports in Criminal Cases, 38 N.M. L. Rev. (forthcoming 2008) (“Imwinkelried”), available at http://www.ssrn.com/abstract=1080059; Pamela R. Metzger, Cheating the Constitution, 59 Vand. L. Rev. 475, 504-05 (2006) (“Metzger”); Jennifer Mnookin, Expert Evidence and the Confrontation Clause after Crawford v. Washington, 15 J.L. & Pol'y 791, 797-801 (2007) (“Mnookin”); Recent Case, United States v. Feliz, 467 F.3d 227 (2d Cir. 2006), 120 Harv. L. Rev. 1707 (2007); see also 1 Paul C. Giannelli & Edward J. Imwinkelried, Scientific Evidence §6.04(c) n.233 (4th ed. 2007) (“Giannelli & Imwinkelried”) (collecting cases for the proposition that “lab reports are testimonial in nature”); David Kaye, David Bernstein & Jennifer Mnookin, The New -14- Wigmore § 3.10 (2007 Supp.). This Court agrees. Those reports are prepared with the primary intent of “establish[ing] or prov[ing] past events potentially relevant to later criminal prosecution.” Davis, 547 U.S. at 822. That was plainly the case with the evidence seized from Lindell Brown. Of course, under Federal Rule of Evidence 703, an expert may rely on information “perceived by or made known to the expert at or before the hearing,” and “the facts or data need not be admissible in evidence in order for the opinion or inference to be admitted.” Fed. R. Evid. 703. However, the rules of evidence must succumb to the defendant’s Sixth Amendment rights, including the right to confront witnesses, when there is a conflict. Crawford, 541 U.S. at 61 (holding that the Sixth Amendment is not subject to the “vagaries of the rules of evidence”). In United States v. Stone, 432 F.3d 651, 654 (6th Cir. 2005), the Sixth Circuit suggested that an expert witness may not rely on testimonial hearsay in a criminal case, although the Court found that the expert actually relied only on evidence that was properly admitted. The Court dealt with a Crawford challenge to an expert witness’s testimony as follows: Defendants, however, do not point to any testimony by Agent Cantrell that was not supported by prior in-court witness testimony or by documents properly admitted into evidence. In fact, the Government points to an exchange in which Agent Cantrell indicated that her expert opinions were based on witness testimony and documents properly admitted into evidence. Because Defendants do not establish that Agent Cantrell relied on out-of-court interviews of witnesses not called to testify, their Crawford argument is not well taken. As this Crawford argument is the only assignment of error relating to guilt Defendants make on appeal, their convictions are affirmed. Id. at 654. The Court then noted that the expert witness did rely on testimonial hearsay when he testified during the sentencing phase, but that the Crawford confrontation rights do not extend to that phase of the proceeding. Ibid. -15- The Second Circuit cited Stone, but reached a slightly different result in United States v. Lombardozzi, 491 F.3d 61, 73-74 (2d Cir. 2007). The court held that the district court did not commit plain error because the expert’s testimony “was fully supported by evidence that can in no way be considered testimonial,” and therefore the expert was not “directly conveying” to the jury testimonial hearsay. Id. at 73. Similarly, the D.C. Circuit recently held that relying on, but not relating to the jury, testimonial hearsay did not violate the Confrontation Clause. United States v. Law, 528 F.3d 888, 912 (D.C. Cir. 2008). The information in that case covered the broad spectrum of a narcotics officer’s interviews over several years, upon which he formed his opinions of how drug dealers operate. The present case presents a different problem. In order for the expert’s opinion on whether the laboratory instrument readings indicate cocaine to be relevant, there must be information in the record to prove what was tested. See United States v. Grant, 967 F.2d 81, 82-83 (2d Cir. 1992) (“In order for the chemist’s testimony to be relevant, there must be some likelihood that the substance tested by the chemist was the substance seized at the airport. The government’s failure to establish a chain of custody from the moment the substance was seized to the time it was subjected to laboratory analysis makes this less likely, and thus casts some doubt on the admissibility of the chemist’s testimony.”) In other words, the government must offer evidence that establishes a foundation for the test results that satisfies the Court making the admissibility decision under Rules 104 and 901, but there also must be evidence from which a rational juror could conclude that Williams tested the substance later removed from the property room by the defendant. See Douglass v. Eaton Corp., 956 F.2d 1339, 1348 (6th Cir. 1992) (Ryan, J., concurring), abrogated on other grounds by Weisgram v. Marley Co., 528 U.S. 440 (2000). Williams’s report cannot furnish that -16- link without violating the hearsay rule and the Confrontation Clause. Rule 703 states: “Facts or data that are otherwise inadmissible shall not be disclosed to the jury by the proponent of the opinion or inference unless the court determines that their probative value in assisting the jury to evaluate the expert's opinion substantially outweighs their prejudicial effect.” But even this balancing test, heavily weighted in favor of exclusion, is not available to the government. The Crawford decision represents “a fundamental re-conception of the Confrontation Clause,” United States v. Cromer, 389 F.3d 662, 671 (6th Cir. 2004), and disavows the idea that judicial balancing tests can substitute for cross-examination. By allowing the court the option of admitting otherwise inadmissible evidence, for example, Rule 703 could be understood to contemplate the very judicial balancing that Crawford eschews. The Court concludes that Mr. Williams’s laboratory reports may not be used to authenticate the instrument printouts. However, there may be other methods by which the government could authenticate the exhibits. See generally Fed. R. Evid. 901(b). “Physical evidence is admissible when the possibilities of misidentification or alteration are ‘eliminated, not absolutely, but as a matter of reasonable probability.’” United States v. Allen, 106 F.3d 695, 700 (6th Cir. 1997) (quoting United States v. McFadden, 458 F.2d 440, 441 (6th Cir. 1972 . At oral argument, the government insisted that it would be able to establish a chain of custody of the cocaine and prove – without resort to inadmissible hearsay – that the laboratory printouts from Mr. Williams’s testing related to the drugs that eventually were removed from the property room and replaced with non- controlled substances. The Court cannot rule out the possibility that the government might succeed in that effort, and it will not foreclose the government’s attempts. Therefore, the Court will deny -17- the defendant’s motion in limine at this time insofar as it relates to evidence of the composition of the substance removed from the property room. IV. The Court finds that the defendant’s proposed evidence of allegations appearing in recent media reports of inaccuracies involving the firearms unit of the Detroit Police Department’s crime laboratory is irrelevant and inadmissible. However, evidence relating to the facts and circumstances involved in another prosecution involving Detroit Police Officers accused of stealing drugs from the property room, and other allegations of misconduct involving Detroit Police Officers, including narcotics officers, may be relevant and admissible at trial. The defendant may offer evidence of his own good character, but that evidence must take the form of reputation or opinion testimony, and the witnesses may not offer opinions on the guilt or innocence of the defendant in this case. The government’s evidence of the field tests of the substance in question is inadmissible, but the Court cannot declare at this time that evidence offered through Detroit crime laboratory employees as to the testing of the substance in question is inadmissible. Accordingly, it is ORDERED that the government’s motion in limine [dkt #29] is GRANTED IN PART AND DENIED IN PART. The defendant may not offer evidence of irregularities in the firearms unit of the Detroit police crime laboratory, and his character evidence may be offered only through testimony as to reputation or opinion, provided that no witness may testify to opinions on the guilt or innocence of the defendant in this case. It is further ORDERED that the defendant’s motion in limine [dkt #28] is GRANTED IN PART AND DENIED IN PART. The government may not offer evidence of the field test known as a “presumptive test” or “Travnikoff test” performed on the substance in question. However, the -18- government may attempt to establish a foundation for the laboratory instrument test results for the tests run by Michael Williams. It is further ORDERED that the parties shall appear before the Court for a status conference on November 24, 2008 at 4:00 p.m. to establish trial and other case management dates. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: November 14, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on November 14, 2008. s/Felicia M. Moses FELICIA M. MOSES -19-

=== Miller Opinion Adopting R&R ===

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. CHARLES MILLER, ______________________________________/ Defendant. Case Number 06-45 Honorable David M. Lawson OPINION AND ORDER ADOPTING MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION, OVERRULING DEFENDANT’S OBJECTIONS TO REPORT AND RECOMMENDATION, AND DIRECTING CLERK TO ISSUE WRIT OF GARNISHMENT The matter is before the Court on the defendant’s objections to the report filed by Magistrate Judge Joseph G. Scoville recommending that the defendant’s objections to a writ of garnishment be overruled. The United States sought the writ to recover funds from monthly distributions of the defendant’s pension plan in order to enforce the restitution order contained in the judgment of sentence. The defendant objected to the garnishment request claiming that it is prohibited by the anti-alienation provisions of the Employee Retirement and Income Security Act of 1974 (ERISA), the Court’s prior order directing quarterly payments of $25 which precludes a subsequent garnishment, the defendant’s wife’s interest in the pension benefits is superior to the government’s and therefore preempts the garnishment, and the defendant was misled into agreeing to the restitution amount during his plea negotiations. The defendant filed objections to the writ of garnishment on February 12, 2007. On March 7, 2007, the Court referred the objections to Magistrate Judge Scoville for report and recommendation. On April 30, 2007, the magistrate judge issued his report recommending that the writ be enforced because the defendant’s objections have no merit. On May 1, 2007, the defendant filed objections to the R&R. After conducting a de novo review of the matter, the Court finds the defendant’s objections to the garnishment and the magistrate judge’s report lack merit. Therefore, the Court will overrule the objections and order the clerk to issue the writ of garnishment allowing 25% of the defendant’s pension benefits to be applied to his restitution obligation. I. On February 23, 2006, defendant Charles Miller and three others were indicted on a variety of charges related to a scheme by which they obtained substantial sums of money by fraud from Phoebe Carol Ann Schull, an elderly woman who resided in an adult care facility. The defendant was charged with conspiracy, bank fraud, credit union fraud, identity theft, aggravated identity theft, access device fraud, wire fraud, and mail fraud. On June 30, 2006, the defendant pleaded guilty to counts one and ten of the indictment. Count one charged the defendant with conspiracy to commit bank fraud, identity theft, access device fraud, mail fraud, wire fraud, and false demands against the United States. Count ten charged the defendant with access device fraud. In the plea agreement, the defendant acknowledged that “pursuant to 18 U.S.C. § 3663A(c)(1)(A)(ii), he will be required to pay full restitution to the victim of the offenses. . . . As a result of the conduct of Defendant, Jeanne Miller, Kenneth Goff, and Delores Goff, which included but was not limited to the described acts, Phoebe Carol Ann Shull suffered a financial loss of between $120,000 and $200,000.” Amended Plea Agreement [dkt # 70]. On October 16, 2006, the Court sentenced the defendant to concurrent sentences of 24 months in custody to be followed by 2 years of supervised release on each count. A judgment was -2- entered on October 25, 2006, which required the defendant to pay restitution of $146,938.73 jointly with the co-defendants. The judgment also included a schedule of payments with the following provisions: Having assessed the defendant’s ability to pay, payment of the total criminal monetary penalties shall be due as follows: A C Lump sum payment of $200.00 due immediately. . . Payment in equal quarterly installments of $25.00 during the term of incarceration, to commence 60 days after the date of this judgment. Judgment at 6 [dkt # 88]. The defendant apparently receives a monthly benefit from the General Motors Hourly Pension Plan of $1,715.72. Fidelity Investments is the plan administrator. On December 20, 2006, the Clerk of the Western District issued a writ of continuing garnishment requiring Fidelity Investments to respond with information about its indebtedness to defendant Charles Miller. Fidelity Investments did not respond to the writ in a timely manner. On February 12, 2007, the defendant filed objections to the writ of garnishment. The defendant states he is fifty-six years old and has cancer and heart problems. He believed the garnishment would leave him homeless once he was released and prevent him from supporting himself and his wife. The defendant also asserted that his pension fund is exempt from garnishment. As noted, the Court referred the objections to Judge Scoville for a report and recommendation. On April 11, 2007, the magistrate judge ordered Fidelity Investment to appear and explain why it had not answered the writ. On April 25, 2007, Fidelity answered the writ, reporting that it had been directed by General Motors to send the defendant’s pension payments to the Clerk in compliance with the writ. On April 30, 2007, the magistrate judge entered a report recommending -3- that the defendant’s objection to the writ of garnishment be overruled. The defendant timely objected. Since that time, the Court has received several letters from the defendant, his wife, and his mother-in-law, as well as two motions. On July 26, 2007, the defendant filed a motion for clarification, stating that he has not received any update on the objections he filed, but that his monthly pension payments have ceased. He requests that the Court notify him of the status of his objections as soon as possible. On September 11, 2007, the defendant filed a request (in what was docketed as an order) that the restitution order be amended to limit his restitution payments to $25 quarterly while he is incarcerated, or limit the percentage of funds subject to garnishment. He argues that the actions of the United States Attorney exceed the scope of the Court’s judgment, usurp this Court’s authority, and are fundamentally unfair. On August 5, 2008, the defendant’s mother-in-law, Dolores Goff (a co-defendant), sent a letter to the Court informing the Court that the garnishee has been non-responsive to her inquiries, and that they have not received any payment since May 2007. She states that her financial situation has grown dire attempting to pay the defendant’s bills without the benefit of his pension. After the magistrate judge entered his report, the plaintiff e-filed a proposed order that reads: A Writ of Garnishment, directed to Garnishee, has been duly issued and served upon the Garnishee. Pursuant to the Writ of Garnishment, the Garnishee filed an Answer on April 25, 2007, stating that at the time of the service of the Writ it had in its possession or under its control a monthly benefit of $1,715.72 due the defendant from the General Motors Plan Trust. On January 26, 2007, the defendant was notified of his right to a hearing. The defendant objected to the garnishment and on April 30, 2007, United States Magistrate Judge Joseph G. Scoville entered his Report and Recommendation “recommending that the objections of defendant Charles B. Miller to the -4- government’s continuing writ of garnishment (docket #104) be overruled and that the garnishment writ be enforced.” IT IS ORDERED that Garnishee pay to plaintiff, Clerk, U.S. District Court, 399 Federal Building, 110 Michigan NW, Grand Rapids, MI 49503, 25% of the defendant’s monthly benefit and continue said payments until the debt to the plaintiff is paid in full or until the garnishee no longer has custody, possession or control of any property belonging to the debtor or until further Order of this court. Prop. Or. [dkt. #123]. A line for the clerk’s signature is below. It appears that the Clerk has not entered the order. The defendant began his term of supervision on April 22, 2008, with a discharge date of August 21, 2010. The magistrate judge rejected the defendant’s objection that he was misled into agreeing to the amount of restitution during plea negotiations because of the plain language in the plea agreement. He also noted that restitution orders cannot be challenged through 28 U.S.C. § 2255. United States v. Watroba, 56 F.3d 28, 29 (6th Cir. 1995). Judge Scoville also rejected the defendant’s claim that the judgment entered by the Court limits his obligation to pay restitution to $25 per quarter. He noted that the Mandatory Victim’s Restitution Act (MVRA), 18 U.S.C. §§ 3663A-3664, required the Court to order full restitution and establish a payment schedule. But the Act does not prohibit collection efforts beyond the terms of the court’s order. The magistrate judge next rejected the defendant’s claim that his pension was property exempt from execution 18 U.S.C. § 3613(a). The petitioner submitted a claim exemption form, but the magistrate judge found that the pension fit under none of the categories of exempt property identified by the defendant. Next, the magistrate judge concluded that Congress provided an exception to ERISA’s anti-alienation provisions when it enacted the MVRA, and he rejected the defendant’s objection on that ground. He also observed that the defendant’s claim that the money is needed to support himself or his wife had no merit. Restitution is payable without consideration -5- of the economic circumstances of the defendant. 18 U.S.C. § 3664(f)(1)(A). The magistrate judge pointed out that this claim is ironic in that the defendant and his wife committed the crimes together, with his wife being even more culpable than the defendant and receiving a longer prison sentence, and she is jointly and severally liable for the restitution amount. Finally, the magistrate judge held that the defendant is not entitled to a hearing on his objections under 28 U.S.C. § 3202(d). The defendant has not raised a valid exemption or alleged a failure to comply with statutory requirements. The defendant’s objections should be overruled, and the writ of garnishment should be enforced. The defendant objected to the report and recommendation by stating first that his attorney never told him that his pension could be accessed to satisfy the judgment. The defendant appears to concede that this is not the proper forum to assert an ineffective assistance claim, and he suggests that he intends to make such a claim through other litigation. The defendant also believes his financial circumstances must be considered under 18 U.S.C. § 3664(f)(2), upon which he relied, he says, in entering the plea. The defendant states the amended plea agreement does not permit the government to garnish his pension. The defendant also reiterates that his pension is protected from garnishment by ERISA, citing Guidry v. Sheet Metal Workers National Pension Fund, 493 U.S. 365, 376 (1990). He believes that the MVRA is not sufficiently clear to override ERISA’s protections, and he insists that courts in other federal jurisdictions holding to the contrary are wrong. Finally, the defendant cryptically claims his pension is income, not property, and is not subject to the garnishment for “non-federal restitution.” The defendant states the restitution ordered -6- by the Court is “non-federal,” as evidenced by the government’s characterization of the restitution in its response to his objections to the writ of garnishment. Obj. at 12. II. Objections to a report and recommendation are reviewed de novo. “A judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made. A judge of the court may accept, reject, or modify, in whole or in part, the findings or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1). The parties’ failure to file objections to the report and recommendation waives any further right to appeal. Smith v. Detroit Fed’n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987). Likewise, the failure to object to the magistrate judge’s report releases the Court from its duty to independently review the motion. Thomas v. Arn, , 149 (1985). Of all the defendant’s objections, the most pivotal one is that the government’s attempt to seize his pension benefits is prohibited by ERISA. When Congress enacted ERISA in 1974, it contained the following anti-alienation provision: (d) Assignment or alienation of plan benefits (1) Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated. 29 U.S.C. § 1056. In Guidry v. Sheet Metal Workers National Pension Fund, 493 U.S. 365, 376 (1990), the Supreme Court held that section 1056 prohibits any attempts to attach pension benefits to satisfy a judgment, even where the beneficiary engaged in criminal activity. The Court explained: ERISA erects a general bar to the garnishment of pension benefits from plans covered by the Act. . . . We see no meaningful distinction between a writ of garnishment and the constructive trust remedy imposed in this case. That remedy is therefore prohibited by § 206(d)(1). . . . Section 206(d) reflects a considered congressional policy choice, a decision to safeguard a stream of income for pensioners (and their dependents, who may be, and perhaps usually are, blameless), -7- even if that decision prevents others from securing relief for the wrongs done them. If exceptions to this policy are to be made, it is for Congress to undertake that task. Guidry, 493 U.S. at 371-72, 376. Five years later, the Fourth Circuit, citing Guidry, held that ERISA barred access by the government to pension benefits to satisfy a restitution order in a criminal case. United States v. Smith, 47 F.3d 681, 684 (4th Cir. 1995). Then in 1996, Congress passed the Mandatory Victims Restitution Act (MVRA), 18 U.S.C. §§ 3663A-3664, which requires sentencing courts to order criminal defendants to pay restitution to their victims. The Court must order full restitution without consideration of the defendant’s economic circumstances. The Court must then impose a payment schedule that does take account of the defendant’s economic circumstances: (a)(1) Notwithstanding any other provision of law, when sentencing a defendant convicted of an offense described in subsection (c), the court shall order, in addition to, or in the case of a misdemeanor, in addition to or in lieu of, any other penalty authorized by law, that the defendant make restitution to the victim of the offense or, if the victim is deceased, to the victim’s estate. . . . (d) An order of restitution under this section shall be issued and enforced in accordance with section 3664. 18 U.S.C. § 3663A. (f)(1)(A) In each order of restitution, the court shall order restitution to each victim in the full amount of each victim’s losses as determined by the court and without consideration of the economic circumstances of the defendant. (B). . . (2) Upon determination of the amount of restitution owed to each victim, the court shall, pursuant to section 3572, specify in the restitution order the manner in which, and the schedule according to which, the restitution is to be paid, in consideration of– (A) the financial resources and other assets of the defendant, including whether any of these assets are jointly controlled; (B) projected earnings and other income of the defendant; and (C) any financial obligations of the defendant, including obligations to dependents. -8- . . . (m)(1)(A)(i) An order of restitution may be enforced by the United States in the manner provided for in subchapter C of chapter 227 and subchapter B of chapter 229 of this title; or (ii) by all other available and reasonable means. 18 U.S.C. § 3664(f), (m)(1)(A). Subchapter B of chapter 229 includes 18 U.S.C. § 3613, which contains the following provisions: (a) Enforcement.--The United States may enforce a judgment imposing a fine in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law. Notwithstanding any other Federal law (including section 207 of the Social Security Act), a judgment imposing a fine may be enforced against all property or rights to property of the person fined, except that-- (1) property exempt from levy for taxes pursuant to section 6334(a)(1), (2), (3), (4), (5), (6), (7), (8), (10), and (12) of the Internal Revenue Code of 1986 shall be exempt from enforcement of the judgment under Federal law; (2) section 3014 of chapter 176 of title 28 shall not apply to enforcement under Federal law; and (3) the provisions of section 303 of the Consumer Credit Protection Act (15 U.S.C. 1673) shall apply to enforcement of the judgment under Federal law or State law. . . . (f) Applicability to order of restitution.--In accordance with section 3664(m)(1)(A) of this title, all provisions of this section are available to the United States for the enforcement of an order of restitution. 18 U.S.C. § 3613(a), (f) (emphasis added). Several courts have held that the foregoing provisions of the MVRA constitute a Congressional exception to ERISA’s anti-alienation provision when it comes to the enforcement of a restitution order against a criminal defendant. See, e.g., United States v. James, 312 F. Supp. 2d 802, 805 (E.D. Va. 2004) (observing that “the Supreme Court specifically admonished that ‘[i]f exceptions to this policy are to be made, it is for Congress to undertake that task.’ [Guidry, 493 U.S. at 376.] It appears that precisely this has occurred; Congress in passing the Mandatory Victim Restitution Act of 1996 (“MVRA”) has created just such an exception”); see also United States v. Novak, 476 F.3d 1041, 1053-64 (9th Cir. 2007) (en banc); United States v. First Bank & Trust East -9- Texas, 477 F. Supp. 2d 777, 781 (E.D. Tex. 2007) (collecting cases); ; United States v. Irving, 452 F.3d 110, 126 (2d Cir. 2006) (considering criminal fine); United States v. Wahlen, 459 F. Supp. 2d 800, 822 (E.D. Wis. 2006); United States v. Tyson, 242 F. Supp. 2d 469, 474 (E.D. Mich. 2003). This Court finds the reasoning of these decisions persuasive and quite sensible. After all, the anti-alienation provision found in ERISA was the product of congressional policy-making, and Congress is free to re-order its priorities to promote efforts to make victims of crimes whole. Congress plainly stated in 18 U.S.C. § 3613 that fines – and through section 3664(m)(1)(A) orders of restitution as well – “may be enforced against all property or rights to property” of the defendant, listing only three exceptions. None of the exceptions includes pension benefits regulated by ERISA. This Court joins the ranks of several other federal courts, see United States v. Irving, 452 F.3d at 126 (noting that “[d]istrict courts across the country have found 18 U.S.C. § 3613(a) permits courts to consider ERISA protected assets in determining appropriate fines and restitution”), holding that ERISA presents no bar against enforcing restitution orders in criminal judgments by garnishing the defendant’s pension plan distributions. Nor does the periodic payment provision in the judgment prohibit the garnishment. Other courts have made clear that the government may seek a writ of garnishment requiring payments on a schedule that exceeds that previously ordered by the Court. In a recent Fifth Circuit case, the court rejected a defendant’s objection to a garnishment on grounds similar to those advanced by defendant Miller, reasoning: Ekong contends that there was no justification for requiring immediate payment because the criminal judgment specified that restitution be paid in installments. This argument is without merit. “The [Mandatory Victim Restitution Act (MVRA)] provides the Government authority to enforce victim restitution orders in the same manner that it recovers fines and by all other available means” and, under 18 U.S.C. § 3613(a), it may collect “restitution ‘in accordance with the practices and -10- procedures for the enforcement of a civil judgment under Federal law or State law,’ ” including the Federal Debt Collection Procedures Act of 1990. United States v. Phillips, 303 F.3d 548, 550-51 (5th Cir. 2002). The attorney general is required by the MVRA to enforce victim restitution orders “aggressively.” Id. at 551. There is nothing in the criminal judgment to the contrary. United States v. Ekong, 518 F.3d 285, 286 (5th Cir. 2007) (per curiam). A district court recently reached the same result, finding that the periodic payment provision in a criminal judgment cannot be immutable or insulate a defendant from other collection efforts. United States v. Lawrence, 538 F.Supp.2d 1188, 1193 (D. S.D. 2008). The court appropriately observed that it would be “wholly unrealistic to assume that a defendant’s ability to make installment payments would not change during the 20-year limitations period for the collection of debts, especially when this period does not even begin to run until the defendant has completed the custody portion of his sentence.” Ibid.; see also James, 312 F. Supp. 2d at 806-07 (noting that “the existence of this [payment] schedule does not mean that the government is precluded from pursuing other avenues of ensuring that defendant’s restitution obligation is satisfied”); United States v. Hanhardt, 353 F. Supp. 2d 957, 959-61 (N.D. Ill. 2004) (holding that a payment schedule does not pre-empt other collection efforts, and a claim by family members to pension benefits is not superior to the government’s claim for restitution). The Court agrees with these decisions as well. The MVRA permits the government to enforce a restitution order “by all other available and reasonable means,” 18 U.S.C. § 3664(m)(1)(A), including “in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law.” 18 U.S.C. § 3613(a). The government is seeking to enforce the judgment through the Federal Debt Collection Procedure Act, which certainly is an “available and reasonable means” of enforcing a judgment. Nothing in the Court’s judgment -11- prohibits this, and the statute specifically allows it. The defendant’s objection on this ground will be overruled. Nor is the defendant entitled to an evidentiary hearing on his objections. The Federal Debt Collection Procedure Act, 28 U.S.C. § 3201 et seq., provides the procedure for the issuance of writs of garnishment to enforce judgments. The Act requires the government to issue notices when it commences garnishment proceedings. 28 U.S.C. § 3202(b). Upon receipt of such a notice, a debtor may request a hearing and move to quash enforcement of the writ. See 28 U.S.C. § 3202(d). Issues subject to a hearing include “the probable validity of any claim of exemption by the judgment debtor,” and compliance [by the creditor] with any statutory requirement for the issuance of the post- judgment remedy granted.” Ibid. Although the Act states that the court “shall hold a hearing” at the debtor’s request, courts have denied a hearing where the debtor did not object based on one of the issues specified in 28 U.S.C. § 3202(d), where the objection is plainly without merit, or where the objection was simply a matter of statutory interpretation. United States v. Greenberg, No. 06- MC-55, 2006 WL 3791373, *1 (D. Vt. 2006); see also United States v. Furkin, 165 F.3d 33, 1998 WL 846873, at *3-4 (7th Cir. Nov. 24, 1998) (holding that defendant was not entitled to a hearing when he did not file a “valid claim of exemption”); Lawrence, 538 F. Supp. 2d at 1194 (holding that defendant was not entitled to a hearing when he claimed financial hardship or the equities of the case, as this was not an enumerated section in the statute). Because the defendant’s objections did not include any of the listed grounds, the magistrate judge did not err by not conducting a hearing on the objections. There is another provision that states that if the judgment-debtor files an objection to the garnishee’s answer within twenty days of receipt and requests a hearing, “[t]he court shall hold a -12- hearing within 10 days after the date the request is received by the court, or as soon thereafter as is practicable, and give notice of the hearing date to all the parties.” 28 U.S.C. § 3205(c)(5). That statute does not limit the purposes for such a hearing. United States v. Crowther, 473 F. Supp. 2d 729 (E.D. Tex. 2007). However, the defendant did not request a hearing in his objection to the garnishee’s answer, so he is not entitled to a hearing under this section. Next, the defendant’s argument that his financial circumstances must be considered under 18 U.S.C. § 3664(f)(2) lacks merit as well. Under the MVRA, the Court is required to order full restitution without considering the defendant’s financial situation. “[T]he financial resources and other assets of the defendant” become relevant only when the Court orders a payment schedule. 18 U.S.C. § 3664(f)(2)(A). But when the government seeks garnishment through the Federal Debt Collection Procedure Act, 28 U.S.C. § 3201 et seq., as here, no payment schedule is called for. Of course, financial considerations are pertinent to determine the amount of the periodic payment that is subject to garnishment. If the Court enters the proposed order of garnishment, the United States may seize only twenty-five percent, the maximum permitted by statute. 15 U.S.C. § 1673(a); see also United States v. Sloan, 505 F.3d 685, 693 (7th Cir. 2007). The garnishment order in this case seeks no more than that, and it will be so limited. Finally, the statements in the defendant’s objections regarding “non-federal restitution” must be overruled because it is too vague for the Court to determine what he means. “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller, 50 F.3d at 380. The defendant’s objections cite no case or statute supporting the idea that the government may not garnish his pension because it is “non-federal restitution.” -13- In a related matter, the defendant has filed a motion to amend the Court’s judgment to clarify that the payment schedule is the exclusive means for enforcing the order of restitution. He has not identified the basis for this request, and the Court finds none. Federal Rule of Criminal Procedure 35(a) permits the Court to modify a judgment under certain circumstances. However, “[t]he authority conferred by Rule 35(a) to a district court is extremely limited.” United States v. Arroyo, 434 F.3d 835, 838 (6th Cir. 2006). “‘[I]f [an error] did not constitute an obvious error or mistake that would have resulted in a remand by this Court [of Appeals],’ it is outside of Rule 35(a)’s narrow purview.” Ibid. (quoting United States v. Galvan-Perez, 291 F.3d 401, 407 (6th Cir. 2002 . Even more significantly, the Court lacks jurisdiction to consider such a request made more than seven days after entry of judgment. Fed. R. Crim. P. 35(a); United States v. Vicol, 460 F.3d 693, 696 (6th Cir. 2006). The defendant’s motion comes over a year after the Court’s judgment, so it is untimely. As a result, the motion to amend or correct the restitution order must be denied. III. The defendant has not identified any meritorious objections to the application for writ of garnishment or the magistrate judge’s report and recommendation. He has not objected to the magistrate judge’s conclusion that he was not entitled to a hearing, so he has waived any such claim. Moreover, because the issues raised by the defendant’s claims, even if true, would not grant him relief, he is not entitled to a hearing. He has complained, however, that he has not been receiving any portion of his pension. Although the garnishee’s refusal to make payments to the Court is understandable, as the Clerk has not yet entered a writ of garnishment to it, nothing in the record indicates why the garnishee has withheld funds from the defendant. If there are funds on deposit with the Clerk that exceed 25% of -14- the monthly payment amounts, that circumstance must be remedied by the Clerk immediately and the difference should be remitted to the defendant forthwith. Accordingly, it is ORDERED that the magistrate judge’s report and recommendation [dkt. #119] is ADOPTED, the defendant’s objections to the report and recommendation [dkt. #121] are OVERRULED, and the defendant’s objections to the writ of garnishment [dkt. #104] and the garnishee’s answer [dkt. #120] are OVERRULED. It is further ORDERED that the defendant’s motion to amend or correct the judgment and order of restitution [dkt. #127] is DENIED. It is further ORDERED that the defendant’s motion for disclosure of current proceedings [dkt. #116] be DENIED as moot. It is further ORDERED that the Clerk is DIRECTED to enter an order of garnishment requiring transmission of a portion of each of the defendant’s pension checks to the Clerk, U.S. District Court, 399 Federal Building, 110 Michigan NW, Grand Rapids, MI 49503, to be applied to the defendant’s restitution obligation in an amount not to exceed twenty-five percent (25%) of each periodic payment. Payments by the garnishee defendant shall continue until the debt to the plaintiff is paid in full; or until the garnishee no longer has custody, possession, or control of any property belonging to the debtor; or until further order of this Court. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: November 6, 2008 -15- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on November 6, 2008. s/Felicia M. Moses FELICIA M. MOSES -16-

=== Cambell Bankruptcy Application Opinion ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION GRETA CAMPBELL, ______________________________________/ Debtor, WEIK AND ASSOCIATES P.C., Appellant, v. KRISPEN S. CARROLL, Chapter 13 Trustee, ______________________________________/ Appellee. OPINION Case Number 08-12964 Bankr. Number 06-58897 Honorable David M. Lawson This appeal was commenced by a Chapter 13 debtor’s attorney to challenge an order entered by the bankruptcy court approving attorney’s fees for post-confirmation work. Weik and Associates, P.C., appellant and counsel for the debtor, claims that the fee order improperly disallowed .9 hours of billed time at $200 per hour, for a total of $180, and the bankruptcy court thus abused its discretion. However, the fee order was entered pursuant to a stipulation that the appellant attorney signed. The fees awarded are in the exact amount recited in the stipulation the appellant signed with the Chapter 13 trustee. Although the appellant now seeks to challenge the general guidelines discussed on the record by the bankruptcy judge before the stipulation ultimately was drafted, this Court finds that the appellant has waived its right to appeal that order by agreeing to its terms in the bankruptcy court. Therefore, the order approving post-confirmation fees is affirmed. I. On December 19, 2006, Greta Campbell filed a voluntary petition for relief under Chapter 13 of the bankruptcy code. Her plan was confirmed on March 16, 2007. On August 1, 2007, counsel conducted a post-confirmation review of the file, presumably to monitor compliance with the plan. The law firm charged 1.4 hours for that service. Fees relating to that review are not in dispute in this appeal. The dispute in this case centers around a second post-confirmation review by the debtor’s counsel performed on April 23, 2008. In its fee petition, counsel stated that 1.2 hours were spent on that review, broken down in the following manner: Post Confirmation file review. Hours 0.20 Amount 40.00 Accessed Pacer. Reviewed Docket Report and Claims Register. 0.20 40.00 Accessed Trustee system for pay history, claims, disbursements, payees, and plan calc. 0.30 60.00 Compared Claims Register with filed Claims in file, Schedules, and Trustee System. Prepared report for file. 0.20 0.10 40.00 20.00 Drafted letter to Debtor re: status of case, and request for Debtor to submit Federal income tax refunds/returns. 0.20 40.00 Second App. for Comp., Ex. 5 [case no. 06-58897, dkt. #45]. This work was performed by Shannon R. Warner at a billable rate of $200 per hour, for a total of $240. Other charges, which are not in dispute, brought the total fee application of May 23, 2008 to $493.78 in professional services plus $5.66 in costs. -2- The trustee objected to the fee petition as excessive because there had been a prior review within the preceding year, no pleadings or other case activity had been filed to prompt such a review, and the amount of time charged for the described work was unreasonably large. The time spent searching the docket, the trustee noted, was especially unusual in light of the bankruptcy court’s electronic filing system, which notifies counsel immediately of case activity. The trustee also noted that the time entries were “pro forma” and duplicated the work performed in August 2007. The bankruptcy court consolidated the fee petition with three other fee petitions by the same law firm and held a hearing on all of them on June 25, 2008. One of the four applications was presented in the form of a rehearing motion of a prior fee request that was rejected by the bankruptcy court. At the hearing, the court asked counsel to explain what work was included in the description “file review.” She responded with this explanation: [W]hat we do in that case, we review the file, review – make sure that there are – if we’ve gotten any correspondences from any creditors or any documentation and notices from creditors or from the debtor just to make any new payments – or not payments – I’m sorry – any pay advices, anything like that, for the debtor and make sure everything is adding up with what we have, both what’s been filed with the Court in the docket report as well as the information that we have in the file. We go through a thorough review of everything that has taken place, any – review any motions, ensure that any – if we’ve done a plan modification – well, in the past before the new local rules took place that the order had been entered double- checking all that kind of thing. Then with regard to the second – we reviewed the docket report again to make sure that there were – there’s nothing that has been filed that we do not have in our files or that could affect the debtor’s case as well as the claims register, any new claims that have been filed, how they – if there happen – Hr’g Tr. at 7-8. After the court questioned other time entries, the court proceeded to offer guidance on how petitions for post-confirmation attorney’s fees should be evaluated. The court first stated that post- -3- confirmation reviews are reasonable and necessary. It then suggested some “default guidelines” as to how often they should take place and how much time ought to be spent, noting that “there are cases in which a more frequent review is justified and cases perhaps in which a less frequent review is justified.” Hr’g Tr. at 18. The court concluded that an initial review six months after confirmation is prudent, but then reviews more frequently than annually would require additional justification. As to the time required, the court believed that spending more than half-an-hour on second and subsequent reviews would require special justification. The court observed that none existed in these cases. But then the court concluded: [S]o I’m going to ask counsel to work together to apply these guidelines to these four fee applications and see if you can agree upon what my ruling would be if it had to be presented to me and submit an order and be guided accordingly in the future. Hr’g Tr. at 20. On July 8, 2008, the law firm and the trustee submitted a stipulation to the court for the payment of the following fees: Prior award for fees: $ 3,367.50 Prior award for cost: $ 7.95 Total award to date: $ 3,375.45 Present award for fees: $ 313.78 Present award for cost: $ 5.66 Present award: $ 319.44 TOTAL OF FEES AND COSTS $ 3,694.89 Case No. 06-58897, dkt. #52. The same day, the bankruptcy court entered an order containing the identical language. As it turned out, the stipulation and resulting order reduced the requested fee award by $180, or a reduction of 0.9 hours of attorney time. The appellant filed a notice of appeal from that order. After briefing, the Court heard oral argument on the appeal on October 21, 2008. -4- II. This Court has appellate jurisdiction over the final orders of the bankruptcy court, and an order conclusively granting or denying attorney’s fees to a debtor’s attorney constitutes such a final order. 28 U.S.C. § 158(a)(1); In re Boddy, 950 F.2d 334, 336 (6th Cir. 1991). Bankruptcy courts are required to determine the reasonableness of attorney’s fees claimed by the debtor’s attorney based on the “benefit and necessity” of such services to the debtor. 11 U.S.C. § 330(a)(4)(B) (stating that “[i]n a chapter 12 or chapter 13 case in which the debtor is an individual, the court may allow reasonable compensation to the debtor’s attorney for representing the interests of the debtor in connection with the bankruptcy case based on a consideration of the benefit and necessity of such services to the debtor and the other factors set forth in this section”). The Court reviews the bankruptcy court’s determination regarding the amount of attorney’s fees for an abuse of discretion. In re Boddy, 950 F.2d at 336. “A bankruptcy court abuses its discretion when ‘it relies upon clearly erroneous findings of fact or when it improperly applies the law or uses an erroneous legal standard.’” In re DSC, Ltd., 486 F.3d 940, 944 (6th Cir. 2007) (quoting In re Eastown Auto Co., 215 B.R. 960, 963 (B.A.P. 6th Cir. 1998 . The appellant argues that the bankruptcy court abused its discretion in adjudicating the fee petition in this case by allowing only half-an-hour of attorney time, thereby establishing a blanket fee. Instead, appellant insists, the court should have used the lodestar method to assess the reasonableness of the fee claimed. This Court does not agree with appellant’s characterization of the bankruptcy court’s “ruling.” In fact, an examination of the transcript of the hearing discloses that the court made no ruling at all. Instead, it set forth guidelines and instructed counsel to see if they could agree to a -5- resolution. That resolution was presented to the court in the form of a stipulation. Indeed, there is no indication in the stipulation or the resulting order that the appellant contested the outcome of its fee petition in the bankruptcy court. The Supreme Court has long recognized that a party may not appeal an order with which he agreed in the court below. See United States v. Swift & Co., 286 U.S. 106, 116-17 (1932) (“We do not turn aside to inquire whether some of these restraints upon separate as distinguished from joint action could have been opposed with success if the defendants had offered opposition. Instead, they chose to consent, and the injunction, right or wrong, became the judgment of the court.”); Swift & Co. v. United States, 276 U.S. 311, 324 (1928) (noting that “‘a decree, which appears by the record to have been rendered by consent is always affirmed, without considering the merits of the cause’” (quoting Nashville, Chattanooga & St. Louis Ry. Co. v. United States, 113 U. S. 261 (1885 ; Pacific R.R. v. Ketchum, 101 U.S. 289, 295 (1879) (holding that “[i]f, when the case gets here, it appears that the decree appealed from was assented to by the appellant, we cannot consider any errors that may be assigned which were in law waived by the consent. . . .”). Parties who enter into consent decrees waive their right to appeal those issues, see United States v. Armour & Co., 402 U.S. 673, 681 (1971); McCuiston v. Hoffa, 202 F. App’x 858, 864 (6th Cir. Oct. 12, 2006), and “[s]tipulations [of facts] voluntarily entered by the parties are binding, both on the district court and on [the appellate court],” Federal Deposit Ins. Corp. v. St. Paul Fire and Marine Ins. Co., 942 F.2d 1032, 1038 (6th Cir. 1991). Applying this reasoning, the courts have found that “[w]here the parties have agreed to entry of an order or judgment without any reservation relevant to the issue sought to be appealed, one party may not later seek to upset the judgment, unless lack of ‘actual consent’ or a failure of subject -6- matter jurisdiction is alleged.” Dorse v. Armstrong World Industries, Inc., 798 F.2d 1372, 1375 (11th Cir. 1986); see also March Point Cogeneration Co. v. Puget Sound Power and Light Co., 232 F.3d 895, 2000 WL 875318, at *1 (9th Cir. Jun. 30, 2000) (table) (“Puget Sound stipulated to the order, pursuant to which the documents were produced, so it waived any appeal of the order itself.”); Haitian Refugee Center v. Civiletti, 614 F.2d 92, 93 (5th Cir. 1980). “An exception to this longstanding rule exists where a party specifically preserves its right to appeal.” Slaven v. American Trading Transp. Co., Inc., 146 F.3d 1066, 1070 (9th Cir. 1998); see also Association of Community Orgs. for Reform Now v. Edgar, 99 F.3d 261, 262 (7th Cir. 1996) (Posner, J.) (“A party to a consent decree or other judgment entered by consent may not appeal unless it explicitly reserves the right to appeal.”). The Sixth Circuit has endorsed the use of stipulations as serving a useful purpose: Stipulations serve the purpose of conserving judicial resources and allowing the parties to focus on truly disputed issues. Everyone benefits when parties agree to make stipulations. It saves the parties the time and money of proving facts that are not in dispute but that are nonetheless necessary to the outcome of the dispute. It saves time and energy for judges and juries who don’t have to hear evidence about what the parties are willing to agree about. And it saves the public money, by making trials shorter and clearing space on the docket. Federal Deposit Ins. Corp., 942 F.2d at 1038. The stipulated order entered by the bankruptcy court accomplishes these purposes. The court entertained argument concerning the trustee’s objections to the appellant’s fee petitions, offered guidance as to how it would evaluate such requests, and invited counsel to attempt a resolution in light of the insight offered by the court. The court never granted or denied the fee petition. Instead, the parties evidenced their agreement by the stipulation they filed, and the court confirmed that agreement by entering the order. -7- The appellant has waived its right to challenge an order to which it stipulated in the lower court. Moreover, it is apparent that the bankruptcy court utilized a lodestar amount in suggesting its guidelines, which is calculated by “multiplying the attorney’s reasonable hourly rate by the number of hours reasonably expended.” Grant v. George Schumann Tire & Battery Co., 908 F.2d 874, 879 (11th Cir. 1990) (citing Hensley v. Eckerhart, , 433 (1983 . That method, of course, is informed by 11 U.S.C. § 330, which provides, in part, for “reasonable compensation for actual, necessary services rendered . . . based on the nature, the extent, and the value of such services, the time spent on such services, and the cost of comparable services other than in a case under this title. . . .” 11 U.S.C. § 330(a)(1). It is the fee petitioner’s burden to establish the reasonableness of the fee request. As this Court has explained: To meet its burden, the fee petitioner must “submit evidence supporting the hours worked and rates claimed.” Hensley v. Eckerhart, , 433 (1983) (deciding fee petition under 42 U.S.C. § 1988). “The most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.” Id. See also Adcock-Ladd v. Secretary of Treasury, 227 F.3d 343, 349 (6th Cir. 2000). Courts should exclude hours that are not reasonably expended. Hensley, 461 U.S. at 433. Hours are not reasonably expended if they are excessive, redundant, or otherwise unnecessary. Id. “A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee.” Mich. R. Prof'l Conduct (MRPC) 1.5. After determining the number of hours reasonably expended, the court must examine whether the requested hourly rate is reasonable. Adcock-Ladd, 227 F.3d at 349. Generally, a reasonable hourly rate is to be calculated according to the prevailing market rates in the relevant community. Blum v. Stenson, , 895 (1984). This determination is made, in turn, by assessing the experience and skill of the prevailing party’s attorneys and comparing their rates to the rates prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation. Id. at 895 n.11. See also MRPC 1.5. Mehney-Egan v. Mendoza, 130 F. Supp. 2d 884, 885-86 (E.D. Mich. 2001) (footnote omitted). -8- The bankruptcy court incorporated all of these concepts in discussing its “default guidelines.” The court did not impose a blanket rule on all post-confirmation review fee petitions, but rather it suggested what one would expect in the ordinary case in order to distinguish requests that otherwise would appear “excessive, redundant, or otherwise unnecessary.” The court left plenty of room for counsel to justify a greater request, which the appellant did not do in this case. The Court finds that the bankruptcy court’s approach to the problem was reasonable and consistent with the law governing attorney’s fee requests. And since the appellant stipulated to the order approving fees, it waived its right to complain. III. The Court finds that the bankruptcy court did not abuse its discretion in approving the fee petition. Accordingly, the order of the bankruptcy court is AFFIRMED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: October 22, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 22, 2008. s/Felicia M. Moses FELICIA M. MOSES -9-

=== FTSS Order Dismissing ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION FTSS KOREA, v. Plaintiff, FIRST TECHNOLOGY SAFETY SYSTEMS, INC., ______________________________________/ Defendant. Case Number 07-15366 Honorable David M. Lawson OPINION AND ORDER GRANTING MOTION TO DISMISS WITHOUT PREJUDICE AND GRANTING IN PART DEFENDANT’S MOTION FOR ATTORNEY’S FEES The plaintiff commenced this action for breach of contract alleging that it is a corporation formed under the laws of the Republic of Korea by one Ken Kim, and invoked this Court’s diversity jurisdiction under 28 U.S.C. § 1332(a)(2). After the defendant had answered the complaint, and during discovery, which included the translation of several documents from Korean to English, counsel for the plaintiff learned that Mr. Kim’s company was not a corporation at all, but rather, Kim operated his business as a sole proprietorship. Because Kim is an American citizen but has no domicile in the United States, the plaintiff filed a motion for voluntary dismissal under Federal Rule of Civil Procedure 41(a)(2) for want of subject-matter jurisdiction. The defendant does not dispute the argument that the case cannot proceed in this Court, but the defendant seeks an award of attorney’s fees as a condition of the dismissal and has filed its own motion to that effect. The plaintiff is correct that the Court does not have subject-matter jurisdiction over the breach of contract action. “In order to be a citizen of a State within the meaning of the diversity statute, a natural person must both be a citizen of the United States and be domiciled within the State.” Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828 (1989). Stateless citizens, such as Mr. Kim, cannot bring an action in federal court under the diversity statute. See Coury v. Prot, 85 F.3d 244, 248 (5th Cir. 1996) (holding that “[a]n American national, living abroad, cannot sue or be sued in federal court under diversity jurisdiction, 28 U.S.C. § 1332, unless that party is a citizen, i.e. domiciled, in a particular state of the United States”) (citing 1 J. Moore, Moore's Federal Practice § 0.74[4] (1996 . Absent subject matter jurisdiction, the Court has no authority to adjudicate the breach of contract claim. On the other hand, the Court does have the authority to award reasonable costs, including attorney’s fees, when a matter is dismissed for want of jurisdiction. Rule 41(a)(2) states the Court may dismiss a case at the plaintiff’s request “on terms that the court considers proper.” And 28 U.S.C. § 1919 states that “[w]henever any action . . . is dismissed in any district court . . . for want of jurisdiction, such court may order the payment of just costs.” See also Brown v. Local 58, Int’l Bhd. of Elec. Workers, AFL-CIO, 76 F.3d 762, 766-67 (6th Cir. 1996). It is not unusual to award costs and attorney’s fees when a case is voluntarily dismissed under Rule 41(a)(2). See 9 C. Wright & A. Miller, Federal Practice & Procedure § 2366, at 177-80 n.9 (1971 & Supp.1984) (collecting cases). The purposes for such awards include reimbursing the defendant for the litigation costs incurred when there is a risk that the same suit will be refiled and will impose duplicative expenses upon him. See Colombrito v. Kelly, 764 F.2d 122, 133 (2d Cir. 1985); Smoot v. Fox, 353 F.2d 830, 833 (6th Cir. 1965); John Evans Sons, Inc. v. Majik-Ironers, Inc., 95 F.R.D. 186, 191 (E.D. Pa. 1982). In this case, continuation of the present dispute in a state court is a certainty, but only those expenses addressing the federal jurisdictional issue are likely to be wasted, since the fees expended addressing the merits of the claim would have been incurred no matter where the case was pending. It is quite clear that this case was filed in this Court based on -2- the plaintiff’s mistake as to its legal status as a corporate entity. Therefore, the Court believes that the defendant should be reimbursed for the reasonable expenses incurred in litigating the jurisdiction question. The plaintiff does not dispute that general proposition. The parties clash, however, over how much was reasonably expended to address that singular issue. As the saying goes, it’s not the money, it’s the amount. The defendant seeks an award of costs and attorney’s fees totaling $23,808.49, which includes legal time for two different attorneys and a paralegal amounting to 68.3 hours, a fee paid to a mediator for a cancelled mediation, and expenses paid to an expert on Korean law. The plaintiff balks at this claim, characterizing it as grossly excessive and patently absurd. Plaintiff’s counsel states that he addressed the same issues through investigation and research at a cost of about $1,800. After reviewing the defendant’s attorneys’ billing records and the parties’ submissions, the Court is convinced that plaintiff’s counsel is far closer to what was reasonably expended. This Court set forth the manner of calculating a reasonable attorney’s fee for cases involving lack of jurisdiction in Mehney-Egan v. Mendoza, 130 F. Supp. 2d 884 (E.D. Mich. 2001), as follows: [T]he statutory prescription to award “just” costs incorporates the concept of reasonableness in assessing a claim for attorney[’s] fees. The party seeking attorney’s fees has the burden to prove that its request for attorney’s fees is reasonable. To meet its burden, the fee petitioner must “submit evidence supporting the hours worked and rates claimed.” Hensley v. Eckerhart, , 433 (1983) (deciding fee petition under 42 U.S.C. § 1988). “The most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.” Id. See also Adcock-Ladd v. Secretary of Treasury, 227 F.3d 343, 349 (6th Cir. 2000). Courts should exclude hours that are not reasonably expended. Hensley, 461 U.S. at 433. Hours are not reasonably expended if they are excessive, redundant, or otherwise unnecessary. Id. “A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee.” Mich. R. Prof'l Conduct (MRPC) 1.5. -3- After determining the number of hours reasonably expended, the court must examine whether the requested hourly rate is reasonable. Adcock-Ladd, 227 F.3d at 349. Generally, a reasonable hourly rate is to be calculated according to the prevailing market rates in the relevant community. Blum v. Stenson, , 895 (1984). This determination is made, in turn, by assessing the experience and skill of the prevailing party’s attorneys and comparing their rates to the rates prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation. Id. at 895 n.11. See also MRPC 1.5. Mehney-Egan, 130 F. Supp. 2d at 885-86 (footnote omitted). An examination of defense counsel’s billing statement reveals large amounts of time spent on rudimentary procedures that should easily be completed with dispatch by an attorney passingly familiar with practice in the federal courts. For instance, spending over four hours to conduct “[r]esearch regarding pretrial conference statement” and “review court rules and procedural rules” is excessive, especially when the scheduling conference notice set forth item-by-item the requisites for the preliminary statement and the items to be discussed at the conference. Similarly, the time charged for extensive researching of basic legal issues on diversity and alienage jurisdiction is unreasonable in light of the black-letter pronouncements in these very points by Congress and the Supreme Court. The main dispute in the case on which the jurisdiction issue turned was a factual one: whether the plaintiff was a Korean corporation or a sole proprietorship. The time devoted to that question, according to the descriptions in the billing records, amounts to approximately 14.3 hours for attorney Christopher Nelson and 4.7 hours for attorney Miles Macik. Those figures are approximations because the billing descriptions are quite terse, some entries include multiple activities, and there is no affidavit from counsel indicating exactly what he or his law firm did to determine the business entity status of the plaintiff. The Court believes that defense counsel probably could do very little on that score, since the documents all were in Korean and required -4- either translation or the advice from a foreign law firm conversant in the language and law of that nation. There is a statement from a Korean law firm engaged by the defendant apparently for the purpose of determining the business entity status of the plaintiff, who charged $6,761.99 for 20.2 hours of work. It is unclear whether this work duplicated the effort of defense counsel or vice versa. The Court finds, therefore, that of the large amount of time charged by defense counsel with respect to the jurisdiction question, only a small portion was reasonably expended to address the key issues relating to the plaintiff’s right to proceed in this Court. The expenses incurred by the engagement of the Korean law firm were reasonable, better suited to the task at hand, and constitute a superior measure of compensation of the defendant for wasted effort expended in this Court. The defendant also claims a right to recover $310 per hour for Christopher Nelson’s work and $245 per hour for Miles Macik. However, the defendant has not furnished any information by way of affidavit or otherwise by which the Court might assess “the experience and skill of the . . . attorneys” or enabling the Court to “compar[e] their rates to the rates prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation.” Mehney-Egan, 130 F. Supp. 2d at 886. In the absence of that information from the parties, the Court turns to the State Bar of Michigan’s 2007 Economics of Law Practice Survey results. That survey shows that the medial billing rate for litigation firms is $195 per hour, the hourly rate for litigation firms in Detroit and Oakland County ranges from $200 to $210, and the rate for lawyers with five to nine years in practice averages $165 per hour, and with ten to fourteen years the average rate is $175 per hour. See https://www.lawpracticeeconomics.com/securesite/results/results.aspx?menu= Billing%20Rates&submenu=Billing%20Rate%20Summary (last visited Oct. 20, 2007). Attorney -5- Nelson is identified by his law firm as a senior attorney practicing twelve to thirteen years, and attorney Macik is listed as an associate practicing six to seven years. A reasonable hourly rate for the work done in this case by local counsel based on the information made available to the Court therefore is $175. The rate charged by the Korean law firm averages about $345 per hour. The Court has no way of determining if that is a reasonable rate in that foreign community. However, the work performed approximates that of an expert witness, and the Court finds that the expense actually was incurred and was reasonable given the task at hand. Because the work done by the Korean law firm largely duplicated the investigation performed by local counsel, the Court finds that the defendant should recover for five hours of local counsel’s time, plus the cost expended for work performed by the Korean law firm. The defendant is not entitled to recover the payment to the mediator. Therefore, reasonable costs amount to $7,636.99. The defendant also seeks to recover a fee paid to a facilitator in the amount of $1,050. Apparently, the mediation session never went forward, and this fee represents a non-refundable portion of the payment. It is not clear why the mediation was cancelled, and it has not been explained why this would have been a wasted expense. The Court understands that the dispute between the parties continues. Alternative dispute resolution would benefit both parties irrespective of their arguments over this Court’s jurisdiction or the plaintiff’s legal status. The mediation expense is not a wasted cost that should be reimbursed to the defendant as a term of dismissal under Rule 41(a)(2). Based on the foregoing, the Court determines that the Court lacks subject-matter jurisdiction over this case. The plaintiff has stated valid grounds for voluntarily dismissing this action without -6- prejudice. A proper term for dismissal is the award of reasonable costs and attorney’s fees incurred by the defendant in disputing jurisdiction. Accordingly, it is ORDERED that the plaintiff’s motion for voluntary dismissal without prejudice [dkt #17] is GRANTED. It is further ORDERED that the defendant’s motions for costs and attorney’s fees [dkts # 18, 20] are GRANTED IN PART . It is further ORDERED that the action is DISMISSED WITHOUT PREJUDICE. It is further ORDERED that the plaintiff shall pay to the defendant the sum of $7,636.99. It is further ORDERED that the defendant’s motion to amend or correct its answer and affirmative defenses [dkt #12] is DISMISSED as moot. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: October 20, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 20, 2008. s/ Susan Pinkowski SUSAN PINKOWSKI -7-

=== New Vision Opinion Granting Motion to Dismiss ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION NEW VISION HOME HEALTH CARE and SALEEM BIN SHAKOOR, Plaintiffs, v. MICHAEL LEAVITT, as Secretary of the United States Department of Health and Human Services, KERRY WEEMS, as Administrator of the Centers for Medicare and Medicaid Services, NATIONAL GOVERNMENT SERVICES, and LINDA MANN, as Manager of Benefit Integrity Investigations for TrustSolutions, LLC, ____________________________________/ Defendants. Case Number: 08-11704 Hon. David M. Lawson OPINION AND ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS AND DISMISSING CASE The plaintiffs in this case, New Vision Home Health Care and Saleem Bin Shakoor, a home health care agency, brought this action to challenge an audit under the Medicare Act, 42 U.S.C. § 426 et seq. The defendants are Michael Levitt, Secretary of the United States Department of Health and Human Services, Kerry Weems, Administrator of the Centers for Medicare and Medicaid Services, National Government Services, and Linda Mann, manager of benefit integrity investigations for TrustSolutions, LLC. The defendants have filed a motion to dismiss contending that the Court lacks subject-matter jurisdiction over this case because the plaintiffs have failed to exhaust administrative remedies. The plaintiffs counter that their request for relief is collateral to issues that might be addressed in an administrative audit, and therefore the case meets a very limited exception to the jurisdictional bar of 42 U.S.C. § 405. The Court scheduled a hearing on the present motion and deferred a hearing on the plaintiffs’ motion for a preliminary injunction. Oral argument was conducted on June 10, 2008, after which the Court allowed the plaintiffs to file a supplemental brief in support of a contention made at oral argument. Both parties filed supplemental briefs. The Court now finds that it does not have subject-matter jurisdiction over the plaintiffs’ claims and will dismiss the case. I. The plaintiffs allege that a post-payment review of Medicare claims being conducted by the defendants is motivated by hostility directed against plaintiff Shakoor because of his national origin. He seeks, among other things, an injunction terminating the audit, which the plaintiffs believe is merely a tool for harassment. New Vision furnishes physical therapy services to home-bound patients, among others. Plaintiff Saleem Bin Shakoor, a naturalized citizen originally from Pakistan, is the owner of New Vision, which qualifies as a home health agency (HHA) and provider of Medicare home health services within the meaning of 42 U.S.C. § 1395x(o), (u). Many of New Vision’s patients are eligible for Medicare coverage, and therefore New Vision looks to Medicare for payment for its services. After rendering services, New Vision submits claims for Medicare Part A reimbursement to defendant National Government Services (NGS), the Medicare Part A “fiscal intermediary” for Michigan. As an intermediary, NGS is responsible for “[d]etermining the amount of payments to be made to providers for covered services furnished to Medicare beneficiaries” and “[m]aking the payments.” 42 C.F.R. § 421.100(a). However, NGS does not have primary responsibility for investigating fraud. That task lies in the hands of TrustSolutions, a Medicare “program safeguard contractor” (PSC). TrustSolutions holds a contract with Medicare pursuant to the Medicare Integrity -2- Program. See 42 U.S.C. § 1395ddd. As a PSC, TrustSolutions is charged with investigating Medicare fraud and abuse, and, to accomplish the task, it may perform cost-report audits and analyze the services provided. New Vision explains that because its patients average seventy-five years of age, they “can require more visits to attain the necessary [physical therapy] goals”; “elderly patients simply cannot tolerate therapy sessions the same as a 65 year old or younger.” Mot. to Dismiss, Ex. 2, Letter to P. Carroll, Gov’t Task Leader, at 1. See also Mot. to Dismiss, Shakoor Aff. at ¶ 4. The higher frequency of therapy sessions apparently led to the government’s suspicion in this case, prompting an audit request. On December 11, 2006, TrustSolutions, at the direction of manager Linda Mann, initiated a pre-payment review of physical-therapy claims submitted by New Vision. Under Medicare, PSCs conduct both pre- and post-payment reviews. See Farkas v. Blue Cross & Blue Shield of Michigan, 24 F.3d 853, 854 n.1 (6th Cir. 1994). “‘The primary goal of prepayment utilization screening is to ensure that Medicare pays only for medically necessary services . . . . Prepayment controls . . . [allow the carrier to better monitor] services provided by problem providers before a claim is processed.’” Ibid. (quoting Farkas v. BCBSM, 803 F. Supp. 87, 88 (E.D. Mich. 1992 . As noted above, TrustSolution’s review of New Vision was triggered by New Vision’s billing patterns, which, according to the defendants, implied an “overutilization of not-medically- necessary therapy services.” Br. in Supp. of Mot. to Dismiss at 7. As part of the pre-payment review, NGS sent New Vision “additional discovery request” (ADR) notices for fifty-one of its claims in mid-December 2006. The parties have not furnished the ADR requests, and they dispute whether the defendants informed New Vision that its claims were under review. Nevertheless, -3- plaintiff Shakoor responded to the requests, submitting, among other things, 485 care plans and clinical notes. On April 25, 2007, NGS notified the plaintiffs of its decision on the claims, “noting all therapy services denied and most nursing visits denied as ‘not reasonable and necessary.’” Mot. for Prelim. Inj., Ex. 4, Guenin Letter at 2. (The interaction between TrustSolutions and NGS in all this was as follows: “TrustSolutions notified NGS of its determination and NGS issued a remittance notice to New Vision either paying, partially paying, or denying payment for the claim.” Br. in Supp. of Mot. to Dismiss at 7-8.) The pre-payment review continued for some time, with NGS continuing to deny the vast majority of claims at TrustSolutions’s request. In early June 2007, New Vision’s attorney, Elizabeth Zink-Pearson, contacted Linda Mann, manager of investigations for TrustSolutions, inquiring about the audit. Mann responded on June 15, explaining the reason for the review and stating that the review would continue, but noting New Vision could “take appeal actions as desired.” Mot. for Prelim. Inj., Ex. 5, Mann Letter. TrustSolutions terminated the pre-payment review on January 9, 2008. In the meantime, and as a result of the high error rate found (approximately 90% of the payment denials were reversed), TrustSolutions implemented a post-payment review of claims submitted by New Vision from January 2004 to December 2006. On July 31, 2007, TrustSolutions asked New Vision to furnish additional documentation in support of claims paid by NGS during this time period. New Visions sent to TrustSolutions on 225 of these claims in September 2007. According to a letter sent by the Centers for Medicare and Medicaid Services (CMS), the post- payment audit was still underway as of January 9, 2008, and the defendants confirm that remains the case. -4- Although the complaint only seeks relief with respect to the post-payment review, the plaintiffs have devoted much of their brief discussing the pre-payment audit as well. They apparently believe evidence of impropriety concerning the pre-payment review makes impropriety more likely in the context of the post-payment audit. And there is considerable evidence that TrustSolutions fumbled the audit of several claims. As the defendants acknowledge in their brief, as of May 5, 2008, New Vision had requested that NGS perform a redetermination of 79 of the 117 claims that had been denied, in full or in part, during the pre-payment review. Of those 79 claims, NGS affirmed the initial determination for 66 claims (i.e. agreed that the claim should be denied), reversed the initial determination for three claims, and partially reversed the initial determination for two claims. Eight claims still are pending before NGS for redetermination. Br. in Supp. of Mot. to Dismiss at 8-9. In their complaint, the plaintiffs challenge only the post-payment review. They bring counts for breach of the duty of due care (against TrustSolutions only) (Count 1), arbitrary and capricious agency action in violation of law (against all defendants) (Counts 2-3), and violation of the Equal Protection Clause (against all defendants) (Count 4). The plaintiffs also bring a count requesting a writ of mandamus (Count 5) ordering the Secretary of Health and Human Services to promulgate regulations governing the activities of the Program Safety Contractors. The plaintiffs theorize that they were targeted because New Vision is owned by a Middle Easterner, and the audit is simply being used as a tool of harassment. In terms of relief, the plaintiffs ask the Court to (1) grant a permanent injunction barring further post-payment review; (2) declare TrustSolutions’ actions arbitrary and capricious and in violation of law; (3) order the Secretary to promulgate regulations that reign in the activities of Program Safety Contractors; and (4) award attorney’s fees under the Equal Access to Justice Act. -5- The plaintiffs say they have presented their complaint to the Secretary, and also demanded relief from TrustSolutions and CMS, but there is no administrative process available to pursue this complaint. On January 19, 2008, counsel for the plaintiffs wrote a letter to the Secretary, which he says amounted to “presentation” of the claim. The letter reads as follows: Dear Secretary Leavitt: This letter is intended to present the claim against Trust Solutions, LLC, a PSC Contractor, and CMS Region V staff for ongoing failure to use due care, discriminatory conduct, and defamation towards and against New Visions [sic] Home Health Care Inc. in the initiation, continuation and implementation of a program safeguard audit based on allegations of unnecessary services that have been proven to date to be false and without basis in fact. My client has been severely damaged economically as well as having his business reputation impacted by the unwarranted investigation and communication to various entities accusing my client of what amounts to fraud. As there exists no administrative process to proceed with these complaints, I am presenting the claim to you. I am enclosing correspondence concerning the issues with Trust Solutions LLC and CMS Region V. If you have any questions or wish to discuss the complaint further, please do not hesitate to contact me at my office. Sincerely, s/ Elizabeth Zink Person Elizabeth Zink Pearson Mot. for TRO, Ex. 12, Letter to Sec. Also on January 19, counsel for the plaintiff sent a similar letter to Donna Morros Weinstein, Chief Counsel of the Office of General Counsel for the Department of Health and Human Services. The letter reads: Dear Ms. Weinstein: I represent New Visions [sic] Home Health Care, Inc. and am writing you to place a complaint against the Program Safeguard Contractor Trust Solutions LL. I am enclosing correspondence with staff at Trust Solutions LLC to insist that they -6- discontinue any further false and defamatory statements about New Visions [sic] Home Health Care Inc. and to end all further “investigation” in the form of post- payment or pre-payment audits of claims that are based on false allegations of unnecessary services. I ask you to investigate the internal operations of Trust Solutions LLC as I suggest that they have not complied with established rules and procedures for identifying providers to target for investigation. In fact, I submit to you that the investigation of New Visions [sic] has nothing to do with actual unnecessary services or truly aberrant billing patterns. Instead, I believe the pre-payment and pending post-payment claim reviews were initiated either because [of] (1) the owner’s middle eastern ethnic background, or (2) the fact that this agency historically has performed on an average 16 or more therapy visits an episode for patients receiving therapy services. Under the PPS payment system in place until January 1, 2008, home health agencies were reimbursed at the highest rate when more than 10 therapy services were provided. They received no more payment if they provided 16 visits than they would if they provided 11. Indeed, providing these extra visits in many cases caused New Visions to lose money on the services. Therefore, the increased therapy services did not in any way damage the program . . . up to this year, but starting this month, the reimbursement scheme has increased the therapy thresholds, and a higher reimbursement rate is paid for 14 or more therapy visits in an episode. I submit the Trust Solutions “investigation” of New Visions [sic] was in part a means to discipline New Visions [sic] future conduct to reduce the overall therapy utilization and not in any way based on alleged “unnecessary” or “unreasonable” services. In that regards, it is important to note that to date, every claim denial made by Trust Solutions that has reached the Administrative Law Judge setting has been fully overturned and all services deemed reasonable and necessary. I presume you understand the burden this wrongful investigation has placed on my client. And I ask that you include in your review the QIC First Coast Options who we learned were using only social workers to conduct the review at the QIC level. Surely such staff do not have the requisite or necessary skills to asses the necessity of therapy or other clinical services which evidence here again the lack of due care in the performance of their duties. It is no wonder that this QIC chooses to rubber stamp over 90% of Trust Solution denials – and these are both for-profit entities that benefit from such denials. I am enclosing recent correspondence from me to Trust Solutions and CMS staff to demand that all further auditing of New Visions [sic] ceases. I believe that in light of the ALJ reversals, there exists no way to justify any further auditing of New Visions [sic] and continu[ing] to do so will cause my client serious damage. I ask that you advise me of the result of your investigation into this complaint. Mot. for TRO, Ex. 12, Letter to Chief Counsel. -7- The plaintiffs filed their complaint in this Court on April 22, 2008, along with a motion for a temporary restraining order and preliminary injunction. The defendants filed the present motion to dismiss for lack of subject-matter jurisdiction on May 21, 2008. Although the Court had originally scheduled the injunctive motion for a hearing before the motion to dismiss, it adjourned that hearing in favor of the present motion. II. The defendants move to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(1), contending that this Court lacks subject-matter jurisdiction over this case because the plaintiffs have failed to exhaust administrative remedies as required by 42 U.S.C. § 405. The defendants argue the plaintiffs first must follow the established procedure for appellate review under Medicare before they can seek relief from this Court, which they have not yet done. The defendants argue that the plaintiffs first must present their constitutional argument in the administrative forum before bringing it to the courts, and the only avenue for judicial review is via section 405(g), which requires exhaustion of administrative remedies. The plaintiffs counter this argument by asserting that their complaint does not address itself to the denial of individual claims for payment. Instead, they insist that they are entitled to attack the procedure wholesale because it is being misused to harass them due to their national origin, thereby denying them the equal protection of the laws. At oral argument, the plaintiffs represented to the Court that this constitutional issue, which forms the basis of their claim, cannot be presented in an administrative forum designed to review individual claim denials. They contend that because they are mounting a procedural or systemic attack on the post-payment review process in general, exhaustion is not available and therefore not required. -8- Rule 12(b)(1) authorizes dismissal where subject matter jurisdiction is wanting. Lack of subject matter jurisdiction may be asserted at any time, either in a pleading or a motion. Fed. R. Civ. P. 12(b)(1); Television Reception Corp. v. Dunbar, 426 F.2d 174, 177 (6th Cir. 1970). When subject matter jurisdiction is challenged, the plaintiff has the burden of proving jurisdiction in order to survive the motion. Michigan Southern R.R. Co. v. Branch & St. Joseph Counties Rail Users Ass'n, Inc., 287 F.3d 568, 573 (6th Cir. 2002); see also Moir v. Greater Cleveland Reg'l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990). Both parties agree that a provider claiming wrongful denial of payment (or a patient claiming wrongful denial of benefits) under Medicare must exhaust administrative remedies before turning to the courts. The administrative process is extensive, and the exhaustion requirement is broad. The statutory basis for this requirement is 42 U.S.C. § 405(g), which allows judicial review only after administrative remedies have been exhausted, and section 405(h), which states: The findings and decision of the Commissioner of Social Security after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact or decision of the Commissioner of Social Security shall be reviewed by any person, tribunal, or governmental agency except as herein provided. No action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter. 42 U.S.C. § 405(h). As the plaintiffs have stated, the administrative review process presumes an “initial determination” by the carrier. See 42 C.F.R. § 405.807. Initial determinations include decisions as to “[t]he coverage of items and services furnished.” See 42 C.F.R. § 405.704(b). If a provider disagrees with a carrier’s initial determination, the provider may request the carrier to review the decision, see 42 C.F.R. § 405.807, or may seek administrative review and hearing by the Secretary -9- of the Department of Health and Human Services, see 42 U.S.C. § 1395ff(b). After exhausting administrative procedures, the healthcare provider may seek judicial review pursuant to the mechanisms provided by the Social Security Act, 42 U.S.C. § 405(g). See United States ex rel. Rahman, v. Oncology Assoc., PC, 198 F.3d 502, 512-13 (4th Cir. 1999). Although this procedure is best suited to contests over discrete payment disputes, blanket challenges are handled no differently. In Heckler v. Ringer, 466 U.S. 602 (1984), the Supreme Court explained that as long as the claim arises under the Medicare Act, the route to the courts passes only through section 405(g). In that case, three individuals who had been denied Medicare reimbursement for bilateral carotid surgery at some, but not all, administrative levels brought suit challenging the Secretary’s ruling that the surgery was not reasonable and necessary. They were joined by a man who had declined the surgery because he could not afford it. The complaint sought a declaration that the Secretary’s position on bilateral carotid surgery (a blanket policy) was unlawful; an injunction compelling the Secretary to instruct her intermediaries to cover surgeries of this variety; and an injunction barring the Secretary from forcing surgery patients to pursue administrative appeals in order to secure payment. The Court observed that “[t]he third sentence of 42 U.S.C. § 405(h), made applicable to the Medicare Act by 42 U.S.C. § 1395ii, provides that § 405(g), to the exclusion of 28 U.S.C. § 1331, is the sole avenue for judicial review for all ‘claim[s] arising under’ the Medicare Act.” Id. at 614 (footnote omitted). Therefore, the Court concluded, “all aspects of respondents’ claim for benefits should be channeled first into the administrative process which Congress has provided for the determination of claims for benefits.” Ibid. The Court explained its reasoning, with particular emphasis on the breadth of the exhaustion requirement, as follows: -10- In Weinberger v. Salfi, supra, 422 U.S., at 760-761, we construed the “claim arising under” language quite broadly to include any claims in which “both the standing and the substantive basis for the presentation” of the claims is the Social Security Act. In that case we held that a constitutional challenge to the duration-of-relationship eligibility statute pursuant to which the claimant had been denied benefits, was a “claim arising under” Title II of the Social Security Act within the meaning of 42 U.S.C. § 405(h), even though we recognized that it was in one sense also a claim arising under the Constitution. Id. at 615. The Ringer Court recognized only two exceptions to this broad general rule. One, not applicable here, is when the Secretary waives the exhaustion requirement. The other is exemplified by Mathews v. Eldridge, 424 U.S. 319 (1976), a case in which “the plaintiff asserted a procedural challenge to the Secretary’s denial of a pretermination hearing, a claim that was wholly ‘collateral’ to his claim for benefits, and where he made a colorable showing that his injury could not be remedied by the retroactive payment of benefits after exhaustion of his administrative remedies.” Ringer, 466 U.S. at 617. It is the second exception for which the plaintiffs here seek to qualify. They believe their position is bolstered by Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667 (1986), decided two years after Ringer. The respondents in that case brought a challenge to the constitutional viability of a Medicare regulation. At that time, Medicare precluded judicial review of Part B “amount determinations,” which concern physician services and related medical needs. The Court held that the Act did not bar the respondents’ claim, which was a challenge to the “method by which . . . amounts are determined.” Id. at 681 n.11. After considering the legislative history, the Court concluded that “matters which Congress did not delegate to private carriers, such as challenges to the validity of the Secretary’s instructions and regulations, are cognizable in courts of law.” Id. at 680. It also observed that the exhaustion requirement was inapposite because -11- traditional administrative remedies contemplated a decision following a hearing, and the Secretary nevered enacted a regulation that called for a hearing. As such, “[r]espondents’ attack on the regulation . . . [wa]s not subject to such a requirement because there [wa]s no hearing, and thus no administrative remedy, to exhaust.” Id. at 679 n.8. Eight years later, the Sixth Circuit decided Farkas v. Blue Cross & Blue Shield of Michigan, 24 F.3d 853 (6th Cir. 1994). The defendants say this case supports their argument for dismissal, essentially relegating Michigan Academy to an historical footnote. In Farkas, a physician sued the Secretary of Health and Human Services, alleging that he was improperly subject to a pre-payment audit. Id. at 854. The district court dismissed the case for want of jurisdiction, and the Sixth Circuit affirmed. The issue before the appellate court was simple: “Did the district court have jurisdiction over Dr. Farkas’ P[re-]P[ayment ]U[tilization ]R[eview] claim, when he had neither presented his claim to the Secretary nor exhausted the administrative remedies available to him prior to seeking judicial review?” Ibid. The Sixth Circuit found that it did not. The Sixth Circuit began by noting that the Secretary has passed regulations that authorize carriers “to audit provider records to ensure that services for which reimbursement is claimed are ‘medically necessary,’ ‘reasonable,’ and otherwise payable under Part B.” Farkas, 24 F.3d at 855 (quoting Isaacs v. Brown, 865 F.2d 468, 470 (2d Cir. 1989 . The Court explained that, although Medicare has always provided for judicial review of Part A benefit claims, it did not traditionally allow for judicial review of Part B claims. Ibid. However, following the Michigan Academy decision, Congress passed the Omnibus Budget Reconciliation Act of 1986, “so as to provide for judicial review of Part B amount determinations.” Id. at 856. The issue before the Sixth Circuit, then, was “whether the holding in Michigan Academy authorizes federal question jurisdiction over -12- Dr. Farkas’ claim under 28 U.S.C. § 1331 or whether instead Dr. Farkas is bound by the requirement of 42 U.S.C. § 405(g) that judicial review is available only ‘after [a] final decision of the Secretary made after a hearing to which he was a party.’” Ibid. The court applied the broad exhaustion requirements and elected the latter option. The claim presented by Dr. Farkas is parallels the arguments presented by the plaintiffs in this case. As the Sixth Circuit put it: Dr. Farkas argues that Michigan Academy is still good law, even after the 1986 amendment to the Medicare Act, and that it controls the outcome of his appeal. He contends that even though judicial review of Part B amount determinations is now available, after the presentment and exhaustion requirements of 42 U.S.C. § 405(g) have been satisfied, his claim here is one challenging the methodology of Part B determinations, for which Michigan Academy still provides direct federal-question jurisdiction. He characterizes his claim as one “challenging the regulation that gives the Secretary the unbridled discretion to place him on PPUR on arbitrary and capricious grounds . . . . This is not an amount dispute but one over the methodology used by the Secretary to place providers on PPUR.” He considers PPUR to be “a severe form of punishment ” that “consistently results in denied claims which necessitate ‘amount’ hearings.” He argues that he has a constitutional challenge in that the Secretary placed him under PPUR “solely [out] of vindictiveness,” in retaliation for his lawsuit against BCBSM, which “sanction is extremely repugnant to basic due process requirements.” Id. at 859. The court disagreed with Dr. Farkas’s reading of Michigan Academy, holding that “the OBRA Amendments to the Medicare Act have deprived Michigan Academy of lasting precedential value.” Id. at 860. The court explained its rationale as follows: Since claims under Medicare Parts A and B are now to be treated in identical fashion, a holding that a party may bring a methodology claim under Part B directly to federal district court, without having first presented a claim to the Secretary for a final decision, would mean that we would have to grant federal-question jurisdiction to a methodology claim under Part A of Medicare as well. This would in effect be a holding that Michigan Academy overrules the entire line of Supreme Court cases that has denied direct federal-question jurisdiction to claims under Part A. See National Kidney, 958 F.2d at 1132. This is a step, understandably, that we -13- are not willing to take. We therefore will no longer apply the amount/methodology distinction to claims brought under Part B of the Medicare Act as a means of providing federal-question jurisdiction for such claims. Ibid. However, the court did not close the door entirely on the claim challenging pre-payment review. The court noted that Dr. Farkas could challenge the denial of payments in the administrative forum, and then look to the courts for relief after administrative remedies were exhausted. The plaintiffs dispute the defendants’ view that Farkas demonstrates the vestigial status of Michigan Academy, and they argue that its continued vitality is confirmed by Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1 (2000). The Court agrees, to a point. Certainly, the distinction drawn between Medicare Part A and Part B claims by Michigan Academy has evaporated in the light of new regulations establishing an administrative procedure for resolving disputes over the latter. But the Shalala Court confirmed that Michigan Academy is still good law to the extent it establishes that the exhaustion requirement cannot be enforced “where application of § 405(h) would not simply channel review through the agency, but would mean no review at all.” Id. at 19. This holding, the Court stated, “has the virtues of consistency with Michigan Academy’s actual language; consistency with the holdings of earlier cases such as Ringer; and consistency with the distinction that this Court has often drawn between a total preclusion of review and postponement of review.” Ibid. The plaintiffs argue that enforcing the exhaustion requirement of section 405(h) would mean no review at all of their constitutional claim because administrative law judges have no power to adjudicate constitutional claims. That argument must fail for two reasons. First, the underlying premise of the argument is false. The plaintiffs seem to contend that because ALJs are not Article III judges, they do not have power to provide equitable relief. Supp. Br. at 4 (citing Northern -14- Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982 . But that is different than lacking the power to decide the constitutionality of a practice. Despite being given additional opportunity to provide authority for their assertion, the plaintiffs have not delivered. Although their supplemental brief contains a number of citations to the Code of Federal Regulations, not one of them indicates that a discrimination argument cannot be made during the administrative process. Second, even if their constitutional argument would not be entertained at the administrative level, the Shalala Court held that the exhaustion requirement must be utilized unless that process would result in the plaintiffs’ claims never being heard. The Court rejected the plaintiff’s claim in that case, holding that channeling the claims through administrative review would not “amount to the practical equivalent of a total denial of judicial review.” Shalala. 529 U.S. at 20 (internal quotes omitted). Although the Court recognized that the plaintiff might suffer a burden, the Court was not willing to “hold that an individual party could circumvent § 1395ii’s channeling requirement simply because that party shows that postponement would mean added inconvenience or cost in an isolated, particular case. Rather, the question is whether, as applied generally to those covered by a particular statutory provision, hardship likely found in many cases turns what appears to be simply a channeling requirement into complete preclusion of judicial review.” Id. at 22. Making a point that applies especially to the plaintiffs in this case, the Court dismissed the plaintiff’s argument that it need not comply with presentment and the administrative appeals process because “a host of procedural regulations limit the extent to which the agency itself will provide the administrative review channel leading to judicial review.” Id. at 23. The Court reasoned: The Council’s members remain free, however, after following the special review route that the statutes prescribe, to contest in court the lawfulness of any regulation or statute upon which an agency determination depends. The fact that the agency might not provide a hearing for that particular contention, or may lack the power to -15- provide one, see Sanders, 430 U.S., at 109 (“Constitutional questions obviously are unsuited to resolution in administrative hearing procedures . . .”); Salfi, 422 U.S., at 764; Brief for Petitioners 45, is beside the point because it is the “action” arising under the Medicare Act that must be channeled through the agency. See Salfi, supra, at 762. After the action has been so channeled, the court will consider the contention when it later reviews the action. And a court reviewing an agency determination under § 405(g) has adequate authority to resolve any statutory or constitutional contention that the agency does not, or cannot, decide, see Thunder Basin Coal, 510 U.S., at 215, and n. 20; Haitian Refugee Center, supra, at 494; Ringer, 466 U.S., at 617; Salfi, supra, at 762, including, where necessary, the authority to develop an evidentiary record. Proceeding through the agency in this way provides the agency the opportunity to reconsider its policies, interpretations, and regulations in light of those challenges. Nor need it waste time, for the agency can waive many of the procedural steps set forth in § 405(g), see Salfi, supra, at 767, and a court can deem them waived in certain circumstances, see Eldridge, 424 U.S., at 330-331, even though the agency technically holds no “hearing” on the claim. See Salfi, supra, at 763-767 (holding that Secretary’s decision not to challenge the sufficiency of the appellees’ exhaustion was in effect a determination that the agency had rendered a “final decision” within the meaning of § 405(g ; Eldridge, supra, at 331-332, and n. 11 (invoking practical conception of finality to conclude that collateral nature of claim and potential irreparable injury from delayed review satisfy the “final decision” requirement of § 405(g . At a minimum, however, the matter must be presented to the agency prior to review in a federal court. This the Council has not done. Id. at 23-24 (emphasis added). So it is with the plaintiffs here. The plaintiffs admit they have not invoked the administrative process, but they say they should be excused because their claim is “wholly collateral” to a claim for payment and there is no administrative process that specifically addresses their claim of abuse. However, although the plaintiffs may not be seeking to overturn a discrete decision regarding coverage (instead they object to the post-payment review process, not its results, contending that it is the product of racial discrimination and caprice), their complaint nevertheless arises under the Medicare Act. It is application of the Act and regulations promulgated thereunder that upsets the plaintiffs. -16- Although there may not be an administrative process for bringing the precise claims advanced by the plaintiffs prior to an initial determination, they are not without recourse. Like Dr. Farkas, New Vision and Shakoor “may challenge [the defendants’] decision in conjunction with a claim for any payments denied.” See Farkas, 24 F.3d at 861. If the defendants reject this argument at the administrative level, the plaintiffs “may then seek review of that decision via the appeals process available within the Department of Health and Human Services and ultimately from the federal courts.” Ibid. If a district court then determines that the post-payment review was improper, “it can issue the appropriate relief.” Ibid. Requiring the plaintiffs to channel their claims through the administrative process would not “amount to the practical equivalent of a total denial of judicial review.” Shalala, 529 U.S. at 20 (internal quotes omitted). “The fact that the agency might not provide a hearing for that particular contention, or may lack the power to provide one, is beside the point because it is the ‘action’ arising under the Medicare Act that must be channeled through the agency.” Id. at 23. To be sure, this may be more burdensome for the plaintiffs than immediate judicial review. However, this Court cannot ignore the exhaustion requirement simply because a party “shows that postponement would mean added inconvenience or cost.” Id. at 22. III. The Court finds that the sole basis for jurisdiction over the plaintiffs’ claims in this case is 42 U.S.C. § 405(g). Because the plaintiffs have not exhausted their administrative remedies under 42 U.S.C. § 405(g) and (h), this Court does not have subject-matter jurisdiction over the claims. Accordingly, it is ORDERED that the hearing on the defendants’ motion to dismiss [dkt #14] is GRANTED. -17- It is further ORDERED that the complaint is DISMISSED. It is further ORDERED that the plaintiffs’ motion for a preliminary injunction [dkt #4] is DISMISSED. Dated: October 2, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 2, 2008. s/Felicia M. Moses FELICIA M. MOSES -18-

=== Opinion Denying Absolute Writ (Scott v. Bock) ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Petitioner, Case No. 99-10274 Honorable David M. Lawson CLARENCE SCOTT, v. BARBARA BOCK, ________________________________________/ Respondent. OPINION AND ORDER DENYING PETITIONER’S MOTION FOR ISSUANCE OF ABSOLUTE WRIT OF HABEAS CORPUS On January 13, 2003, this Court issued a writ of habeas corpus that ordered the petitioner’s release unless the State of Michigan held a new trial on the charge of first-degree murder within ninety days. The Court issued a stay of its order pending appeal, and after affirmance and issuance of an appellate court mandate, the trial deadline became May 16, 2005. The State failed to honor that deadline, although the petitioner later entered a guilty plea to second-degree murder. Now he seeks an order from this Court vacating his new conviction and commanding his immediate release. The Court heard the parties’ arguments in open court on September 3, 2008 and now concludes that the State’s failure to bring the petitioner to trial within the time set by the Court did not deprive the State of jurisdiction, and this matter does not fall within that narrow category of cases in which extraordinary circumstances would bar retrial. Therefore, the petitioner’s motion will be denied. I. Petitioner Clarence Scott’s original trial took place in 1995. He was convicted of the first- degree premeditated murder, first-degree felony murder, and possession of a firearm during the commission of a felony (felony firearm) for killing a single victim during robbery at a fast food restaurant near the Detroit Metropolitan Airport in Romulus, Michigan. The state court sentenced the petitioner to two consecutive life imprisonment terms for the two murder counts, and a consecutive two-year term for his firearm conviction. The Michigan Court of Appeals later vacated a felony murder conviction on double jeopardy grounds, People v. Scott, No. 184480, 1997 WL 33347912, at *3 (Mich. App. May 30, 1997), and this Court’s finding of constitutional infirmity in the present matter required retrial of the remaining murder conviction. Because the defendant had already served the two-year term on the felony firearm conviction by the time he brought his first habeas petition, it was never subject of this Court’s consideration. The State appealed, but the matter was handled by the Wayne County, Michigan prosecutor’s office instead of the state attorney general. This Court granted a stay pending the appeal and refused Mr. Scott’s request for release pending appeal. The Sixth Circuit affirmed this Court’s ruling, and the Supreme Court denied certiorari. See Scott v. Gundy, 100 Fed. Appx. 476, 2004 WL 1303235 (6th Cir. June 9, 2004) (unpublished), cert. denied, 543 U.S. 1089 (2005). The court of appeals then issued the mandate on February 14, 2005, beginning anew the ninety-day time period within which a new trial must commence, which ended on May 16, 2005. Despite the deadline and the conditional nature of the writ, however, the state remained indifferent about retrying Mr. Scott. The initial momentum of the local prosecutor’s office “to act quickly to retry the case” apparently stalled, and the State did not initiate any proceedings in Wayne County until May 18, 2005, two days after the ninety-day deadline. See Cadillac News, Online Edition, Court Decision Requires New Trial in 1994 Murder, Jan. 19, 2005, Ex. A to Pet.’s Reply to Respondent’s Answer to Br. in Support of Suppl. Habeas Petition [dkt # 52]; Respondent’s Answer to Br. in Support of Suppl. to Habeas Petition [dkt # 51], at 5. During that May 18, 2005 -2- hearing before state circuit judge Edward Ewell, assistant Wayne County prosecuting attorney Elizabeth Walker attributed the delay to her ignorance of the deadline and her lack of knowledge of how to bring the prisoner to Wayne County. Although it was her office that represented the State in the federal habeas proceedings, she explained, remarkably: While I was aware that the habeas court had given him relief and new trial was to be ordered I was not aware of the time lines. There was no other triggering mechanism to get him here until I received a call, or our office received a call yesterday from the authorities in Ionia that someone needed to come get – and get him. At that point we made arrangements. Ex. C, Pet.’s Reply to Respondent’s Answer to Br. in Support of Suppl. to Habeas Petition [dkt # 52], at 5. The hearing transcript reveals that the petitioner’s just-appointed counsel likewise was in the dark about the procedural posture of the case, but, urged by Mr. Scott, counsel noted that he wished to do everything not to prejudice his client’s rights to seek relief under the ninety-day order, including seeking dismissal. The case then proceeded slowly through the system to a pretrial services report ordered on May 18, 2005, a calendar conference two days later, the “final” conference on June 24, 2005, and a hearing on August 8, 2005, where Mr. Scott expressed discontent with his attorney’s services. Still no trial was held. During the August 8 hearing, the state trial court, apparently confused by the federal nomenclature, opined on the subject of the ninety-day deadline that “dismissal of the case is not the remedy” for its violation. Id., Ex. E, at 5. The court analogized a ninety-day order to the state 180-day rule: It’s just kinda’ like the 180-day rule. Just because you don’t proceed doesn’t mean dismissal is the recourse. There could be credit; it could be the fact that the person is credited. They’d still have to show prejudice of how this defendant – there’s a standard. There’s nothing that says, “Boom, you’re out of here, because you violate,” especially a time ordinance. And that’s the problem. -3- Ibid. At that same hearing, Wayne County circuit court judge Vonda R. Evans, after much hesitation about the strength of evidence absent the confession, finally made a ruling on the petitioner’s new bond, resolving to “keep [it] as it is.” Id., Ex. E, at 10-11. Trial was then scheduled to begin on September 20, 2005, over four months after the expiration of this Court’s retrial deadline. However, instead of a trial, the petitioner opted to enter a guilty plea to second-degree murder and possession of a firearm during the commission of a felony under an agreement capping his sentence at twenty-eight years for the murder and two years for the felony firearm count. The petitioner now seeks to invalidate his plea, asserting that his counsel at that stage was ineffective, and the state court was without jurisdiction to accept the guilty plea because of the state’s violation of the ninety-day deadline. The petitioner also seeks an order unconditionally granting habeas relief and a determination that he should be released from incarceration for non- compliance with the deadline set forth in the Court of Appeals mandate. II. District courts generally favor conditional grants of the writ of habeas corpus because they provide the state with a window of opportunity to cure the error identified in the conditional grant. Satterlee v. Wolfenbarger, 453 F.3d 362, 369 (6th Cir. 2006). Apart from affording time to the state, conditional writs serve another important purpose: accommodating concerns of federalism and comity between co-equal sovereigns. See Hilton v. Braunskill, 481 U.S. 770, 775 (1987). The only appreciable difference between a conditional and an absolute grant of a habeas writ is that “the former lies latent unless and until the state fails to perform the established condition, at which time the writ springs to life.” Gentry v. Deuth, 456 F.3d 687, 692 (6th Cir. 2006). But like an absolute -4- grant, the conditional grant represents a final order that “ordinarily and ideally operate[s] automatically, that is, without the need for the district court to act further.” Ibid. When the state fails to comply with the order’s conditions, a conditional grant of a writ of habeas corpus requires the petitioner’s release from custody. Satterlee, 453 F.3d at 369; see also Fisher v. Rose, 757 F.2d 789, 791 (6th Cir. 1985); Wilkinson v. Dotson, 544 U.S. 74, 86-87 (2005) (Scalia, J., concurring) (“Conditional writs enable habeas courts to give States time to replace an invalid judgment with a valid one, and the consequence when they fail to do so is always release.”). Such requirement of release is not absolute, however. District courts retain jurisdiction over the conditional grant cases and possess broad discretion in assessing the extent of the state’s compliance with their orders and the legitimacy of reasons the state might offer for the lack of or delay in compliance. See Gentry v. Deuth, 456 F.3d at 692. When a petitioner alleges non-compliance with a conditional order, the district court must evaluate whether the state’s action was sufficient to cure the error and assess any prejudice resulting to the petitioner from non-compliance. McKitrick v. Jeffreys, 255 Fed. Appx. 74, 76, 2007 WL 4012561, at *2 (6th Cir. Nov. 15, 2007) (unpublished). Although it is well within the district court’s power to order the release of the prisoner when the state does not fulfill the outlined conditions exactly, see Satterlee, 453 F.3d at 369, it is equally within the court’s prerogative to deny release of the petitioner and nullification of the conviction based on the state’s substantial compliance with the conditions. See, e.g., Santos-Rosario v. Renico, No. 05-CV-70456 (E.D. Mich. March 30, 2006) (unpublished) (refusing to release the petitioner based on substantial compliance when the state was two weeks late in appointing appellate counsel); Flenoy v. Russell, 902 F.2d 33 (6th Cir. 1990) (unpublished) (finding substantial compliance when the trial date was originally set eighteen days later than the mandate required and that date was -5- further postponed for more than six months because of the attorney’s conflict of interests); McKitrick v. Jeffreys, 255 Fed. Appx. at 76-77, 2007 WL 4012561, at *2-3 (finding substantial compliance with a conditional writ where a counsel was appointed and the hearing was scheduled within ninety days as required, but the new sentence was imposed on the ninety-first day because of the granted continuance). “Although it is preferable for the state to request an extension of time from the district court before the time for compliance expires if the state realizes that the terms of the conditional writ will not be fulfilled within the time frame specified, it is also within the district court’s discretion to grant an extension post-hoc if the time for compliance has passed.” McKitrick v. Jeffreys, 255 Fed. Appx. at 76-77, 2007 WL 4012561, at *3 (citation omitted). The State argues that it complied substantially with this Court’s order because it addressed the petitioner’s new trial proceedings only two days beyond the ninety-day deadline. That argument is specious. There was no demonstrated effort to bring the petitioner to trial on May 18, 2005. Instead, a conference was held merely to get the ball rolling. Trial was not to come for another four months. The State’s attempts to blame the delay on the breakdown in communications between different prosecuting agencies, inability to transfer Mr. Scott to Wayne County, or the ignorance of the State prosecutor about having to retry the petitioner all ring hollow. After all, it was a single prosecutor’s office that represented the respondent throughout the proceedings until the present motion was filed. The language of the orders of the court of appeals and this Court is plain, and the obligation set forth in the conditional writ is clear. The casual disregard of this Court’s orders is disturbing, if not contumacious. The suggestion that the local prosecutor did not know how to effectuate the transfer of the petitioner to Wayne County for trial strains belief. The conclusion is -6- inescapable that the prosecution inexcusably failed to carry out the order of this Court and the mandate of the court of appeals. However, the petitioner’s argument that the State’s disregard of the Court’s order deprives it of jurisdiction to proceed does not find support in the jurisprudence. The Sixth Circuit has held that the state’s failure to comply with the conditions of a writ does not usually foreclose a later prosecution by the state based on the original charging documents. Fisher v. Rose, 757 F.2d 789, 791 (6th Cir. 1985) (“holding a conviction invalid and granting the writ do not generally bar retrial on the original charge”) (quoting Bromley v. Crisp, 561 F.2d 1351, 1364 (10th Cir. 1977) (internal quotations omitted . As long as the prisoner does not remain in custody based on a constitutionally defective conviction, “the state is not precluded from rearresting petitioner and retrying him under the same indictment.” Id. at 791 (internal citation omitted). The petitioner in this case was never released from custody and rearrested. But the State held a bond hearing at which the petitioner’s release was considered in light of the new circumstances of a weakened prosecution case. The State’s delay did not result in the loss of authority to proceed. The fact that jurisdiction was not lost, however, does not mean that the State can disregard this Court’s new trial order with impunity. Consistent with the broad discretion of the habeas court in fashioning a proper remedy, district courts may bar the State from reprosecuting a defendant in “extraordinary circumstances.” Satterlee, 453 F.3d at 370. Such extraordinary circumstances exist when “the state inexcusably, repeatedly, or otherwise abusively fails to act within the prescribed time period or if the state’s delay is likely to prejudice the petitioner’s ability to mount a defense at trial.” Ibid. (citation omitted). As the term “extraordinary” implies, courts should award relief in the form of barring reprosecution sparingly, reserving this drastic remedy for the most outrageous -7- cases where the prisoner languishes behind prison bars while the State remains passive in the face of accumulating prejudice to the petitioner. See, e.g., Morales v. Portuondo, 165 F. Supp. 2d 601, 609 (S.D.N.Y. 2001) (barring reprosecution based upon, among other facts, the defendants’ likely innocence, the district attorney’s handling of the case, and the severe prejudice to the defendants in their ability to present a defense in a new trial given the significant passage of time). Unless the constitutional violation is not redressable at a new trial, or the second trial would be especially unjust, the bar on reprosecution is difficult to justify. See Cave v. Singletary, 84 F.3d 1350, 1359 (10th Cir. 1996) (citing Capps v. Sullivan, 13 F.3d 350, 352-53 (10th Cir. 1993) and Foster v. Lockhart, 9 F.3d 722, 727 (8th Cir. 1993 . Despite the State’s disregard of the retrial deadline, the Court does not find that extraordinary circumstances bar retrial. The petitioner can point to no prejudice that was caused by the delay. His constitutional rights were not further abridged. And, perhaps most importantly, the petitioner admitted his guilt of the homicide by entering his guilty plea to second-degree murder. It is well established that a voluntary and unconditional plea of guilty waives all nonjurisdictional defects in the proceedings, United States v. Ormsby, 252 F.3d 844, 848 (6th Cir. 2001), including those defects that are based on a delay of the start of a criminal defendant’s trial, Drumm v. Parke, 895 F.2d 1412 (6th Cir. 1990) (unpublished). In this case, imposing a reprosecution bar as a sanction for the State’s failure to abide a federal order would be an extreme remedy out of proportion to the local prosecutor’s violation, especially where the defendant has admitted his guilt. In weighing the option of deterring future transgressions by the State by preventing an untimely retrial against releasing an acknowledged killer, the balance tips decidedly against the reprosecution bar. To hold otherwise would be a gross example of freeing a criminal solely because of the blunders of the local -8- prosecutor, which this Court cannot justify in the absence of some demonstrated prejudice or claim of actual innocence. III. The Court finds that the State failed to comply with the retrial deadline in this Court’s conditional grant of a writ of habeas corpus. However, the State retained jurisdiction to retry the petitioner, which was not destroyed by its failure to comply with the order. Because the delay did not cause any prejudice to the petitioner, the State’s failure to comply appears to be due to negligence rather than willfulness, there was no repeated or abusive conduct by the State, and the petitioner has admitted his guilt of the crime charged, extraordinary circumstances do not warrant barring reprosecution. The petitioner is not entitled to release from the sentence imposed upon his new conviction of second-degree murder. Accordingly, it is ORDERED that the petitioner’s motion for absolute grant of writ of habeas corpus and for release [dkt # 49] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: September 12, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on September 12, 2008. s/Felicia M. Moses FELICIA M. MOSES -9-

=== Bobbitt Order re Discovery ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 07-10742 Honorable David M. Lawson TASHELIA BOBBITT, MISTY LATURNUS, SONYA PARKER, KIMBERLY DAVIS, TERRIE BUCHANAN, SHERITA FRAZIER, NICOLE ROSSITER, LONJA ALLEN, and DIANE POHL, on behalf of themselves and a class of all those similarly situated, Plaintiffs, v. ACADEMY OF COURT REPORTING, INC., and DELTA CAREER EDUCATION CORP., _______________________________________/ Defendants. OPINION AND ORDER SUSTAINING PLAINTIFFS’ OBJECTIONS AND OVERRULING DEFENDANTS’ OBJECTIONS TO MAGISTRATE JUDGE’S DISCOVERY ORDER REGARDING DISCLOSURE OF PRIVILEGED MATERIAL, VACATING MAGISTRATE JUDGE’S ORDER, AND DENYING DEFENDANTS’ MOTION TO COMPEL RETURN OF DISCLOSED MATERIAL This matter is before the Court on the parties’ objections to Magistrate Judge Virginia M. Morgan’s order granting in part the defendants’ motion to compel the return of certain documents – all e-mail communications – that the defendants contend are protected by the attorney-client privilege but were inadvertently disclosed. Judge Morgan held that one of the e-mail documents could be used by the plaintiffs to clarify the testimony of Suzanne Peters, in-house counsel and “compliance officer” for the Academy of Court Reporting, but the remaining e-mail documents were “presumptively” protected by the attorney-client privilege, and inadvertent production did not waive that privilege. The plaintiffs wish to be able to use all of these materials for all relevant purposes. They contend that the magistrate judge erred when she failed to: (1) realize that there was no evidence suggesting inadvertent disclosure; and (2) find that the defendants had waived any privilege through their inaction, including substantial delay in asserting the privilege claims. The defendants also object to the ruling. They argue that the plaintiffs should not be permitted to use even the single e-mail communication for the limited purpose identified by the magistrate judge, because it too is protected by the attorney-client privilege. After considering the parties’ arguments, the Court concludes that the magistrate judge committed clear error. The Court finds that some of the communications are not subject to the attorney-client privilege, and the defendants waived the privilege as to the other documents. Therefore, the Court will sustain the plaintiffs’ objections to the magistrate judge’s order, overrule the defendants’ objections, and deny the motion to compel the return of the documents. I. The plaintiffs commenced this class action on behalf of former and current students of the Academy of Court Reporting (the Academy) in early 2007. The original defendants included the Academy, Delta Career Education Corporation (Delta), Gryphon Colleges Corporation, and Gryphon Investors, Inc. (collectively, the “Gryphon entities”). The Academy apparently operated for some time as an independent corporation, but then Gryphon purchased one hundred percent of the Academy’s shares in 2006. Delta acquired the Academy later that year and now serves as its parent corporation. The plaintiffs’ allegations against Delta and the Gryphon entities initially were tenuous. At a hearing on these defendants’ motion to dismiss held in June 2007, the plaintiffs agreed to dismiss the non-Academy defendants and then file an amended complaint if they uncovered a basis for proceeding against one or more of them. The plaintiffs filed an amended complaint a few months later – in November 2007 – naming as defendants only Delta and the Academy. The -2- plaintiffs brought various counts sounding in fraud, and the Court certified the matter as a class action on May 1, 2008. In the meantime, the parties were engaging in discovery, which leads to the present dispute. On October 8, 2007, the Gryphon entities (non-parties at the time) produced a handful of documents in response to a subpoena from the plaintiffs. The plaintiffs had served the subpoena in August 2007, and counsel for the Gryphon entities, Christopher Keegan of Kirkland & Ellis LLP, responded on August 27, 2007. Keegan stated in a letter (to which the Academy and Delta’s counsel was copied) that he would furnish the requested documents. It appears that at some time during the litigation, the Academy, Delta, and the Gryphon entities were parties to a joint defense agreement. Among the items produced were the e-mail threads that are the subject of the controversy at hand. The e-mail communications consist of three threads, but they are best thought of as falling into two categories or conversations: one that took place in January 2007 and one that took place in February 2007. Both conversations appear to be damaging to the Academy and Delta’s defense. Despite the fact that counsel for the Academy and Delta was apprised of this disclosure, those defendants remained silent for quite some time. In fact, it was the Gryphon entities that first realized the disclosure may have been unwise. On November 13, 2007, Mr. Keegan wrote counsel for the plaintiffs (again sending a copy to Abdu Murray, counsel for the Academy and Delta): [A]s you are aware, in response to your third party subpoena to the [Gryphon entities], [the Gryphon entities] produced more than 6,400 pages of email communications and other documents responsive to your seventy-four requests. It has come to my attention that the Gryphon Entities inadvertently produced documents containing attorney-client privileged communications. Specifically the documents bates labeled: GRY005201-5204; GRY005185-5188; and GRY005174- 75 are confidential attorney client communications discussing legal advice related to this case. Consistent with paragraph 11 of the Stipulated Protective Order and the case law on inadvertent production of privileged communications, the Gryphon Entities request that you return these documents, including all copies. -3- Please destroy any copies that cannot be returned, including, for example, any electronic copies that might have been made, and expunge any document, material or information reflecting or disclosing the contents of these privileged communications. Pls.’ Resp. Br. re Mot. to Comp. [dkt # 79], Ex. 10, Keegan Letter at 1. The plaintiffs’ counsel responded to Mr. Keegan on November 19, 2007, refusing the request for return of the items because: the protective order referred to “confidential information” and said the parties could in fact use such information; “prevailing case law” holds that inadvertent disclosure may constitute a waiver; the communications are not protected by the attorney-client privilege; if they were privileged, the Academy waived the privilege by sending the communications to the Gryphon entities, which are separate corporations; any applicable privilege would be held by the Academy, whose failure to object underscores the idea of waiver; and a claim of inadvertent disclosure strains credulity in light of Kirkland & Ellis’s extensive review procedures. See Resp. to Keegan Letter at 2. Two days later, the plaintiffs filed their motion for class certification. In their supporting brief, the plaintiffs quoted Suzanne Peter’s January 29, 2007 e-mail wherein she expressed her belief that the Academy had wrongly represented its authority to grant associate’s degrees. They also referenced an e-mail sent by John Rogers on February 26, 2007 where Rogers opined that it would be wise to separate the plaintiffs from their counsel. Additionally, in their amended complaint filed November 2, 2007, the plaintiffs alluded to the contents of the disputed e-mails. See Amend. Compl. at ¶¶ 246-47 (“Delta executives began to communicate about devising ways to ‘pry’ Plaintiffs ‘loose’ from their counsel in this action. . . . Joseph Fox . . . had participated in the internal communications at Delta and the Academy during the previous two weeks regarding how to pry -4- Plaintiffs loose from their counsel.”). Following the certification motion, several months passed without a word about the e-mails. The Academy and Delta said nothing about the plaintiffs’ reference to the e-mails in their response brief. The Academy and Delta broke the silence by filing the present motion to compel on March 21, 2008, requesting return of the disputed e-mails and preclusion as to their use. The Court referred the motion to Magistrate Judge Morgan for hearing and decision, and Judge Morgan issued her ruling on May 2, 2008, one day after this Court certified the matter as a class action. As mentioned above, Judge Morgan ordered the plaintiffs to return the e-mail communications of February 2007, but she determined that the plaintiffs could use the January 2007 e-mail thread a limited purpose. In the e-mail thread approved by Judge Morgan, Ms. Peters responded to a notification sent by Debby Adams, an employee of Delta at the time. Adams informed Peters that she had acquired a new phone, and Peters responded as follows on January 29, 2007: I am glad you have a new cell phone. Is the number the same? Also, I just got off the phone with a student in Clawson and I want to give you a heads up. I spoke with this student last week. She was upset about the new associate degree process. I explained everything to her. This morning she called back for clarification. She advised she had been told by un-named staff members that the way we had been awarding the associate degree in the past was “illegal.” I told her that was untrue and explained the review process we went through resulting in the change. She claimed she and other students were thinking about going to the press. I told her we would work with her. I don’t know where this is going, hopefully nowhere, but I want you to know there is a potential issue out there. When Ken and Dennis dreamed this process up back in 2000, I expressed my displeasure especially since we had nothing in writing. I also told Jay and Kim we should not be telling students they were enrolling in an associate degree program when in fact they were not. They told me they would not do so. A year or so ago, I found out they were telling the students they were enrolling in an associate degree program and I complained to Ken very loudly. He made them stop at that point. -5- Unfortunately the damage had already been done and students in school who enrolled 2 or more years ago may have been given incorrect information when they enrolled. It is possible we will have to give some of those students complete refunds if the matter is pushed. If that happens, I think the money should be subtracted from what Gryphon owes Ken since this was a preexisting problem. I don’t want any students to leave and my plan is to work with everyone to satisfy them, however I don’t want any bad press on this. Defs.’ Objs., Ex. D, Peters Thread at 1-2. There is some disagreement as to whether Peters acted only as in-house counsel for the Academy, or whether she also wore the hat of “compliance officer.” The record suggests a mixed role; Peters is an attorney, but she was identified in campus literature as a person students could contact with complaints. Debby Adams forwarded Peters’s message to Joe Fox, president of the Academy and a Delta official, soliciting his thoughts. Fox did not respond to Peters or Adams, but rather sent the following message to Kevin Smith (CEO of Delta), Joe Kennedy (CFO of Delta), and John Rogers (of Gryphon): The Michigan Campus of ACR (Clawson) is not approved to offer Associate Degrees. They had/have a process for having students complete their Diploma portion in Clawson, and then “transfer” to Cleveland to get their Assoc. Degree. As you can see from the e-mail [from Ms. Peters], some students feel they were misled regarding the Assoc. Degree program. I will look into this further. Id. at 1. The other e-mail communications at issue were sent in February 2007. Suzanne Peters learned of the lawsuit shortly after it was filed, and she immediately informed Joe Fox. Word of the case made its way to Kevin A. Smith, CFO of Delta Career Education Corp., who in turn e-mailed David Breach, one of Delta’s attorneys. Smith wrote: David: -6- I received the attached law suit yesterday afternoon and immediately notified Bill Birkhead, our local counsel here in Norfolk with Vandeventor Black. He has contacted Suzanne Peters with ACR to gather additional information regarding this issue and to find out specifically when and where the complaint was served. He has already spoken to Marsh to notify our underwriters. It appears that these claims are related to activities prior to our ownership. If this is correct, we need guidance from your firm regarding the indemnification and escrows that were included in the purchase agreement and how to proceed with regards to the former owners [i.e., Gryphon]. Academy’s Reply Br. re Mot. to Compel [dkt # 87], Ex. B, Feb. 2007 E-mail Thread at 1-2. When John Rogers, a Gryphon official, learned of the lawsuit, he e-mailed Fox, Smith, and Joe Kennedy, CEO of the Academy, on February 26, 2007. Rogers wrote as follows: I spoke with Joe Fox to get some background on this. My two cents on this is that we should see it first as a student relationship management issue and second as a legal matter. In other words, if there are things we can do to make these students happy and pry them loose from the attorney who is stirring them up, then that is a better path forward than looking for a legal defense in the event that we end up in court. At that point we have probably lost far more in the form of student morale, bad publicity, etc. Perhaps we can discuss in executive session at the board mtg this week. Id. at 1. Minutes later, Rogers e-mailed Will Lynn (a partner with Gryphon) and Don Miller (also with Gryphon). David Andrews (Gryphon’s founder) and attorney Breach were copied to the e- mail. The message reads: Attached is a copy of the lawsuit that we [sic] recently filed against ACR by disgruntled students. I spoke with Joe Fox to get some background. The issue revolves around students who claimed that they were promised an AA degree at a campus that doesn’t grant such degrees. The plan according to Suzanne was to have students take a 2 day weekend course at a campus that offers the AA degree as their final course. Apparently this is both legal and acceptable by the accrediting bodies, but the students may be unhappy with that approach. Joe also thought that the final class could probably be offered online by the degree granting campuses. The main issue in the near term is that it got picked up by the local press and is being stirred up by a plaintiffs’ attorney, so proactively managing the students will probably -7- minimize potential fallout relative to a protracted legal strategy. We should probably discuss this at the board meeting this week in executive session. Ibid. Although Judge Morgan explained her reasoning in greater detail on the record, her written ruling is brief. Judge Morgan ordered that “[(]1) [t]he e-mail of January 29, 2007 referenced at deposition may be used to clarify testimony of Ms. Peters[;]” and “[(]2) [t]he other two e-mails are presumptively attorney-client privilege[d] and inadvertent disclosure does not waive privilege.” Order Granting in Pt. Mot. to Comp. [dkt # 94] at 1-2. With respect to the January communication, Judge Morgan based her ruling on a perceived inconsistency between Peters’s statements in the e- mail and her statements during a deposition. The deposition reads in relevant part as follows: Q. . . . What I’m asking you is at some point, did you become aware that students, prospective students at the Academy of Court Reporting in Michigan, were being told that they were enrolling in an associate degree program? . . . [A.] I had received information, and I don’t remember even when it was. But over the – you know, I had received information that it was possible that students were being told that they were enrolling in an associate degree program. This information was hearsay information, it was related to me by Mr. Rice. You know, I had no – I was never actually – no student ever told me that. I never sat in on any interviews where that happened or anything. But I – you know, I did receive some information that could indicate that that was the case. Defs.’ Objs., Ex. F, Peters Dep. at 275. In Judge Morgan’s view, the e-mail suggested that Peters heard of the misrepresentations directly from a student, while Peters spoke in deposition of hearing it through the grapevine. Therefore, it appears Judge Morgan intended to allow the plaintiffs to use the January e-mail in conjunction with the deposition testimony to determine exactly what Peters heard and from whom she heard it. Both parties filed timely objections to the magistrate judge’s decision. -8- II. The district court reviews an order by a magistrate judge on a non-dispositive matter to determine whether the decision is “clearly erroneous.” United States v. Curtis, 237 F.3d 598, 603 (6th Cir. 2001). A decision is “clearly erroneous” if “although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” United States v. United States Gypsum Co., , 395 (1948). Where there are two plausible views, a decision cannot be “clearly erroneous.” Anderson v. City of Bessemer City, North Carolina, , 573 (1985). The plaintiffs object to the magistrate judge’s order on the grounds that (1) there is no evidence that the documents were inadvertently produced; (2) the defendants’ extended silence following production constituted a waiver of any privilege claims; (3) the e-mail communications themselves evidence a violation of professional ethics and therefore cannot be protected by the privilege; and (4) if the e-mail string from Suzanne Peters is not subject to the privilege, there is no basis to limit its permissible use. The defendants, on the other hand, insist that the e-mails turned over to the plaintiffs’ attorneys all are subject to the attorney-client privilege. They contend that they do not have to offer actual evidence of inadvertent disclosure; rather, the Court may find inadvertent disclosure from the circumstances of production. The defendants also take issue with the magistrate judge’s allowance of Peters’s e-mail string for a limited purpose. They contend that if the document is privileged, it cannot be used for any purpose. Both sides rely on Fox v. Massey Ferguson, Inc., 172 F.R.D. 653 (E.D. Mich. 1995), as authoritative precedent on the issue of inadvertent disclosure. Federal Rule of Civil Procedure 26 prescribes the general provisions governing discovery: -9- Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party. Fed. R. Civ. P. 26(b)(1) (emphasis added). The privilege at issue in this case is the attorney-client privilege. The Sixth Circuit has explained that this privilege “protects from disclosure confidential communications between a lawyer and his client in matters that relate to the legal interests of society and the client.” Ross v. City of Memphis, 423 F.3d 596, 600 (6th Cir. 2005) (quoting In re Grand Jury Subpoena (United States v. Doe), 886 F.2d 135, 137 (6th Cir.1989 (internal quotation marks omitted). The elements of the attorney-client privilege were summarized decades ago by Dean Wigmore as follows: (1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) unless the protection is waived. 8 Wigmore, Evidence (McNaughton rev. ed.1961), § 2292, p. 554; see also Reed v. Baxter, 134 F.3d 351, 355-56 (6th Cir.1998). The purpose of the attorney-client privilege is to encourage clients to communicate freely with their attorneys. Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). It is a matter of common law right, “the oldest of the privileges for confidential communications known to the common law.” Ibid. But the essence of the privilege is confidentiality, and when confidentiality is destroyed, there is little justification for incurring the heavy cost to the production of relevant evidence which the privilege exacts. Parkhurst v. Lowten, 2 Swanst. 194, 216; 36 Eng. Rep. 589, 596 (Ch. 1895) (“The moment confidence ceases, privilege ceases.”); see also In re Grand Jury Proceedings Oct. 12, 1995, 78 F.3d 251, 254 (6th Cir. 1996). Because the privilege operates -10- to reduce the amount of information discoverable during the course of a lawsuit, it is narrowly construed. In re Grand Jury Investigation No. 83-2-35, 723 F.2d 447, 451 (6th Cir.1983). By voluntarily disclosing an attorney’s advice to a third party, for example, a client is held to have waived the privilege because the disclosure runs counter to the notion of confidentiality. See Westinghouse Elec. Corp. v. Republic of the Philippines, 951 F.2d 1414, 1424 (3rd Cir. 1991) (holding that “voluntary disclosure to a third party of purportedly privileged communications has long been considered inconsistent with an assertion of the privilege.”). Turning first to the question of whether the two e-mail strings were subject to the attorney- client privilege to begin with, it appears that Judge Morgan found at least some parts of the Peters’s e-mail satisfied the elements of the privilege. Suzanne Peters apparently was acting in a dual role of counselor and compliance officer. The compliance officer title may be something of a misnomer, however, as her task in that capacity looks like it was limited to managing relations between students and the administration. Nevertheless, at least a portion of the e-mail can be considered protected communication between an attorney and her client, since a part of it alerted Debbie Adams, an agent of Delta (which owns the Academy), to a potential legal issue, and Peters also expressed concern over issues of legal accountability for potential costs or damages that might result. The magistrate judge did not commit clear error in concluding that this e-mail at least qualified as privileged according to its subject matter. The February 2007 e-mail communications present a closer call. That e-mail thread begins with a message from Kevin Smith, Delta’s CFO, to David Breach, one of Delta’s attorneys. Smith forwarded a copy of the complaint to Breach, described the nature of the action, and asked for legal advice. See Feb. 2007 E-mail Thread at 1-2 (“[W]e need guidance from your firm regarding the -11- indemnification and escrows that were included in the purchase agreement and how to proceed with regards to the former owners [i.e., Gryphon].”). This communication is obviously privileged. However, in the next portion of the thread, John Rogers, a Gryphon official, sent an e-mail to Joe Fox, Kevin Smith, and Joe Kennedy, offering his “two cents” on the lawsuit. Id. at 1. Attorneys Breach and Birkhead received copies of the e-mail (they were listed on the “cc” line), but they were not listed in the salutation, and it does not appear that the purpose of sending the message was to obtain legal advice from them. According to the Eastern District of California, “[b]ecause of the narrowness of the attorney-client privilege, it is axiomatic that a communication between individuals is not transformed into a privileged one simply by virtue of an attorney being copied on the communication.” Coleman v. Schwarzenegger, 2008 WL 2468492, *4 (E.D. Cal. 2008) (citing In re Gabapentin Patent Litig., 214 F.R.D. 178, 186 (D.N.J. 2003 ; but see In re New York Renu with Moistureloc Product Liability Litig., 2008 WL 2338552, *10 (D.S.C. 2008) (suggesting that “a ‘cc’ to an attorney can qualify for the privilege” when the communication is intracorporate “between non-lawyer employees about matters which the parties intend to seek legal advice”). These communications were not “intracorporate.” Indeed, it appears that Debbie Adams of Delta shared the message with Joe Fox, president of the Academy, who in turn sent the information to Delta and Graphon officials. Therefore, the conclusion is inescapable that various corporate officials made selective disclosures of these communications to related but separate entities. The final message was sent on February 26, 2007, just minutes after the previous e-mail. Rogers e- mailed Will Lynn and Don Miller (Gryphon executives), and he copied to the e-mail David Andrews (Gryphon’s founder) and counsel Breach. Rogers attached a copy of the complaint, and he explained the basic nature of the action. The thrust of Rogers’s communication mirrored the -12- previous message, as he stated that “proactively managing the students will probably minimize potential fallout relative to a protracted legal strategy.” Feb. 2007 E-mail Thread at 1. It cannot be said with any certainty that this communication was made to obtain legal advice, but even if it were, the Delta and Academy officials made selective disclosures of the communications to representatives of a separate corporation, Graphon. Selective waivers of the privilege are disapproved, and they generally result in the destruction of the protection initially provided by the attorney-client privilege. As the Sixth Circuit has explained: [A]ny form of selective waiver, even that which stems from a confidentiality agreement, transforms the attorney-client privilege into “merely another brush on an attorney’s palette, utilized and manipulated to gain tactical or strategic advantage.” Steinhardt, 9 F.3d at 235. Once “the privacy for the sake of which the privilege was created [is] gone by the [client’s] own consent, . . . the privilege does not remain in such circumstances for the mere sake of giving the client an additional weapon to use or not at his choice.” Green v. Crapo, 181 Mass. 55, 62, 62 N.E. 956, 959 (1902) (Holmes, J.). “The client cannot be permitted to pick and choose among his opponents, waiving the privilege for some and resurrecting the claim of confidentiality as to others, or to invoke the privilege as to communications whose confidentiality he has already compromised for his own benefit.” Permian, 665 F.2d at 1221. In re Columbia/HCA Healthcare Corp. Billing Practices Litig., 293 F.3d 289, 302 -303 (6th Cir. 2002). The Court concludes, therefore, that the second e-mail string was not protected by the attorney-client privilege because the protection was waived by the disclosure to third parties. Then there is the question of disclosure resulting from the discovery production by Graphon‘s attorneys. The attorney-client privilege is not automatically waived in the case of inadvertent disclosure. United States v. Ary, 518 F.3d 775, 783 (10th Cir. 2008). Rather, courts consider a variety of factors – generally concerning the diligence of the disclosing party and the -13- impact of disclosure – to determine whether waiver should be implied. See ibid. (explaining that “courts have examined three main factors in determining whether protection has been waived when material has been involuntarily disclosed: (1) the specificity with which the defendant identifies the material; (2) the expediency by which the defendant informs the government that it seized protected material; and (3) the expediency by which the defendant seeks judicial action to enforce the protection.”); Nat’l Wildlife Federation v. EPA, 286 F.3d 554, 575-76 (D.C. Cir. 2002); In re Grand Jury Proceedings, 219 F.3d 175, 188 (2d Cir. 2000); Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251, 2008 WL 2221841, *5 (D. Md. 2008); Bus. Integration Servs., Inc. v. AT&T Corp., __ F.R.D. ___, ___, 2008 WL 1849755, *9 (S.D.N.Y. 2008). The Sixth Circuit has not addressed the issue. See United States ex rel. Pogue v. Diabetes Treatment Ctrs. of America, Inc., 444 F.3d 462, 467 (6th Cir. 2006) (declining to determine “whether the inadvertent disclosure of the allegedly protected documents constitutes a waiver of the attorney-client privilege and, if it does, what is the scope of such a waiver.”). But it has been addressed over the years by district courts in this Circuit. For example, in United States v. Kelsey-Hayes Wheel Co, 15 F.R.D. 461 (E.D. Mich. 1954), the defendants in a civil anti-trust case delivered hundreds of documents to the government during discovery. Twenty confidential letters between attorney and client were inadvertently included among these documents. The Court found that the attorney-client privilege was waived, and attributed the inadvertence of counsel to the client. In this Circuit, a helpful current case is that identified by the parties, Fox v. Massey- Ferguson, Inc., 172 F.R.D. 653 (E.D. Mich. 1995). The Fox court looked to the following factors in considering whether inadvertent disclosure resulted in waiver: “(1) the reasonableness of precautions taken in view of the extent of document production, (2) the number of inadvertent -14- disclosures, (3) the magnitude of the disclosure, (4) any measures taken to mitigate the damage of the disclosures, and (5) the overriding interests of justice.” Id. at 671 (citing FDIC v. Ernst & Whinney, 137 F.R.D. 14, 17 (E.D. Tenn. 1991), Hydraflow, Inc. v. Enidine, Inc., 145 F.R.D. 626, 637 (W.D.N.Y. 1993), Golden Valley Microwave Foods, Inc. v. Weaver Popcorn Co., 132 F.R.D. 204, 208-09 (N.D. Ind. 1990), and FDIC v. Marine Midland Realty Credit Corp., 138 F.R.D. 479 (E.D. Va. 1991 . Applying the Fox factors leads the Court to the conclusion that waiver occurred as to both e-mail strings. The first factor – “the reasonableness of precautions taken in view of the extent of document production,” Fox, 172 F.R.D. at 671 – slightly favors the defendants. The record contains little evidence on the precautions taken, but Thomas Howlett, counsel for the plaintiffs, lauded Kirkland & Ellis’s document screening procedures. See Resp. to Keegan Letter at 2. Of course, Kirkland & Ellis represented the Gryphon entities, so these precautions mean little to whether the Academy and Delta took reasonable precautions. The second factor is “the number of inadvertent disclosures.” Fox, 172 F.R.D. at 671. Like the first factor, consideration of this factor would appear to reward diligence and punish carelessness – the more inadvertent disclosures, the more likely waiver becomes. This factor favors neither side. The third factor follows naturally from the second, relating as it does to “the magnitude of the disclosure.” Fox, 172 F.R.D. at 671. This factor clearly points in the direction of waiver. The disclosures here are extremely relevant to the merits of this case – they speak directly to the validity of the fraud claim. Again, it is worth noting that the disclosures were actually made by the Gryphon entities, not the Academy and Delta. However, Academy and Delta personnel were parties to the e-mails, the Academy and Delta were involved in a joint defense agreement with Gryphon, and they -15- were apprised of the disclosures not long after they were made. Attributing to the Academy and Delta knowledge of the magnitude of the disclosures is therefore reasonable. The fourth factor the Court considers is “any measures taken to mitigate the damage of the disclosures.” Fox, 172 F.R.D. at 671. This factor also weighs heavily in favor of waiver. The Academy and Delta became aware of the disclosure, at the latest, on November 13, 2007, when Chris Keegan, counsel for the Gryphon entities, sent a letter to plaintiffs’ counsel (to which counsel for the Academy and Delta was copied) identifying the e-mails and requesting their return on grounds of privilege. Plaintiffs’ counsel refused this request in a comprehensive response letter. Then, on November 21, 2007, the plaintiffs filed their motion for class certification, referring to portions of the disputed e-mails. The Academy and Delta did nothing to contest the use of these e- mails until March 21, 2008, when they filed the present motion to compel. To put it colloquially, the measures taken by the Academy to mitigate the damage of disclosure are “a day late and a dollar short.” Finally, there is “the overriding interests of justice.” Fox, 172 F.R.D. at 671. Justice would not appear to be served by sweeping under the rug highly probative documents that were out in the open for so long without vigorous objection. Further, the questionable nature of the privilege claims also figures into this analysis. The Court concludes, therefore, that the magistrate judge committed clear error in determining that the inadvertent disclosure did not result in waiver of any applicable claims of privilege. -16- III. The Court concludes that the magistrate judge committed clear error when she granted in part the defendants’ motion to compel the return of certain e-mail documents on the basis that they are protected by the attorney-client privilege. According, it is ORDERED that the plaintiffs’ objections to the magistrate judge’s order granting in part the defendants’ motion to compel [dkt #100] are SUSTAINED and the defendants’ objections [dkt #105] are OVERRULED. It is further ORDERED that the magistrate judge’s order granting in part the defendants’ motion to compel return of disclosed documents [dkt #94] is VACATED. It is further ORDERED that the defendants’ motion to compel [dkt #63] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: August 26, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 26, 2008. s/Felicia M. Moses FELICIA M. MOSES -17-

=== Pankey Opinion ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION BRYAN DUANE PANKEY and JO ANN PANKEY, ______________________________________/ Debtors, GENE R. KOHUT, Appellant, v. NEW CENTURY MORTGAGE CORP. and WELLS FARGO BANK, N.A., ______________________________________/ Appellee. Case Number 07-13256 Bankr. Number 05-67427 Honorable David M. Lawson OPINION The bankruptcy trustee appeals the decision of the bankruptcy court granting summary judgment to creditors Wells Fargo Bank, N.A. and New Century Mortgage Corporation, determining as a matter of law that a mortgage on the debtor’s property was perfected more than ninety days before the bankruptcy filing, and therefore did not constitute a preferential transfer within the meaning of 11 U.S.C. § 547(b)(4)(A). The critical and determinative issue is the date on which the mortgage can be deemed “recorded” under Michigan law, which in turn establishes the date on which the creditor’s security interest was perfected in this case and therefore the transfer date of the property interest in question. The Court finds that an instrument is “recorded” by a county register of deeds when the person who seeks the benefit of the recording laws completes all the legal requirements for recording such an instrument, even when county officials are unfaithful to their statutory duties. Because fact issues preclude a determination as to when those requirements were completed in this case, the Court finds that summary judgment was improper. Therefore, the Court will reverse the judgment of the bankruptcy court and remand the case for further proceedings. I. The parties are in substantial agreement as to the basic facts and the underlying legal framework in which this dispute is presented. On February 11, 2005, debtors Bryan and Jo Ann Pankey refinanced their home located in Clarkston, Michigan, with two loans from New Century Mortgage Corporation. Each loan was memorialized by a separate promissory note, and each was secured by a mortgage. Only the first of these notes, for $192,000, is at issue in this case. As security for the loan, the debtors granted New Century a first mortgage against their residential property. The funds were disbursed on February 16, 2005, and shortly thereafter, on February 22, 2005, New Century assigned the mortgage to Wells Fargo. Progressive Title Insurance Agency, Inc. handled the closing of the loan transaction and subsequent recording of the mortgage. The title company presented the mortgage in recordable form to the Oakland County Register of Deeds on March 24, 2005. A check for the recording fee was written either on that date or on March 28, 2005. However, the mortgage was not assigned a liber and page until June 20, 2005, and the recording fee check was not deposited by the county until June 22, 2005. On August 26, 2005, the debtors filed a petition for bankruptcy under Chapter 7 of the Bankruptcy Code. Adversarial proceedings were commenced by the trustee Kohut in October 2006 to avoid the mortgage pursuant to 11 U.S.C. § 547(b) as a preferential transfer. Of course, the bankruptcy trustee may avoid transfers by the debtor that occur within ninety days before the debtors’ bankruptcy filing. 11 U.S.C. § 547(b)(4)(A). A transfer includes a conveyance of any interest in property, including a security interest. 11 U.S.C. § 101(54). A mortgage constitutes such -2- a conveyance. In re Van Duzer, 390 Mich. 571, 577, 213 N.W.2d 167, 170 (1973). The Bankruptcy Code states that a transfer is made “at the time such transfer is perfected.” 11 U.S.C. § 547(e)(2)(B).1 In the case of real property, “perfection” of a security interest occurs “when a bona fide purchaser of such property from the debtor against whom applicable law permits such transfer to be perfected cannot acquire an interest that is superior to the interest of the transferee.” 11 U.S.C. § 547(e)(1)(A). Under Michigan law, a good faith purchaser cannot acquire such a superior interest in real estate after the transferee’s conveyance is “duly recorded.” Mich. Comp. Laws § 565.29. So for the purpose of the preference statute, a transfer of an interest in real estate occurs on the date the interest is recorded under state law. If the creditor’s mortgage in this case is deemed to have been recorded after May 27, 2005 – that is, within ninety days from the bankruptcy filing – the trustee may set it aside as a preference. All of this demonstrates the importance of establishing with certainty the date an instrument affecting real estate is deemed “recorded.” That point was fully embraced long ago by the Michigan legislature when it prescribed specific rules governing county registers of deeds and the recording of instruments. For instance, the law requires “[e]very register of deeds [to] keep an entry book of . . . mortgages” noting the “date of receipt, month, day, [and] hour” the documents are received by the register of deeds for recording. Mich. Comp. Laws § 565.24. When a mortgage fit for recording is presented to a county register of deeds, “[i]n the entry book of mortgages the register shall enter all mortgages.” Mich. Comp. Laws § 565.25(1) (emphasis added). For over a century, under 1Under the 2005 version of the Code, the formal date of transfer also could relate back to the actual date of conveyance if perfection had occurred within ten days of that date. 11 U.S.C. § 547(e)(2)(A) (2005). Subsequent amendments have expanded that period to thirty days. There is no argument here that the transfer in this case relates back to the conveyance date of February 11, 2005. -3- Michigan law “[t]he instrument shall be considered as recorded at the time so noted” in the book. Mich. Comp. Laws § 565.25(4); see also Balen v. Mercier, 75 Mich. 42, 48, 42 N.W. 666, 668-69 (1889) (holding that “[o]ur statutes contemplate that any instrument which is entitled to be recorded shall first be entered by the register in the entry book, and it is then deemed recorded”). One might assume, then, that the recording date of the mortgage in this case would be quickly ascertained by consulting Oakland County’s mortgage entry book. But the answer to the question, “when was the mortgage in this case recorded?” has been complicated by the failure of the Oakland County Register of Deeds, Ruth Johnson, to maintain a mortgage entry book, in defiance of state law. This problem apparently exists in other Michigan counties as well, see In re Schimiel, 362 B.R. 802, 808-09 (Bankr. E.D. Mich. 2007), and it prompted the bankruptcy court in another case to certify to the Michigan Supreme Court the question when a mortgage is deemed recorded where a county register of deeds shirks her legal duty to keep a mortgage entry book. Although commercial certainty and predictability would have been enhanced by a definitive answer to that question under state law, the state supreme court refused to furnish one. In re Certified Question from the U.S. Bankr. Ct. for the E. Dist. of Mich., 477 Mich. 1210, 722 N.W.2d 423 (2006). In the absence of a bright-line indicator of the recording date in this case, the parties sought to discover the facts surrounding the presentation of the Pankey mortgage to county officials. The record shows that the mortgage was delivered to the Oakland County register of deeds on March 24, 2005 by a title company employee, and it was stamped “received” on that date. Def.’s Mot. for Summ. J., Ex. D, Thierbach Dep. at 13. The mortgage was not delivered by itself, but rather arrived with a “batch” of twenty-three other documents. The chief deputy register of deeds, Laura Thierbach, testified that the mortgage was in recordable form on the date it was received. However, -4- because it was submitted by a title company and arrived with a “batch” of other mortgages, the mortgage was subject to a different, slower process for actual recording. Although Thierbach testified that the procedure was followed for several years beforehand, see Thierbach Dep. at 8, the policy at issue was not set down in writing until May 5, 2005. In a memo addressed to “all title companies,” The Oakland County Register of Deeds explained as follows: Because Oakland County deals with a large number of title companies daily, the Register of Deeds Office has established a specific procedure we ask all title companies to follow. If the procedures change, you will be notified in writing. Documents recorded by companies are divided into two categories, large and small, and there is a different procedure for each. Small groups of documents (50 documents or less) should follow the following procedure: Small Recordings - Drop the documents off in a folder with the title company name on it in the wire basket to the Validation department to have the legal descriptions verified. The parcel ID number must be shown on each document. The Register of Deeds Staff is not allowed to change numbers or put numbers on the documents. If there is an error on a document, the Validation unit will put a blue post[-]it note on the top of the document telling you what the problem is. After the Validation department is done with the folder, the Real Estate unit will check each document for errors and/or omissions. If there is a problem with a document, the real estate unit will put a yellow post[-]it note at the top of the document telling you what the problem is. **Once all the documents are ready to record with all corrections made, take any document that has had a correction made to the appropriate department for the initials of the company to be put on. Run two adding machine tapes showing the total of the recording package. **Organize the documents in the folder with deeds first, then put the rest of the documents in smallest to largest page count order, with the exception of first and second mortgages. It is the responsibility of the Title Company to have all documents in the order they want them recorded. **Leave the folder of documents along with the two adding machine tapes and your blank check in the small title recording basket. These documents will be recorded the next morning. You can come back later that day or the next day to pick up your empty folder and receipt. -5- Large Recordings - Groups of documents up to 300 per day. Documents should again be submitted to the Validation unit following the same procedure above. Once the Real Estate unit has completed checking the documents they will return the folder to the filing cabinet located in the front of the office. Title companies should pick up their folders, make all corrections and then take the documents back to the appropriate department for title company initials to be put on all documents. **Once all the documents are ready to record with all corrections made, run two adding machine tapes showing the total of the recording package. If you are recording the limit of 300 document [sic], divide your documents into groups of 100’s [sic] or less and total each group. Organize the documents with deeds first then all other documents in order of smallest to largest page count order, with the exception of first and second mortgages. Once you have recorded a group of 100 documents, you will need to sign up again to record the others. You need to have a separate check for each group. **Sign up on the cashier recording list. The documents are recorded in the order the companies have signed up. It is the responsibility of the company representative to watch the sign up list so that you will be present for your turn. There is a ten-minute waiting period between companies. If you do not go to the register to record within the [sic] ten minutes, you will be skipped. (We do not wait 10 minutes per Title Company). Pls.’s Objs. to Mot. for Summ. J., Ex. 3, The Oakland County Register of Deeds Memo. Thierbach testified that the Oakland County register of deeds had a unique policy that applied when title companies delivered mortgages, which is described in the memo. When, as here, the title company sought to record fifty documents or fewer, the title company was required to leave the documents in a folder at the register of reeds office for review and validation. Documents were validated in the order of their receipt, first by the “validation unit” and then by the “real estate unit.” Workers in the validation unit would stamp the mortgages “received” on the date they arrived and would then “check the legal descriptions shown on each document.” Thierbach Dep. at 5. If the mortgage passed inspection at that level, personnel in the real estate unit would take over “and check each document for state requirements such as signatures, notaries, [and] dates.” Id. at 6. When the real estate unit was finished, the mortgages would be placed in a filing cabinet where the title -6- company could pick them up and make corrections if needed or, if not, take them directly to the cashier’s department for payment of the filing fee. As Thierbach explained, that process placed quite a bit of responsibility on the title company and, strangely, required submission of a blank check: When those ladies [in the real estate unit] are done, we have a filing cabinet that the entire folder is put in. Then the title company, it’s their responsibility to come back, pick up their documents. If they have any corrections that need to be made either to the legal description or if a signature is missing or something like that, it’s their responsibility to have those corrections made. . . . And take them back to the appropriate department to have the final check put on it so that we all know that everything is right with that document and get them to the cashier. If they have less than 50 documents, they can run – we ask them to run two adding machine tapes to total up – to show what their total is. And we ask them to do it twice just so we’re sure that they have the correct total. They can then take those documents, put a blank check in the folder with the documents. We have a basket that goes right to our cashiers. And they are put on record the next morning. . . . So if they’re leaving it blank, then the cashiers would fill in the amount as long as they match the adding machine tapes that the title company has come up with a total for. Id. at 6-7. See also id. at 19-21 Again, although the memo was not distributed until May 2005, the Oakland County register of deeds apparently had followed the practice set forth therein “for years and years,” since 2000 or 2001. Id. at 8. Notably, the process does not include making any entries in the mortgage entry book, as the statute requires. Examining the mortgage document at issue in this case, Thierbach testified that “it was in recordable form” when it was received on March 24, 2005. Id. at 13. However, she noted that it was not assigned a liber and page number until June 20, 2005, which she deemed the “recorded date.” Id. at 14. She knew the document was in recordable form on the day of receipt because if there had been problems, there would have been a post-it note attached and, following corrections, an additional “received” stamp. Id. at 13-14, 18. When asked why there was a roughly three-month gap between the date of receipt and the recorded date, Theirbach could only speculate: -7- I believe that it’s because the title company representatives did not come back and pick up the documents in a timely amount of time. Maybe they did. Maybe they came back the very next day and picked them up and for whatever reason they weren’t recorded until June 20th. I have no way of knowing that. Id. at 14. Michigan law requires that the register of deeds must record “the date, hour, and minute of receipt . . . in the order in which the instruments respectively are received.” Mich. Comp. Laws § 565.25(1). Theirbach testified, however, that the Oakland County register of deeds’s entry book for mortgages lists the date that a mortgage was finally recorded (i.e., when the filing fee was processed and the documents were assigned a liber and page), not the date it was received. See id. at 18-19. Additionally, Theirbach discussed the payment process. She described two basic options that are available to a title company to submit the necessary fee. The usual method, mentioned above, involved placing a blank check with the mortgage and an adding machine tape into a bin in front of the cashier’s window. When this method was chosen, the cashiers would come out the next morning, empty the bin, and process the payments. In the alternative, the title company agent could choose to wait in line and make the payment in person. However, that could entail a significant wait because “[t]here may be another title company recording that has 300 documents.” Id. at 17. As soon as the cashier processed a payment, she would assign a liber and page number to each mortgage. The mortgage would then go to the indexing department, where it would be scanned and entered into the computer system. In addition to the liber and page number, the computer log contained other information, such as the parties involved and the date and time of recording. Thierbach was also asked whether, if the title company had wanted to, it could have delivered the mortgage and accomplished recording all in one day. Theirbach stated that this could be done, but it was not possible to simply submit a check for payment and the mortgages at the very -8- same time. As outlined above, the title company agent would need to perform one or more steps in between. Initially, she explained the process as follows: Q. Okay. If a title company – well, if Progressive Title Company had wanted to drop off their mortgages, this one was included with the Oakland County Register of Deeds, and have them all recorded and pay the fee on March 24th 2005, could they have done that? A. Well – Q. Could they have left a check with the mortgages for the recording fee? A. Not at the same time they dropped the documents. No. Id. at 24-25. However, Theirbach amended her view in the following exchange: Q. And again, if Progressive Title Company had dropped off this mortgage with the – in the bin for the validation department, would they have been able to do that and also pay the fee at the same time for the recording? A. If – yes. There is no reason why they can’t take them to the cashier the very same day. We do not tell people they cannot record documents. . . . Q. Well, I understand that. But if they were to just drop off the mortgage in the bin at the validation department, can they drop off the mortgage with the fee at the same time and leave and have that mortgage recorded? A. No. Q. Okay. A. We do not want them leaving the check when they leave the documents. Id. at 26-27. The questioning continued, leading to the following testimony: Q. Do they [i.e., title companies] have an option of recording a mortgage in a single day by coming into the office or by getting it there some other way other than in a batch? -9- A. Sure. Q. And how would they do that? A. They can walk into the office and hand-deliver it. Q. And does it have to be one at a time? Or is there some maximum number that they can deliver that way and have them recorded in the same day? A. Well, there is no set amount that we ask them to not go over or not ask us to do right away. Depending on what the circumstances are, we listen to what the circumstances are, and then we – even if it’s not something we can do in the next 5 to 15 minutes, we would explain to them this is going to take us a half hour to check the locals. Or we’re really busy right now, can you just leave them here with us, have a seat, go to the cafeteria, have coffee, whatever, go to lunch, come back in an hour and we’ll be done. And then at that point they can take them to the cashier and pay at that time and the documents are recorded right away then. Q. So in March of 2005 would a title company have been able to walk into your office with 25 mortgages and a check and wait around while you – A. March of ‘05? Q. Yes. While you validated and – A. It would all depend on how busy we were, if we had a backlog, if there were other title companies that had documents that were waiting to be checked, was our full staff there that day. There were a lot of things taken into consideration. But if someone comes into the office and says this is a rush recording, we hear this all the time, a million dollar deal, I’ve got to get these on record today, we do that for them. Id. at 34-36. However, Thierbach reiterated that dropping off a check and a batch of mortgages (or even a single mortgage) at the same time was not permitted: Q. But they can leave the mortgages and a check? A. We don’t want the blank checks laying around because – just we don’t want to be responsible. What if it falls out of the folder and gets lost. You know, it’s a blank check. We are a public office. We’re open to the public. If someone found it, you know. -10- Q. So the Register of Deeds wants to check all the mortgages before they accept payment for the recording fee for the mortgages? A. Well, just so that there’s not blank checks flying all over the office. Q. I understand. But regardless, even if they were coming in with one mortgage, Register of Deeds would want to check that mortgage first before they would accept tender and payment for the recording fee? A. Yes. Id. at 40. On the other hand, the trustee submitted an affidavit by Thierbach given in another case wherein she identified a way in which a person could submit a check and mortgage at the same time. When questioned whether the procedure she described in that affidavit was available from March through June 2005, she stated that it was. In addition to the process outlined in the memo and in- person “rush” processing, Thierbach stated in her affidavit that “documents could have been submitted individually for recording by mail or overnight service, in which case, such documents would have been marked with a received date, would have been processed in order of receipt and returned to the sender after recording, so long as they were in proper form and were accompanied by the proper fee.” Pl.’s Objs. to Mot. for Summ. J., Ex. 8, Thierbach Aff at ¶ 9. As mentioned above, Thierbach seemed to believe that the delay between receipt of the mortgage and ultimate recording was the product of the title company’s failure to come back to the register of deeds in a timely manner and submit payment along with the verified mortgage. See Thierbach Dep. at 14 (“I believe that it’s because the title company representatives did not come back and pick up the documents in a timely amount of time.”). However, this is undermined by the evidence that the title company had a check ready for payment on either March 24 or 28, 2005. See Pl.’s Objs. to Mot. for Summ. J., Exs. 1-2, Progressive Checks. Unfortunately, that evidence is -11- compromised somewhat by the unexplained inconsistency of two different copies of the same check. The fact that there are two checks by itself raises a red flag because there was only one payment to be made. Moreover, both copies of the check are from the title company and made payable to the Oakland County register of deeds, and both are written for $4,797.30, the recording fee for the batch of mortgages at issue. However, copy one of the check is dated March 24, 2005, while copy two is dated March 28, 2005. In addition, the month notation on the second check is handwritten; whatever month was originally printed is now indecipherable. Yet both checks bear the same check number. The back of the first check shows that it was deposited on June 22, 2005. The back of the second check, on the other hand, bears two stamps, one indicating that it was received on June 20, 2005 and the other indicating that it was deposited on June 22, 2005. The Court is not sure what to make of all this, and neither was the bankruptcy court. That court only mentioned the check issue in a footnote, observing that the parties “were unable to provide any explanation for these discrepancies.” See Bank. Ct. Op. at 7 n.1. However, the court found that the illegal practice of the Oakland County register of deeds in refusing to accept payment when recordable instruments were presented excused the need to tender payment, and therefore the court concluded that “any factual issues about the dates on the check are not material, and do not preclude summary judgment.” Ibid. Finally, the record contains a written description of the Oakland County register of deeds’s recording policy as it was understood by Progressive Title Company employee Denise Jalecki, the agent who handled the mortgage at issue. Although the statement is unsworn, it tends to confirm the idea that the title company was only aware of the procedure outlined in the memorandum. In relevant part, Jalecki writes: In regards to getting documents on record with Oakland County, the way it works is, I take a batch of 30 documents and drop them off in a basket. It takes approximately -12- a week to get the batch checked. I pick them back up after they have been checked over by an Oakland County register of deeds clerk. If they are rejected, I have to bring them back to the office, fix them, and drop them back off at OC for another week for a recheck. If they are not rejected, they are left in a separate batch with either a blank check to be filled out by the clerk, or I would have to fill in the amount and leave the check. Sometimes the check is rejected and the batch has to be re picked up, fixed and left again. See Pl.’s Objs., Ex. 5, Jalecki Statement. It is not clear from Jalecki’s statement whether she has any knowledge of the circumstances of the specific recording at issue in this case. Following the bankruptcy petition filed on August 26, 2005, the bankruptcy trustee and appellant in this matter, Gene Kohut, commenced adversary proceedings on October 18, 2006. See Bankruptcy Dkt. Sht. at 1. Kohut sought to avoid the mortgage as a preferential transfer pursuant to 11 U.S.C. § 547(b), contending that the mortgage was perfected on June 20, 2005, and thus within the ninety days preceding the bankruptcy petition. See Adversary Compl. at ¶ 12. Wells Fargo filed a motion for summary judgment on May 2, 2007, contending that the mortgage should be deemed recorded on March 24, 2005 when it was presented to the Oakland County register of deeds, although not accompanied by the required filing fee, because the register of deeds would not have accepted the filing fee had it been offered. The bankruptcy court credited this theory and granted Wells Fargo’s motion on that basis. Kohut subsequently filed this timely appeal. The Court heard oral argument on December 3, 2007. II. “The district court reviews the bankruptcy court’s grant of summary judgment de novo.” In re Lewis, 398 F.3d 735, 746 (6th Cir. 2005). This Court therefore turns to the same procedural rules used by the bankruptcy court in adjudicating that motion. Ibid. A motion for summary judgment under Federal Rule of Civil Procedure 56 presumes the absence of a genuine issue of material fact -13- for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non- moving party and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 587 (1986). The party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). It must be emphasized, however, that “[i]n evaluating the evidence, [the court] ‘draw[s] all reasonable inferences therefrom in a light most favorable to the non-moving party.’” Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003) (citation omitted).. To prevail on a claim of avoidance, the trustee has the burden of satisfying all of the elements of a preferential transfer pursuant to § 547(b) of the Bankruptcy Code. 11 U.S.C. § 547 (g); In re Southern Air Transport, Inc., 511 F.3d 526, 534 (6th Cir. 2007) (“The trustee bears the burden of proving each of the five elements under 11 U.S.C. § 547(b) for a transfer to be avoidable under that section.”) (citing In re Fulgham Constr. Corp., 706 F.2d 171, 172 (6th Cir. 1983 . One of those elements is that the transfer to be avoided was “made . . . on or within 90 days before the date of the filing of the petition. 11 U.S.C. § 547(b)(4)(A). Wells Fargo maintained in its motion for summary judgment that the trustee failed to come forward with evidence that the mortgage was recorded – and therefore the security interest was perfected – within the preferential transfer period. -14- The bankruptcy court was faced with the task in this case of determining when the Pankey mortgage was recorded where the local county official had abandoned the practice that the state legislature had put in place to determine that very fact. Because the corrupt entry mortgage book provided no help, the parties looked to different aspects of the recording process and seized on discrete features as an indicator of the mortgage record date. For instance, the creditor asserted that the undisputed evidence established that the mortgage was presented in recordable form on March 24, 2005, and therefore it should be deemed recorded as of that date. The trustee argued that the liber and page numbers were assigned and the recording fee paid on June 20, 2005, which should be deemed the record date. In approaching its task, the lower court first turned for guidance to its own precedent, In re Schmiel, 362 B.R. 802 (Bankr. E.D. Mich. 2007), as does this Court. In that case, as in the present matter, the debtors had refinanced their home by obtaining a new mortgage shortly before filing for bankruptcy on September 26, 2003. Closing occurred on April 25, 2003, and the mortgage was delivered to the Oakland County Register of Deeds by a title company employee on April 30, 2005. However, register of deeds “did not make any notation on the mortgage to show the date and time that it was received.” Id. at 806. The check for the recording fee was dated June 17, 2003, but register of deeds did not deposit the check until July 30, 2003. On that date, ninety-six days after the April 25, 2003 closing, register of deeds stamped the mortgage with a liber and page number. To bring the transfer within the ninety-day period, the trustee argued, as here, that the mortgage was recorded on July 30, 2003, the date the liber and page number were assigned. The bankruptcy court disagreed with the trustee. After examining Michigan statutory and decisional law, the court held that notation into a mortgage book was a sufficient but not a necessary -15- condition for proving recordation of a mortgage for the purpose of the race-notice recording statute. Schmiel, 362 B.R. at 816 (observing that “just because a register of deeds does not comply with its statutory obligations to maintain an entry book under Mich. Comp. Laws Ann. § 565.24, it does not follow that a document cannot be deemed recorded under Michigan law”; and that “a document can be considered as recorded in Michigan even when the register of deeds has failed to perform its statutory duty to make an entry of such document in an entry book as required by Mich. Comp. Laws Ann. § 565.24”). The court reasoned that when the county register of deeds abdicates its statutory responsibility and does not keep a mortgage entry book, the recording date of a mortgage can be determined by the date(s) of completion of three statutory requirements: 1. The mortgage must be received by the register of deeds under Mich. Comp. Laws [] § 565.25(1). 2. The mortgage must meet the technical requirements of Mich. Comp. Laws [] § 565.201. 3. The recording fee must be paid when the mortgage is left for record, under Mich. Comp. Laws [] § 600.2567(1)(a). If these three requirements are met, in light of Central Ceiling [& Partition, Inc. v. Department of Commerce, 249 Mich. App. 438, 642 N.W.2d 397 (2002), affirmed at 470 Mich. 877, 683 N.W.2d 142 (2004)], and prior Michigan case law, the Court holds that the Michigan Supreme Court would conclude that a mortgage is deemed recorded, even absent the entry of the mortgage in an entry book by the register of deeds as required by Mich. Comp. Laws [] §§ 565.24 and 565.25. Id. at 817. The court also stated that assignment of a liber and page number is conclusive evidence that a document has been recorded, but recording can occur before the assignment of those numbers. Rather, according to the court’s reasoning, a document is “duly recorded” within the meaning of Mich. Comp. Laws § 565.29 when all three statutory requirements have been met. Id. at 820 -16- (holding that “recording is deemed to occur at the first moment that all three requirements have been met”). This Court agrees with the reasoning of the bankruptcy court in Schmiel, finds it to be a sensible and accurate gloss on Michigan statutory law governing the recording of documents affecting an interest in real property, and adopts the reasoning as its own. The uncontested record establishes, as the bankruptcy court found in this case, that the Pankey mortgage was presented to the register of deeds in recordable form on March 24, 2005. The date the recording fee was paid is the subject of a factual dispute, however. And that factual dispute precludes summary judgment. Burkart v. Post-Browning, Inc., 859 F.2d 1245, 1249 (6th Cir. 1988) (holding that “summary judgment may not be granted unless there are no remaining material facts in dispute”). The bankruptcy court held that the factual dispute was not material on the theory that the creditor in this case was excused from paying the recording fee because there was some evidence that the register of deeds would have refused to accept payment if it were tendered, and Michigan law does not require a person to engage in a “useless formality.” Bank. Ct. Op. at 6-7. The court did not address the question when payment of the recording fee actually was made in this case. Instead, the court found that the creditor had offered evidence that Oakland County officials would not accept payment of recording fees at the time title companies presented a batch of documents for recording, and it held that “the policy of the Oakland County Register of Deeds excused Wells Fargo from making payment on March 24, 2005, when it submitted this mortgage, as any such tender of payment would have been futile.” Id. at 7. The Court disagrees with that reasoning on several grounds. First, as the Schmiel court observed, one of the three essential features required by Michigan law for a proper recordation of -17- an instrument affecting an interest in real estate is payment of the recording fee. Schmiel, 362 B.R. at 817. The Michigan statute states simply: “The fee shall be paid when the deed, mortgage, certified copy of an attachment, notice of the pendency of a suit, or other instrument is left for record.” Mich. Comp. Laws § 600.2567(1)(a). The lower court stated that there is no statutory authority permitting a county register of deeds to refuse payment of a recording fee, and that, no doubt, is true. But the Schmiel court correctly concluded that “if a mortgage is delivered to a register of deeds and is in compliance with [the statutory technical requirements], but the statutory fee is not then paid, then the mortgage is not recorded at that moment because Mich. Comp. Laws [] § 600.2567(1)(a) has not been met.” Schmiel, 362 B.R. at 819. That court anticipated the very problem presented in this case when it observed that “the failure or the refusal of a register of deeds to accept payment of a recording fee when a mortgage in recordable form is delivered, whether accomplished by refusing to accept a check, returning a check, or delaying negotiation of a check, should not result in a mortgage left for record not being deemed recorded any more than the failure of a register of deeds to maintain an entry book should cause such result.” Id. at 819 n.5. All of that is true as well. But it does not alter the statutory obligation of the person seeking to record a document to pay the recording fee at some point in time. Under Michigan law, the burden of complying with the recording statutes rests with the recording party. Barnard v. Campau, 29 Mich. 162, 162, (1874) (“In general it will not be disputed that one who seeks a benefit from the recording laws must incur all risks of the failure to put his papers duly upon record, whether the fault shall be his own or that of an officer.”). Second, the bankruptcy court’s reliance on Hanesworth v. Hendrickson, 320 Mich. 577, 31 N.W. 2d 726 (1948), for the proposition that a party need not tender payment when it is likely to be -18- refused is misplaced. Hanesworth involved a suit for specific performance of a contract for the sale of real estate. The purchaser paid over a deposit, but the trial court found as a fact that before the closing the seller made it clear that he would refuse to convey the land. The court held that in those circumstances, the seller was not obliged to tender the balance of the purchase price in order to preserve his right to specific performance. That holding is based on the well-accepted contract doctrine of anticipatory repudiation. See Eaton Corp. v. Easton Assocs., Inc., 728 F.2d 285, 291 (6ht Cir. 1984) (observing that “Hanesworth presents a classic case of anticipatory breach of a land sale contract. In the case of anticipatory breach of a contract of sale plaintiff is not required to tender performance in order to bring suit on the contract”) (citing 4 Corbin on Contracts § 959 (1979 . The Michigan Supreme Court has held that when statutory duties are involved, compliance with payment provisions are mandatory, and a “willingness to tender payment [is] not sufficient.” Flynn v. Korneffel, 451 Mich. 186, 203, 547 N.W.2d 249, 256 (1996) (interpreting statutes governing redemption of forfeited land contracts). Third, it is not altogether clear that the Oakland County Register of Deeds would have refused payment of the recording fees under all circumstances. There is little doubt that simultaneous payment was discouraged when title companies sought to record large batches of documents, and that the Oakland County officials had invented an extra-statutory procedure for processing payments in those cases. But the trustee offered evidence that the register of deeds occasionally did accept payment of recording fees in accordance with her statutory obligation, that is, when the documents were presented and payment was tendered. For instance, deputy register of deeds Laura Thierbach filed an affidavit stating that the title company could have walked in the mortgage and asked for “rush” recording or sent the mortgage by mail along with a check. Wells -19- Fargo argues that the Court should not consider Thierbach’s affidavit because it was given in another case. It is beyond dispute that this Court should not consider evidence missing from the record below when engaging in appellate review. See, e.g., Brown v. Marshall, 704 F.2d 333, 334 (6th Cir. 1983). However, this rule does not apply to the present matter because, although Thierbach’s affidavit originated in another case, it was made a part of the record before the bankruptcy court in the present matter. The affidavit is sufficient to raise a question of fact whether the payment would have been refused. Even in Hanesworth and the cases upon which it relies, there was a finding of fact at trial or by party admission that performance would have been refused regardless of any attempt at tender of payment. Fourth, the ultimate fact question in this case – when was payment made – remains unresolved on this record. The trustee insists that the question is answered conclusively by evidence of the date the check was negotiated by the register of deeds. However, the creditor’s obligation under the recording statute – Mich. Comp. Laws § 600.2567(1)(a) – is to make the payment, not have it accepted. Evidence of check negotiation certainly is relevant to the determination of when the payment was “made,” but it by no means is conclusive. If a creditor presents to the register of deeds its mortgage in recordable form and makes payment of the recording fees, it has completed all three steps required for recording the mortgage, even if the payment is refused. See Schmiel, 362 B.R. at 819 n.5. There is evidence that the recording fee check was written on March 24 or 28, 2005, but that is not conclusive evidence of when the payment was made, either. The title company may seek to establish the date payment was presented to the register of deeds by evidence of its routine practice, see Fed. R. Evid. 406, but on this record, the fact issue cannot be resolved as a -20- matter of law. After all, the inferences yielded by these sketchy facts must be viewed “in a light most favorable to the non-moving party.’” Rodgers, 344 F.3d at 595. The Court concludes, therefore, that the bankruptcy court’s determination as a matter of law that the Pankey mortgage was “duly recorded” outside the preference period was erroneous. III. The Court finds that the bankruptcy court’s order granting the motion for summary judgment filed by Wells Fargo Bank, N.A. and New Century Mortgage Corporation was erroneous. Fact questions preclude summary judgment in this case. Accordingly, the judgment of the bankruptcy court is REVERSED, and the case is REMANDED for further proceedings. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: August 21, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 21, 2008. s/Felicia M. Moses FELICIA M. MOSES -21-

=== Fharmacy Opinion on Motions ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION FHARMACY RECORDS a/k/a, FHARMACY RECORDS PRODUCTION CO., FHARM I PUBLISHING COMPANY, SHELTON RIVERS, Plaintiffs, v. SALAAM NASSAR,CURTIS JACKSON, DARRIN DEAN, DEF JAM RECORDING, RUFF RYDERS, JANICE COMBS PUBLISHING, UNIVERSAL MUSIC PUBLISHING, UNIVERSAL MUSIC & VIDEO DISTRIBUTION CORPORATION, EMI APRIL, INC., SOO SOOS SWEET SWISHER MUSIC, JOHN DOE, ET AL., ______________________________________/ Defendants. Case Number 05-72126 Honorable David M. Lawson Magistrate Judge Donald A. Scheer OPINION AND ORDER DENYING PLAINTIFFS’ REQUEST TO DISQUALIFY JUDGE, DENYING PLAINTIFFS’ MOTIONS FOR RECONSIDERATION AND RELIEF FROM JUDGMENT, DENYING PLAINTIFFS’ MOTION FOR ATTORNEY’S FEES, AND REFERRING DEFENDANTS’ MOTION FOR ATTORNEY’S FEES TO MAGISTRATE JUDGE Presently before the Court are seven post-judgment motions in this copyright sampling case. Six of the motions were filed by the plaintiffs at various times following entry of this Court’s opinion and order granting the defendants summary judgment and judgment dismissing the case on March 31, 2008. One of the motions was filed by the defendants and seeks attorney’s fees and costs. The plaintiffs’ motions all request relief in one form or another from the Court’s judgment of dismissal, except for one motion which asks for attorney’s fees. However, the plaintiffs also apparently seek the disqualification of the undersigned, although they have not filed a motion requesting that relief. Instead, the disqualification request is found in the plaintiffs’ response to the defendants’ attorney’s fees motion. Treating the response as a motion to disqualify the undersigned judge, the Court finds no grounds that favor disqualification. The Court also finds no basis to grant relief from its judgment of dismissal, and the plaintiffs’ motion for attorney’s fees is frivolous. The defendants have shown that they may be entitled to attorney’s fees under the Copyright Act and as a result of discovery abuse by the plaintiffs. However, the defendants have not made a proper showing that the amount of fees and costs they seek is reasonable. Therefore, the Court will decline to disqualify itself, deny the plaintiffs’ motions for relief from the order of dismissal, deny the plaintiffs’ motion for attorney’s fees, and refer the defendants’ motion for attorney’s fees to Magistrate Judge Donald A. Sheer for a report and recommendation. I. Facts and Proceedings The facts of this case are set forth in detail in the Court’s order granting the defendants’ motion for summary judgment and motion to dismiss, and they need not be repeated here. In brief summary, the plaintiffs brought suit alleging that defendant Salaam Nassar stole a rhythmic beat created by plaintiff Shelton Rivers, a.k.a. the “Ess Man.” After Rivers made the beat, the Fharmacy plaintiffs acquired an interest in it and secured copyright protection. Later on, rap artist DMX released a song with a strikingly similar beat entitled “Shot Down.” Many of the defendants were involved in the production of “Shot Down” and sales of the album on which it appeared. When the album went platinum, the plaintiffs sued. Their theory was that Nassar had access to Rivers’s equipment, and he simply lifted the beat when Rivers wasn’t looking. The Court found that the plaintiffs in their complaint alleged unlawful “sampling” of a sound recording in violation of 17 U.S.C. § 114(b), the plaintiffs were unable to produce any evidence that the protected work and the accused work were identical, and the defendants were entitled to summary judgment on the merits of the claim. The Court also documented the disturbing conduct of the plaintiffs and their attorneys -2- in the manipulation and destruction of evidence in the case, which resulted in a finding that dismissal was an appropriate sanction. In determining that dismissal was an appropriate sanction, the Court discussed the factors outlined in Regional Refuse Sys. v. Inland Reclamation Co., 842 F.2d 150, 154 (6th Cir. 1988), and concluded as follows: Looking to Regional Refuse and progeny for guidance, the first factor is whether the misconduct by the plaintiffs and their counsel results from “willfulness, bad faith, or fault.” Reyes, 307 F.3d at 458. In the present case, this factor is plainly satisfied. Although some of the events in this litigation might be excused as resulting from mere negligence when viewed in isolation (e.g., Mr. Reed’s loss of the CD allegedly furnished by Seaton), considering them in the aggregate invariably leads to the conclusion that the plaintiffs and their attorney have conducted a campaign of fraud. The list of abuses is extensive. In addition to Mr. Reed’s loss of the “original” CD furnished by Seaton, Rivers’s zip disk was intentionally wiped of data; Rivers lost the tape recording allegedly containing Nassar’s confession; the Fharmacy computer that was allegedly used in 2001 did not even exist until 2003; that computer contained files that were intentionally backdated; the 2001 assignment document referenced entities that were not even formed until 2004; the original assignment documents were lost; the computer that was used to draft such documents was thrown away; and the R.J. Rice hard drive contained file dates that could not be verified. And this list does not even include the material inconsistencies in the plaintiffs’ testimony, late disclosure of evidence, misrepresentation of evidence, and prevarications by Mr. Reed in his representations to opposing counsel. If this is not bad-faith litigation, nothing is. The second factor is whether the defendants have been prejudiced by the plaintiffs’ misconduct, Reyes, 307 F.3d at 458, and that element too has been satisfied. The plaintiffs seem to think that dismissal would just be a windfall to the defendants because they have come forward with relatively little evidence in support of their version of events. However, the plaintiffs forget that the burden of proof lies with them, and the defendants have a right to test the evidence brought against them. Due to the conduct of the plaintiffs and their attorney, the defendants’ right to rebut the plaintiffs’ allegations has meant little because the evidence has either been lost, tampered with, or irretrievably compromised. There is simply no way that this case can go forward. The third factor under Regional Refuse is whether the plaintiffs were “warned that failure to cooperate could lead to dismissal.” Reyes, 307 F.3d at 458. This is the one factor that does not clearly militate in favor of dismissal but, on balance, it is not dispositive. There is nothing in the record showing that the plaintiffs were warned by a judicial officer that dismissal was a possibility. However, this factor seems less -3- relevant in a case such as this, where the conduct at issue is not merely contestable, but in contravention of basic notions of fairness and professional responsibility. A party does not need formal notice to know that spoliation of evidence and misrepresentations may lead to dismissal. The fourth and final factor is whether less drastic sanctions were imposed or considered before resorting to dismissal. Reyes, 307 F.3d at 458. This factor reflects the concept that dismissal is a sanction of last resort and should be issued only in extreme situations. See Regional Refuse, 842 F.2d at 154. This factor also favors dismissal of the instant case because lesser sanctions were imposed for earlier discovery violations, see Order Granting Mot. for Partial Dismissal and Sanctions [dkt # 55], and anything less than dismissal would be futile. That is, the evidence in this case has been so tainted that pushing onward to a decision on the merits (save granting summary judgment in favor of the defendants, as explained above) would be practically impossible. Fharmacy Records v. Nassar, 248 F.R.D. 507, 530 (E.D. Mich. 2008). Thereafter, the plaintiffs filed a motion for relief from judgment under Federal Rule of Civil Procedure 60(b) and a motion for reconsideration on April 14, 2008. Pls.’ Mots. for Relief and Recon. [dkt #s 250, 253]. The plaintiffs also filed a motion for costs and attorney’s fees under 28 U.S.C. § 1927 “for vexatiously multiplying these proceedings unreasonably.” Pls.’ Mot. for Att. Fees [dkt # 251]. The defendants filed their own motion for attorneys’ fees shortly thereafter. Defs.’ Mot. for Att. Fees [dkt # 252]. On August 8, 2008, the plaintiffs filed another “expedited” motion for relief under Rule 60(b). Pls.’ Mot. for Relief [dkt # 268]. On August 11, they filed yet another. Pls.’ Mot. for Relief [dkt # 269]. On August 12, they filed a “motion for ruling on their request for recusal and four pending motions for reconsideration and/or relief from judgment.” Mot. for Ruling [dkt # 270]. As noted above, the plaintiffs filed a response to the defendants’ motion for attorney’s fees in which they stated that the undersigned judge should be disqualified for personal bias against the plaintiffs’ attorneys. Although no formal motion seeking that relief was ever filed, the Court will construe the plaintiffs’ response as such a motion and turn to it now. -4- II. Motion to Disqualify Judge The plaintiffs insist that the undersigned must disqualify himself and refer all post-judgment motions to another district judge under 28 U.S.C. §§ 455(a) and (b)(1) based upon a “personal bias against . . . Gregory J. Reed arising out of [my] background and prior association as a practicing attorney with . . . Clark Hill PLC.” Resp. Br. [dkt # 257] at 2. The plaintiffs’ reasoning goes like this: I was an attorney at the Clark Hill law firm in Detroit; Gregory Reed was involved in a case against the Girl Scouts in the 1990s; the Girl Scouts were represented in the litigation by other attorneys at the Clark Hill law firm; Clark Hill attorneys harbored animosity towards Mr. Reed following his victory in that case; and those attorneys continue to harbor such resentment as evidenced by acts and statements in 2006 and 2008. Based upon these facts, the plaintiffs claim that a reasonable person “would conclude that this Court was aware of the Girl Scouts case and has adopted the personal bias against . . . Gregory J. Reed exhibited by his former law firm.” Id. at 4. This conclusion is reinforced, the plaintiffs claim, due to a “Notre Dame connection,” which the plaintiffs outline thus: Kevin Hendrick, John J. Hern, Jr., and I all attended college in South Bend (although not at the same time), and we all worked together at Clark Hill or another law firm, Hill Lewis. Hendrick represented the Girl Scouts in the aforementioned case, and Mr. Hern is presently Clark Hill’s CEO. Although I did not work on the Girl Scouts matter, the plaintiffs say it is fair to impute the alleged bias to me because I supported the Notre Dame Fighting Irish alongside Hendrick and Hern. This is how attorney Reed puts it: Graduates from the University of Notre Dame feel an extreme sense of pride and school spirit from their alma mater. The Notre Dame Alumni Association has been in existence [since] 1868 and has nearly 122,000 members. There [are] 267 local Notre Dame Clubs throughout the world including a Detroit Club. The University -5- Alumni Association has developed a professional network for lawyers called[] Notre Dame Lawyers in order to strengthen the bond between lawyers who attended the school. Given the spirt of camaraderie among Notre Dame graduates, a reasonable, objective person would believe that three Notre Dame graduates working at the same 100 + person law firm . . . would network and befriend one another including discussing difficult cases such as the Reed case with one another. Ibid. So, the plaintiffs believe I am biased against Mr. Reed because Hendrick and Hern did not like Mr. Reed, and Hendrick, Hern, and I all attended the same college. The plaintiffs extend the conspiracy theory slightly farther, observing that other attorneys who work for firms that have a financial stake in this case also attended the University of Notre Dame. See ibid. (stating that Plunkett Cooney is seeking to recover $35,000 in fees and costs, but one of its partners is president of the Notre Dame Club of Detroit; and Dickinson Wright is seeking to recover $241,300 in fees and costs even though two of its attorneys are on the Notre Dame Club of Detroit Board of Directors). The plaintiffs argue that other evidence of bias can be found in “[t]he court clerk receiving a call in open court before the summary judgment hearing began and responding, ‘Yes, Mr. Reed is here,’” and the Court calling the rap beat at issue in this case “‘[m]ediocre at best.’” Id. at 5-6 (quoting Op. and Order at 3). The trial judge himself must rule on a motion to recuse under 28 U.S.C. § 455. See In re Drexel Burnham Lambert, Inc., 861 F.2d 1307, 1312 (2d Cir. 1988) (“Discretion is confided in the district judge in the first instance to determine whether to disqualify himself.”); see also Schurz Communications, Inc. v. FCC, 982 F.2d 1057, 1059 (7th Cir. 1992) (“Section 455 clearly contemplates that decisions with respect to disqualification should be made by the judge sitting in the case, and not by another judge.”) (quoting United States v. Balistrieri, 779 F.2d 1191, 1202-03 (7th Cir. 1985 ; Lambert v. Blackwell, 2001 WL 410639, at *2 n.2 (E.D. Pa. Apr. 20, 2001) (“It is well-established, if not entirely intuitive, that the resolution of such a motion is entrusted to the -6- judge who is the subject of the motion.”). More recent Sixth Circuit decisions have noted that a recusal motion is committed to the sound discretion of the district court and the standard of review is whether the court abused its discretion. Wheeler v. The Southland Corp., 875 F.2d 1246, 1251 (6th Cir. 1989). A judge presiding over a case “shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned,” such as when the judge “has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding.” 28 U.S.C. § 455(a), (b)(1). “Under 28 U.S.C. §§ 144 and 455, a judge must recuse himself if a reasonable, objective person, knowing all of the circumstances, would have questioned the judge’s impartiality.” United States v. Hartsel, 199 F.3d 812, 820 (6th Cir.1999) (quoting Hughes v. United States, 899 F.2d 1495, 1501 (6th Cir. 1990 . Prejudice or bias sufficient to justify recusal must be personal or extrajudicial. In re M. Ibrahim Khan, P.S.C., 751 F.2d 162, 164 (6th Cir. 1984). “Personal bias is prejudice that emanates from some source other than participation in the proceedings or prior contact with related cases.” United States v. Nelson, 922 F.2d 311, 319-20 (6th Cir.1990) (internal quotation marks omitted). Personal bias may arise from the judge’s background or associations that “result[] in an opinion on the merits on some basis other than what the judge learned from participation in the case.” Ibid. (internal quotation marks omitted). Bias finding its source in the judge’s view of the law or the facts of the case itself is not sufficient to warrant disqualification. United States v. Story, 716 F.2d 1088, 1090 (6th Cir.1983). Therefore, disagreement with a judge’s decision or ruling is not a basis for disqualification. Liteky v. United States, 510 U.S. 540, 555-56 (1994). In making its determination, a court must remember that “where the standards governing disqualification have not been met, disqualification is not optional; -7- rather, it is prohibited.” In re Aguinda, 241 F.3d 194, 201 (2d Cir. 2001). “Although a judge is obliged to disqualify himself when there is a close question concerning his impartiality, United States v. Dandy, 998 F.2d 1344, 1349 (6th Cir.1993), he has an equally strong duty to sit where disqualification is not required, Laird v. Tatum, 409 U.S. 824, 837 (1972) (separate memorandum of Rehnquist, J.) (collecting cases).” United States v. Angelus, 258 Fed. Appx. 840, 842 (6th Cir. Dec. 27, 2007). The plaintiffs’ allegations of judicial bias in this case are feckless and irresponsible. There is no substance to the plaintiff’s claim that my association with the Clark Hill law firm – at a time which postdated Mr. Reed’s encounter with that firm by a few years – could cause a reasonable person to detect any personal feelings toward attorney Reed. The plaintiffs point to no concrete evidence from which personal bias could be inferred; instead they rely upon an agglomeration of disconnected facts to spin an unlikely yarn that challenges the most active imagination. Judicial impartiality and independence are serious matters. See United States v. Johnson, 488 F.3d 690, 697 (6th Cir. 2007) (criticizing a procedure dealing with expert witnesses that “detracts from the court's neutrality and detachment”). However, the plaintiffs have trivialized these attributes by equating proof of bias to a parlor game akin to six degrees of separation. The plaintiffs no doubt are dissatisfied with the outcome of this litigation, but that is no cause for a baseless attack upon the impartiality of the decision maker. Story, 716 F.2d at 1090. The motion to disqualify will be denied. III. Plaintiffs’ Motions for Relief from Judgment The plaintiffs have filed several motions for relief from the judgment of dismissal or reconsideration alleging various grounds. In docket number 250, the plaintiffs move for relief under -8- Rule 60 and Local Rule 7.4 based on the following contentions: (1) the relative weight of the evidence offered by the plaintiffs was more than that furnished by the defendants; (2) the fact that plaintiffs’ counsel did not lose the original “Ess Beats” CD, as asserted by the Court; counsel says he couldn’t find it – he didn’t lose it (he claims there is a difference) – and counsel says he found the disk following the Court’s decision; (3) the Court erred when accepting the defendants’ direct evidence that Rivers’s zip disk was intentionally wiped clean; (4) the fact that Rivers did not lose the tape recording with the Rivers-Nassar conversation; Rivers said he couldn’t find it, not that he lost it; (5) the court erred when finding that the computer files were back-dated; (6) the Court erred in concluding that the assignment documents referenced non-existent entities; (7) Ms. Baker discarded her computer – on which the assignment documents were supposedly drafted – in good faith; (8) the plaintiffs “produced a consistent theory” that Rivers created “Ess Beats,” which was “invariably verified” by R.J. Rice Studio and R.J. Rice II; (9) the undersigned failured to recuse himself based upon work for the Clark Hill law firm and knowledge of the Girl Scouts case; and (10) Mr. Reed does not have a history of fraud. In docket number 253, the plaintiffs move for reconsideration under Rule 60(a) or Local Rule 7.4 on the grounds that the Court erroneously construed the complaint as pleading a sampling case only (as opposed to infringement of a musical composition). They believe that the complaint properly construed suggests that the substantial similarity test applies, and the evidence is undisputed that the beats were substantially similar. In docket number 268, the plaintiffs move for expedited relief from the dismissal order. They argue that the Court erred by relying on Ives Potrafka’s expert report where that report was flawed, particularly in its conclusion that the zip disk was “wiped clean.” Rivers “presents a -9- reputable Grammy Music Award engineer” (i.e., Hector Delgado), who confirms that this was not the case. In docket number 269, the plaintiffs move for relief under Rule 60(b) on the grounds that (1) Ives Potrafka mistakenly asserted that the dates of the music files found on R.J. Rice Studio’s hard drive could not be verified; and (2) the Court failed to recognize that R.J. Rice and R.J. Rice II are distinct individuals. Finally, in docket number 270, the plaintiffs ostensibly move for a decision on their post- judgment motions. However, their actual request is that the Court adjudicate the disqualification issue and their motions for relief from judgment and reconsideration before addressing the defendants’ motion for attorney’s fees. That procedure is the one adopted here, and the motion therefore will be denied as moot. In the rest of these motions, the plaintiffs have sought relief under Rule 60(a) and (b). Rule 60(a) authorizes the Court to “correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment, order, or other part of the record.” Rule 60(b) consists of six enumerated clauses that contain the grounds upon which relief from a judgment or order may be granted. These include: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party; (4) the judgment is void; (5) the judgment has been satisfied, released or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or (6) any other reason that justifies relief. -10- Fed. R. Civ. Pro. 60(b). The Sixth Circuit has “recognized a claim of legal error as subsumed in the category of mistake under Rule 60(b)(1).” Pierce v. United Mine Workers Welfare & Ret. Fund for 1950 & 1974, 770 F.2d 449, 451 (6th Cir. 1985). When applied under subsection (1), the word “mistake” has been held to include “any type of mistake or error on the part of the court,” including a legal mistake. Barrier v. Beaver, 712 F.2d 231, 234 (6th Cir. 1983) (citing Oliver v. Home Indem. Co., 470 F.2d 329 (5th Cir. 1972 . Nonetheless, a motion based on Rule 60(b)(1) is “intended to provide relief to a party in only two instances: (1) when the party has made an excusable litigation mistake or an attorney in the litigation has acted without authority; or (2) when the judge has made a substantive mistake of law or fact in the final judgment or order.” Cacevic v. City of Hazel Park, 226 F.3d 483, 490 (6th Cir. 2000) (internal quotation marks omitted). A party may not use Rule 60(b) “as an occasion to relitigate its case.” General Universal Systems, Inc. v. Lee, 379 F.3d 131, 157 (5th Cir. 2004). The Court will grant a motion for reconsideration only if the moving party shows (1) a “palpable defect,” (2) the defect misled the court and the parties, and (3) that correcting the defect will result in a different disposition of the case. E.D. Mich. LR 7.1(g)(3). A “palpable defect” is a defect which is “obvious, clear, unmistakable, manifest, or plain.” Fleck v. Titan Tire Corp., 177 F. Supp. 2d 605, 624 (E.D. Mich. 2001). “[M]otions for rehearing or reconsideration which merely present the same issues ruled upon by the Court, either expressly or by reasonable implication, shall not be granted.” E.D. Mich. LR 7.1(h)(3). A decision to grant or deny a Rule 60(b) motion “is a matter of discretion for the district court.” Bank of Montreal v. Olafsson, 648 F.2d 1078, 1079 (6th Cir. 1981). The Court finds no grounds to grant the plaintiffs relief under Rule 60(a). The Court has found no clerical mistake or any mistake arising from oversight in its judgment. -11- Nor does the Court find any basis for granting relief under Rule 60(b). The arguments contained in the motion docketed as entry 250 simply rehash the arguments heard and rejected by the Court in deciding the cross motions for summary judgment and the defendants’ motion to dismiss. The motion for reconsideration, docket number 253, is premised on the assertion that the plaintiffs pleaded something other than a copyright sampling case. The Court found otherwise in its opinion and order, and this finding was based on the pleadings and the plaintiffs’ lawyers’ assertions on the record at oral argument. The plaintiffs argue in the motions docketed as entries 268 and 269 that they have discovered new evidence that the zip disk that supposedly contained the original rhythm beat was not “wiped clean,” and therefore the Court’s reliance on defense expert Ives Potrafka’s opinion otherwise is a mistake of fact. The plaintiffs offered evidence purportedly showing that Shelton Rivers’s zip disk contains the disputed beat with a creation date between 1998 and 2002. The evidence, much like the plaintiffs’ other offerings, is suspect. The plaintiffs attached various documents to their motion, starting with a letter Rivers sent to a Los Angeles-based FBI agent on July 30, 2008. Rivers posited that “[t]he involved parties paid an excessive amount of monies . . . to secure fabricated and perjured evidence that was provided to the court to falsely assert that the evidence was destroyed or wiped clean of a zip disk drive by me in an expert report.” Pls.’ Exp. Mot., Ex. A, Rivers FBI Letter at 1. To support this claim, Rivers pointed to the testimony of producer and studio engineer Hector Delgado. Apart from the fact that Delgado has no apparent qualifications as a forensic expert – although he has produced songs for Michael Jackson and Jay-Z – Delgado’s findings actually undermine the plaintiffs’ case. Delgado wrote: -12- When I finished examining [Rivers’s] zip disk I found 19 files on the disk that were created between 1998 and 2002 with the music data file names in the following sequential order: . . . 10. Ess Beat (Tek/Hip hop) DMX Beat All-Pgm. Pls.’ Exp. Mot., Ex. B, Delgado Aff at ¶ 4. Delgado explained that the above beat was “identical” to the beat used in “Shot Down.” Id. at ¶ 5. That is undoubtedly so. But the file name has the sequence “DMX” in it, even though it was allegedly created between 1998 and 2002. DMX did not release Grand Champ, the album containing “Shot Down,” until September 16, 2003. See http://en.wikipedia.org/wiki/Grand_Champ (last visited Aug. 11, 2008). Rivers never claimed that he created the beat for DMX, but that DMX obtained it through theft perpetrated by Salaam Nassar. And this is the first time an “Ess Beats” file name has contained a reference to DMX. The only explanation for this fatal inconsistency is not congruent with a theory that the evidence is genuine. Perhaps the beat was reloaded onto the zip disk with a new file name. In any event, this “evidence” only reinforces the Court’s decision. The Court will deny the plaintiffs’ motions for relief from judgment and reconsideration. IV. Plaintiffs’ Motions for Attorney’s Fees In docket number 251, the plaintiffs move for attorney’s fees under 28 U.S.C. § 1927 on the grounds that the defendants abused the “litigation process by asserting and maintaining a meritless defense”; secretly deposing a witness, Rofeal Jackson, “without providing Plaintiffs or their counsel with any notice”; obtaining unnecessary extensions due to Salam Nassar and Soo Soo Sweet’s 174- day absence from this litigation; continuing to pursue an independent creation theory when the only evidence supporting that was Nassar’s self-serving testimony; engaging in expert-shopping and producing a late expert report; and preventing the delivery of evidence held by Tony Martinez. Pls.’ -13- Mot. for Fees at 1-2. This motion is expressly contingent on the Court’s granting the plaintiffs’ motions for relief from judgment, which has not and will not occur. The Court has discretion to award attorney’s fees, costs, and expenses against “[a]ny attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiples the proceedings in any case unreasonably and vexatiously.” 28 U.S.C. § 1927. “Under § 1927, a court must review whether the attorneys engaged in conduct which multiplied the litigation unreasonably or vexatiously.” Riddle v. Egensperger, 266 F.3d 542, 553 (6th Cir . 2001). Under this provision, a court may impose sanctions “when an attorney knows or reasonably should know that a claim pursued is frivolous, or that his or her litigation tactics will needlessly obstruct the litigation of nonfrivolous claims.” Jones v. Cont’l Corp., 789 F.2d 1225, 1230 (6th Cir. 1986). A finding of bad faith is not necessary under section 1927. Dixon v. Clem, 492 F.3d 665, 679 (6th Cir. 2007). However, “[s]imple inadvertence or negligence that frustrates the trial judge will not support a sanction under § 1927.” Riddle, 266 F.3d at 553. Rather, “‘[t]here must be some conduct on the part of the subject attorney that trial judges, applying the collective wisdom of their experience on the bench, could agree falls short of the obligations owed by a member of the bar to the court and which, as a result, causes additional expense to the opposing party.’” Ibid. (quoting In re Ruben, 825 F.2d 977, 984 (6th Cir. 1987 . The primary goal of 28 U.S.C. § 1927 is deterrence and punishment. See Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d 642, 647 (6th Cir. 2006). As with Rule 11 sanctions, the “district courts have broad discretion in deciding upon a sanction award under § 1927.” In Re Petition of Gerald A. Meier, 223 F.R.D. 514, 520 (W.D. Wis. 2004). -14- Is assessing the plaintiffs’ motion criticizing the conduct of defense counsel, it immediately becomes apparent that the shoe is on the wrong foot. The proceedings in this case indeed may have been vexatious, but that was not due to the conduct of the defendants or their attorneys. The plaintiffs have not made a showing sufficient to jstify an award of fees and expenses under section 1927. Their motion will be denied. V. Defendants’ Motion for Attorney’s Fees The defendants also have moved for attorney’s fees and expenses in the total amount of $543,245.49. They claim that they are entitled to that relief under (1) the Copyright Act, 17 U.S.C. § 505, as the prevailing party; (2) 28 U.S.C. § 1927 as a result of discovery abuse; and (3) the Court’s inherent authority to impose monetary sanctions. The Copyright Act authorizes an award of costs and reasonable attorney’s fees to a prevailing party in an action brought under the statute. 17 U.S.C. § 505. The Court may award attorney’s fees if a party’s claim is frivolous and objectively unreasonable. Fogerty v. MGM Group Holdings Corp., 379 F.3d 348, 356-57 (6th Cir. 2004). Although attorney’s fees are not awarded automatically and are still “a matter of the court’s discretion,” Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994), the grant of fees is routine and is “the rule rather than the exception,” Thoroughbred Software Int’l, Inc. v. Dice Corp., 488 F.3d 352, 362 (6th Cir. 2007) (internal quotation marks omitted). More particularly, judicial discretion should be exercised in an evenhanded manner “consistent with the primary purposes of the Copyright Act.” Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792, 807 (6th Cir. 2005). Nonexclusive factors that help inform the exercise of judicial discretion include “frivolousness, motivation, objective unreasonableness (both in the -15- factual and legal components of the case), and the need in particular circumstances to advance considerations of compensation and deterrence.” Fogerty, 510 U.S. at 534 n.19. No single factor is necessary or dispositive on its own; rather, the Fogerty factors – along with other factors a court might find pertinent – assist courts in weighing various considerations. Bridgeport Music, Inc. v. Diamond Time, Ltd., 371 F.3d 883, 894 (6th Cir. 2004). The Court may also award fees and costs under 28 U.S.C. § 1927, as noted earlier, against an attorney whose conduct is unreasonable and which multiplies the proceedings vexatiously. In accordance with the language and purpose the statute, a court may hold parties and their counsel jointly and severally liable under section 1927. See, e.g., Royal Oak Entertainment, LLC v. City of Royal Oak, 486 F. Supp. 2d 675, 679 (E.D. Mich. 2007). When it comes to arriving at an exact sum, the typical approach under fee-shifting statutes is the following: A starting point is to calculate “the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.” (This is known as the “lodestar” calculation.) The court should then exclude excessive, redundant, or otherwise unnecessary hours. Next, the resulting sum should be adjusted to reflect the “result obtained.” Wayne v. Village of Sebring, 36 F.3d 517, 531 (6th Cir. 1994) (quoting Hensley v. Eckerhart, , 433-34 (1983) (calculation of attorney’s fees under 42 U.S.C. § 1988). Although Wayne was a section 1988 case, the Sixth Circuit has adopted the lodestar approach for calculations under the Copyright Act, albeit in an unpublished opinion. Ametex Fabrics, Inc. v. Custom Interiors and Supply Co., 162 F.3d 1161, 1998 WL 553046, *3 (6th Cir. Aug. 11, 1998) (Table); see also Bridgeport Music, Inc. v. Lorenzo, 255 F. Supp. 2d 795, 800-01 (M.D. Tenn. 2003), aff’d sub nom., Bridgeport Music, Inc. v. Diamond Time, Ltd., 371 F.3d 883 (6th Cir. 2004) -16- “[T]he fee applicant bears the burden of establishing entitlement to an award and documenting the appropriate hours expended and hourly rates.” Hensley, 461 U.S. at 437; accord Zolfo, Cooper & Co. v. Sunbeam-Oster Co., Inc., 50 F.3d 253, 261 (3d Cir. 1995); see also Dubay v. Wells, 442 F. Supp. 2d 404, 415-16 (E.D. Mich. 2006); Mehney-Egan v. Mendoza, 130 F. Supp. 2d 884, 885 (E.D. Mich. 2001). In the present case the Court has little trouble concluding that the plaintiffs and their counsel should be held jointly and severally liable for the defendants’ costs and fees. An award is appropriate under both 17 U.S.C. § 505 and 28 U.S.C. § 1927; the Court need not resort to its inherent authority. An award of costs and fees to the prevailing party in a copyright action is “the rule rather than the exception.” Thoroughbred Software, 488 F.3d at 362 (internal quotation marks omitted). Certainly the circumstances of the present case do not dictate a departure from the usual course of things. The Fogerty factors – “frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case), and the need in particular circumstances to advance considerations of compensation and deterrence” – all weigh heavily in favor of costs and fees under section 505. See Fogerty, 510 U.S. at 534 n.19. The last factor is particularly compelling; justice requires that the defendants be compensated for the distress of warding off a frivolous case. Although section 505 does not expressly authorize an award from an attorney for a party, 28 U.S.C. § 1927 plainly does. A court may hold parties and their counsel jointly and severally liable under that statute for “multipl[ying] the proceedings in any case unreasonably and vexatiously.” See 28 U.S.C. § 1927; Royal Oak Entertainment, LLC, 486 F. Supp. 2d at 679. There likely is cause to hold attorney Gregory Reed accountable for at least a portion of the fees and expenses, and perhaps -17- against Mr. Reed’s co-counsel, Stephanie Hammonds, as well. Those issues will be referred to Magistrate Judge Donald A. Sheer to determine. With respect to the amount of attorney’s fees and costs, the defendants have produced the following chart: DEFENDANT TOTAL DEFENSE COST The Universal Defendants and Curtis Jackson (Represented by Dickinson Wright PLLC) (Exhibit A-1) $214,994 (Fees) $12,043.93 (Costs) $14,273.28 (Experts) EMI April Music, Inc. (Represented by Butzel Long PLC) (Exhibit A-2) $189,506.00 (Fees) $7,016.50 (Costs) $14,273.28 (Experts) Janice Combs Publishing d/b/a Justin Combs Publishing (Represented by Plunkett Cooney PLC and Butzel Long PLC beginning in August 2007, as well as Jonathan D. Davis, P.C. ___) (Exhibits A3-A4) Salam Nassar and Soo Soo Sweet Swisher Music (Represented by the Law Offices of Leslie Schefman) (Exhibit A-5) $35,000.00 (Plunkett Cooney Fees and Costs) $25,224.00 (Jonathan D. Davis P.C. Fees) $142.75 (Jonathan D. Davis P.C. Costs) $30,771.75 (Fees) Totals $543,245.49 Br. in Supp. at 5-6. The Court finds that the exhibits on which these figures are premised do not furnish the level of detail that is required to determine the reasonableness of the fee requests. For example, to account for Dickinson Wright’s fees and costs for June 2005 (based on work by partner Daniel Quick and associate Michael D. Socha), the firm writes: June 2005 Tasks/Events -18- • Review and analysis of complaint; conducting preliminary interviews and background investigation in preparation for responding to the complaint • Draft and file motion for partial dismissal (dismissal of state law claims) • Draft and file answer to complaint 14.60 Hours Billed: $3,290.50 Total Fees: $225.27 Total Costs: Total for Month: $3,515.77 Br. in Supp., Ex. A1, Dickinson Fees and Costs at 3. These entries do not allow the Court to assess the amount of time spent on specific tasks by individual lawyers, and they do not furnish sufficient detail to permit a reasoned challenge by the plaintiffs or their attorneys. The defendants state in their brief that they are “willing to provide their billing records should the Court so desire, but given the conduct of Plaintiffs’ counsel to date, they prefer that such a review occur in camera by the Court.” Br. in Supp. at 6. The defendants correctly anticipate the need for further review, but they have not justified the need for in camera protection. However unreasonably the plaintiffs and their counsel have behaved, they have not forfeited the right to examine the defendants’ billing records. The Court, therefore, will refer the defendants’ attorney’s fees motion to Magistrate Judge Donald A. Sheer to conduct a hearing in whatever manner he deems appropriate for the purpose of determining the amount of attorney’s fees, costs, and expenses, if any, that should be awarded to the respective defendants, and to determine further whether the plaintiffs’ attorneys ought to be personally accountable for any or all of those fees and expenses, and to prepare a report and recommendation on these matters in accordance with 28 U.S.C. § 636(b)(1). -19- VI. Conclusion The Court finds no merit in the plaintiffs’ motions for relief from judgment, reconsideration, or attorney’s fees and expenses. The plaintiffs’ motion for a decision has been mooted by the procedures utilized by the Court herein. The defendants are entitled to attorney’s fees and expenses, but the questions of the respective amounts and accountable persons requires a hearing. Accordingly, it is ORDERED that the plaintiffs’ motions for relief from judgment and reconsideration [dkt #s 250, 253, 268, 269] are DENIED. It is further ORDERED that the plaintiffs’ motion for attorney’s fees and costs [dkt #251] is DENIED. It is further ORDERED that the defendants’ motion for attorney’s fees and costs [dkt #252] is GRANTED IN PART. It is further ORDERED that the plaintiffs’ motion for ruling [dkt #270] is DENIED as moot. It is further ORDERED that the defendants’ motion for attorney’s fees and costs [dkt # 252] is REFERRED to Magistrate Judge Donald A. Sheer to conduct a hearing to determine the amount of attorney’s fees, costs, and expenses, if any, that should be awarded to the respective defendants, and further to determine whether the plaintiffs’ attorneys ought to be personally accountable for any or all of those fees and expenses, and to prepare a report and recommendation on these matters in accordance with 28 U.S.C. § 636(b)(1). s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: August 15, 2008 -20- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 15, 2008. s/Susan K. Pinkowski SUSAN K. PINKOWSKI -21-

=== Chesterfield Opinion on Cross MJSs ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 07-12254 Honorable David M. Lawson CHESTERFIELD EXCHANGE, LLC, Plaintiff and counter-defendant, v. SPORTSMAN’S WAREHOUSE, INC., Defendant, counter-plaintiff, and third-party plaintiff, v. DEVELOPERS DIVERSIFIED REALTY CORP., Third-party defendant. _____________________________________________/ OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT, GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT, DISMISSING COMPLAINT, COUNTERCLAIM, AND THIRD-PARTY COMPLAINT, AND DENYING SEVERAL MOTIONS IN LIMINE This lawsuit comes in the aftermath of a signed lease agreement between the plaintiff and defendant for a retail store in a shopping center, which fell through when an anchor tenant pulled out of the development. The crux of the questions presented is whether the participation of the anchor tenant was such an integral part of the agreement (or, indeed, part of the formal agreement at all) that the failure of that event justified defendant Sportsman’s Warehouse, Inc. rescinding the lease. Plaintiff Chesterfield Exchange, LLC has brought an action against Sportsman’s for specific performance of the lease and damages; Sportsman’s counterclaimed for fraud and joined Chesterfield’s leasing agent, Developers Diversified Realty Corporation (DDR), as a third-party defendant on the same theory. Both sides filed motions for summary judgment, and the Court heard oral argument from the parties on August 6, 2008. The Court now finds that there are no material fact issues, the provision of the lease indicating the presence of the anchor tenant was ambiguous, resort to parol evidence confirms that the anchor tenant’s participation was a substantial and material term without which Sportsman’s would not have signed the lease, and the failure of that condition justified Sportsman’s rescinding the lease. Therefore, Chesterfield’s claims for specific performance and damages fail as a matter of law. However, neither Chesterfield nor DDR ever made a misrepresentation of an existing fact, nor did they misrepresent a future promise they had no intention of keeping. Consequently, Sportsman’s fraud claims fail as a matter of law as well. Therefore, the Court will deny Chesterfield’s motion for summary judgment except to the extent it seeks dismissal of Sportsman’s affirmative claims for damages, grant Sportsman’s motion for summary judgment insofar as it seeks dismissal of the complaint and deny it in all other respects, and deny as moot the parties several motions in limine. I. The undisputed facts that emerge from the discovery materials reveal that Sportsman’s, a nationwide “big box” retailer of hunting, fishing, and camping gear, has over sixty stores across the country, some of which are at properties leased from Chesterfield and DDR. In mid-2004, Chesterfield caused DDR to contact Sportsman’s and solicit its agreement to lease retail space at a shoping center development in Chesterfield, Michigan. The proposed site was in a new retail plaza known as “Chesterfield Marketplace,” which Chesterfield represented would house a Wal-Mart store – later to be expanded into a Super Wal-Mart – and two other “big box” retailers. Sportsman’s was to operate its own store, and Chesterfield would construct certain portions of the physical premises. -2- Sportsman’s decided to abandon the negotiations following more than a year of negotiations that were complicated by a number of issues. However, on January 24, 2006, DDR’s vice-president, Steven Dorsky, called Sportsman’s CEO, Steven Utgaard, and informed him that Sam’s Club had agreed to be a tenant. This information apparently rekindled Sportsman’s interest in the site. Even though Sam’s Club wanted the space that originally had been offered to Sportsman’s, Sportsman’s accepted DDR’s term that it would have to accept a new location in the shopping center and change its building design. On July 11, 2006, Sportsman’s and Chesterfield executed a lease. The lease term was to run for fifteen years, with Sportsman’s to retain the option to renew for twenty additional years. The rent was to be based on the square footage of the store, which, as construction had not yet begun, was still to be determined. Communications leading up to the lease suggest that the prospect of a Sam’s Club store anchoring the development was crucial to Sportsman’s decision, and lend support to Sportsman’s claim that it thought a Sam’s Club was going to be built. As mentioned above, Sportsman’s Utgaard had a conversation with DDR vice president Dorsky on January 24, 2006. Shortly after that conversation, William Boukalik, DDR’s Development Director, sent Mr. Utgaard a follow-up email to which he attached a copy of the then-current site plan. Boukalik wrote: Pursuant to your conversation with Steven Dorsky this morning, please see the attached plan. We are in the process of getting the Sam’s Club added onto the plan and will send you and [sic] updated plan, as soon as their box is placed on the plan. Sportsman’s Mot. for Summ. J., Ex. P, Boukalik Jan. 24, 2006 e-mail. Dorsky sent a similar email telling Utgaard that DDR was “in the process of updating the plan to show Sam’s.” Sportsman’s Mot. for Summ. J., Ex. Q, Dorsky Jan. 24, 2006 e-mail. According to Utgaard, the Chesterfield -3- project “wouldn’t have happened” had Dorsky not “call[ed] and sa[id] that Sam’s Club was going to build a store there.” Sportsman’s Mot. for Summ. J., Ex. E, Utgaard Dep. at 75. It is plain that both parties believed that Sam’s Club would be opening a store in the shopping center at the time. On March 22, 2006, DDR sent the revised site plan as promised. See Sportsman’s Mot. for Summ. J., Ex. R, Revised Site Plan. The plan depicts a Wal-Mart store next to a Sam’s Club on a west-east line, with the Sportsman’s Warehouse store situated on a north-south line to the west of Wal-Mart. Originally there was some dispute about Wal-Mart’s expansion to a Super Wal-Mart, but that point no longer is in contention in this case. The only thing unusual about the box representing Sam’s Club is that the name of the store is prefaced by the word “proposed” in fine- print lettering. The meaning of that term, and whether it creates an ambiguity, frames the principal dispute in his case. In deposition, DDR’s Dorsky explained the importance of site plans: We put anchor tenants on our site plans so that our site plans are accurate, showing where we are on the development, what it looks like or what it is going to look like so we can send that to prospective tenants to see what [the] shopping center looks like. We want to show all of our tenants, proposed or actual tenants, on our plans so that tenants can see what the project will look like. Sportsman’s Mot. for Summ. J., Ex. B, Dorsky Dep. at 72-73. As mentioned above, Sportsman’s agreed to move the location of its store to accommodate Sam’s Club. This was not simply a matter of placing Sportsman’s name on a new box on the site plan; the original plan called for an “end entry” design, whereas the revised version called for a “side entry” design. Utgaard Dep. at 79-80. It took several months to redesign the store, and Sportsman’s incurred $22,000 in additional architectural fees. On the other hand, Utgaard stated that the new location was actually superior. See Utgaard Dep. at 80 (“[W]e had to move it to the front which was -4- great by me because it was closer to the street, it had better visibility, and everybody that went to Sam’s Club or Super Wal-Mart had to drive by our store.”). As the spring of 2006 deepened, the parties continued to negotiate over the precise terms of the lease. Sportsman’s signed the lease on June 27, 2006 and Chesterfield followed in kind on July 11, 2006. Nothing in the lease proper suggested that Sam’s Club would be a tenant or that Sportsman’s would have a right to terminate the lease in the event Sam’s Club did not locate there. On the other hand, two exhibits to the lease arguably implied as much. Exhibit B, styled “Depiction of Shopping Center and Premises,” was a copy of the site plan described above. The box showing Sam’s Club still described it as “proposed.” In addition, the legend contained a disclaimer, which is alleged to read: This drawing is for general information purposes only. Any and all features, matters and other information depicted hereon or contained herein are for illustrative marketing purposes only, are subject to modification without notice, are not intended to be relied upon by any party and are not intended to constitute representations or warranties as to the ownership of the real property depicted hereon, the size and the nature of improvements to be constructed (or that any improvements will be constructed) or the identity or nature of any occupants thereof. Depiction of Shopping Center at 1. However, this disclaimer is not legible, and this Court determined at a previous hearing that it has no legal effect. See Order Granting Mot. for Lv. to Amend [dkt # 45]. Exhibit J, styled “Pylon Sign Depiction,” was a rendering of the main Chesterfield sign containing individual signs of the anchor tenants. Wal-Mart was followed by Sam’s Club and Sportsman’s Warehouse. All parties agree that the exhibits are to be included as part of the substantive terms of the lease. The lease also contained an integration clause, which reads as follows: This Lease contains all of the agreements made between the parties regarding the subject matter hereof, and may not be modified or amended in any manner, except -5- by an agreement in writing signed by all of the parties hereto, or their respective successors in interest. Lease at ¶ 34. Although Sportsman’s at this point believed that everything was proceeding apace, DDR’s negotiations with Sam’s Club were actually sputtering and had been for some time. Early on in the talks, Wal-Mart Corp. insisted that Sam’s Club would not move in unless it could also build an adjoining gas station. DDR responded that it would need fueling-station release and indemnity provisions in any agreement they reached. However, the DDR agent spearheading the deal, Tim Bruce, did not consider this a “sticking point” because DDR had consummated similar deals in the past and never had a problem obtaining the necessary terms. DDR had standard language that it used for gas-station terms. Therefore, when Wal-Mart Corp. sent over a draft purchase agreement without this language, DDR added the terms. Wal-Mart continued to resist. As of May 19, 2006, the issue remained contentious. Mr. Boukalik (of DDR) sent Daniel Hurwitz (of Chesterfield) an e-mail that date, stating as follows: As you know, prior to the meeting with Wal-Mart on April 17th, Wal-Mart’s outside counsel was pushing back on our standard fuel center indemnity language . . . . Tim Bruce and I addressed this with Mike Gardner at the meeting in April 17th, and at that time, he didn’t believe this to be an issue. Since that time, Wal-Mart legal has pushed back and not yielded on the initial position. DDR has even offered to reciprocate the language, should we ever do a fuel center in the shopping center. This continues to be the only issue remaining on the purchase agreement that is preventing us from execution. As a reminder, we have this standard language on every fuel center deal that we do with every tenant in our portfolio, including Wal- Mart. Sportsman’s Mot. for Summ. J., Ex. V, Boukalik May 19, 2006 e-mail. The volley continued over the next month with little progress. On June 26, 2006, however, Mr. Ewing, Wal-Mart’s Senior Real Estate Manager, sent an e-mail containing compromise -6- language. Ewing added, “I don’t think we’ll be able to get any more than this from our legal department.” Sportsman’s Mot. for Summ. J., Ex. GG, Ewing Email. DDR refused to accept this “compromise,” and instead sent back a draft bearing the same release and indemnity language it had proposed from the beginning. The parties were at a clear deadlock. According to Mr. Bruce, the language proposed by Wal-Mart was “consistently unacceptable” to DDR and vice-versa. Bruce Dep. at 37. Nevertheless, DDR never stated or even hinted to Sportsman’s that the Sam’s Club negotiations had reached a roadblock. The Sam’s Club deal was pronounced dead on August 2, 2006, about a month after the parties signed the lease in this case. It was not until March 2007 that Sportsman’s learned of the problem. As Sportsman’s was about to break ground that month, it discovered that the Wal-Mart had not yet expanded to a Super Wal-Mart, even though it had plans to do so within eight months. Mr. Utgaard called Mr. Dorsky to inquire about the hold-up, and it was then that he learned the Sam’s Club deal had fallen through. Utgaard recalled his conversation of March 15, 2007 as follows: And then I said to [Dorsky]: When is Sam’s Club going to start construction? And he said to me: They’re not. And I said: Really? I said: That’s a problem. And he said: Well, we better have our attorneys handle this, and that was our discussion. That’s the first I knew that Sam’s Club was not going to build a store there. Utgaard Dep. at 100. The next day, March 16, 2007, Sportsman sent Chesterfield and DDR notice of its intent to terminate the lease. Sportsman’s counsel made the reason for termination very clear: Please be advised that Sportsman’s Warehouse hereby terminates the Lease. Stu Utgaard, Sportsman’s CEO, requested that I provide you with this notice of termination by reason of the Landlord’s fraudulent inducement to Sportsman’s regarding the co-tenancy of Sam’s Club in the Shopping Center. -7- I am advised that, at the Landlord’s specific request, Sportsman’s relocated its premises within the Center prior to the execution of the Lease. Sportsman’s agreed to this relocation to accommodate the location for a Sam’s Club in the Center. Stu Utgaard advises that but for the Landlord’s assurance that Sam’s Club would be located in the Center, Sportsman’s Warehouse would not have continued its negotiations for the lease of space in the Center. Moreover, Stu Utgaard has been made aware that the Landlord knew of Sam’s Club’s failure to lease within the Center prior to the execution of the Lease. The Landlord’s failure to clearly communicate Sam’s Club decision to Sportsman’s when the Landlord was well advised of Sportsman’s desire to be a co-tenant with Sam’s Club provides the basis for Sportsman’s termination. Sportsman’s Mot. for Summ. J., Ex. KK, Notice of Termination. Utgaard described the impetus for the decision in similar terms: “Chesterfield was terminated for one reason only. Sam’s Club was not going there or an equivalent. That’s the only reason we went there to start with, okay?” Utgaard Dep. at 250. Litigation ensued almost immediately, with Chesterfield commencing this action in the Macomb County, Michigan circuit court on April 25, 2007 seeking specific performance of the lease, damages for unpaid rent (now in excess of $600,000), and a declaratory judgment. SW removed the case to this Court on May 24, 2007 and then counterclaimed to rescind the lease and to recover damages for fraud amounting to over $100,000 in costs incurred in redesigning its proposed structure from an “end entry” building to a “side entry” building. Sportsman’s added DDR as a third-party defendant. As mentioned earlier, the major bone of contention is the nature of the representation that Sam’s Club was building a store in the shopping center and whether Sportsman’s had a right to rely on it. For their part, Chesterfield and DDR emphasize the lease’s silence regarding Sam’s Club. However, they also point to evidence to counter the alleged misrepresentations and Sportsman’s claim of reasonable reliance. The absence of a co-tenancy provision is significant in light of the fact -8- that, when negotiations began in 2004, Sportsman’s had five other leases with DDR and its affiliates, two of which had co-tenancy provisions. See Utgaard Dep. at 9; Chest. and DDR’s Mot. for Summ. J., Ex. 3, Mt. Nebo Lease at ¶ 46 (“If Tenant has not commenced construction of the Building on or before August 1, 2005, as a result of the failure by Target to commence construction of its building on or before August 1, 2005, Tenant shall have the right to terminate this Lease.”); Ex. 4, Riverdale Lease at ¶ 5. Furthermore, the letter of intent prefacing negotiations between DDR and Sportsman’s expressly stated that there was no co-tenancy provision. See Chest. and DDR’s Mot. for Summ. J., Ex. 5, Letter of Intent (dated July 13, 2004) at 3 (“Co-Tenancy: None.”). Of course, that letter was drafted in 2004, before the original negotiations stalled and well before the possibility of Sam’s Club came to light. Chesterfield and DDR agree that negotiations re-commenced once the possibility of Sam’s Club arose. However, they observe that Sportsman’s had not entirely abandoned the project beforehand. The evidence shows that, as of January 19, 2006, before Sam’s Club became a distinct possibility, Sportsman’s was “planning” on submitting its construction plans to the City of Chesterfield. Moreover, Chesterfield and DDR rely heavily on the fact that there is no evidence that they ever represented Sportsman’s would have a right to terminate in the event Sam’s Club did not work out. Utgaard testified that Dorsky “didn’t say there was a signed lease,” and never actualy reprsented that “Sam’s bought the property.” Utgaard Dep. at 156. But see ibid. (“What he said to me is I had to relocate our store because Sam’s Club was going to build a store where we were.”) (emphasis added); id. at 155-56 (“Q. Okay. Was it your understanding from your conversations with Mr. Dorsky that Sam’s Club had a signed lease . . . [?] A. Oh, definitely because he said: You -9- have to move your building because Sam’s Club is going here.”). Utgaard stated that he could not recall whether anyone from Sportsman’s spoke with Chesterfield or DDR about a co-tenancy provision. Utgaard “assume[d]” that counsel Debra Page “had some discussions on that matter,” but he was not sure. Utgaard Dep. at 113. But Page testified that this never occurred. See Defs.’ Mot. for Summ. J., Ex. 7, Page Dep. at 57-58 (“Q. In your negotiations regarding the Chesterfield lease, did you request any language in the lease that would insure the presence of a Sam’s Club at or around Chesterfield Marketplace? A. Not to my knowledge. . . . Q. In your negotiations regarding the Chesterfield lease, did you discuss with anybody representing Chesterfield Exchange any language concerning the presence of a Sam’s Club at or around Chesterfield Marketplace? A. I have no recollection of that.”). Page further testified that there was nothing in the lease she “would characterize as a co-tenancy provision.” Id. at 53. As to the site-plan exhibit showing the “proposed” Sam’s Club, Chesterfield and DDR note that Sportsman’s was aware of this modifier. Although Mr. Utgaard complained about the legibility of the exhibit, he admitted that he was “aware that the word proposed was there when [he] signed the lease.” Utgaard Dep. at 171. To Utgaard, this word meant something like “[p]lanned” or “pending,” id. at 175, but he never asked why the word was included, see id. at 176. Whatever hints may have existed beforehand, Chesterfield and DDR submit that the Sam Club’s deal was not officially dead until after the lease was signed, and that point is not contradicted by any definitive evidence. The lease was executed on July 11, 2006, but it was not until early August 2006 that Mike Gardner – the Wal-Mart executive in charge of negotiations – informed DDR’s Tim Bruce “that the Sam’s Club deal [was] dead.” Defs.’ Mot. for Summ. J., Ex. 14, Bruce -10- e-mail (dated Aug. 2, 2006). Dorsky did not feel the need to pass the word along to Sportsman’s, evidently due to the nature of the lease. Dorsky testified to this point as follows: Q. . . . I apologize if I’ve asked this before. After you found out in August 2006 that Sam’s wasn’t coming in did you give any consideration to telling Sportsman’s about that? . . . [A.] I didn’t really, I didn’t really give a lot of thought, I mean, I may have considered it, I don’t know, but I didn’t really feel the need to go back and inform Stu [Utgaard]. Q. Why didn’t you feel the need? A. You know, we had a lease that was done, we were in the process of obtaining approvals for the design and site plan, there was no cotenancy; I just didn’t feel, I felt we should go forward and finish our deal, move forward. Dorsky Dep. at 134. With this discovery, the parties filed their cross motions for summary judgment. Each side believes the undisputed facts compel judgment in its favor. II. Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact.” Fed. R. Civ. P. 56(c). The fact that the parties have filed cross motions for summary judgment does not automatically justify the conclusion that there are no facts in dispute. Parks v. LaFace Records, 329 F.3d 437, 444 (6th Cir. 2003) (“The fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate.”). Instead, the Court must apply the well-recognized standards when deciding such cross motions: when this Court considers cross motions for summary judgment, it “must evaluate each motion on its own merits and view all facts and inferences in the -11- light most favorable to the nonmoving party.” Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003). A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 587 (1986). Because the Court’s authority is this case is based on diversity jurisdiction, Michigan substantive law supplies the rules for decision. In federal cases based upon diversity jurisdiction, the Court must apply the law of the forum state’s highest court. Erie R.R. v. Tompkins, , 78 (1938). If the state’s highest court has not decided an issue, then “the federal court must ascertain the state law from ‘all relevant data.’” Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995) (quoting Bailey v. V & O Press Co., 770 F.2d 601, 604 (6th Cir. 1985 . “Relevant data includes the state’s intermediate appellate court decisions, as well as the state supreme court’s relevant dicta, restatements of the law, law review commentaries, and the majority rule among other states.” Ososki v. St. Paul Surplus Lines, 156 F. Supp. 2d 669, 674 (E.D. Mich. 2001) (internal quotes and citation omitted) (quoting Angelotta v. Am. Broad. Corp., 820 F.2d 806, 807 (6th Cir. 1987 . -12- Chesterfield and DDR premise their case largely on the lease’s integration clause and the parol evidence rule, which is not a rule of evidence at all, but rather a tenet of the law of contracts. The parol evidence rule has been summarized as follows: “Parol evidence of contract negotiations, or of prior or contemporaneous agreements that contradict or vary the written contract, is not admissible to vary the terms of a contract which is clear and unambiguous.” Hamade v. Sunoco, Inc (R & M), 271 Mich. App. 145, 166, 721 N.W.2d 233, 247 (2006) (internal quotation marks omitted). However, “[a] finding that the parties intended a written instrument to be a complete expression of their agreement concerning the matters covered is a prerequisite” to application of the rule. Farm Credit Services of Michigan's Heartland, PCA v. Weldon, 232 Mich. App. 662, 669, 591 N.W.2d 438, 442 (1998). That prerequisite is satisfied by inclusion of an integration or merger clause because such a clause creates a conclusive presumption of the parties’ intent to have the contract stand as a complete expression of their agreement. Hamade, 271 Mich. App. at 169, 721 N.W.2d at 248. Even in the face of an integration clause, however, parol evidence is “admissible to demonstrate fraud, which, if proved, would render the contract voidable by the innocent party.” Ibid. In this case, the lease documents leave little doubt that the parties intended the writings – including the exhibits to the lease – to be the complete expression of their agreement. The integration or merger clause satisfies that aspect of Michigan contract law. But Sportsman’s insists that it was the victim of fraud in the inducement to sign the lease, and if not outright fraud, then at least negligent or innocent misrepresentation. It argues that this fraud vitiates the integration clause and allows for consideration of parol evidence to show that it was duped into signing the lease by the promise of a Sam’s Club store as a co-tenant. The Court -13- disagrees. To be actionable, fraud normally must relate to a statement concerning a past or existing fact. Samuel D Begola Services, Inc v. Wild Bros, 210 Mich. App. 636, 639, 534 N.W.2d 217, 219 (1995). Michigan also recognizes promissory fraud in the inducement, which occurs when “a party materially misrepresents future conduct under circumstances in which the assertions may reasonably be expected to be relied upon and are relied upon.” Ibid. Fraud in the inducement renders the contract voidable at the election of the defrauded party, Wild Bros., 210 Mich. App. at 640, 534 N.W.2d at 219, and also authorizes damages flowing from reasonable reliance, see Nowicki v. Podgorski, 359 Mich. 18, 23-24, 101 N.W.2d 371, 374 (1960); Williston on Contracts § 69:53. Fraud may also occur when a party to a transaction has a duty of disclosure but remains silent. This brand of fraud is known as silent fraud. See M&D, Inc. v. W.B. McConkey, 231 Mich. App. 22, 29, 585 N.W.2d 33, 37 (1998) (“‘[T]he suppression of a material fact, which a party in good faith is duty-bound to disclose, is equivalent to a false representation and will support an action in fraud.’”) (quoting Williams v. Benson, 3 Mich. App. 9, 19, 141 N.W.2d 650 (1966 . In all cases, “[t]he principal is liable for the acts of an agent when performed in an endeavor to promote the principal’s business within the scope of actual or apparent authority conferred upon him for that purpose.” Shinabarger v. Phillips, 370 Mich. 135, 141, 121 N.W.2d 693, 696 (Mich. 1963) (internal quotation marks omitted). But there is no evidence that Chesterfield or DDR misrepresented a past or present fact in order to induce Sportsman’s to sign the lease. Nor did it make a promise that it had no intention of fulfilling in the future. At the time the lease was signed, the undisputed evidence demonstrates that DDR’s intention was to include the Sam’s Club store in the shopping center. Indeed, all parties to the present lease believed that to be the case. -14- Sportsman’s claims that DDR was negligent in its representation that the Sam’s Club store would be part of the grouping. But there is no evidence of that, either. The elements of negligent misrepresentation are: (1) justifiable and detrimental reliance on (2) information provided without reasonable care (3) by one who owed a duty of care. Law Offices of Lawrence J. Stockler v. Rose, 174 Mich. App 14, 33, 436 N.W.2d 70 (1989). Although DDR’s negotiations with Wal-Mart Corporation had not been concluded, the undisputed evidence plainly shows that DDR believed that a deal was imminent and only the terms of the fueling-station release and indemnity provisions required finalization. Given the past easy dealings between DDR and Wal-Mart Corporation on this very provision, it was not unreasonable for DDR to believe that a deal would be forthcoming. It is undisputed that the deal for the Sam’s Club store did not evaporate until August 2006, about a month after the lease was signed. Neither Chesterfield nor DDR engaged in any misrepresentation – fraudulent, negligent, innocent, or otherwise – as a device to induce Sportsman’s to sign the lease. But the parol evidence rule also allows for extrinsic evidence to clear up ambiguities. Goodwin, Inc. v. Orson E. Coe Pontiac, Inc., 392 Mich. 195, 220 N.W.2d 664 (1974) (holding that the parol evidence rule does not preclude admitting extrinsic evidence to resolve an ambiguity that is proven to exist and, therefore, to determine the actual intent of the parties); see also Edoff v. Hecht, 270 Mich. 689, 695, 260 N.W. 93, 96 (1935) (“The parol evidence rule does not preclude the admission of parol or extrinsic evidence for the purpose of aiding in the interpretation or construction of a written instrument, where the language of the instrument itself taken alone is such that it does not clearly express the intention of the parties or the subject of the agreement.”) (internal quotation marks omitted); Hamade, 271 Mich. App. at 266; Meagher v. Wayne State Univ., 222 Mich. App. 700, 722, 565 N.W.2d 401, 415 (1997) (“Parol evidence is not admissible to vary a -15- contract that is clear and unambiguous, In re Skotzke Estate, 216 Mich. App. 247, 251, 548 N.W.2d 695 (1996), but may be admissible to prove the existence of an ambiguity and to clarify the meaning of an ambiguous contract. Goodwin, Inc. v. Coe, 392 Mich. 195, 209, 220 N.W.2d 664 (1974).”); Hesse v. Superior Business Forms, Inc., 2008 WL 441603, *3 (Mich. Ct. App. Feb. 19, 2008) (“Plaintiff argues that the parol evidence rule prohibits the admission of extrinsic evidence, even to interpret an ambiguity, if the contract contains an integration clause. We disagree.”). A contract is ambiguous “when its provisions are capable of conflicting interpretations.” AFSCME Int'l Union v. Bank One, 267 Mich. App 281, 283-84, 705 N.W.2d 355, 358 (2005) (internal citations and quotation marks omitted). See also Universal Underwriters Ins. Co. v. Kneeland, 464 Mich. 491, 496, 628 N.W.2d 491, 494 (2001) (stating that a contract is ambiguous “if its provisions may be reasonably understood in different ways”). Where a term is ambiguous, the court must determine its meaning “in light of the apparent purpose of the contract as a whole, the rules of contract construction, and extrinsic evidence of intent and meaning.” Klapp v. United Ins Group Agency, Inc, 468 Mich. 459, 469, 663 N.W.2d 447, 454 (2003) (internal quotation marks omitted). The proper interpretation of a contract is a question of law. Coates v. Bastian Brothers, Inc., 276 Mich. App. 498, 503, 741 N.W.2d 539, 543 (2007). In engaging in this task, the Court must give the language of the contract its plain and ordinary meaning. In re Smith Trust, 480 Mich. 19, 24, 745 N.W.2d 754, 757-58 (2008). The ambiguity in this case centers on the word “proposed” as a modifier in Exhibit B to the lease entitled “Depiction of Shopping Center and Premises,” which is a copy of the site plan showing a Sam’s Club store. Chesterfield and DDR contend that the term means “possible” or “likely,” but not “promised.” They cite Brady v. Farley, 193 Md. 255, 257, 66 A.2d 474, 475 -16- (1949), and Brownsville v. West, 149 S.W.2d 1034, 1037-38 (Tex. Civ. App. 1941), for that proposition. However, the Michigan Court of Appeals has also construed it to mean “planned” or “intended.” People v. Shahideh, 277 Mich. App. 111, 116, 743 N.W.2d 233, 237 (2007) (holding that “the word ‘propose’ is defined as ‘to plan; intend,’ Random House Webster’s College Dictionary (1997), and ‘to form or declare a plan or intention,’ Webster's Third New International Dictionary, Unabridged Edition (1965)”). The word “proposed,” therefore, is ambiguous because it can mean anything from “possible” to “intended.” Random House Unabridged Dictionary (2006). Based on the undisputed evidence in the case, the Court believes that a construction of the term to mean “intended” is required, because the conduct of the parties points ineluctably in that direction. After all, it was the participation of Sam’s Club that rekindled the lease negotiations. Because of that, Sportsman’s was willing to incur the cost of relocating and redesigning the building to accommodate that inclusion. It is undisputed that DDR’s vice-president Dorsky told Sportsman’s CEO Utgaard that Sam’s Club was going to build a store. DDR and Chesterfield never did anything to inform Sportsman’s that Sam’s Club would not locate there or that the negotiations had reached an impasse until March 2007. Based on everything Sportsman’s knew, it reasonably believed Sam’s Club would locate there; Utgaard reasonably thought “proposed” meant “planned” or “pending.” Utgaard Dep. at 175. Utgaard testified without contradiction that Sportsman’s would not have signed the lease if the Sam’s Club store was not part of the shopping center. And the lease as signed included Exhibit B representing the Sam’s Club store, which was referenced in the lease and used to describe the physical landscape of the plaza, and Exhibit J, which depicted an entrance sign listing Sam’s Club as a tenant. With this interpretation, the Court finds that the lease did in fact contain a representation that Sam’s Club would be a tenant. -17- That does not end the matter, however, because Sportsman’s was not justified in rescinding the lease unless the unfulfilled term is “substantial.” “The rule in Michigan is that one who first breaches a contract cannot maintain an action against the other contracting party for his subsequent breach or failure to perform. However, that rule only applies when the initial breach is substantial.” Michaels v. Amway Corp., 206 Mich. App. 644, 650, 522 N.W.2d 703, 706-07 (1994) (internal quotation marks and citations omitted). So while Michigan law holds that a “substantial” or “material” breach of a contract is an adequate basis for rescission, Walker & Co. v. Harrison, 347 Mich. 630, 635, 81 N.W. 2d 352, 355 (1957); Philip Corp. v. Flying Tiger Line, Inc., 18 Mich. App. 206, 216, 171 N.W.2d 16, 21 (1969), the rescinding party’s determination of “susbtantiality” or “materiality” – the terms are interchangeable – is “fraught with peril,” Walker, 247 Mich. at 635, 81 N.W. 2d at 355. As the Michigan Supreme Court explained, “should such determination, as viewed by a later court in the calm of its contemplation, be unwarranted, the repudiator himself will have been guilty of material breach and himself have become the aggressor, not an innocent victim.” Ibid. The Michigan Supreme Court stated that there is “no single touchstone” to separate substantial, rescission-warranting breaches from immaterial ones, but it found the following factors instructive: (1) “[t]he extent to which the injured party will obtain the substantial benefit which he could have reasonably anticipated”; (2) “[t]he extent to which the injured party may be adequately compensated in damages for lack of complete performance”; (3) “[t]he extent to which the party failing to perform has already partly performed or made preparations for performance”; (4) “[t]he greater or less hardship on the party failing to perform in terminating the contract”; (5) “[t]he wilful, negligent or innocent behavior of the party failing to perform”; and (6) “[t]he greater or less -18- uncertainty that the party failing to perform will perform the remainder of the contract.” Ibid. (internal quotation marks omitted). In application, the jurisprudence defining “substantiality” is not without some degree of conflict. For instance, in Baith v. Knapp-Stiles, Inc., 380 Mich. 119, 126, 156 N.W.2d 575, 579 (1968), the court stated that substantiality “can be found only in cases where the breach has effected such a change in essential operative elements of the contract that further performance by the other party is thereby rendered ineffective or impossible, such as the causing of a complete failure of consideration or the prevention of further performance by the other party.” (emphasis added) (internal quotation marks and citation omitted). In contrast, another judge of this Court explained: “Where the breach substantially limits the non-breaching party from receiving the benefit of his bargain, the breach is deemed material and the victim of the breach may rescind the deal.” P.A.L. Investment Group, Inc. v. Staff-Builders, Inc., 118 F. Supp. 2d 781, 787 (E.D. Mich. 2001) (applying Michigan law). The latter understanding is supported by the greater weight of recent cases, as well as the national approach. See Adell Broadcasting v. Apex Media Sales, 269 Mich. App. 6, 13-14, 708 N.W.2d 778, 783 (2005) (stating that “rescission is permissible when there is failure to perform a substantial part of the contract or one of its essential items, or where the contract would not have been made if default in that particular had been expected or contemplated”) (internal quotation marks omitted); Omnicon of Michigan v. Giannetti Inv. Co., 221 Mich. App. 341, 348, 561 N.W.2d 138, 141 (1997) (“In determining whether a breach is material, the court should consider whether the nonbreaching party obtained the benefit it reasonably expected to receive.”); Holtzlander v. Brownell, 182 Mich. App. 716, 721-22, 453 N.W.2d 295, 298 (1990) (“In order to warrant recision, there must be a material breach affecting a substantial or essential part of the contract. One -19- consideration in determining whether a breach is material is whether the nonbreaching party obtained the benefit which he or she reasonably expected to receive.”); Corpus Juris Secundum Contracts § 468 (explaining that “the breach must go to the root, heart, or essence of the contract, and as long as such is the case, even a partial failure of performance may merit rescission”) (footnotes omitted). In this case, there is no doubt that a major consideration propelling Sportsman’s to commit to space in the plaintiff’s shopping center was the presence of a big box anchor tenant. In fact, all the evidence suggests that the promise of a pending Sam’s Club was material to Sportsman’s decision to sign the lease. Therefore, when it was clear that the Sam’s Club was not going to be built, Sportsman’s had the option to rescind the lease. III. Because there was a failure of a material term of the lease on the part of Chesterfield, Sportsman’s had a right to rescind the lease and no obligation to perform. Chesterfield, in turn, may not enforce the lease or recover damages because of the failure of that material term. Neither Chesterfield nor DDR engaged in any fraudulent conduct or other misrepresentation, so Sportsman’s cannot prevail on its affirmative claim for damages. Accordingly, it is ORDERED that the motion for summary judgment by Chesterfield Exchange, LLC and Developers Diversified Realty Corporation [dkt #50] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the motion for summary judgment by Sportsman’s Warehouse, Inc. [dkt #47] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the complaint is DISMISSED WITH PREJUDICE. -20- It is further ORDERED that the defendant may have judgment on the counterclaim only insofar as it seeks recision of the lease, and in all other respects the counterclaim and third-party complaint are DISMISSED WITH PREJUDICE. It is further ORDERED that the plaintiff’s motion to exclude expert testimony [dkt #80] and the defendant’s motions in limine [dkt #s 98, 99, 100, 101, 102, 103, 104, 105, 106] are DISMISSED as moot. Dated: August 11, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 11, 2008. s/Felicia M. Moses FELICIA M. MOSES -21-

=== SPX Order Overruling Obj to Sanction Order ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION SPX CORPORATION, Plaintiff, vs. BARTEC USA, LLC, BARTEC AUTO ID LTD., SCHRADER-BRIDGEPORT INTERNATIONAL, INC., MYERS TIRE SUPPLY DISTRIBUTION, INC., ______________________________________/ Defendants. Case No. 06-14888 Hon. David M. Lawson Magistrate Judge Steven D. Pepe OPINION AND ORDER OVERRULING OBJECTIONS TO MAGISTRATE JUDGE’S ORDER GRANTING PLAINTIFF’S MOTION TO EXCLUDE EVIDENCE DISCLOSED LATE AND DENYING MOTION TO STRIKE OBJECTIONS This matter is before the Court on defendant Bartec USA, LLC’s objections to Magistrate Judge Pepe’s order granting the plaintiff’s motion for sanctions in the form of excluding from evidence certain items that were not seasonably disclosed as required by the Federal Rules of Civil Procedure and Judge Pepe’s orders entered pursuant thereto. Judge Pepe entered his detailed order after extensive briefing and oral argument. The defendant responded with seven objections spread across twenty-eight pages of additional briefing. The plaintiff responded with more briefing plus a motion to strike the objections because they exceeded the twenty-page limit imposed on motion briefs. After reviewing all of this, the Court finds that Judge Pepe’s order is not clearly erroneous, the result he reached is appropriate, and the plaintiff’s motion to strike is moot. I. Judge Pepe discussed the facts and proceedings at length in his order. At the risk of succumbing to the parties’ penchant for prolixity, the Court will review those matters again before discussing the defendant’s objections. The underlying case is an action for infringement of United States Patent No. 6,904,796 (the ‘796 patent), which describes a handheld tool used in rotating tires equipped with remote tire monitoring systems (RTMS). The defendants, Bartec USA and its British parent, Bartec Auto ID, Ltd., have counterclaimed alleging invalidity, unenforceability, and non- infringement. On October 23, 2007, the plaintiff moved for sanctions under Federal Rule of Civil Procedure 37(b) in the form of exclusion of certain evidence Bartec USA would offer in support of its invalidity defense based on anticipation and obviousness, contending that Bartec had intentionally delayed its disclosure. The plaintiff commenced this case alleging infringement on October 30, 2006. At the time, Bartec USA was the only named defendant. Bartec USA answered on December 5, 2006, denying the allegations and asserting counterclaims for invalidity, unenforceability, and non-infringement. In making these arguments, Bartec USA asserted that “[p]ertinent prior art exists including prior art that was not disclosed to or considered by the United States Patent and Trademark Office during the prosecution of the applications that led to the issuance of the ‘796 patent.” Counterclms. at ¶ 5. The plaintiff filed an amended complaint on April 2, 2007, this time naming four other defendants, including Bartec Auto ID. Bartec USA answered the amended complaint shortly thereafter, again advancing a counterclaim alleging invalidity premised on the existence of prior art. It is on this complaint and counterclaim that the case has proceeded. Bartec Auto ID did not answer the complaint until May 29, 2007. As the magistrate judge noted, service evidently was delayed -2- because Bartec Auto ID required the plaintiff to serve it through the Hague Convention, even though Bartec Auto ID and Bartec USA have the same owners and counsel. The two entities are owned by Charles Beal and Collin Webb, and they are represented in this action by three attorneys from Harness, Dickey, and Pierce – David McLaughry, Michael Doerr, and George Moustakas. Bartec Auto ID admitted personal jurisdiction in its answer and, predictably, joined in the counterclaim for invalidity, unenforceability, and non-infringement. As discovery opened, the plaintiff proceeded immediately to question Bartec USA regarding its invalidity position. Bartec Auto ID was not yet a party to the case. In early 2007, the plaintiff sent Bartec USA a first set of interrogatories, asking Bartec USA to state separately for each patent claim, the factual and legal bases for such allegations, including without limitation, an identification of each alleged § 102 anticipatory reference and all corroborating evidence as well as an application to the claims of the patents in suit on an element-by-element basis, identification of the prior art relied on and analysis of the Graham test for obviousness for Bartec’s allegations under § 103, and identification of all prior art or other documents, if any, being relied upon. Mot. to Compel [dkt # 13], Ex. 2, Bartec USA’s Answers to First Set of Interrogatories at 6. After articulating boiler-plate objections, Bartec USA offered the following response: Without waiving these general and specific objections, Defendant is informed and believes that the claims of the ‘796 patent are invalid as being anticipated under 35 U.S.C. 102 or obvious under 35 U.S.C. 103 in view of various prior art, either alone or in combination, including the admitted prior art set forth in the specification of the ‘796 patent, the prior art of record, as well as the prior art identified in the letter from Ryan Massey to Robert Gilling dated February 7, 2006, a copy of which will be produced in response to Plaintiff’s request for production of documents. Id. at 6-7. Dissatisfied with this answer, the plaintiff moved to compel a complete response on March 6, 2007. The Court referred that motion to Judge Pepe under 28 U.S.C. § 636(b)(1)(A), and he held a hearing in April 2007. Bartec USA supplemented its response before the hearing, but Judge Pepe -3- nevertheless ordered Bartec USA to provide more information. In pertinent part, Judge Pepe’s April 18, 2007 order states as follows: 3. Interrogatory #1: In its supplemental response to Interrogatory # 1, Defendant provided Plaintiff only with an identification of its positions on invalidity and the prior art relied upon in its supplementation. Defendant shall supplement its responses to indicate an application to the claims of the patents in suit on an element- by-element basis with reference to page numbers from each reference where the particular element may be found as discussed at the hearing (April 12, 2007, Hearing Transcript, at pp. 15-17). Defendant also claims in response that “aspects of the tool method claimed in U.S. Patent No. 6,904,796 are vague and/or inadequately described.” While Defendant provides a broad identification of its defenses, its [sic] does not provide Plaintiff with the complete factual and legal basis for its allegations. Defendant shall supplement its answers with specific reference to the relevant paragraphs 1-6 of 35 U.S.C. § 112. Order Granting in Pt. Mot. to Compel at 2 [dkt # 25]. Despite this order, Bartec USA was still reticent to disclose all relevant information. On May 25, 2007, the plaintiff filed a motion for sanctions, arguing that Bartec USA had failed to comply with the magistrate judge’s order. Although Bartec Auto ID was a party at this point, it was not the subject of the order or the plaintiff’s motion for sanctions. Judge Pepe did not impose sanctions, but he did direct Bartec USA to furnish more information concerning its invalidity position. The magistrate judge’s order dated July 11, 2007 reads: 1. SPX shall identify particular prior art references and claim limitations of claim 1 of the U.S. Patent No. 6,904,796, as broken out in Table 1 of Bartec’s Third Supplemental Response to SPX Interrogatory No. 1. 2. Within ten calendar days from this identification by SPX, Bartec shall identify the primary sentence, paragraph or specific portion of any figure, schematic or image that Bartec relies upon to demonstrate that the identified limitations of claim 1 are disclosed in the particular reference. Order Granting in Pt. Mot. for Sanctions [dkt # 74] at 2. -4- In the meantime, the plaintiff began to engage in discovery with the other Bartec defendant, Bartec Auto ID. This task seems to have been fairly pro forma, as the first set of interrogatories mirrored that served upon Bartec USA, and the responses, prepared by shared counsel, contained many similarities. On October 5, 2007, Bartec USA and Bartec Auto ID furnished their expert report on invalidity authored by Dr. Valdis Liepa. Dr. Liepa explained that he was retained by both of the Bartec defendants, and he discussed twelve alleged pieces of prior art, see Mot. to Exclude [dkt # 128], Ex. 6, Liepa Rep. at 5-12 (identifying GB 2,305,074; US Patent No. 6,617,962; U.S. Patent No. 5,952,935; U.S. Patent No. 5,124,410; U.S. Pat. App. Pub. No. 2004-0036595; BXR Reader Publications and Quote; US Patent No. 5,602,524; U.S. Pat. App. Pub. No. 2003-0080862; U.S. Patent No. 6,234,007; U.S. Pat. App. Pub. No. 2003-0121320; EP Pat. App. Pub. 1,092,568; and U.S. Patent No. 6,438,467). However, only a handful of these were identified by Bartec USA and Bartec Auto ID in their interrogatory responses, see Mot. to Exclude, Ex. 1-3, Bartec USA and Bartec Auto ID’s Resps. and Supp. Resps. (identifying only BXR HLF 2000 Users Manual; GB 2,305,074; and U.S. Patent No. 6,438,647). Liepa stated that he reviewed the documents alleged to be prior art “at the request of the lawyers for Defendants.” Liepa Rep. at 1. The new references to prior art understandably took the plaintiff by surprise. Moreover, ten days later, and forty-six days before discovery was to close, Bartec furnished to the plaintiff 200,000 documents on CDs. As the magistrate judge noted, the documents were converted to .tif format, which is unsearchable. Compounding this problem, the plaintiff was scheduled to depose Charles Beal, co-owner of both Bartec USA and Bartec Auto, as a Rule 30(b)(6) witness on October 18, 2007. Although the deposition occurred as scheduled, the Bartec defendants delivered a package -5- to the plaintiff on the eve of October 17, 2007, which included additional documents and a supplemental interrogatory response. The supplementary response disclosed for the first time Bartec Auto ID’s position that the claims in the ‘796 patent are “anticipated and/or rendered obvious by Bartec [Auto ID]’s own activities.” Mot. to Exclude, Ex. 1, Further Supp. Resp. at 7 (emphasis added). Bartec Auto ID recited a long history of its own activities – spanning from 1996 to 2003 and including development of devices such as hand-held tools for reading bar codes and a tire- pressure monitoring tool with multiple activation capability – that allegedly amounted to anticipation. Nevertheless, Bartec Auto ID did not provide any documents or other factual information to support these claims. On October 18, 2007, the plaintiff deposed Mr. Beal and questioned him about these new assertions. An excerpt from the Beal deposition is set forth in Judge Pepe’s order, showing that Beal could not explain why Bartec Auto ID made these assertions just a day beforehand, and he admitted that he was aware of these activities at the time they occurred, and that Bartec attorneys (i.e., counsel for both defendants) had the information for almost a year. Flummoxed, the plaintiff filed the present motion to exclude Bartec’s “intentionally late” disclosure on October 23, 2007. The plaintiff filed the motion against Bartec USA (reasoning that it had made the late disclosure in violation of discovery orders), but it clearly imputed the acts and omissions of Bartec Auto ID to Bartec USA. Although the Court originally indicated that it would hear the motion itself, the Court referred the motion to Magistrate Judge Pepe on November 15, 2007 pursuant to 28 U.S.C. § 636(b)(1)(A). Judge Pepe held a hearing on December 5, 2007. At the hearing, Judge Pepe questioned counsel for Bartec USA and Bartec Auto ID to determine whether Bartec USA had timely supplemented its interrogatory responses. Counsel’s response is -6- reproduced in Judge Pepe’s order; he asked to file another brief documenting the dates when the late-disclosed information acquired relevance in the defendants’ eyes, which Judge Pepe permitted. Discovery closed on November 30, 2007. In its supplemental brief, Bartec USA argued that it did not have reason to know it would be able to contend this prior art (i.e., Bartec Auto ID’s own activities) was “invalidating prior art and therefore . . . subject to . . . disclosure obligations under Rule 26(e)” until September 18, 2007. Def.’s Supp. Br. at iii. At this point, of course, the division between Bartec USA and Bartec Auto ID was becoming illusory: counsel for Bartec USA essentially admitted that it would be relying on Bartec Auto ID’s activities as well, and he knew that exclusion as to one meant exclusion at to both. In light of Bartec’s supplemental brief, SPX “d[id] not seek exclusion of any item of prior art that was disclosed to SPX during the discovery period in the manner required by the Court’s April 18, 2007, and May 25, 2007, orders.” MJ Order [dkt # 206] at 8. Accordingly, that left the magistrate judge to consider only two items: “(1) Bartec’s ‘own activities’ as presented in the October 17, 2007, Supplemental Interrogatory Response (Dkt # 151, Ex. A, pp. 7-9), and (2) Bartec’s two manuals its [expert witness] relied upon as ‘printed publications.’” Ibid. In a decision dated April 10, 2008, Judge Pepe concluded that both of these items should be excluded. Judge Pepe analyzed the two categories of materials in turn. While he acknowledged that the plaintiff was only pursuing sanctions against Bartec USA, he essentially treated the two Bartec entities as one. See MJ Order at 2 n.2 & 3. The magistrate judge concluded that “Bartec [Auto ID] knew of its ‘own activities’ when they occurred, and that the relevant information was provided to Bartec’s counsel, Harness, Dickey and Pierce[,] by early 2007.” Id. at 10. Judge Pepe came to this decision despite Bartec USA’s explanation for the delay. According to Bartec USA: “It was not -7- until mid-October that a further review of the documents and information produced to-date showed that some of these activities had a nexus with the United States and thus provided a basis to assert an independent invalidity contention based on the sale or use of BXR tools in the United States.” Def.’s Supp. Br. at 5. Judge Pepe found that this explanation lacked credibility. He wrote: This extensive and unexplained delay, through multiple opportunities to disclose Bartec’s “own activities,” is particularly difficult to accept. As stated by Bartec’s counsel at the hearing: “It has always been Bartec’s contention that its own activities anticipated. They’ve known that from the get go.” (Transcript, p. 58). If that were the case, its invalidity positions should have been disclosed at the “get go,” or in one of the six times that it supplemented its response to Interrogatory No. 1. Bartec’s present excuse that it learned of its “own activities” in October 2007 seems disingenuous—especially when it was coupled with an avalanche of unsearchable documents, never-before produced, just weeks before the discovery cut-off. MJ Order at 15. Judge Pepe also concluded that the two “printed publications” should be excluded for unjustified delay. The documents, produced by Bartec Auto ID and bates stamped BAID 000690 et seq. and BAID 002254 et seq., respectively, were not identified by defense counsel as relevant prior art until November 26, 2007. See Mot. in Limine [dkt # 176], Ex. 1, First Printed Pub.; Ex. 2, Second Printed Pub. However, the first document, styled “Activation Tool, BXR2000A1, Bartec Auto ID Activation Tool,” is dated September 3, 2001. First Printed Pub. at 1-2. The second document, styled “BXR LHF – 2000 User Manual, Bartec Auto ID – BXR LHF 2000 – Range of Rugged Hand Held TPMS Readers,” is dated August 2002. Second Printed Pub. at 1, 17. Both documents discuss technology that is clearly relevant to the patent litigation. The first document describes a tool that “is a rugged hand held radio tag activator configured to activate and put to sleep Schrader T[ire ]P[ressure ]M[onitoring ] sensors when installed in a wheel.” First Printed Pub. at 3. The second document similarly describes “a rugged hand held radio tag reader configured to read -8- R[emote ]T[ire ]P[ressure ]M[onitoring ]S[ystem] sensors when installed in a wheel.” Second Printed Pub. at 2. Despite the obvious bearing these documents have on the ‘796 patent, Bartec Auto ID did not identify these works as patent-defeating prior art until four days before discovery closed. Judge Pepe was not convinced by defense counsel’s claim that the relevancy of the documents was only recently determined. He wrote: If Bartec published a document in 2001 or 2002, it should have known about it and should have disclosed it long before October of 2007 [sic – should read November of 2007]. Indeed, when Harness, Dickey and Pierce were investigating in late 2005, such documents would have been provided. In its supplemental submission Bartec contends that these documents were “identified” in July and August of 2007. Bartec provides no explanation as to why these documents were not produced earlier or why they were never disclosed on its invalidity position. MJ Order at 17. Further, Judge Pepe observed that it was far from apparent the documents qualified as “printed publications” under 35 U.S.C. § 102. MJ Order at 17. He stated that this required proof that the documents were accessible to the public, that they could be located by the interested public, and that they were actually disseminated. Ibid. (citing In re Hall, 781 F.2d 897, 899 (Fed. Cir. 1986), Constant v. Advanced Micro Devices, 848 F.2d 1560, 1568 (Fed. Cir. 1988), and Norian Corp. v. Stryker Corp., 363 F.3d 1321, 1330 (Fed. Cir. 2004 . He also noted that the defendants bore the burden to show as much by clear and convincing evidence. Ibid. (citing 35 U.S.C. § 102). Judge Pepe then noted that there was Rule 30(b)(6) testimony that the manuals were not published. See id. at 18-19. After outlining these discovery abuses, the magistrate judge analyzed prejudice to the plaintiff. The passage, unfortunately, mimics the discussion of this point in the plaintiff’s -9- supplemental brief. Nonetheless, Judge Pepe wrote that the timing of the disclosures by the defendants of their invalidity positions and the supporting evidence stifled the plaintiff’s efforts to discover the soundness of those positions. Based on this analysis, Judge Pepe concluded that exclusion of the relevant discovery items was an appropriate remedy under Rule 37(c)(1). He granted the plaintiff’s motion and order that “(1) Bartec’s ‘own activities’ as set forth on pages 7-9 of Dkt # 151, Ex. A, and (2) BAID 2254 and BAID 690 as ‘printed publications’ are excluded.” MJ Order at 23. II. Bartec USA filed timely objections to Judge Pepe’s order on April 28, 2008, complete with a twenty-eight page brief in support. The plaintiff filed a fifteen-page response brief, as well as a motion to strike the objections for exceeding the page limit designated by Local Rule 7. The district court reviews an order by a magistrate judge on a non-dispositive matter to determine whether the decision is “clearly erroneous.” United States v. Curtis, 237 F.3d 598, 603 (6th Cir. 2001). A decision is “clearly erroneous” if “although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” United States v. United States Gypsum Co., , 395 (1948). Where there are two plausible views, a decision cannot be “clearly erroneous.” Anderson v. City of Bessemer City, North Carolina, , 573 (1985). Bartec USA has advanced seven basic objections to the magistrate judge’s order. First, Bartec USA claims that the order “mistakenly purports to exclude evidence of Bartec USA’s prior art activities and Bartec USA’s two manuals, but refers instead to prior art activities and prior art manuals of Bartec Auto ID.” Objs. at iv (emphasis added). In other words, Bartec USA contends -10- he magistrate judge failed to distinguish between the two entities, and effectively sanctioned Bartec USA for Bartec Auto ID’s acts and omissions. Next, Bartec USA says that it did in fact comply with the supplemental provisions of Rule 26(e), and the magistrate judge’s discovery orders (or the gloss he applied to them) cannot supplant that Rule. Bartec USA initially notes that the prior discovery orders did not impose a deadline for supplementing discovery responses with additional prior art. Therefore, the supplementation provisions of Rule 26(e) alone govern the disclosure of other prior art. And Bartec USA insists it complied with those provisions. SPX’s Interrogatory No. 1 asked for invalidity contentions. Therefore, the defendants believe, information of other prior art was implicated only when it became the basis for an invalidity contention to be presented at trial, and the defendants say that the new invalidity contentions were “formulated between September 18, 2007 and October 5, 2007.” Id. at 15. Third, Bartec USA contends that the magistrate judge’s order should be vacated where the order “claims that the supplemental invalidity contentions were not ‘charted’ but fails to consider whether the additional or corrective information was otherwise made known during the discovery process or in writing under Fed. R. Civ. P. 26(e).” Objs. at iv. In other words, Bartec USA concedes that the prior art activities and two publications at issue may not have been produced in chart form, but it submits that they were disclosed beforehand in a different fashion (i.e., the publications were furnished to the plaintiffs on August 9, 2007; Bartec Auto ID’s prior art activities were discussed “ad nauseum” in the deposition of Mr. Beal; and both were disclosed through Leipa’s report on October 5, 2007). Id. at 17-18. -11- For its fourth objection, Bartec USA claims that Magistrate Judge Pepe improperly applied a “clear and convincing” standard to the two manuals at issue. Bartec USA’s fifth objection is that Judge Pepe “mischaracterized Bartec Auto ID’s production of emails.” Id. at 20. Bartec USA observes that “the alleged 200,000 documents are actually 4,700 emails that were requested by SPX, with various computer file attachments.” Id. at 21. Bartec USA contends in its sixth objection that the order should be set aside because Judge Pepe failed to find any actual prejudice to SPX. Bartec USA says there cannot be any prejudice because “[t]he supplemental invalidity contentions at issue were provided on October 5, 2007 – a full 8 weeks before the close of discovery – and on October 17, 2007 – over 6 weeks before the close of discovery,” Objs. at 21, and since SPX had a substantial opportunity for discovery after the disclosures (and did in fact conduct significant discovery thereafter), prejudice is not obvious. Bartec USA also criticizes Judge Pepe’s copying verbatim the assertions of prejudice made by SPX in its supplemental brief. Finally, Bartec USA takes issue with the scope of the relief granted by Judge Pepe. “The Magistrate’s Order indicates that the ‘activities’ and ‘printed publications’ are ‘excluded,’ but fails to specify the scope of the exclusion.” Id. at 26. Even if the Court sustains the ruling that Bartec Auto ID’s own activities and publications are excluded as independent invalidating prior art, Bartec USA says these materials should remain admissible for other purposes, such as demonstrating “the technical history of Bartec Auto ID’s products.” Id. at 26-27. The Court finds that Judge Pepe correctly identified the governing law in his order. Rule 26(a) of the Federal Rules of Civil Procedure requires parties to disclose substantial information -12- about any given case. Rule 26(a)(1) deals with “initial disclosures” and provides that a party must, without awaiting a discovery request, disclose the identity of persons likely to have discoverable information; copies of relevant documents in the party’s possession; a computation of damages; and any relevant insurance agreement. Rule 26(a)(2) governs “disclosure of expert testimony.” In addition to the disclosures required by Rule 26(a)(1), Rule 26(a)(2) demands parties disclose the identity of an expert witness and furnish an accompanying expert report. The required contents of such a report are set forth in detail in the Rule. See Fed. R. Civ. P. 26(a)(2)(B). Rule 26(a)(3) then describes additional required disclosures once the case gets closer to trial. These disclosures generally involve expected witnesses and exhibits, and Rule 26(e) imposes a duty to supplement previous discovery, including expert disclosures. Rule 37(c)(1) authorizes the district court to exclude from a trial information that was, in violation of Rule 26(a) or (e), withheld without “substantial justification,” unless the failure to disclose was “harmless.” In fact, the language of Rule 37 suggests that exclusion is mandatory in these circumstances, and the Sixth Circuit has cited with approval a Seventh Circuit decision to that effect. Dickenson v. Cardiac and Thoracic Surgery of Eastern Tenn., 388 F.3d 976, 983 (6th Cir. 2004) (citing Musser v. Gentiva Health Servs., 356 F.3d 751, 756 (7th Cir. 2004 ; see also Samos Imex Corp. v. Nextel Co., 194 F.3d 301, 305 (1st Cir. 1999) (explaining that “as amended, the civil procedure rules make clear that exclusion of evidence [such as an expert’s testimony] is a standard sanction for a violation of the duty of disclosure under Rule 26(a)”). Applying these standards, Magistrate Judge Pepe determined Bartec USA failed to timely supplement its responses to Interrogatory Number 1 in violation of Rule 26(e), and he granted the request for exclusion under Rule 37(c)(1). -13- The Court finds it useful to group Bartec USA’s seven objections to this ruling into three categories. The first is that the magistrate judge conflated the acts and omissions of Bartec USA with those of Bartec Auto ID. The second is that the defendants provided corrective information under Rule 26(e)(1)(A), rendering exclusion under Rule 37 inappropriate. The third is that Judge Pepe did not identify actual prejudice. Taking these concerns in turn, the Court finds that Judge Pepe properly sanctioned Bartec USA for failing to disclose the invalidity contention based on Bartec Auto ID’s prior art and technical manuals. Although courts generally respect the autonomy and limited liability provided by the corporate form, judicial respect gives way when the corporations themselves fail to honor the corporate form. See N.L.R.B. v. Fullerton Transfer & Storage, Ltd., Inc., 910 F.2d 331, 340 (6th Cir. 1990) (discussing the circumstances in which a court may pierce the corporate veil). “A corporation is presumed to be a separate entity from its shareholders,” Michigan Carpenters Council Health and Welfare Fund v. C.J. Rogers, Inc., 933 F.2d 376, 384 (6th Cir. 1991), and, of course, from other corporations, see Corrigan v. U.S. Steel Corp., 478 F.3d 718, 724 (6th Cir. 2007) (“A parent corporation generally is not liable for the acts of its subsidiary, even if its subsidiary is wholly owned.”). This case does not implicate a piercing scenario per se, but it is a case where it is appropriate to sanction Bartec USA for Bartec Auto ID’s untimely disclosure. The companies are owned by the same two men, Collin Webb and Charles Beal, and they are represented in this case by the same attorneys. Charles Beal testified that he was aware of the subject prior art when the activities occurred (five to seven years ago), and he testified on October 18, 2007 that defense counsel had this information for nearly a year beforehand. Given the nature of the prior art, it is difficult to believe that defense counsel needed until October 2007 to determine that it would rely -14- on this information in arguing for invalidity. The untimely disclosure, while ostensibly only the doing of Bartec Auto ID, must be attributed to Bartec USA as well. The purpose of Rule 37 is not only to punish discovery abusers, but also to protect litigants who legitimately seek information to prepare for trial. Because the plaintiff plainly was disadvantaged by the late disclosures, both Bartec entities must pay the price for noncompliance with Rule 26(e). Bartec USA’s claim that it (or its parent corporation) provided corrective information in keeping with Rule 26(e)(1)(A) is also unavailing. Rule 26(e)(1)(A) requires a party to supplement a discovery response “in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect.” Fed. R. Civ. P. 26(e)(1)(A); see also Mawby v. United States, 999 F.2d 1252, 1254 (8th Cir. 1993). However, a party need not supplement a response “if the additional or corrective information has . . . otherwise been made known to the other parties during the discovery process or in writing.” Fed. R. Civ. P. 26(e)(1)(A). Bartec USA states that corrective information of the publications was made known to the plaintiff by way of Dr. Liepa’s report produced on October 5, 2007, and corrective information of Bartec Auto ID’s prior art activities was made known through Mr. Beal’s deposition testimony on October 18, 2007. Although there is some merit to this contention, the information still was not timely disclosed. Beal testified that defense counsel was in possession of this information for about a year before his October 18, 2007 deposition. Bartec USA provides no explanation – other than its rather fantastic claim that it took almost a year to conclude that this would be part of its invalidity position – as to why it took so long to furnish these references to the plaintiff. Bartec USA’s third objection, dealing with prejudice, need not detain the Court long. Although it is troubling that Magistrate Judge Pepe copied a portion of the plaintiff’s brief verbatim, -15- that has no bearing on the propriety of exclusion under Rule 37(c)(1). Rule 37(c)(1) authorizes the district court to exclude from a trial information that was withheld in violation of Rule 26(a) or (e) without “substantial justification,” unless the failure to disclose was “harmless.” Fed. R. Civ. P. 37(c)(1). A party requesting exclusion under Rule 37(c)(1) need not show prejudice; rather, the burden is on the moving party to show that the non-disclosure was harmless or substantially justified. When the non-moving party fails to show as much, case law suggests that exclusion is mandatory. See Dickenson, 388 F.3d at 983; Samos Imex Corp., 194 F.3d at 305. Accordingly, it matters not whether the plaintiff would suffer prejudice absent exclusion (although it seems likely that it would). It is enough to say that Bartec USA has not shown substantial justification or harmlessness, which it has not. Bartec USA’s remaining complaints also can be disposed of quickly. It has conceded itself that the magistrate judge’s characterization of the e-mail production is immaterial. Upon review, it is clear that the magistrate judge’s discussion of the standard of proof regarding printed publications under 35 U.S.C. § 102 also is irrelevant. Reading the discussion in context, it becomes apparent that Judge Pepe referenced this standard (and the trouble the defendants might have in meeting it) simply to cast doubt on the bona fides of the untimely disclosure. Judge Pepe seemed to think that the manuals were probably not “printed publications” within the meaning of section 102, and their disclosure at the eleventh hour made him wonder if the defendants were engaging in mere gamesmanship. Whether the defendants or their counsel engaged in bad faith discovery tactics remains to be seen, although looming in the background is the unexplained conduct of converting 200,000 pages of e-mail documents to an unserachable format before turning them loose. Nonetheless, the Court accepts and affirms Judge Pepe’s decision to exclude the evidence under -16- Rule 37(c)(1), to which the “clear and convincing” discussion was ancillary. Finally, the Court overrules the objection regarding the scope of relief. The magistrate judge stated that the materials were excluded, and he presumably meant that they were excluded for all purposes. Bartec USA has not identified law showing a limit to the scope of exclusion under Rule 37(c)(1), and its claim that the materials may be needed for background development is unpersuasive. III. The Court is not “left with the definite and firm conviction that a mistake has been committed,” United States Gypsum Co., 333 U.S. at 395, by Magistrate Judge Pepe’s order. The Court finds that the defendant’s objections to the magistrate judge’s order lack merit. Having so ruled, the plaintiff’s motion to strike the objections as too lengthy becomes moot. Accordingly, it is ORDERED that Bartec USA’s objections [dkt #214] to Magistrate Judge Steven D. Pepe’s order granting the plaintiff’s motion to exclude the defendant’s late disclosure [dkt #206] are OVERRULED. It is further ORDERED that the plaintiff’s motion to strike the objections [dkt #217] is DENIED as moot. Dated: August 4, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 4, 2008. s/Felicia M. Moses FELICIA M. MOSES -17-

=== Parks Opinion Adopting and Rejecting HC R&R ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION CURTIS PARKS, Petitioner, Case Number 05-10036 Honorable David M. Lawson v. MILLICENT WARREN, ________________________________________/ Respondent. OPINION AND ORDER ADOPTING IN PART AND REJECTING IN PART MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION, DENYING IN PART PETITION FOR WRIT OF HABEAS CORPUS, AND REFERRING MATTER TO MAGISTRATE JUDGE FOR APPOINTMENT OF COUNSEL AND AN EVIDENTIARY HEARING ON REMAINING HABEAS CLAIM Petitioner Curtis Parks, who currently is confined at the Ryan Correctional Facility in Detroit, Michigan, filed this pro se petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 on February 2, 2005. In October 2001, the petitioner was convicted by a jury of three counts of first- degree criminal sexual conduct in the Kent County, Michigan circuit court. He was sentenced to concurrent terms of fifteen to forty years in prison on all three counts, and after his direct appeals in the state courts, he filed the present petition. This matter was referred to Magistrate Judge Charles E. Binder, who issued a report on April 17, 2006 recommending that the petition be denied. The petitioner filed three timely objections to the report and recommendation, only one of which warrants extended discussion. This matter is now before the Court for de novo review. I. The magistrate judge thoroughly set forth the facts of the case, which were taken from a stipulation by the parties in the state appellate court, and they need not be repeated here as neither party objected to that part of the magistrate judge’s report. It is sufficient to know that the petitioner had sexual intercourse with the victim in her apartment in Grand Rapids, Michigan on April 22, 2001. The victim testified that the petitioner assaulted her and penetrated her three times; the petitioner asserted the sex was consensual and done in exchange for money. The jury preferred the victim’s version of the events over the petitioner’s and it convicted him of three counts of first- degree criminal sexual conduct. He was sentenced on November 29, 2001. The petitioner filed a direct appeal in the state court of appeals. Between the time of sentencing and the appeal, a story appeared in The Grand Rapids Press detailing a computer “glitch” in the Kent County juror selection system. The computer system had inadvertently excluded nearly 75% of the county’s 454,000 eligible jurors from potential jury pools since the spring of 2001. During this time period, the majority of jurors selected came from the suburbs of Grand Rapids, which racially is overwhelmingly white, to the exclusion of many black citizens from Grand Rapids proper. According to a July 30, 2002 article in The Grand Rapids Press: W. David Boehm, director of the county’s computer technology department, explained that with only one quarter of the names and addresses to choose from, the computer automatically selected a correct proportion of jurors from each of the county’s zip codes. Then, when the computer noticed the need for hundreds more jurors, it started selecting again from the top of the list - the lowest numbered zip codes that happen to serve the county’s outlying areas. Filling out the needed number, the computer usually stopped at zip code 49505 and never again reached zip codes that cover the county’s most dense population areas The result: more jurors than required were summoned from places such as Rockford and Cannon Township while fewer jurors than expected were summoned from inner- city Grand Rapids. Walker, Kentwood and parts of Wyoming also were under- represented. “We clearly screwed up in that data entry but didn’t know it,” Boehm said. -2- Pet., Ex. D, Doug Guthrie & Kyla King, “Kent Admits Glitch in Jury Selection,” The Grand Rapids Press (July 30, 2002). This “glitch” has been discussed in other state appellate decisions, see, e.g., People v. Bryant, 2004 WL 513664, *4 (Mich. App. 2004); People v. Perdue, 2004 WL 257256, *2 (Mich. App. 2004); People v. Barnes, 2004 WL 1121901,*2 (Mich. App. 2004), and the State does not appear to take issue with these facts. After learning of this irregularity, the petitioner raised a challenge to the jury selection procedure on appeal, contending that his Sixth Amendment right to a jury drawn from a venire representative of a fair cross-section of the community was abridged. He also alleged: his rights under the Due Process Clause were violated by the prosecutor’s impermissible use of peremptory challenges to exclude African Americans from the petit jury; ineffective assistance of counsel because his trial attorney failed to assert that Batson challenge; and an abuse of the court’s discretion for allowing the admission of a prejudicial “mug shot” that had no probative value. The court of appeals affirmed his convictions. Speaking to the challenge to the jury array, the court held that the petitioner “failed to preserve his challenges to the venire and the jury selection process because he did not object to the jury array before the jury was impaneled and sworn.” People v. Parks, 2003 WL 21958299, *1 (Mich. App. Aug. 14, 2003). The petitioner then filed an application for leave to appeal in the Michigan Supreme Court, raising the same issues. On February 27, 2004, the Michigan Supreme Court denied leave to appeal. People v. Parks, 469 Mich. 1012, 677 N.W.2d 27 (2004) (unpublished). The petitioner’s pro se habeas petition in this Court followed. The habeas petition raises three issues. First, the petitioner repeats the challenge to the assembly of the jury array as violating his Sixth Amendment right to a fair and impartial jury. Next -3- the petitioner asserts that the Kent County prosecutor abused the jury selection process by using his peremptory challenges to exclude African-Americans from the jury, and the petitioner’s trial counsel was ineffective for failing to mount a timely objection. Third, the petitioner contends that he was denied a fair trial when the state court allowed the prosecutor to introduce a mug shot in evidence when that photograph was not probative but was unfairly prejudicial. The magistrate judge noted that the state courts held that the petitioner had forfeited his first two claims in state court by failing to make timely objections. He also found that the state’s procedural rule was an adequate and independent state law ground for the decision, which precluded review of the federal claim in this court unless the petitioner could establish cause for the failure to abide by state procedures and actual prejudice from the constitutional violation. With respect to cause, the magistrate judge was “sympathetic” to the petitioner’s plight of not learning of the computer glitch until his case was in the court of appeals, but he found no actual prejudice resulting from the systemic irregularity in the selection of jury pools. He found no cause or prejudice that would save the petitioner’s Batson issue. The magistrate judge also discussed the merits of the jury array issue and concluded that the petitioner failed to demonstrate that minority groups were under-represented in the jury array and that the exclusion of minority groups was systematic. He concluded that even absent procedural default on this issue, the petitioner was not entitled to relief. On the issue of admission of the mug shot, the magistrate judge noted that state law evidence issues do not give rise to federal habeas intervention unless the admission of the evidence rendered the trial fundamentally unfair. Concluding that the admission of the mug shot did not so taint the trial, the magistrate recommended that relief be denied on this issue as well. -4- II. The petitioner objected to all three of these conclusions. A. Taking the objections in reverse order, the petitioner argues that the mug shot admitted into evidence was unduly prejudicial and that its probative value was minimal. The Court is satisfied, however, that the magistrate judge properly resolved this issue, and the Court adopts that portion of his report. An error of state law is not a ground for habeas corpus relief. Pulley v. Harris, , 41 (1984). “In conducting habeas review, a federal court is limited to deciding whether a conviction violated the Constitution, laws, or treaties of the United States.” Estelle v. McGuire, , 68 (1991) (citing 28 U.S.C. § 2241 and Rose v. Hodges, 423 U.S. 19, 21 (1975) (per curiam . “Habeas review does not encompass state court rulings on the admission of evidence unless there is a constitutional violation.” Clemmons v. Sowders, 34 F.3d 352, 357 (6th Cir. 1994) (citing Fuson v. Jago, 773 F.2d 55, 59 (6th Cir. 1985 . An evidentiary ruling violates a criminal defendant’s due process rights only when it is “so egregious that it results in a denial of fundamental fairness.” Bugh v. Mitchell, 329 F.3d 496, 512 (6th Cir. 2003). The magistrate judge correctly concluded that the admission of the mug shot was not fundamentally unfair and did not violate the Constitution. B. The petitioner objects to the conclusion that his Batson issue was procedurally defaulted. There is no dispute, however, that there was no objection at trial to the prosecutor’s use of peremptory challenges to remove African-Americans from the jury. Michigan procedural rules require challenges to the use of peremptory challenges under Batson v. Kentucky, 476 U.S. 79 -5- (1986), to be preserved by a contemporaneous objection. See People v. Williams, 174 Mich. App. 132, 137, 435 N.W.2d 469, 472 (1989) (holding that under state procedural law “a timely objection is necessary to preserve a Batson question for appellate review”). A procedural default is “a critical failure to comply with state procedural law.” Trest v. Cain, , 89 (1997). It will bar consideration of the merits of a federal claim if the state rule is actually enforced and is an adequate and independent ground for the state court’s decision. Coleman v. Thompson, , 750 (1991); Monzo v. Edwards, 281 F.3d 568, 576 (6th Cir. 2002). A procedural default can be excused by a showing of cause and prejudice, Coleman, 501 U.S. at 750, and the petitioner offers his trial attorney’s ineffective assistance as cause for the lack of a contemporaneous objection. The magistrate judge did not address this argument in his report because he believed that the petitioner did not raise the issue in his petition. However, the petitioner included that claim in the statement of his second habeas issue. Ineffective assistance of counsel may serve as “cause” for a procedural default if it rises to the level of a constitutional violation. Martin v. Mitchell, 280 F.3d 594, 605 (6th Cir. 2002). In fact, a “claim of ineffective assistance of counsel . . . can serve as both cause and prejudice, excusing a procedural default in an underlying substantive claim.” Franklin v. Anderson, 434 F.3d 412, 418 (6th Cir. 2006). However, to establish constitutionally ineffective assistance of counsel, the petitioner must meet the two-pronged test set forth in Strickland v. Washington, (1984). Towns v. Smith, 395 F.3d 251, 258 (6th Cir. 2005). To show a violation of the Sixth Amendment right to effective assistance of counsel, a petitioner must establish that his attorney’s performance was deficient and that the deficient performance prejudiced the defense. Strickland, 466 U.S. at 687. An attorney’s performance is deficient if “counsel’s representation fell below an objective standard -6- of reasonableness.” Id. at 688. The defendant must show “that counsel made errors so serious that counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment.” Id. at 687. “Judicial scrutiny of counsel’s performance must be highly deferential.” Id. at 689. The Supreme Court has “declined to articulate specific guidelines for appropriate attorney conduct and instead [has] emphasized that ‘[t]he proper measure of attorney performance means simply reasonableness under prevailing professional norms.’” Wiggins, , 521 (2003) (quoting Strickland, 466 U.S. at 688 ). An attorney’s deficient performance is prejudicial if “counsel’s errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable.” Strickland, 466 U.S. at 687. The petitioner must show “a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.” Id. at 694. Unless the petitioner demonstrates both deficient performance and prejudice, “it cannot be said that the conviction [or sentence] . . . resulted from a breakdown in the adversary process that renders the result unreliable.” Id. at 687. The petitioner has failed to establish that his trial attorney’s performance was ineffective. He says that his attorney’s failure to make a Batson challenge violated professional norms because the prosecutor used her peremptory challenges to excuse African-Americans from the petit jury. The petitioner has supplied affidavits from four people, three who identify themselves as African-Americans, who were peremptorily excused by the prosecutor, Pet., Exhibit G, Affidavits of Excused African-American Jurors: Ahmed Shabazz, Aria Moody, Melain Gipson, and Steven Vanhuizen, and he argues that the prosecutor’s purpose for removing the African-American jurors -7- was racially based. But the petitioner has not provided any evidence whatsoever to support this claim. No voir dire transcript has been included with the exhibits. The affidavits of the excused jurors simply say that they were excused. To conclude that the prosecutor exercised peremptory challenges on the base of race requires pure speculation. The petitioner has not provided the Court with any facts to support his allegation that the prosecutor acted improperly or that defense counsel’s omissions amounted to deficient performance. “[E]rrors of tactics or omission do not necessarily mean that counsel has functioned in a constitutionally deficient manner.” Greer v. Mitchell, 264 F.3d 663, 677 (6th Cir. 2001), cert. denied, 535 U.S. 940 (2002). Therefore, the Court must conclude that the petitioner has not established cause for the procedural default on his Batson claim. The Court agrees with the magistrate judge that this state procedural rule was an adequate and independent ground for the state court’s ruling on this issue. The Court, therefore, will adopt the part of his report rejecting the Batson claim. C. The Court cannot conclude, however, that the claim that the petitioner was denied a fair jury pool was procedurally defaulted, at least not on the present record. Assuming without deciding that the state’s rule requiring an objection to the jury array prior to the jury being sworn is a firmly- establish state procedural rule that is regularly followed, Warner v. United States, 975 F.2d 1207, 1213-14 (6th Cir. 1992), the Court believes that the petitioner has shown both cause and prejudice that excuse his failure to abide by that rule. The magistrate judge was “somewhat sympathetic under the ‘cause’ inquiry,” R&R at 10, and with good reason. The petitioner could not have known of Kent County’s computer deviation at or before the time of jury selection. County officials did not even know about it, having -8- discovered it several months after the petitioner’s trial. “A habeas petitioner shows ‘cause’ where he demonstrates that he failed to raise a constitutional issue because it was ‘reasonably unknown to him’ at the time.” Fautenberry v. Mitchell, 515 F.3d 614, 629 (6th Cir. 2008) (quoting Amadeo v. Zant, , 222 (1988 ; see also Jamison v. Collins, 291 F.3d 380, 388 (6th Cir. 2002) (“Cause is shown when the factual basis of the claim was ‘reasonably unknown’ to the defendant’s counsel.”). The petitioner has established cause. The nature of the error – the denial of a jury pool comprised of a fair cross-section of the community – can only be characterized as a structural error, for which prejudice is presumed. The Supreme Court has explained: In Arizona v. Fulminante, 499 U.S. 279 (1991), we divided constitutional errors into two classes. The first we called “trial error,” because the errors “occurred during presentation of the case to the jury” and their effect may “be quantitatively assessed in the context of other evidence presented in order to determine whether [they were] harmless beyond a reasonable doubt.” Id. at 307-308 (internal quotation marks omitted). These include “most constitutional errors.” Id. at 306. The second class of constitutional error we called “structural defects.” These “defy analysis by ‘harmless-error’ standards” because they “affec[t] the framework within which the trial proceeds,” and are not “simply an error in the trial process itself.” Id. at 309- 310; see also Neder v. United States, 527 U.S. 1, 7-9 (1999). United States v. Gonzalez-Lopez, 548 U.S. 140, 148-149 (2006). In Taylor v. Louisiana, (1975), the Court held that “the Sixth Amendment affords the defendant in a criminal trial the opportunity to have the jury drawn from venires representative of the community[.]” Id. at 537 (emphasis added). When potential jurors are excluded from the jury pool on the basis of race, structural error occurs. Vasquez v. Hillery, 474 U.S. 254 (1986). The Vasquez Court discussed the presumption of error when African-Americans were improperly excluded from grand jury service, stating: -9- When constitutional error calls into question the objectivity of those charged with bringing a defendant to judgment, a reviewing court can neither indulge a presumption of regularity nor evaluate the resulting harm. Similarly, when a petit jury has been selected upon improper criteria or has been exposed to prejudicial publicity, we have required reversal of the conviction because the effect of the violation cannot be ascertained. See Davis v. Georgia, 429 U.S. 122 (1976) (per curiam); Sheppard v. Maxwell, 384 U.S. 333, 351-352 (1966). Like these fundamental flaws, which never have been thought harmless, discrimination in the grand jury undermines the structural integrity of the criminal tribunal itself, and is not amenable to harmless-error review. [A] conviction cannot be understood to cure the taint attributable to a charging body selected on the basis of race. Once having found discrimination in the selection of a grand jury, we simply cannot know that the need to indict would have been assessed in the same way by a grand jury properly constituted. The overriding imperative to eliminate this systemic flaw in the charging process, as well as the difficulty of assessing its effect on any given defendant, requires our continued adherence to a rule of mandatory reversal. Id. at 263-64. To avoid the procedural default bar, a habeas petitioner claiming a structural error need not show actual prejudice. Owens v. United States, 483 F.3d 48, 64-65 (1st Cir. 2007) (holding that “a defendant who is seeking to excuse a procedurally defaulted claim of structural error need not establish actual prejudice”); see also Sustache-Rivera v. United States, 221 F.3d 8, 17 (1st Cir. 2000) (“If [an error] did constitute structural error, there would be per se prejudice, and harmless error analysis, in whatever form, would not apply.”); Becht v. United States, 403 F.3d 541, 549 (8th Cir. 2005) (suggesting, but not deciding, that counsel’s failure to raise a structural error on appeal would constitute per se prejudice); McGurk v. Stenberg, 163 F.3d 470, 475 (8th Cir.1998) (holding that where counsel’s deficient performance resulted in structural error, prejudice will be presumed); United States v. Canady, 126 F.3d 352, 364 (2d Cir. 1997) (even though habeas petitioner had not raised public trial claim on direct appeal, deciding that he was entitled to relief because public trial claim is structural error). Because prejudice is presumed, the Court must reject the magistrate -10- judge’s conclusion that the petitioner’s failure to show actual prejudice required invocation of the procedural default bar. The magistrate judge also discussed the merits of the jury venire claim. He relied on Michigan appellate cases to conclude that the flawed selection process in Kent County did not actually result in underrepresentation or systematic exclusion of racial minorities. For instance, he referred to People v. Bryant, 2004 WL 513664 (Mich. App. 2004), in which the court of appeals discussed the same problem with Kent County’s “computer glitch,” to support that proposition. However, in that case, the court held as follows: In this case, defendant properly preserved the issue below and plaintiff recognizes that “it is of course difficult to expect anyone to raise an issue where the factual basis for the issue is unknown at the time.” Further, plaintiff admits that “the factual predicate underlying the defendant’s assumptions was not a matter of public knowledge [at the time of defendant’s trial] and not easily discernable.” Given these circumstances, we find the appropriate remedy to be a remand to the trial court for an evidentiary hearing, which will allow defendant an opportunity to present evidence that the Kent County jury selection system resulted in systematic exclusion of African-Americans causing this group to be substantially underrepresented in defendant’s jury venire. If defendant is able to make “a prima facie showing of an infringement of his constitutional right to a jury drawn from a fair cross section of the community, it is the State that bears the burden of justifying this infringement by showing attainment of a fair cross section to be incompatible with a significant state interest.” If plaintiff cannot carry its burden, then defendant is entitled to a new trial. Bryant, 2004 WL 513664 at *4 (footnote and citation omitted). The magistrate judge also cited Smith v. Berghuis, 2006 WL 461248 (W.D. Mich. 2006), to suggest that a federal court already has put its stamp of approval on the same Kent County jury selection system challenged here. But that case concerned a trial that occurred in 1993 in which the jury array was selected by a method different from the one in this case. See People v. Smith, 463 Mich. 199, 209 n.2, 615 N.W.2d 1, 5 n.2 (2000) (Cavanaugh, J., dissenting) (observing that “[s]ome time after [Smith] was tried, Kent -11- County changed this practice, and began requesting all names on the list, rather than a given number”). In United States v. Allen, 160 F.3d 1096 (6th Cir. 1998), the Sixth Circuit discussed the showing a criminal defendant must make to establish a prima facie violation of the Sixth Amendment resulting from the exclusion of racial groups from a jury pool: The Sixth Amendment requires that the jury venire from which a jury is selected represent a “fair cross-section” of the community. Taylor v. Louisiana, , 528 (1975). In Duren v. Missouri, 439 U.S. 357 (1979), the Supreme Court held that a defendant may establish a prima facie fair cross-section violation by showing (1) that the group alleged to be excluded is a “distinctive” group in the community; (2) that the representation of this group in venires from which juries are selected is not fair and reasonable in relation to the number of such persons in the community; and (3) that this underrepresentation is due to systematic exclusion of the group in the jury-selection process. Id. at 364. The government may rebut this prima facie case by showing that “a significant state interest [is] manifestly and primarily advanced by those aspects of the jury-selection process . . . that result in the disproportionate exclusion of a distinctive group. Id. at 367-68. Id. at 1103. It appears from the present record that there is little dispute as to the first element, since African-Americans are a distinct group within the community. Likewise, the description of excluding citizens from geographic regions of the community indicates that it was accomplished through a flaw in a computer program that ignored those individuals in inner-city zip code zones “systematically.” No one suggests that this was done purposefully, but intentionality is not an element of this type of structural error. To prove the second element – underrepresentation – the Sixth Circuit has endorsed the “absolute disparity” method for determining whether “the representation of African-Americans on -12- venires is not ‘fair and reasonable in relation to the number of [African-Americans eligible for jury service] in the community.’” United States v. Forest, 355 F.3d 942, 954 (6th Cir. 2004). “In the context of jury selection, one way to evaluate the fairness of representation is by calculating ‘absolute disparity,’ which refers to ‘the difference between the percentage of a certain population group eligible for jury duty and the percentage of that group who actually appear in the venire.’” Ibid. (quoting United States v. Greene, 971 F. Supp. 1117, 1128 n.11 (E.D. Mich. 1997 . The petitioner has not made such a showing, but he has not yet had an opportunity to do so. He had no opportunity to develop the issue in the state trial court because he had no knowledge of the system’s flaws, and the state appellate courts refused to entertain the issue because the petitioner did not raise it in the lower court. The magistrate judge took no evidence on the matter, either. Under the federal habeas statute, an evidentiary hearing on a habeas claim may be held if a petitioner must establish “a factual predicate [for his claim] that could not have been previously discovered through the exercise of due diligence,” and the facts, if shown, could establish actual prejudice. 28 U.S.C. § 2254(e)(2)(A)(ii), (B); see also Sawyer v. Hofbauer, 299 F.3d 605, 610 (6th Cir. 2002) (stating that an evidentiary hearing may be held when the petitioner “alleges sufficient grounds for release, relevant facts are in dispute, and the state courts did not hold a full and fair evidentiary hearing”) (internal quotation marks omitted). In this case, the petitioner could not have learned of the jury selection error through the utmost exercise of diligence, and if the constitutional error is proven prejudice is presumed. To properly adjudicate the petitioner’s first habeas claim, therefore, the Court believes that an evidentiary hearing will be required. Due to the complexity of the issue, all parties and the Court -13- will best be served by the appointment of counsel to represent the petitioner on this issue. The matter will be referred to the magistrate judge to complete these tasks. III. The Court concludes that the magistrate judge correctly determined that the petitioner’s claim relating to the Batson challenge is procedurally defaulted and the claim relating to the admission of the mug shot is without merit. However, an evidentiary hearing is required to resolve the claim that the petitioner was deprived of his right under the Sixth Amendment to a trial by a jury chosen from a fair cross-section of the community. Counsel will be appointed for the petitioner to assist in the presentation of that claim. Accordingly, it is ORDERED that the petitioner’s objections to the magistrate judge’s Report and Recommendation [dkt #24] are OVERRULED IN PART AND SUSTAINED IN PART. It is further ORDERED that the magistrate judge’s Report and Recommendation [dkt #19] is ADOPTED IN PART AND REJECTED IN PART. It is further ORDERED that claims two and three in the petition for a writ of habeas corpus are DENIED. It is further ORDERED that the matter is referred to Magistrate Judge Charles E. Binder under the previous order of reference [dkt #18] to appoint counsel for the petitioner, to conduct an evidentiary hearing on the issues raised in claim one of the petition, and to prepare a report and recommendation. Dated: July 31, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge -14- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 31, 2008. s/Felicia M. Moses FELICIA M. MOSES -15-

=== Anderson Opinion Denying Habeas Corpus ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION MICHAEL LEROY ANDERSON, Petitioner, Civil No. 05-10194 Honorable David M. Lawson v. ANDREW JACKSON, __________________________________/ Respondent. OPINION AND ORDER DENYING PETITION FOR WRIT OF HABEAS CORPUS The petitioner, Michael Leroy Anderson, presently confined at Mound Correctional Facility in Detroit, Michigan, has filed a pro se petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254. The petitioner stands convicted of two counts of first-degree criminal sexual conduct, first- degree home invasion, and nineteen counts of illegal use of another person’s financial transaction device. He was sentenced as an habitual offender to concurrent terms of life imprisonment for criminal sexual conduct, thirty to sixty years for the home invasion, and five to fifteen years for the illegal use of a financial transaction device. The petitioner alleges that he is incarcerated in violation of his constitutional rights to effective assistance of counsel, to confront the witnesses against him, and to a fair trial. The respondent has filed an answer to the petition, asserting that the petitioner’s claims are procedurally defaulted because the petitioner failed to raise his claims on direct appeal. The Court determines that the petitioner’s claims are not procedurally defaulted, but they lack merit. Therefore, the habeas petition will be denied. I. The petitioner was charged in Ingham County, Michigan with two counts of first-degree criminal sexual conduct, Mich. Comp. Laws § 750.520b(1)(c) (sexual penetration during the commission of another felony), one count of first-degree home invasion, Mich. Comp. Laws § 750.110a(2), and nineteen counts of illegal use of a financial transaction device, Mich. Comp. Laws § 750.157p. The charges arose from a home invasion in Lansing Township. The intruder raped the female resident of the home and subsequently used her ATM card. The victim testified at trial that she fell asleep about 10:30 p.m. on Sunday, August 23, 1998. She awoke when a man placed his hands on her shoulders and told her not to scream or he would kill her. The man put duct tape on her mouth, bound her hands with nylon ties, and placed a towel over her head. Then he pulled her out of bed and ushered her into the bathroom. After he asked where she kept her money, she heard noises that sounded like he was looking for something. He subsequently returned to the bathroom where he penetrated her vagina with a soft object and then with his penis. Her purse and other items were missing after the man left the premises. Detective Sergeant John Draganchuk testified at a pretrial motion to suppress evidence that he obtained a description of the victim’s assailant after speaking with her on August 25, 1998.1 Because the victim’s head was covered by a towel for part of the assault, she was able to give a limited description of her attacker. However, she described her attacker as having a slight build, wispy, curly brown hair, blue eyes, and further recalled that he smelled strongly of cigarette smoke. As part of his investigation, Draganchuk also obtained films from video surveillance cameras at four different financial institutions where the assailant used the victim’s automatic teller machine (ATM) card to withdraw funds in the hours following the assault. After reviewing the films, Draganchuk was able to discern distinct charac- _________________ 1 The assault occurred on August 23, 1998. -2- teristics of the assailant’s vehicle. Draganchuk determined over twenty identifying characteristics of the vehicle,2 such as pieces of paper on the vehicle’s dashboard, and an elliptical shaped item hanging from the rear-view mirror. Draganchuk subsequently met with a representative from a local Ford dealership who confirmed that the vehicle on the films was a Ford Ranger from the period of the late 1980s to 1992 because it did not have a driver’s side airbag. Draganchuk also observed that the assailant was of small stature, and although he wore a face mask, his hair was curly. On September 23, 1998, Draganchuk observed a vehicle matching the specific description of the one in the films traveling within a mile of the victim’s home, and noted that the driver matched the description of the suspect given by the victim. Specifically, the driver had a slight build and curly hair, and the vehicle had papers on the dashboard and an elliptical shaped object hanging from the rearview mirror. After conducting a LIEN check, Draganchuk further discovered that defendant was the owner of the vehicle, and that defendant had a slight build and blue eyes, as described by the victim. _________________ 2 These included that (1) the vehicle was a light-colored or silver pick-up truck, (2) with an oval Ford emblem on the rear tailgate, (3) the steering wheel did not have an airbag, (4) the vehicle had standard automobile size, rather than truck size, side view mirrors, (5) the vehicle had a black bed liner, and (6) a black plastic tool box extending the entire width of the back bed. People v. Anderson, No. 224031, 2001 WL 1511839, at *2 (Mich. Ct. App. Nov. 27, 2001) (unpublished) (footnotes in original). The police searched the petitioner’s home where they found the victim’s purse, a dildo, and a mask. A witness testified at trial that the dildo contained the victim’s DNA. The petitioner denied entering the victim’s home, assaulting her, or using her ATM card. He testified that on the night of the assault, he went to the store for a splint because his hand was bothering him. After leaving the store and returning to his vehicle, he noticed a white plastic bag in the bed of his truck. He assumed that some college students who had parked next to him tossed the bag in his truck. He later discovered that the bag contained a woman’s purse, a mask, and a dildo. -3- The jurors apparently did not believe the petitioner’s version of the facts, for they convicted him as charged. On September 24, 1999, the trial court sentenced the petitioner as a habitual offender to life imprisonment for the criminal sexual conduct, thirty to sixty years for the home invasion, and five to fifteen years for the illegal use of a financial transaction device. In his direct appeal, the petitioner alleged that the searches of his home and vehicle were illegal. He also argued that the trial court erred in denying his challenge of a juror for cause. The Michigan Court of Appeals affirmed the petitioner’s convictions, see ibid., and on July 29, 2002, the Michigan Supreme Court denied leave to appeal, see People v. Anderson, 467 Mich. 853, 650 N.W.2d 338 (July 29, 2002) (Table). The petitioner raised his habeas claims in a motion for relief from judgment, which the trial court denied in a reasoned opinion on December 1, 2003. The petitioner appealed the trial court’s decision, but the Michigan Court of Appeals and the Michigan Supreme Court denied leave to appeal for failure to establish entitlement to relief under Michigan Court Rule 6.508(D). See People v. Anderson, No. 254553 (Mich. Ct. App. Aug. 20, 2004); People v. Anderson, 472 Mich. 912, 696 N.W.2d 713 (May 31, 2005) (Table). The petitioner filed his habeas corpus petition on August 1, 2005. His grounds for relief, as stated in a supporting brief, read: I. II. Petitioner was denied due process and a fair trial when the State did not disclose that his star witness[’s] testimony was false about the DNA analysis. Petitioner was denied his Constitutional right to “confront” the person who actually did the DNA test - rather than the person who testified. III. The DNA test in this case did not meet the “general acceptance” standard employed for admission of scientific evidence. -4- IV. V. The petitioner was denied due process and a fair trial when the State introduced “other acts” evidence to the jury. Petitioner’s trial counsel was ineffective within the meaning of the Sixth Amendment to the United States Constitution. II. The respondent argues in an answer to the habeas petition that the petitioner procedurally defaulted his claims by not raising them in his direct appeal. A procedural default is “a critical failure to comply with state procedural law.” Trest v. Cain, , 89 (1997). It will bar consideration of the merits of a federal claim if the state rule is actually enforced and is an adequate and independent ground for the state court’s decision. Coleman v. Thompson, , 750 (1991); Monzo v. Edwards, 281 F.3d 568, 576 (6th Cir. 2002). “When a state court judgment appears to have rested primarily on federal law or was interwoven with federal law, a state procedural rule is an independent and adequate state ground[] only if the state court rendering judgment in the case clearly and expressly stated that its judgment rested on a procedural bar.” Simpson v. Sparkman, 94 F.3d 199, 202 (6th Cir. 1996). Federal habeas courts may not consider a state prisoner’s procedurally defaulted claims “unless the prisoner can demonstrate cause for the default and actual prejudice as a result of the alleged violation of federal law, or demonstrate that failure to consider the claims will result in a fundamental miscarriage of justice.” Coleman, 501 U.S. at 750. The procedural rule in question here is Michigan Court Rule 6.508(D)(3), which prohibits state courts from granting relief from judgment if the defendant alleges nonjurisdictional grounds that could have been raised on appeal from the conviction or sentence, unless the defendant demonstrates cause and prejudice. Both the Michigan Supreme Court and the Michigan Court of -5- Appeals denied the petitioner’s applications for leave to appeal his claims on the basis of Rule 6.508(D). The respondent therefore maintains that habeas review of the petitioner’s claims is precluded. Whether a state court has actually enforced a procedural sanction depends on whether “the last state court from which the petitioner sought review . . . invoked the state procedural rule as a basis for its decision to reject reviewing the petitioner’s federal claims.” Abela v. Martin, 380 F.3d 915, 921 (6th Cir. 2004) (citing Coleman v. Thompson, , 729-30 (1991 . In Ylst v. Nunnemaker, 501 U.S. 797, 803 (1991), the Supreme Court held that, where the last state court decision is silent or unexplained as to its reasons for not granting relief, the federal court may “look through” that judgment and assume that it relied on the last reasoned judgment issued in the course of the petitioner’s state appeals. That prior judgment’s rationale is then taken as the state court’s basis for denying relief. Id. Ivory v. Jackson, 509 F.3d 284, 291-92 (6th Cir. 2007). The last state court to review the petitioner’s claims was the Michigan Supreme Court, which denied leave to appeal for failure “to meet the burden of establishing entitlement to relief under [Michigan Court Rule] 6.508(D).” People v. Anderson, 472 Mich. 912, 696 N.W.2d 713 (May 31, 2005) (Table). The Michigan Court of Appeals denied relief for the same reason. The United States Court of Appeals for the Sixth Circuit has determined that a state court order denying relief under Rule 6.508(D) is a sufficient explanation for federal district courts to conclude that the order was based on a state procedural bar, which precludes habeas review of the underlying claims. See Burroughs v. Makowski, 282 F.3d 410, 413-14 (6th Cir. 2002); Simpson v. Jones, 238 F.3d 399, 405-09 (6th Cir. 2000). However, in Abela v. Martin, 380 F.3d 915 (6th Cir. 2004), the Sixth Circuit determined that the petitioner’s claims were not procedurally defaulted, despite the Michigan Supreme Court’s reliance on Rule 6.508(D), because the trial court and the Michigan Court of Appeals adjudicated Abela’s claims on the merits instead of invoking a procedural bar. Id. at 923. -6- This case is more like Abela than Simpson or Burroughs because the trial court issued a reasoned opinion in which it adjudicated the merits of the petitioner’s claims, instead of invoking the procedural bar of Rule 6.508(D). The Court therefore concludes that the petitioner’s claims are not procedurally defaulted. The Court will proceed to analyze the petitioner’s claims, using the following standard of review. III. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the standard of review federal courts must apply when considering applications for a writ of habeas corpus raising constitutional claims. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) imposes the following standard of review for habeas cases: An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim – (1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or (2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding. 28 U.S.C. § 2254(d). Therefore, federal courts are bound by a state court’s adjudication of a petitioner’s claims unless the state court’s decision was contrary to or involved an unreasonable application of clearly established federal law. Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Mere error by the state court will not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) ( internal quotes omitted . Additionally, this -7- Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). The Supreme Court has explained the proper application of the “contrary to” clause as follows: A state-court decision will certainly be contrary to [the Supreme Court’s] clearly established precedent if the state court applies a rule that contradicts the governing law set forth in our cases. . . . A state-court decision will also be contrary to this Court’s clearly established precedent if the state court confronts a set of facts that are materially indistinguishable from a decision of this Court and nevertheless arrives at a result different from [the Court’s] precedent. Williams, 529 U.S. at 405-06. The Supreme Court has held that a federal court should analyze a claim for habeas corpus relief under the “unreasonable application” clause of § 2254(d)(1) “when a state-court decision unreasonably applies the law of this Court to the facts of a prisoner’s case.” Id. at 409. The Court defined “unreasonable application” as follows: [A] federal habeas court making the “unreasonable application” inquiry should ask whether the state court’s application of clearly established federal law was objectively unreasonable. . . . [A]n unreasonable application of federal law is different from an incorrect application of federal law. . . . Under § 2254(d)(1)’s “unreasonable application” clause, then, a federal habeas court may not issue the writ simply because that court concludes in its independent judgment that the relevant state-court decision applied -8- clearly established federal law erroneously or incorrectly. Rather, that application must also be unreasonable. Id. at 409-11; see also Eady v. Morgan, 515 F.3d 587, 594-95 (6th Cir. 2008); Davis v. Coyle, 475 F.3d 761, 766-67 (6th Cir. 2007); King v. Bobby, 433 F.3d 483, 489 (6th Cir. 2006); Harbison v. Bell, 408 F.3d 823, 828-29 (6th Cir. 2005); Rockwell v. Yukins, 341 F.3d 507, 512 (6th Cir. 2003) (en banc). A. The petitioner asserts that he was denied due process and a fair trial because the prosecution failed to disclose that the testimony of Dr. Julie Howenstine, a forensic scientist for the Michigan State Police, was false. The trial court adjudicated this claim and was unpersuaded that Dr. Howenstine presented perjured testimony. “[W]hen police or prosecutors conceal significant exculpatory or impeaching material in the State’s possession, it is ordinarily incumbent on the State to set the record straight.” Banks v. Dretke, 540 U.S. 668, 675-76 (2004). “[S]uppression by the prosecution of evidence favorable to an accused upon request violates due process where the evidence is material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution.” Brady v. Maryland, , 87 (1963). Exculpatory evidence within the meaning of Brady includes information about false testimony. “[D]eliberate deception of a court and jurors by the presentation of known false evidence is incompatible with rudimentary demands of justice.” Giglio v. United States, 405 U.S. 150, 153 (1972) (internal quotation omitted). “The same result obtains when the State, although not soliciting false evidence, allows it to go uncorrected when it appears.” Napue v. Illinois, 360 U.S. 264, 269 (1959). A conviction obtained by the knowing use of perjured testimony must be set aside “if ‘the false testimony could . . . in any reasonable likelihood have affected the judgment of the -9- jury.’” Giglio, 405 U.S. at 154 (quoting Napue, 360 U.S. at 271); see also United States v. Agurs, 427 U.S. 97, 103 (1976). There are three components to a true Brady claim: “The evidence at issue must be favorable to the accused, either because it is exculpatory, or because it is impeaching; that evidence must have been suppressed by the State, either willfully or inadvertently; and prejudice must have ensued.” Strickler v. Greene, 527 U.S. 263, 281-82 (1999). “[F]avorable evidence is material, and constitutional error results from its suppression by the government, ‘if there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different.’” Kyles v. Whitley, 514 U.S. 419, 433 (1995) (quoting United States v. Bagley, 473 U.S. 667, 682, 685 (1985 . The allegedly false testimony in this case was Dr. Howenstine’s statement that she took a swab from the dildo found in the petitioner’s home. The petitioner claims that following his trial, he acquired documentation demonstrating that Glenn Moore, not Julie Howenstine, took swabs from the dildo. The petitioner maintains that the prosecutor (1) failed to disclose that Glenn Moore swabbed the dildo and (2) failed to reveal that Julie Howenstine’s testimony was false. The petitioner asserts that he could have used the undisclosed evidence to impeach Dr. Howenstine. Dr. Howenstine implied at trial that she was part of a team of scientists that received and examined evidence obtained from the police. She testified that the dildo was submitted to her, that it was swabbed, and that a slide was prepared from the swab to determine whether DNA was present. She claimed to have been present at the processing of the evidence. Attached to the habeas petition is a memorandum from Dr. Howenstine to Glenn Moore. The memorandum confirms that the scientists did everything as a group and that Dr. Howenstine -10- was present at all times. See Pet. for Writ of Habeas Corpus, Ex. 2, page 2. Dr. Howenstine apparently supervised the swabbing and examination of the dildo. Thus, the petitioner has failed to show that Dr. Howenstine testified falsely when she stated that she took a swab from the dildo. Although she may not have personally swabbed the dildo, she was involved in the process. Furthermore, even assuming that the prosecutor failed to disclose Glenn Moore’s involvement in the swabbing of evidence, that information was not “material.” The identity of the person who did the swabbing was not material to the petitioner’s guilt or innocence, since the critical issue was the result of the test, which revealed the victim’s DNA on the dildo found in the petitioner’s home. There is no reasonable probability that the result of the trial would have been different had the prosecutor revealed that Glenn Moore did the actual swabbing. The petitioner’s Brady claim therefore has no merit. B. The petitioner alleges in a related claim that Dr. Julie Howenstine’s testimony describing the results of DNA testing was inadmissible hearsay. The trial court held on post-conviction review of this claim that no error occurred in admitting Dr. Howenstine’s testimony. Although hearsay is not admissible under the Michigan Rules of Evidence, see Mich. R. Evid. 802, “federal habeas corpus relief does not lie for errors of state law,” Lewis v. Jeffers, , 780 (1990). The petitioner’s constitutional claim alleges that he was denied his -11- constitutional right to confront Glenn Moore, who took swabs from evidence submitted by the police and prepared the swabs for DNA testing. “The Sixth Amendment guarantees to a criminal defendant the right ‘to be confronted with the witnesses against him.’ U.S. Const. amend. VI.” Danner v. Motley, 448 F.3d 372, 377 (6th Cir. 2006). The Amendment applies to state court proceedings, Pointer v. Texas, 380 U.S. 400, 403 (1965), and it “provides two types of protections for a criminal defendant: the right physically to face those who testify against him, and the right to conduct cross-examination,” Pennsylvania v. Ritchie, 480 U.S. 39, 51 (1987). Since the petitioner’s trial, the interpretation of the Confrontation Clause has undergone a radical transformation. See Crawford v. Washington, (2004). The petitioner’s reliance on Crawford, however, is misplaced because Crawford was decided after the petitioner’s conviction became final, and it is not retroactive to cases already final on direct review. Whorton v. Bockting, __ U.S. __, __, 127 S. Ct. 1173, 1177, 1181 (2007); Dorchy v. Jones, 398 F.3d 783, 788 (6th Cir. 2005). This Court, therefore, must examine the petitioner’s claim of constitutional trial error under the law in effect at the time of the petitioner’s direct appeal. As of that time, the Supreme Court had held that the right of confrontation does not require “an actual face-to-face encounter at trial in every instance in which testimony is admitted against a defendant. Instead, . . . the Clause permits, where necessary, the admission of certain hearsay statements against a defendant despite the defendant’s inability to confront the declarant at trial.” Maryland v. Craig, 497 U.S. 836, 847-48 (1990). There is no “hearsay” issue as such in this case, however, because there was no out-of-court statement concerning the DNA evidence that was admitted at trial. Rather, the petitioner complains that he was not permitted to cross-examine the -12- person who actually prepared the swabs from the dildo, although Dr. Howenstine testified that she was present when the swabs were taken and the petitioner had a full opportunity to cross-examine her. The only evidence at trial concerning preparation of the swab came from the verbal testimony of Dr. Howenstine. It does not appear that affidavits or reports describing the process of sample preparation were admitted. Dr. Howenstine described what she observed, and she provided sufficient evidence from which a reasonable fact finder could conclude that she actually observed the process, and therefore she had personal knowledge of the facts she described. That was sufficient to satisfy Michigan Rule of Evidence 602, and the state trial judge held as much in his opinion denying the motion for post-conviction relief. Glenn Moore did not testify at the petitioner’s trial, but the record does not indicate whether he was actually unavailable as a witness. That is of no moment here, however, becasue no out-of- court statement by Moore was offered in evidence, and he provided no evidence against the petitioner. Therefore, even if the petitioner was unable to call and cross-examine Moore regarding his involvement in the case, there was no violation of the Confrontation Clause because Moore was not a witness against the petitioner. Even assuming that Glenn Moore was unavailable as a witness, Dr. Howenstine’s testimony of what Moore did could not violate the petitioner’s right to confront witnesses because Howenstine was the witness against the petitioner and the petitioner’s right to confront her was fully vindicated at trial. C. The petitioner alleges next that the DNA test used in his case did not meet the “general acceptance” standard set forth in People v. Young, 418 Mich. 1, 340 N.W.2d 805 (1993), for the -13- admission of scientific evidence. However, an error of state law is not a ground for habeas corpus relief. Pulley v. Harris, , 41 (1984). “In conducting habeas review, a federal court is limited to deciding whether a conviction violated the Constitution, laws, or treaties of the United States.” Estelle v. McGuire, , 68 (1991) (citing 28 U.S.C. § 2241 and Rose v. Hodges, 423 U.S. 19, 21 (1975) (per curiam . “Habeas review does not encompass state court rulings on the admission of evidence unless there is a constitutional violation.” Clemmons v. Sowders, 34 F.3d 352, 357 (6th Cir. 1994) (citing Fuson v. Jago, 773 F.2d 55, 59 (6th Cir. 1985 . An evidentiary ruling violates a criminal defendant’s due process rights only when it is “so egregious that it results in a denial of fundamental fairness.” Bugh v. Mitchell, 329 F.3d 496, 512 (6th Cir. 2003). The petitioner’s reliance on Daubert v. Merrell Dow Pharm. Inc., (1993), also is misplaced, because Daubert was concerned with the Federal Rules of Evidence, which are not relevant to the petitioner’s state conviction. Norris v. Schotten, 146 F.3d 314, 335 (6th Cir. 1998). Moreover, Dr. Howenstine testified that the Michigan State Police Laboratory used a number of checks and balances to confirm that standard procedures were used when performing the DNA analysis. In addition, Dr. Nibedta Mahanti testified that the procedures she followed when performing a DNA analysis of the evidence corresponded with national guidelines. The petitioner has failed to show that the alleged evidentiary error rose to the level of a federal constitutional claim warranting relief. Therefore, the trial court’s conclusion that no error occurred was objectively reasonable. D. The petitioner next alleges that he was denied due process and a fair trial when the prosecution elicited testimony that he had been stalking the victim. The petitioner asserts that there -14- was absolutely no evidence of stalking, and the testimony was prejudicial because the jury could have concluded that stalkers have a tendency to commit the crime of rape. The victim testified that her assailant asked her where she went on weekends and he stated that he had been watching or stalking her. Thus, contrary to the petitioner’s assertions, there was evidence of stalking. Furthermore, to the extent that the stalking was “other bad acts” evidence, the United States Court of Appeals for the Sixth Circuit has explained that [t]here is no clearly established Supreme Court precedent which holds that a state violates due process by permitting propensity evidence in the form of other bad acts evidence. . . . While the Supreme Court has addressed whether prior acts testimony is permissible under the Federal Rules of Evidence, see Old Chief v. United States, (1997); Huddleston v. United States, 485 U.S. 681 (1988), it has not explicitly addressed the issue in constitutional terms. Bugh v. Mitchell, 329 F.3d 496, 512-13 (6th Cir. 2003). Because there is no Supreme Court decision holding that the admission of similar acts evidence violates the Constitution, the state court’s decision – that the evidence was relevant and admissible – cannot be deemed “contrary to” Supreme Court precedent under 28 U.S.C. § 2254(d). E. The petitioner’s fifth and final claim alleges ineffective assistance of trial counsel. The trial court adjudicated this claim and determined that no error was made. The two-pronged test set forth in Strickland v. Washington, (1984), governs claims of ineffective assistance of counsel. Towns v. Smith, 395 F.3d 251, 258 (6th Cir. 2005). To show a violation of the Sixth Amendment right to effective assistance of counsel, a petitioner must establish that his attorney’s performance was deficient and that the deficient performance prejudiced the defense. Strickland, 466 U.S. at 687. An attorney’s performance is deficient if “counsel’s -15- representation fell below an objective standard of reasonableness.” Id. at 688. The defendant must show “that counsel made errors so serious that counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment.” Id. at 687. “Judicial scrutiny of counsel’s performance must be highly deferential.” Id. at 689. The Supreme Court has “declined to articulate specific guidelines for appropriate attorney conduct and instead [has] emphasized that ‘[t]he proper measure of attorney performance means simply reasonableness under prevailing professional norms.’” Wiggins, 539 U.S. at 521 (quoting Strickland, 466 U.S. at 688 ). An attorney’s deficient performance is prejudicial if “counsel’s errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable.” Strickland, 466 U.S. at 687. The petitioner must show “a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.” Id. at 694. Unless the petitioner demonstrates both deficient performance and prejudice, “it cannot be said that the conviction [or sentence] . . . resulted from a breakdown in the adversary process that renders the result unreliable.” Id. at 687. 1. The petitioner alleges that trial counsel failed to contest an invalid in-court identification of him. The victim failed to identify the petitioner before trial. In fact, she picked someone out of a photographic array even though the petitioner’s picture was not included in the array, and she identified someone other than the petitioner at the line-up. She stated at trial that she saw the petitioner at the preliminary examination, but she admitted on cross-examination that she had not identified him during trial as the person who entered her apartment on August 23, 1998. -16- Consequently, there is no factual basis for the petitioner’s claim that the victim identified him. He misconstrues the record. Because there was no identification of the petitioner, there was no basis for defense counsel to object, and there could be no deficient performance that resulted. 2. The petitioner contends that his attorney should have objected to the introduction of evidence that he stalked the victim. The victim’s testimony about the petitioner’s comment that he had been stalking her was a minor part of the trial. Detective John Draganchuk also mentioned that the petitioner had stalked the victim, but Draganchuk made the comment to explain why the police seized a pair of binoculars from the petitioner’s vehicle. The Court concludes from the relatively insignificant testimony about stalking that defense counsel’s failure to object did not amount to deficient performance and, even if it did, the deficiency did not prejudice the defense. The Court concludes that the state trial judge’s finding that the petitioner received the assistance of counsel that the Sixth Amendment requires was a reasonable application of Strickland. IV. The state court’s decision in this case was not contrary to federal law, an unreasonable application of federal law, or an unreasonable determination of the facts. Therefore, the petitioner has not shown that he is in custody in violation of the Constitution or the laws of the United States. Accordingly, it is ORDERED that the petition for a writ of habeas corpus [dk#1] is DENIED. Dated: July 24, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge -17- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 24, 2008. s/Felicia M. Moses FELICIA M. MOSES -18-

=== Stewart Opinion Granting Habeas Corpus ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ARTEMIA STEWART, Petitioner, Civil No. 05-10196 Honorable David M. Lawson v. HUGH WOLFENBARGER, _______________________________/ Respondent. JUDGMENT In accordance with the Opinion and Order Granting in Part and Denying in Part Petition for Writ of Habeas Corpus entered on this day, It is ORDERED AND ADJUDGED that the Petition for Writ of Habeas Corpus be, and the same hereby is, GRANTED in part and DENIED in part. It is further ORDERED AND ADJUDGED that the respondent forthwith shall release the petitioner from custody on the second-degree murder conviction only. It is further ORDERED AND ADJUDGED AND DECLARED that the petitioner’s sentences for armed robbery and felony firearm DO NOT VIOLATE the Constitution or laws of the United States. Dated: July 18, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 18, 2008. s/Felicia M. Moses FELICIA M. MOSES -2-

=== Phipps Opinion Denying Habeas Corpus ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JEFFREY A. PHIPPS, Petitioner, Civil No. 05-10156 Honorable David M. Lawson v. KEN ROMANOWSKI, _______________________________/ Respondent. OPINION AND ORDER DENYING PETITION FOR WRIT OF HABEAS CORPUS The petitioner, Jeffrey A. Phipps, presently confined at the Parnall Correctional Facility in Jackson, Michigan, has filed a pro se petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254. The petitioner pleaded no contest to one count of child sexually abusive activity, Mich. Comp. Law § 750.145c(2), in the Newaygo County, Michigan circuit court. He was sentenced to an indeterminate custody sentence of twenty months to twenty years. The petitioner contends that the trial court erred in denying his motion to withdraw his plea where the plea was unintelligent and involuntary, and he received ineffective assistance of counsel. The respondent has filed a response to the petition arguing that the petitioner’s claims lack merit. The Court finds that the petitioner’s no contest plea was knowing, intelligent, and voluntary, and counsel was not constitutionally ineffective. Therefore, the Court will deny the petition. I. On May 15, 2003, the petitioner pleaded no contest in the Newaygo County, Michigan circuit court to one count of child sexually abusive activity in violation of Michigan Compiled Law § 750.145c(2). The charge was based on the accusation that the petitioner coerced two minor girls to strip for him by providing them with alcohol and offering them money. On June 30, 2003, he was sentenced to a minimum custody term of twenty months and a maximum term of twenty years. He filed a motion to withdraw his plea on April 27, 2004, which the trial court denied. The petitioner’s motion to withdraw his plea, like his argument before this Court, was premised on the notion that his plea was rendered involuntary due to the trial court’s off-the-record promise that he would be sentenced to no more than twenty months in prison. The petitioner claimed that his trial counsel had made a similar representation. The transcript from the May 15, 2003 plea hearing reads in relevant part as follows: THE COURT: We’ll go on the record in the case of the People of the State of Michigan versus Jeffrey Alan Phipps. Today’s the date and time set for trial. The record should reflect that the prosecutor’s office is represented by Mr. Brian Thiede. Mr. Phipps is here with counsel, Mr. Mark Schropp. The Court has been given to understand that a plea agreement has been worked out in this case. If that’s correct, I would ask Mr. Thiede if you would state that agreement for the record. MR. THIEDE: Your Honor, we have offered and remain consistent, the minimum being 20 months in this case, statutory maximum is 20 years, as charged. We anticipate the defendant would enter a plea in accordance with that. MR. SCHROPP: Your Honor, Mark Schopp on behalf of Mr. Phipps. That’s my understanding. (Off-the-record discussion) . . . . THE COURT: Do you solemnly swear or affirm that the testimony you are about to give will be the truth, the whole truth, and nothing but the truth, so help you God? THE DEFENDANT: Yes, sir. THE COURT: Do you understand that the plea agreement provides that in exchange for your plea of guilty [sic] to Count 1, the prosecutor is moving to dismiss Count 2 and Count 3? In addition, he’s recommending to the Court that the maximum minimum term in your case not exceed 20 months. So what that means, if following the recommendation of the prosecutor, that the harshest sentence that the Court would give you in terms of incarceration would be not less than 20 months nor more than 20 years with the Michigan Department of Corrections. Is that the agreement, as you understand it to be? -2- MR. SCHROPP: For the record, 20 months would be the recommended minimum and then you have to serve that. 20 years is just a statutory maximum. THE DEFENDANT: No more than 20? MR. SCHROPP: Right. THE DEFENDANT: Yes, sir. THE COURT: Also, do you understand that by pleading no contest that you would be convicted of this offense the same as if you plead guilty? Do you understand that? THE DEFENDANT: Yes, sir. THE COURT: So, in other words, if I accept your plea of no contest, it would result in your being convicted of one count of child sexually abusive activity. Do you understand that? THE DEFENDANT: Yes, sir. THE COURT: Now, have I stated the agreement as you understand it to be? THE DEFENDANT: Yes, sir. THE COURT: Were there any promises made to you in addition to what I just stated on the record in order to get you to plead no contest? THE DEFENDANT: No, sir. Plea Hearing Tr. at 3-6. After this exchange, the trial court proceeded to ensure that the petitioner understood the various rights he was waiving and that he was doing so voluntarily. The court then returned to the issue of off-the-record promises before accepting the plea: THE COURT: Are you satisfied the Court complied with MCR 6.302 rules pertaining to taking a no contest plea, Mr. Thiede? MR. THIEDE: Yes, your Honor. THE COURT: Mr. Schropp? -3- MR. SCHROPP: I am, your Honor. THE COURT: It appears to the Court that the defendant is competent to make this plea. Is this your understanding, Mr. Thiede? MR. THIEDE: Yes, your Honor. THE COURT: Mr. Schropp? MR. SCHROPP: It is, your Honor. THE COURT: Were there any promises, threats, or inducements which haven’t been stated on the record, Mr. Thiede? MR. THIEDE: None, your Honor. THE COURT: Mr. Schropp? MR. SCHROPP: No, your Honor. Id. at 10-11. As stated above, sentencing occurred on June 30, 2003. The transcript shows that the petitioner apparently was caught off-guard by the term imposed: THE COURT: Anything that you wish to tell me before the Court sentences you on this case? THE DEFENDANT: No, sir. THE COURT: For the record, the court acknowledges that Sentence Guidelines call for a sentence between 24 to 40 months. The court will sentence consistent with the plea agreement that was worked out in this case. It would be the sentence of the court that you serve not less than 20 months nor more than 20 years with the Michigan Department of Corrections. . . . For the record, the court acknowledges that this sentence is a departure from the Sentence Guidelines from the low end, but the court would indicate that there was a plea agreement and that is the reason that the court is departing from the Guidelines. Do you have any questions regarding your sentence, Mr. Phipps? THE DEFENDANT: I believe you said no less than 20 months, nor more than 20 years? -4- THE COURT: Right. That was your plea agreement. (Off-the-record discussion between Defendant & Mr. Schropp) THE COURT: Mr. Phipps, when I took your plea agreement I recall explaining that to you, that the maximum set by law is 20 years, the minimum is 20 months. THE DEFENDANT: All right. THE COURT: So I don’t think there could be any confusion – there shouldn’t be any confusion on your part regarding that. THE DEFENDANT: Well, when I went through the plea agreement, he [Mr. Schropp] told me that morning no more than 20 months, and then I don’t know what was said in the courtroom in your chambers, and then again a few minutes ago he told me again no more than 20 months. THE COURT: On the minimum. So the maximum I don’t have any control of. The maximum is set by law, so you’re not treated any different than any other defendant that’s convicted of this type of crime. You know, the maximum is set according to the maximum penalty. The court sets the minimum, and I did that consistent with the plea agreement in this case. And I would note that Mr. Schropp negotiated on your behalf a plea agreement that’s less than what the Sentence Guidelines would call for. You know, there’s a low and a high end, and you’re getting less than the low end of the Sentence Guidelines, so I would suggest that maybe Mr. Schropp did a reasonable job in representing you. THE DEFENDANT: Yes, sir. THE COURT: Any other questions? THE DEFENDANT: No, sir. Sentencing Tr. at 7-9. In support of his motion to withdraw the plea filed roughly ten months later, the petitioner submitted an affidavit in which he testified that his trial counsel and the judge promised the petitioner he would serve no more than twenty months in prison. The affidavit reads in relevant part as follows: -5- 5. On the morning of trial, attorney Schropp told me for the first time that the prosecution was going to bring a lot of other girls to testify against me. I wanted to know how they could do this at the last minute. Then I told attorney Schropp that I wanted to go to trial because I could prove that the charges were false. 6. Attorney Schropp told me that the prosecution could bring in other girls to testify against me “because of all the new sex laws.” He also told me that if I did not plead no contest that day, that my bond would be immediately pulled and I would immediately go to jail. 7. Attorney Schropp then told me “Just take the 20 months. The time caps at 20 months. It caps at both ends.” 8. At that point, I agreed, feeling under enormous pressure. Attorney Schropp told the judge and the prosecutor that there was a plea deal, and we all went out of the courtroom into the judge’s chambers with the court reporter. The plea was taken in the secretary’s room immediately outside the judge’s office. 9. At the start of the plea, there was an “off the record” conversation. Judge Monton told me something to the effect, “Jeff, you’re just going to do your 20 months. With the way the jails are overcrowded, if you keep clean the most you’ll do is 20 months.” Then, we went back on the record and did the plea. . . . . 12. As I said, I am innocent of these charges, and would not have pleaded no contest except for the extreme pressure I was under and the statements made to me by my attorney and the judge. Pet. for HC, Ex. 1, Aff. of Phipps at ¶¶ 5-9, 12. The trial court held a hearing on the petitioner’s motion to withdraw his plea on May 25, 2004. The court denied the motion from the bench, finding the petitioner’s version of events to be a complete fabrication: As I recall, there was an off-the-record discussion between Mr. Schropp and Mr. Phipps apparently in an effort for the two of them to clarify exactly what the plea agreement was. The court did not make any such statement in the off-the-record discussion that he would only receive 20 months. That simply did not occur. His affidavit is false. And I think as evidenced by the fact that on the record I took great pains to explain to him exactly, you know, what the plea agreement was, and the transcript shows that I told him that he would receive 20 months minimum to a maximum of 20 years. And then thereafter Mr. Schropp, for the record, said on page -6- 5: “MR. SCHROPP: Twenty months would be the recommended minimum and then you would have to serve that. Twenty years is the statutory maximum. THE DEFENDANT: No more than 20? MR. SCHROPP: Right.” So the court feels that in looking at the entire transcript that he clearly understood that he was looking at a minimum term or a maximum term. Minimum term being no more than 20 months, maximum term being 20 years; so the court would deny the motion. Mot. to Withdraw Tr. at 7-8. The petitioner filed an application for leave to appeal in the Michigan Court of Appeals arguing: (1) Michigan Court Rule 6.302(F), requiring that a verbatim record be made of a plea proceeding, was violated because an off-the-record discussion was held during the plea proceeding, and the court should have given the petitioner the opportunity to withdraw the plea under Michigan Court Rule 6.310(B); (2) the trial court erred in denying his motion to withdraw the plea where there were off-the-record promises of leniency; and (3) he received ineffective assistance of counsel. The Michigan Court of Appeals denied leave to appeal “for lack of merit in the grounds presented.” People v. Phipps, No. 256433 (Mich. Ct. App. Aug. 30, 2004). The petitioner then filed an application for leave to appeal in the Michigan Supreme Court, presenting the same claims presented to the Michigan Court of Appeals. The Supreme Court denied leave to appeal because it was not persuaded the questions presented merited its review. People v. Phipps, 472 Mich. 879, 693 N.W.2d 820 (March 29, 2005) (Table). The petitioner now seeks habeas relief on the following grounds: I. II. The trial court erred in denying petitioner’s motion to withdraw his plea of no contest where there were off-the-record promises of leniency. Petitioner received ineffective assistance of counsel when, on the day that his trial was set to start, his counsel informed him of a plea offer in which both ends of the sentence would be capped at 20 months which was not the case. -7- Brf. in Supp. at 5, 7. The respondent has filed an answer to the petition asserting that the claims should be denied for lack of merit. II. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the standard of review federal courts must apply when considering applications for a writ of habeas corpus raising constitutional claims, including claims of ineffective assistance of counsel. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) imposes the following standard of review for habeas cases: An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim – (1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or (2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding. 28 U.S.C. § 2254(d). Therefore, federal courts are bound by a state court’s adjudication of a petitioner’s claims unless the state court’s decision was contrary to or involved an unreasonable application of clearly established federal law. Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Mere error by the state court will not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) (internal quotes omitted . Additionally, this -8- Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). The Supreme Court has explained the proper application of the “contrary to” clause as follows: A state-court decision will certainly be contrary to [the Supreme Court’s] clearly established precedent if the state court applies a rule that contradicts the governing law set forth in our cases. . . . A state-court decision will also be contrary to this Court’s clearly established precedent if the state court confronts a set of facts that are materially indistinguishable from a decision of this Court and nevertheless arrives at a result different from [the Court’s] precedent. Williams v. Taylor, , 405-06 (2000). The Supreme Court has held that a federal court should analyze a claim for habeas corpus relief under the “unreasonable application” clause of § 2254(d)(1) “when a state-court decision unreasonably applies the law of this Court to the facts of a prisoner’s case.” Id. at 409. The Court defined “unreasonable application” as follows: [A] federal habeas court making the “unreasonable application” inquiry should ask whether the state court’s application of clearly established federal law was objectively unreasonable. . . . [A]n unreasonable application of federal law is different from an incorrect application of federal law. . . . Under § 2254(d)(1)’s “unreasonable application” clause, then, a federal habeas court may not issue the writ simply because that court concludes in its independent judgment that the relevant state-court decision applied -9- clearly established federal law erroneously or incorrectly. Rather, that application must also be unreasonable. Id. at 409, 410-11; see also Eady v. Morgan, 515 F.3d 587, 594-95 (6th Cir. 2008); Davis v. Coyle, 475 F.3d 761, 766-67 (6th Cir. 2007); King v. Bobby, 433 F.3d 483, 489 (6th Cir. 2006); Harbison v. Bell, 408 F.3d 823, 828-29 (6th Cir. 2005); Rockwell v. Yukins, 341 F.3d 507, 512 (6th Cir. 2003) (en banc). A. The petitioner first claims that the trial court should have granted his motion to withdraw his plea because the plea was based upon an unfulfilled promise of leniency, rendering his no contest plea unknowing and involuntary. The petitioner argues that during the plea proceeding, an off-the- record discussion occurred during which the trial judge promised the petitioner that he would serve no more nor no less than twenty months imprisonment. A guilty plea, and by analogy a plea of nolo contendere, must be supported by “an affirmative showing that it was intelligent and voluntary.” Boykin v. Alabama, 395 U.S. 238, 242 (1969). The Sixth Circuit has observed that: [a] plea is valid if it is entered voluntarily and intelligently as determined under the totality of the circumstances. Brady v. United States, 397 U.S. 742, 749 (1970). The constitution requires the circumstances to reflect that the defendant was informed of all the direct consequences of his plea. Id. A plea may be involuntary if the defendant does not understand the nature of the constitutional rights he is waiving, or unintelligent if the defendant does not understand the charges against him. Henderson v. Morgan, 426 U.S. 637, 645 n.13 (1976). United States v. Ormsby, 252 F.3d 844, 849 (6th Cir. 2001). A showing of intelligence and voluntariness generally is made by the State’s production of a transcript of state court proceedings to establish that the plea was made voluntarily. McAdoo, 346 F.3d at 166 (citing Garcia v. Johnson, 991 F.2d 324, 326 (6th Cir.1993 . The Supreme Court has held that a defendant must have -10- “sufficient awareness of the relevant circumstances and likely consequences” of his plea. Brady v. United States, 397 U.S. 742, 748 (1970). Thus, a no contest plea is voluntary if it is made with full knowledge of its direct consequences, and it will stand unless it is made under duress or as a result of threats, misrepresentations, or improper inducements. Id. at 755. In addition, the Sixth Circuit has stated that in cases challenging the voluntariness of a plea agreement a petitioner is generally bound by his in-court statements regarding his understanding of the plea. See Ramos v. Rogers, 170 F.3d 560, 563-64 (6th Cir. 1999). The dispute in this case focuses solely on the sentence the petitioner received, which he says was to be no more than twenty months. Michigan uses an indeterminate sentencing scheme for custodial sentences in which the sentencing court sets a minimum term of imprisonment that may be as long as two-thirds of the statutory maximum sentence. See Mich. Comp. Laws § 769.34(2)(b); People v. Babcock, 469 Mich. 247, 255 n.7, 666 N.W.2d 231, 237 n.7 (2003) (citing People v. Tanner, 387 Mich. 683, 690, 199 N.W.2d 202, 204-05 (1972 . If the statutory maximum sentence is life in prison, which is not the case, then the sentencing court has discretion to set the maximum term as well. See Babcock, 469 Mich. at 255 n.7, 666 N.W.2d at 237 n.7. Otherwise, the maximum term is the maximum prescribed by the statute that defines the crime. Ibid. The Michigan parole board has the discretion to release a prisoner after he has served his minimum sentence. Mich. Comp. Laws § 791.233(1); Hopkins v. Michigan Parole Bd., 237 Mich. App. 629, 644 n.7, 604 N.W.2d 686, 694 n.7 (1999). The plea agreement in this case addressed only the minimum sentence. To complete the criminal sentence under the indeterminate sentence law, the sentencing court also must establish a maximum term, which, as noted earlier, is set automatically by statute. -11- In light of this sentencing scheme, which was not discussed in any detail on the record, it is possible to see how the petitioner and the lawyers were, perhaps, talking past each other when discussing the twenty-month sentence. When the petitioner asked his lawyer, “No more than 20?” and the lawyer responded “Right,” one can see how the petitioner might have been led to believe that he would serve no more than twenty months in prison under all circumstances. The lawyer’s explanation that preceded this exchange – “For the record, 20 months would be the recommended minimum and then you have to serve that. 20 years is just a statutory maximum.” – did little to illuminate the situation. However, for a no contest plea to be voluntary, “the defendant need only be aware of the direct consequences of the plea” and “the maximum sentence that could be imposed.” King v. Dutton, 17 F.3d 151, 153-54 (6th Cir. 1994). There is no question that the record discloses that this information was given to the petitioner. During the plea colloquy, the petitioner stated that no one coerced or pressured him into accepting the plea. The petitioner was informed on three occasions the he faced a maximum sentence of twenty years imprisonment, once each by the trial court judge, the prosecutor, and defense counsel. The petitioner stated that there were no other promises, threats or inducements made which had not been placed on the record. On the other hand, the petitioner’s claim of an off-the-record promise is not entirely without evidentiary support. In addition to his affidavit, the transcript does contain a notation indicating that some off-the-record discussion occurred at the plea hearing, and the petitioner was seemingly surprised when the court announced his sentence. Cf. Adams v. Burt, 471 F. Supp. 2d 835, 843 (E.D. Mich. 2007) (“If the petitioner was laboring under a misapprehension of his maximum sentence -12- exposure from the earlier plea hearing, it is reasonable to infer that he would have addressed that confusion when the facts were made clear at the sentencing hearing.”). Presented with this evidence, however, the trial judge rejected the petitioner’s assertion that he had promised the petitioner he would serve no more than twenty months. This Court is bound by such a factual determination unless it is clearly erroneous. See 28 U.S.C. § 2254(e)(1); West, 73 F.3d at 84; see also Ramos, 170 F.3d at 564 (stating that “the existence of any plea agreement, even an ‘off-the-record’ one, is a question of fact, and thus a . . . finding that no such agreement existed is reviewed only for clear error”). The record in the present case contains ample evidence to justify the trial judge’s conclusion. As an initial matter, the trial judge’s position that he never made such a representation is entitled to substantial weight; obviously, the trial judge was in good position to know what he did or did not say. In addition, the petitioner’s testimony at the plea hearing lends support to the judge’s conclusion that the petitioner understood the nature of agreement when he tendered his plea. And on top of all this is the petitioner’s testimony at the plea hearing that there were no off-the-record promises. See Plea Hearing Tr. at 6 (“THE COURT: Were there any promises made to you in addition to what I just stated on the record in order to get you to plead no contest? THE DEFENDANT: No, sir.”). “Courts naturally look with a jaundiced eye upon any defendant who seeks to withdraw a [no contest] plea after sentencing on the ground that he expected a lighter sentencing.” United States v. Crusco, 536 F.2d 21, 24 (3d Cir. 1976). In this case, the Court remains all the more skeptical because the petitioner’s own testimony directly contradicts his present claim of an off-the-record promise. Moreover, the evidence suggests that the off-the-record discussion the petitioner had with his lawyer was no different than what was discussed on the record. The likely scenario was that the -13- lawyer told his client that his minimum sentence would be “no more than twenty months,” but what the petitioner heard him say was that he would serve no more than twenty months. Without an understanding of the functioning of Michigan’s brand of indeterminate sentencing, this misunderstanding remains a distinct possibility. But there is no credible evidence that the petitioner was actually told he would serve only twenty months in custody. Rather, he was told that his maximum sentence would be twenty years. And he entered his no contest plea with this advice fresh in his ears, if not in his mind. To the extent the petitioner argues that the trial court should have offered him an opportunity to withdraw his plea under Michigan Court Rules 3.02(F) and 3.10(B), this claim is not cognizable on habeas review because it arises under state law. Lewis v. Jeffers, , 780 (1990). It is “not the province of a federal habeas court to reexamine state-court determinations on state-law questions.” Estelle v. McGuire, , 67-68 (1991). A federal court is limited on federal habeas review to deciding whether a state court conviction violates the Constitution, laws, or treaties of the United States. Ibid. Therefore, although there may be some merit to the petitioner’s argument that the trial court should have affirmatively offered him an opportunity to withdraw his plea pursuant to Michigan Court Rules 3.11(B) based on an off-the-record discussion in violation of Michigan Court Rule 3.02(F), such error, if indeed there was any, does not justify habeas relief. The petitioner is not entitled to habeas relief on the grounds that his plea was involuntary or unknowing. B. In his second claim for habeas relief, the petitioner argues that his attorney was ineffective because he incorrectly advised the petitioner about the sentence he would face if he pleaded no -14- contest. The petitioner claims that his attorney, like the sentencing judge, informed him that he would serve no more than twenty months. Had counsel not made this representation, the petitioner asserts that he would have insisted on going to trial. The two-prong test set forth in Strickland v. Washington governs claims of ineffective assistance of counsel. Towns v. Smith, 395 F.3d 251, 258 (6th Cir. 2005). To show a violation of the Sixth Amendment right to effective assistance of counsel, a petitioner must establish that his attorney’s performance was deficient and that the deficient performance prejudiced the defense. Strickland v. Washington, , 687 (1984). An attorney’s performance is deficient if “counsel’s representation fell below an objective standard of reasonableness.” Id. at 688. The defendant must show “that counsel made errors so serious that counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment.” Id. at 687. “Judicial scrutiny of counsel’s performance must be highly deferential.” Id. at 689. The Court has “declined to articulate specific guidelines for appropriate attorney conduct and instead [has] emphasized that the proper measure of attorney performance remains simply reasonableness under prevailing professional norms.” Wiggins v. Smith, , 521 (2003) (quoting Strickland, 466 U.S. at 688) (internal quotes omitted). An attorney’s deficient performance is prejudicial if “counsel’s errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable.” Strickland, 466 U.S. at 687. The defendant must show “a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.” Id. at 694. Unless the petitioner demonstrates -15- both deficient performance and prejudice, “it cannot be said that the conviction . . . resulted from a breakdown in the adversary process that renders the result unreliable.” Id. at 687. The Strickland framework applies to claims of ineffective assistance of counsel arising from a guilty or nolo contendere plea. Hill v. Lockhart, 474 U.S. 52, 58 (1985); Carter v. Collins, 918 F.2d 1198, 1200 (5th Cir. 1990). The first prong of the test remains the same. Ibid. However, the prejudice requirement focuses on whether counsel’s constitutionally ineffective performance affected the outcome of the plea process. Hill, 474 U.S. at 59. In other words, the defendant must show “that there is a reasonable probability that, but for counsel’s errors, he would not have pleaded [nolo contendere] and would have insisted on going to trial.” Ibid.; Carter, 918 F.2d at 1200; see also Smith v. United States, 348 F.3d 545, 551-52 (6th Cir. 2003). The petitioner alleges that his trial attorney advised him that the maximum sentence he would receive would be twenty months imprisonment. As noted above, the record does not support the petitioner’s claim. During the plea hearing, the petitioner was informed that the terms of the plea agreement were as follows: the harshest sentence the court could impose would be not less than twenty months imprisonment and not more than twenty years imprisonment. The petitioner acknowledged this and specifically denied that any promises had been made to him other than those reflected on the record. His counsel also confirmed as much. Although the petitioner may not have fully appreciated the intricacies of Michigan’s indeterminate sentencing scheme, any misunderstanding the petitioner may have had about the terms of the plea agreement should have been cured by the trial court’s accurate explanation of the plea agreement and the maximum possible sentence. Ramos, 170 F.3d at 565. Although it is advisable for Michigan courts and defense lawyers to offer on-the-record explanations about the significance of a “minimum sentence” under -16- Michigan law, this Court cannot conclude on the present record that the petitioner’s attorney was ineffective in inaccurately explaining the plea agreement to him. Since there was no constitutionally deficient performance, the petitioner is not entitled to habeas corpus relief on this claim. III. The petitioner has not established that he is presently in custody in violation of the Constitution or laws of the United States. Accordingly, it is ORDERED that the petition for a writ of habeas corpus [dkt. #1] is DENIED. Dated: July 14, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 14, 2008. s/Felicia M. Moses FELICIA M. MOSES -17-

=== Denying Reconsideration of Order Disqualifying Counsel ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ALEYNU, INC., Plaintiff, v. UNIVERSAL PROPERTY DEVELOPMENT AND ACQUISITION CORPORATION, Defendant. _________________________________/ Case Number 07-11707 Honorable David M. Lawson OPINION AND ORDER DENYING RECONSIDERATION OF ORDER DISQUALIFYING COUNSEL On October 26, 2007, the Court entered an order disqualifying attorneys Scott Smith and Jack Wolfe and the Smith and Wolfe PLLC law firm from representing the plaintiff in this matter. The order was entered after a hearing in which Mr. Smith acknowledged on the record that Mr. Wolfe had “severe conflict” of interest and Mr. Smith himself did not “feel comfortable proceeding” as the attorney for the plaintiff. Apparently, Messrs. Wolfe and Smith have changed their minds, for they have filed a motion to reconsider the disqualification order, contending that Michigan Rule of Professional Conduct (MRPC) 3.7 does not require the disqualification. The Court ordered a response from the defendant. After reviewing the matter, the Court tends to agree that Rule 3.7 itself does not mandate disqualification of Mr. Smith. However, the Court remains convinced that Messrs. Wolfe and Smith should not serve as attorneys for the plaintiff in this case because there remains a serious conflict of interest between Mr. Wolfe’s interest and the plaintiff, and Mr. Smith agreed to the disqualification during the hearing. Therefore, the motion for reconsideration will be denied. I. The case appears to involve a straight-forward collection of money owed on a delinquent promissory note and guarantee. According to the complaint, Aleynu, Inc. loaned $330,000 on November 1, 2004, which was to be repaid with interest on November 30, 2004. The loan is memorialized by a promissory note and guarantee. The complications arise when one learns that the borrower is Jack B. Wolfe, the attorney for the plaintiff, and his wife, Charlene K. Wolfe; and the guarantors are Loan Giant Bridge Loan, LLC and World Wide Financial Services, Inc., of which Mr. Wolfe is the manager and chief executive officer, respectively, and on whose behalf Mr. Wolfe signed the guarantee. The note is also guaranteed by Pro-Core Group, Inc., the former name of the defendant in this case, and was signed by George Csatary, who the defendant alleges has a personal relationship with Mr. Wolfe. Although as the attorney for the plaintiff, Mr. Wolfe apparently chose not to sue himself and his wife or the companies he controls, he is attempting to collect on his client’s behalf the money he himself failed to repay. The Court pointed out this rather obvious conflict of interest at a hearing on October 25, 2007 originally scheduled on a motion to dismiss filed by the defendant. It appears that Mr. Wolfe decided that it would be imprudent to argue that motion himself, so attorney Scott Smith, Mr. Wolfe’s law partner, was belatedly pressed into service. Mr. Wolfe is a member of Smith & Wolfe, PLLC, as is attorney Scott Smith. However, according to Mr. Wolfe, he and Mr. Smith are not really partners in any meaningful sense. At the hearing, Wolfe stated: Your Honor, the only cases that Scott Smith and I have ever worked on is the case that you heard this morning with Karate Institute. We are two individuals who practice law. We – we look to one another for support and advice with regard to the cases we’re handling, and if a situation arises in which one of us cannot be in two places at one time and another can cover, then we do so, but in terms of, do we have an account in which fees are placed into that account associated to the law firm -2- Smith and Wolfe, yes, that we do, but we also have fees that are written directly to Jack Wolfe, Attorney At Law, and fees that are written directly to Scott Smith Attorney At Law. To call me a partner, I think, is a stretch under the laws of the State of Michigan. Are we members of Smith and Wolfe, PLLC? Yes, we are. Are we managers of Smith and Wolfe, PLLC? Yes, we are. But in terms of practicing attorneys, I don't work on his caseload, he doesn't work on my caseload. Hrg. Tr. 8-9 (Oct. 25, 2007). This case began on April 17, 2007, when Mr. Wolfe filed a complaint on behalf of Aleynu. The defendant filed a motion to dismiss for lack of personal jurisdiction and failure to state a claim, to which the plaintiff responded. Mr. Smith signed the response, which was e-filed by Mr. Wolfe, and included a three-page affidavit by Mr. Wolfe, where he attempts to provide facts sufficient to defeat the plaintiff’s motion for dismissal for lack of personal jurisdiction. As noted above, both Mr. Smith and Mr. Wolfe were present at the hearing October 25, 2007 on the motion. Early in the hearing, Mr. Smith stated that “Mr. Wolfe is not going to argue the motion or be involved in the case from this time on, since it might – it might be improper.” Tr. 5-6. Mr. Smith stated that he was not originally involved in the case, until “Mr. Wolfe realized that he had a severe conflict.” Id. at 6. Although it appears that Mr. Smith signed the response to the motion, he stated on the record that he was brought into the case only a few hours prior to the hearing. Id. at 8. The Court stated that it was “uncomfortable proceeding under the circumstances and that discomfiture should be severalfold on [Mr. Smith’s] part, and certainly on [Mr. Wolfe’s] part.” Id. at 8. Mr. Smith then stated: I share your discomfort after reading the rule and I think it’s improper for us to proceed. What I would suggest, and I, you know, apologize to Counsel here, is that we be given a very short time to find someone to replace us. A lot of the work is done, but I think you’re – we can certainly – you know, I have to say, I don’t know if there is any real conflict here, but the appearance of impropriety is enough to – that -3- I think, you know – and I think the Court has pointed it out and we apologize for not focusing on it. Actually, I did bring it up that it could be a problem, but I – in the rush of everything, I didn’t research it and no one else raised it, but I – I share your – I don't feel comfortable proceeding. Tr. 9-10. The Court then ordered that Mr. Smith, Mr. Wolfe, and Smith & Wolfe, PLLC be disqualified and gave the plaintiff fifteen days to find another attorney. Some time thereafter, Messrs. Wolfe and Smith filed the present motion for reconsideration. In support, they submitted an affidavit signed by Rabbi Alon Tolwin, director of Aleynu, Inc. Babbi Tolwin states, “Any potential conflict of interest which Jack B. Wolfe, Esq., Scott F. Smith, Esq. and/or Smith & Wolfe, PLLC . . . may have in this matter is waived by me on behalf of my organization.” Aff. of Alon Tolwin [dkt. #18] ¶ 3. He continues: I have been fully informed and advised by my Attorneys as to any and all potential conflicts that may arise in this matter, especially the fact the [sic] Mr. Wolfe will likely be called as a witness in this case as he was the obligor of the note that Aleynu is suing on and was the individual that spear-headed the entire transaction. In addition, I am fully aware of and have been informed of the recently settled case of the Karate Institute, Inc. (“KI”) and the potential conflict that may arise in that a recovery for KI against the defendant may be in lieu of a recovery by Aleynu which could benefit Mr. Wolfe and/or his ex-partners in World Wide Financial Services, Inc. Id. at ¶ 4. He states that Smith and Wolfe “agreed to assist us in the prosecution of this matter at a reduced fee based upon the charitable nature of our organization.” Id. at ¶ 5. He claims that “Disqualification of the Attorneys will cause substantial hardship for Aleynu. The Attorneys, most specifically Mr. Wolfe, understand this case at a depth that would require over 100 hours from any other substitute counsel.” Id. at ¶ 6. Messrs. Wolfe and Smith argue, therefore, that they should not be disqualified under MRPC 3.7 because the rule speaks to lawyer’s acting at trial, not during pre-trial proceedings. They cite several advisory, non-binding State Bar of Michigan Ethics Opinions that emphasize that the Rule -4- only disqualifies counsel at trial, not from pretrial proceedings. They note that although Mr. Wolfe cannot act as trial counsel, Mr. Smith can because the rule contains an exception for members of the attorney’s law firm. Further, disqualifying Smith and Wolfe would work a substantial hardship on their client, they say, because it is a “charitable organization” and the present lawyers are well- versed in the facts. They concede that Mr Wolfe will be a necessary witness in the trial of the case. The defendant emphasizes that Mr. Wolfe’s testimony would relate to a contested issue. The defendant also argues that it is unlikely that there is a substantial hardship on the plaintiff, because this case is still at the pleadings stage, and the factual investigation has not fully begun, so substitution of attorneys would be unproblematic. The defendant states that the reduced fee that the plaintiff is receiving is more a symptom of Mr. Wolfe’s conflict, rather than based on the charitable nature of the organization; the organization’s ability to loan $330,000 suggests that it does not lack financial resources. II. Motions for reconsideration may be granted pursuant to Local Rule 7.1(g) when the moving party shows (1) a “palpable defect,” (2) that misled the court and the parties, and (3) that correcting the defect will result in a different disposition of the case. E.D. Mich. LR 7.1(g)(3). A “palpable defect” is a defect which is obvious, clear, unmistakable, manifest, or plain. Mich. Dep’t of Treasury v. Michalec, 181 F. Supp. 2d 731, 734 (E.D. Mich. 2002) (citations omitted). “Generally . . . the court will not grant motions for . . . reconsideration that merely present the same issues ruled upon by the court, either expressly or by reasonable implication.” E.D. Mich. LR 7.1(g)(3). The Court originally believed that the plaintiff’s lawyers should be disqualified under MRPC 3.7, which provides that “[a] lawyer shall not act as advocate at a trial in which the lawyer is likely -5- to be a necessary witness.” MRPC 3.7(a). Courts have the inherent authority to prevent individuals from practicing before it. D.H. Overmyer Co., Inc. v. Robson, 750 F.2d 31, 33 (6th Cir. 1984). “The power is one which ought to be exercised with great caution, but which is, we think, incidental to all Courts, and is necessary for the preservation of decorum, and for the respectability of the profession.” Ex parte Burr, 22 U.S. (9 Wheat.) 529, 531 (1824) (Marshall, C.J.). “Unquestionably, the ability to deny one’s opponent the services of capable counsel, is a potent weapon. Confronted with such a motion, courts must be sensitive to the competing public policy interests of preserving client confidences and of permitting a party to retain counsel of his choice.” Manning v. Waring, Cox, James, Sklar and Allen, 849 F.2d 222, 224 (6th Cir. 1988). “A court should only disqualify an attorney ‘when there is a reasonable possibility that some specifically identifiable impropriety actually occurred.’” Moses v. Sterling Commerce (America), Inc., 122 Fed. Appx. 177, 184 (6th Cir. 2005) (quoting Kitchen v. Aristech Chem., 769 F. Supp. 254, 257 (S.D. Ohio 1991). In determining whether disqualification ought to occur, the Court must account for “‘the traditional concerns of the legal profession that client confidences be protected and that appearances of professional impropriety be avoided.’” DeBiasi v. Charter County of Wayne, 284 F. Supp. 2d 760, 770-71 (E.D. Mich. 2003) (quoting Manning v. Waring, Cox, James Sklar and Allen, 849 F.2d 222, 225 (6th Cir. 1988 . A state’s ethics rules are appropriate standards against which to measure to propriety of an attorney’s conduct for the purpose of determining whether a lawyer should be disqualified in a particular case. National Union Fire Ins. Co. of Pittsburgh, Pennsylvania v. Alticor, Inc., 466 F.3d 456, 458 (6th Cir. 2006), vacated on other grounds, 472 F.3d 436 (6th Cir. 2007) (citing Evans & Luptak, PLC v. Lizza, 251 Mich. App. 187, 650 N.W.2d 364, 368-69 (2002). -6- The text of MRPC 3.7 reads: (a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness except where: (1) the testimony relates to an uncontested issue; (2) the testimony relates to the nature and value of legal services rendered in the case; or (3) disqualification of the lawyer would work substantial hardship on the client. (b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer’s fi rm is likely to be called as a witness unless precluded from doing so by Rule 1.7 or Rule 1.9. “MRPC 3.7(a) seeks to prevent the mixing of advocacy and testimony.” Informal Opinion 281 (Sept. 1996). “[T]he purpose of the rule is to prevent any problems that would arise from a lawyer’s having to argue the credibility and the effect of his or her own testimony, to prevent prejudice to the opposing party that might arise therefrom, and to prevent prejudice to the client if the lawyer is called as an adverse witness, not to permit the opposing party to seek disqualification as a tactical device to gain an advantage. People v. Tesen, 276 Mich. App. 134, 143, 739 N.W.2d 689, 694 (2007). “[A]ttorneys are not necessary witnesses if the substance of their testimony can be elicited from other witnesses and the party seeking disqualification did not previously state an intent to call the attorney as a witness.” Id. at 144, 739 N.W.2d at 695. When another lawyer is capable of representation, and has been involved with the case a long time, disqualification of the lawyer-witness does not work a substantial hardship on the client. Waltzer v. Transidyne General Corp., 697 F.2d 130, 135 n. 3 (6th Cir. 1983) (applying Michigan law). Attorneys may handle pretrial matters, “but should plan for the disqualification prospect and take appropriate action.” Informal Opinion 281 (Sept. 1996). Representation must be informed of the potential disqualification, consent to it, and the attorney’s representation must be otherwise consistent with the conflict of interest rules. Ibid. -7- The informal ethics opinion also notes that subparagraph (b) of Rule 3.7 “ameliorates the harshness of disqualification by making it plain that the disqualification is personal, so that another lawyer from the law firm can step in without facing imputed disqualification.” Informal Opinion 281. The interest sought by the rule is to protect the opposing party by preventing counsel “from arguing that the lawyer’s own testimony ought to be believed, and making the disqualification purely personal strips the possibility of some of its potential for abuse.” Ibid. If a lawyer would be testifying “adverse to the client,” then the entire firm should be disqualified, and this conflict is not waivable. Informal Opinion 21 (May 1989). In this case, the credibility of Mr. Wolfe is an immediate issue since he has filed a factual affidavit in an effort to defeat the defendant’s motion to dismiss. Although it is quite obvious that Mr. Wolfe cannot act as an attorney at trial, the Court believes he also must be prohibited from acting as counsel on pretrial matters. His extensive involvement with all parties on both sides of the lawsuit renders intolerable the likelihood that he will slip into and out of his roles as advocate and fact witness, which will undermine the detached professionalism that is required by members of the Bar. That he cannot appreciate the potential pitfalls of his dual role itself is disconcerting, but it serves to emphasize the wisdom of requiring his disqualification in the present matter, despite the protestations by the plaintiff that it will lose the benefit of Mr. Wolfe’s discounted fee. The plain terms of Rule 3.7(b), however, do not require the disqualification of Mr. Smith. Nonetheless, before that conclusion can be reached with certainty, the Court must examine the conflict-of-interest provisions in Rules 1.7 and 1.10. The movants do not address directly whether there is a conflict of interest relating to Mr. Wolfe’s representation. The defendant contends that Smith and Wolfe should both be disqualified -8- because there is a conflict of interest between Mr. Wolfe’s interest and the plaintiff. The defendant reasons that Wolfe’s own interests are controlling this litigation because of his $330,000 obligation (which he shares with his wife). The defendant maintains that Mr. Wolfe can only obtain a waiver of the conflict if he “reasonably believes” that his representation will not be adversely affected, which cannot be the case here. Mr. Wolfe’s (and his wife’s) potential personal liability precludes him from giving detached advice, the defendant insists. A court may disqualify an attorney for possessing a conflict of interest. See National Union Fire Ins. Co. of Pittsburgh, Pa. v. Alticor, Inc., 472 F.3d 436, 437 (6th Cir. 2007). Rule 1.7 of the Michigan Rules of Professional Conduct provide that: (b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person, or by the lawyer’s own interests unless: (1) the lawyer reasonably believes the representation will not be adversely affected; and (2) the client consents after consultation. Rule 1.7. The comments note “If the probity of a lawyer’s own conduct in a transaction is in serious question, it may be difficult or impossible for the lawyer to give a client detached advice.” Comment to Rule 1.7. Moreover, a conflict of interest may arise when the lawyer must testify at a trial. If the lawyer’s testimony will be adverse to the client’s interest, then a conflict arises that extends to the lawyer’s firm, and is not waivable. Informal Opinion 281. The mere act of accepting representation knowing that the lawyer will not be able to advocate at trial can constitute a conflict of interest. Ibid.; see also Informal Opinion 289 (Feb. 1997) (a lawyer can reasonably believe his interest will not be adversely affected when he is suing a municipality and his spouse is elected to the city commission); Informal Opinion 251 (Mar. 1996) (an attorney who participates in voluntary highway -9- cleanup does not materially limit his representation of criminal defendants who may be sentenced to community service where they may have to clean the same stretch of highway). Moreover, when an attorney has a financial interest in the litigation, a non-waivable conflict of interest arises. Informal Opinion 231 (Mar. 1995) (attorney who has a financial interest in sending the client to a particular expert witness based on a fee arrangement has a non-waivable conflict). When a conflict of interest arises as to a member of the law firm, the rules require disqualification of the firm: “While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rule[] 1.7. . . .” MRPC 1.10(a); see also National Union Fire Ins. Co., 472 F.3d at 438. The comments to the rules make the following observation about the definition of “firm”: For example, two practitioners who share office space and occasionally consult or assist each other ordinarily would not be regarded as constituting a firm. However, if they present themselves to the public in a way suggesting that they are a firm or conduct themselves as a firm, they should be regarded as a firm for purposes of the rules. Comment to MRPC 1.10. The Michigan Rules of Professional Conduct also categorically prohibit specific types of conflicts of interest. Rule 1.8(j) states that “A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client,” except to secure an attorney’s lien or in the case of approved contingent fee agreements. This provision codifies the common law relating to champerty and maintenance. Comment to Rule 1.8(j). On the similarly worded ABA model rule, the ABA opines, “The modern rationale for the rule is the concern that a lawyer acquiring less than all of a client’s cause of action creates so severe a conflict between the -10- lawyer’s interest and the client's interest that it is nonconsentable.” ABA Formal Opinion 00-418 (July 2000). The issue of a conflict of interest was not directly addressed in the Court’s prior order. However, there is plainly a conflict of interest here. Since the client appears to have consented to the conflict of interest, the question becomes whether Mr. Wolfe “reasonably believes the representation will not be adversely affected.” It is virtually certain that Mr. Wolfe’s trial testimony will support his client. However, Mr. Wolfe could be placed in a situation where he must challenge the enforceability of the promissory note to save him and his wife from exposure to a $300,000 liability. Mr. Wolfe himself alleges that he has declared bankruptcy; but the protections of bankruptcy are not absolute, and the record does not show that Mr. Wolfe’s debt has been discharged already. Nor does the record show that Mr. Wolfe’s wife is seeking bankruptcy. Therefore, Mr. Wolfe still has an interest in voiding the note, which is inconsistent with his representation of the plaintiff. This sort of conflict cannot be waived because Wolfe cannot reasonably believe that his (and perhaps his wife’s) considerable financial interest relating to the note will not affect his representation. Mr. Smith and the law firm are disqualified by operation of Rule 1.10(a) and, perhaps more pointedly, by Mr. Smith’s candid assessment at the hearing where he acknowledged his discomfiture with proceeding in light of the deep involvement of his law partner in the disputed transactions. Mr. Smith agreed to disqualify himself and Mr. Wolfe during the hearing, so it is, perhaps, unusual that they would seek reconsideration of the Court’s order. The Court believes that Mr. Smith should -11- adhere to his first instinct, and that the rules of propriety and professional conduct require disqualification. III. The Court finds no palpable defect in the order of disqualification by which the court and the parties were misled, or that a different disposition of the case is required. Accordingly, it is ORDERED that Scott Smith’s and Jack Wolfe’s motion for reconsideration of the order disqualifying them from representing any party in this matter [dkt #16] is DENIED. It is further ORDERED that the plaintiff shall have until August 4, 2008 to retain substitute counsel, who shall file an appearance and respond to the defendant’s motion to dismiss by then, if counsel chooses. If no response is received by that date, the Court will proceed to decide the motion to dismiss on the motion papers submitted. Dated: June 30, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on June 30, 2008. s/Felicia M. Moses FELICIA M. MOSES -12-

=== Au Sable Order re R&R and MSJs ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ANGLERS OF THE AU SABLE, TIM MASON, and SIERRA CLUB (MACKINAC CHAPTER), Plaintiffs, v. UNITED STATES FOREST SERVICE, and UNITED STATES BUREAU OF LAND MANAGEMENT, ______________________________________/ Defendants. Case Number 05-10152 Honorable David M. Lawson Magistrate Judge Charles E. Binder OPINION AND ORDER ADOPTING IN PART AND REJECTING IN PART MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION, SUSTAINING IN PART AND OVERRULING IN PART DEFENDANTS’ OBJECTIONS, GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT, GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT, AND GRANTING PLAINTIFFS’ MOTION FOR CLARIFICATION This matter is before the Court on the defendants’ objections to a report filed by Magistrate Judge Charles E. Binder recommending that the plaintiffs’ motion for summary judgment be granted and the defendants’ cross motion for summary judgment be denied. The plaintiffs also have filed a motion seeking clarification of the magistrate judge’s report, which is addressed herein as well. The case was initiated by two environmental groups and one private citizen who contend that the United States Forest Service (Forest Service) and the United States Bureau of Land Management (BLM) violated their obligations under three federal acts in approving exploratory gas and oil drilling on a parcel of land within the Huron-Manistee National Forest. The plaintiffs ask this Court to review the agencies’ decisions under the Administrative Procedures Act, and they seek declaratory and injunctive relief. In their eight-count amended complaint, the plaintiffs allege that the defendants violated the National Environmental Policy Act (NEPA), 42 U.S.C. § 4321 et seq., the National Forest Management Act (NFMA), 16 U.S.C. § 1600 et seq., the Mineral Leasing Act (MLA), 30 U.S.C. § 181 et seq., and the Administrative Procedure Act (APA), 5 U.S.C. § 555 et seq., by conducting a faulty environmental assessment (EA), improperly issuing a “Finding of No Significant Impact” (FONSI), and failing to prepare and issue an environmental impact statement concerning the project. The Court referred the matter to Magistrate Judge Charles E. Binder for general case management, although the reference was temporarily withdrawn to adjudicate a motion for preliminary injunction. The magistrate judge issued his report on the parties’ cross motions for summary judgment on June 20, 2006, and the defendants filed timely objections, to which the plaintiffs responded and the defendants replied. The Court has reviewed the file, the report and recommendation, the defendants’ objections, the responses, and replies, and has made a de novo review of the record in light of the parties’ submissions. The Court agrees with the magistrate judge’s conclusion that the defendants failed to comply with all of the procedural requirements of the National Environmental Policy Act, the environmental assessment is defective, and the finding of no significant impact is unsound. However, the magistrate judge did not address the plaintiffs’ claims under the National Forest Management Act or the Mineral Leasing Act, and as to those claims (which are the subject of the plaintiffs’ motion for clarification) the defendants are entitled to summary judgment. I. Summary of decision -2- For reasons explained in detail below, the Court concludes as follows: First, The Forest Service acted arbitrarily and capriciously in finding that the leaseholder’s (Savoy Energy, L.P.) proposed drilling project would have no significant environmental impact. NEPA requires that federal agencies prepare an environmental impact statement (EIS) for all major federal actions that “significantly” affect the environment. Significance is measured by the context and intensity of impact. The Counsel on Environmental Quality’s (CEQ) regulations outline ten factors that federal agencies must evaluate when assessing the intensity of an action’s environmental impact. The defendants overlooked or insufficiently addressed at least four of the CEQ intensity factors in issuing a FONSI. First, the Forest Service failed to study the possible impact of the project on the unique recreational characteristics of the Mason Tract, and the concomitant effect that a degradation of the recreational experience could have on tourism at the local, county, and state levels. Second, several effects of Savoy’s proposed project are highly uncertain, and the Forest Service has failed to explain why better data was not gathered. Third, the Forest Service did not address the impact the present action may have as a precedent for future decisions. Finally, the biological assessment is woefully inadequate in evaluating the possible impact of the drilling project on the Kirtland’s warbler, an endangered species. Cumulatively, these oversights raise substantial questions about the significance of the proposed project, and the contrary evidence suggests a significant environmental impact. Second, the Forest Service did not consider an appropriate range of alternatives to Savoy’s proposed drilling project as required by NEPA and CEQ regulations. NEPA requires agencies to consider any appropriate alternatives to a project that might alter the cost-benefit balance. Agencies may not define their own objectives in such narrow terms as to prevent the meaningful consideration -3- of alternatives. Here, the Forest Service failed twice: first, the Forest Service did not take the requisite “hard look” at the “No Action” alternative because it felt constrained (unduly) by law and by the terms of Savoy’s mineral lease; second, the Forest Service did not consider alternative locations for the well’s bottom hole, impermissibly deferring to Savoy’s project objectives despite the fact that an analysis of those alternative locations is more consistent with the Forest Service’s stated goals. The Forest Service’s failure to consider important aspects of the problem before approving drilling constitutes arbitrary and capricious agency action in violation of the Administrative Procedures Act. Third, the Court finds that the defendants are entitled to summary judgment on the plaintiffs’ claim under the National Forest Management Act alleging a violation of the Huron-Manistee National Forest Land and Resource Management Plan (LRMP) because the plaintiffs have failed to show that the Forest Service contradicted the terms of the LRMP. Although the LRMP establishes that disturbance to old growth forest shall be avoided where feasible and encourages the maintenance of a natural environment and the elimination of unnecessary roads, it balances these interests against the desire to promote mineral exploration. The drilling project in this case does not contradict the LRMP’s terms, and it appears to mesh with the spirit of the plan. Based on these circumstances and the fact that the Forest Service’s interpretation of the plan is entitled to considerable deference, the plaintiffs have failed to show arbitrary or capricious agency action. Fourth, the defendants are entitled to summary judgment on the plaintiffs’ claim under the Mineral Leasing Act because the plaintiffs have cited no legal authority for this claim. The plaintiffs allege that the defendants violated the MLA by contravening 43 C.F.R. § 3161.2. However, this regulation is phrased in very general, perhaps aspirational, terms. The plaintiffs seem to believe that -4- section 3161.2 is violated every time NEPA is violated, but there is no authority for this novel proposition. Therefore, the Court will grant in part and deny in part each party’s motion for summary judgment, declare the EA and the FONSI inadequate, and enjoin the defendants from proceeding to authorize the proposed gas drilling project based on the FONSI. II. Facts and proceedings The Court takes the facts from the administrative record, although the plaintiffs have attempted to supplement the record with declarations. The parties have not filed the entire administrative record with this Court, but instead they have designated and submitted portions of the administrative record. In actions seeking review under the Administrative Procedures Act (APA), a court’s review is confined to the “whole record or those parts of it cited by a party.” 5 U.S.C. § 706 (emphasis added). In this case, the administrative record consists of seven binders of documents pertaining to the Forest Service’s decision, and six folders of documents pertaining to the Bureau of Land Management’s decision. Rather than producing the full record, the parties have chosen to produce and designate certain portions of the record for this Court’s review. Given the scope of review, this presents no obstacle to the Court’s ability to pass judgment. See 5 U.S.C. § 706. In 2002, the BLM, with the consent of the Forest Service, began leasing 9,500 acres of subsurface federal oil and gas resources within the Huron-Manistee National Forest. Under the terms of the leases, the leaseholders acquire mineral rights, but they must submit separate applications to obtain permits to drill on the surface land. The applications must be approved by the BLM, Forest Service, the Michigan Department of Environmental Quality (MDEQ) and the -5- Michigan Department of Natural Resources (MDNR) before drilling can commence. Under an interagency agreement established between the Forest Service and the BLM in 1991, the federal agencies’ obligations are bifurcated; in essence, the Forest Service determines whether the surface aspects are consistent with federal law and policy, and the BLM addresses underground concerns. Pursuant to the agreement, the Forest Service takes the lead, but the decision to permit drilling and attendant surface operations is described as a collaborative effort: “A. General – No oil and gas operations involving surface disturbance on [Forest Service] lands are permitted without approval from the [Forest Service]. The [Forest Service] shall have the lead for National Environmental Policy Act (NEPA) analysis and documentation for such operations. The BLM shall be responsible for addressing down-hole aspects of proposals. A single NEPA document is to be prepared to support all decisions to be made by [the Forest Service] or BLM on the proposed action, including decisions on off lease uses. NEPA documents shall be tiered to existing documents to the extent possible.” Pls.’ Mot. for Prelim. Inj., Ex. B, Environmental Assessment (EA) at 8 (quoting interagency agreement). Savoy Energy, L.P. (Savoy) holds three federal and three state subsurface mineral leases within the forest, comprising roughly 640 acres. In May 2003, Savoy filed an application with the BLM to drill a directional gas well into one of its lease holdings. Directional drilling involves entry of the surface at one point (the “top hole”) to access minerals located at another point (the “bottom hole”), which does not lie directly below the top hole. Savoy’s proposed development involves clearing, grading, and leveling a 3.5-acre well pad, preparing a production facility approximately 1.5 miles from the well, and constructing a pipeline connecting the two locations. In September 2003, responding to public concern over visibility, noise, and the effect of road alterations, Savoy withdrew its initial application and filed a second application for drilling, with a new location for the top hole and the production facility. The project’s dimensions did not change. -6- Savoy’s proposal received significant public attention because the drilling target (i.e., the bottom hole) is beneath the Mason Tract, state land that is one of the most revered sections of forest in all of Michigan. The 4,700-acre Mason Tract was established in the 1950s by a gift to the State from naturalist George W. Mason. The gift was conditioned on a promise by the State to keep the land as a permanent game preserve, to limit camping significantly, and never to sell the land. See Michigan DNR Description of Mason Tract at http://www.michigan.gov/dnr/0,1607,7-153-303 01_30505 _31025-66206--,00.html (last visited July 8, 2008). In honor of his generosity, the state built a log-cabin chapel, known as the Mason Chapel, which today serves as a sanctuary for the fishermen, hikers, bicyclists, skiers, campers, hunters, and mushroom- and berry-pickers who frequent the area. Other development within the Mason Tract includes intermittent tree harvesting, and the maintenance of a cross-country ski trail, a campground, and the Mason Chapel parking lot. At present, the Mason Tract is accessible only by six miles of unimproved, seasonably passable roads. The South Branch of the Au Sable River runs through the Mason Tract. This stretch of river is described as “probably the best brown trout water in the Great Lakes Region, and it may be the best east of the Rockies.” Pls.’ Mot. for Prelim. Inj., Ex. M, DNR Au Sable River Plan at 2. It is also popular for canoeing. The South Branch of the Au Sable is home to two federally protected species, the Kirtland’s warbler (which is endangered) and the bald eagle (which is threatened). Because the Mason Tract contains a “no surface occupancy” restriction, EA, App’x B at 14, Savoy proposes to engage in directional drilling, with a top hole located nearly half a mile southeast of the bottom hole. Therefore, although the ultimate drilling target is located beneath the state- owned Mason Tract, the top hole and the various drilling apparatuses would be positioned on federal -7- land, in the Huron-Manistee National Forest. Due to the environmentally sensitive nature of the region, the area surrounding the Mason Tract is designated by the Forest Service as a Semi-primitive Non-motorized (SPNM) area, “characterized by few and/or subtle human modifications with a large probability of isolation from the sites and sounds of others.” EA at 33. The SPNM area is mostly forested and, in 2003, the Forest Service designated the entire SPNM area an “old growth” region. The well pad, well head, and a portion of the pipeline would be located in this SPNM area. The production facility and the remainder of the pipeline would be located outside of the SPNM area, but still within the Kirtland’s Warbler Management Area. The area encompassing the production facility is designated Roaded Natural, and is characterized by a “predominately natural environment,” where “[e]vidence of the sights and sounds of humans is moderate but in harmony with the natural environment.” EA at 33. As part of the project, two Forest Service roads, FSR 4208 and FSR 4209, would be plowed to allow year-round vehicle access to the site. Both roads would be widened, some trees would be removed, and portions of the surface would be improved to permit easier access. In addition, fifty feet of new road would be added to FSR 4208 to allow access to the well pad. If the well is productive, construction of the production facility would require clearing approximately two more acres and installing a gas-water separator, oil and brine tanks, a dehydrator, a compressor, and monitoring equipment. The well pad and the production facility would be connected by approximately 1.7 miles of pipeline that would be buried alongside the roads. The project calls for up to six feet of additional roadside clearing to accommodate the pipeline. Construction of the well pad and access road would take approximately four days. The well itself would take another forty-five days to drill. If the well were productive, construction of the -8- pipeline would require two weeks, and construction of the production facility would take another two months. Savoy proposes to complete all construction between December 1 and April 15, so as to minimize the disruption of the environment. In August 2004, the Forest Service issued an Environmental Assessment (EA) and a Biological Assessment (BA). These documents detailed Savoy’s proposed action, considered some alternative courses of action, and evaluated the impact of each alternative on the environment and forest wildlife. Based on these documents, Forest Supervisor Leanne M. Martin issued a Decision Notice and Finding of No Significant Impact (FONSI) on January 1, 2005, explaining that the environmental impact of the project was not expected to be significant. She approved Alternative 2, a slightly modified version of Savoy’s proposal. See Pls.’ Mot. for Prelim. Inj., Ex. A, FONSI at 1, 3-5 (describing Alternative 2 as “the same as the original Proposed Action as outlined above, with additional conditions of approval to the SUPO [Surface Use Plan of Operations] based on mitigation measures”). The additional measures attendant to Alternative 2 include placing stumps out of view on FSR 4209 and FSR 4208; the imposition of reporting requirements for changes in equipment; construction of a dike around the oil and brine tanks of sufficient size to contain 150% of the total capacity of the tanks; and capping the sound level audible from 1,320 feet at 36 decibels (as opposed to the 45-decibel cap set forth in Savoy’s proposal), in addition to a number of other noise-reduction measures. A “No Action” alternative was also considered. FONSI at 3; EA at 20. As its namesake suggests, the “No Action” alternative would simply amount to maintenance of the status quo. This alternative was rejected out of hand, however, because the Forest Service found that it “would not comply with the laws, regulations, policies and Forest Plan direction guiding mineral development on National Forest System . . . lands.” FONSI at 20; EA at 3. -9- According to the plaintiffs, the BLM approved Savoy’s application for drilling on August 4, 2005, relying on the Forest Service’s EA to reach that decision. The defendants have denied this allegation, but neither side has provided proof on this issue. The plaintiffs in this case, Anglers of the Au Sable, Tim Mason, and the Mackinac Chapter of the Sierra Club, commenced the present action on June 8, 2005 alleging that the defendants, the Forest Service and the BLM, have violated their duties under the National Environmental Policy Act, the National Forest Management Act, and the Mineral Leasing Act. The plaintiff thereafter filed an amended complaint (making a non-substantive change), and the Court referred the matter to Magistrate Judge Charles E. Binder for general case management pursuant to 28 U.S.C. § 636. On December 2, 2005, the plaintiffs filed a motion for a preliminary injunction, asking this Court to halt the commencement of the drilling project pending a final decision. Because the issue was time-sensitive, the Court decided to resolve the injunctive motion itself instead of utilizing the longer report and recommendation process. On December 7, 2005, the Court granted preliminary injunctive relief. Anglers of the Au Sable v. United States Forest Serv., 402 F. Supp. 2d 826 (E.D. Mich. 2005). Following that decision, the Court referred the matter back to the magistrate judge for further proceedings consistent with the original order of reference. The parties’ cross motions for summary judgement followed, and the magistrate judge issued his report on June 20, 2006. In his report, Magistrate Judge Binder recommended that the Court grant the plaintiffs’ motion for summary judgment, deny the defendants’ motion for summary judgment, enjoin the defendants from proceeding under the FONSI, and remand the matter to the defendants for further proceedings. Judge Binder found that the defendants had failed to adhere to NEPA’s guidelines and -10- therefore acted in an arbitrary and capricious manner in issuing the FONSI. In concluding that the project’s impact would not be “significant” (such that a full-blown environmental impact statement was not necessary), Judge Binder suggested the defendants had paid only “lip service” to the relevant environmental regulations. R & R at 21. He viewed with skepticism the conclusion that a gas well drilling project that admittedly would alter scenic and primitive areas for up to 30 years, double noise levels in areas isolated from human contact, involve clearing old growth forest, and emit petroleum and engine exhaust odors would have no significant environmental impact. He observed that the defendants actually conceded substantial environmental impact in the EA (without calling it such), but nevertheless issued a FONSI, engaging in a sort of non sequitur. Judge Binder identified four effects that amounted to significant environmental impacts: (1) the effect on visual aesthetics; (2) emission of odor; (3) noise levels; and (4) disruption of protected wildlife and old growth forest. Judge Binder also opined that the defendants gave superficial consideration to alternatives, and had engaged in improper segmentation (a practice whereby an agency understates a project’s potential impact by analyzing it in piecemeal fashion). Commenting on the biological assessment, the magistrate judge found the document to contain nothing but a conclusory assessment of the project’s likely impact on the Kirtland’s warbler and bald eagle. He suggested that the BA, and the FONSI which it informed, contained no “meaningful consideration of the Forest Service’s duty under the [Endangered Species Act] to encourage the propagation and diffusion of endangered species.” Id. at 26. In the end, therefore, Magistrate Judge Binder submitted that the plaintiffs were entitled to summary judgment on their claim alleging a violation of NEPA. However, although the motions before Judge Binder called for adjudication of all the plaintiffs’ claims, Judge Binder never addressed the claims under the National Forest Management Act or the Mineral Leasing Act. As -11- a result, the plaintiffs have filed a motion for “clarification” of the report, asking this Court to adjudicate the NFMA and MLA claims. The defendants filed timely objections to the report and recommendation on July 26, 2006, and the plaintiffs responded thereto. The defendants filed a reply, and the matter is now ready for decision. III. Standard of review Objections to a report and recommendation are reviewed de novo. 28 U.S.C. § 636(b)(1). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller v. Currie, 50 F.3d 373, 380 (6th Cir.1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). The motions in this case request summary judgement. Generally, summary judgment is appropriate “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). When reviewing the decision of an administrative agency, however, a motion for summary judgment is merely the conduit to bring the legal question before the court; the usual tests of summary judgment, such as whether a genuine issue of material fact exists, do not apply. See Benedixen v. Standard Ins. Co., 185 F.3d 939, 942 (9th Cir. 1999); see also City of Cleveland v. Ohio, 508 F.3d 827, 838 (6th Cir. 2007) (“When a district court upholds on summary judgment an administrative agency’s final decision under the Administrative Procedure -12- Act, this court ‘review[s] the district court’s summary judgment decision de novo, while reviewing the agency’s decision under the arbitrary and capricious standard.’) (quoting Coalition for Government Procurement v. Fed. Prison Indus., Inc., 365 F.3d 435, 457 (6th Cir. 2007 ; Pit River Tribe v. United States Forest Serv., 469 F.3d 768, 778 (9th Cir. 2006) (“Because this is a record review case, we may direct that summary judgement be granted to either party based on our de novo review of the administrative record.”) (internal quotation marks omitted). Where the Court must rule based on review of an administrative agency’s final decision, review is governed by the Administrative Procedure Act. Carabell v. United States Army Corps of Eng’rs, 391 F.3d 704, 707 (6th Cir. 2004). The APA provides that a court should set aside an agency’s decision if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” 5 U.S.C. § 706(2)(A). To assess whether an agency has acted arbitrarily or capriciously, the Court should consider whether the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. Motor Vehicles Mfrs. Assn. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). Because analysis of the relevant documents “requires a high level of technical expertise,” the Court must defer to “the informed discretion of the responsible federal agencies.” Kleppe v. Sierra Club, 427 U.S. 390, 412 (1976); see also Baltimore Gas & Elec. Co. v. NRDC, 462 U.S. 87, 103 (1983) (“When examining this kind of scientific determination . . . a reviewing court must generally be at its most deferential.”). The Court’s inquiry is “‘searching and careful,’ but ‘the -13- ultimate standard of review is a narrow one.’” Marsh v. Or. Natural Res. Council, 490 U.S. 360, 378 (1989) (quoting Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971 . Although the review is confined to the administrative record, the Court may consult documents outside the record, such as the declarations submitted by the plaintiffs, to determine if there is any information the agency should have considered but did not. Asarco, Inc. v. EPA, 616 F.2d 1153, 1160 (9th Cir. 1980); Thompson v. United States Dep’t of Labor, 885 F.2d 551, 555 (9th Cir. 1989). IV. The defendants’ objections The defendants’ objections amount to an extension of the arguments made in support of their motion for summary judgment. The defendants defend the legitimacy of the methodology behind the FONSI, and argue that their ultimate conclusion was reasonable under the circumstances. The defendants have made two general objections, and seven specific objections. The general objections – that the magistrate judge failed to show that there was no “rational connection” between the facts found and the choice made; and that the magistrate judge failed to give adequate deference to the Forest Service’s decision – are so vague as to preclude meaningful review. They must be overruled. See Spencer, 449 F.3d at 725 (explaining that “[o]verly general objections do not satisfy the objection requirement”). Turning to their specific objections, the defendants first posit that the magistrate judge erred in concluding that the project would have a significant impact on the visual aesthetics of the area because he incorrectly suggested that FSR 4209 would fail to meet visual quality objectives under the project. They also state that the magistrate judge erred in suggesting road improvements would cause traffic to increase significantly in light of the modest nature of those improvements. -14- Second, the defendants object to the magistrate judge’s analysis of noise levels because he focused on the potential noise level of a productive well rather than what the noise level would definitely be. They also point out that even if new wells were planned, they could not be built without additional drilling permits and additional environmental analysis. Moreover, the defendants believe that there is no evidence the noise levels that were bound to occur “would precipitate significant environmental impacts.” Defs.’ obj. at 8. Third, the defendants object to the magistrate judge’s finding that the drilling project would interfere with the preservation of old growth forest. Because the project only calls for the removal of 3.5 acres of the 3,505 acres designated as old growth, the defendants submit that there is no basis for a finding of significant impact. Fourth, the defendants contend that the magistrate judge erroneously found that the Forest Service did not adequately consider the “unique characteristics” of the area, including the Mason Tract. According to the defendants, “the Forest Service documented the unique ecological characteristics of both the Mason Tract and the Huron’s surrounding areas in detail.” Id. at 10. Unlike the magistrate judge, however, the defendants gave due weight to the fact that there are numerous active oil and gas wells within several miles of the proposed site, and yet visitors continue to perceive their recreational experience as “pristine.” Fifth, the defendants object to the magistrate judge’s finding that the Forest Service did not adequately consider alternatives. The defendants observe that the magistrate judge did not describe any feasible alternatives that should have been considered but were not. The magistrate judge suggested that the Forest Service should have considered drilling from more remote sites. However, the defendants state that these possibilities were considered, but they were rejected as -15- “environmentally unsafe and technologically impractical.” Id. at 12. In the defendants’ view, consideration of three alternatives was sufficient to meet the demands of NEPA. They reason that “[t]ime and resources are simply too limited to hold that an [EA] fails because the agency failed to ferret out every possible alternative.” Id. at 14. Sixth, the defendants object to the magistrate judge’s observation that the Forest Service engaged in improper segmentation when conducting its analysis. The defendants state that the Forest Service was not required to consider in depth possible future drilling for two reasons. First, they claim that any additional wells could not be constructed without additional drilling permits, environmental analysis, and (of course) the discovery of valuable minerals. Since the drilling of additional wells is not imminent, analysis under NEPA is not necessary at this juncture. Second, the defendants argue that there was no improper segmentation because “the exploratory well has ‘independent utility,’ regardless of whether Savoy builds or does not build future wells.” Id. at 15. Finally, the defendants argue that the Forest Service sufficiently analyzed the potential impact on the Kirtland’s warbler and bald eagle. The defendants attack the magistrate judge’s conclusion to the contrary on the grounds that he (1) superficially based his decision on the number of paragraphs in the BA devoted to the species, and (2) cited no evidence to contradict the Forest Service’s finding. V. Discussion of the NEPA claim The National Environmental Protection Act requires that federal agencies prepare a detailed environmental impact statement whenever undertaking “a major Federal action” that will “significantly affect[ ] the quality of the human environment.” 42 U.S.C. § 4332(2)(C) (emphasis added). The EIS requirement has twin aims. First, it obligates federal agencies to consider the -16- significant environmental impacts of proposed actions. Baltimore Gas, 462 U.S. at 97. Second, it ensures that the public is informed of the agency’s decision-making process and environmental concerns. Ibid. These aims do not require agencies to elevate environmental concerns above all other appropriate considerations. Rather, they simply demand that the agency take a “hard look” at the environmental consequences of a proposed action before taking an irreparable step. Ibid. Thus, NEPA’s mandate is merely procedural; it does not require particular outcomes. See Save Our Cumberland Mountains v. Kempthorne, 453 F.3d 334, 338 (6th Cir. 2006). N E P A a l s o established the Counsel on Environmental Quality (CEQ) to review and develop environmental policies for the nation. See 42 U.S.C. §§ 4341-47. The CEQ has promulgated regulations that help determine whether an EIS is needed – that is, to determine whether a project’s impact on the environment likely will be “significant.” See 40 C.F.R. § 1501.4. If it is unclear whether an EIS is needed – if the proposed agency action is neither one that typically requires an EIS, nor one that is categorically excluded from the EIS requirement – the CEQ regulations require the agency to prepare an environmental assessment (EA). 40 C.F.R. § 1501.4(b). An EA is a concise document that allows agencies to consider the environmental concerns associated with a proposed project while conserving agency resources for those projects in which a full EIS is required. Sierra Club v. Slater, 120 F.3d 623, 635 (6th Cir. 1997); see also Louisiana Crawfish Producers Ass’n-West v. Rowan, 463 F.3d 352, 356 (5th Cir. 2006) (describing an EA as “a rough cut, low-budget environmental impact statement designed to show whether a full-fledged environmental impact statement – which is very costly and time-consuming to prepare and has been the kiss of death to many a federal project – is necessary”) (internal quotation marks omitted). The EA is only a first step; it merely informs an agency’s decision either to prepare an EIS or to issue a FONSI, in which -17- case an EIS would not be required. Charter Twp. of Huron, Mich. v. Richards, 997 F.2d 1168, 1174 (6th Cir. 1993). No one questions that the proposed drilling plan in this case is a major federal action. See 40 C.F.R § 1508.18 (defining major federal actions as “actions . . . potentially subject to Federal control and responsibility”). Rather, the present dispute centers on the defendants’ compliance with NEPA and with CEQ regulations in determining whether the impact of Savoy’s proposal would be environmentally significant, triggering NEPA’s EIS requirement. The plaintiffs contend that the Forest Service failed to properly assess the intensity of the environmental impact – including the effect of the project on the area’s unique characteristics, the controversy and uncertainty of the impact, the cumulative and precedential effects of the project, and the effect of the project on federally protected species. Additionally, the plaintiffs contend that the Forest Service violated their obligations under NEPA by failing to consider an adequate range of alternatives to the proposed project before issuing a decision notice. Many of the plaintiffs’ claims have merit and lead to the conclusion that the agency’s decision that the drilling project would have no significant environmental impact was arbitrary and capricious. A. The United States Forest Service incorrectly assessed intensity of impact CEQ regulations direct federal agencies to determine the “significance” of a project’s environmental impact by considering “both context and intensity.” 40 C.F.R. § 1508.27. Proper assessment of an impact’s intensity requires consideration of the following ten factors: (1) Impacts that may be both beneficial and adverse. A significant effect may exist even if the Federal agency believes that on balance the effect will be beneficial. (2) The degree to which the proposed action affects public health or safety. (3) Unique characteristics of the geographic area such as proximity to historic or cultural resources, park lands, prime farmlands, wetlands, wild and scenic rivers, or ecologically critical areas. -18- (4) The degree to which the effects on the quality of the human environment are likely to be highly controversial. (5) The degree to which the possible effects on the human environment are highly uncertain or involve unique or unknown risks. (6) The degree to which the action may establish a precedent for future actions with significant effects or represents a decision in principle about a future consideration. (7) Whether the action is related to other actions with individually insignificant but cumulatively significant impacts. Significance exists if it is reasonable to anticipate a cumulatively significant impact on the environment. Significance cannot be avoided by terming an action temporary or breaking it down into small component parts. (8) The degree to which the action may adversely affect districts, sites, highways, structures, or objects listed in or eligible for listing in the National Register of Historic Places or may cause loss or destruction of significant scientific, cultural, or historical resources. (9) The degree to which the action may adversely affect an endangered or threatened species or its habitat that has been determined to be critical under the Endangered Species Act of 1973. (10) Whether the action threatens a violation of Federal, State, or local law or requirements imposed for the protection of the environment. 40 C.F.R. § 1508.27(b). As long as the agency has engaged in a “reasoned evaluation of the relevant factors,” Marsh, 490 U.S. at 378 (internal quotation marks omitted), a conclusion that the environmental impact of a project is insignificant lies well within an agency’s discretion, see Cumberland Mountains, 453 F.3d at 341. However, as the Ninth Circuit has noted, in challenging an agency’s decision to issue a FONSI, “a plaintiff need not show that significant effects will in fact occur[;] raising substantial questions whether a project may have a significant effect is sufficient.” Idaho Sporting Congress v. Thomas, 137 F.3d 1146, 1150 (9th Cir. 1998) (internal quotation marks omitted); accord Shenandoah Ecosystems Defense Group v. United States Forest Service, 194 F.3d 1305, *7 (4th Cir. 1999) (Table). The plaintiffs contend that the Forest Service failed to analyze several intensity factors properly in concluding that the proposed drilling will have no significant impact, and -19- Magistrate Judge Binder agreed. For the reasons that follow, this Court concurs in some of those determinations but must reject others. 1. Unique characteristics CEQ regulations require an agency to consider the “[u]nique characteristics of the geographic area such as proximity to historic or cultural resources, park lands, . . . wild and scenic rivers, or ecologically critical areas” when determining whether a proposed project will have a significant environmental impact. 40 C.F.R. § 1508.27(b)(3). The plaintiffs contend that the drilling site in this case is home to unique human recreational experiences that will be significantly affected by the proposed action, and that the Forest Service failed to consider the effect of the proposed drilling on recreational tourism in the region and in the State. The plaintiffs produce the testimony of several of their members and other sympathetic persons to support their assertions. For instance, Charles Guenther, former Wildlife Chief for the Michigan Department of Natural Resources notes that “[t]he[] proposed clearing and site preparations would create a[n] irretrievable loss of hunting opportunity and certainly have a negative impact on the local economy, as hunters [would] locate in other areas for these recreational activities.” Guenther Dep. at ¶ 5. The defendants object to this and other testimony because it was not a part of the administrative record at the time of the FONSI. Although the defendants are correct that the plaintiffs may not augment the record by merely changing the quantum of information in it, see Overton Park, 401 U.S. at 416, 420, this Court is permitted to extend its review beyond the administrative record where the plaintiff alleges that an agency has neglected to mention a serious environmental consequence, or has “swept stubborn problems or serious criticism . . . under the -20- rug,” Or. Natural Res. Council v. Love, 109 F.3d 521, 526-27 (9th Cir. 1997) (internal quotation marks omitted). The plaintiffs’ evidence not only alerts this Court’s attention to an environmental consequence that was not addressed in any depth in the EA, but it also demonstrates the ease with which the defendants could have acquired additional information about recreational tourism. Recreational tourism was addressed in the EA by the Forest Service only in Appendix A, where it was identified as a “non-significant issue.” EA at 70. The Forest Service noted that “[i]n personal discussions with a Forest Economist in East Lansing, Michigan, there are many variables that influence the local economy and specifically tourism, not just one thing,” and that “[o]ther wells drilled in the vicinity . . . have not reduced the amount of tourism to the area.” Ibid. (errors in original). That same “Forest Economist” (he is actually an economist for the Forest Service) recommended that the Forest Service interview both local business owners and area visitors. However, there is no evidence that the Forest Service conducted such a survey, yet the outpouring of public comments – including comments from Michigan’s Governor, the County of Crawford, and the Michigan Environmental Council, among others – suggests that the project’s impact on recreation and tourism could be substantial. When the issue was repeatedly raised again during the public comment period, the Forest Service responded with references to the mitigation measures adopted (regarding noise and visual quality) and to Appendix A of the EA. Magistrate Judge Binder did not address the impact of the project on unique recreational experiences in his report; he nevertheless concluded that both the EA and the FONSI merely paid “lip service” to the unique characteristics and ecologically critical areas of this section of the forest, “effectively disregard[ing]” these considerations in reaching their conclusions. R & R at 21. Citing -21- three factors – visual quality, noise, and old growth tree stands – Judge Binder stated that the Forest Service’s analysis amounted to a “non-sequitur.” Id. at 20. The defendants contend that Judge Binder erred by not affording the conclusions of the Forest Service appropriate deference. It is true that the Forest Service’s treatment of this intensity factor is arbitrary and capricious if its conclusion that the impact would not be significant runs counter to the evidence that was before the agency and is so implausible that it cannot be ascribed to a difference in view or to agency expertise, or if the Forest Service failed to consider a unique characteristic of the project area. Motor Vehicles Mfrs. Assn., 463 U.S. at 43. The defendants point to the analysis in the EA of the three factors referenced above by Judge Binder – visual quality, noise, and old growth forest – and provide an explanation for why these factors will not be significant: first, the only road which will not meet the Visual Quality Objective for the SPNM area within one growing season is FSR 4208, “a tiny fragment of the 977,326-acre Huron Forest,” Defs.’ Obj. at 5; second, even with the foreseeable development of three additional wells, the noise from the production facility would not exceed existing noise standards and would be subject to oversight from the Department of Environmental Quality; third, the project calls for the removal of only 0.099% of South Branch old growth forest, which would have no appreciable effect on the old- growth tree stand or on wildlife dependant on old growth trees. In providing the appropriate level of deference, the Court may not “substitute [its] judgment of the environmental impact for the judgement of the agency.” Kelley v. Selin, 42 F.3d 1501, 1518 (6th Cir. 1995) (internal quotation marks omitted). In determining that the project would have no significant impact on the unique characteristics of the area, the Forest Service supported its conclusions with reference to the evidence it had gathered, and in that aspect the decision cannot be -22- considered arbitrary when confined to consideration of visual quality, noise, or old growth tree stands. However, this Court cannot accept the defendant’s assertion that it has taken a “hard look” at the effects of the proposed action on the unique recreational aspects of the area. Both the evidence provided by the plaintiffs and the evidence contained within the administrative record raise substantial questions about the significance of this project’s effects on an area renowned for its recreational opportunities. The defendants’ contention that “many variables . . . influence the local economy and specifically tourism, not just one thing” does not relieve the burden set by NEPA to examine thoroughly and critically the influence of the project on this “one thing”: recreation and tourism. The Court concludes that the defendants “entirely failed to consider an important aspect of the problem,” Motor Vehicles Mfrs. Assn., 463 U.S. at 43, rendering their decision arbitrary and capricious. 2. Controversy and uncertainty CEQ regulations require an agency undertaking a major federal action to consider the extent to which the proposed action is both “highly controversial” and “highly uncertain.” 40 C.F.R. §§ 1508.27(b)(4)-(5). Although these factors are not “categorical rules that determine by themselves whether an impact is significant,” Spiller v. White, 352 F.3d 235, 243 (5th Cir. 2003), the presence of controversy or uncertainty will often lead courts to require a full-blown EIS, see, e.g., Nat’l Parks & Conservation Ass’n v. Babbitt, 241 F.3d 722, 736-37 (9th Cir. 2001). Because the level of controversy and uncertainty must be “high” to warrant consideration, the Court considers only controversy and uncertainty that raise substantial questions about the significance of the project’s environmental impact. See Native Ecosystems Council v. United States Forest Serv., 428 F.3d 1233, 1240 (9th Cir. 2005) (“Simply because a challenger can cherry pick information and data out of the -23- administrative record to support its position does not mean that a project is highly controversial or highly uncertain.”). The Sixth Circuit has not yet established a test to determine which impacts are “highly controversial” within the meaning of 40 C.F.R. § 1508.27(b)(4), but most jurisdictions agree that the term means more than mere public opposition; it requires “a substantial dispute . . . as to the size, nature, or effect of the major federal action.” Coliseum Square Ass’n, Inc. v. Jackson, 465 F.3d 215, 234 (5th Cir. 2006) (internal quotation marks omitted); see also Ind. Forest Alliance, Inc. v. United States Forest Serv., 325 F.3d 851, 857 (7th Cir. 2003); Town of Cave Creek v. F.A.A., 325 F.3d 320, 331 (D.C. Cir. 2003); Blue Mountain Biodiversity Project v. Blackwood, 161 F.3d 1208, 1212 (9th Cir. 1998); North Carolina v. F.A.A., 957 F.2d 1125, 1133-34 (4th Cir. 1992) (noting that allowing bare opposition to suffice as controversy would open agency action to “govern[ance] by a heckler’s veto”) (internal quotation marks omitted). A substantial dispute exists when “evidence, raised prior to the preparation of an EIS or FONSI, casts serious doubt upon the reasonableness of the agency’s conclusions.” Nat’l Parks, 241 F.3d at 736 (internal citation omitted). Such evidence generally challenges the scope of the scientific analysis, the methodology used, or the data presented by the agency. See Blue Mountains, 161 F.3d at 1212-13 (citing the Forest Service’s failure to consider the recommendations and data of an independent scientific report that ran contrary to the proposed action as evidence of controversy); Sierra Club v. United States Forest Serv., 843 F.2d 1190, 1193 (9th Cir. 1988) (pointing to “affidavits and testimony of conservationists, biologists, and other experts who were highly critical of the EAs and disputed the Forest Service’s conclusion that there would be no significant effects from logging because the sequoias could be protected and their regeneration -24- enhanced,” and concluding that “this is precisely the type of ‘controversial’ action for which an EIS must be prepared”). Even in the face of a substantial dispute as to the size, nature, or effect of the proposed action, an agency must have the discretion to rely on the reasonable findings of its chosen expert. See Marsh, 490 U.S. at 377-78. Therefore, an agency that considers the dispute and addresses any concerns in its final decision likely will survive the very narrow review standard under the APA. Forest Alliance, 325 F.3d at 858 (holding that an agency’s consideration and resolution of the dispute is properly thought of as a second step in the controversy analysis); accord Wetlands Action Network v. United States Army Corps of Eng’rs, 222 F.3d 1105, 1122 (9th Cir. 2000). In alleging that the proposed drilling is likely to be highly controversial, the plaintiffs point to concerns expressed by the Department of Environmental Quality, the Michigan Environmental Council, the Michigan Department of Natural Resources, the County of Crawford, Governor Granholm, United States Senators Carl Levin and Debbie Stabenow, United States Representative Bart Stupak, Michigan Representative Matt Gillard, Michigan Trout Unlimited, and numerous private commentators, including a biology professor and citizen whose “granddad knew Mr. Mason.” Pl.’s Br. in Supp. at 18-20; Exs. O and P, Excerpts of Comments. Most of these concerns focus on the visual impact and noise of the project. Magistrate Judge Binder considered this evidence and agreed with the plaintiffs, concluding that “the intensity of the public comment made at every opportunity makes clear that this project is ‘likely to be highly controversial’ within the meaning of the CEQ regulations.” R & R at 21. However, the plaintiffs demonstrate only mere public opposition; they present no evidence disputing the size, nature, or effect of the project. At no point do the plaintiffs assert that the -25- defendants failed to analyze some likely effect of the proposed drilling, nor do they challenge the credibility of the defendants’ experts, data, or methodology. Instead, the plaintiffs cite general concerns about the impact of the drilling and criticisms of the EA. The plaintiffs are not entitled to manufacture controversy in such a manner. The words of the Sixth Circuit are instructive here: So long as mining involves the initial destruction of the earth’s surface, it will have some near-term effect on the environment. The critical question is what the company proposes to do about it. The company in this instance responded to initial concerns that the agency raised about the application, proposed measures to mitigate the near-term damage to the environment and proposed measures designed to restore the environment to its pre-mining state. In addition to raising these concerns, the agency thoroughly examined the application and the environmental consequences of granting the license. Under these circumstances, the agency did what the law required it to do . . . and its decision that the effects of the mining would not be significant lay well within its discretion. Cumberland Mountains, 453 F.3d at 341. Moreover, requiring an EIS based on nothing more than public controversy over the significance of the effects disclosed in the EA penalizes an agency for precisely the type of candid disclosure that NEPA seeks to promote. See Native Ecosystems, 428 F.3d at 1240. Additionally, the Forest Service has considered and responded to the concerns raised in a variety of ways: negotiating with Savoy to move the wellhead, implementing mitigation measures to reduce the visual impact as well as the impact from noise and odor, and addressing reclamation of the site when the well ceases to be productive. In fact, two of the agencies cited by the plaintiffs as expressing concerns – the Michigan Department of Environmental Quality and the Michigan Department of Natural Resources – eventually approved the proposed drilling. Therefore, considering that the plaintiffs have failed to produce evidence of a substantial dispute that rises above mere public opposition and to demonstrate that the Forest Service did not consider and address the public concerns in their final decision, and because the command of NEPA is, in the -26- main, procedural, the Court finds that the environmental impact of the proposed drilling project is not highly controversial within the meaning of the CEQ regulations. However, the determination of “significance” also turns on whether the environmental effects of a proposed agency action are highly uncertain or involve unique or unknown risks. 40 C.F.R. § 1508.27(b)(5). Although no hard-and-fast rule is available to determine the certainty of environmental impacts, the Ninth Circuit has tied the requirement to the purpose motivating an EIS generally: Preparation of an EIS is mandated where uncertainty may be resolved by further collection of data, or where the collection of such data may prevent “speculation on potential . . . effects. The purpose of an EIS is to obviate the need for speculation by insuring that available data are gathered and analyzed prior to the implementation of the proposed action.” Nat’l Parks, 241 F.3d at 732 (quoting Sierra Club, 843 F.2d at 1195) (alteration in original) (internal citations omitted). Where an EA lacks certainty on one or more issues, it is the responsibility of the agency to provide a “justification regarding why more definitive information could not be provided.” Blue Mountains, 161 F.3d at 1213 (internal quotation marks and citation omitted). “[L]ack of knowledge does not excuse the preparation of an EIS; rather it requires the [agency] to do the necessary work to obtain it.” Nat’l Parks, 241 F.3d at 733. Review of the administrative record in this case highlights four areas of uncertainty: impact from automobiles, impact from odors, effect on wildlife, and effect on tourism. In the EA, the Forest Service predicts that road improvements could create a “minor long- term increase in vehicle traffic,” as “[p]eople with sedans are more likely to drive down an improved road.” EA at 38. The Forest Service speculates that “[s]ome visitors might notice the increase in traffic which could impact their recreational experience.” Ibid. Given the low density of traffic on -27- FSR 4209 – four to seven vehicles per day in the summer – the addition of a single car per day could increase the likelihood of a visitor encountering the accompanying sights, sounds, and smells by as much as 25%. The Forest Service neither provides quantifiable information about the likely increases in traffic nor attempts to justify the absence of such information. Although the EA identifies three sources of odor that could impact visitors to the forest, it provides only conclusory statements about the duration and intensity of odors while failing to cite a source for this information. First, the EA states that drilling would produce burning hydrogen sulfide on “several” occasions, each lasting about one to two weeks, that would be detectable “hundreds of feet in the down wind area of the drilling pad.” EA at 44. Second, the production facility would produce compressor exhaust and fumes from petroleum storage. The Forest Service asserts that, although the odor would be detectable “in the immediate vicinity,” it would not be detectable in the SPNM area, and “would not likely be detectible to people driving by the production facility most of the time.” Ibid. Third, the construction of the well pad, the road improvements, and the drilling phase would result in odors from heavy equipment that would be detectable at “a few hundred feet.” Ibid. The record contains no data whatsoever supporting the Forest Service’s vague assertions regarding the duration and intensity of these odors. The EA also acknowledges that the proposed action would result in “temporary or permanent displacement” of some wildlife in the area, and the possible killing of species that have “limited dispersal capabilities,” yet denies that the project would have any impact on the viability or habitat of wildlife in the project area. Id. at 60-61. At least part of the justification for this conclusion is that the project area comprises less than two percent of the analysis area. Id. at 61. The EA does not explain why such a large area was analyzed, nor does the use of this broad-context analysis -28- alleviate the burden on the Forest Service to address the certainty of the impact on wildlife in the immediate vicinity of the project. See Anderson v. Evans, 371 F.3d 475, 490-92 (9th Cir. 2004) (requiring an EIS where the effects of whaling on a small group of gray whales was highly uncertain, despite certainty that the project would have no significant effect on the broader gray whale population). The EA also notes that construction will provide foraging habitat for the brown- headed cowbird, but provides no analysis of how an increase in the population of the cowbird – a notorious “nest parasite,” Pl.’s Mot. for Summ. J., Ex. Q, FWS Fact Sheet re Kirtland’s Warbler at 2 – may affect other species in the area. Finally, the EA provides no analysis on how construction may affect tourism beyond noting that some visitors may choose to go elsewhere. The record reflects a partial explanation for the lack of information. A Forest Service economist indicated that the suggested method for assessing the impact drilling might have on tourism – correlating tourism with the number of active oil and gas wells in the county – would be unreliable. The economist suggested that a better approach might simply be to interview business owners and area visitors. But the Forest Service never conducted the suggested survey, and instead concluded that the effect on tourism is a non-significant issue. Although perhaps the failure of data or analysis on a single issue discussed above may not demonstrate findings that are “highly uncertain,” the accumulation of numerous vague, conclusory, and incomplete analyses certainly raises “substantial questions” about the possible significance of the project’s impact. The Court finds that this uncertainty is enough to trigger an EIS. 3. Precedent and cumulative impact -29- In assessing intensity, an agency is required to evaluate both the cumulative impact of a proposed action, defined as “the impact on the environment which results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions regardless of what agency (Federal or non-Federal) or person undertakes such other actions,” 40 C.F.R. § 1508.7, and the degree to which a proposed action may establish a precedent for future actions, 40 C.F.R. §§ 1508.27(b)(6)-(7). Here, the analysis of the project’s cumulative impact was not contested beyond an improper segmentation claim that fails because the Forest Service is not currently considering any other proposed projects, even if further development is reasonably foreseeable. However, the outcome of this project likely sets a precedent for future drilling in the region, an effect that was not considered in the EA. CEQ regulations require agencies to consider whether a proposed action is related to other actions “with individually insignificant but cumulatively significant impacts.” 40 C.F.R. § 1508.27(b)(7). One purpose of this requirement is the prevention of improper segmentation of a project. Improper segmentation occurs when a project that normally would require an EIS is subdivided into component parts that individually have no significant environmental impact. Highway J Citizens Group v. Mineta, 349 F.3d 938, 962 (7th Cir. 2003). The standard test for improper segmentation is whether “the proposed component action has little or no independent utility and its completion may force the larger or related project to go forward notwithstanding the environmental consequences.” Hirt v. Richardson, 127 F. Supp. 2d 833, 842 (W.D. Mich. 1999); see also Historic Pres. Guild v. Burnley, 896 F.2d 985, 991-92 (6th Cir. 1989) (noting that when two proposed projects “each have such little value in their own right that their separate construction could be considered arbitrary or irrational, the court will find them to be a single project”) (internal -30- quotation marks omitted). The doctrine of improper segmentation is limited, however, to proposed actions; NEPA “‘does not require an agency to consider the possible environmental impacts of less imminent actions.’” City of Riverview v. Surface Transp. Bd., 398 F.3d 434, 442 (6th Cir. 2005) (quoting Kleppe v. Sierra Club, 427 U.S. 390, 410 n.20 (1976 . The plaintiffs do not contend that the Forest Service has failed to consider the cumulative impact of the exploratory drilling project; they argue instead that the project was improperly segmented by not including in the analysis the impact of other likely wells. The Forest Service acknowledges that proposals for three additional wells are likely if the exploratory well is productive, but it notes that future wells have not been proposed, and any future wells will require individual permit applications and environmental assessments. The plaintiffs’ claim that the present well has no utility absent future wells is not supported by the record. If the presently proposed well produces, it will have value unto itself. Even if Savoy does not find what it seeks, the drilling project would still bear value because Savoy would know to avoid investing in the area. This Court finds no improper segmentation because the future wells are not yet “imminent.” Indeed, the very point of an exploratory well is to evaluate the possibilities for future development; additional wells will not be proposed unless the first well is productive. Of course, if that eventuates, the cumulative effect of the present project, should it go forward, must be taken into account in assessing the new proposal. The other side of the segmentation coin, however, is the sixth intensity factor: whether a proposed action may establish a precedent for future actions with significant effects. 40 C.F.R. § 1508.27(b)(6). “The purpose of that section is to avoid the thoughtless setting in motion of a ‘chain of bureaucratic commitment that will become progressively harder to undo the longer it continues.’” -31- Presidio Golf Club v. Nat’l Park Serv., 155 F.3d 1153, 1162-63 (9th Cir. 1998) (quoting Sierra Club v. Marsh, 769 F.2d 868, 879 (1st Cir. 1985 . In Presidio, the court determined that there were no precedential concerns where the proposed project was unique, and no similar or related projects were being contemplated. In the more recent decision of Anderson v. Evans, 371 F.3d 475 (9th Cir. 2004), the court required an agency to prepare a full EIS where the agency had not considered the possibility that its decision, although limited in both scope and duration, might affect future agency deliberations. Id. at 493. City of Sausalito v. O’Neill, 386 F.3d 1186 (9th Cir. 2004), exemplifies the depth of analysis contemplated by the CEQ regulations. There, the National Park Service adopted a proposal to develop a conference center and retreat center at Fort Baker – “one of the most special gems” of the Golden Gate Recreation Area. Id. at 1194-96. The Park Service provided information about the “likely community and commercial impacts of the Plan on the regional economy” and placed the impacts in the context of regional land use plans. Id. at 1211. The Park Service considered, for example, how the need for dining and lodging services to accommodate conference center guests and employees of the conference center would likely spur private development near the fort. The quality of this analysis satisfied the court that the Park Service had made an informed decision about the project’s precedential effect. However, in the present case, there is no evidence that the Forest Service considered the precedential impact of its decision to approve Savoy’s drilling project. Unlike in Presidio, the proposed project is not unique: the Forest Service acknowledges that if the proposed well is productive, the development of three additional wells is likely. Although each of the future wells would require individual EAs prior to approval, the Forest Service has not assessed the extent to -32- which approving the current proposal could affect those future decisions. Just as the Forest Service frequently references the currently active wells in the Huron-Manistee Forest to help justify its FONSI, allowing drilling so near the Mason Tract would almost certainly color the Forest Service’s analysis of the environmental impact of these future wells. Finally, the Forest Service has engaged in none of the sophisticated analysis of precedential effect exemplified by Sausalito. In particular, the EA does not fully consider the “likely community and commercial impacts of the Plan on the regional economy.” See Sausilito, 386 F.3d at 1211. This failure fortifies the Court’s conclusions that the Forest Service has failed to take a “hard look” at the precedential effect of its decision, and the EA does not provide sufficient information from which the agency could have made an informed decision. 4. Endangered species The “significance” of a proposed project’s environmental impact also must be evaluated in light of “the degree to which the action may adversely affect an endangered or threatened species or its habitat.” 40 C.F.R. § 1508.27(b)(9). Not all adverse effects to an endangered or threatened species require an EIS, however; the question ultimately is one of degree. See Envtl. Prot. Info. Center v. United States Forest Serv., 451 F.3d 1005, 1012 (9th Cir. 2006); see also Native Ecosystems, 428 F.3d at 1240 (rejecting need for EIS despite FONSI’s acknowledgment of project’s impact on individual goshawks and their habitat where Forest Service concluded impact on species was insignificant). In Greater Yellowstone Coalition v. Flowers, 359 F.3d 1257, 1276 (10th Cir. 2004), the Tenth Circuit noted that a proposed project did not significantly affect a threatened species where (1) the mitigation measures in place greatly reduced the likelihood that the species would be affected significantly, (2) the agency’s determination that the project’s effect would be -33- insignificant was based on two extensive studies, and (3) the effect of the project varied with the idiosyncracies of the particular animals impacted, making further analysis fruitless. In contrast, the BA prepared by the Forest Service in this case is woefully inadequate in assessing potential impact on the Kirtland’s warbler. Although acknowledging that both the proposed production facility and approximately one mile of the proposed pipeline are within the Kirtland Warbler’s Management Area (KWMA), the BA concludes that the proposed project “would have NO EFFECT on the Kirtland’s warbler,” because the project does not physically encroach on the warbler’s “essential habitat.” Id. at 14-15. But the BA ignores the potential effect of non- physical invasions – such as odor or noise – upon the Kirtland’s warbler; it does not even discuss those factors. Further, a project still may affect an endangered or threatened species significantly without affecting its essential habitat. See Greater Yellowstone, 359 F.3d at 1275 (“The fact that the FWS has not designated this, or any, territory as the bald eagle’s ‘critical habitat’ does not alone persuade us that its potential destruction should not be considered ‘significant’ for purposes of NEPA.”). As the magistrate judge pointed out, one way in which the warbler may be affected is by an increase in brown-headed cowbirds within the KWMA. See EA at 61 (explaining that construction may increase the foraging habitat of the cowbird); FWS Fact Sheet re Kirtland’s Warbler at 2 (explaining the threat cowbirds pose to the Kirtland’s warbler). At one point the BA asserts that construction that actually is inside the KWMA and that borders the warbler’s essential habitat would not affect the warbler because the trees to be removed would be across a road from the essential habitat. BA at 14 (“Although River Lake Road from Forest Road 4209 to the production facility would be widened by approximately five-ten feet for pipeline installation, the road would be widened only to the north to avoid Kirtland’s warbler essential habitat to the south.”). -34- This Court finds that the Forest Service did not take the requisite “hard look” at the likely effects of construction on the Kirtland’s warbler. B. The United States Forest Service failed to consider appropriate project alternatives NEPA requires that agencies “study, develop, and describe appropriate alternatives” to the proposed course of action. 42 U.S.C. § 4332(2)(E). Consideration of alternatives is “the heart of the environmental impact statement.” 40 C.F.R. § 1502.14. This requirement exists to “ensure that each agency decision maker has before him and takes into proper account all possible approaches to a particular project (including total abandonment of the project) which would alter the environmental impact and the cost-benefit balance.” NRDC v. Tenn. Valley Auth., 502 F.2d 852, 853 (6th Cir. 1974) (emphasis added). An agency need not consider alternatives that are inconsistent with the agency’s basic policy objectives or the project’s essential purpose. See Cumberland Mountains, 453 F.3d at 342-44; Mayo Found. v. Surface Transp. Bd., 472 F.3d 545, 550 (8th Cir. 2006); N. Alaska Envtl. Ctr. v. Kempthorne, 457 F.3d 969, 978 (9th Cir. 2006); Utah Envtl. Cong. v. Bosworth, 439 F.3d 1184, 1195 (10th Cir. 2006). However, an agency may not define the objectives of its action in such unreasonably narrow terms as to make consideration of alternatives a mere formality. Citizens Against Burlington, Inc. v. Busey, 938 F.2d 190, 196 (D.C. Cir. 1991). Additionally, “NEPA requires an agency to ‘exercise a degree of skepticism in dealing with self-serving statements from a prime beneficiary of the project’ and to look at the general goal of the project rather than only those alternatives by which a particular applicant can reach its own specific goals.” Envtl. Law & Policy Ctr. v. United States Nuclear Regulatory Comm’n, 470 F.3d 676, 683 (7th Cir. 2006) (quoting Simmons v. Army Corps of Eng’rs, 120 F.3d 664, 666 (7th Cir. 1997 . -35- These requirements also extend to the preparation of an EA. 40 C.F.R. § 1508.9(b) (“[EAs] [s]hall include brief discussions of the need for the proposal, of alternatives as required by [42 U.S.C. § 4332(2)(E)], of the environmental impacts of the proposed action and alternatives, and a listing of agencies and persons consulted.”). However, an agency’s duty to consider alternatives in preparing an EA is less than when preparing a full-blown EIS. Cumberland Mountains, 453 F.3d at 342-43. “‘[A]lthough consideration of some range of alternatives is essential to any environmental assessment, it makes little sense to fault an agency for failing to consider more environmentally sound alternatives to a project which it has properly determined, through its decision not to file an impact statement, will have no significant environmental effects anyway.’” Id. at 343 (quoting Sierra Club v. Espy, 38 F.3d 792, 803 (5th Cir. 1994 . Here, the Forest Service’s consideration of alternatives was faulty for two reasons: first, it did not take the requisite “hard look” at the No Action alternative, since it mistakenly considered itself obligated by both policy and by the terms of Savoy’s lease to adopt an action alternative; second, the agency impermissibly narrowed the range of alternatives by only considering those consistent with Savoy’s project objectives, rather than Forest Service goals. The Forest Service rejected the No Action alternative because it “would not comply with the laws, regulations, policies, and Forest Plan direction guiding mineral development on National Forest System (NFS) lands.” FONSI at 3; EA at 20. However, the Forest Service has failed to demonstrate that denying Savoy’s proposed Surface Use Plan actually would violate any law, regulation, policy, or the Forest Plan. The Forest Service cites nine separate laws, regulations, or policies that each place exploration and development of mineral resources among the Forest Service’s legitimate objectives, but none of the cited authorities mandates approval of proposed -36- mineral extraction, forecloses a decision of No Action, or places the Forest Service’s objectives at odds with environmental preservation. For example, 43 C.F.R. § 3161.2, which directs an authorized officer to “approve and monitor . . . proposals for drilling, development or production of oil and gas,” requires that “all operations be conducted in a manner which protects other natural resources and the environmental quality,” and provides that “[b]efore approving operations on [a] leasehold, the authorized officer shall determine . . . that the proposed plan . . . is sound both from a technical and environmental standpoint.” 43 C.F.R. § 3161.2. The plain language of the regulation makes clear that approval is not appropriate in all cases, particularly cases where the project poses a threat to environmental quality. The Forest Service also cites 36 C.F.R. § 228.107, which directs it to “ensure that . . . [t]he surface use plan of operations is acceptable, or is modified to be acceptable, to the authorized Forest officer based upon a review of the environmental consequences of the operations.” 36 C.F.R. § 228.107(a)(4). However, the same regulation requires that the surface use plan be consistent with “applicable Federal laws.” 36 C.F.R. § 228.107(a)(1). It would be absurd to conclude that the regulation’s requirement that the plan be modified until acceptable prevents the Forest Service from fully considering a No Action alternative, as required by NEPA. Similarly, the Forest Service’s goals to “provide for economically and environmentally sound exploration, extraction, and reclamation practices” and to “encourage inventory and development of Federal minerals, [and] respect private mineral rights” are limited by “Standards and Guidelines” that direct surface- disturbing exploration to be permitted “in most areas” with “consent to mineral extraction plans . . . determined by the environmental protection guidelines.” EA at 4 (emphasis added). The Sixth -37- Circuit rejected a similar argument when it found that “the agency [failed to] demonstrate[] that the Mining Act pulls it in one direction while the Environmental Act pulls it in another when it comes to the review of this mining application.” Cumberland Mountains, 453 F.3d at 344. The same conclusion is compelled here. It is also evident that the Forest Service felt constrained from fully considering the No Action alternative by Savoy’s mineral lease. The Forest Service’s response to public comment is particularly illuminating on this point: 8. There is no economic need for this project. This is outside the scope of the project. [Savoy] has a legal right to fully explore and develop the resource as stated in their lease. . . . 13. Why should we allow drilling at this time? Response: Through the existing state and federal leases, [Savoy] has acquired the right to extract and dispose of the specific mineral resource covered by the lease, subject to the terms and conditions of the lease. [Savoy] has submitted the necessary documentation and a decision . . . is required . . . . 14. Why not wait until some time in the future when drilling techniques will surely improve? Response: The Forest Service and BLM have the responsibility to respond to requests for development on authorized leases. EA, Ex. A at ¶ 8, Ex. B at ¶¶ 13-14. These exchanges reveal the Forest Service’s mind set that it considered itself obligated by Savoy’s lease to approve either Savoy’s initial proposal or a modified version of Savoy’s proposal, and never realistically contemplated denying the application for drilling altogether. The Forest Service’s sense of constraint is even more disconcerting when viewed in conjunction with the Forest Service’s justification to lease mineral rights in the first place. In responding to public concern about leasing mineral rights so near the Mason Tract and the Chapel, the Forest Service noted, “Based on the best available information, the reasonably foreseeable -38- development scenario . . . outlines no known exploration targets within these lease tracts, and in the professional judgement of the BLM geologist who predicted probable development, it is indicated that no wells are likely.” Pl.’s Ex. N, FONSI re Lease at 2 (emphasis added). So the FONSI’s rejection of the No Action alternative on the ground that it would violate Savoy’s lease rights is a product of dangerous circular reasoning , where the very decision to confer those rights assumed that no mining would occur. The Forest Service’s consideration of alternatives was also deficient because it impermissibly limited the range of alternatives to only those that would meet Savoy’s project objectives, rather than alternatives that might better serve Forest Service goals. For example, the Forest Service never questioned Savoy’s choice of bottom hole location within Savoy’s lease. Because Savoy’s leasehold is within old growth, the Forest Service is restricted to approving at most one bottom hole per 640 acres. However, the Forest Service did not require Savoy to present any information about the likely productivity of its preferred bottom hole. See EA, Ex. B at ¶ 40 (“There is no requirement that the operator provide information about the potential for natural gas reserves in the target formation.”) Without this information, the Forest Service could not take into account “all possible approaches to a particular project (including abandonment of the project) which would alter the environmental impact and the cost-benefit balance.” See NRDC, 502 F.2d at 853. The likely productivity of this bottom hole relative to other possible bottom holes within the leasehold is essential information in assessing the project’s benefits, particularly when approval of the proposed project necessarily precludes other possibly beneficial alternatives. The Forest Service’s treatment of the No Action alternative cannot be considered a “hard look” within the meaning of NEPA. While it is clear that the cited regulations seek to encourage -39- mining operations where appropriate, they do not conflict with nor otherwise exempt the Forest Service from the requirements of NEPA. The Forest Service’s summary rejection of the No Action alternative must be considered arbitrary and capricious within the meaning of the APA. VI. Discussion of the National Forest Management Act claim Although the magistrate judge did not decide the matter, the plaintiffs alleged that the defendants violated the National Forest Management Act, and the motions for summary judgment requested adjudication of that claim. Shortly after Judge Binder issued his report, the plaintiffs filed a motion for clarification asking this Court to “issue a decision” upon this count, as well as the plaintiffs’ remaining count for violation of the Mineral Leasing Act. Because the underlying motions called for resolution of all counts, the Court will grant the motion for clarification and analyze de novo the issues raised in the motions for summary judgment on these counts. The National Forest Management Act (NFMA) requires that the Forest Service create land management plans for each national forest. 16 U.S.C. § 1604. The Act’s purpose is to “meet the multiple-use objectives of the national forest system,” Seattle Audubon Society v. Evans, 952 F.2d 297, 299 (9th Cir. 1991), while pursuing the “goal of sustaining social, economic, and ecological systems,” Ecology Center, Inc. v. United States Forest Service, 451 F.3d 1183, 1195 (10th Cir. 2006). The management plans are to “identif[y] the resource management practices, the projected levels of production of goods and services, and the location where various types of resource management may occur.” Northwoods Wilderness Recovery, Inc. v. United States Forest Service, 323 F.3d 405, 407 (6th Cir. 2003). “Resource plans and permits, contracts, and other instruments for the use and occupancy of National Forest System lands shall be consistent with the land management plans.” 16 U.S.C. § -40- 1604(i). If a “use, project, or activity is not consistent with the applicable plan,” the regulations give the Forest Service three options: (1) Modify the project or activity to make it consistent with the applicable plan components; (2) Reject the proposal or terminate the project or activity, subject to valid existing rights; or (3) Amend the plan contemporaneously with the approval of the project or activity so that it will be consistent with the plan as amended. The amendment may be limited to apply only to the project or activity. 36 C.F.R. § 219.8(e); see also Colorado Off Highway Vehic. Coal. v. United States Forest Service, 357 F.3d 1130, 1132 (10th Cir. 2004). “[A]gency decisions allegedly violating NFMA . . . are reviewed under the Administrative Procedure Act.” Native Ecosystems Council v. United States Forest Service, 428 F.3d 1233, 1238 (9th Cir. 2005). Consequently, “[s]ubstantial deference is due to the Forest Service’s interpretation of a Forest Plan.” Cherokee Forest Voices v. United States Forest Service, 182 Fed. Appx. 488, 494 (6th Cir. 2006). The Forest Plan at issue in the present case is the Huron-Manistee National Forest Land and Resource Management Plan (LRMP). The LRMP provides that “[w]here reasonable alternatives exist, surface-disturbing activities will take place outside of old growth.” LRMP at IV-73. In addition, the LRMP states that the Semi-primitive Non-motorized (SPNM) area “will be characterized by a predominantly natural or natural-appearing environment,” in keeping with the “desired future condition” of the area. Id. at IV-191. The LRMP also speaks to the goal of reducing road density through the elimination of unnecessary pathways: Roads on National Forest lands were developed through the years for specific access needs and remain open even though the need for many of them has ceased. These nonessential roads are mostly primitive roads, often referred to as “two-tracks” . . . . General use of these roads continues, though nonessential, and creates -41- environmental, aesthetic, wildlife, and recreational concerns. Closure of these nonessential roads is desirable to reduce erosion, noise, and access to certain areas to provide improved habitat for sensitive wildlife species and increased opportunities for semiprimitive recreation experiences. . . . The preferred management direction will emphasize road management throughout the Forests according to the desired management prescriptions. This will include closure of nonessential roads (those roads not needed to meet management objectives), which will result in a net reduction of 220 miles of roads (280 miles of roads closed and 60 miles of road construction) during decade 1, and reduction of 686 miles by the end of the fifth decade. Id. at III-9-11. On the other hand, the LRMP states that “[t]he Forest Service will . . . encourage inventory and development of Federal minerals [and] respect private mineral rights,” with the caveat that it “ensure operators take reasonable and prudent measures to prevent unnecessary disturbance to the surface.” Id. at IV-73. Similarly, the LRMP provides that the Forest Service shall “[p]ermit surface- disturbing exploration in most areas, especially where there is a potential to discover minerals of compelling domestic significance.” Id. at IV-87-88. The plaintiffs allege that the decision to allow directional drilling is inconsistent with the LRMP because (1) the project would take place within old growth forest, and the Forest Service failed to show that there were no reasonable alternatives to that placement; (2) the Forest Service did not establish that the project would contribute to achievement of the desired future condition for the SPNM and old-growth areas; and (3) the present road density already exceeds the density prescribed by the LRMP, and the project would only aggravate that defect. Therefore, the plaintiffs assert, the Forest Service’s approval of the project was arbitrary, capricious, and not in accordance with the law, and therefore must be rejected under the APA. -42- The Court cannot conclude that the Forest Service violated the standards set forth in the LRMP with respect to old growth issues because the LRMP does not contain a blanket prohibition on the disturbance of old growth forest. Rather, it directs the Forest Service to examine feasible alternatives to development in old growth areas and otherwise limit the disturbance of old growth. Although the Forest Service’s shallow and cursory examination of alternatives is troubling, the evidence shows that the impact on old growth would not be significant. The project calls for the removal of a small fraction (0.099%) of South Branch old growth forest, which the Forest Service could fairly deem immaterial and not incongruous with the overall management plan. Therefore, the Forest Service did not act arbitrarily or capriciously in determining that the project, as modified, could go forward in a manner consistent with the LRMP. Similarly, the plaintiffs have not established a violation of the NFMA through their allegation that the decision to authorize drilling is in tension with the “desired future condition” of the SPNM area. The forest plan contemplates preserving the “natural or natural-appearing environment” of the SPNM zone, LRMP at IV-191, but it does not create a hard-and-fast prohibition against industrial activities. The language on which the plaintiffs rely is explicitly aspirational, the future condition of the SPNM being “desired,” not mandated. Likewise, the language is not absolute: “[t]he desired future condition of [SPNM] management areas will be characterized by a predominately natural or natural-appearing environment.” Ibid. (emphasis added). More importantly, however, the overall context of the LRMP reveals that, although discouraged, low-level industrial activity may occur within SPNM areas under certain circumstances. In addition to the general language quoted above, see, e.g., id. at IV-73 (“The Forest Service will . . . encourage inventory and development of Federal minerals [and] respect private -43- mineral rights”), there is a specific section that deals with oil and mineral extraction in SPNM zones. It lists the following conditions: “[(]A[)] Production facilities are outside the area when practical[; (]B[)] Flowlines follow the access road where practical[; (]C[)] Needed pumps are run by electric motors or equipped to minimize noise[; and (]D[)] On-site facilities are painted earth tone colors.” Id. at IV-204. In the present case, the production facility would be located outside of the SPNM area, the flowlines would follow roads (although some expansion would be needed), efforts would be taken to minimize the noise, and there has been no allegation that the facility would not be painted in earth tones. Because the project appears to coincide with the specific terms of the LRMP, the Forest Service did not act arbitrarily and capriciously under the NFMA. Finally, the plaintiffs have abandoned their claim concerning road density. It is well settled that abandonment may occur where a party asserts a claim in its complaint, but then fails to address the issue in response to an omnibus motion for summary judgment. See Graham v. American Cyanamid Co., 350 F.3d 496, 506 (6th Cir. 2003) (leaving undisturbed district court’s conclusion that plaintiffs “had abandoned their fraud claim by failing to respond to American Cyanamid’s summary judgment motion on the claim”); Palmer v. Marion County, 327 F.3d 588, 597 (7th Cir. 2003) (“[B]ecause Palmer failed to delineate his negligence claim in his district court brief in opposition to summary judgment . . . , his negligence claim is deemed abandoned.”); Clark v. City of Dublin, Ohio, 178 Fed. Appx. 522, 524 (6th Cir. 2006); Connor v. Hardee’s Food Sys., Inc., 65 Fed. Appx. 19, 24-25 (6th Cir. 2003); see also Fed. R. Civ. P. 56(c); Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989) (explaining that a party opposing a motion for summary judgment may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the -44- motion). Here, the plaintiffs averred in their complaint that the defendants had violated the NFMA by approving a project that would contribute to road density, yet they never addressed this allegation at any other point in the proceedings. In their brief in support of their motion for summary judgment, the plaintiffs devoted approximately one page to their NFMA claim. However, their discussion was confined to the old growth and desired future condition issues, with not a word on the allegation of excessive road density. When the defendants moved for summary judgment shortly thereafter, they too gave short shrift to the NFMA claim. However, although the defendants did not mention the road density allegation, they clearly sought to extinguish the whole of the plaintiffs’ claim under the Act. In a twenty-three page response to the defendants’ motion, the plaintiffs discussed the NFMA in two short paragraphs; but again, they did not write a word about the road density issue. Nor did they discuss the issue in their motion for clarification. Because the plaintiffs have shown no inclination to proceed on this allegation in the face of a motion for summary judgment seeking its resolution, the Court finds that the claim has been abandoned. The Court believes that the defendants are entitled to judgment in their favor on the plaintiffs’ NFMA claim. VII. Discussion of the Mineral Leasing Act claim Finally, the plaintiffs pleaded a claim for violation of the Mineral Leasing Act (MLA) (also unaddressed by Judge Binder). The MLA governs leases authorizing the extraction of minerals from federal land. See Amoco Production Co. v. Watson, 410 F.3d 722, 725 (D.C. Cir. 2005). In passing the MLA, Congress “sought to promote the orderly development of oil and gas deposits in publicly owned lands of the United States.” Devon Energy Corp. v. United States, 45 Fed. Cl. 519, 521 (1999). Before a company can extract minerals from federal lands, it must receive a lease from the -45- Department of Interior (DOI). Murphy Exploration and Production Co. v. United States Dept. of the Interior, 252 F.3d 473, 476 (D.C. Cir. 2001). However, the Secretary has broad “discretion to refuse to issue any lease at all on a given tract.” Udall v. Tallman, 380 U.S. 1, 4 (1965). Once a lease has been granted, regulations implementing the MLA provide: The authorized officer is authorized and directed to approve unitization, communitization, gas storage and other contractual agreements for Federal lands . . . and to require that all operations be conducted in a manner which protects other natural resources and the environmental quality, protects life and property and results in the maximum ultimate recovery of oil and gas with minimum waste and with minimum adverse effect on the ultimate recovery of other mineral resources. . . . Before approving operations on leasehold, the authorized officer shall determine that the lease is in effect, that acceptable bond coverage has been provided and that the proposed plan of operations is sound both from a technical and environmental standpoint. 43 C.F.R. § 3161.2. Case law interpreting the MLA generally, and section 3161.2 specifically, is sparse. At least one court has held that section 3161.2 “sets forth only a broad objective to be achieved” and “lack[s] the specificity and clarity necessary to support judicial action under [APA] § 706(1).” Blancett v. U.S. Bureau of Land Management, 2006 WL 696050, *8 (D.D.C. Mar. 20, 2006), appeal dismissed, 2007 WL 1125713 (D.C. Cir. 2007). The court noted that the language was not defined by the Act or regulations, and is intended to vest the agency with discretion. Ibid. The plaintiffs alleged in their complaint that the defendants had violated the MLA by failing to comply with 43 C.F.R. § 3161.2 because they failed to ensure that the drilling project would be conducted in a manner that protected the environment and other natural resources. Further, the plaintiffs averred that the defendants had failed to ensure sufficient bond coverage and verify that the plan was sound from a technical and environmental standpoint. However, even assuming that the APA provides for review of a claim under section 3161.2, the plaintiffs have not alleged any -46- facts that would establish a violation of this regulation independent of their NEPA claim. Rather, the plaintiffs seem to assume that they have established a violation of the MLA (by way of 43 C.F.R. § 3161.2) simply because they have shown a violation of NEPA. The plaintiffs have cited no authority for that proposition and the Court has found none. Nor do the statute or regulations suggest that the MLA is violated every time NEPA is breached in a mining case. The defendants are entitled to summary judgment on this claim as well. VIII. Conclusion The Court agrees with Magistrate Judge Binder that the defendants’ decision to issue a FONSI was arbitrary and capricious, although for slightly different reasons than those outlined in the magistrate judge’s report. The Court also finds merit in the plaintiffs’ request for clarification so that all its claims in the present dispositive motions are considered. The Court finds that the plaintiffs cannot prevail on their claims under the National Forest Management Act or the Mineral Leasing Act. Accordingly, it is ORDERED that the plaintiffs’ motion for clarification [dkt #54] is GRANTED. It is further ORDERED that the defendants’ objections to the magistrate judge’s report and recommendation [dkt #56] are SUSTAINED IN PART AND OVERRULED IN PART. It is further ORDERED that the report and recommendation [dkt #51] is ADOPTED IN PART. It is further ORDERED that the plaintiffs’ motion for summary judgment [dkt #30] is GRANTED IN PART AND DENIED IN PART. -47- It is further ORDERED that the defendants’ motion for summary judgment [dkt #34] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the Decision Notice, Environmental Assessment, and Finding of No Significant Impact for the U.S.A. & South Branch 1-8 Well Project is DECLARED INADEQUATE. It is further ORDERED that the defendants are RESTRAINED AND ENJOINED from using or relying upon and taking any action in reliance upon the Decision Notice, Environmental Assessment, and Finding of No Significant Impact for the U.S.A. & South Branch 1-8 Well Project. It is further ORDERED that counts VII (violation of NFMA) and VIII (violation of MLA) of the amended complaint are DISMISSED WITH PREJUDICE. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 10, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 10, 2008. s/Felicia M. Moses FELICIA M. MOSES -48-

=== Pucci Opinion on MSJ ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JULIE A. PUCCI, v. Plaintiff, NINETEENTH DISTRICT COURT, and CHIEF JUDGE MARK W. SOMERS, _________________________________________/ Defendants. Case Number 07-10631 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT The plaintiff, Julie Pucci, has filed a second amended complaint alleging that she was wrongfully terminated from her job as an administrator in Michigan’s Nineteenth District Court when defendant Mark W. Somers became that court’s chief judge. She has pleaded four causes of action, but the foundation of her complaint is her belief that she lost her job when defendant Somers manipulated a court reorganization with the intention of eliminating her because her domestic relationship with Somers’s rival, Judge William C. Hultgren, without benefit of marriage, clashed with Somers’s religious beliefs. The defendants have filed a motion for summary judgment alleging that they are entitled to immunity under the Eleventh Amendment and the plaintiff has not produced evidence supporting the four remaining counts in her amended complaint. The plaintiff filed an answer and brief in opposition. The Court has reviewed the submissions of the parties and finds that the relevant law and facts have been set forth in the motion papers and that oral argument will not aid in the disposition of the motion. Accordingly, it is ORDERED that the motion be decided on the papers submitted. See E.D. Mich. LR 7.1(e)(2). The Court finds that the defendants are local units of government to which the Eleventh Amendment bar does not apply, and fact questions preclude summary judgment on all but the plaintiff’s religious discrimination count and parts of the plaintiff’s retaliation count. Therefore, the Court will grant the motion for summary judgment in part and dismiss count III and part of count II of the second amended complaint, and deny the motion in all other respects. I. Plaintiff Julie Pucci began her career with the Nineteenth District Court in March 1991 when she was hired as a court typist. The Nineteenth District Court serves the City of Dearborn. In December 1992, she took a position as a probation officer and judicial aide to Judge William Runco. In 1994, she became clerk of the court, and one year later she was promoted and became the assistant court administrator. In 1998, the plaintiff’s position was reclassified to that of Deputy Court Administrator, and she reported to Court Administrator Doyne Jackson. This reclassification was approved by the Dearborn Civil Service Commission. While the plaintiff was the deputy court administrator, she entered into a live-in relationship with William C. Hultgren, one of the court’s judges. This relationship, which began in 2001, apparently caused no problems for the operation of the court until January 2003, when defendant Mark W. Somers was elected to replace a retiring judge of the court, who had been the chief judge. The Nineteenth District Court is designated by statute as a “third class” district court, Mich. Comp. Laws § 600.8121(4), which means that the City of Dearborn “is responsible for maintaining, financing and operating the district court,” Mich. Comp. Laws § 600.8103(3). The district court is an administrative unit unto itself, although it is subject to superintending control by the state supreme court. Mich. Comp. Laws § 600.8101(1). The administrative duties of the court, including -2- the authority to hire and fire court employees, fall to the chief district court judge. Mich. Ct. R. 8.110(C)(3) (2008). At one time, multi-judge Michigan courts selected their chief judges by the vote of their members. See Mich. Ct. R. 8.110 (1985). In 1995, the Michigan Supreme Court changed the rule so that chief judges would be selected by the state supreme court to serve two-year terms. See Mich. Ct. R. 8.110(B) (1995). With the election of Judge Somers, the Nineteenth District Court bench consisted of Judges Hultgren, Wygonik, and Somers. Apparently, the supreme court could not find one of their number to serve as chief judge, so the court appointed Judge Leo K. Foran, a judge of a neighboring district court, to serve as the chief judge of the Nineteenth District Court. His tenure as chief judge began in March 2005 and concluded in January 2006, when defendant Somers was appointed chief judge. The parties agree that the relationship between Judges Hultgren and Somers was acrimonious, although it is unclear when that bitterness developed. Perhaps that was one reason Judge Foran was selected to be chief of a court of which he was not a member. In any event, Judge Foran testified that the tension between the two was obvious from the first time he sat in a room with both of them. Meanwhile, the plaintiff’s service as deputy court administrator proceeded apparently without incident, and she received good reviews about her work. In 2004, however, she raised a complaint about Judge Somers’s practice of interjecting his personal religious beliefs into judicial proceedings and the business of the court. The record indicates that Judge Somers used official court stationery on three separate occasions to send official correspondence affixing a quote from a biblical passage. Judge Foran stated that for the ten months that he served as chief judge, he -3- received ten or fifteen complaints from lawyers “about Judge Somers interjecting his religious beliefs from the bench or imposing sentences based on religion.” Def.s’ Mot., Ex. F, Foran Dep. 62. One example was when a “Muslim boy got a stiffer sentence by the judge because of the fact that whatever offense he had, it happened during Ramadan.” Ibid. Others complained that Judge Somers lectured defendants about marijuana, declaring that it was the devil’s weed or Satan’s surge, and that he would ask litigants in court if they go to church. The plaintiff reported these incidents to Mr. Jackson, her supervisor, and regional court administrator Jan Hunt-Kost. Another court employee, Nancy Siwik, actually filed a complaint against Judge Somers with the state judicial tenure commission. There is no evidence in the record of the outcome of the tenure commission complaint, but the regional court administrator instructed Judge Somers to desist from using court stationery to send religious messages. On March 30, 2005, Judge Foran announced his intention to reorganize the court’s administrative structure. He planned to have “Sharon Langen remain as clerk of the court,” move the plaintiff to court administrator, and not fill the position of deputy court administrator. Def.s’ Mot., Ex. F, Foran Dep. 14-15. Judge Foran testified that the plaintiff was the natural successor for retiring court administrator Jackson. He said: [S]he was doing the job as the court administrator anyway. She was accepted, highly regarded, and respected by any attorney that ever talked to me about her and highly respected and regarded in the community at large. Def.s’ Mot., Ex. F, Foran Dep. 10. While Mr. Jackson was the court administrator, he had delegated a large number of his duties to the plaintiff. Pl.’s Resp., Ex. 8, Somers Dep. 121. Judge Somers vigorously opposed the plaintiff’s elevation to court administrator because of her relationship with Judge Hultgren. He believed that there was “an inherent conflict,” Pl.’s Resp., -4- Ex. 8, Somers Dep. 133, and eventually he embarked upon a campaign to have the plaintiff removed as a court employee. On March 31, 2005, Judge Somers sent a memo to Judge Foran complaining about the plaintiff’s promotion. It states: Judge Hultgren and myself have had some rather candid and, one might say, pointed conversations regarding the effect of his engagement to and live-in relationship with a court employee. I believe I can fairly characterize his position by stating he does not believe that relationship should prevent him from being chief judge and that he also believes it should not prevent Ms. Pucci from being promoted to court administrator upon the retirement of Mr. Jackson this summer, although he has said he would gladly relinquish any claim to the chief judge position if Ms. Pucci gets the administrator position. Moreover, he believes that Ms. Pucci should automatically get the job without any competition and that anything to the contrary would be “an insult”. Judge Hultgren has gone so far as to tell me that this is “personal” to him, that he will never support me for the chief judge position if I oppose Ms. Pucci’s appointment to court administrator and that he will do everything he can to get Judge Wygonik on his side of this issue. I wholeheartedly and completely disagree with Judge Hultgren’s position in every respect. Although the present anti-nepotism rule technically applies only to married couples in this situation, I see no ethical or moral ground for standing upon technicalities. We are judges elected to serve our community and should willingly hold ourselves to the highest of standards. I am not the first to say that Judge Hultgren cannot serve as chief judge under these circumstances – the Supreme Court has already done that. If need be, I will be the first to say that for the very same reasons Ms. Pucci cannot serve as court administrator. I implore you to prevail upon my colleague and explain the impossibility of his position in this matter. As I have said to him directly, I am happy for them both to have found each other and to be in a loving relationship but their relationship comes with limitations for the workplace. The position I have been blessed with here is alike a dream come true. There is nothing I desire more than harmony in this court that for far too long suffered under the personal battles of its judges. I truly believe that you are the person whose good counsel will be accepted by my colleague. Pl.’s Resp., Ex. 10. Judge Foran responded a day later: I have read your letter of March 31 with great interest. However I must advise you that in keeping with my mandated responsibility to provide the 19th District Court with the best possible administration I have informed the control unit in a March 30 -5- writing that Mr. Jackson is leaving in June and that Ms. Pucci will be his replacement. Therefore, it is not necessary for me to comment on the merits of your presentation. Pl.’s Resp., Ex. 11. Judge Somers was still unhappy. On April 5, 2005, Judge Somers sent a note to Judges Hultgren and Wygonik. He states I am deeply troubled by the apparently calculated manner in which Ms. Pucci’s succession to the court administrator position has been handled. The issue was placed on the agenda for our last judge’s meeting but never discussed. This has been a sensitive issue between Judge Hultgren and myself for some time. Now, without the courtesy of consultation or discussion, Ms. Pucci’s appointment is presented as a fait accompli. These issues are not personal to me. They are matters of principle and ethics. Our individual and collective integrity and the integrity of this court are at stake. As you can see from my missive to Ms. Green, I have every intention of testing the legality of this appointment under the Supreme Court’s anti-nepotism policy (attached) and the Cannons - in particular Cannon 2 and Cannon 5. Def.s’ Mot., Ex. C, Pucci Dep., Ex. 9 (footnotes omitted) (spelling of “cannon” in original). Judge Somers also wrote to regional court administrator Deborah Green asking her to reverse Judge Foran’s decision and prevent the plaintiff from becoming the court administrator. He pointed to an anti-nepotism rule that the state supreme court had implemented by administrative order in 1996, which stated that “[r]elatives of . . . judges or court administrators shall not be employed within the same court.” Def.s’ Mot., Ex. C, Pucci Dep., Ex. 8. (Administrative Order No. 1996-11). A “relative” was defined specifically as a “spouse, child, parent, brother, sister, grandparent, grandchild, first cousin, uncle, aunt, niece, nephew, brother-in-law, sister-in-law, daughter-in-law, son-in-law, mother-in-law, and father-in-law, whether natural, adopted, step or foster.” Ibid. Judge Somers told Ms. Green that the plaintiff would not be allowed to work in the court at all if she actually were married to Judge Hultgren. -6- On April 14, 2005, Judge Somers wrote a letter to state court administrator Carl Gromek, asking him to reverse Judge Foran’s appointment of the plaintiff as court administrator, remove Judge Foran as chief judge, and expand the terms of Administrative Order 1996-11 to include “domestic partners” among those disqualified from court employment, which would result in the plaintiff’s termination from her court position. One week later, Somers wrote Gromek another letter accusing Judges Foran and Hultgren of conspiring in “calculated efforts to conceal the whole truth from the public” and pledging to “see these matters through to an appropriate end.” Pl.s’ Resp., Ex. 15. On May 5, 2005, Judge Foran issued a memo appointing the plaintiff as interim court administrator and accepting Mr. Jackson’s resignation. However, on May 10, 2005, Carl Gromek sent Judge Foran a letter that states: I referred this matter to the Court, and the Justices have concluded that Ms. Julie A. Pucci’s romantic partnership with Judge Hultgren is a violation of the spirit of its antinepotism rule. While the Court is of the view that Ms. Pucci may remain employed with the 19th District Court in the capacity that predated her romantic relationship with Judge Hultgren, she cannot be advanced or otherwise be advantaged after the beginning of her romantic relationship with Judge Hultgren. Accordingly, Ms. Pucci will not succeed Doyne E. Jackson as Court Administrator. Def.s’ Mot., Ex. C, Pucci Dep., Ex. 6. The status and legal effect of this letter is confusing and not readily apparent under state law. The court rule prescribing the powers and duties of chief judges states that “[a] chief judge shall act in conformity with the Michigan Court Rules, administrative orders of the Supreme Court, and local court rules, and should freely solicit the advice and suggestions of the other judges of his or her bench and geographic jurisdiction.” Mich. Ct. R. 8.110(C)(1). However, Mr. Gromek’s letter was neither a “Michigan Court Rule,” “administrative order[] of the Supreme Court,” nor a “local court rule[ ].” The plaintiff’s attorney’s subsequent -7- efforts to obtain clarification of the letter’s status from the supreme court ultimately went unanswered. Nonetheless, when Judge Foran learned that the appointment of the plaintiff as court administrator was discouraged, he chose to appoint Ms. Langen to that position, kept the plaintiff in her then-current position as deputy court administrator, and did not fill the clerk of the court position. This arrangement was consistent with his desire to hire from within because it was good for morale. Def.s’ Mot., Ex. F, Foran Dep. 6. In a May 16, 2005 memo, Judge Foran wrote: Because of unforeseen developments, I have decided against filling this position with an interim appointment. Instead, I have decided to appoint from within and am appointing our current Clerk of the Court, Sharon Langen, as the new 19th District Court Administrator, effective June 2, 2005. Pl.s’ Resp., Ex. 19. For the remainder of 2005, Judge Foran served as chief judge, Ms. Langen served as court administrator, and the plaintiff served as deputy court administrator. Judge Foran was “perfectly satisfied with everything they were doing. They were doing an excellent job, and the job of administering the court was being done.” Pl.’s Resp., Ex. 2, Foran Dep. 18. There were no grievances and no complaints from staff or the community. In mid-November, 2005, Judge Somers was appointed to a two-year term as chief judge. On January 10, 2006, John Hazime was demoted from Work Program Director to Court Officer. Judge Somers told Mr. Hazime that this was done solely for budgetary reasons. However, Mr. Hazime testified that he believed that he lost the position due to his friendship with the plaintiff and Judge Hultgren. Pl.’s Resp., Ex. 4, Hazime dep. at 14-15. Then Judge Somers began to find fault with the job Ms. Langen was doing as clerk of the court. He stated that he did not have confidence in Ms. Langen, that she was unable to perform the -8- duties of court administrator. Pl.’s Resp., Ex. 8, Somers Dep. 135-37. “She’s too timid in dealing with other people. She didn’t have any real response to the demands to cut personnel. Julie [Pucci] did a better job in that regard . . . .” Id. at 144. On June 12, 2006, Judge Somers e-mailed regional court administrator Green, stating: “I would like the opportunity to talk with you in the not-too-distant future concerning potential administrative changes here at the 19th.” Pl.’s Resp., Ex. 22. Ms. Green spoke to Judge Somers, and sent him an e-mail on July 21, 2006 that states: Hope I was of some help, you have a difficult and delicate situation on your hands. One thing that occurred to me after I left – you might want to inquire as to when Julie is eligible for retirement. You asked about possible legal ramifications, and if my memory serves Dearborn has an “all or nothing” retirement system that I thought Julie was very close to vesting in. Terminating her on the eve of her vesting might be seen as suspect if she sues. If she vests it might also give you and she a graceful way out. Ibid. On October 10, 2006, Judge Somers sent out memo announcing another administrative reorganization. He proposed to retain one court administrator and one clerk of the court and eliminate the position of deputy court administrator, held by the plaintiff. Sharon Langen was to continue as the court administrator until a new one was hired, and then she would be reassigned to the clerk of court position. Judge Somers permitted the plaintiff to stay with the court until January 1, 2007, which had some effect on her eligibility for retirement benefits. The plaintiff requested, but was denied, a severance package. When the plaintiff was first employed as a court typist, she was a member of a labor union. She did not retain her union status through her various promotions, but she never signed an “at-will” employment agreement, as did some other court employees. She testified that the court does not have any personnel policies or employee handbooks, so it has “always adopted the City of -9- Dearborn’s.” Def.’s Mot., Ex. C, Pucci Dep. 64, 66. The plaintiff submitted an affidavit that non- union court employees were treated in the same manner as union court employees, and she reasonably believed that she could only be discharged for cause. Pl.’s Resp., Ex. 32, Pucci Aff. ¶¶ 5, 8, 11. The court’s practice was consistent with the policies of the city, such as giving progressive discipline, and the court “wouldn’t just fire somebody to fire them.” Def.s’ Mot., Ex. C, Pucci Dep. 67. The plaintiff also related events involving the termination of two male employees years earlier, Robert Cardoni and Lloyd Hren, who both were given severance packages consisting of a lump sum payment and six months of health insurance, in exchange for signing a waiver of their employment rights. Gary Dodge was selected for the court administrator position. According to the plaintiff, Mr. Dodge does not have a college degree or any district court or Michigan court experience. Def.s’ Mot., Ex. C, Pucci Dep. 103. Mr. Dodge is the nephew of a member of Judge Somers’ Kiwanis Club, a fact that Judge Somers disclosed to Ms. Green. Def.s’ Mot., Ex. E, Somers Dep. 193. Mr. Dodge previously had worked as a court administrator for a court in Chicago, but was told to resign or be fired because the judges “couldn’t work with [him] anymore” and “didn’t trust [him].” Pl.’s Resp., Ex. 36, Dodge Dep. 19-21. The deputy court administrator position was eliminated, and the plaintiff lost her job, despite Judge Somers’s professed satisfaction with her job performance. The only open position was the clerk’s position, for which Ms. Langen, with ten years experience in that role, was “the natural choice.” Pl.’s Resp., Ex. 8, Somers Dep. 40. Initially the plaintiff was offered the chance to receive a cash payment for one-half of her sick days. However, Judge Somers changed his mind on that offer when he learned that the plaintiff found employment with the city of Dearborn. -10- When threatened with a lawsuit, Judge Somers wrote a letter to the plaintiff’s attorney denying any illegal motive in his termination of the plaintiff. He offered reasons as to why he was dissatisfied with her job performance, and insisted that he merely “implement the same organizational plan that was already in the works under Judges Foran and Hultgren before the Michigan Supreme Court intervened with regard to Ms. Pucci’s promotion.” Pl.’s Resp., Ex. 26 (2/7/07 letter from Somers). Judge Foran testified that he believes Judge Somers fired the plaintiff because he did not like her and did not approve of her lifestyle. Def.s’ Mot., Ex. F, Foran Dep. 42. He stated that he found the defendants’ invocation of his name as justification for their conduct “laughable, outrageous, and prevaricative.” Id. at 42. The plaintiff’s complaint in this Court has been amended twice. She sought and was granted leave to file a third amended complaint, but the record shows no such filing. Presently, the operative complaint contains four counts: count I alleges violation of 42 U.S.C. § 1983 for “due process” violations; count II alleges retaliation for conduct protected by the First and Fourteenth Amendments; count III alleges religious discrimination in violation of the Michigan Civil Rights Act; and count V alleges sex discrimination in violation of the Michigan Civil Rights Act. Count IV was dismissed by stipulation, and the city of Dearborn was dismissed as a defendant, also by stipulation. II. The defendants have moved for summary judgment on all counts of the amended complaint. They claim Eleventh Amendment immunity from the federal claims in counts I and II; they argue that the plaintiff had no protectable property interest under count I and no protectable conduct -11- alleged in support of the retaliation claim in count II. They also contend that the plaintiff has not offered evidence on the religious and sex discrimination claims in counts III and V. A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics and Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). Thus a factual dispute which “is merely colorable or is not significantly probative” will not defeat a motion for summary judgment which is properly supported. Kraft v. United States, 991 -12- F.2d 292, 296 (6th Cir. 1993); see also Int’l Union, United Auto., Aerospace and Agric. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999). The party bringing the summary judgment motion has the initial burden of informing the district court of the basis for its motion and identifying portions of the record which demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). The party opposing the motion then may not “rely on the hope that the trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). A party opposing a motion for summary judgment must designate specific facts in affidavits, depositions, or other factual material showing “evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. If the non-moving party, after sufficient opportunity for discovery, is unable to meet his or her burden of proof, summary judgment is clearly proper. Celotex Corp., 477 U.S. at 322-23. The party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). “[T]he party opposing the summary judgment motion must ‘do more than simply show that there is some “metaphysical doubt as to the material facts.”’” Highland Capital, Inc. v. Franklin Nat. Bank, 350 F.3d 558, 564 (6th Cir. 2003) (quoting Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir. 1994), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 586 (1986 . “Thus, the mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there -13- must be evidence on which the jury could reasonably find for the plaintiff.” Ibid. (quoting Anderson, 477 U.S. at 252) (internal quote marks omitted). A. The defendants first argue that the Nineteenth District Court and Judge Somers (in his official capacity) have Eleventh Amendment immunity from suit in federal court. They reason that the court is an arm of the state, and they point to a similar case in which another judge of this court that state district courts are entitled to sovereign immunity for damage suits. See Englar v. 41B Dist. Court, 2006 WL 2726986, 2006 U.S. Dist. LEXIS 68157 (E.D. Mich. Sept. 22, 2006). The plaintiff disputes this claim on the ground that the most important factor in determining whether an entity has sovereign immunity – whether the state treasury must pay a judgment rendered against the entity – augurs in favor of no immunity. Sovereign immunity does not apply, the plaintiff insists, because the judgment will be paid by the City of Dearborn, not the state. “It is well-settled that a suit in federal court by private parties seeking to impose a liability which must be paid from public funds in the state treasury is barred by the Eleventh Amendment.” Hutsell v. Sayre, 5 F.3d 996, 999 (6th Cir. 1993) (internal citations and quotations omitted). “When suit is brought against a public agency or institution, and/or its officials, the application of the Eleventh Amendment turns on whether said agency or institution can be characterized as an arm or alter ego of the state, or whether it should be treated instead as a political subdivision of the state.” Ibid. Whether the judgment will be paid from the treasury is the most important factor in determining whether an entity has sovereign immunity. Hess v. Port Authority Trans-Hudson Corp., 513 U.S. 30, 49-50 (1994); Hutsell, 5 F.3d at 999 (“The most important factor in resolving this question, however, is whether any monetary judgment would be paid out of the state treasury.”). -14- This is because the “the impetus for the Eleventh Amendment [was] the prevention of federal-court judgments that must be paid out of a State’s treasury.” Hess, 513 U.S. at 48. Other factors include the “status of the entity under state law,” the amount of control the state has over the entity, and whether the “entity is concerned with state-wide or local issues.” Alkire v. Irving, 330 F.3d 802, 812-13 (6th Cir. 2003). The Sixth Circuit held that these factors should apply to a determination of the Eleventh Amendment’s applicability to a suit against a local court. Alkire, 330 F.3d at 813; see also Cash v. Hamilton County Dept. of Adult Probation, 388 F.3d 539, 545 (6th Cir. 2004) (“A final resolution of this issue will turn on factual findings regarding whether the Department of Adult Probation is part of the Ohio court system and whether the State or the County would pay damages for a constitutional violation perpetrated by the Department.”). At least two other judges of this District have concluded that district courts in Michigan are entitled to sovereign immunity. In Englar v. 41B Dist. Court, 2006 WL 2726986, 2006 U.S. Dist. LEXIS 68157 (E.D. Mich. Sept. 22, 2006), Judge Borman wrote: First, it is clear that the employees of 41B District Court are employees of the state judicial branch and not employees of Clinton Township. Michigan law recognizes that employees of the judicial branch “are not employees of the county, city, or other district control unit, even though they are paid by the district control unit.” Judges of the 74th Judicial District v. Bay County, 385 Mich. 710, 723 (1971). Second, as a matter of law, this Court finds that Defendant 41B District Court is an “arm of the state” entitled to sovereign immunity in suits for damages in federal court. Id. at *5; see also Geller v. Washtenaw County, 2005 WL 3556247 (E.D. Mich. Dec 29, 2005) (Borman, J.). Judge Gadola reached the same conclusion in a published decision: Michigan Circuit Courts, are funded in part by the county in which they are located. -15- In Ernst, the Sixth Circuit, while again leaving open the question of whether other factors may be considered in the arm of the state analysis, stated that “when no evidence is presented regarding the issue of whether the funds to satisfy a judgment would come from the state treasury, the other factors may be considered.” 379 F.3d 373, 381, (citing Dubuc v. Mich. Bd. of Law Examiners, 342 F.3d 610, 615 (6th Cir.2003 . “The parties have not submitted any evidence regarding whether the State of Michigan would be ultimately responsible for any money judgment against the Board or the Bar. The other factors, however, weigh in favor of finding the Board and the Bar immune from this lawsuit.” In this case, the parties have not presented any evidence showing whether the State of Michigan would be responsible for a money judgment against the Defendant Circuit Courts. The Court, while noting that the Sixth Circuit has expressly left undecided the question of whether the impact on the state treasury is the only factor to be considered in the analysis, finds that, in such a situation, where no evidence as to funding is available, it may consider other factors in its analysis. Specifically, the Court, in the absence of evidence on the most important factor, looks to the “dignity” factor examined by the Sixth Circuit in S.J., 374 F.3d at 421. The Court, in examining this factor, finds that Defendant Circuit Courts, like the Ohio county court in S.J., are the “adjudicative voice” of the State of Michigan, created pursuant to the Michigan Constitution and subject to the supervision of the Michigan Supreme Court. As such, they are “arms of the state,” entitled to the sovereign immunity provided to the State of Michigan itself. Accordingly, the Court affords Defendants Oakland County Circuit Court and Clinton County Circuit Court Eleventh Amendment immunity and grants their Motions to Dismiss. Smith v. Oakland County Circuit Court, 344 F. Supp. 2d 1030, 1056 (E.D. Mich. 2004). The Court finds neither of these cases persuasive in the present matter, however, because neither focused on the “most important factor” of the state treasury’s exposure to a judgment in the event of liability. In this case, the responsibility for funding a third class district court – such as the Nineteenth District Court – lies with the local unit of government, here the city of Dearborn. See Mich. Comp. Laws §§ 600.8121(4), 600.8103(3). Michigan law confirms that the State is not responsible for claims by employees arising from their employment by a district court. Michigan Compiled Laws § 600.591(12) expressly states: “Except as otherwise provided by law, the state is not the employer of court officers or personnel and is not liable for claims arising out of the -16- employment relationship of court officers or personnel or arising out of the conduct of court officers or personnel.” Consequently, the state is not responsible for employment-related claims. Kain v. State, 109 Mich. App. 290, 311 N.W.2d 351 (1981) (holding that assignment clerk for district court was not a city employee or state employee but, instead, was an employee of judicial district, whose costs were to be paid by the “local control unit,” and thus state was not liable for workers’ compensation benefits to clerk’s dependents following his death which arose out of and in course of his employment). The state supreme court has applied this concept to employment discrimination cases brought by court employees. See Cameron v. Monroe County Probate Court, 457 Mich. 423, 426-27, 579 N.W.2d 859, 862 (1998) (observing that “[t]he county contends, correctly, that employment discrimination is not an ‘expense of justice,’” and holding that “supervision and administration of court personnel is a necessary expense of justice for which the county is expected to pay”). It is apparent in this case that any judgment against Judge Somers or the Nineteenth District Court must be satisfied by the city of Dearborn, not the state treasury. The Supreme Court and Sixth Circuit have suggested that this fiscal money judgment issue, if not dispositive, is the most important factor. Because the state will not pay for a money judgment here, sovereign immunity does not bar suit against the defendants. -17- B. On the federal claims, the plaintiff has sued Judge Somers in both his individual and his official capacities. The defendants argue that the official capacity claim (and presumably the claim against the district court itself) must fail because there is no link between a municipal policy or custom and the constitutional violation, as required by Monell v Dep’t of Soc. Serv.s, , 691 (1978). The defendants reason that the plaintiff “has not made any showing that Somers’ actions (i.e., the reorganization) represented ‘official policy or custom’ of the 19th District Court or the judicial branch of the State of Michigan.” Def.s’ Mot. for Summ. J. 8. She only complained about the plan when the Michigan Supreme Court interpreted its anti-nepotism policy. The Court finds this argument unpersuasive. The Supreme Court has held that “Congress did not intend municipalities to be held liable unless action pursuant to official municipal policy of some nature caused a constitutional tort.” Monell, 436 U.S. at 691. However, “[a] municipality may be liable under Section 1983 for actions of its authorized policymakers ‘where – and only where – a deliberate choice to follow a course of action is made from among various alternatives by the official or officials responsible for establishing final policy with respect to the subject matter in question.’” Adair v. Charter County of Wayne, 452 F.3d 482, 493 (6th Cir. 2006) (quoting Pembaur v. City of Cincinnati, 475 U.S. 469, 483 (1986 . A policymaker is the final authority if his “‘decisions are final and unreviewable and are not constrained by the official policies of superior officials.’” Ibid. (quoting Waters v. City of Morristown, 242 F.3d 353, 362 (6th Cir. 2001 . A final policymaker is more than a final decisionmaker; a final policymaker is charged with the duty to “formulate[ ] plans for the implementation of broad goals.” Miller v. Calhoun County, 408 F.3d 803, 814 (6th Cir. 2005) (alteration in original). -18- The plaintiff complains of Judge Somers’s decision to eliminate her position and fire her. Under Michigan law, the chief judge is authorized to coordinate the court’s finances, including the duty to “supervise the performance of all court personnel, with authority to hire, discipline, or discharge such personnel.” Mich. Ct. R. 8.110(C)(3)(d). Judge Somers acted pursuant to this authority when he terminated the plaintiff. The defendants seek cover from the letter of Mr. Gromek that says the plaintiff cannot become the court administrator. However, that letter provides no safe harbor since it had neither the force of law nor the power of administrative direction as set forth in the Michigan court rules prescribing the supreme court’s superintendence over administrative matters. See Mich. Ct. R. 8.110(C)(1) (requiring a chief judge’s obedience only to “the Michigan Court Rules, administrative orders of the Supreme Court, and local court rules”). Moreover, the decision to implement the court reorganization and fire the plaintiff was Judge Somers’s and his alone. When he became chief judge, he chose to set in motion a course of events that he knew would lead inevitably to the plaintiff’s termination from a position that even the state supreme court said she could retain. If his decision was animated by an illegal motive, he is liable in his individual capacity and his official capacity as the final policymaker for the district court, and the district court shares that liability. C. The defendants next attack the plaintiff’s claim alleging a denial of procedural due process. Pucci’s claims that the defendants violated her constitutional rights are brought pursuant to 42 U.S.C. § 1983, under which the plaintiff must prove (1) that there was a deprivation of a right secured by the Constitution and (2) that the deprivation was caused by a person acting under of color of state law. Wittstock v. Mark A. Van Sile, Inc. 330 F.3d 899, 902 (6th Cir. 2003). Since the -19- plaintiff was a court employee, there is no dispute over the second component. The defendants argue that Pucci cannot prove a violation of the Due Process Clause because she was an at-will employee and she had no property interest in continued employment that was protected by the Constitution. The Fourteenth Amendment to the Constitution prohibits State and local governments from “depriv[ing] any person of life, liberty, or property, without due process of law[.]” Federal courts consistently have recognized that state civil servants may have a property interest in continued employment under certain circumstances and must be afforded due process before being discharged. See, e.g., Cleveland Bd. of Educ. v. Loudermill, (1986); Relford v. Lexington-Fayette Urban County Government, 390 F.3d 452, 460 (6th Cir. 2004) (stating that “[u]nder state law, government and civil service employees may have a property right in their continued employment”). A claimed due process violation is analyzed in two steps. First the court must determine whether a protected property interest exists; absent an interest, no right to due process is present. Singfield v. Akron Metropolitan Housing Authority, 389 F.3d 555, 565 (6th Cir. 2004). The second step, if the first is answered in the affirmative, poses the question of what process is due. Ibid; see also Johnston-Taylor v. Gannon, 907 F.2d 1577, 1581 (6th Cir. 1990). The formality of the process due under federal law “depends upon the importance of the [property] interest” at stake. Farhat v. Jopke, 370 F.3d 580, 595 (6th Cir. 2004). The Supreme Court has recognized that a municipal employee can have a property interest in continued employment; however, such “property interests are not created by the Constitution[;] ‘they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law. . . .’” Loudermill, 470 U.S. at 538 (quoting Board of Regents -20- v. Roth, , 577 (1972 . Generally, a showing that a civil servant may be fired only for cause, by operation of state contract law, statute, or administrative rules and regulations is sufficient to trigger the second step of the analysis. Farhat, 370 F.3d at 595. Michigan law provides three methods by which a plaintiff can prove he is a “just cause” employee: “(1) proof of ‘a contractual provision for a definite term of employment or a provision forbidding discharge absent just cause;’ (2) an express agreement, either written or oral, regarding job security that is clear and unequivocal; or (3) a contractual provision, implied at law, where an employer’s policies and procedures instill a ‘legitimate expectation’ of job security in the employee.” Lytle v. Malady (On Reh), 458 Mich. 152, 164, 579 N.W.2d 906, 911 (1998). In this case, the parties agree that the plaintiff can point to no contractual provision guaranteeing just cause termination. Nor has the plaintiff produced any evidence of an express written or oral agreement. However, the Court believes that the plaintiff has come forward with evidence that creates a fact question as to the employer’s policies and procedures creating a legitimate expectation of a secure job that would not be withdrawn absent just cause. Although in Michigan, the “default principle” is that employment is at-will, Mannix v. County of Monroe, 348 F.3d 526, 532 (6th Cir. 2003), the city of Dearborn protects its civil servants from termination except for “good cause.” Such a policy creates a property interest subject to constitutinal protection. Silberstein v. City of Dayton, 440 F.3d 306, 311 (6th Cir. 2006) (noting that “[t]he Supreme Court has recognized that when a state statute provides that ‘classified civil service employees’ may be dismissed only for cause, the statute creates a property interest in one’s employment that is protected by the Fourteenth Amendment”). Although not expressly adopted by the court, the plaintiff testified that the court implicitly adopted the policies. The evidence bears this -21- out: two individuals who were terminated received severance packages and the city’s civil service commission got involved when the plaintiff’s job was reclassified. The plaintiff has created an issue of fact whether, by implicitly adopting these policies – even voluntarily, and in a non-contractual manner – the court created an expectation of continued employment under Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 613, 292 N.W.2d 880, 892 (1980) (holding that “[i]t is enough that the employer chooses, presumably in its own interest, to create an environment in which the employee believes that, whatever the personnel policies and practices, they are established and official at any given time, purport to be fair, and are applied consistently and uniformly to each employee. The employer has then created a situation ‘instinct with an obligation’”). The plaintiff then had a property interest in continued court employment. It appears that the parties do not dispute that the plaintiff was not provided with any pre- termination procedural process. Sixth Circuit precedent makes clear “that in the pretermination stage, the employee does not have a right to, and the Constitution does not require, a neutral and impartial decisionmaker. The ‘right of reply’ before the official responsible for the discharge is sufficient.” Farhat, 370 F.3d at 595. But the plaintiff was not even afforded that in this case. In Buckner v. City of Highland Park, 901 F.2d 491, 494 (6th Cir. 1990), the Sixth Circuit held that due process before termination means “oral or written notice of the charges against him or her, an explanation of the employer’s evidence, and an opportunity to present his or her side of the story to the employer.” At the pre-termination stage, “the elements required for due process are notice and an opportunity to respond.” Farhat, 370 F.3d at 595 (internal citations and quotations omitted). -22- The Court believes that the defendants are not entitled to summary judgment on the plaintiffs’ violation of due process claim. D. The defendants also attack count II of the amended complaint, which alleges retaliation for exercising a number of constitutional rights. That count of the amended complaint is not a model of clarity, and the Court finds merit in the defendants’ argument that there is no evidence of a violation of the plaintiff’s right to association with Judge Hultgren or the exercise of her own religious practices. To the extent that the complaint can be read as an oblique challenge to the court’s anti-nepotism policy, that challenge must fail. “Virtually every court to have confronted a challenge to an anti-nepotism policy on First Amendment, substantive due process, equal protection, or other grounds has applied rational basis scrutiny.” Montgomery v. Carr, 101 F.3d 1117, 1126 (6th Cir. 1996). Consistent with this rule, when an employee is terminated due to an intimate relationship, the Sixth Circuit applies rational basis review. Beecham v. Henderson County, 422 F.3d 372, 374, 378 (6th Cir. 2005). “The Supreme Court has held that rational-basis review is satisfied ‘so long as there is a plausible policy reason’ for the decision, Nordlinger v. Hahn, 505 U.S. 1, 11 (1992), and it is ‘entirely irrelevant for constitutional purposes’ whether the plausible reason in fact motivated the policymaker, FCC v. Beach Communications, Inc., 508 U.S. 307, 315 (1993).” Beecham, 422 F.3d at 378. There certainly is a plausible reason in this case for the anti-nepotism policy itself, even though the plaintiff did not fall literally within the terms of that policy. But the Court does not read count II of the amended complaint so narrowly. Although the plaintiff has not come forward with evidence that Judge Somers engineered the reorganization to -23- eliminate her job because of his rejection of her religious practices or association with Judge Hultgren, the complaint can be read to include a claim for retaliation due to the plaintiff’s complaints of Judge Somers’s own practice of preaching his religion from the civil bench. A public employee pleads a viable claim for retaliation in violation of the First Amendment if she demonstrates that “(1) [s]he engaged in constitutionally protected speech or conduct; (2) an adverse action was taken against [her] that would deter a person of ordinary firmness from continuing to engage in that conduct; and (3) there is a causal connection between elements one and two-that is, the adverse action was motivated at least in part by his protected conduct.” Scarbrough v. Morgan County Bd. of Educ., 470 F.3d 250, 255 (6th Cir. 2006) (citing Thaddeus-X v. Blatter, 175 F.3d 378, 394 (6th Cir. 1999) (en banc ; see also Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 287 (1977). If the plaintiff makes this showing, the burden then shifts to the defendant to show by a preponderance of the evidence “that it would have taken the same action even in the absence of the protected conduct.” Jackson v. Leighton, 168 F.3d 903, 909 (6th Cir. 1999) (quotation omitted); see also Mt. Healthy, 429 U.S. at 287. The Supreme Court has held that “when public employees make statements pursuant to their official duties, the employees are not speaking as citizens for First Amendment purposes, and the Constitution does not insulate their communications from employer discipline.” Garcetti v. Ceballos, 547 U.S. 410, 421 (2006). However, in this case, there is evidence that the plaintiff complained “as a citizen,” Def.s’ Mot., Ex. C, Pucci Dep 28, about Judge Somers’s practice of religiosity in his judicial pronouncements, and those complaints were lodged with local and state officials. The plaintiff plainly was speaking out on a matter of public concern. “Matters of public concern include speech that ‘relat[es] to any matter of political, social, or other concern to the -24- community.’” Rodgers v. Banks, 344 F.3d 587, 596 (6th Cir. 2003) (quoting Connick v. Myers, , 146 (1983 . Such speech calls attention to the functioning of government, misconduct of public employees or officials, or breaches of public trust. See Connick, 461 U.S. at 148; Rodgers, 344 F.3d at 596; Brandenburg v. Housing Authority of Irvine, 253 F.3d 891, 898 (6th Cir. 2001). In determining whether there is sufficient evidence to warrant a trial on the causation element, “th[e] analysis focuses on whether the adverse employment action was motivated in substantial part by the plaintiff's constitutionally protected activity.” Sowards v. Loudon Cnty., 203 F.3d 426, 431 (6th Cir. 2000). The temporal proximity between the complaint and the termination can demonstrate discriminatory animus. Singfield v. Akron Metro. Hous. Auth., 389 F.3d 555, 565 (6th Cir. 2004). In this case, Judge Somers set in motion the process to eliminate the plaintiff’s job within months of his assumption of authority as chief judge. Moreover, the record contains abundant evidence of his animosity toward the plaintiff’s continued employment with the court and his efforts to remove her from the employee roles even before he assumed that position. A jury could conclude from this evidence that Judge Somers’s motives for removing the plaintiff were unconstitutional and retaliatory. Therefore, that portion of count II alleging retaliatory discharge for the exercise of First Amendment speech rights may proceed to trial, although the balance of that count will be dismissed. Lastly, defendant Somers claims qualified immunity on this claim against him in his individual capacity. However, the right to speak out on matters of public concern is clearly established, and it would have been plain to a reasonable person in the defendant’s position that he could not retaliate against a person complaining about his judicial misconduct without running afoul of the First Amendment. -25- -26- E. The defendants next argue that the plaintiff’s claim of religious discrimination under state law must fail because she has not shown that she was qualified for the court administrator position. That position was a level above the deputy court administrator position, with higher pay and more responsibility, and the state supreme court advised Judge Foran that the plaintiff could not improve her position with the Nineteenth District Court. The defendants also argue that the plaintiff has not shown that the defendants treated the plaintiff differently than individuals with different religious views. The plaintiff answers that she was a member of the protected class of people who did not share Somers’ view of non-marital intimate relationships, she was fired, and Somers was predisposed to discriminate against people in her position and actually did so. Under the Michigan Civil Rights Act, “(1) An employer shall not do any of the following: (a) Fail or refuse to hire or recruit, discharge, or otherwise discriminate against an individual with respect to employment, compensation, or a term, condition, or privilege of employment, because of religion . . . ” Mich. Comp. Laws § 37.2202(1)(a). Michigan’s Elliot Larson Civil Rights Act tracks federal law, and the Michigan courts often refer to Title VII jurisprudence when evaluating such claims. See Robinson v. Ford Motor Co., 277 Mich. App. 146, 153, 744 N.W.2d 363, 367-68 (2007). A person alleging a violation of the Civil Rights Act has the initial burden of establishing that her employer discriminated against her because of religion. After examining the record in this case, despite all of Judge Somers’s proselytizing, the Court has not found evidence that Judge Somers actually disapproved of the plaintiff because she was cohabitation with Judge Hultgren out of wedlock. One might assume that such practice might -27- offend Judge Somers’s brand of morality, but there is no evidence that he expressed such disapproval or acted on it in making employment decisions. There is evidence that the plaintiff was qualified to perform the job of court administrator. Moreover, the evidence is plain that Judge Somers did not want the plaintiff employed in the Nineteenth District Court, that the reason for his intense desire to get rid of her was her relationship with another judge of that court, and that his motivation to implement a discarded court reorganization plan could be viewed as a pretext for his true mission of eliminating the plaintiff’s job. But none of this can be tied to “discriminat[ion] . . . because of religion. ” Mich. Comp. Laws § 37.2202(1)(a). The Court finds, therefore, that the defendants are entitled to summary judgment on count III of the amended complaint. F. Finally, the defendants challenge that plaintiff’s claim of sex discrimination on the premise that she was not qualified for Court Administrator, so she cannot base her discrimination claim under the McDonnell Douglas framework when she was not placed in that position. The defendants’ argument misses the mark, however. First, there is no state law, rule of administrative order that renders the plaintiff unqualified for the position. As noted earlier, the legal effect of the letter from Mr. Gromek is questionable, and it is unclear that the defendants were entitled to act on it. Second, it is pellucidly clear that the plaintiff was qualified for the position as deputy court administrator. The defendant’s action sought to eliminate that position – and thereby the plaintiff herself – from the rolls of the court’s employees. She was replaced by a male whose qualifications were demonstrably inferior to hers. Third, the defendants claim that they had a legitimate reason for implementing court reorganization, which suggests that the motives for firing the plaintiff through -28- job elimination were mixed. The Sixth Circuit recently has held in the Title VII context that “the McDonnell Douglas/Burdine burden-shifting framework does not apply to the summary judgment analysis of Title VII mixed-motive claims.” White v. Baxter Healthcare Corp., --- F.3d ----, 2008 WL 2607893, at *14 (6th Cir. Jul. 3, 2008). Instead, in order “to survive a defendant’s motion for summary judgment, a Title VII plaintiff asserting a mixed-motive claim need only produce evidence sufficient to convince a jury that: (1) the defendant took an adverse employment action against the plaintiff; and (2) race, color, religion, sex, or national origin was a motivating factor for the defendant’s adverse employment action.” Ibid. (citations and quotations omitted). Since state law discrimination claims parallel the Sixth Circuit’s Title VII jurisprudence, see Meyer v. City of Center Line, 242 Mich. App. 560, 569, 619 N.W.2d 182, 188 (2000), the plaintiff’s sex discrimination claim should be analyzed under White’s new test. The plaintiff’s evidence easily satisfies that test. Summary judgment on count V, therefore, will be denied. III. The Court finds that the defendants are not entitled to immunity under the Eleventh Amendment claims, the plaintiff has not come forward with sufficient evidence of religious discrimination, and fact questions preclude summary judgment on the remaining claims, except for portions of count II of the amended complaint. Accordingly, it is ORDERED that the defendants’ motion for summary judgment [dkt #31] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that count III (religious discrimination) and that part of count II of the second amended complaint alleging a retaliation for exercising rights other than rights of free -29- speech are DISMISSED WITH PREJUDICE. The plaintiff must file a third amended complaint to clarify her free speech retaliation claim on or before July 24, 2008. It is further ORDERED that counsel for the parties appear before the Court for a status conference on August 11, 2008, at 4:00 p.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 10, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 10, 2008. s/Felicia M. Moses FELICIA M. MOSES -30-

=== Ellis Order Adopt in part R&R, Deny Motion to Dismiss ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION DONALD ELLIS, Plaintiff, v. SEETH VADLAMUDI, NAOMI SMITH-GLADNEY, C. BEASLEY, SONYA GREEN, and D. MOORE, Defendants. ______________________________________________/ Case Number 07-10773 Honorable David M. Lawson Magistrate Judge Charles E. Binder ORDER ADOPTING MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION, OVERRULING DEFENDANTS’ OBJECTIONS, AND DENYING DEFENDANTS’ MOTION TO DISMISS This matter is before the Court on the defendants’ objections to a report filed by Magistrate Judge Charles E. Binder recommending that the defendants’ motion to dismiss be denied. The plaintiff is a prisoner in the custody of the Michigan Department of Corrections, who has filed a complaint alleging, among other things, that the defendants were deliberately indifferent to his serious medical needs. He contends that the defendants have failed to treat the chronic pain that results from several diagnosed conditions, and he now has been rendered immobile and confined to a wheelchair. He also alleges conspiracy. The defendants contend that the plaintiff failed to exhaust his administrative remedies as required by 42 U.S.C. § 1997e(a), and his complaint should be dismissed. The case was referred to Judge Binder to conduct all pretrial proceedings. On November 19, 2007, Judge Binder filed a report recommending that the motion to dismiss be denied. The defendants filed timely objections. The Court has reviewed the file, the report and recommendation, the defendants’ objections, and has made a de novo review of the record in light of the parties’ submissions. The Court now concludes that the plaintiff filed a timely grievance against all the defendants alleging an ongoing conspiracy to deprive him of medical treatment that addressed his complaints of intractable pain, he pursued his grievance through all the required steps, and therefore he exhausted his administrative remedies. The Court will adopt the magistrate judge’s report in most respects and deny the motion to dismiss. I. A. The events about which plaintiff Donald Ellis complains occurred when he was incarcerated at Mound Correctional Facility in Detroit, Michigan. According to his complaint filed in this court on February 22, 2007, the plaintiff has been diagnosed with a variety of medical disorders over the years, including sarcoidosis of the lungs in 1994, chronic prostatitis in 1998, and degenerative joint disease in 2004. In 2004, the plaintiff says he began to experience severe pain in his lower back and abdominal area. In that same year, he alleges that he complained about this pain to defendant Dorothy Moore, a registered nurse in the Mound Correctional Facility health care department, and to other unnamed nurses who advised him to take aspirin and lay down. In 2005 and 2006, the plaintiff complained about his pain to defendants Naomi Smith-Gladney, Christine Beasley and Sonya Greene, nurses employed by the prison, who also told him to take aspirin and lay down. The plaintiff alleges that he requested medical care for his pain “several” times, and he had to wait “several months” before he saw a physician. Compl. ¶ 26. The plaintiff finally saw defendant Seetha Vadlamudi, a prison physician, on two occasions in 2005 and 2006. Defendant Vadlamudi prescribed Tylenol during their first meeting and Motrin during the second. The plaintiff complains that Dr. Vadlamudi did not properly treat his pain. -2- The plaintiff contends that his medical condition now “affect[s] everything [the plaintiff does] from standing, walking, laying down, and using the rest room for bodily functions.” Aff. of Donald Ellis ¶ 2. He alleges that, due to the defendants’ conduct, he “is confined in a prison setting under conditions that impose[] a significant risk to his health and safety as no medical treatment has been provided for his medical need[s],” Compl. ¶ 29, and he was “subjected . . . to increased pain in his lower back and abdomen causing him to become confined to a wheel chair for mobility,” Compl. ¶ 31. By February 11, 2007, the plaintiff was receiving treatment at Duane L. Waters hospital from a Doctor Rawals. Aff. of Donald Ellis ¶¶ 4-5. He states that he receives treatment from the hospital three times each week, but that the transport to the hospital now causes him “pain and suffering.” Id. at ¶ 4. On June 5, 2006, the plaintiff submitted a grievance to the Michigan Department of Corrections. Originally he wrote “Ongoing” as the “date of incident,” but someone later wrote “5- 30-06” on the form. The plaintiff complains that he “do[es] not have access to Health Care Staff as they do not respond to my medical kites requesting treatment or medical assistance.” He continues: DELIBERATE INDIFFERENCE TO MY SERIOUS MEDICAL NEEDS AND A RISK TO FUTURE HARM This grievance is submitted against NRF Health Care Personnel employed from July 2005, to June 2006, To Wit: Nurse Gladny; Nurse Beasley, Jane Doe Nurse-1, Jane Doe Nurse-2, and Doctor Vadlamudi. This is so because I have complained about severe abdomen and lower back pain since 2004, but I have yet to receive treatment for the pain which is getting worse. . . . The delay in providing treatment subjects me to a serious risk of future harm to my person because my condition can cause severe damage to those body parts affected by the medical ailments. I hereby request that I be seen immediately by health care and a medical program be provided to estop [sic] the pain and sufferings [sic] I have underwent since 2004. The pain is so intense is causes my legs and buttocks areas to go numb. Compl. Ex. A. -3- After receiving no response from the Step I level, the plaintiff appealed to Step II on July 6, 2006. On August 16, 2006, Karri Osterhout, Administrative Assistant for Region III Health Care Administration, found that “[e]vidence supports [the prisoner’s] claim that there was a delay in treatment for [the prisoner’s] abdominal and lower back pain. Due to the nature of this complaint, this case will be referred to quality improvement for review.” Compl. Ex. C. The response also summarized its investigation into the factual background of the plaintiff’s complaint: Review of the medical record relating to your abdominal and lower back pain reveals: 8/3/05 MSP exam for chronic abdominal and lower back pain (labs and x- ray ordered; Motrin prescribed); 6/6/06 MSP exam for lower back pain and numbness and tingling in right leg (re-ordered x-ray, labs ordered and Tylenol given for pain); 6/13/06 X-ray Lumbar spine (advanced degenerative disk changes at L3-4 level with arthritis noted of these vertebral bodies; mild diffuse facet joint arthritic changes seen throughout the lumbar spine); 6/24/06 Kite concern - lower back pain and numbness in hips and legs; 6/30/06 MSP Chart Review (Motrin prescribed for pain; follow up after labs and x-rays); 7/8/06 MSP exam (x-ray reviewed; MSP ordered additional x-rays and will follow up after x-ray results); 7/11/06 X-ray PA and lateral chest (normal); 7-11-06 X-ray Lumbar spine (degenerative disk L3-4). Ibid. The plaintiff was unsatisfied, however, and on August 25, 2006, he submitted his grievance to Step III, the highest level of appeal. On September 11, 2006, “J. Armstrong” issued the following response: Note: “On-going” is an inappropriate entry for “Date of Incident.” Grievance alleges that he was not timely seen by the MSP for his abdominal and back pains. The Step I and II responses are affirmed. No further relief can be provided. Grievance appeal denied. Compl. Ex. D. The plaintiff alleges five counts in his pro se complaint, filed on February 22, 2007. Count one alleges a violation of the Fourteenth Amendment’s Due Process Clause because the defendants “provided Plaintiff with drugs without first examining him for the medication and denied him treatment, medical diagnosis, and access to a medical doctor to properly diagnose and treat him.” -4- Compl. ¶ 34. Count two alleges a violation of the Eight Amendment on the ground that the defendants were deliberately indifferent to his health and prevented him from receiving medical care. Compl. ¶ 35. Count three alleges a violation of his right to receive medical care. Compl. ¶ 36. Count four alleges that the defendants conspired among themselves to deny the plaintiff treatment, “causing his condition to worsen, requiring a wheel chair.” Compl. ¶ 37. Count five alleges a violation of state law, Mich. Comp. Laws § 4.202(e). He seeks an order requiring the defendants to provide him with medical treatment, and over $10,000 in damages. B. The defendants moved to dismiss on the ground that the plaintiff’s grievance was untimely. They point to the grievances themselves – which are attached to the complaint – and to other evidence consisting of the plaintiff’s medical records, and observe that the plaintiff is complaining of pain that dates back to 2004, yet he only filed a single grievance in 2006. The defendants reason that the prior incidents cannot form the basis of a lawsuit under the Prison Litigation Reform Act because the grievance is untimely. The magistrate judge believed that the grievance was timely because the prisoner was making a complaint about an ongoing problem instead of a discrete incident. He found no Sixth Circuit precedent addressing the issue of an ongoing complaint, but he rejected the defendants’ suggestion to follow the Fifth Circuit in Johnson v. Johnson, 385 F.3d 503, 519 (5th Cir. 2004), which dealt with a claim against prison officials for their failure to protect the plaintiff from repeated sexual assaults. The court decided that the plaintiff had only properly exhausted those claims brought within the time period allowed by the prison for filing a grievance, and therefore any assaults that occurred before the first grievance’s permissible time frame could not support the -5- plaintiff’s complaint. However, once the grievance was filed, the plaintiff need not refile the grievance to capture events that occurred after the grievance. The magistrate judge suggested that this case not be followed because an ongoing medical condition is different than ongoing sexual assaults. Instead, the magistrate judge looked to several district court decisions that held that “that claims relating to an ongoing medical condition arising before, as well as after, the relevant grievance was filed may be considered exhausted.” R&R at 8 (citing Griswold v. Morgan, 317 F. Supp. 2d 226, 231 (W.D.N.Y. 2004); Gomez v. Winslow, 177 F. Supp. 2d 977, 982 (N.D. Cal. 2001); Poullard v. Blanco, No. A.05-1019-P, 2006 WL 1675218, *8 (W.D. La. June 9, 2006); Garcia v. Mule Creek State Prison, No. S03-1947MCEPANP, 2005 WL 1366515, *2 (E.D. Ca. May 31, 2005 . The magistrate judge cited the Sixth Circuit decision of Thomas v. Woolum, 337 F.3d 720, 726-27 (6th Cir. 2003), and applied its standard assessing whether the defendants received “fair notice” of the plaintiff’s claims. The magistrate judge concluded that the burden is on the defendants to prove the affirmative defense of lack of exhaustion, suggesting that doubts be resolved in favor of the prisoner. C. The defendants’ objections focus on Supreme Court’s decision in Woodford v. Ngo, (2006), which held that a prisoner must adhere to the time limits in the prison’s regulations. The requirements in Michigan’s regulation establish a seven-day limit to initiate the grievance process. So the defendants insist that the claims against Moore and Gladney must fail because they had no contact with the plaintiff after 2005, according to the medical records. The claims against Beasley, Green, and Vadlamudi that arose before or are based on events prior to May 24, 2006 are similarly -6- precluded, although the defendants concede that claims based on the plaintiff’s medical condition against any of the above five defendants because they did or did not do something with regard to his care after May 24, 2006 would be exhausted and can proceed. II. Objections to a report and recommendation are reviewed de novo. 28 U.S.C. § 636(b)(1). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller v. Currie, 50 F.3d 373, 380 (6th Cir.1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). The Prison Litigation Reform Act prohibits the filing of lawsuits alleging a violation of federal law “with respect to prison conditions . . . until such administrative remedies as are available are exhausted.” 42 U.S.C. § 1997e(a). In 2006, the Supreme Court interpreted this provision to bar suit unless the prisoner presented his grievance to the state administrative appeal system within the deadlines set by the state. Woodford v. Ngo, (2006). “[I]t is the prison's requirements, and not the PLRA, that define the boundaries of proper exhaustion.” Jones v. Bock, --- U.S. ----, 127 S. Ct. 910, 923 (2007). The failure to exhaust is an affirmative defense that must be proved by the defendant. Id. at 919; Kramer v. Wilkinson, 226 F. App’x 461, 462 (6th Cir. Mar. 21, 2007) (holding that failure to exhaust “may serve as a basis for dismissal only if raised and proven by the defendants.”). If a prisoner presents both exhausted and unexhausted claims, the Court may proceed to consider the exhausted claims. Jones, 127 S.Ct. at 924. -7- One of the cases relied upon by the magistrate judge, Thomas v. Woolum, 337 F.3d 720, 725- 26 (6th Cir. 2003), held that the PLRA’s exhaustion requirement would not bar a lawsuit if administrative remedies were not available due to a lack of timeliness by the prisoner in seeking review. That holding was expressly abrogated by Woodford. Woodford, 126 S. Ct. at 2384. Now, a prisoner must abide by the time limits of the administrative regulations lest his claim be barred from judicial consideration. The Michigan Department of Corrections has a policy directive applicable to prisoners who wish to grieve actions taken against them or complain about prison conditions: In an effort to resolve grievable issues as soon as possible, prior to submitting a written grievance, the grievant shall attempt to resolve the issue with the staff member involved within two business days after becoming aware of a grievable issue, unless prevented by circumstances beyond his/her control. If the complaint is not resolved, the grievant may file a Step I grievance. PD 03.02.130(R) (12/19/03). Step I must be filed “[w]ithin five business days after attempting to resolve a grievable issue with staff.” PD 03.02.130(X). The grievance must specify “[d]ates, times, places[,] and names of all those involved.” PD 03.02.130(T). If the grievance is not acted upon within the time limits, the prisoner may appeal within ten days of the expiration of the deadline. PD 03.02.130(V). If there is a response with which the prisoner is unsatisfied, he may appeal to the Step II Grievance Coordinator. PD 03.02.130(DD). Step I and Step II grievances are decided by specially designated staff members. PD 03.02.130(P). If the prisoner is still unsatisfied, he may appeal to Step III, where his grievance is sent to the Prisoner Affairs Section. PD 03.02.130(HH). The prison regulations do not define a “grievable issue.” Although some discrete events obviously fit neatly within that label, such as an assault by a prison guard or a denial of certain privileges, other circumstances may not become “grievable” until the passage of time or the -8- aggregation of events manifested by the conduct of several prison staff members. In the latter case, the date of the “grievable issue” may not be obvious, and the rigid application of the time limits established by the regulations becomes difficult. In this case, the plaintiff contends that prison medical personnel were deliberately indifferent to his medical conditions that caused chronic pain. To prove that claim, the plaintiff must show a serious medical need and “that an official who actually knew of the serious medical need possessed ‘a sufficiently culpable state of mind in denying medical care.’” Perez v. Oakland County, 466 F.3d 416, 424 (6th Cir. 2006) (quoting Miller v. Calhoun County, 408 F.3d 803, 813 (6th Cir. 2005 . For an acute medical condition, like a heart attack or a diabetic coma, the time of the failure to treat (and therefore the time of the Eighth Amendment violation) can be determined with some precision, and therefore the time limit for filing a grievance can be readily established. Such is not the case for a chronic medical condition that is ignored, or for which treatment is delayed or inadequate. The seriousness of a chronic condition may not become obvious to prison officials until some time passes, and the indifference to that condition – and the resulting pain suffered by the prisoner that equates to the infliction of punishment – may not become manifest until then as well. Such a condition is properly identified as “ongoing,” and a grievance that identifies the persistent failure to address that condition must be considered timely as long as the prison officials retain the power to do something about it. The defendants in this case argue that the Court should look to the Fifth Circuit decision in Johnson v. Johnson as the analytical framework for analyzing the “accrual” of the grievable issue in this case. Johnson dealt with a claim by a prisoner that officials failed to protect him from the daily sexual assaults by other inmates. The court held that the grievance filed by the prisoner did -9- not serve to exhaust claims for assaults that occurred more fifteen days earlier, but it did cover complaints that he was assaulted and remained unprotected thereafter. Johnson, 385 F.3d at 519, 521 (noting that “Johnson could not have been expected to file a new grievance every fifteen days, or each time he was assaulted (which, according to him, was virtually every day), for the entire period during which he remained unprotected in the general population”). The Court agrees with the magistrate judge that Johnson does not provide guidance in the context of the denial of care for a chronic medical condition. The sexual assaults in Johnson surely were discrete events that should have prompted the prisoner to invoke the administrative complaint system promptly. The Court finds a better analogy in the cases dealing with the statute of limitations on claims of deliberate indifference to chronic medical needs. Other circuits have adopted the position that ongoing deliberate indifference to medical needs is a “continuing violation” that is not captured by a statute of limitation periods as long as the medical need remains untreated. The Seventh Circuit recently held in an unpublished opinion as follows: The district court erred in concluding that Jervis’s suit against Dr. Mitcheff is partly barred by the statute of limitations. Unlike the district court, we do not read the amended complaint to include multiple, discrete claims. Rather, Jervis alleges that ever since he first met with Mitcheff in September 2003, he has not received medical treatment for his knee and back injuries. Deliberate indifference to a serious medical need is a continuing violation that accrues when the defendant has notice of the untreated condition and ends only when treatment is provided or the inmate is released. See Heard v. Sheahan, 253 F.3d 316, 318-19 (7th Cir.2001). The statute of limitations commences anew every day that treatment is withheld, see id. at 318, so in this case it does not matter whether Jervis sued more than two years after he saw Mitcheff for the first and only time. Jervis v. Mitcheff, 258 F. App’x 3, 5-6 (7th Cir. Dec. 13, 2007). In an earlier case, the Seventh Circuit discussed at length when prisoner’s inadequate medical care claims “accrue” for purposes of statutes of limitation: -10- The district court, as we said, thought the date of accrual was when the plaintiff discovered he had a medical problem that required attention. This would be correct if the suit were for medical malpractice. But it is not; malpractice does not violate the Eighth Amendment; instead the suit charges that the defendants inflicted cruel and unusual punishment on the plaintiff by refusing to treat his condition. This refusal continued for as long as the defendants had the power to do something about his condition, which is to say until he left the jail. Every day that they prolonged his agony by not treating his painful condition marked a fresh infliction of punishment that caused the statute of limitations to start running anew. . . . A more difficult question is precisely how far the plaintiff can reach back in seeking to prove liability and estimate damages. He cannot reach back to the first time he noticed the bulge and began to experience pain from it, for remember that his suit is for redress of the deliberate indifference of the defendants, and that could not be thought to begin until they learned he had a condition warranting medical attention yet unreasonably refused to provide that attention. Until then, the defendants had not violated his rights, and so his claim had not accrued. Heard v. Sheahan, 253 F.3d 316, 318 (7th Cir. 2001) (citations omitted). The Eleventh Circuit found that a prisoner’s claims alleging inadequate medical treatment were not barred by the statute of limitations due to the continuing violations doctrine: The facts, as alleged in the complaint, however, support an inference of continued disregard of Robinson’s need of medical treatment for his hernia until October 3, 2003, when Robinson's hernia surgery was performed. Because Robinson’s claim regarding his hernia accrued on October 3, 2003, and Robinson filed his administrative claim on September 23, 2005, within the two year statute of limitations, his FTCA claim is timely as to the denial of adequate health care for his hernia. Likewise, continuing to expose Robinson to the source of his scabies after he was diagnosed was a continuing violation of Robinson’s rights. Because it does not appear beyond a reasonable doubt that Robinson can prove no set of facts which would avoid the statute of limitations, Robinson’s claim is timely as to his continued exposure to scabies. Consequently, we vacate and remand the claims of inadequate medical treatment for Robinson’s hernia and for continued exposure to scabies. Robinson v. United States, 2007 WL 2988759, *2 (11th Cir. Oct. 15, 2007). The Court finds that the plaintiff has properly exhausted his claim alleging a continuous – or “ongoing” – Eighth Amendment violation. The defendants point out that medical records show that the plaintiff was seen by certain prison nurses well before the time allowed for filing grievances -11- and the claims against these nurses should be barred. However, the plaintiff has alleged that the defendants conspired over time to deprive him of medical care, thereby inflicting punishment in violation of the Eighth Amendment on an ongoing basis. Viewed in that context, the plaintiff’s grievance must be considered timely, and the claims are exhausted. Finally, it is apparent that the prison official who reviewed the Step II grievance addressed the substance of the complaint and found merit in the plaintiff’s complaint of delayed or improper medical treatment. The courts that have considered the issue have held that a prisoner who files a late complaint that is nevertheless addressed by the prison system has properly exhausted his remedies. Patel v. Fleming, 415 F.3d 1105, 1111 (10th Cir. 2005); Pozo v. McCaughtry, 286 F.3d 1022, 1025 (7th Cir. 2002); Griswold v. Morgan, 317 F. Supp. 2d 226, 229-30 (W.D.N.Y. 2004). This result is suggested by the Supreme Court’s holding in Woodford, where the Court repeatedly noted that many prisons retain the discretion to hear late appeals. The Court also compared the rule it was announcing to that of procedural default in habeas cases. Woodford, 126 S. Ct. at 2386-87. In habeas cases, procedural default may be excused if the state courts decide the case on the merits. Ylst v. Nunnemaker, 501 U.S. 797, 801 (1991); Harris v. Reed, 489 U.S. 255, 262 (1989). The Sixth Circuit has endorsed that concept. Haliym v. Mitchell, 492 F.3d 680, 691 (6th Cir. 2007) (“If the state court considered Petitioner’s alleged error on the merits notwithstanding the fact that it was not timely filed, then the state court's determination does not rest on a procedural ground that bars federal review.”). III. -12- The Court agrees with the magistrate judge’s conclusion that the claims in the complaint are not barred by the PLRA’s exhaustion rule. Accordingly, it is ORDERED that the magistrate judge’s report and recommendation [dkt #30] is ADOPTED. It is further ORDERED that the defendants’ objections to the recommendation [dkt #31] are OVERRULED. It is further ORDERED that the defendants’ motion to dismiss [dkt #25] is DENIED. It is further ORDERED that the matter is referred to Magistrate Judge Charles E. Binder under the previous reference order [dkt #8] to ready the matter for trial, and to conduct a trial if the parties consent under 28 U.S.C. § 636(c)(1). s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: July 10, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on July 10, 2008. s/Felicia M. Moses FELICIA M. MOSES -13-

=== Curry Opinion Denying Class Cert ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 06-11728 Honorable David M. Lawson PERCY CURRY, RICK BANKS, III, MARIE HILLARD, individually and on behalf of all other similarly situated persons, Plaintiffs, v. SBC COMMUNICATIONS, INC., a.k.a. AT&T, Inc., and COMMUNICATION WORKERS OF AMERICA LOCAL 4108, ____________________________________/ Defendants. OPINION AND ORDER DENYING MOTION CLASS CERTIFICATION This putative class action was filed by the three named plaintiffs who allege racial discrimination by their employer and their union local, claiming that the defendants’ actions created a hostile work environment and resulted in disperate treatment in violation of state and federal law. The plaintiffs seek to certify the matter as a class action under Federal Rule of Civil Procedure 23(b)(2), which is appropriate when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Fed. R. Civ. P. 23(b)(2). Both defendants vigorously oppose the motion. The Court heard oral arguments on the motion on December 6, 2007, at which time the plaintiffs argued that their claims for declaratory and injunctive relief predominate over their claims for damages. The Court now finds that the argument is untenable; Sixth Circuit precedent compels the contrary conclusion, and therefore the Court will deny the motion for class certification. I. The plaintiffs, Percy Curry, Rick Banks, III, and Marie Hillard, commenced this putative class-action on April 10, 2006 asserting counts for (1) race discrimination in violation of Title VII, (2) race discrimination in violation of 42 U.S.C. § 1981, and (3) race discrimination in violation of the Elliott-Larsen Civil Rights Act. They named as defendants SBC Communications, Inc. (now a part of AT&T), Communication Workers of America, and Communication Workers of America Local 4108. The national union has since been dismissed, and the plaintiffs filed an amended complaint against SBC and the union local only. As modified by their present motion for class certification, the plaintiffs seek to prosecute this complaint on behalf of “all African Americans whom SBC employed and who were members of Local 4108 in SBC’s Saginaw, Michigan office during the longest period of time permitted by the applicable statute of limitations.” Br. in Sup. of Mot. for Class Cert. [dkt # 76] at 19. In the alternative, the plaintiffs submit that certification should at least be forthcoming with respect to African Americans employed on the third floor of SBC’s office building in Saginaw, Michigan during the relevant time period. In their amended complaint, the plaintiffs set forth “pattern allegations” that pertain to all class members, as well as individual narratives recounting the specific events encountered by the named plaintiffs. It is most expedient to quote their pattern allegations in full: Pattern Allegations A. 18. During Plaintiffs’ employment with SBC and membership in the Local Union, SBC, aided and abetted by the Local Union (and in many cases with active participation of the Local Union), engaged in a pattern and practice of discriminatory conduct, including, but not limited to: (a) (b) (c) failing to promote African American employees; underutilizing African American employees; engaging in occupational segregation; -2- (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) considering race when making employment decisions such as hiring, training, promoting, transferring, or assigning duties; failing to credit African American employees for their experience on the same basis as white employees and failing to consider African American employees for timely promotions or title changes on the same basis as white employees; systematically paying African American employees lower wages and/or denying African American employees opportunities to increase their earnings and perform jobs for additional compensation; subjecting African American employees to racial and other types of harassment to which white employees were not subjected; failing to enforce anti-discrimination and anti-harassments [sic] policies and failing to adequately train SBC employees in anti-discrimination and anti- harassment policies; systematically transferring or demoting African American employees or otherwise altering the terms of their employment with the intent to adversely affect their earnings; negligently hiring or retaining employees, including supervisors, with known propensities to discriminate against African Americans; ignoring complaints of discrimination and harassment made by African American employees; retaliating against African American employees who complained of discrimination and harassment, including subjecting them to further discrimination and harassment, their employment, and constructively discharging them; making significant employment decisions based on racial stereotypes; and refusing to take adverse actions against SBC employees and the Local Union representatives, including supervisors, who engage in racial discrimination and harassment. terminating Amend. Compl. [dkt # 58] at ¶ 18. According to the plaintiffs, these practices pervade all aspects of employment and have led to the creation of a hostile work environment at SBC’s Saginaw office. Plaintiff Curry, who worked for SBC at its Saginaw office from June 2004 to May 2005, alleges that he was subject to a number of discriminatory actions and treated differently than white employees. Among other things, Curry claims that: (1) he was harassed for working too slowly, even though many white employees worked more slowly than him; (2) he was not allowed to keep a fish at his desk (presumably alive and in a fish bowl), whereas a white employee was permitted -3- to do so; (3) a union official hung a noose in front of the SBC elevator banks, where it remained for over fourteen hours, and, upon hearing Curry’s complaints, white managers told Curry to “stop living in the past” and failed to discipline the offending union official in any meaningful way, Compl. at ¶ 31; (4) he was reprimanded for speaking with other African American employees, whereas white employees were able to speak with one another with impunity; (5) he was physically grabbed and forced back to his chair by one of his managers, Debra Akright, on numerous occasions; (6) he was separated from white employees and placed with African American employees near Akright’s office for monitoring purposes; (7) he was reprimanded in front of a union representative for minor mistakes that went overlooked when made by white employees; (8) he, along with other African Americans, was wrongfully accused by union representatives of insubordination because he was black; (9) a white employee called an African American employee a “porch monkey,” and yet union officials took no action upon hearing the slur, id. at ¶ 43; (10) he was told by the local union president to stop documenting incidents that occurred at work; (11) he was denied the opportunity to become a “Service Leader,” a job bearing increased compensation, even though he was rightfully entitled to it; and (12) he was ultimately terminated on the pretext of “threats and violence in the workplace,” id. at ¶ 53. Curry alleges that he reported these incidents to SBC managers and local union officials, but his complaints largely fell on deaf ears. The allegations of the second named plaintiff, Rick Banks, III, are much the same, including complaints about the conduct of manager Akright. Like Curry, Banks worked in SBC’s Saginaw, Michigan office from June 2004 to May 2005. He says that Akright failed to accommodate his allergy to bleach by making him work downwind of its odor, she would chastise him for getting up to simply perform his office duties, and she denied him credit for an entire day of work. Banks also -4- contends that local union officials failed to do anything about his complaints, criticized him for insubordination, and retaliated against him for complaining. The third named plaintiff, Marie Hillard, is still employed with SBC at its Saginaw office and is a member of Local 4108. She contends that since she began working at SBC’s Saginaw office in 2000, she has “experienced racial discrimination and a hostile work environment that both SBC and the Local Union have ignored.” Id. at ¶ 78. Hillard claims that in 2002 someone wrote the words “Niggers go home” in an SBC stairwell, and SBC management never addressed the incident, although the epithet was eventually removed. Id. at ¶ 79. She says she heard an SBC manager refer to a black employee as “Mr. Bo Jangles” across the “manager’s communications system,” id. at ¶ 92, and in August 2005, white SBC employees passed out fliers to a “whites only party” that was held at the local union hall, id. at ¶ 93. Hillard also alleges that SBC consistently chose whites for better paying or more desirable positions, such as Service Leaders. When black employees were appointed as Service Leaders, they were disproportionately criticized for making mistakes and quickly demoted. The plaintiffs specifically seek multiple forms of relief in their complaint. Their prayer includes a request that the Court declare the defendants’ conduct to be in violation of 42 U.S.C. § 1981, Title VII, and analogous provisions of state law; award the plaintiffs and class members compensation for the loss of wages and benefits due to racial discrimination in the past and in the future; reinstate the named plaintiffs and others similarly situated and restore lost seniority; award punitive damages, interest, and attorney’s fees; enjoin the employer and the local union from engaging in unlawful discriminatory practices in the future; and appoint a monitor to ensure compliance with federal and state civil rights laws. -5- Discovery has born out many of the plaintiffs’ allegations, but considerable doubt remains on the question of whether the racism was truly pervasive or simply a series of isolated incidents. From a formal standpoint, it is undisputed that the official policies of SBC and Local 4108 condemned racist behavior. To at least some extent, however, it appears that these policies have not been observed. The most egregious incident alleged is certainly the hanging of a noose in the workplace. The evidence shows that on August 24, 2004, a white union steward, Charles Carter, hung a noose above his desk in a public area on the third floor of SBC’c Saginaw office building. However, according to notes taken in connection with an EEOC investigation of the matter, the conduct was the product of an innocent (albeit culturally insensitive) joke. According to the company’s investigative report, employees strung a clothesline in the office and used clothes pins and play money to mark their progress of a sales promotion. Sometime around 6:30 p.m., Charles Carter, service leader and union steward, used a length of the line to fashion a hangman’s noose to symbolize what would happen to him if he did not meet his sales quota. Several management-level employees saw the noose but failed to take corrective action. Carter allegedly intended to take the noose down when he left for the night, but he became distracted and forgot. At around 6:40 p.m., Raymond Tucker saw the noose (and managers laughing at it) as he was preparing to leave. He was offended and immediately reported it to union steward Travis Ruffin, who was at home at the time. Ruffin in turn reported the noose to chief union steward “Keith XX,” who said he would “get on it right away.” Br. in Supp., Ex. 4, Union Report at 1. When Tucker returned to work the next morning at 9:30 a.m., the noose had been removed. Keith approached Tucker and told him that, although it was just a joke, local president Billy Martin was “looking into the incident.” Ibid. -6- The EEOC investigative notes also confirm that plaintiff Hillard lodged a complaint about the nose on the morning of September 1, 2004. According to the notes, Hillard thought that Cheryl Griggs and Force Scheduler may have seen the noose as well, but she was not sure. Kimil Wiggins, another African American worker, also saw the noose and became “really upset.” Id. at 2. Hillard and Wiggins reported the noose to union steward Sean Deloney, who took the noose down at 8:15 a.m. Beforehand, however, Kimil had unsuccessfully appealed to SBC manager Lori Ruthruff. The investigative notes read: Manager Lori Ruthruff arrived at work at approximately 7:30 and as she walked towards her desk was approached by Kimil at which time Kimil expressed her disgust with the noose. Ruthruff admitted to she didn’t understand the severity of the situation and the content in which it was being viewed therefore failing to look at the situation from Kimil’s perspective, Ruthruff dismissed Kimil by saying that Chuck was joking around. Nonetheless, Ruthruff failed to act on this and once more did not remove the noose. Id. at 3 (mistakes in original). After interviewing seventeen employees, the investigator, Beatriz Oshita, Senior EEOC Consultant to SBC, concluded that there was no racial motive behind the incident, but concluded that Carter and the management team should attend diversity training. Marie Hillard was still upset, particularly by what she saw as the union’s acquiesence, so on November 14, 2004 she and co-worker Cheryl Currie sent a letter to the national union. She also contacted the union local and met with local president Billy Martin. Martin allegedly resisted their request to file a grievance, but eventually a group grievance was filed based on the noose incident, although the allegation fails to mention that event specifically. The charge and union position simply read: The Union charges Management with the violation of Article 3, Article 4 and any other related articles or letter of agreement and any violations protected under title VII. . . . -7- The Union demands that the Company stop discriminating against African American workers and stop promoting the destruction of racial harmony which is creating a hostile work environment for all workers. The Union further demands that all retaliation taken against individuals that came forward cease and those individuals be made whole in all respects. Local 4108 Resp. Br., Ex. H, Hostile Work Grievance. Martin testified that, prior to the grievance, the local union held a meeting to discuss the noose incident and gauge the employees’ sense of the matter. He stated that a flier was posted around the Saginaw facility informing workers that the noose incident would be discussed. Martin testified that the incident “cause[d] a lot of commotion” at the office, and “[m]ost everybody” on the third floor knew about it, even if a lot of folks on the other floors did not. Br. in Supp., Ex. 8, Martin Dep. at 83-84. It is unclear how many people attended the meeting, but Martin stated that he normally gets “30 to 40 people in a Union membership meeting.” Id. at 85. The plaintiffs believe that Martin had an ulterior motive for filing the group grievance: to obtain information on Mr. Carter’s discipline so that Local 4108 could then file a grievance on his behalf to reverse the discipline resulting from the noose incident. There is no evidence, however, that Martin or Local 4108 had an improper motive for filing the group grievance and did not genuinely seek to address the noose incident. One day after the group grievance was filed, on December 2, 2004, Local 4108’s Committee of Equity released a memorandum communicating the results of its own investigation into the noose incident. Supp. Br., Ex. 14, COE Memo. Although the dates do not quite match up, it would appear that this memo actually led to the group grievance: After a thorough investigation we find that in the case of the hanging noose there was no direct intent on one person or group of people to directly intimidate or discriminate. However we feel that such action should be addressed by diversity training so that this can be prevented in the future. It is the recommendation of the -8- COE that the company initiates a company wide diversity training for all management and union employees. This training should start with the BCS department. In addition it is also the recommendation of the COE that a grievance be filed against management for creating a hostile work environment. Ibid. In addition to the noose incident, the discovery has support the named plaintiffs’ other claims of racial slurs and other forms of harassment. For instance, Nicole Riley stated that a white co- worker, Laicy Youkman, called her a “porch monkey” on March 3, 2005. When Riley told Youkman that she was offended, Youkman later sent an email to several African American employees stating that the term was not considered a racial slur “in her neighborhood.” Br. in Supp., Ex. 15, Riley Statement at 1. Stephen Curry testified that he and several other workers heard the slur as well. Youkman eventually was suspended for her conduct, but it is unclear for how long. In a letter dated November 21, 2005, Hillard wrote a letter to the Michigan Department of Civil Rights describing some other events that had occurred since the noose incident: On Wednesday, November 16, 2005, it was brought to my attention that the words “No Niggers” was written on the door coming inside of the SBC building. I proceeded to view this for myself and there it was scrapped on the door. After the noose incident (late last year) the racial tension has escalated. One employee was called a “porch monkey.” Management and the Union were notified and no response has been received. In another incident, a manager announced “I need a verifier for Kim Garrett [black woman] aka Mr. Bo Jangles” across the managers’ communication system. To date, there has not been any response to what was said about her making that statement. More recently, we have experienced racial profiling as any time another black employee approaches to my desk to speak with me my manager rushes over saying, “Break it up” while white employees spend excessive time at one another’s desk on leisure material. And now today we have the word nigger scrapped on the entry door. Br. in Supp., Ex. 17, Hillard Letter to MDOCR at 1 (mistakes in original). -9- With respect to the defacement incident, however, the uncontradicted testimony of Senior Manager Karen Bugeja tends to support the defendants’ claim that they effected a quick response. She averred in her affidavit she called for maintenance to cover the writing, and when she returned local president Billy Martin already had painted over it. Bugeja had the door removed, stripped to bare metal, inspected for deeper defacement, and painted afresh. SBC then required employees to undergo more racial diversity training. The plaintiffs also allege that several African American employees were told that SBC management was watching them closely due to their race; that SBC looks differently upon African American sales representatives; and that they needed to outperform their white counterparts. In support of these allegations, the plaintiffs refer to the statements (handwritten and unsigned) by employees Sean Deloney, Trevis Ruffin, and Raymond Tucker. Deloney states that on September 21 (the year is not indicated), he was approached by Tucker, who was upset because manager Andre Clark had advised him that since he, Tucker, was a minority, he should not be seen talking with other minorities on the floor. A couple of weeks later, Deloney states that Andre Clark pulled him and Ruffin aside and told them: “You know you guys are being watched more than anyone else since you are black and especially being black males.” Br. in Supp., Ex. 19, Deloney Statement at 1. Similarly, Trevis Ruffin states that Clark told him on October 12, 2004 that he was being watched by several managers due to the color of his skin that he had to “conduct [himself] better than the average rep because the company looks at minorities differently.” Br. in Supp., Ex. 19, Ruffin Statement at 1. Raymond Taylor made a similar statement: “I was told [by Andre Clark] that since I was a minority and the lady that I’m dating is a minority, -10- that we should only talk on breaks and lunches, but not on the floor.” Br. in Supp., Ex. 19, Taylor Statement at 1. The plaintiffs also allege that manager Debra Akright serially harassed African American subordinates, including plaintiffs Banks and Curry. For instance, Curry testified that Akright would harass him for performing “TPV verification” slowly, even though he was faster than many of his white counterparts who were not harassed. Moreover, Akrught would “run off” African American workers who were talking together, but would turn a blind eye when it came to whites. Similarly, Curry stated that Akright would pull and push African Americans when they got up from their seats, even for work-related tasks. Akright did not physically harass, or even reprimand, white employees when they left their seats. On May 10, 2005, Akright was disciplined with a Final Written Warning for touching employees. The plaintiffs also allege that SBC had discriminated against African Americans in terms of job opportunities. The allegations here mainly involve the position of Service Leader. According to the complaint, “[t]he Service Leader position was a three-month job that came with increased compensation and which everyone was supposed to have the opportunity to fill once.” Amend. Compl. at ¶ 51. The plaintiffs allege that “SBC rarely appointed an African American employee as a Service Leader.” Id. at ¶ 98. However, the plaintiffs identify no facts in their brief to substantiate this claim, and the defendants’ witnesses thoroughly refute the plaintiffs’ contention. The defendants state that 30 African Americans performed in the Service Leader designation building wide in 2003; in 2004, 54 African Americans served in this designation building wide including Ms. Hillard; 37 African Americans performed that duty building wide in 2005; and 33 African Americans performed this designation building wide, including Marie Hillard, in 2006. Bugeja and -11- other managers also testified that promotion and discipline decisions were “not based upon entirely subjective criteria,” but rather were “made according to demonstrated behaviors.” SBC Resp. Br., Ex. D, Bugeja Aff. at ¶ 15. According to a chart produced by SBC, there were approximately 68 African American workers/union members on the third floor at the time of the relevant events. It is unclear how many African Americans there were in the whole building, but Billy Martin agreed that there were “more than 40 African American members of the Local Union at the Bay Road facility.” Martin dep. at 54-55. Curry and Banks also claim that they were terminated on May 13, 2005 for complaining about the discrimination and harassment they experienced. However, the declaration of Bugeja tends to contradict this: 8. In 2005, Nicole Riley (African American), Laicy Younkman, and Stacy Reinke (Caucasians) made allegations of physical threats and sexual harassment in the workplace against Percy Curry, Rick Banks, Chuck Townsel, Pharrington Maxey (all African Americans). Naomi Walker (Caucasian) made allegations of sexual harassment in the workplace against Rick Zeitz (Caucasian). During the investigation, 26 interviews were conducted, most of which I attended. 9. The allegations regarding Curry and Banks were corroborated by witnesses who reported to the interviewers that: a. Curry entered a woman’s cubicle and pressed his erect penis against her arm and later made comments about her being “camel toe.” b. Curry put his hand in the same woman’s water and said, “See how my ‘pre-cum’ tastes.” c. Male employees confirmed that Curry talked about women in the office in a sexual way. d. Many witnesses confirmed that Curry inappropriately touched women in the office. -12- e. Stacy Reinke reported and three witnesses confirmed that Curry threatened Stacy Reinke after she made the harassment complaint. They stated that Curry told Reinke that he would “lay her out in the parking lot” and that “the bitch better watch her back.” f. Rick Banks [] showed various employees topless photos of co- worker, Naomi Walker, that were on his cell phone. (Banks does not deny showing the photos to Mary Teck Shaefer, but claimed it was an accident.) g. An African American male said that Banks looked at female employees in a sexual way. h. A witness stated Curry and Banks would take out a ruler and talk about their penis size. i. Witnesses reported that Curry and Banks made comments about women bent over, and would say to each other “wonder how she would look bent over.” Another confirmed that Banks and Curry made comments about women’s body parts in the office and that would comment on how they wanted to see “so and so bend over the desk.” j. Curry and Banks talked about “anal beads” and that they referred [to] themselves as the “beadmasters.” Banks admitted to the beadmasters comments. 10. After the investigation concluded, Curry, Banks, Townsel and Zietz were terminated. Bugeja Aff. at ¶¶ 8-10. The plaintiffs contend that these allegations and the supporting evidence establish their right to proceed on behalf of a class consisting of all African American workers at SBC’s Saginaw facility who are represented by Local 4108. They insist that the number of African Americans that suffered from the defendants’ acts at the Saginaw office is so numerous that joinder would be impracticable; and because the named plaintiffs experienced the same acts of discrimination as the class, the plaintiffs’ claims are typical, the questions of law and fact are common, and the named plaintiffs can -13- fairly and adequately protect the interests of the class. The plaintiffs also contend certification is appropriate under Rule 23(b)(2) because their claims for declaratory and injunctive relief predominate over their claims for damages. The defendants contend that class certification is inappropriate because the claims are largely individualized, numerosity is lacking, and there is tension between the circumstances of the lead plaintiffs and those of the putative class members. In addition, defendant Local 4108 argues that certification is inappropriate as to it because the plaintiffs have failed to identify facts sufficient to sustain a claim. Both defendants assert that certification under Rule 23(b)(2) is unavailable in light of the Sixth Circuit’s decision in Reeb v. Ohio Dep’t of Rehab. and Corrections, 435 F.3d 639 (6th Cir. 2006). II. As an initial matter, Local 4108 contends that the Court should not reach any of the issues for class certification under Rule 23, at least as to it, because the plaintiffs cannot prove any facts that would sustain a cause of action against the union local. This argument is somewhat beside the point, particularly since Local 4108 has not filed a motion to dismiss or for summary judgment. To be sure, Local 4108 is correct that class certification would be inappropriate if the plaintiffs had failed to state a claim or produce facts sufficient to create a jury question, insofar as there would be no action to certify. However, to provoke such a determination, Local 4108 would need to file an appropriate motion under Rule 12 or 56. Since Local 4108 has not done this, the procedural posture of the case does not lend itself to that analysis. In some cases it is appropriate to entertain a motion to dismiss before deciding a class certification motion, especially when the motion to dismiss is based on a want of jurisdiction. See Hoving v. Transnation Title Ins. Co., 545 F. Supp. 2d 662, 265-68 (E.D. Mich. 2008). In addition, -14- the Court can and should look beyond the pleadings in analyzing a motion for class certification, but only to the extent that it is necessary to conduct the Rule 23 analysis. Whatever the merit of the union’s underlying assertion, there is no basis at present for making the sort of merits-based determination that Local 4108 requests. Local 4108 has cited no authority to support this particular argument in opposition to class certification. III. According to Federal Rule of Civil Procedure 23, a matter may proceed as a class action in the name of representative parties if (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law and fact common to the class; (3) the claims and defenses of the representative parties are typical of the claims and defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. Amchem Prods., Inc. v. Windsor, , 613 (1997) (citing Fed. R. Civ. P. 23(a ; Olden v. LaFarge Corp., , 268 (E.D. Mich. 2001), aff’d 383 F.3d 495 (6th Cir. 2004). These factors are normally referred to as numerosity, commonality, typicality, and adequacy of representation. A class must meet all of the above prerequisites plus one of those listed in Federal Rule of Civil Procedure 23(b) to be certified. Amchem Prods., Inc., 521 U.S. at 614; Sprague v. General Motors Corp., 133 F.3d 388, 397 (6th Cir. 1998). The movant bears the burden of establishing that all prerequisites for class certification are satisfied. Thompson v. County of Medina, 29 F.3d 238, 241 (6th Cir. 1994). When reviewing a motion for class certification, the Court must conduct a “rigorous analysis” of the requirements of Rule 23. Sprague, 133 F.3d at 397 (quoting General Telephone Co. of the Southwest v. Falcon, , 161 (1982 . The Court is not bound to accept the -15- allegations on the face of the complaint as true, and should probe further into the facts where necessary to determine whether these requirements have been met. Weathers v. Peters Realty Corp., 499 F.2d 1197, 1200 (6th Cir. 1974) (“[O]rdinarily, the determination should be predicated on more information than the pleadings will provide.”); Szabo v. Bridgeport Mach., Inc., 249 F.3d 672, 675 (7th Cir. 2001) (“The proposition that a district judge must accept all of the complaint’s allegations when deciding whether to certify a class cannot be found in Rule 23 and has nothing to recommend it.”). A. Turning first to the requirements of Rule 23(a), the plaintiffs posit that there are at least sixty-eight African American union members on the third floor of SBC’s Saginaw facility alone, so the numerosity element is easily satisfied. The defendants contest this claim on the ground that the plaintiffs have recited only the maximum number of African Americans that could meet the class definition without establishing that each class member suffered the alleged harm common to the named plaintiffs, in that the evidence shows that only five people saw the noose; there has been no showing as to how many African Americans saw the defaced door; there is no evidence that anyone other than Hillard heard the term “Bojangles”; only a “few employees” heard the term “porch monkey”; the plaintiffs have not established the number of African American employees that were harassed by Akright; and the plaintiffs have not shown how many African Americans applied for and were denied the service leader position. The numerosity requirement is satisfied when “the class is so numerous that joinder of all members is impracticable.” Fed. R. Civ. P. 23(a)(1). Although this is not a strict numerical test, “‘substantial’ numbers usually satisfy the numerosity requirement.” Daffin v. Ford Motor Co., 458 -16- F.3d 549, 552 (6th Cir. 2006) (quoting In re Am. Med. Sys, 75 F.3d 1069, 1079 (6th Cir. 1996 . The Court “may consider many factors, including ‘class size, ease of identification of members of the proposed class . . . geographic dispersion of class members, and whether proposed members of the class will be able to pursue remedies on an individual basis.’” Beattie v. CenturyTel, Inc., 234 F.R.D. 160, 167 (E.D. Mich. 2006) (quoting Liberty Lincoln Mercury, Inc. v. Ford Marketing Corp., 149 F.R.D. 65, 74 (D. N.J. 1995 . In most cases, a class in excess of forty members will do. Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001); Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d. Cir. 1995); Cox v. Am. Cast Iron Pipe Co., 784 F.2d 1546, 1553 (11th Cir. 1986). In keeping with the notion that the standard is not strictly numerical, however, there is no need to prove the exact number of class members. “Where the exact size of the class is unknown but general knowledge and common sense indicate that it is large, the numerosity requirement is satisfied.” Orantes-Hernandez v. Smith, 541 F. Supp. 351, 370 (C.D. Cal. 1982). Although a close call, the Court finds that the plaintiffs have satisfied the numerosity requirement. The number of people directly exposed to the predicate incidents (e.g., the noose incident, the porch monkey incident, and the defacement incident) is relatively small, and likely would not satisfy the numerosity standard. However, because the plaintiffs seek to proceed on a hostile work environment theory, the analysis requires more depth. The vast majority of the events described above (i.e., everything except for the slur on the door and, perhaps, the allegations concerning the service leader position) occurred on the third floor. The evidence shows that there were some sixty-eight African Americans working on the third floor who were union members at the time. Although the plaintiffs have submitted no evidence on the point, the number of African Americans working throughout the facility was presumably greater. In a hostile work environment -17- claim, the issue focuses on the nature of the prevailing atmosphere. See Hafford v. Seidner, 183 F.3d 506, 512 (6th Cir. 1999) (explaining that a plaintiff must satisfy the following elements to make out a prima facie race-based hostile work environment claim: (1) that he was a member of a protected class; (2) that he was subjected to unwelcome racial harassment; (3) that the harassment was based on race; (4) that the harassment had the effect of unreasonably interfering with the plaintiff’s work performance by creating an intimidating, hostile, or offensive work environment; and (5) that the employer was liable for the harassment). Although many African Americans on the third floor may not have seen the noose with their own eyes (or heard the porch monkey slur with their own ears, etc.) it is reasonable to assume – at least at this stage of the proceedings – that they were all affected by it. Indeed, Billy Martin testified that the noose incident caused “quite a commotion” and surmised that everyone on the third floor knew about it. In light of the rule that there is no need to prove exact numbers and the Court may rely on common sense, see Orantes- Hernandez, 541 F. Supp. at 370, the Court believes that the numerosity requirement is satisfied. B. Commonality is the second prerequisite for class certification and simply demands that “there are questions of law or fact common to the class.” Fed. R. Civ. P. 23(a)(2). This provision does not mandate that all questions of law and fact raised in the complaint are common. Rather, “Rule 23(a) simply requires a common question of law or fact.” Bittinger v. Tecumseh Prods. Co., 123 F.3d 877, 884 (6th Cir. 1997). On the other hand, generalized or abstract commonality will not suffice. See Sprague, 133 F.3d at 397. “What we are looking for is a common issue the resolution of which will advance the litigation.” Ibid. -18- Many of the so-called common questions articulated by the plaintiffs are simply too abstract to meet this requirement. See Br. in Supp. at 14 (listing as a common question “whether Defendants discriminated against the class members by fostering or condoning a racial hostile work environment”). However, there are some issues that do fit the bill. For instance, the question whether the hanging of the noose constituted harassment based on race would certainly be common to all members of the class and would advance the litigation. Therefore, this second element is satisfied. C. The third prerequisite for class certification is typicality. Fed. R. Civ. P. 23(a)(3) (providing that “the claims or defenses of the representative parties [must be] typical of the claims or defenses of the class”). A named plaintiff’s claim is typical if “it arises from the same event or practice or course of conduct that gives rise to the claims of other class members, and if his or her claims are based on the same legal theory.” In re Am. Med. Sys., Inc., 75 F.3d 1069, 1082 (6th Cir. 1996) (internal quotation marks omitted). See also Sprague, 133 F.3d at 399 (stating that the essence of typicality boils down to the notion that “[a]s goes the claim of the named plaintiff, so go the claims of the class”). Typicality requires that a “‘sufficient relationship exist[] between the injury to the named plaintiff and conduct affecting the class, so that the court may properly attribute a collective nature to the challenged conduct.’” Stout v. Byrider, 228 F.3d 709, 717 (6th Cir. 2000) (quoting Sprague, 133 F.3d at 399). Although the named plaintiffs’ claims must fairly encompass the class members’ claims, they need not always involve the same facts or law. See Sprague, 133 F.3d at 399; Senter v. General Motors Corp. 532 F.2d 511, 525 n.31 (6th Cir. 1976). “The test for typicality, like commonality, is not demanding.” Sprague, 133 F.3d at 415 (internal quotation marks omitted). -19- In addition, the Sixth Circuit has explained that the commonality and typicality requirements “‘tend to merge.’” Ball v. Union Carbide Corp., 385 F.3d 713, 728 (6th Cir. 2004) (quoting Rutherford v. City of Cleveland, 137 F.3d 905, 909 (6th Cir. 1998 . Together they “serve as guideposts for determining whether under the particular circumstances maintenance of a class action is economical and whether the named plaintiffs’ claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence.” Rutherford, 137 F.3d at 909. The defendants in this case correctly observe that plaintiffs Curry and Banks can be distinguished from the vast majority of class members to the extent that they seek relief for retaliatory termination. The plaintiffs have contended in their reply brief that this is not the thrust of their claim, but that seems questionable in light of the emphasis placed on the treatment of these former employees as individuals. However, it is not necessary that the claims of named plaintiffs’ mirror those of the class members, but simply that they fairly encompass them. See Sprague, 133 F.3d at 399. The essence of the named plaintiffs’ claims in this case is that SBC’s management personnel acted with racial animus toward them when they created a hostile work environment and took adverse employment action against them by, among other things, denying employment opportunities to them because of their race. They also say the local union turned a deaf ear to them on account of their race when they sought assistance in remedying these abuses. This conduct can be projected upon the class of African-American employees, at least those on the third floor of the SBC facility in Saginaw, since the incidents, people involved, their motivations, and the consequences of their conduct can be said to affect the class members in a way that is similar to the harm alleged by the -20- named plaintiffs. In conjunction with plaintiff Hillard, who remains an employee for SBC, Curry and Banks meet this standard. The Court finds that the third requirement of Rule 23(a) has been satisfied. D. This finding dovetails into the fourth prerequisite for class certification: that “the representative parties will fairly and adequately protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). See also In re Am. Med. Sys., 75 F.3d at 1083. “Adequate representation” invokes two inquiries: (1) whether the class counsel are “qualified, experienced and generally able to conduct the litigation” and (2) whether the named plaintiffs have interests that are “antagonistic” to the other class members. Stout, 228 F.3d at 717. “Interests are antagonistic when there is evidence that the representative plaintiffs appear unable to vigorously prosecute the interests of the class.” Id. at 717. As the Sixth Circuit has noted, “[t]he adequate representation requirement overlaps with the typicality requirement because in the absence of typical claims, the class representative has no incentives to pursue the claims of the other class members.” In re Am. Med. Sys., 75 F.3d at 1083. The Court is satisfied that class counsel are sufficiently competent to handle this matter. In their briefs, they have exhibited a relatively high degree of legal acumen and a command of the facts, and the defendants, in fact, do not appear to contest their skill. On the other hand, the defendants assert that adequacy of representation is lacking because there is a conflict between the lead plaintiffs and some class members. This argument is based on the fact that the named plaintiffs assert claims against Local 4108 and some of the putative class members are union stewards. Thus, the defendants argue, this amounts to a situation where the left hand is suing the right. However, the plaintiffs perry this argument with the assertion that union stewards perform relatively minor -21- roles, and their beef with the union does not center on the conduct of African American stewards. After studying the pleadings and evidence adduced, the Court agrees with the plaintiffs. The points raised by the defendants do not suffice to show that the claims of the named plaintiffs are “antagonistic” to those of other class members. E. Where the plaintiffs fall short in this case is in fulfilling one of the requirements listed in Rule 23(b). See Amchem Prods., Inc., 521 U.S. at 614; Sprague, 133 F.3d at 397. According to their assertion in their reply brief, the plaintiffs seek certification only under Rule 23(b)(2). That provision allows class certification where “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Fed. R. Civ. P. 23(b)(2). Both sides point to Reeb v. Ohio Dep’t of Rehabilitation and Corrections, 435 F.3d 639 (6th Cir. 2006), as controlling authority, and the defendants rely heavily on this decision for the proposition that a class action seeking monetary damages cannot satisfy the mandate of Rule 23(b)(2) as a matter of law because the individualized claims for damages in such a case will predominate over declaratory or injunctive relief, rendering subsection (b)(2) inappropriate. See Reeb, 435 F.3d at 651. In Reeb, the Sixth Circuit reversed a district court’s order granting class certification under Rule 23(b)(2) in a Title VII sex discrimination case. Central to its decision was its pronouncement that “Title VII cases in which plaintiffs seek individual compensatory damages are not appropriately brought as class actions under Rule 23(b)(2) because such individual claims for money damages will always predominate over requested injunctive and declaratory relief.” Id. at 641. The plaintiffs in Reeb were a group of female corrections officers who alleged that they were subject to a whole host -22- of discriminatory treatment, including placement in undesirable assignments, diminished leave opportunities, disparate disciplinary treatment, sexual harassment, and retaliation for voicing their complaints. They purported to represent a class of all female employees at a specific corrections institution who were also union members. The complaint sought $2 million in compensatory damages, $3 million in punitive damages, attorneys’ fees and costs, and declaratory relief, and was also construed to request a permanent injunction. The district court granted certification under Rule 23(b)(2) based on the belief that certification under that provision is acceptable as long as money damages do not constitute the predominate relief sought. The court of appeals disagreed. The court first confirmed that class certification under Rule 23(b)(2) is “not intended to ‘extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages.’” Reeb, 435 F.3d at 646 (quoting Advisory Committee Note to Fed. R. Civ. P. 23). Then, after acknowledging that the “Supreme Court has never determined whether subdivision (b)(2) classes can be certified in cases in which, in addition to an injunction, the plaintiffs seek monetary relief,” ibid., the court went on to examine other circuits’ treatment of the question when the relief of money damages can be considered to predominate. The court found most instructive the Fifth Circuit’s holding in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998), where the court found that “monetary relief predominates in (b)(2) class actions unless it is incidental to requested injunctive or declaratory relief.” Id. at 415. The Fifth Circuit interpreted “incidental” to mean “damages that flow directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief, as the text of subdivision (b)(2) refers to ‘relief appropriate with respect to the class as a whole.’” Reeb, 435 F.3d at 647 (internal quotation marks omitted). The Reeb court then elaborated: -23- To be more specific, the court stated that damages in these cases should be “concomitant with, not merely consequential to, class-wide injunctive or declaratory relief” and that the computation of such damages should not be “dependent in any significant way on the intangible, subjective differences of each class member’s circumstances.” Id. at 415. Damages recoverable would be those that inure to the group benefit, which the court felt was most consistent with the purpose of the (b)(2) class to begin with. Id. Reeb, 435 F.3d at 647-48. The Reeb court also relied heavily on its own decision in Coleman v. GMAC, 296 F.3d 443 (6th Cir. 2002), in which the court “stated that Equal Credit Opportunity Act (ECOA) plaintiffs seeking compensatory damages cannot seek class certification under subdivision (b)(2) because the request for such damages necessarily predominates over any requested injunctive or declaratory relief.” Reeb, 435 F.3d at 643; see also id. at 649-50. In arriving at this decision, the Coleman court observed that while “‘there is an apparent consensus that money damages are recoverable to some extent in a Rule 23(b)(2) class action,’” “the Supreme Court has expressed concern about the constitutionality of certifying a mandatory class where claims for money damages were involved.” Reeb, 435 F.3d at 649 (quoting Coleman, 296 F.3d at 447). The court then concluded that the case for precluding Rule 23(b)(2) certification in Title VII cases was even more compelling than in the ECOA case discussed in Coleman. The court reasoned that in Title VII cases, not only must the matter of compensatory damages be analyzed on an individual basis, but a court also must assess “whether the discriminatory practice actually was responsible for the individual class member’s harm, the applicability of nondiscriminatory reasons for the action, showings of pretext, and any affirmative defense . . . on an individual basis.” Id. at 651. The court then concluded: Accordingly, we hold that, because of the individualized nature of damages calculations for Title VII plaintiffs and the ability of those plaintiffs to bring -24- individual actions, the claims for individual compensatory damages of members of a Title VII class necessarily predominate over requested declaratory or injunctive relief, and individual compensatory damages are not recoverable by a Rule 23(b)(2) class. . . . We emphasize, however, that this holding does not foreclose all Title VII class actions. Plaintiffs now have the choice of proceeding under Rule 23(b)(3) in an action for money damages or in an action under Rule 23(b)(2) for declaratory or injunctive relief alone or in conjunction with compensatory and punitive damages that inure to the group benefit. And, as always, plaintiffs remain free to bring Title VII actions as individuals. Id. at 650-651. The Court believes that the holding in Reeb, whose facts are remarkably similar to the present matter, must dictate the result in this case. The plaintiffs insist that their claim for damages can be considered “incidental” to the equitable relief they seek, especially in light of the willingness of the named plaintiffs to withdraw their individual damages claims. However, the Court does not see how mere elimination of the lead plaintiffs’ individual claims for damages would render the remaining claims for compensatory and punitive damages subordinate to the requests for declaratory and injunctive relief. The claims for damages would still predominate due to the individualized analysis that would be required to determine whether each class member was subjected to racial discrimination or a hostile work environment and, if so, the amount of damages due. With respect to the disperate treatment claims, there are individualized assessments required to determine the nature of the adverse employment action as to the individual class members, and, as the Reeb court noted, other questions relating to legitimate reasons for that treatment, pretext, and the applicability of affirmative defenses. The Sixth Circuit’s sweeping pronouncement that class certification under Rule 23(b)(2) in Title VII cases is not appropriate because “individual claims for money damages will always predominate over requested injunctive and declaratory relief,” id. at 641 (emphasis added), leaves -25- little room for exceptions. The nature of the claims brought by the individual named plaintiffs do not fall within any exception that a fair reading of Reeb might allow. Therefore, the Court must deny the motion to certify this matter as a class action. IV. The Court finds that the plaintiffs likely meet the requirements of Federal Rule of Civil Procedure 23(a) to certify the case as a class action. However, based on controlling Sixth Circuit precedent, the plaintiffs fail to satisfy the requirements of Rule 23(b)(2), to which they have limited themselves in seeking class action status. Accordingly, it is ORDERED that the plaintiffs’ motion for class certification [dkt #76] is DENIED. It is further ORDERED that counsel for the parties shall appear at a status conference to discuss further case management deadlines on August 20, 2008 at 2:30 p.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: June 23, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on June 23, 2008. s/Felicia M. Moses FELICIA M. MOSES -26-

=== Equipements Opinion Granting Stay ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION EQUIPEMENTS DE TRANSFORMATION IMAC, Plaintiff, v. ANHEUSER-BUSCH COMPANIES, INC. and ANHEUSER-BUSCH, INC., __________________________________________/ Defendants. Case Number 07-13306 Honorable David M. Lawson OPINION AND ORDER GRANTING MOTION TO STAY PROCEEDINGS AND DENYING EMERGENCY MOTION TO STAY DISCOVERY ORDER This matter is before the Court on the defendants’ motion to stay this case pending reexamination of the subject patent by the United States Patent and Trademark Office (PTO). Plaintiff Equipements de Transformation IMAC (Equipements), a Canadian corporation, has brought suit against defendants Anheuser-Busch Companies, Inc. and Anheuser-Busch, Inc. (collectively, Anheuser-Busch) for infringement of United States Patent No. 6,852,191 (the ‘191 Patent), which describes a method and apparatus for making adhesive-backed labels that are applied to various products, including beer bottles. The defendants ask the Court to stay the action on the grounds that proceedings before the PTO cast serious doubt on the validity of the patent in suit and, regardless of the outcome, judicial economy favors a stay pending those proceedings. Since this motion was filed, the magistrate judge issued an order compelling discovery, and the defendants have moved on an emergent basis to stay that order as well. The plaintiff opposes the motion for a stay pending PTO proceedings, contending that there is no statutory authority for a stay and taking such action would result in substantial delay and prejudice. The plaintiff is correct that no statute authorizes anyone other than the patent owner to seek a stay during inter partes reexamination by the PTO. However, the Court has inherent power to stay the proceedings, and the controlling factors favor a stay in this case. Therefore, the Court will grant the motion to stay proceedings in the entire case and deny the emergency motion to stay discovery as moot. I. On February 8, 2005, the ‘191 Patent was issued to the plaintiff as the assignee of inventors Francois Bayzelon, Frédéric La Brie, and Daniel Brochu. The ‘191 Patent describes a method and apparatus for creating pressure-sensitive labels, probably of the transparent variety, although neither the Patent nor the record is clear on that point. Equipements manufactures and sells the apparatuses to companies that produce labels. Anheuser-Busch sells products that display similar labels, which are manufactured in part by FLEXcon Corporation, a company based in Spencer, Massachusetts. However, Anheuser-Busch itself neither makes the labels nor the equipment used to produce them. On August 8, 2007, the plaintiff filed its complaint in this Court against Anheuser-Busch for patent infringement. The theory is straightforward: Anheuser-Busch has, since 2006, “sold beer in bottles bearing labels made by a process covered by one or more claims of the ‘191 patent without right, authority or license.” Amend. Compl. at ¶ 8. Bud Light and Budweiser Select apparently have been distributed in containers stamped with these labels, although the original product (The King of Beers) remains pure and untainted. In its complaint, the plaintiff suggests that FLEXcon is “controlled” or “wholly owned” by Anheuser-Busch. In its motion response, however, the plaintiff seems to have retreated from that assertion, but it still has questions regarding the “legal relationship between Defendants and FLEXcon.” Resp. Br. at 5. The plaintiff seeks injunctive relief and treble damages for willful infringement. -2- Anheuser-Busch answered the complaint on October 15, 2007. In addition to denying the allegations of infringement, Anheuser-Busch asserted that the plaintiff failed to state a claim; the Court lacks personal jurisdiction; venue is improper; the ‘191 Patent is invalid or unenforceable; the plaintiff is estopped from claiming infringement “[b]y reason of the prior art and/or statements” made to the PTO, Ans. at ¶ 4; the action is barred by laches; and any damages suffered by the plaintiff were the product of its own doing. Anheuser-Busch also asserted counterclaims seeking declaratory judgments of invalidity and non-infringement. On October 12, 2007, just three days before Anheuser-Busch filed its answer, non-party FLEXcon filed a request for inter partes reexamination of the ‘191 Patent. Inter partes reexamination (which is to be distinguished from ex parte reexamination) is a statutorily-authorized procedure by which any interested party may request the PTO to review its decision to issue a patent in light of prior art. See 35 U.S.C. § 311. “Although proceedings before the PTO ordinarily are ex parte, in the late 1970’s the regulations governing PTO reissue proceedings were amended by the so-called ‘Dann amendments’ to allow inter partes protestor participation. See generally PIC, Inc. v. Prescon Corp., 485 F. Supp. 1302, 1303-05 (D. Del. 1980); see also 47 Fed. Reg. 21, 749 (1982). The purpose of these amendments was to economize the time and expense for both the courts and the litigants.” PPG Indus., Inc. v. Celanese Polymer Specialities Co., Inc., 840 F.2d 1565, 1568 (Fed. Cir. 1988). However, the Dann amendments were generally seen as ineffective, ibid., so new provisions appeared in the Intellectual Property and Communications Omnibus Reform Act of 1999, Pub. L. No. 106-113, 113 Stat. 1501 A-521 (codified at 35 U.S.C § 311, et seq.). Under the new regime, [i]nter partes reexamination can be initiated by “any person.” The process begins with the requester filing a citation of prior art under section 301. Thereafter, in the -3- case of inter partes reexamination, the requestor files a written request under section 311. As in the case of ex parte reexamination, the Director of the Patent and Trademark Office determines after receiving a request under section 311 whether the request sets forth a “substantial new question of patentability.” Where such a question is found to exist, the Director issues an order instituting inter partes reexamination. Inter partes reexamination is be conducted, as a general matter, “according to the procedures established for initial examination under the provisions of sections 132 and 133.” The claims of the patent undergoing inter partes reexamination can be amended so as to be narrower, but no broadening is allowed. At the conclusion of inter partes reexamination a certificate is issued that states the outcome of the proceeding. 5 Moy’s Walker on Patents § 16:66 (4th ed.) (footnotes omitted) (citing 35 U.S.C. §§ 311, 312, 313, 314, 316). As noted earlier, a common basis for seeking inter partes reexamination is the existence of undisclosed prior art. See, e.g., Tomco Equip. Co. v. Southeastern Agri-Systems, Inc., 542 F. Supp. 2d 1303 (N.D. Ga. 2008); Callaway Golf Co. v. Acushnet Co., 523 F. Supp. 2d 388 (D. Del. 2007); Cooper Tech. Co. v. Duda, 247 F.R.D. 510 (E.D. Va. 2007); Pieczenik v. Cambridge Antibody Tech. Group, 2004 WL 1118500 (S.D.N.Y. May 14, 2004). “Any person at any time may cite to the Office in writing prior art consisting of patents or printed publications which that person believes to have a bearing on the patentability of any claim of a particular patent.” 35 U.S.C. § 301. Under 35 U.S.C. § 311(b)(2), “[t]he request [for inter partes review] shall . . . set forth the pertinency and manner of applying cited prior art to every claim for which reexamination is requested.” The PTO’s final decision following inter partes reexamination is binding as to the party requesting reexamination, see 35 U.S.C. § 315(c) (“A third-party requester whose request for an inter partes reexamination results in an order under section 313 is estopped from asserting at a later time, in any civil action arising in whole or in part under section 1338 of title 28, the invalidity of any claim finally determined to be valid and patentable on any ground which the third-party requester raised -4- or could have raised during the inter partes reexamination proceedings [except as to] . . . newly discovered prior art unavailable to the third-party requester and the Patent and Trademark Office at the time of the inter partes reexamination proceedings.”); Anascape, Ltd. v. Microsoft Corp., 475 F. Supp. 2d 612, 617 (E.D. Tex. 2007); Tomco, 542 F. Supp. 2d at 1306; Proctor & Gamble Co. v. Kraft Foods Global, Inc., 2007 WL 2990152, *1 (N.D. Cal. Oct. 11, 2007). On the other hand, if the PTO determines through inter partes reexamination that a formerly-issued patent is no longer valid, parallel litigation in the district court could be altered dramatically because the patentee suing for infringement would no longer have a patent on which to sue. Citing fifteen pieces of prior art that allegedly “raise[] substantial new issues of patentability,” FLEXcon’s request for reexamination challenged all thirty-three of the claims contained in the ‘191 Patent. See Mot. for Stay, Ex. A, Request for Reexam. According to Anheuser-Busch, the request for reexamination “demonstrates . . . that a key element relied upon by E[quipements] to obtain the patent – use of a second ‘chill roll’ after lamination in the label making process – was in fact taught by numerous prior patents and printed publications, and therefore is not valid grounds for patentability.” Br. in Supp. at 6. The same day Anheuser-Busch filed its answer it filed the present motion to stay litigation pending reexamination before the PTO. After the plaintiff responded and Anheuser-Busch replied, Anheuser-Busch filed a supplemental brief informing the Court that the PTO granted FLEXcon’s request for inter partes reexamination. The Court held a conference with the parties on February 1, 2008 to attempt to craft an order providing limited discovery until an estimate could be made of the time the reexamination process might last. That effort proved fruitless after the parties failed to reach an accord about the scope of discovery. -5- Meanwhile, the PTO granted the request for inter partes reexamination on February 22, 2008, determining that a “substantial new question of patentability affecting claims 1 and 12 of United States Patent Number 6,852,191 . . . is raised.” First Supp. Br., Ex. A, PTO Order Granting Reexam. Request at 6. The PTO also decided to reexamine claims 31-33. On March 10, 2008, Anheuser-Busch filed an updated report to inform the Court that on February 29, 2008, the PTO issued its opinion rejecting certain claims following reexamination. The PTO rejected claims 1, 12, 31, 32, and 33 under 35 U.S.C. § 103(a) as being unpatentable due to prior art. Those claims appear to be critical to the overall invention, reading as follows: 1. A method for manufacturing a product comprising the steps of: feeding a continuous web of release paper to a lamination workstation; applying adhesive to the release paper at an adhesive application workstation prior to entering the lamination workstation; and laminating a continuous strip of face stock to the release paper with the applied adhesive in a continuous single pass cycle at the lamination workstation; contacting the release paper downstream of the adhesive application step with a first cooling roller having an internal passage for receiving a continuous stream of coolant thereby to cool the release paper; pressing the face stock and the release paper between the first cooling roller and a pressure roller to laminate the face stock and release paper together; and contacting the lamination with a second cooling roller having an internal passage for receiving a continuous stream of coolant downstream of the lamination step for the purpose of cooling the face stock lamination. . . . 12. An apparatus for manufacturing a product comprising: means for feeding a continuous web of release paper to a lamination workstation; means for applying adhesive to the release paper at an adhesive application workstation prior to entering the lamination workstation; means for laminating a continuous strip of face stock to the release paper with the applied adhesive in a continuous single pass cycle at the lamination workstation; wherein the apparatus further comprises a first cooling roller having an internal passage for receiving a continuous stream of coolant and being located downstream of the adhesive application workstation for cooling the release paper, a pressure roller for pressing the face stock and the release paper together for lamination as the face stock and release paper move between the first cooling roller and the pressure roller to create a face stock lamination; and -6- a second cooling roller having an internal passage for receiving a continuous stream of coolant, the second roller being located downstream of the lamination workstation for cooling the face stock lamination. . . . 31. The apparatus of claim 12, wherein the adhesive applying means further comprises: a slot die located upstream of the lamination workstation. 32. The apparatus of claim 12, wherein the adhesive is hot melt adhesive. 33. The apparatus of claim 12, wherein the cooling means further comprises: a cooling workstation located downstream of the adhesive application workstation including a pump for pumping a continuous stream of coolant through the first and second rollers and a heat exchanger for removing heat from the coolant after passing through the rollers. Compl., Ex. A, ‘191 Patent at columns 9-10, 12. Pursuant to 37 C.F.R. § 1.945, the plaintiff had until April 29, 2008 to respond to the PTO’s decision. Initial PTO Decision at 3. FLEXcon then would have thirty days thereafter to comment. Ibid. (citing 35 U.S.C. § 314(b)(2) and 37 C.F.R. § 1.947). According to the plaintiff, it has “responded to the . . . rejection of claims, vigorously arguing the patentability of the originally claimed invention.” Pl.’s Reply re Mot. to Comp. Disc. at 6. It is unclear whether FLEXcon has commented. The PTO has stated that, once it passes on these arguments, it intends to issue “an Action Closing Prosecution” (i.e., a final decision). Initial PTO Decision at 3. At that point, however, either the plaintiff or FLEXcon may appeal to the Board of Patent Appeals and Interferences and, beyond that, to the United States Court of Appeals for the Federal Circuit. See 35 U.S.C. §§ 315, 134, 141; Cooper Tech. Co., 247 F.R.D. at 512 n.1. -7- II. As a preliminary matter, the plaintiff contends that the Court has no power to stay these proceedings at the request on the defendants because of want of statutory authority. Section 318 of Title 35 authorizes a stay of litigation pending inter partes reexamination at the request of the patentee. The statute provides: Once an order for inter partes reexamination of a patent has been issued under section 313, the patent owner may obtain a stay of any pending litigation which involves an issue of patentability of any claims of the patent which are the subject of the inter partes reexamination order, unless the court before which such litigation is pending determines that a stay would not serve the interests of justice. 35 U.S.C. § 318 (emphasis added). The plaintiff argues that the limitation in the statute to patent owners implies an intent by Congress to preclude others from seeking such a stay. However, the statute notwithstanding, it is well established that courts also have inherent power to issue stays pending reexamination. Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1996) (“Courts have inherent power to manage their dockets and stay proceedings, including the authority to order a stay pending conclusion of a PTO reexamination.”) (internal citation omitted); Pass & Seymour, Inc. v. Hubbell, Inc., 532 F. Supp. 2d 418, 435 (N.D.N.Y. 2007); Anascape, Ltd. v. Microsoft Corp., 475 F. Supp. 2d 612, 615 (E.D. Tex. 2007); see also Emerson Elec. Co. v. Davoil, Inc., 88 F.3d 1051, 1054 (Fed. Cir. 1996). The plaintiff argues that recognizing inherent authority to issue a stay is unwise in light of the limited nature of the statutory stay provision. The Northern District of California rejected this very argument in 2007: In granting defendant’s motion for a stay, the court rejects plaintiff’s contention that 35 U.S.C. § 318 limits the right to request a stay to the patent owner alone. Although true that § 318 does not expressly provide for an automatic stay of parallel district court proceedings, the statute in no way impacts the inherent powers of the court to -8- control the litigation before it, and to grant a stay in the interests of justice when so required. See also Middleton [v. Minnesota Manufcturing and Mining Company], 2004 WL 1968669 at * 2 [(S.D. Iowa 2004)] (disregarding similar objections based on 35 U.S.C. § 318 in view of the court’s “inherent discretionary power to issue a stay”). Proctor & Gamble, 2007 WL 2990152 at *1. the Court agrees with this rationale and adopts it. Section 318 does not displace this Court’s inherent power to issue a stay that is so well grounded in decisional law. III. The defendants ask the Court to stay proceedings in this forum pending the reexamination process, contending that a stay is likely to simplify or moot certain issues, rendering the litigation in this Court more efficient. The plaintiff’s response opposing a stay is based largely on the speculative propositions that proceeding in this forum would be much quicker, and that Anheuser- Busch and FLEXcon may use a “tag-team” strategy to protract reexamination for a substantial period of time, using the time bought to continue to infringe the plaintiff’s patent rights. “When considering whether to stay patent infringement litigation pending a reexamination of the patent in suit, courts generally examine three factors, including ‘(1) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether discovery is complete and whether a trial date has been set.’” Pass & Seymour, 532 F. Supp. 2d at 435 (quoting Xerox Corp. v. 3Com Corp., 69 F. Supp. 2d 404, 406-07 (W.D.N.Y. 1999 . Accord Time Warner Cable, Inc. v. USA Video Tech. Corp., 520 F. Supp. 2d 579, 582 n.26 (D. Del. 2007); Anascape, Ltd., 475 F. Supp. 2d at 615; Medicis Pharmaceutical Corp. v. Upsher-Smith Laboratories, Inc., 486 F. Supp. 2d 990, 993-94 (D. Ariz. 2007); Telemac Corp. v. Teledigital, Inc., 450 F. Supp. 2d 1107, 1111 -9- (N.D. Cal. 2006); Gonnoci Revocable Living Trust v. Three M Tool & Mach., Inc., 8 U.S.P.Q.2d 1755, 1757 (E.D. Mich. Oct. 7, 2003). Many courts have recognized that “there is a liberal policy in favor of granting motions to stay proceedings pending the outcome of USPTO reexamination . . . proceedings.” See, e.g., Medicis Pharmaceutical Corp., 486 F. Supp. 2d at 993 (internal quotation omitted). The relevant factors favor a stay in this case. The first factor weighs in favor of a stay because the plaintiff’s claim of tactical disadvantage is based on mere speculation. The plaintiff claims that reexamination proceedings could last three to four years because Anheuser-Busch and FLEXcon may employ a tag-team strategy by making successive requests for inter partes reexamination. There are a pair of problems with this argument. First, Anheuser-Bush has disclaimed ownership or control of FLEXcon, and nothing in the record supports the idea that FLEXcon is anything other than an independent supplier to Anheuser-Busch. Since there is no other evidence of a close relationship, the suggestion that these entities may be colluding is mere speculation. Second, and more importantly, the tag-team strategy envisioned by the plaintiff makes little practical sense. The plaintiff seems to imagine FLEXcon making only some arguments for invalidity in the reexamination process, leaving others for Anheuser-Busch to make in the future, thereby extending the proceedings before the PTO. The reason this argument strains credulity is that FLEXcon obviously has much to lose in all this (if the plaintiff is right, FLEXcon is using patented technology without license), so it only makes sense that it would present all colorable arguments to the PTO in the first instance. Absent evidence to the contrary, it is simply unreasonable to assume a delay scheme predicated on intentionally withholding arguments and references to prior art. Further, the plaintiff has not shown prejudice. The plaintiff’s argument that it would suffer prejudice -10- in the form of delay is unavailing because (1) it has a fair degree of control over how long the reexamination process takes, and (2) the PTO has proceeded expeditiously thus far. Moreover, the fact that the plaintiff did not request preliminary injunctive relief cuts against any argument that it is faced with emergent circumstances. The second factor – whether a stay will simplify the issues in question and trial of the case – is also important. Courts routinely issue stays in infringement cases pending reexamination for the very reason that the infringement action can become moot or, at the very least, narrowed significantly. See, e.g., Pass & Seymour, 532 F. Supp. 2d at 436 (staying proceedings based on “finding that the parties and the court could benefit immensely from the expertise of the PTO, and that its determination could potentially avoid the necessity of this case going forward, or at a minimum materially reshape the issues presented”); Anascape, 475 F. Supp. 2d at 617 (“[T]his court finds that the possibility of simplification of issues resulting from reexamination weigh in favor of granting stays as to the ‘791, ‘205 and ‘415 patents.”). Here, the PTO has already expressed its opinion that five claims are invalid. Although it is unclear precisely how critical these claims are to the ‘191 Patent, they likely are material; the patent may well fail without them. Certainly, the validity of the plaintiff’s infringement action is cast into some doubt by the reexamination proceedings. Analysis of the third factor – whether discovery is complete and whether a trial date has been set – is simpler still. The answer to both queries is “no.” The Court has not yet issued an initial scheduling order in this case; court-ordered discovery has only recently begun but a trial date has not been set. -11- Finally, the Court believes that judicial economy and fairness to all parties augurs in favor of a stay. The time invested in the proceedings before the PTO likely will pay dividends in the ultimate resolution of the present action. IV. The Court finds that it has the inherent authority to stay proceedings in the interest of fairness and efficiency. The circumstances of the proceedings before the PTO in this case suggest that the present litigation will be well informed by those proceedings. Accordingly, it is ORDERED that the defendants’ motion to stay all proceedings in this Court [dkt # 9] is GRANTED. All proceedings in this case are STAYED until December 1, 2008 or until further order of the Court. On or before that date, the parties shall file a joint report with the Court outlining the activity that has taken place before the PTO and other tribunals concerning the inter partes examination and provide an estimate as to the likely completion date. Either party may seek relief from the stay by appropriate motion. It is further ORDERED that the defendants’ emergency motion to stay the magistrate judge’s discovery order [dkt #31] is DENIED as moot. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: June 17, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on June 17, 2008. s/Felicia M. Moses FELICIA M. MOSES -12-

=== Keaik Opinion on Cross MSJs ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ALI MOHAMED KEAIK, Petitioner, v. Case Number 07-13198 Honorable David M. Lawson MICK DEDVUKAY, District Director, United States Citizenship and Immigration Service, EMELIO T. GONZALEZ, Director, United States Citizenship and Immigration Service, MICHAEL CHERTOFF, Secretary, Department of Homeland Security, and MICHAEL MUKASEY, United States Attorney General, Respondents, ____________________________________________________/ OPINION AND ORDER GRANTING RESPONDENTS’ MOTION FOR SUMMARY JUDGMENT AND DENYING PETITIONER’S MOTION FOR SUMMARY JUDGMENT The petitioner, Ali Mohamed Keaik, seeks de novo review of his application for citizenship, as is his right under 8 U.S.C. § 1421(c), after his application was denied by the United States Citizenship and Immigration Service (CIS). The petitioner, a young man from Lebanon, argues that the CIS erroneously found a lack of good moral character. According to the petitioner, the CIS placed undue weight on relatively minor traffic offenses that do not show a lack of respect for the law. The respondents contest the premise of this argument: they submit that the traffic offenses were collectively serious, the petitioner was not forthright about them, and he failed to submit documents needed to evaluate these incidents fully. After reviewing the record submitted, the Court finds that no material fact issues require an evidentiary hearing; the petitioner’s traffic record, although quite blemished, does not itself stand as an obstacle to his establishing good moral character; the petitioner’s failure to answer truthfully the questions relating to his traffic violations convinces the Court that the petitioner has not carried his burden of showing good moral character; and the failure of the petitioner to furnish proper documentation relating to the traffic offenses within a reasonable period of time constitutes a failure to prosecute his citizenship application. Therefore, the Court will deny the petitioner’s motion for summary judgment, grant the respondents’ motion for summary judgment, and dismiss the case with prejudice. I. The record submitted by the parties furnishes the uncontested facts. The petitioner in this case, Ali Mohamed Keaik, is a thirty-one-year-old native of Lebanon. Keaik was lawfully admitted to the United States in May 1997 on a B-2 visitor visa. Although that visa expired three months later, the petitioner stayed in the United States without seeking renewal. The petitioner then married a United States citizen, Jessica Gray, on January 29, 1999. Less than one month later, Grey filed a Form I-130 visa petition on behalf of the petitioner, and the petitioner applied to become a permanent resident. The petitioner became a lawful permanent resident on March 23, 2000, but his status was conditional because he was the beneficiary of a relative visa less than two years after marrying an American citizen. See 8 U.S.C. § 1186a. On October 12, 2000, less than seven months later, the petitioner and Gray were divorced. On February 18, 2001, the petitioner married another woman by the name of Nada Zahir. On February 13, 2003, the petitioner filed an application to remove the conditions on his residency. Following an interview in 2005, that relief was granted. On January 31, 2005, the petitioner filed his application for naturalization. He reported, accurately, that he had been a lawful permanent resident for at least five years. However, the petitioner was not truthful when answering the questions dealing with past legal offenses. In the section titled “Good Moral Character,” the petitioner indicated that he had never “been arrested, cited, or detained by any law enforcement officer . . . for any reason”; had never “been charged with -2- committing any crime or offense”; had never “been convicted of a crime or offense”; and had never “received a suspended sentence, been placed on probation, or been paroled.” Resps.’ Mot. for Summ. J., Ex. E, App. for Naturalization at 8. None of these answers was accurate. According to records produced subsequently, the petitioner was convicted of driving with a suspended license on January 15, 2002 and January 30, 2002; of failing to display a valid license on February 13, 2002; and of speeding on February 13, 2002, May 30, 2002, and July 8, 2004. As it turns out, the petitioner also was convicted of speeding three more times following his naturalization application, on April 22, 2005, April 12, 2006, and September 12, 2006. The petitioner appeared for the required interview regarding his naturalization application on June 22, 2005. There, the petitioner conceded that he had been arrested, his license had been suspended, and he had received “about five” traffic tickets. Resps.’ Mot. for Summ. J., Ex. H, Sworn Statement. The CIS informed the petitioner on the same day of the interview that a decision could not yet be made on his application because additional documentation was needed. The CIS requested certified copies of “any and all [p]olice [r]eport(s) relating to any arrests,” “[t]he [o]riginal [c]harge/[c]omplaint relating to any and all arrests,” “[t]he [c]ourt [d]isposition of any and all arrests,” and the petitioner’s “[d]ischarge [f]rom [p]robation and [p]roof [t]hat [a]ll [f]ines/[f]ees [h]ave [b]een [p]aid.” Resps.’ Mot. for Summ. J., Ex. I, Request for Info. The CIS warned the petitioner that failure to furnish these documents could lead to denial of his application. In response to this request for information, the petitioner wrote a “letter of explanation,” to which he attached a handful of documents. Resps.’ Mot. for Summ. J., Ex. J, Letter of Explanation. The petitioner explained as follows: I am just writing this letter to explain that I did not know that my driver license was suspended twice. On 12/07/2001 my Driver License was suspended. On 01/15/2002 -3- I went to court after I found out that my driver license was suspended (I was not arrested, I found out at the Secretary of State) and I took care of it. I pleaded guilty and paid the fine. To the best of my knowledge I thought that my driver license was reinstated because I paid the fine and I was told that I don’t owe the City of Dearborn ANY money. Then on 01/28/2002, just 13 days after having pleaded guilty, paid the fine and reinstated my Driver License, I was arrested in Birmingham for driving with a suspended Driver license. The reason of the suspension was a non-payment of a seat belt ticket to the City of Dearborn. On 01/30/02, I went back to court and I pleaded guilty, paid the fine. I was sentenced to 2 year probation and 3 days work program. I completed my sentence. I still don’t understand how they let me go the 1st time (01/15/2002) when they knew that I still had a non-paid ticket. I can assure sir that this 2nd suspension was a mistake but I did not take the time to fight it in court because at this time I was going through some financial problems and I did not have the money to either hire an attorney nor miss work. I hope that this letter will help my case. Ibid. (errors in original). The petitioner attached four documents to this letter. The first two documents are titled “Certification of Court Disposition”; they describe, in scant detail, the petitioner’s proceedings in the Dearborn district court for driving with a suspended license. Exs. to Letter of Explanation at 1-2. The documents do not provide a claer picture of exactly what occurred, but the contents of these documents seem to mesh with the petitioner’s story. One certification reads: On 12/07/2001, the defendant was charged with Drove While License Suspended, Revoked, Denied. On 01/15/2002, the defendant plead [sic] guilty and was sentenced to $200 fine. The fine was paid and the case closed. Id. at 2. The other states: On 12/13/2000, the defendant was charged with Drove While License Suspended, Revoked, Denied. On 01/30/2002, the defendant plead [sic] guilty and was sentenced to 2 years probation; 3 days work program; $60 work program costs; and a $250 fine. On 06/13/2002, the case was closed. -4- Id. at 1. The third and fourth documents, a form police report and a narrative police report from the City of Birmingham Police Department, also relate to the petitioner’s conviction of driving with a suspended license. The narrative report reads as follows: On the 01/28/02 at 0907 hrs while on routine patrol I observed the listed vehicle W/B on Lincoln near Stanley. The vehicle speed was 42 mph in a 25-mph zone. The vehicle was stopped Lincoln and Southfield. A routine LEIN check showed 1 Warrant out of the 19th District Court. SOS showed 2 suspensions. The driver was arrest[,] transported to the Station where he was processed per procedure[,] and released on $100.00 bond for 48th DWLS charge and $350.00 for the 19th District. Id. at 4 (errors in original). On February 8, 2006, the CIS denied the petitioner’s naturalization application for failure to prosecute, which in turn prevented the petitioner from carrying his burden of establishing good moral character. The CIS offered the following explanation: The record reflects that on 06/22/2005 you appeared for an examination with a Service officer on the N-400, Application for Naturalization that you filed with USCIS on 01/31/2005. Following your examination, you were issued a Form N-14 because you stated that you had been arrested for driving while your Michigan driver license was suspended (DWLS). Subsequent to your examination on 06/22/2005, you submitted documents that revealed that your license had been suspended not once, but two times. However, you only submitted a certified “police report” for one DWLS charge. In addition, at your examination on 06/22/2005, you also indicated that you have received four or five citations. You did not provide copies [of] each of these citations at your examination and as such, it is not determinable, based upon the documents that you failed to submit[,] how many of the citations resulted in actual arrests. Consequently, it does not appear that you have submitted . . . 1. A complete set of your Police and Arrest Records. 2. A complete set of your Court Disposition Records. -5- In that you failed to reveal at your examination the fact that you have been charged not once but twice with DWLS, prima facie evidence exists to suggest that you have not met the burden of establishing the good moral character requirement. Irrespective of this possibility, the Service cannot conclude, at this time, that you have met the good moral character requirement because you did not provide certified copies of all police reports related to the DWLS charges, since you pled guilty to said offense on more than one occasion. Therefore, because you failed to submit all of the required documents that the Service requested by way of Form N-14, subsequent to your N-400 examination on 06/22/2005, you have failed to establish your eligibility for naturalization. Accordingly, your application must be, and hereby is, denied. Resps.’ Mot. for Summ. J., Ex. K, Denial Doc. at 2. The CIS informed the petitioner that he could request a review hearing within thirty days. On March 6, 2006, the petitioner filed a timely request for a hearing pursuant to 8 U.S.C. § 1447(a). At the hearing, held on November 14, 2006, the petitioner provided a copy of his driving record (discussed above). The petitioner had written notes next to some of the offense-entries, attempting to explain what had occurred. Those explanations are barely legible, and they seem simply to rehash the petitioner’s earlier explanation regarding his license being suspended. On April 5, 2007, the CIS affirmed the denial and sent the petitioner a letter to that effect. The CIS explained that the naturalization application was originally denied because the petitioner “did not establish, to the satisfaction of the Service, that [he was] a person of good moral character during the statutory period when a showing of good moral character is a prerequisite” and “failed to provide complete documentation as requested.” Resps.’ Mot. for Summ. J., Ex. N, Affirmation of Denial at 1-2. The CIS abided by this decision, writing as follows: On 11/14/2006, you were scheduled to appear for your Hearing. Explanation: You appeared as scheduled. You were accompanied by your accredited representative. The only documentation submitted on your behalf was an unofficial computer printout of your driving record. It was noted from the printout submitted, -6- that you had received two additional citations for speeding since your N-400, Application for Naturalization, was originally denied. The latest citations occurred on February 23, 2006, and August 26, 2006. No certified proof of disposition of the citations was provided. Based on your actions, it appears that you neither regard nor respect the rules and regulations as set forth by the State. No pattern of reformation can be determined by your behavior. Therefore, in light of the fact that insufficient documentation was submitted to overcome the assumption that reformation has been made [sic], the previously rendered decision will not be vacated. Thus, the following order is entered: ORDER: The denial of your N-400, Application for Naturalization, was correct and the decision is hereby affirmed. Id. at 2. Naturally, the petitioner was not pleased with this decision. In a deposition taken in January 2008, the petitioner suggested that he viewed his actions as consistent with typical American behavior: I never broke the law, never was in jail, except my driving record, and even if you look at this ticket, except the first two ticket where I was still a wild young man driving nice car that I never drove in my life, most of the tickets that I have are like five, ten over the speed that I got on the highway. Like every single American, name me one person in America who does not have a ticket. Resps.’ Mot. for Summ. J., Ex. FF, Pet. Dep. at 60. On August 1, 2007, the petitioner filed the present suit seeking de novo review of the denial under 8 U.S.C. § 1421(c). The petitioner has not requested an evidentiary hearing, but instead argues that the undisputed facts establish the required elements entitling him to United States citizenship. The respondents disagree and have filed a cross-motions for summary judgment. The Court heard oral argument on the motions on May 29, 2008. -7- II. This Court has jurisdiction over the matter pursuant to 8 U.S.C. § 1421(c). According to the procedures established by Congress, the CIS examines an application for naturalization in accordance with 8 U.S.C. § 1446. If the examiner denies the application, the applicant may request a hearing before an immigration officer. 8 U.S.C. § 1447(a). If the immigration officer denies the application following the hearing, the applicant “may seek review of such denial before the United States district court for the district in which such person resides.” 8 U.S.C. § 1421(c). “Such review shall be de novo, and the court shall make its own findings of fact and conclusions of law and shall, at the request of the petitioner, conduct a hearing de novo on the application.” Ibid. III. As noted above, the petitioner has not requested an evidentiary hearing in this matter. In fact, both sides have moved for summary judgment, contending that the record contains no disputed material facts. The only dispute, according to the parties, is the legal consequences that flow from the undisputed facts stated in the record. Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact.” Fed. R. Civ. P. 56(c). The fact that the parties have filed cross motions for summary judgment does not automatically justify the conclusion that there are no facts in dispute. Parks v. LaFace Records, 329 F.3d 437, 444 (6th Cir. 2003) (“The fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate.”). Instead, the Court must apply the well-recognized standards when deciding such cross motions: when this Court considers cross motions for summary -8- judgment, it “must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party.” Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003). A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 587 (1986). The petitioner argues that the only contested element in his application for citizenship is proof of good moral character, and he has established all of the other requisites. The government appears to agree with that contention. The petitioner states that the presence of good moral character is generally established by the absence of misconduct, and he insists that his poor driving record does not amount to the type of misconduct that is disqualifying. Rather, he says, most of the offenses that support a finding of bad character are felonies, crimes of moral turpitude, or lying to obtain an immigration benefit, which the petitioner has never committed. He cites a number of decisions to show that traffic law violations and other such conduct – such as his twin convictions of driving on a suspended license – do not give rise to a finding of poor moral character. The respondents point out that all but two of the petitioner’s numerous offenses occurred during the five-year statutory period for establishing good moral character (see 8 C.F.R. § -9- 316.10(a)(1 , and, more importantly, the petitioner was not forthcoming about these incidents. The petitioner denied any law enforcement contact on his initial application, and although he acknowledged brushes with the law during his June 22, 2005 interview, even then he was less than candid, admitting only five tickets when he had actually been cited eighteen different times. They say that the petitioner’s letter of explanation raised more questions than it answered, and coupled with the lack of proper documentation, it failed to rebut the inference that the petitioner’s moral character and respect for the law was unfavorable. Because the petitioner failed to rebut that inference with records that showed he had completed probation, his traffic stops did not result in arrest, and all his traffic citations were resolved, the conclusion that the petitioner failed to prosecute his application was warranted as well, the respondents argue. After an individual has been a lawful permanent resident for five years, he becomes eligible for naturalization. 8 U.S.C. § 1427(a). However, aliens “have no natural right to become citizens,” and therefore they must satisfy the requirements prescribed by Congress. United States v. Schwimmer, 279 U.S. 644, 649 (1929). Apart from the residency requirement (and other prerequisites that are not material for purposes of this case), the applicant must be “a person of good moral character, attached to the principles of the Constitution of the United States, and well disposed to the good order and happiness of the United States.” 8 U.S.C. § 1427(a). The applicant bears the burden of establishing all the requirements by a preponderance of the evidence. 8 C.F.R. §§ 316.2(b) & 316.10(a)(1); Berenyi v. District Director, Immigration and Naturalization Service, 385 U.S. 630, 637 (1967). All doubts are to be resolved in favor of the government. Berenyi, 385 U.S. at 637. -10- Federal regulations instruct the CIS to consider the moral character issue on a “case-by-case basis,” taking into account designated factors as well as “the standards of the average citizen in the community of residence.” 8 C.F.R. § 316.10(a)(2). An applicant “shall be found to lack good moral character” if, during the statutory period, he was convicted of a crime of moral turpitude, 8 C.F.R. § 316.10(b)(2)(i); violated a drug law, 8 C.F.R. § 316.10(b)(2)(iii); or gave false testimony (whether material or not) in order to obtain an immigration benefit, 8 C.F.R. § 316.10(b)(2)(vi). The regulations specify that “[a]n applicant who has been on probation, parole, or suspended sentence during all or part of the statutory period is not thereby precluded from establishing good moral character, but such probation, parole, or suspended sentence may be considered by the Service in determining good moral character.” 8 C.F.R. § 316.10(c)(1). Nevertheless, “[a]n application will not be approved until after the probation, parole, or suspended sentence has been completed.” Ibid. (emphasis added). When a person applies for naturalization, the CIS reviews the application and other submissions and conducts an in-person interview. 8 U.S.C. § 1446(b); 8 C.F.R. § 335.2(a), (c). If the CIS detects a problem in the application, “the Service officer may continue the initial examination on an application for one reexamination, to afford the applicant an opportunity to overcome deficiencies on the application that may arise during the examination.” 8 C.F.R. § 335.3(b). “If the applicant is unable to overcome the deficiencies in the application, the application shall be denied.” Ibid. The CIS may order an applicant to furnish documents it deems necessary to determine eligibility, and failure to comply comes at a heavy price: An applicant for naturalization who has appeared for the examination on his or her application as provided in § 335.2 shall be considered as failing to prosecute such application if he or she, without good cause being shown, . . . fails to provide within -11- a reasonable period of time such documents, information, or testimony deemed by the Service to be necessary to establish his or her eligibility for naturalization. 8 C.F.R. § 335.7. As mentioned above, if the examiner denies the application, the applicant may request a hearing by an immigration officer. 8 U.S.C. § 1447(a). If the immigration officer denies the application following the hearing, the applicant may seek a de novo review of the denial before the district court. 8 U.S.C. § 1421(c). After reviewing the documents submitted, the Court agrees with the conclusion of the CIS that the petitioner has not established good moral character by a preponderance of the evidence, and he failed “to provide within a reasonable period of time such documents, information, or testimony deemed by the Service to be necessary to establish his or her eligibility for naturalization.” 8 C.F.R. § 335.7. The CIS determined that the petitioner failed to meet the moral-character requirement, and that he failed to prosecute his claim by failing to furnish information that could have shed more light on the petitioner’s character. The Court also finds this to be the case, not because the petitioner’s poor driving record demonstrates that he is a person of bad moral character, but because he lied about his past law enforcement contacts on his application and minimized his disregard of the traffic laws when given a chance to correct his prevarications. In his application for naturalization, the petitioner reported that he had never “been arrested, cited, or detained by any law enforcement officer . . . for any reason”; had never “been charged with committing any crime or offense”; had never “been convicted of a crime or offense”; and had never “received a suspended sentence, been placed on probation, or been paroled.” App. for Naturalization at 8. However, records uncovered afterwards showed that the petitioner was convicted of driving with a suspended license on two occasions and numerous other low-level traffic -12- offenses. The petitioner changed his story when he was initially interviewed, acknowledging that he had received “about five” traffic tickets (still an understatement of the actual figure). Sworn Statement at 1. Faced with this inconsistency, the CIS requested specific documentation. The petitioner complied in part but not in full. Although he provided substantial information concerning the driving-with-a-suspended-license convictions, he furnished no information concerning other tickets and no proof that he was discharged from probation. From all this, there were at least three reasons why naturalization was inappropriate, two of which convince the Court that the petition must be denied. Initially, the petitioner’s legal history could cast doubt on his good moral character. It is true that none of the petitioner’s offenses, including driving with a suspended license, were serious enough to imply bad moral character automatically. See 8 C.F.R. § 316.10(b)(1)-(2). Nevertheless, the regulations contain a catch-all provision, which states: Unless the applicant establishes extenuating circumstances, the applicant shall be found to lack good moral character if, during the statutory period, the applicant: . . . (iii) Committed unlawful acts that adversely reflect upon the applicant’s moral character, or was convicted or imprisoned for such acts, although the acts do not fall within the purview of § 316.10(b)(1) or (2). 8 C.F.R. § 316.10(b)(3). The petitioner filed his application for naturalization on January 31, 2005. The five-year statutory period for establishing good moral character therefore began on January 31, 2000. During that time period, the petitioner committed at least nine traffic offenses, including driving with a suspended license twice, for which he received two years probation. Further, the petitioner was twice cited for speeding after he filed his application. Those tickets fall within the statutory period as well, since the period includes “the date of the application up to the time of admission to citizenship.” 8 U.S.C. § 1427(a). Nevertheless, the Court agrees with the petitioner -13- that bad moral character can not be found solely on these incidents. Although another judge in this district has held that “[t]raffic violations may indeed indicate lack of ‘good moral character,’” In re Petition for Naturalization of Odeh, 185 F. Supp. 953, 955 (E.D. Mich. 1960), he held in the same case that sixteen garden-variety traffic tickets did not “constitute the incidents envisioned by Congress as detracting from a person’s qualifications for citizenship,” ibid. Other courts have reached a similar conclusion. See Yin-Shing Woo v. United States, 288 F.2d 434, 435 (2d Cir. 1961) (holding that disregard of parking laws, even as many as twenty-three times, is not so “inimical” to the good order of the nation as to justify denial of naturalization); Puciaty v. Dep’t of Justice, 125 F. Supp. 2d 1035, 1040-41 (D. Hawaii 2000) (finding failure to pay civil judgment insufficient to support determination of poor moral character). Although these offenses are insufficient to establish bad moral character by themselves, they certainly bolster the conclusion of poor moral character premised on the petitioner’s lack of candor, which brings us to the second point. By failing to disclose his convictions, the petitioner gave false testimony to obtain an immigration benefit in violation of 8 U.S.C. § 1101(f)(6) and 8 C.F.R. § 316.10(b)(2)(vi). There has been no claim that the petitioner lacks an understanding of English (he satisfied the language requirement), so it is difficult to see how he could have so seriously misunderstood the simple question whether he had ever “been arrested, cited, or detained by any law enforcement officer . . . for any reason.” App. for Naturalization at 8. Since an applicant “shall be found to lack good moral character” if he gives false testimony to secure an immigration benefit, 8 C.F.R. § 316.10(b)(2)(vi), the petitioner’s lack of candor alone justifies denial of his application and this petition. -14- Finally, there is the issue on which the CIS placed the most weight: failure to prosecute. The regulations expressly state that failure to prosecute will be found where an applicant, without good cause being shown, “fails to provide within a reasonable period of time such documents, information, or testimony deemed by the Service to be necessary to establish his or her eligibility for naturalization.” 8 C.F.R. § 335.7. Following the initial interview, the CIS formally requested a series of documents to assess the petitioner’s legal history. The petitioner complied only in part, producing some (but not all) of the documents concerning his convictions for driving with a suspended license and none of the documents relating to his other citations. This is all the more significant given that the petitioner did not furnish documentation showing completion of probation. After all, an application for naturalization “will not be approved until after the probation, parole, or suspended sentence has been completed.” 8 C.F.R. § 316.10(c)(1). On balance, it is clear that the CIS properly denied the petitioner’s application, and after de novo review the Court is constrained to agree with that result. The petitioner has not carried his burden of establishing entitlement to naturalization. Of course, this does not mean that the petitioner cannot remain in the United States as a lawful permanent resident, or that he cannot apply for citizenship at a later date. At present, however, the petitioner is not eligible for naturalization. IV. The Court finds upon a de novo review of the record that the petitioner has not established by a preponderance of the evidence that he is “a person of good moral character, attached to the principles of the Constitution of the United States, and well disposed to the good order and happiness of the United States.” 8 U.S.C. § 1427(a). -15- Accordingly, it is ORDERED that the petitioner’s motion for summary judgment [dkt #13] is DENIED. It is further ORDERED that the respondents’ motion for summary judgment [dkt #14] is GRANTED. It is further ORDERED that the petition is DISMISSED with prejudice. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: June 2, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on June 2, 2008. s/Felicia M. Moses FELICIA M. MOSES -16-

=== Lipa Opinion Granting Motion to Dismiss ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION MATTHEW LIPA, Plaintiff, v. ASSET ACCEPTANCE, LLC, Defendant. Case Number 07-12950 Honorable David M. Lawson ______________________________________/ OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO DISMISS AND DENYING PLAINTIFF’S MOTION TO AMEND COMPLAINT This matter is before the Court on the defendant’s motion to dismiss this action brought under the Fair Debt Collection Practices Act (FDCPA) and state law for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The defendant argues that the plaintiff’s complaint alleges only that the defendant, Asset Acceptance, LLC, sued the plaintiff for an alleged debt without providing the underlying loan agreement or, in the alternative, a timely affidavit of account, which does not make out a violation of the FDCPA according to controlling Sixth Circuit precedent. The plaintiff responded by attempting to distinguish the cited precedent, and then at oral argument held on April 8, 2008 he added a few more reasons that the lawsuit should proceed. The Court allowed additional time for filing supplemental briefs and to permit the plaintiff to move to amend his complaint, if he so chose. The Court reviewed the supplemental filings and now concludes that the plaintiff’s complaint cannot be read as expansively as he contends, the complaint as drafted fails to state a cognizable claim, and the plaintiff’s proposed amendment is futile and untimely and should not be allowed. Therefore, the Court will grant the motion to dismiss and dismiss the case. I. According to the complaint, on April 16, 2007, the defendant in this case, Asset Acceptance, LLC, sued plaintiff Matthew Lipa in a Michigan state court to collect a debt in the amount of $816.24, apparently resulting from an unpaid credit card obligation. Asset Acceptance did not file the underlying credit agreement with its state-court complaint. Instead, it submitted an “affidavit of account,” which read as follows: AFFIDAVIT OF ACCOUNT I hereby certify and affirm that I, Patricia Conaton, am the Legal Manager of ASSET ACCEPTANCE LLC . . . . I further state that the said company has purchased and is the owner of a claim against Matthew Lipa, Account Number XXXXXXXX0251, originally with PROVIDIAN FINANCIAL, and the amount of $816.24 is now due and owing with pre-judgment interest continuing to accrue at the rate of 5.000%. . . . I further state that the business records of this account received at the time of purchase have been reviewed and the information contained herein was obtained from said business records. Compl., Ex A., Aff. of Account. The plaintiff contends that this affidavit was defective under state law because it was not executed within ten days before the complaint was filed; rather, “it was signed about a month before the Summons [was issued].” Compl. at ¶ 19. According to plaintiff Lipa, bringing suit in this fashion – without producing the debt-creating instrument or, alternatively, furnishing a proper account affidavit – constituted a violation of the FDCPA. On July 16, 2007, the plaintiff filed a complaint in this Court asserting a count under that Act. After setting forth the facts noted above, the plaintiff alleged that the defendant violated several specific sections of the FDCPA consisting of (1) 15 U.S.C. § 1692d, which prohibits “any conduct -2- the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of the debt”; (2) 15 U.S.C. § 1692e(5), which prohibits a debt collector from “threat[ening] to take any action that cannot legally be taken”; (3) 15 U.S.C. § 1692e(10), which prohibits the “use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer”; and (4) 15 U.S.C. § 1692f, which prohibits an attempt to collect “any amount . . . unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” Compl. at ¶¶ 22-26. It is apparent from the factual allegations and subsequent filings, however, that the plaintiff only takes issue with the way in which the defendant brought its collection suit. The defendant contends that the facts as alleged in the complaint do not establish a violation of any of these statutory provisions, and therefore the complaint fails to state a claim. The defendant points to Harvey v. Great Seneca Financial Corp., 453 F.3d 324 (6th Cir. 2006), in support of its contention that the FDCPA is not violated by a debt collector filing a collection lawsuit without attaching to its suit papers a copy of written proof of the debt. In his response to the motion, the plaintiff attempts to distinguish Harvey on the basis that Harvey never disputed that he owed the amount claimed, whereas Lipa contests the amount of the debt. At oral argument on the motion, however, the plaintiff raised new arguments. He insisted that the complaint includes the theory that the defendant failed to validate the debt before it filed suit, and the defendant actually did not own the debt at the time. He argued that if the complaint cannot be read that broadly, he should be given a chance to amend. However, in his response to the defendant’s motion to dismiss the plaintiff also “agree[d] to dismiss it’s [sic] State claims and go to the Jury with just the FDCPA violations.” Pl.’s Resp. at 8. -3- The Court gave the parties time to file supplemental briefs and told the plaintiff he could move to amend his complaint if he chose. The plaintiff then filed a supplemental brief raising yet another argument: that the motion to dismiss is untimely. He also developed further his arguments that the defendant did not respond to his request to validate the debt in writing, and the defendant was not the true owner of the debt, and he moved to amend his complaint. The validation letter offered by the plaintiff is dated November 28, 2006, and there appears to be no dispute that the defendant received it shortly thereafter. In terms of when the plaintiff first learned of the debt, he writes in the validation letter, “This letter is being sent to you in response to a notice sent to my father’s house dated October 18, 2006.” Pl’s Supp. Br., Ex. 5, Validation Letter at 1. The plaintiff has also submitted an affidavit, not referenced in the complaint (either the original or the proposed amended complaint), wherein he states that the defendant failed to respond to this letter, and he always disputed the amount allegedly owed. Turning to the claim for lack of ownership of the debt, the plaintiff theorizes that defendant Asset did not own the debt at the time it filed the collection lawsuit because Washington Mutual (which apparently owns Providian Financial, from whom Asset acquired the debt) continued to send the plaintiff bills. The evidence here is rather limited and consists of six bills sent by Washington Mutual from April 27, 2007 to September 27, 2007. The bills were sent to the plaintiff (although he claims he did not receive them because the address was wrong), and they requested payment in the amount of $832.51. The one exception to this is the final bill sent on September 27, 2007, which was an invoice of $0. If the Court rejects the plaintiff’s position that the current complaint is sufficient to proceed with his FDCPA case, the plaintiff requests leave to amend. His proposed amended complaint only -4- adds language alleging that the defendant did not respond to the plaintiff’s demand to validate the debt, and it does not add allegations regarding the non-ownership of the debt. The new factual allegations read as follows: 21. Prior to the lawsuit, Plaintiff sent Defendant a validation notice regarding the alleged debt. (Exhibit 3 - Letter) 22. Defendant received this letter. (Exhibit 4 - Return Receipt) 23. Defendant failed to validate the debt and instead sued Plaintiff to collect the alleged debt. Pl.’s Supp. Br., Ex. 1, Prop. Amend. Compl. at ¶¶ 21-23. The plaintiff then adds the following legal conclusion: “Defendants have violated the FDCPA, 15 U.S.C. § 1692g(b), by continuing to attempt to collect a debt without validating the debt after being asked to do so.” Prop. Amend. Compl. at ¶ 30. In his supplemental brief, the plaintiff asks the Court to either (1) deny the defendant’s motion to dismiss, (2) convert the motion to one for summary judgment and deny it as such, or (3) allow the plaintiff to amend his complaint. The defendant continues to assert that Harvey requires the conclusion that the complaint fails to state a claim, and the complaint states neither a validation nor lack-of-ownership claim. The defendant also opposes the plaintiff’s effort to amend the complaint on the grounds that the proposed amendment would be futile, the plaintiff has committed undue delay, and amendment would be prejudicial. -5- II. The defendant’s motion to dismiss is directed to the original complaint. Motions to dismiss are governed by Rule 12(b) of the Federal Rules of Civil Procedure and allow for dismissal for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). When deciding a motion under that Rule, the court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the complaint contains “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S.__, __, 127 S.Ct. 1955, 1974 (2007). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Ibid. Federal Rule of Civil Procedure 8(a) requires that the complaint give the defendant fair notice of the nature of the claim and the factual grounds upon which it rests. Twombly, 127 S.Ct. at 1964. Therefore, “[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 1964-65 (citations omitted) (alteration in original). “In practice, ‘a . . . complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.’” In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir. 1993) (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (1984 ; see also -6- Ana Leon T. v. Fed. Reserve Bank, 823 F.2d 928, 930 (6th Cir. 1987) (per curiam) (mere conclusions are not afforded liberal Rule 12(b)(6) review). A. The main thrust of the plaintiff’s complaint in this case is that the defendant filed a defective collection lawsuit in state court because its affidavit of account stated was stale and there was no other written proof of the debt attached to the state court pleadings. The plaintiff reasons, therefore, that the defendant violated the FDCPA by filing this lawsuit without any written proof of the debt, thereby contravening 15 U.S.C. § 1692f (prohibiting attempts to collect “any amount . . . unless such amount is expressly authorized by the agreement creating the debt or permitted by law”), 15 U.S.C. § 1692e(10) (outlawing the “use of any false representation or deceptive means to collect or attempt to collect any debt”), and 15 U.S.C. § 1692d (forbidding “any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of the debt”). There are several reasons why the plaintiff’s case lacks merit. Before discussing them, however, the Court will briefly address the plaintiff’s contention that the defendant’s motion is untimely, which is equally meritless. The plaintiff has seized upon an excerpt from Rule 12(b) that says “[a] motion asserting any of these defenses must be made before a responsive pleading if a responsive pleading is allowed,” and argues that since the defendant already filed an answer it waived the defense of failure to state a claim. This argument ignores the clear language stated elsewhere in the Rule that preserves such defenses that are asserted in the first responsive pleading, as the defendant did here. See Fed. R. Civ. P. 12(b) (“No defense or objection is waived by joining it with one or more other defenses in a responsive pleading or in a motion.”). In addition, Rule 12(h)(2) provides that a party may raise the failure-to-state-a-claim defense up to and including trial, -7- and Sixth Circuit precedent confirms this. As long as a defendant notes the defense in its responsive pleading, “[t]he defense of failure to state a claim upon which relief can be granted is protected from waiver through trial.” Romstadt v. Allstate Ins. Co., 59 F.3d 608, 610-11, 611 n.1 (6th Cir. 1995). Turning to the defects in the plaintiff’s theory of liability, it is apparent that controlling Sixth Circuit precedent renders lawful under the FDCPA the conduct the plaintiff describes in his complaint. The Fair Debt Collection Practice Act, 15 U.S.C. § 1692 et seq., was enacted in 1978 to promote fair debt collection by eliminating abusive practices in the collection of consumer debts and by defining the rights of consumers vis-à-vis debt collectors. “The statute is very broad, and was intended to remedy ‘what is considered to be a widespread problem.’” Harvey v. Great Seneca Financial Corp., 453 F.3d 324, 329 (6th Cir. 2006) (quoting Frey v. Gangwish, 970 F.2d 1516, 1521 (6th Cir. 1992 . Therefore, “[i]n determining whether any particular conduct violates the FDCPA, the courts have used an objective test based on the least sophisticated consumer.” Ibid. (citing Smith v. Transworld Sys., Inc., 953 F.2d 1025, 1029 (6th Cir. 1992 . In Harvey, the Sixth Circuit addressed an FDCPA claim that was substantially similar to the one before this Court. The plaintiff sued a debt collector and the collector’s law firm, alleging that they had violated the FDCPA by filing a collection suit without the immediate means of proving their claim. Attached to the collection suit were “two exhibits that listed the account number, the balance, and the statement closing date for each account.” Id. at 326. However, when Harvey sought discovery to validate the debt, the collectors refused to provide a response and eventually dismissed the suit. Based on these events, the plaintiff claimed the defendants “filed ‘a lawsuit to collect a purported debt without the means of proving the existence of the debt, the amount of the -8- debt, or that Seneca owned the debt.’” Ibid. However, the district court held that the plaintiff failed to state a claim for violation of the FDCPA, and the Sixth Circuit affirmed. As in this case, the plaintiff in Harvey alleged that filing a collection suit without adequate proof at the time of filing constituted a harassing and oppressive procedure and false representation in contravention of 15 U.S.C. §§ 1692d and e(10). Harvey, 453 F.3d at 329. The court of appeals rejected this theory. With respect to section 1692(d), the court observed that the activities prohibited by this provision (such as violent threats, the use of obscene language, and repeated phone calls) are those “tactics intended to embarrass, upset, or frighten a debtor.” Harvey, 453 F.3d at 330 (citing 15 U.S.C. § 1692d(1)-(6 . Yet “[t]hese tactics are not comparable to the single filing of a debt- collection lawsuit:” Even when viewed from the perspective of an unsophisticated consumer, the filing of a debt-collection lawsuit without the immediate means of proving the debt does not have the natural consequence of harassing, abusing, or oppressing a debtor. Any attempt to collect a defaulted debt will be unwanted by a debtor, but employing the court system in the way alleged by Harvey cannot be said to be an abusive tactic under the FDCPA. Id. at 330-31. The Sixth Circuit further dismissed the plaintiff’s theory that filing a collection action without the immediate means of proving the debt equaled a deceptive practice under 15 U.S.C. § 1692e(10). Harvey, 453 F.3d at 331-33. After noting some of the common practices considered deceptive within the meaning of this provision (impersonating a public official, misrepresenting the amount owed), the court distinguished the case at hand on the grounds that the plaintiff did not allege a falsehood. See id. at 331. As the court explained, Harvey never denied in her complaint that she owed Seneca a debt, nor did she claim that Seneca and Javitch misstated or misrepresented the amount that she owed. Her allegations against Seneca and Javitch therefore do not allege that Seneca and Javitch -9- made “false representations” or used means that were “deceptive” in the traditional sense. See 15 U.S.C. § 1692e(10). Id. at 332. Nevertheless, the plaintiff contended that the defendants’ conduct – proceeding on a claim without sufficient proof – was “‘analogous to suing on a time-barred debt,’” a practice held by many courts to violate the FDCPA even though it does not involve affirmative misrepresentation. Without deciding the legality of suing on a time-barred debt, the Sixth Circuit rejected this argument by identifying a critical distinction: if there is deception in filing a time-barred collection action, it lies in the implicit representation that the debt can in fact be collected; on the other hand, a person filing suit does not tacitly represent that he has the proof on hand to validate the debt. To quote the court: Harvey argues that these cases illustrate by analogy that a lawsuit filed without the immediate means of proving the existence, amount, or true owner of the debt is deceptive. We respectfully disagree. Seneca and Javitch did not implicitly represent by filing the Complaint for Money that they had in hand the means to prove Seneca’s claims. Rule 11 of the Federal Rules of Civil Procedure does not require attorneys to ensure that their client can prove its case before filing. Instead, the Rule mandates only that “the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.” Fed. R. Civ. Proc. 11(B)(3). Harvey did not allege in her complaint that Seneca and Javitch failed to undertake a reasonable investigation into whether or not Harvey’s debt existed; rather, she essentially focused on the contention that Seneca and Javitch did not presently possess the means of proving that debt. In addition, a number of the cases holding that the filing of a time-barred claim is a deceptive practice under the FDCPA rely on 15 U.S.C. § 1692e(2), which prohibits “the false representation of . . . the character, amount, or legal status of any debt.” See Shorty, 90 F. Supp. 2d at 1331 (“Common sense dictates that whether a debt is time-barred is directly related to the legal status of that debt . . . [because] a debt cannot be pursued in court . . . [if] it is time-barred . . . .”). On the other hand, a debt may be properly pursued in court, even if the debt collector does not yet possess adequate proof of its claim. Seneca and Javitch’s alleged actions, therefore, did not misrepresent the legal character of the debt owed. Id. at 333. -10- The rule from Harvey has been applied by other courts in Deere v. Javitch, Block, & Rathbone, LLP, 413 F. Supp. 2d 886, 890 (S.D. Ohio 2006) (dismissing FDCPA claim that “essentially allege[d] that more of a paper trail should have been in the lawyers’ hands or attached to the complaint”), and Nickoloff v. Wolpoff & Abramson, LLP, 511 F. Supp. 2d 1043, 1045 (C.D. Cal. 2007) (“[T]o the extent that Plaintiff’s allegations of harassing and abusing the debtor rest on the fact that Defendants did not posses adequate proof of the debt at the time they delivered the arbitration claim, Plaintiff can prove no set of facts that would entitle him to relief under the FDCPA.”). The plaintiff has alleged no more in this case. He claims that when the defendant sued him, the defendant refused his demand for a copy of the credit agreement. Compl. at ¶ 18. He then avers that the defendant “sued Plaintiff improperly and without proof Plaintiff owed the debt.” Id. at ¶ 20. These allegations do not differ materially from those discussed in Harvey. In both cases, the debtors claim they were harassed, deceived, and abused merely because the creditors did not have (or produce) proof of the debt at the time they filed suits in collection. Yet the Sixth Circuit made it pellucidly clear that, without more, such conduct does not amount to a harassing or oppressive act in violation of 15 U.S.C. § 1692d or deceptive or false means in violation of 15 U.S.C. § 1692e(10). Harvey, 453 F.3d at 329. There is also a defect in the plaintiff’s underlying premise that the state lawsuit was defective because the affidavit of account stated was stale. If that proposition were correct, then perhaps an argument could be made that the defendant violated 15 U.S.C. § 1692e(5), which prohibits a debt collector from “threat[ening] to take any action that cannot legally be taken,” and 15 U.S.C. § 1692f, which prohibits an attempt to collect “any amount . . . unless such amount is expressly authorized -11- by the agreement creating the debt or permitted by law,” if the plaintiff alleged additional conduct that would support such claims. However, the plaintiff has not alleged that the debt is time-barred, and (although he says otherwise in his brief) he never in his complaint contested owing the debt or the amount claimed, nor did he allege that the account affidavit was not based on adequate records. And the plaintiff is wrong in his assertion that the state court lawsuit was fatally flawed because of the out-of-time affidavit. The complaint in this case reads: “Under MCLA 600.2145, Defendant must have an Affidavit signed within ten (10) days of the Summons for it to be a proper substitute to the creditor agreement. The affidavit of account here was signed about a month before the Summons.” Compl. at ¶ 19. However, section 600.2145 says no such thing. There is no legal requirement that a creditor attach to its collection complaint either a credit agreement or a proper affidavit. Instead, the statute merely prescribes a procedure that, when correctly followed, eases the burden on a creditor seeking to collect a delinquent open account by converting it to an account stated. An open account is an account with a balance which has not been ascertained, and which is kept open in anticipation of future transactions. 1 Am Jur 2d, Accounts and Accounting, § 4 (1994). An account stated consists of “‘a balance struck between the parties on a settlement.’” Keywell & Rosenfeld v. Bithell, 254 Mich. App. 300, 331, 657 N.W.2d 759, 777 (2002) (quoting Watkins v. Ford, 69 Mich. 357, 361, 37 NW 300, 302 (1888 . The statute reads: In all actions brought in any of the courts of this state, to recover the amount due on an open account or upon an account stated, if the plaintiff or someone in his behalf makes an affidavit of the amount due . . . and annexes thereto a copy of said account, and cause[s] a copy of said affidavit and account to be served upon the defendant, with a copy of the complaint filed in the cause or with the process by which such action is commenced, such affidavit shall be deemed prima facie evidence of such indebtedness . . . . Any affidavit in this section mentioned shall be deemed sufficient if the same is made within 10 days next preceding the . . . filing of the complaint. -12- Mich. Comp. Law § 600.2145 (emphasis added). Nothing in this language suggests that an account affidavit is a prerequisite to bringing a collection action. Rather, “[i]f an account stated exists, an unanswered affidavit . . . creates a prima facie case that the party failing to respond owes the other party the amount stated.” Echelon Homes, LLC v. Carter Lumber Co, 261 Mich. App. 424, 435, 683 N.W.2d 171, 178 (2004), rev'd in part on other grounds 472 Mich. 192, 694 N.W.2d 544 (2005). A proper affidavit therefore shifts to the debtor the burden of going forward with proof that the amount claimed is inaccurate. If the affidavit is defective or is rebutted by the defendant with competent proof, the plaintiff simply is left with the burden to prove its case in the usual fashion. See Law Offices of Lawrence J. Stockler, P.C. v. Rose, 174 Mich. App. 14, 55-56, 436 N.W.2d 70, 90-91 (1989). As the state court of appeals explained in unpublished decisions, Mich. Comp. Laws § “600.2145 is not the only way to establish a claim for an account stated; such a claim can be proven through evidence of an express understanding, or words and acts, and the necessary and proper inferences thereon.” Klochko Equip. Rental Co., Inc. v. Village Green Construction, LLC, 2003 WL 21398305, *3 (Mich. App. 2003). An “affidavit . . . made more than ten days before the complaint was filed” does not void the collection lawsuit; untimeliness merely “prohibits a court from assigning prima facie evidentiary weight to such an untimely affidavit.” Capital One Bank v. Ringelberg, 2005 WL 2319125, *1 (Mich. App. 2005). The plaintiff here has not alleged that the claims in the state court case were false. He merely alleges that there was a technical deficiency, which there was not. In all events, the complaint as filed fails to state a claim under the FDCPA. -13- B. The plaintiff states that his complaint can be read to include a claim that the defendant violated 15 U.S.C. § 1692g(b) by continuing its efforts to collect a debt without validating the debt after it was asked to do so. The plaintiff believes that this theory can be coaxed from paragraph 18 of the complaint, which reads as follows: Defendant sued Plaintiff for an alleged debt and would not provide the agreement between the Defendant and creditor showing Plaintiff owed the debt. Defendant attached an Affidavit of Account instead of the credit agreement. Please see attached Exhibit 2. Defendant refused to provide a copy of the signed, written proof of a credit agreement between the parties. Compl. at ¶ 18. By itself, and particularly when read in conjunction with the other allegations contained in the complaint, this paragraph supports only the claim that the defendant filed suit in an improper manner. The sentence, “Defendant sued Plaintiff for an alleged debt and would not provide the agreement between the Defendant and creditor showing Plaintiff owed the debt,” immediately precedes the allegation, “Defendant attached an Affidavit of Account instead of the credit agreement.” Given this sequence, it is only fair to assume that the second sentence qualifies the first, i.e., that the defendant failed to provide the credit agreement when it sued, attaching an account affidavit “instead of the credit agreement.” As the Supreme Court recently clarified in Bell Atlantic Corp. v. Twombly, 550 U.S. __, __, 127 S.Ct. 1955, 1964 (2007), pleading under the Federal Rules of Civil Procedure requires that the complaint give “the defendant fair notice of what the claim is and the grounds upon which it rests.” The complaint in this case does not provide notice of the theory that the plaintiff now seeks to extract from its vague language. If “a formulaic recitation of the elements of a cause of action will not do,” id. at 1965, a complaint that contains neither the factual allegations nor the legal conclusions of the asserted claim must certainly fail. -14- C. The plaintiff also asks the Court to consider a November 28, 2006 letter the plaintiff allegedly sent asking the defendant to validate the debt, certain invoices from the entity that sold the debt to the defendant, and an affidavit in which he states that the defendant failed to respond to this letter, and he always disputed the amount allegedly owed. Of course, courts generally do not consider facts outside the complaint when adjudicating a motion under Rule 12(b)(6). See, e.g., Amini v. Oberlin Coll., 259 F.3d 493, 502 (6th Cir. 2001). An exception exists, however, with respect to “documents referenced by the pleadings themselves that are central to the plaintiff’s claim.” Brown v. Scott, 329 F. Supp. 2d 905, 909 (E.D. Mich. 2004) (citing Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 514 (6th Cir.1999 . The only documents referenced in the complaint on file are the state-court summons and complaint and the account affidavit. Those documents do nothing to advance the validation and ownership claims. The documents belatedly submitted by the plaintiff can only be considered if the Court converts the motion to one for summary judgment. See Fed. R. Civ. P. 12(d) (“If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.”); Nieman v. NLO, Inc., 108 F.3d 1546, 1554 (6th Cir. 1997). The district court exercises its discretion in determining whether to convert a 12(b)(6) motion into one for summary judgment. Ball v. Union Carbide Corp., 385 F.3d 713, 719 (6th Cir. 2004). However, “[a]ll parties must be given a reasonable opportunity to present all the material that is pertinent to the motion,” Fed. R. Civ. P. 12(d), and therefore “it is ‘serious error’ for a district court to convert the motion sua sponte to a summary judgment motion without notice to parties and without further discovery,” Ball, 385 F.3d at 719. In Ball, the Sixth -15- Circuit affirmed a district court’s decision to convert a 12(b)(6) motion to one for summary judgment where the defendant had asked for that relief in the alternative, and the plaintiff responded with various materials outside the pleadings. Ibid. Here, the circumstances counsel against conversion. The defendant’s motion challenges only the legal sufficiency of the complaint, and the plaintiff’s new allegations (and the facts they implicate) have just been raised. Although the plaintiff has requested conversion (so the Court would not be guilty of doing so sua sponte), the defendant has not had an adequate opportunity to test the plaintiff’s evidence through discovery. Yet even if the Court did convert the motion and examine the issues under Rule 56, the plaintiff would still have a fundamental problem: the evidence he presents – relating as it does to failure to validate and lack of ownership of the debt – is not material for summary judgment purposes. A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). Here, the plaintiff has not pleaded claims for failure to validate or lack of ownership; the evidence addressing those claims is simply immaterial given the nature of the complaint on file. D. That brings us to the plaintiff’s motion to amend his complaint. Under Federal Rule Civil Procedure 15(a), a party may amend at this stage of the proceedings only after obtaining leave of court. Although the Rule provides that “[t]he court should freely give leave when justice so requires,” Fed. R. Civ. P. 15(a)(2), leave may be denied on the basis of undue delay, bad faith by the moving party, repeated failure to cure defects by previously-allowed amendments, futility of the proposed new claim, or undue prejudice to the opposing party, Forman v. Davis, , 182 -16- (1962); Duggins v. Steak & Shake, Inc., 195 F.3d 828, 834 (6th Cir. 1999); Fisher v. Roberts, 125 F.3d 974, 977 (6th Cir. 1997). “Notice and substantial prejudice to the opposing party are critical factors in determining whether an amendment should be granted.” Wade v. Knoxville Utilities Bd., 259 F.3d 452, 458-459 (6th Cir. 2001). The Rule does not establish a deadline within which a party must file a motion to amend. See Lloyd v. United Liquors Corp., 203 F.2d 789, 793 (6th Cir. 1953) (reviewing a district court’s denial of a motion to amend after the entry of summary judgment). Delay alone does not justify denial of a motion brought pursuant to Rule 15(a). Security Ins. Co. of Hartford v. Kevin Tucker & Assocs., Inc., 64 F.3d 1001, 1009 (6th Cir. 1995). However, the party seeking to amend should “act with due diligence if it wants to take advantage of the Rule’s liberality.” Parry v. Mohawk Motors of Michigan, Inc., 236 F.3d 299, 306 (6th Cir. 2000). Courts will find that an amendment to a complaint prejudices a party where the amendment will require the party to prepare an additional defense strategy and expend additional resources to defend against new claims. See Troxel Mfg. Co. v. Schwinn Bicycle Co., 489 F.2d 968, 971 (6th Cir. 1973). As mentioned above, a court also may deny a motion for leave to amend when the proposed amendment would be futile. Head v. Jellico Housing Authority, 870 F.2d 1117, 1123 (6th Cir. 1989); Martin v. Associated Truck Lines, Inc., 801 F.2d 246, 248 (6th Cir. 1986); Neighborhood Development Corp. v. Advisory Council on Historic Preservation, 632 F.2d 21, 23 (6th Cir. 1980). In other words, if the district court concludes that “‘the pleading as amended could not withstand a motion to dismiss,’” the court may deny the motion to amend, thereby saving the parties and the court the expense of having to confront a claim doomed to failure from the onset. See Head, 870 F.2d at 1123 (quoting Martin, 801 F.2d at 258). -17- The Court believes that an amendment of the complaint should be refused because the plaintiff is guilty of undue delay, the defendant would suffer prejudice, and the amendment would be futile. Analyzing these grounds in reverse order, the Court notes that the proposed amended complaint differs from the original only in that it alleges a failure to validate the debt. That renders academic the viability of the plaintiff’s allegation that the defendant did not own the debt when it filed suit. However, even if the Court were to ignore the plaintiff’s failure to propose this amendment and consider the evidence offered by the plaintiff on the point, it would not establish that the defendant violated the FDCPA because it did not own the debt at the time. With respect to the validation claim, the law is simply not in the plaintiff’s favor. Section 1692g of Title 15 governs the procedure for requests for validation. It provides: (a) Notice of debt; contents Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing – (1) the amount of the debt; (2) the name of the creditor to whom the debt is owed; (3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector; (4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and (5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor. (b) Disputed debts If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section that the debt, or any portion thereof, is -18- disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. Collection activities and communications that do not otherwise violate this subchapter may continue during the 30-day period referred to in subsection (a) of this section unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor. 15 U.S.C. § 1692g(a)-(b) (emphasis added). This language makes clear the rule that the consumer’s rights (to validation of the debt) and the collector’s responsibilities (to validate the debt and cease collection activities) are not triggered unless the consumer files a request for validation within thirty days of receiving notice of the debt. See Luxenburg v. Equifax Credit Info. Servs., 2005 WL 78947, *1, 3 (N.D. Ill. Jan. 12, 2005). In the proposed amended complaint, the plaintiff alleges no facts regarding the chronology of the validation issue; he simply states that he “sent Defendant a validation notice” prior to the lawsuit, the defendant “received this letter,” and the defendant “failed to validate the debt and instead sued Plaintiff in an attempt to collect the alleged debt.” Prop. Amend. Compl. at ¶¶ 21-23. This is not sufficient to state a claim under section 1692g, since the obligations imposed by that statute are explicitly tied to the thirty-day period. Even if the Court considers the validation letter itself, which the plaintiff references in the proposed amended complaint, compliance with the time limits cannot be established. The validation letter is dated November 28, 2006. In the opening line, the plaintiff wrote that the notice of debt was dated October 18, 2006. On its face, therefore, over thirty days expired between the notice and the validation letter. It is possible that the plaintiff did -19- not receive the notice until late October (or some other time sufficient to bring him within the thirty- day period), but there are no facts to suggest this and it is inappropriate to engage in this sort of speculation when evaluating the legal sufficiency of one’s pleadings. After all, the plaintiff is the master of his complaint. Loftis v. United Parcel Service, Inc., 342 F.3d 509, 515 (6th Cir. 2003). The proposed amended complaint could not survive a motion to dismiss, and therefore amendment would be futile. Although no single factor is dispositive, a finding of futility is usually fatal to a request for leave to amend a complaint. See, e.g., Miller v. Calhoun County, 408 F.3d 803, 817-18 (6th Cir. 2005). However, in this case, undue delay and prejudice also militate against granting leave to amend. Trial is not presently scheduled in this case (due to the pendency of the defendant’s motion to dismiss), but, until recently, it was scheduled for April 24, 2008. Despite requesting leave to amend on the eve of trial, however, the plaintiff offers no excuse for his tardiness. Delay may be excused in the case of newly discovered evidence or a change in the law, but neither of these factors is present here. (To the extent the plaintiff labels the Washington Mutual bills newly discovered evidence, those items are rendered irrelevant by his failure to propose an amendment based on that evidence.) Instead, the plaintiff has been on notice of the deficiency of his complaint since January 2008 when the defendant filed its motion to dismiss. There is simply no excuse for waiting so long to request leave to amend. Which brings us to prejudice. Although the defendant would likely suffer little prejudice in terms of having to defend against a new claim (the claim, at least as pleaded, is anemic at best), it cannot be discounted completely. The allegation of failure to validate was not foreseeable from the -20- original complaint, and some discovery, as well as a further motion to dismiss or for summary judgment, would almost certainly be necessitated. III. The Court concludes that the complaint fails to state a claim under the Fair Debt Collections Practices Act for which relief can be granted. The plaintiff has agreed to dismiss his state law claims arising from the same transaction. The Court is not persuaded that the proposed amendment to the complaint should be allowed. Accordingly, it is ORDERED that the defendant’s motion to dismiss [dkt #9] is GRANTED. It is further ORDERED that the plaintiff’s federal claims are DISMISSED WITH PREJUDICE. It is further ORDERED that the plaintiff’s state law claims are DISMISSED WITHOUT PREJUDICE. It is further ORDERED that the plaintiff’s motion to amend the complaint [dkt # 26] is DENIED. It is further ORDERED that the defendant’s motion in limine [dkt # 14] is DISMISSED as moot. Dated: May 30, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge -21- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 30, 2008. s/Felicia M. Moses FELICIA M. MOSES -22-

=== Burgess Order Denying MSJ ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ARTHUR BURGESS, Petitioner, v. THOMAS K. BELL, Case No. 07-11367 Honorable David M. Lawson __________________________________________/ Respondent. ORDER DENYING THE RESPONDENT’S MOTION FOR LEAVE TO FILE ANSWER AND MOTION FOR SUMMARY JUDGMENT Through counsel, the petitioner, Arthur Burgess, a state prisoner confined at the Chippewa Correctional Facility in Kincheloe, Michigan, has filed a petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254. He challenges his 1977 conviction for one count of first-degree murder and two counts of second-degree murder. His petition was received for filing on March 29, 2007. On August 7, 2007, Magistrate Judge R. Steven Whalen entered an order pursuant to Rule 5 of the Rules Governing Section 2254 Cases in the United States District Courts requiring the respondent to file responsive pleadings together with the necessary state court pleadings and transcripts on or before February 5, 2008. On February 5, 2008, the respondent filed a motion to enlarge the time for filing responsive pleadings. This motion was denied for lack of merit on February 7, 2008. The respondent then filed a motion for leave to file an answer raising a statute of limitations defense and a motion for summary judgment arguing that the claim is time-barred. The Court denied the motion for an enlargement of time because the motion lacked merit. Since no new information has been offered justifying the request for additional time, the Court will not grant leave to file a late answer. The respondent was given until February 5, 2008 to file his response, which was six months after Judge Whalen’s Rule 5 order, and nearly a year after the petition was filed. The response date was chosen in conformity with the practice adopted by the Judges of this Court to allow the Michigan Attorney General six months to gather Rule 5 materials and respond to habeas petitions. That time frame was selected, in turn, after discussions with the attorney general’s representatives addressing the former practice of entering orders requiring responses within 60 days, which were followed inevitably by motions seeking 120-day extensions of time to respond. The Court generally acceded to an extension, but often times the filing time enlargement was followed by a second request. In arriving at the six-month response time, the Court took into account the representations by the attorney general’s representatives concerning staffing and budget constraints and the difficulty occasionally encountered in obtaining Rule 5 materials from local prosecutors and state courts. Those expressed concerns were accompanied by assurances that if six months uniformly were allowed for responses, extensions would not be sought and responses would be filed timely. The Court is aware that the Michigan Attorney General is presently charged with the responsibility for responding to most federal habeas petitions filed in Michigan’s Eastern and Western federal judicial districts. (The Court is informed that personnel in county prosecutors’ offices respond to habeas petitions based on convictions originating in Jackson and Wayne Counties.) The Court is also aware that the resources that the Michigan Attorney General has to devote to these cases are not limitless. On the other hand, petitioners who seek relief under 28 U.S.C. § 2254 face several obstacles in the form of threshold inquiries that may prevent an adjudication of the merits of the federal constitutional issues that they endeavor to raise in habeas petitions. These threshold issues include -2- the question of exhaustion of state court remedies, procedural default, the prohibition against abuse of the writ and successive petitions, and the statute of limitations, to name a few. Although these issues are not all jurisdictional, they can comprise affirmative defenses that the state can and should interpose in appropriate cases to serve the interests of comity, federalism and finality of convictions. However, requests by the state for delay in responding to habeas petitions can, in and of themselves, prejudice a petitioner by creating a bar to a merits review of a prisoner’s constitutional claims. For instance, if the state ultimately responds by claiming that a petitioner’s issues have not been exhausted in the state system, and the Court determines that the state is correct in such an assertion, the petition must be dismissed. See 28 U.S.C. § 2254(b)(1); O’Sullivan v. Boerckel, 528 U.S. 838 (1999); Rose v. Lundy, 455 U.S. 509 (1982). Since the Supreme Court has held that the filing of a federal habeas corpus petition does not trigger 28 U.S.C. § 2244(d)(2) to suspend the running of the one-year statute of limitations for habeas petitioner, see Duncan v. Walker, 533 U.S. 167, 172 (2001), a dismissal for non-exhaustion could render subsequent petitions in this court untimely, see 28 U.S.C. § 2244(d)(1), thus insulating the petitioner’s claims from review. Although in some cases the Court could allow relief from the statute of limitations, see Griffin v. Rodgers, 308 F.3d 647, 652 n.1 (6th Cir. 2002); Palmer v. Carlton, 276 F.3d 777, 780-81 (6th Cir. 2002), such relief is not automatically given. Requests for enlargement of time should be supported by a showing of good cause. See Fed. R. Civ. P. 6(b); United States ex rel. Kalish v. Desnick, 765 F. Supp. 1352, 1355 (N.D. Ill. 1991). A party shows good cause by demonstrating a “reasonable justification” for its failure to complete the requested task within the time prescribed. See Foster v. Halter, 279 F.3d 348, 357 (6th Cir. 2001). It may do so by advancing specific facts which describe the magnitude of the undertaking, -3- the time available for completion, and circumstances which would prevent a reasonable person from performing within the time allowed by a statute or court rule. Kalish, 765 F. Supp. at 1354. Generalizations and conclusory allegations will not suffice. Ibid. The respondent in this case explained that he has not yet received the Rule 5 material, which he needs to respond to the petition. However, the respondent has not cited any difficulty encountered from the state court, or any loss of records, or even when he first requested the state court records. Not having the Rule 5 material cannot amount to good cause for delay if there is no showing of any effort to get them. Because good cause has not been shown, the Court will deny the respondent’s motion to file its answer. The respondent filed a motion for summary judgment, arguing that the petitioner’s claims are barred by the statute of limitations imposed by the Antiterrorism and Effective Death Penalty Act of 1996, Pub.L. No. 104-132, 110 Stat. 1214 (AEDPA). See 28 U.S.C. § 2244(d)(1). However, the respondent has waived the statute of limitations by failing to file a timely answer or otherwise comply with the time requirements set out in the Court’s order. Under the Federal Rules of Civil Procedure, which are incorporated to apply to proceedings under 28 U.S.C. § 2254 such as this by Rule 11, Rules Governing Section 2254 Cases, the failure to file a timely answer waives affirmative defenses. See English v. Dyke, 23 F.3d 1086, 1090 (6th Cir. 1994). The statute of limitations is listed as an affirmative defense, see Fed. R. Civ. P. 8(c)(1), and the statute of limitations is waivable in section 2254 actions. Smith v. State of Ohio Dept. of Rehabilitation and Corrections, 463 F.3d 426, 429 n. 2 (6th Cir. 2006) (holding that statute of limitations defense was waived in a habeas case because it was not raised by the state on appeal); see also Day v. McDonough, 547 U.S. 198, 205 (2006) (holding that courts have the duty, but not the obligation, to sua sponte consider a statute of limitations bar in section 2254 cases); Trest v. Cain, , 89-90 (1997) (affirming that courts -4- of appeal are not required to raise the defense of procedural default sua sponte, and recognizing that failure to raise the defense normally constitutes a waiver). The respondent filed his pleading late; he cannot now be permitted to object to the timeliness of the petitioner’s petition. Having waived the affirmative defense that is the statute of limitations, the respondent’s motion for summary judgment for failure to comply with the statute of limitations will be denied. Accordingly, it is ORDERED that the respondent’s motion for leave to file an answer [dkt. #7] is DENIED. It is further ORDERED that the respondent’s motion for summary judgment [dkt. #8] is DENIED. Dated: May 27, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney of record herein by electronic means or first class U.S. mail on May 27, 2008. s/Felicia M. Moses FELICIA M. MOSES -5-

=== Thompson Bey Order Adopting R&R and Denying Dismissal ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JOHN THOMPSON BEY, Plaintiff, v. RICHARD STAPLETON, JOANN RICCI, L. MCMILLIAN, GLENDA WELLS, JERRY HOFBAUER, ROBIN PRATT, and HAROLD WHITE, ________________________________________/ Defendants. Case Number 07-10919 Honorable David M. Lawson Magistrate Judge Mona K. Majzoub ORDER OVERRULING OBJECTIONS TO MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION AND DENYING DEFENDANTS’ MOTION TO DISMISS AND PLAINTIFF’S MOTION FOR DECLARATORY JUDGMENT The plaintiff, who presently is a prisoner in the custody of the Michigan Department of Corrections, filed this pro se action alleging that his procedural due process rights were violated in a prison disciplinary proceeding when certain exculpatory evidence was withheld from him during a major misconduct hearing. He brings his action under 42 U.S.C. § 1983. The events that gave rise to the present dispute took place in 1996. The defendants moved to dismiss because this 2007 lawsuit, they say, was filed out of time. The plaintiff responded with a motion for declaratory judgment. Acting under a general order of reference to conduct all pretrial matters, Magistrate Judge Mona K. Majzoub fled a report on March 17, 2008 recommending that both motions be denied. the plaintiff did not object to the recommendation. The defendants filed objections to the report and recommendation, and the matter is before the Court for a de novo review. Although the Court understands the defendants’ consternation over the age of the claim, the Court believes that their objections must be overruled. The plaintiff’s cause of action did not accrue until the decisional law removed the bar that prevented a prisoner’s section 1983 damage action for the alleged deprivation of a constitutional right during prison discipline proceedings. The complaint in this case was filed within the allowable time following the removal of that disability. The Court, therefore, will overrule the defendants’ objections, adopt the recommendation, and deny the motion to dismiss the action. I. The plaintiff is currently incarcerated at Kinross Correctional Facility in Kincheloe, Michigan, but the events that are the subject of this lawsuit occurred when he was incarcerated at the State Prison of Southern Michigan in Jackson, Michigan. Apparently, the plaintiff was suspected of conspiring to assault another inmate, and it is the procedure that concluded in a finding of misconduct and discipline that he says violated his rights under the Fourteenth Amendment. On February 1, 1996, the plaintiff was placed in administrative segregation due to suspicion that he was involved in a stabbing that led to the death of another inmate. On June 4, 1996, investigator Glenda Wells filed a major misconduct report alleging that the plaintiff was involved in a conspiracy to carry out the attack. The plaintiff requested the assistance of a hearing investigator and relevant documents. On June 6, 1996, investigator L. McMillian met with the plaintiff, and the plaintiff gave McMillan a written statement and a list of questions to be answered by McMillian. On June 10, 1996, a hearing was held with Hearing Officer JoAnn Ricci presiding. The plaintiff had not been given responses to his questions yet. However, he had learned that there were three confidential witnesses who made statements against him; two of the statements were signed and one was unsigned. Upon the plaintiff’s protests that his questions were not answered, Ricci -2- adjourned the hearing. On June 24, 1996, when the hearing was reconvened, the plaintiff still had not had his questions answered or seen the documents that were used against him. The plaintiff was found guilty by Ricci at the hearing. On July 8, 1996, the plaintiff obtained the previously withheld documents, which, according to the plaintiff, call into question the credibility of the witnesses. In fact, the plaintiff’s alleged co-conspirator, J. Thomas-Bey, was found not guilty because the hearing officer concluded that the informant was not credible. But as a result of the finding of guilt in his case, the plaintiff received thirty days detention, lost disciplinary credits, suffered an increase in his security classification, was confined to segregation for 2,873 days, and forfeited his participation in general population activities. On July 15, 1996, he filed a request for a rehearing, which was denied. He then filed a grievance dated June 26, 1996, which was denied August 8, 1996. On August 18, 1996, he appealed the grievance to Level II within the administrative system. That appeal was denied on September 9, 1996. It is not clear whether he appealed to Level III (the final stage within the administrative system). The plaintiff then filed a request for judicial review of his conviction. According to his complaint, his claim was dismissed by a Michigan circuit court on January 7, 1999, his intermediate appeal was denied on August 29, 2000, and his application for leave to appeal was denied by the Michigan Supreme Court on March 27, 2001. The plaintiff then filed a petition for a writ of habeas corpus in the Western District of Michigan, which denied on July 15, 2004. The plaintiff’s request for a certificate of appealability was denied by the Sixth Circuit on July 29, 2006, and his petition for a writ of certiorari was denied on January 9, 2007. That set the stage for the present lawsuit. The plaintiff submitted this complaint in this case to prison officials for mailing on February 23, 2007. Therein, the plaintiff alleges that the process -3- used to find him guilty of major misconduct violated his due process rights guaranteed by the Fifth and Fourteenth Amendments to the United States Constitution. He seeks declaratory relief and compensatory damages. He does not ask for restoration of any “good time” credits or an adjustment of his sentence. The defendants filed their motion to dismiss alleging that on the face of the pleadings the claim is untimely. They contend that the cause of action accrued when the plaintiff had reason to know of his legal injury, that is, when he found out about the withheld documents. That was in 1997. The statute of limitations for actions brought under section 1983 in Michigan federal courts is three years, the argue, so the plaintiff filed his case too late. The magistrate judge disagreed. She concluded that under the Sixth Circuit’s decision in Huey v. Stine, 230 F.3d 226 (6th Cir. 2000), a prisoner challenging prison disciplinary proceedings via section 1983 must first obtain a reversal or vacation of the finding of guilt, and the cause of action would not accrue until the prior proceeding was favorably terminated. However, Huey was overruled by the Supreme Court in Muhammad v. Close, 540 U.S. 749 (2004). Since the plaintiff filed his case in this court within three years of that decision, the magistrate judge concluded that it was timely. The defendants object to this conclusion on two grounds. First, they say that Muhammad does not apply to the sort of complaint that the plaintiff is bringing. In Muhammad, the Court expressly found that no good-time credits were taken from the plaintiff. Here, in contrast, the plaintiff lost disciplinary credits, which are slightly different than good-time credits. -4- Second, the defendants state that even if Muhammad did clarify the law relating to challenges to prison disciplinary proceedings under section 1983, the plaintiff still must bring his case within three years of the accrual date, which had expired by the time Huey was decided in late 2000. II. Objections to a report and recommendation are reviewed de novo. 28 U.S.C. § 636(b)(1). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller v. Currie, 50 F.3d 373, 380 (6th Cir.1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). As noted, the plaintiff did not object to the magistrate judge’s conclusion that his motion for declaratory judgment should be denied. Therefore, the Court may and does adopt the report and recommendation as to that ruling. See Thomas v. Arn, , 149-50 (1985) (holding that the failure to object to the magistrate judge’s report releases the Court from its duty to independently review the motion); Smith v. Detroit Fed’n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987). The statute of limitations for claims filed in Michigan based on 42 U.S.C. § 1983 is three years. McCune v. City of Grand Rapids, 842 F.2d 903, 905 (6th Cir. 1988). To comply with that limitation, the plaintiff must file his lawsuit within three years of when his claim accrues. “[T]he accrual date of a § 1983 cause of action is a question of federal law that is not resolved by reference to state law.” Wallace v. Kato, 127 S. Ct. 1091, 1095 (2007). “[I]t is the standard rule that [accrual -5- occurs] when the plaintiff has a complete and present cause of action, that is, when the plaintiff can file suit and obtain relief.” Ibid. (internal quotes and citations omitted; alteration in original). In this case, one might conclude that the plaintiff could have filed his cause of action when the alleged constitutional deprivation occurred, that is, when the disciplinary hearing took place without the hearing officer turning over exculpatory evidence that the plaintiff could have used to defend himself, which is to say in 1997. But, as the magistrate judge observed, that simple observation is complicated by Supreme Court (and Sixth Circuit) jurisprudence. In Heck v. Humphrey, 512 U.S. 477 (1994), the Supreme Court expanded on the distinction drawn between the “two main avenues to relief on complaints related to imprisonment: a petition for habeas corpus, 28 U.S.C. § 2254, and a complaint under the Civil Rights Act of 1871, Rev. Stat. § 1979, as amended, 42 U.S.C. § 1983.” Muhammad, 540 U.S. at 750. The Court held in Heck: [I]n order to recover damages for allegedly unconstitutional conviction or imprisonment, or for other harm caused by actions whose unlawfulness would render a conviction or sentence invalid, a § 1983 plaintiff must prove that the conviction or sentence has been reversed on direct appeal, expunged by executive order, declared invalid by a state tribunal authorized to make such determination, or called into question by a federal court’s issuance of a writ of habeas corpus, 28 U.S.C. § 2254. Heck, 512 U.S. at 486-87. “Under our analysis the statute of limitations poses no difficulty while the state challenges are being pursued, since the § 1983 claim has not yet arisen.” Id. at 489. Consequently, the Court declared, “a § 1983 cause of action for damages attributable to an unconstitutional conviction or sentence does not accrue until the conviction or sentence has been invalidated.” Id. at 489-90. Three years later, on May 19, 1997, the Supreme Court expanded the rule of Heck to a prisoner who brought a section 1983 action for damages as a result of the prison’s revocation of his -6- good-time credits under a procedure that the plaintiff claimed violated due process. Edwards v. Balisok, 520 U.S. 641 (1997). Applying the rationale of Heck, the Court held that the plaintiff’s “claim for declaratory relief and money damages, based on allegations of deceit and bias on the part of the decisionmaker that necessarily imply the invalidity of the punishment imposed, is not cognizable under § 1983.” Id. at 648. The Court again emphasized that “a claim either is cognizable under § 1983 and should immediately go forward, or is not cognizable and should be dismissed.” Id. at 649. The Court emphasized that although the prisoner did not seek the restoration of his disciplinary credits, success of his section 1983 damage claim would necessarily imply the invalidity of the prison administrative proceeding; hence Heck would bar the action absent proof that the prior proceeding was terminated in the prisoner’s favor. Id. at 646 (observing that “[t]he principal procedural defect complained of by respondent would, if established, necessarily imply the invalidity of the deprivation of his good-time credits”). Almost immediately thereafter, the Sixth Circuit began to dismiss claims by Michigan prisoners challenging major misconduct hearings and the consequent loss of good time credits via section 1983. See Foster-Bey v. Duncan, 142 F.3d 433, 1998 WL 124002, at *2 (6th Cir. Mar. 13, 1998) (“The principal procedural defect complained of by Foster-Bey would, if established, necessarily imply the invalidity of the judgment depriving Foster-Bey of his good-time credits.”); Muhammad v. Bush, 121 F.3d 708, 1997 WL 434382, at *4 (6th Cir. Jul. 31, 1997) (table) (due process challenge to major misconduct issued by Michigan prison). In 2000, the Sixth Circuit ratified this line of cases in a published decision, Huey v. Stine, 230 F.3d 226 (6th Cir. 2000). In that case, Joseph Huey, a prisoner, brought a section 1983 claim seeking money damages for a thirty-day detention and loss of privileges he suffered as the result of a conviction for major misconduct. The -7- Court held that “[i]n order to grant the plaintiff in this case the relief that he seeks, we would have to unwind the judgment of the state agency. This is precisely the result that we have repeatedly held to be impermissible based on our interpretation of Edwards.” Id. at 230 (internal quotations omitted). Under this line of cases, therefore, it is reasonable to conclude that Thompson-Bey’s cause of action could not – and did not – accrue since, although he suffered a loss by denial of procedural due process, he had not obtained the favorable termination of the administrative proceedings against him. And if the law in this area remained static, his cause of action still would not have accrued, since he has challenged the prison administrative proceeding through the highest level without success. However, the Supreme Court had more to say. In 2004, the Supreme Court dealt with a Michigan prisoner who brought a § 1983 claim seeking damages for the mandatory prehearing detention allegedly caused by a retaliation-motivated prison official. Muhammad v. Close, 540 U.S. 749, 753 (2004). The Court assumed that there would be no restoration of good-time credits. Id. at 755. Huey’s “mistaken view . . . that Heck applies categorically to all suits challenging prison disciplinary proceedings” was overruled. See id. at 754; see also Muhammad v. Close, 379 F.3d 413, 415 (6th Cir. 2004). In 2005, again reviewing a Sixth Circuit decision, the Supreme Court decided that prisoners could bring a § 1983 suit challenging the procedures used to determine parole. Wilkinson v. Dotson, 544 U.S. 74 (2005). The plaintiffs in that case did not challenge prior prison discipline findings, but rather objected to the use of new and harsher parole criteria that came into effect after they had started serving their sentences. Looking to state law, the Court noted that “[s]uccess for Dotson does -8- not mean immediate release from confinement or a shorter stay in prison; it means at most new eligibility review, which at most will speed consideration of a new parole application. Success for Johnson means at most a new parole hearing at which Ohio parole authorities may, in their discretion, decline to shorten his prison term.” Id. at 82. “Because neither prisoner’s claim would necessarily spell speedier release, neither lies at ‘the core of habeas corpus.’” Ibid. (quoting Preiser v. Rodriquez, 411 U.S. 475, 489 (1973 . Recently the Sixth Circuit decided that a challenge to a major misconduct conviction could proceed even though the plaintiff was seeking the restoration of at least five days of disciplinary credit. Thomas v. Eby, 481 F.3d 434, 439-40 (6th Cir. 2007). The procedural facts of Thomas closely mimic those in the present case. Thomas was found guilty of major misconduct, appealed the finding through the state administrative and judicial system, and then filed a section 1983 action in federal court. Rejecting the argument that the case was barred by Edwards v. Balisok, the court of appeals noted that the disciplinary credit program was “less[]generous” than the good-time credit program, which only applied to individuals who committed the sentenced offense before April 1, 1987, which does not apply here. The Court held: MDOC claims that Thomas’s loss of disciplinary credits necessarily lengthens his sentence, and that Thomas’s § 1983 claim therefore is barred under the habeas exception. However, the decision in Ryan v. Department of Corrections, 259 Mich. App. 26, 672 N.W.2d 535 (Mich. Ct. App. 2003), belies this argument. Ryan notes that disciplinary “credits are explicitly tied to a prisoner’s parole eligibility date and discharge date. . . . Thus, credits do not determine when a sentence expires or is completed, but only when a prisoner is subject to parole or discharge.” Id. at 541. This passage and the statute’s text demonstrate that, as in Dotson, success in Thomas’s § 1983 claim would not necessarily affect the duration of his sentence because prison officials would retain discretion regarding whether to grant him parole. Accordingly, the habeas exception does not bar Thomas’s § 1983 claim. -9- Id. at 439-40. The Court interpreted Wilkinson v. Dotson, 544 U.S. 74 (2005), to hold that the habeas bar does not apply if there is only a “potential effect on the amount of time a prisoner serves.” Thomas, 481 F.3d at 439 (emphasis in original). Whether the plaintiff’s claim in this case is barred by the rule in Edwards remains to be seen. The decision Thomas suggests that it is not, although the Court believes the reasoning is not sound. Although the Thomas court believed that disciplinary credits did not shorten the sentence, the statute suggest otherwise. See Mich. Comp. Laws § 800.33(3) (“Accumulated disciplinary credits shall be deducted from a prisoner’s minimum and maximum sentence in order to determine his or her parole eligibility date and discharge date.” (emphasis added . The Thomas court relied on Ryan v. Dep’t of Corrections, 259 Mich. App. 26, 672 N.W.2d 535 (2003), for the proposition that disciplinary credits do not necessarily shorten a sentence, but that case dealt with the unique situation of calculating and forfeiting disciplinary credits in the case of consecutive sentences. One thing is certain, however: in 1997, after the Supreme Court decided Edwards v. Balisok, the plaintiff’s claim for denial of procedural due process could not have accrued, since he had not obtained a favorable result in his prison disciplinary proceeding. See Heck, 512 U.S. at 489-90. That bar was not removed until the decision in Muhammad v. Close in 2004 at the earliest, and arguably not until 2007 when the Sixth Circuit decided Thomas. The defendants’ second objection therefore must be overruled. This case does not present a situation where a later court decision is used to resurrect an expired cause of action. Based on the foregoing, the plaintiff’s claim did not accrue until after the bar was removed (if it actually was removed, which is a question for another day). -10- The defendants’ first objection – in which they seek to distinguish this case from Muhammad v. Close – likewise must be overruled. The purported distinction is based on the observation that the plaintiff actually lost disciplinary credits, whereas Muhammad never lost any. But that distinction only addresses the question whether the claim has not yet accrued under Heck. See Muhammad, 540 U.S. at 755. It does not affect the application of the statute of limitations, a question that is complicated by the Sixth Circuit’s decision in Thomas. III. There are serious questions about whether the plaintiff has a viable claim in this case, and the potential obstacles to recovery may be formidable. The statute of limitations is not one of them, however. The Court agrees with the magistrate judge’s conclusion that the motion to dismiss on that ground must be denied. Accordingly, it is ORDERED that the defendants’ objections to the report and recommendation [dkt #37] are OVERRULED. It is further ORDERED that the magistrate judge’s report and recommendation [dkt #35] is ADOPTED. It is further ORDERED that the defendants’ motion to dismiss [dkt #17] is DENIED. It is further ORDERED that the plaintiff’s motion for declaratory judgment [dkt #18] is DENIED. It is further ORDERED that the matter is referred to Magistrate Judge Majzoub under the previous reference order [dkt #24] for further pretrial proceedings and to conduct a trial if the parties consent under 28 U.S.C. § 636(c)(1). s/David M. Lawson -11- Dated: May 27, 2008 DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 27, 2008. s/Felicia M. Moses FELICIA M. MOSES -12-

=== SPX Order Granting Reconsideration of Claims ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION SPX CORPORATION, Plaintiff, vs. BARTEC USA, LLC, BARTEC AUTO ID LTD., SCHRADER-BRIDGEPORT INTERNATIONAL, INC., MYERS TIRE SUPPLY DISTRIBUTION, INC., Defendants. ______________________________________/ Case No. 06-14888 Hon. David M. Lawson Magistrate Judge Steven D. Pepe OPINION AND ORDER GRANTING MOTION FOR RECONSIDERATION OF ORDER CONSTRUING CLAIMS AND PERMITTING PARTIES TO REFILE MOTIONS FOR SUMMARY JUDGMENT This matter is before the Court on the plaintiff’s motion for reconsideration of the Court’s opinion and order construing claims entered January 7, 2008. The plaintiff filed this action alleging that the defendants infringed United States Patent 6,904,796 (the ‘796 patent) for a handheld tool that helps auto mechanics rotate and change tires on vehicles equipped with “remote tire monitoring systems” (RTMS). The plaintiff asks the Court to reconsider its determination that the term “means for generating modulated signals” is invalid for indefiniteness. The Court based its finding on the conclusion that the specification corresponding to this limitation did not disclose an algorithm, the structural requirement in microprocessor-implemented means-plus-function claims. The Court believes reconsideration is warranted in light of the Federal Circuit’s recent decisions in AllVoice Computing PLC v. Nuance Communications, Inc., 504 F.3d 1236 (6th Cir. 2007), Aristocrat Tech. Australia Pty Ltd. v. Int’l Game Tech., 521 F.3d 1328 (Fed. Cir. 2008), and Aristocrat Tech. Australia Pty Ltd. v. Multimedia Games, Inc., __ Fed Appx. __, 2008 WL 484449 (Fed. Cir. Feb. 22, 2008) (unpublished), cases that were not available when the parties filed their Markman briefs. After reviewing those decisions, the Court concludes that the reference in the specification of the ‘796 patent to a “microprocessor [that] can provide the modulation to the frequency generator circuitry” adequately identifies an algorithm to one ordinarily skilled in the art, which distinguishes a general purpose microprocessor from a special purpose computer. A computer programmed to perform the disclosed algorithm – modulating the signals from the frequency generator – adequately defines a structure to satisfy the means-plus-function requitement of 35 U.S.C. § 112 ¶ 6. Therefore, the Court will vacate the portion of its order finding the term “means for generating modulated signals” void for indefiniteness and construe the claim as set forth below. I. The device covered by the ‘796 patent is well described in the Court’s previous opinion and order and need not be discussed with any elaboration here. It is sufficient to observe that remote tire monitoring systems measure the air pressure in tires through sensors and then transmit that data to an instrument in the passenger compartment of a motor vehicle, signaling to the driver when air pressure is low. The patented tool derives its value from the fact that it can be used with a multitude of RTMS platforms, eliminating the need to purchase brand-specific tools. The plaintiff filed its complaint alleging patent infringement on October 30, 2006. Bartec USA, LLC thereafter filed an answer denying liability and asserted a counterclaim for invalidity, unenforceability, and non-infringement. After the parties amended their pleadings and engaged in discovery, they filed briefs advocating in favor of their respective interpretations of the claim limitations. On January 7, 2008, the Court issued its opinion and order construing claims. -2- The plaintiff takes issue with only one portion of the Court’s opinion – its analysis of the limitation “means for generating modulated signals.” This term appears in a handful of the ‘796 patent claims, see ‘796 Patent at Clms. 1,3, 4, 6, 7, 9, 11, 13, 15, and it generally represents one of the many ways in which the tool can activate RTMS tire sensors. To put it in context, it is helpful to consider the patent’s first claim: 1. A tool comprising a plurality of means for activating remote tire monitoring system tire sensors, the plurality of means selected from the group consisting of a magnet, a valve core depressor, means for generating continuous wave signals, and means for generating modulated signals, wherein the tool is capable of activating a plurality of tire sensors, each of the plurality of tire sensors utilizing a different method for activating the said tire sensor. ‘796 Patent at Clm. 1 (emphasis added). After setting forth the parties’ proposed constructions (the defendants contended the claim was indefinite, while the plaintiff argued that “means for generating modulated signals” should be construed as “a microprocessor in addition to frequency-generating circuitry, an amplifier or driver circuit, and an inductor (plus equivalents thereof) for generating modulated signals,” see Pl.’s Markman Br., Ex. 6, Joint Claim Const. Chart at 7), the Court determined that this claim limitation failed for indefiniteness. The reasoning that the plaintiff believes ought to be reconsidered is restated as follows: C. “Means for generating modulated signals” The defendants contend that this claim must be declared void for indefiniteness because the designation of the corresponding structure as “a microprocessor” is insufficient. The defendants argue that, when the disclosed structure is a microprocessor or computer, an algorithm must also be disclosed; and no algorithm has been identified in the specification. The Court agrees. The structure disclosed in the specification for “generating modulated signals” is as follows: -3- Means for generating modulated signals at a specific frequency are known in the art and any means known in the art can be utilized for generating a modulated signal in tire positioning tools of the present invention. One means for producing a modulated signal in tire positioning tools of the present invention is to include a microprocessor in addition to frequency generating circuitry. As is known in the art, the microprocessor can provide the modulation to the frequency generator circuitry. An amplifier or driver circuit can also be included to amplify the signal. ‘796 Patent at 5:48-57. Figure 1, a technical illustration of the tool’s overall structure, shows a microprocessor connected to a power supply, receivers, transmitters, a display device, and a frequency generator. ‘796 Patent at Fig. 1. It is now well settled that “[a] computer-implemented means-plus-function term is limited to the corresponding structure disclosed in the specification, and the corresponding structure is the algorithm.” Harris Corp. v. Ericsson, Inc., 417 F.3d 1241, 1253 (Fed. Cir. 2005); see also Tehrani v. Hamilton Medical, Inc., 331 F.3d 1355, 1361-62 (Fed. Cir. 2003); WMS Gaming, Inc. v. Intl Game Tech., 184 F.3d 1339, 1348-49 (Fed. Cir. 1999). This rule also applies to a “means-plus-function limitation implemented by a microprocessor.” Harris Corp., 417 F.3d at 1253. The plaintiff does not contest this rule, but it insists it merely applies when the only disclosed structure for performing the recited function is a microprocessor or computer, and it does not apply when the structure consists of a microprocessor working alongside other apparatuses. The Court cannot accept that argument: nothing in the Federal Circuit decisions commends this interpretation, and the plain language of the applicable cases in fact cuts against it. Since the claim at issue is a microprocessor-implemented means-plus-function term, disclosure of an algorithm is required. That leaves the issue of what constitutes an algorithm. The requirement of an algorithm “does not mean that the patentee must disclose specific source code for the computer. And, the term ‘algorithm’ is not limited to a formula of mathematical symbols.” Finisar Corp. v. The DirecTV Group, Inc., 416 F. Supp. 2d 512, 518 (E.D. Tex. 2006). On the other hand, simply stating that the microprocessor or computer performs the function in the claim is not tantamount to disclosing an algorithm. See ibid. (rejecting alleged disclosure of algorithm on the grounds that it was “nothing more than a restatement of the function, as recited in the claim”) Rather, the patentee must at least disclose the basic steps that the microprocessor takes to enable one skilled in the art to determine the limitations on what is claimed. See Budde v. Harley-Davidson, Inc., 250 F.3d 1369, 1381-82 (Fed. Cir. 2001); In re Dossel, 115 F.3d 942, 946-47 (Fed. Cir. 1997); see also Harris Corp., 417 F.3d at 1254; Finisar Corp., 416 F. Supp. 2d at 518-19. This can be accomplished in a number of ways. “For example, the steps, formula, or procedures to be performed -4- by the computer might be expressed textually, or shown in a flow chart.” Finisar Corp., 416 F. Supp. 2d at 518. In the present case, no algorithm has been disclosed, and therefore the microprocessor-implemented means-plus-function claim is void for indefiniteness. The closest the specification comes to disclosing an algorithm is the statement that “the microprocessor can provide the modulation to the frequency generator circuitry.” ‘796 Patent at 5:54-56. But this is simply restating the function recited in the underlying claim. The function in the claim is “generating modulated signals.” See, e.g., ‘796 Patent at cl. 9. Although one might argue that “providing the modulation” to the frequency generating circuitry is not a pure restatement of the function (since the signal is produced by the circuitry and not the microprocessor), that argument must fail. “Providing modulation” cannot, under any reasonable understanding, be considered an algorithm because that phrase describes what the microprocessor does, not how that task is accomplished. Therefore, although “a precise mathematical formula or flow chart” is not required, Finisar Corp., 416 F. Supp. 2d at 519, the disclosure in this case is inadequate, and the claim limitation fails for indefiniteness. Op. and Order Construing Clms. at 29-31. The plaintiff contends that the Court erred in this finding of indefiniteness. The plaintiff has no quarrel with the Court’s iteration of the governing standard. However, the plaintiff contends that the Court’s analysis conflicts with this standard, particularly in light of the recent decisions in the three cases cited above. According to the plaintiff, the panels in those cases confirmed that the same standard holds true in the case of computer- and microprocessor-implemented functions: although an algorithm may be required, algorithms in the specification need only disclose adequate defining structure to render the bounds of the claim understandable to one of ordinary skill in the art. The plaintiff contends that the reference in the specification to a microprocessor that is programed to modulate the signals manufactured by a frequency generator defines a structure with sufficient definiteness to one ordinarily skilled in the art, particularly in light of the unrebutted testimony set forth in Dr. Gregory W. Davis’s affidavit. -5- The defendants stand by this Court’s analysis, and challenge the plaintiff’s argument by attacking its initial premise – that an algorithm was ever disclosed. The defendants insist that it matters not whether a person of ordinary skill in the art would comprehend the claim limitation; that step in the analysis is only relevant when a structure has been disclosed in the specification, which in the case of a computer- or microprocessor-implemented function must be an algorithm. II. Motions for reconsideration may be granted pursuant to Local Rule 7.1(g) when the moving party shows (1) a “palpable defect,” (2) that misled the court and the parties, and (3) that correcting the defect will result in a different disposition of the case. E.D. Mich. LR 7.1(g)(3). A “palpable defect” is a defect which is obvious, clear, unmistakable, manifest, or plain. Mich. Dep’t of Treasury v. Michalec, 181 F. Supp. 2d 731, 734 (E.D. Mich. 2002) (citations omitted). “Generally . . . the court will not grant motions for . . . reconsideration that merely present the same issues ruled upon by the court, either expressly or by reasonable implication.” E.D. Mich. LR 7.1(g)(3). To reiterate the general principles at work here, federal statutory law governs construction of claim limitations drafted as “means-plus-function” limitations and permits broad claiming ability in such cases: An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof. 35 U.S.C. § 112, ¶ 6. When a claim includes the word “means,” it is presumed that the statutory mandate of § 112, ¶ 6 applies. Rodime PLC v. Seagate Technology, Inc., 174 F.3d 1294, 1302 (Fed. Cir. 1999). -6- “Once a court concludes that a claim limitation is a means-plus-function limitation, two steps of claim construction remain: 1.) the court must first identify the function of the limitation; and 2.) the court must then look to the specification and identify the corresponding structure for that function.” Biomedino, LLC v. Waters Technologies Corp., 490 F.3d 946, 950 (Fed. Cir. 2007). If there is no structure in the specification pertaining to the means-plus-function limitation in the claim, the claim will be deemed invalid for indefiniteness. Ibid. In such instances, the inventor has breached the terms of the bargain envisioned in § 112, ¶6: “[I]n return for generic claiming ability, the applicant must indicate in the specification what structure constitutes the means.” Id. at 948. “‘If the specification is not clear as to the structure that the patentee intends to correspond to the claimed function, then the patentee has not paid the price but is rather attempting to claim in functional terms unbounded by any reference to structure in the specification.’” Ibid. (quoting Med. Instrumentation & Diagnostics Corp. v. Elekta AB, 344 F.3d 1205, 1211 (Fed. Cir. 2003 . On the other hand, “[w]hile the specification must contain structure linked to claimed means, this is not a high bar.” Id. at 950. “All one needs to do in order to obtain the benefit of [§ 112, ¶ 6] is to recite some structure corresponding to the means in the specification, as the statute states, so that one can readily ascertain what the claim means.” Atmel Corp. v. Info. Storage Devices, Inc., 198 F.3d 1374, 1384 (Fed. Cir. 1999). However, the question is not whether the average person could comprehend the claim, but whether the person of ordinary skill in the art could do so. See AllVoice Computing PLC v. Nuance Communications, Inc., 504 F.3d 1236, 1240 (Fed. Cir. 2007) (“The test for definiteness asks whether one skilled in the art would understand the bounds of the claim when read in light of the specification.”) (citing Miles Labs, Inc. v. Shandon, Inc., 997 F.2d 870, 875 (Fed. Cir. 1993 . A party contending that a claim is invalid for indefiniteness must prove, -7- by clear and convincing evidence, “that the specification lacks adequate disclosure of structure to be understood by one skilled in the art as able to perform the recited functions.” Intel Corp. v. VIA Technologies, Inc., 319 F.3d 1357, 1366 (Fed. Cir. 2003). In Aristocrat Tech. Australia Pty Ltd. v. Int’l Game Tech., 521 F.3d 1328 (Fed. Cir. 2008), the court of appeals reiterated that the point of the requirement that an algorithm must be disclosed when the structure referenced in a means-plus-function limitation is a general purpose computer is to prevent pure functional claiming, which is not permitted by 35 U.S.C. § 112 ¶ 6 and the Federal Circuit cases construing it. Int’l Game Tech., 521 F.3d at 1333. As the court explained: For a patentee to claim a means for performing a particular function and then to disclose only a general purpose computer as the structure designed to perform that function amounts to pure functional claiming. Because general purpose computers can be programmed to perform very different tasks in very different ways, simply disclosing a computer as the structure designated to perform a particular function does not limit the scope of the claim to “the corresponding structure, material, or acts” that perform the function, as required by section 112 paragraph 6. Ibid. However, the court also acknowledged that “in a means-plus-function claim ‘in which the disclosed structure is a computer, or microprocessor, programmed to carry out an algorithm, the disclosed structure is not the general purpose computer, but rather the special purpose computer programmed to perform the disclosed algorithm.’” Ibid. (quoting WMS Gaming, Inc. v. Intern’l Game Technology, 184 F.3d 1339, 1349 (Fed. Cir. 1999 . That point is developed in AllVoice Computing PLC v. Nuance Communications, Inc., 504 F.3d 1236 (Fed. Cir. 2007). In that case, the Federal Circuit reversed a district court’s finding of indefiniteness “for failure to set forth sufficient algorithmic structure associated with the contested means-plus-function clauses.” Id. at 1244. The patent at issue was for “an interface between a speech recognition engine and various end-user application programs on a personal computer.” Id. -8- at 1238. For the most part, the invention operated to facilitate translation of a given message into word-processing programs. See ibid. Although some of the technical nuance is difficult to grasp, the Federal Circuit’s holding is not. In reversing the district court, the Federal Circuit held that the lower court had failed to give due weight to the testimony regarding the ordinarily skilled artisan. The appellate court abided by the rule that an algorithm is required in computer- and microprocessor-implemented means-plus-function cases, but noted that the determination of sufficient algorithmic structure must be made in light of the person of ordinary skill in the art. The court’s analysis reads as follows: The district court also found claims 61 and 67 indefinite for failure to set forth sufficient algorithmic structure associated with the contested means-plus-function clauses. The district court held that the disclosure at col.7 l.7, et seq., of the ‘273 patent, along with Figures 4 and 8A, did not constitute sufficient structure “for determining positions of the recognized words (claim 64 and indirectly claim 67) and for updating word positions after edits (claim 61).” Janicke Report ¶ 60. To the contrary, the specification contains sufficient algorithmic structure to give meaning to claims 61 and 67. Claim definiteness, as discussed earlier, depends on the skill level of a person of ordinary skill in the art. Miles Labs., Inc., 997 F.2d at 875. In software cases, therefore, algorithms in the specification need only disclose adequate defining structure to render the bounds of the claim understandable to one of ordinary skill in the art. See, e.g., Med. Instrumentation and Diagnostics Corp. v. Elekta AB, 344 F.3d 1205, 1214 (Fed. Cir. 2003) (“[H]ere there would be no need for a disclosure of the specific program code if software were linked to the converting function and one skilled in the art would know the kind of program to use.”) See also Intel Corp. v. VIA Techs., Inc., 319 F.3d 1357, 1366 (Fed. Cir. 2003) (holding that the internal circuitry of an electronic device need not be disclosed in the specification if one of ordinary skill in the art would understand how to build and modify the device). In that connection, this record does not contain clear and convincing evidence that the disclosure at col.7 l.7, et seq., of the ‘273 patent, along with Figures 4 and 8A of the patent, do not constitute sufficient structure to define the claim terms for the ordinarily skilled artisan. To the contrary, the record contains the statement of Richard Sonnier. This statement set forth several straightforward ways that the algorithm represented in Figure 8A could be implemented by one skilled in the art using well-known features of the Windows operating system (messages, operating system function calls, and -9- hooking). The Sonnier statement concluded with the observation that “[a] person skilled in the art reading the ‘273 specification would know that any of these techniques could be used to determine the position of a recognized word in the third party application, would know the software to use and how to implement it.” Second Supplemental Sonnier Decl. ¶ 17. Thus, the record does contain sufficient algorithmic structure to give meaning to the claim terms from the vantage point of an ordinarily skilled artisan. Thus, Mr. Sonnier supplied the only assessment in this record of the adequacy of the specification to disclose enough steps to constitute an actual algorithm for carrying out the functions claimed in the means-plus-function clauses of claims 61 and 67. Without any record evidence to contradict Sonnier’s assessment, this court discerns that the district court erred in this indefiniteness judgment as well. Therefore, this court holds that claims 61 and 67 satisfy the definiteness requirement. Id. at 1244-46 (figures omitted). “The algorithm represented in Figure 8A” shows the overall procedure followed by the invention, similar to Figure 2 in the ‘796 patent. Compare AllVoice, 504 F.3d at 1245 with ‘796 Patent at Fig. 2. The Federal Circuit followed up on Allvoice with a pronouncement regarding the algorithm requirement in Aristocrat Technologies Australia Pty Ltd. v. Multimedia Games, Inc., __ Fed Appx. __, 2008 WL 484449 (Fed. Cir. Feb. 22, 2008) (unpublished), decided by the same panel that decided Aristocrat Technologies Australia Pty Ltd. v. International Game Technology. In Multimedia Games, the Federal Circuit reversed a district court’s finding of invalidity for indefiniteness in the context of a patent for an electronic lottery machine akin to a slot machine. The lower court based its indefiniteness finding on its belief that the patent failed to disclose sufficient structure corresponding to various means-plus-function limitations. Among other things, the appellees defended this conclusion on the grounds that the specification failed to disclose sufficient algorithmic structure. Although the Federal Circuit left many questions to be resolved by the district court, it rejected this particular argument: Multimedia argues that even if the “random number selection means” corresponds to a “pseudo-random number generating algorithm,” that limitation is still indefinite -10- because the specifics of that algorithm are not disclosed in the specification. Multimedia seemingly urges that WMS Gaming, Inc. v. International Game Technology, 184 F.3d 1339 (Fed. Cir. 1999), stands for the rule that when a general purpose microprocessor or computer is the structure corresponding to a recited function, a specific algorithm for performing that function must be disclosed in order to avoid indefiniteness, and, by extension, a specific random number algorithm must be disclosed here. WMS Gaming, however, does not require that a particular algorithm be identified if the selection of the algorithm or group of algorithms needed to perform the function in question would be readily apparent to a person of skill in the art. . . . Thus, if the district court concludes on remand that a controller is synonymous with a microprocessor and that a person of skill in the art would readily appreciate the type of algorithm necessary to perform the pseudo-random number generating function, the primary focus for purposes of construing “random number selection means” and the final three claim terms in dispute, “means for storing,” “means for sequentially selecting,” and “means for displaying,” will be whether algorithms needed to perform those functions are readily apparent to a person of skill in the art or are disclosed in the specification. Multimedia Games, Inc., 2008 WL 484449 at *5-6. In light of these three recent decisions, the Court concludes that it erred in finding indefinite the claim limitation “means for generating modulated signals.” There can be no doubt that an “algorithm” must be disclosed in the specification in the case of a microprocessor-implemented means-plus-function claim. See AllVoice, 504 F.3d at 1245; Harris Corp. v. Ericsson, Inc., 417 F.3d 1241, 1253 (Fed. Cir. 2005); Tehrani v. Hamilton Medical, Inc., 331 F.3d 1355, 1361-62 (Fed. Cir. 2003); WMS Gaming, 184 F.3d at 1348-49. The plain meaning of that term and prior case law suggested that the patentee had to disclose a fairly detailed series of steps (if not mathematical formulae and source code). However, AllVoice, Multimedia Games, and International Game together clarify that the algorithm requirement is not so burdensome; according to the Federal Circuit’s analysis, the disclosure in the present case is sufficient, particularly in light of the unrebutted testimony of Dr. Davis. -11- Dr. Davis is a professor of mechanical engineering at Kettering University. The Court referred to Dr. Davis’s testimony in other portions of its opinion, see Op. and Order Construing Clms. at 27, but did not mention it in its analysis regarding “means for generating modulated signals.” On this point, Davis testified as follows: 3. I . . . understand that the defendants claim that an algorithm or process performed by the microprocessor is not disclosed in the ‘796 patent. I disagree. As disclosed in the ‘796 patent, the microprocessor “provide[s] the modulation to the “frequency generating circuitry” which results in the “production of a modulated wave.” (5:51-57.) “Modulation” is a well known process to those of skill in the art. (Attachment 3, Newton’s Telecom Dictionary, definition of modulation.) 4. Indeed, one of skill in the art would understand the details of the modulation process upon reading of the ‘796 patent. First of all, it is a basic electronic communication concept that the term “modulation” refers is the process of varying some characteristic of a wave (sometimes referred to as a carrier wave) to transmit information. (Attachment 3, Newton’s Telecom Dictionary, definition of modulation.) The result of a modulation process is a modulated wave. (Attachment 4, Modern Dictionary of Electronics definition of modulated wave.) Prior to a modulation process, there is a wave provided as a starting point. (Attachment 3, definition of modulation.) To modulate the wave, information is encoded on that wave by varying the amplitude, frequency or phase of that wave. (Attachment 3, definition of amplitude modulation.) The result is the production of a modulated wave, which is a wave in which the amplitude, frequency, or phase had been varied to convey information. (Attachment 4, definition of modulated wave.) In the ‘796 patent, the “frequency generating circuitry” creates a continuous wave. (5:13-18.) Since “[s]ome tire sensores may be manufactured such that they are activated upon receiving a modulated signal of a particularly frequency” the continuous wave needs to be modified. (5:45-47.) The microprocessor is included in the specification “to modulate signals, encode signals, decode signals, etc.” (10:25-27.) The specification also discloses that the microprocessor “provide[s] the modulation to the frequency generating circuitry” which results in the “production of a modulated wave.” (5:51-57.) Accordingly, the starting point of the modulation process in the ‘796 patent is the continuous wave created by the frequency generating circuitry. The process performed by the microprocessor is: utilizing the continuous wave from the frequency generating circuitry, encoding information on that wave for activating a tire sensor, and producing a modulated wave. The modulated wave is sent [to] the driver and inductor to create the activation signal. One of skill in the art, reading the specification of the ‘796 patent, understands that this basic modulation procedure is disclosed. -12- Pl.’s Resp. to Defs.’ Markman Br., Ex. 23, Davis Dec. at ¶¶ 3-4 (emphasis added) (typographical errors in original). This testimony is unrebutted. As stated above, the claim limitation at issue is termed “means for generating modulated signals.” The specification elaborates on this limitation as follows: One means for producing a modulated signal in tire positioning tools of the present invention is to include a microprocessor in addition to frequency generating circuitry. As is known in the art, the microprocessor can provide the modulation to the frequency generator circuitry [sic]. An amplifier or driver circuit can also be included to amplify the signal. ‘796 Patent at 5:51-57. As the Court noted in its earlier decision, the specification does not say how the microprocessor goes about providing modulation. But the patent in AllVoice was also silent as to how the process at issue could be implemented. See AllVoice, 504 F.3d at 1245 (“The Sonnier statement concluded with the observation that ‘[a] person skilled in the art reading the ‘273 specification would know that any of these techniques could be used to determine the position of a recognized word in the third party application, would know the software to use and how to implement it.’”). The AllVoice, Multimedia Games, and International Game decisions show that the extent of the algorithm requirement is determined by what the ordinarily skilled artisan would know. Ibid.; International Game, 521 F.3d at 1337; Multimedia Games, 2008 WL 484449 at *5. That is, “algorithms in the specification need only disclose adequate defining structure to render the bounds of the claim understandable to one of ordinary skill in the art.” Allvoice, 504 F.3d at 1245. As in AllVoice, the testimony regarding the skilled artisan’s ability to understand the claim limitation is undisputed. Dr. Gregory Davis opined that “one of skill in the art would understand the details of the modulation process upon reading of the ‘796 patent.” Davis Dec. at ¶ 4. It is his uncontested view that “‘[m]odulation’ is a well known process to those of skill in the art.’” Id. at ¶ -13- 3. It is also undisputed that “modulation” is “the process of varying some characteristic of a wave . . . to transmit information,” and “[t]o modulate the wave, information is encoded on that wave by varying the amplitude, frequency or phase of that wave.” Id. at ¶ 4. The ordinarily skilled artisan therefore would know that the microprocessor is included in the specification to perform these tasks. In light of Dr. Davis’s unrebutted testimony, the only reasonable conclusion is that the specification contains an algorithm that “disclose[s] adequate defining structure to render the bounds of the claim understandable to one of ordinary skill in the art.” AllVoice, 504 F.3d at 1245. Although it may seem indulgent to characterize “providing modulation” as an algorithm, it does describe a task that is distinct from the ultimate function of the claim – “generating modulated signals” – and the person of ordinary skill in the art would recognize this to mean that the microprocessor encodes information on a continuous wave by varying a characteristic of the wave (i.e., its amplitude, frequency, or phase). Davis Dec. at ¶ 4. As a consequence, the reference in the specification to a microprocessor that performs modulation designates an algorithm and distinguished that structure from a general purpose computer. This is all the definiteness requirement demands. AllVoice, 504 F.3d at 1244-46; see also id. at 1240 (citing 35 U.S.C. § 112 ¶ 2; Miles Labs, 997 F.2d at 870); International Game, 521 F.3d at 1333, 1337. The defendants have not met their burden of showing indefiniteness by clear and convincing evidence. See AllVoice, 504 F.3d at 1245; Intel Corp., 319 F.3d at 1366. This conclusion is consistent with the Congressional policy implemented by the means-plus- function claiming allowed by §112 ¶ 6. The evidence shows that modulation is a simple process that is well known in the art, and not some new development on the cutting edge of electrical and computer engineering. To ask a patentee to outline the steps for providing modulation would be to ask for a level of detail that is both unnecessary and problematic. If details of this variety were -14- required, the purpose behind § 112, ¶ 6 would be defeated and every patent would have to “include a technical treatise for the unskilled reader.” S3 Inc. v. Nvidia Corp., 259 F.3d 1364, 1371 (Fed. Cir. 2001); see also Creo Products, Inc. v. Presstek, Inc., 305 F.3d 1337, 1347 (Fed. Cir. 2002) (“Under our case law interpreting § 112, ¶ 6, knowledge of one skilled in the art can be called upon to flesh out a particular structural reference in the specification for purposes of satisfying the statutory requirement of definiteness.”) The Court finds, therefore, that the plaintiff has identified a palpable defect that misled the Court, and that correcting the defect would lead to a different result. Reconsideration is therefore appropriate. E.D. Mich. LR 7.1(g)(3); Michalec, 181 F. Supp. 2d at 734. The Court will vacate its finding of indefiniteness and construe “means for generating modulated signals” in accordance with the plaintiff’s alternative proposed construction. III. The Court finds that its determination that the term “means for generating modulated signals” is void for indefiniteness was in error. The Court will construe that term and the corresponding claim by adopting the plaintiff’s proposed alternative claim construction. In addition, the parties have filed summary judgment motions in reliance on the Court’s previous order construing the claims. The Court believes the parties should have an opportunity to refile their motions, if they wish, in light of the new construction set forth in this order. Accordingly, it is ORDERED that the plaintiff’s motion for reconsideration [dkt #157] is GRANTED. -15- It is further ordered that the Court’s opinion and order construing claims is AMENDED AND MODIFIED to provide that the following disputed term in the ‘796 patent is construed as follows: B. “Means for generating modulated signals” is construed to mean “frequency generating circuitry, a microprocessor: (1) utilizing the continuous wave of the frequency generating circuitry, (2) encoding information on the continuous wave for activating tire sensors by varying a characteristic of the wave, and (3) producing a modulated wave, to the amplifier or driver circuit, and the inductor for generating modulated signals for activating remote tire monitoring system tire sensors.” It is further ORDERED that the parties may, but are not required to, amend their motions for summary judgment. The parties shall either withdraw their present motions for summary judgment and file amended motions, or notify the Court in writing that they do not intend to do so, on or before June 9, 2008. Dated: May 20, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 20, 2008. s/Felicia M. Moses FELICIA M. MOSES -16-

=== Vanbuhler Sentencing ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. THOMAS VANBUHLER, Defendant. _______________________________/ Case Number 07-20265 Honorable David M. Lawson OPINION AND ORDER ALLOWING SENTENCE ENHANCEMENT AND SETTING SENTENCING DATE The defendant, Thomas Vanbuhler, pleaded guilty to one count of possession of child pornography in violation of 18 U.S.C. § 2252(a)(4) and presently is awaiting sentencing. The statute calls for a custody sentence of “not more than 10 years”; however, if the defendant “has a prior conviction . . . under the laws of any State relating to aggravated sexual abuse, sexual abuse, or abusive sexual conduct involving a minor or ward . . . such person shall be fined under this title and imprisoned for not less than 10 years nor more than 20 years.” 18 U.S.C. § 2252(b)(2). The plea agreement in this case contains an agreement that the minimum sentence will be 10 years, despite a lower Sentencing Guideline range. The parties also agreed to submit the question of the applicability of the sentence enhancement provision – and therefore the potentially higher maximum sentence and mandatory minimum sentence – to the Court for a decision. It is undisputed that Vanbuhler was convicted of fourth-degree criminal sexual conduct in the Wayne County, Michigan circuit court on his plea of nolo contendere entered July 10, 2003. However, he argues that this conviction cannot be used to enhance his sentence because it was obtained by a nolo contendere plea and there has never been an adjudication that the prior crime involved the sexual abuse of a minor, which is a necessary element for the prior conviction to be a qualifying offense under section 2252(b)(2). Both parties agree that the determination whether a prior conviction is a qualifying offense for the purpose of enhancing a sentence requires application of a “categorical approach,” which has been used consistently in the context of establishing career offender status at sentencing. See, e.g., United States v. Lancaster, 501 F.3d 673, 675 (6th Cir. 2007) (quoting Taylor v. United States, 495 U.S. 575, 600 (1990); United States v. Flores, 477 F.3d 431, 434 (6th Cir. 2007); United States v. Armstead, 467 F.3d 943, 947 (6th Cir. 2006 . In United States v. McGrattan, 504 F.3d 608 (6th Cir. 2007), the Sixth Circuit held that the same analytical framework should be used to determine whether a sentence should be enhanced in child pornography cases. Id. at 612. The statute considered in McGrattan, 18 U.S.C. § 2252A(b)(1), is syntactically identical to the statute involved in the present case. The categorical approach calls first for “an examination of the fact of conviction and the statutory definition of the predicate offense.” United States v. Arnold, 58 F.3d 1117, 1121 (6th Cir. 1995) (citing Taylor v. United States, 495 U.S. 575, 602 (1990 . Under this approach, “it is not only impermissible, but pointless, for the court to look through to the defendant’s actual criminal conduct.” United States v. John, 936 F.2d 764, 767 (3d Cir. 1991); see also Lancaster, 501 F.3d at 675 (holding that the categorical approach does not permit looking at “the particular facts underlying those convictions”). Of course, the government bears the burden of establishing the defendant’s prior conviction is a qualifying offense. See United States v. Crowell, 997 F.2d 146, 149-50 (6th Cir. 1993). However, where examination of the statute does not clearly establish whether the prior conviction is qualifying, the appellate courts allow the inquiry to proceed one level deeper to the -2- examination of other documents. In Shephard v. United States, 544 U.S. 12 (2005), the Supreme Court clarified the types of documents that can be consulted when the prior conviction results from a guilty plea rather than a trial. The Court determined that “a later court . . . is generally limited to examining the statutory definition, charging document, written plea agreement, transcript of plea colloquy, and any explicit factual finding by the trial judge to which the defendant assented.” Id. at 16. As observed by the McGrattan court, “[t]he [Supreme] Court limited the evidence the court may consider because of concerns that allowing a judge to resolve a ‘disputed finding of fact’ based on a prior plea would present a ‘serious risk[] of unconstitutionality’ by raising the sentencing ceiling without the constitutionally-mandated jury finding.” McGrattan, 504 F.3d at 611 (quoting Shepard, 544 U.S. at 25-26). As noted, the defendant’s prior conviction is for fourth-degree criminal sexual conduct in violation of Michigan Compiled Laws § 750.520e. That statute states: (1) A person is guilty of criminal sexual conduct in the fourth degree if he or she engages in sexual contact with another person and if any of the following circumstances exist: (a) That other person is at least 13 years of age but less than 16 years of age, and the actor is 5 or more years older than that other person. (b) Force or coercion is used to accomplish the sexual contact. Force or coercion includes, but is not limited to, any of the following circumstances: (i) When the actor overcomes the victim through the actual application of physical force or physical violence. (ii) When the actor coerces the victim to submit by threatening to use force or violence on the victim, and the victim believes that the actor has the present ability to execute that threat. (iii) When the actor coerces the victim to submit by threatening to retaliate in the future against the victim, or any other person, and the victim believes that the actor has the ability to execute that threat. As used in this subparagraph, "to retaliate" includes threats of physical punishment, kidnapping, or extortion. (iv) When the actor engages in the medical treatment or examination of the victim in a manner or for purposes which are medically recognized as unethical or unacceptable. -3- (v) When the actor achieves the sexual contact through concealment or by the element of surprise. (c) The actor knows or has reason to know that the victim is mentally incapable, mentally incapacitated, or physically helpless. (d) That other person is related to the actor by blood or affinity to the third degree and the sexual contact occurs under circumstances not otherwise prohibited by this chapter. It is an affirmative defense to a prosecution under this subdivision that the other person was in a position of authority over the defendant and used this authority to coerce the defendant to violate this subdivision. The defendant has the burden of proving this defense by a preponderance of the evidence. This subdivision does not apply if both persons are lawfully married to each other at the time of the alleged violation. (e) The actor is a mental health professional and the sexual contact occurs during or within 2 years after the period in which the victim is his or her client or patient and not his or her spouse. The consent of the victim is not a defense to a prosecution under this subdivision. A prosecution under this subsection shall not be used as evidence that the victim is mentally incompetent. (f) That other person is at least 16 years of age but less than 18 years of age and a student at a public or nonpublic school, and the actor is a teacher, substitute teacher, or administrator of that public or nonpublic school. This subdivision does not apply if the other person is emancipated or if both persons are lawfully married to each other at the time of the alleged violation. (2) Criminal sexual conduct in the fourth degree is a misdemeanor punishable by imprisonment for not more than 2 years or a fine of not more than $500.00, or both. Mich. Comp. Laws § 750.520e. As can be seen, the statute punishes “sexual contact” under a variety of aggravating circumstances, two of which require proof that the victim was under eighteen years old, that is, a minor; and several others in which the age of the victim is not an element. In order for the prior conviction to be a qualifying offense under 18 U.S.C. § 2252(b)(2), it must entail “abusive sexual conduct involving a minor.” “Sexual contact” is defined by state law as “the intentional touching of the victim’s or actor’s intimate parts or the intentional touching of the clothing covering the immediate area of the victim’s or actor’s intimate parts, if that intentional touching can reasonably be construed as being for the purpose of sexual arousal or gratification, done for a sexual purpose, or in a sexual manner for: (i) Revenge[;] (ii) To inflict humiliation[; or] (iii) Out of anger.” Mich. -4- Comp. Laws § 750.520a(o). The defendant’s prior conviction plainly involved “abusive sexual conduct” within the meaning of section 2252(b)(2). However, it is equally apparent from the text of the state statute that it punishes both qualifying and non-qualifying conduct since the previous offense may but need not involve a minor victim. At this point, then, application of the categorical approach requires that we turn to other sources to determine the facts necessary to sustain the prior conviction in the defendant’s case. As noted above, when the prior conviction resulted from a jury trial, the Supreme Court instructs sentencing courts to consider “the charging paper and jury instructions actually required the jury to find all the elements of generic burglary in order to convict the defendant.” Taylor v. United States, 495 U.S. 575, 602 (1990). In cases, such as the present one, that involve convictions by other means, Shepard provides additional guidance: The [Taylor] Court did not, however, purport to limit adequate judicial record evidence strictly to charges and instructions, . . . since a conviction might follow trial to a judge alone or a plea of guilty. . . . [I]n pleaded cases [the closest analogs to jury instructions] would be the statement of factual basis for the charge, Fed. Rule Crim. Proc. 11(a)(3), shown by a transcript of plea colloquy or by written plea agreement presented to the court, or by a record of comparable findings of fact adopted by the defendant upon entering the plea. Shepard, 544 U.S. at 20. The Court held that a sentencing court may not consider a police report to determine the conduct for the guilty plea, but “is limited to the terms of the charging document, the terms of a plea agreement or transcript of colloquy between judge and defendant in which the factual basis for the plea was confirmed by the defendant, or to some comparable judicial record of this information.” Id. at 26. The defendant argues that the “charging document” is no help in this case because the plea bargaining process in the state court never produced one. The Court agrees. It appears that the -5- defendant originally was charged with second-degree criminal sexual conduct. The felony warrant charges that the defendant “did engage in sexual contact with another person, to-wit: [victim’s name], said person being under 13 years of age.” Govt.’s Resp. Br., Ex. 1. The state law defining second-degree criminal sexual conduct includes as an aggravating factor that the victim “is under 13 years of age.” Mich. Comp. Laws § 750.520c(1)(a). However, the defendant did not plead guilty to that charge and he was never convicted of it. Instead, the parties to the state proceeding signed a “Pretrial Settlement Offer” form and the defendant entered a nolo contendere plea to fourth-degree criminal sexual conduct. No amended complaint, warrant, information, or indictment was ever filed reflecting the new charge. The closest thing that we have to a charging document, then, is the settlement form, which the defendant signed. That form states that there was a “charge reduction” to “CSC 4,” with a sentence agreement of “probation, no jail time, sex offender counseling, no unsupervised contact with minors, no contact with complainant.” Govt.’s Resp. Br., Ex. 2. That documents sheds no light on which of the aggravating elements in Mich. Comp. Laws § 750.520e the state prosecutor or the state court relied upon in determining guilt. Because there is no helpful charging document, and the plea agreement provides no insight as to the elements of the actual offense of conviction, the Court must examine other permissible documents to attempt to ascertain that information, which, according to Shepard, includes a “transcript of colloquy between judge and defendant in which the factual basis for the plea was confirmed by the defendant, or to some comparable judicial record of this information.” 544 U.S. at 26. The plea hearing transcript discloses the following: THE COURT: Now what is the basis of the no contest plea? [Defense counsel] MR. BAIN: The police report, your Honor. -6- THE COURT: And there’s a belief that there would be civil liability? MR. BAIN: Yes, I’m sorry yes. THE COURT: Would you indicate into the record the evidence based on the offer to support this plea at this time. [Prosecutor] MR. ELIZONDO: Certainly, your Honor. I believe counsel is willing to stipulate to the following facts which are taken from the investigators report. That is on or about September 14th, 2002 at [victim’s address], City of Livonia, Wayne County Michigan, the defendant was present at a party with the complainant that being [victim’s name] who was age 11. At some time during the course of that party he picked the complainant up and place[d] her on this lap and put his hands under her sweater fondling her breast. And I believe that would be a significant basis a factual basis. THE COURT: Do you agree. MR. BAIN: I agree, your honor. THE COURT: All right. Based upon the evidence that has been presented this morning the Court finds that the defendant would at least be found guilty of what he is pleading to. The Court will accept the plea of no contest. Def.’s Memo Br. in Regard to Enhancement Provision, Ex. 2, Jul. 11, 2003, Tr. 7-9. The defendant contends that this colloquy will not suffice to establish that the prior offense involved a minor because the defendant never assented to it, as is the custom when the plea is one of nolo contendere. The defendant relies heavily on Lichon v. American Universal Ins. Co., 435 Mich. 408, 459 N.W.2d 288 (1990), a case in which the state court determined the effect of a nolo contendere-based conviction in a subsequent civil action arising from the same occurrence. In that case, Lichon had been convicted of arson of his business premises after pleading nolo contendere to that charge. He then brought an action against his insurance company to recover losses arising from that same fire, and the insurance company sought to interpose Lichon’s arson conviction to establish that he intentionally set the fire. The court held that under Michigan law, specifically Michigan Rules of Evidence 410 (which at the time stated that “a plea of nolo contendere . . . is not admissible in any civil or criminal proceeding against the person who made the plea”) and 803(22) (which created a hearsay exception for “a final judgment, entered after a trial or upon a plea of guilty -7- (but not upon a plea of nolo contendere), adjudging a person guilty of a crime punishable by death or imprisonment in excess of one year, to prove any fact essential to sustain the judgment”), a defendant who pleaded nolo contendere to arson was not judicially estopped from denying responsibility for the fire. The decision prompted a change in Michigan’s Rule 410 in 1991 to allow the use of such pleas and convictions in civil cases defensively, that is, “to support a defense against a claim asserted by the person who entered the plea.” Mich. R. Evid. 410(1). But the defendant has a point here, as well. Nolo contendere means “I will not contest it.” Lichon, 435 Mich. at 418, 459 N.W.2d at 293 (citing Black's Law Dictionary (5th ed.), p. 945). As the Michigan Supreme Court explains, The primary purpose of a plea of nolo contendere is to avoid potential future repercussions which would be caused by the admission of liability, particularly the repercussions in potential future civil litigation. Guilty Plea Cases, 395 Mich. 96, 134, 235 N.W.2d 132 (1975). A nolo contendere plea does not admit guilt, it merely communicates to the court that the criminal defendant does not wish to contest the state’s accusations and will acquiesce in the imposition of punishment. Id. at 417, 459 N.W.2d 293. Consequently, it cannot be said that the plea colloquy at a nolo contendere plea hearing constitutes a “transcript of colloquy between judge and defendant in which the factual basis for the plea was confirmed by the defendant,” as Shepard requires. 544 U.S. at 26 (emphasis added). By its very nature, the nolo contendere plea does not require the defendant to admit any facts. But that does not end the inquiry, since the concern of the Shepard Court was not merely whether the defendant himself admitted the prior facts, but whether there was a proper basis, consistent with the Sixth Amendment, for a judicial determination of the facts necessary to find that the prior offense qualified to enhance the subsequent sentence. In other words, if the defendant does not actually admit the necessary facts, there must be “some comparable judicial record of this -8- information” upon which it can be determined that the facts establishing the offense as a qualifying conviction were necessarily found by the prior court. Id. at 26. Under Michigan law, the judge taking a nolo contendere plea must determine guilt based on the record. The Michigan Court Rule requires the trial court to undertake an analysis to ensure that a plea is based in fact: (2) If the defendant pleads nolo contendere, the court may not question the defendant about participation in the crime. The court must: (a) state why a plea of nolo contendere is appropriate; and (b) hold a hearing, unless there has been one, that establishes support for a finding that the defendant is guilty of the offense charged or the offense to which the defendant is pleading. Mich. Ct. R. 6.302(D). “Although a no-contest plea cannot be used as an admission, it nevertheless forms the basis of a conviction that can be used to impeach, just as a conviction following a not-guilty plea and trial can be used to impeach credibility.” Shuler v. Michigan Physicians Mut. Liability Co., 260 Mich. App. 492, 512, 679 N.W.2d 106, 118 (2004) (citing United States v. Williams, 642 F.2d 136, 139 (5th Cir. 1981 . The Sixth Circuit has repeatedly held that “[p]leading nolo contendere has similar legal effect in this context as pleading guilty.” United States v. Armstead, 467 F.3d 943, 949 n. 2 (6th Cir. 2006). In one case, the Sixth Circuit decided that “the state criminal complaint, a transcript of the state plea proceedings, and [the defendant’s] acceptance in those proceedings of the factual statements in the complaint” provided a sufficient basis under Taylor and Shepard for a penalty enhancement under 18 U.S.C. § 2241(c). United States v. Kappell, 418 F.3d 550, 560 (6th Cir. 2005). Based on the plea record, then, could the Michigan state judge have found Vanbuhler guilty of fourth-degree criminal sexual conduct without necessarily determining that the offense involved -9- a minor? To answer that question, we must examine the statutory elements. As noted earlier, the aggravating elements that render sexual contact violative of the statute include the following circumstances: (1) the victim is between 13 and 16 years old – that is, a minor; (2) force or coercion is used; (3) the victim is mentally or physically helpless; (4) the victim is closely related to the actor; (5) the actor is a mental health professional and the victim is his or her patient; and (6) the actor is a school teacher and the victim is his or her student and between 16 and 18 years old. Mich. Comp. Laws § 750.520e(1)(a)-(f). If the state record allows conviction of this crime under any of these aggravating elements that do not involve a minor, then it cannot be said that the judgment of guilt necessarily requires the determination that a minor was involved. However, of these aggravating elements, the only possible one that could have been found by the state judge from the statements in the record is the first. That the facts of the case were taken from the police report presents no obstacle here. The statements from that report were received in evidence without objection, and therefore they were made part of the judicial record. The record contains an agreement by the defendant’s attorney that the facts recited by the prosecutor were established. Those facts, it is true, proved that the victim was 11 years old, not between 13 and 16, as the statute recites. Had there been other evidence in the record that also proved the crime – such as proof that the victim was related to the defendant, or that force or coercion were used – then it might be reasonable to conclude that the state judge relied on other facts to convict and the judgment of guilt would not necessarily prove that a minor was involved. However, a victim who is 11 years old is also less than 16 years old, and there is no alternate basis to support the conviction justified by the state court record. The Court must conclude, therefore, that the “comparable judicial record” of the nolo contendere plea proceedings -10- establishes that the prior offense involved a minor, and that fact was necessary to support the conviction. The Court finds, therefore, that the defendant’s prior conviction qualifies as an offense “under the laws of any State relating to . . . abusive sexual conduct involving a minor” within the meaning of 18 U.S.C. § 2252(b)(2). Accordingly, it is ORDERED that the sentence enhancement provision of 18 U.S.C. § 2252(b)(2) is applicable in this case and the statutory penalty includes a mandatory minimum sentence of 10 years in custody and a maximum term of 20 years. It is further ORDERED that the parties shall appear for sentencing on June 16, 2008 at 10:30 a.m. Dated: May 19, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 19, 2008. s/Felicia M. Moses FELICIA M. MOSES -11-

=== WG Heating Granting MSJ ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION TRUSTEES OF THE SHEET METAL WORKERS’ LOCAL UNION NO. 80 PENSION TRUST FUND, v. Plaintiff, W.G. HEATING & COOLING, ______________________________________/ Defendant. Case Number: 07-15268 Honorable David M. Lawson OPINION AND ORDER GRANTING PLAINTIFF’S MOTION TO STRIKE COUNTERCLAIM, GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT, AND DENYING PLAINTIFF’S MOTION TO STRIKE THIRD-PARTY COMPLAINT This matter is before the Court on three motions filed by the plaintiff in this action to collect payments allegedly owed by the defendant for “withdrawal liability” under the Multiemployer Pension Plan Amendments Act (MPPAA), 29 U.S.C. §§ 1381-1453, which amended portions of the Employee Retirement Income Security Act of 1974 (ERISA) to increase the financial liability of employers who withdraw from underfunded employee benefit plans. The defendant entered into a collective bargaining agreement (CBA) with Sheet Metal Workers International Association, Local 80 in 1982, pursuant to which the defendant assumed the obligation to remit fringe benefit contributions. In April 2006, the defendant’s employees voted to decertify Local 80 as their exclusive bargaining representative, and therefore W.G. Heating ceased to be a signatory to a CBA with the union. In its complaint, the plaintiff alleges that the defendant is subject to withdrawal liability under ERISA section 4201(a), 29 U.S.C. § 1381, because its employees continue to perform work of the type for which contributions to the fund were required previously. The defendant has filed a counterclaim contending that the plaintiff breached its fiduciary duties in managing the fund by committing waste and misrepresenting the possibility of withdrawal liability. The defendant also filed a third-party complaint against Local 80 alleging fraud and misrepresentation on the theory that the union represented a certain amount of fringe benefit contributions would be required, but said nothing about the possibility of withdrawal liability in the event the fringe benefit funds were determined to be underfunded. The plaintiff now moves for dismissal of the counterclaim and third-party complaint, as well as for summary judgment on its complaint. The plaintiff contends the Court lacks subject-matter jurisdiction over the defendant’s claims, and the defendant has not presented viable defenses to the plaintiff’s claims, to which there is no factual dispute. The defendant vigorously contests each of these points in its response brief. The Court has reviewed the submissions of the parties and finds that the relevant law and facts have been set forth in the motion papers and that oral argument will not aid in the disposition of the motion. Accordingly, it is ORDERED that the motion be decided on the papers submitted. See E.D. Mich. LR 7.1(e)(2). The Court finds that it has no subject matter jurisdiction to entertain the counterclaim; the third-party claim is a proper action for indemnity under Federal Rule of Civil Procedure 14(a) over which the Court has jurisdiction; and the defendant’s failure to demand arbitration of the claim for withdrawal liability payments or otherwise to plead a viable defense justifies judgment in the plaintiff’s favor as a matter of law. Therefore, the Court will grant the plaintiff’s motion to dismiss the counterclaim, deny the plaintiff’s motion to strike the third-party complaint, and grant the plaintiff’s motion for summary judgment. -2- I. The plaintiff filed its complaint on December 11, 2007 under ERISA to collect employer withdrawal liability payments. “Withdrawal liability” is a creature of statute, and it can arise when an employer participates in and then withdraws from a multi-employer benefit plan through a collective bargaining agreement. “An employer’s withdrawal liability is its proportionate share of the plan’s unfunded vested benefits, that is, the difference between the present value of vested benefits (benefits that are currently being paid to retirees and that will be paid in the future to covered employees who have already completed some specified period of service, 29 U.S.C. § 1053) and the current value of the plan’s assets.” Concrete Pipe and Prods. of California, Inc. v. Construction Laborers, , 609 (1993) (citing 29 U.S.C. §§ 1381, 1391) (internal quotations omitted). As soon as practicable after an employer withdraws from a multi-employer plan by, say discontinuing participation in a CBA, the ERISA plan trustees must notify the employer of its withdrawal liability and the schedule for payment. 29 U.S.C. § 1399(b)(1). If the trustees do not satisfy these requirements, collection is precluded. Canario v. Lidelco., Inc., 782 F. Supp. 749 (E.D.N.Y. 1992). Disputes over the amount of withdrawal liability are generally subject to arbitration. 29 U.S.C. § 1401(a)(1). If an employer does not satisfy its withdrawal liability, the trustees may bring suit to collect the deficiency in federal court, just as they may for collection of a delinquent fringe benefit contribution. See 29 U.S.C. §§ 1451(a)(1), (b) (“In any action under this section to compel an employer to pay withdrawal liability, any failure of the employer to make any withdrawal liability payment within the time prescribed shall be treated in the same manner as a delinquent contribution.”). -3- The basic facts that give rise to the plaintiff’s claim for withdrawal liability in this case generally are not disputed. In 1982, W.G. Heating entered into a collective bargaining agreement with Local 80 pursuant to the Labor-Management Relations Act of 1947. Under the CBA, W.G. Heating paid fringe benefit contributions to a multi-employer fund managed by the plaintiff in this case. W.G. Heating’s relationship with Local 80 continued to April 28, 2006, when W.G. Heating’s employees voted to discontinue the company’s status as a signatory to the CBA. On February 8, 2007, the defendant completed a “Withdrawal Liability Questionnaire” at the plaintiff’s request. Among other things, the questionnaire asked the defendant to describe its business operations. The defendant indicated that its primary service was installation of heating and cooling systems in residential construction projects. This response, according to the plaintiff, shows that the defendant’s employees continue to perform work that previously was covered by the CBA with Local 80. Therefore, the plaintiff reasons, a “withdrawal” occurred within the meaning of ERISA, subjecting the defendant to withdrawal liability. On May 2, 2007, the plaintiff sent the defendant a “Notice of Assessment of Employer Withdrawal Liability.” As it turns out, the information contained in that notice was erroneous, which all parties concede. The Notice recited a total liability of $32,579; it demanded quarterly installment payments of $8,288 with the first installment due 60 days after receipt of the notice. The defendant received the notice on May 3, 2007. Because of the error, the plaintiff sent a revised notice on June 29, 2007. Although the revised notice specified a lesser total liability ($30,598), it called for the same periodic installment payments of $8,288 “with the first assessment due 60 days after receipt of the Notice dated May 2, 2007.” Martin Aff. at ¶ 5 (emphasis added). The defendant received the revised notice on July 2, -4- 2007, the date which the plaintiff says was the final day for payment of the first installment. Thereafter, on July 6, 2007, the plaintiff sent the defendant a “Notice of Overdue Payment.” The notice informed the defendant that interest would begin to accrue and demanded immediate payment. The defendant first inquired about the basis for the withdrawal liability in a letter dated July 20, 2007 sent by its attorney, Steven A. Wright. Wright objected to the assessment on the grounds that the plaintiff had “not provided sufficient information to W.G. Heating for it to determine the accuracy of the Fund’s determination of withdrawal liability.” Br. in Supp., Ex. B, Wright Letter at 1. Wright requested “that the plan sponsor review and explain precisely how W.G. Heating’s liability was determined,” ibid., in accordance with 29 U.S.C. § 1399(b)(2)(A)(I). He further stated that W.G. Heating wished to audit the fund’s records “to determine (1) the actuarial present value of vested benefit obligations, (2) the value of the plan’s assets, (3) the value of the plan’s vested but unfunded benefits, and (4) W.G. Heating’s proportionate share of unfunded vested benefits.” Ibid. The plaintiff responded by letter dated August 10, 2007, enclosing the following documents: (1) the relevant pension plans and amendments; (2) a portion of the “Actuarial Valuation Report for the Plan Year Commencing June 1, 2005”; and (3) the “Allocation of Unfunded Vested Benefits for W.G. Heating & Cooling Inc.” Br. in Supp., Ex. C, Pl.’s August 10, 2007 Response at 1-2. The plaintiff refused to furnish records concerning other employers who withdrew. Defense counsel was not satisfied, and on August 27, 2007, Wright wrote the plaintiff requesting additional information. Counsel requested the entire Actuarial Valuation Report for 2005 (only one page had been sent); the underlying documents used to create the single-page summary styled “Allocation of Unfunded Vested Benefits for W.G. Heating & Cooling Inc”; and information -5- relating to withdrawal liability of other employers. Wright deemed this information necessary to calculate W.G. Heating’s liability. Counsel warned, “If we do not resolve these matters to our satisfaction by October 1, 2007, we will institute arbitration and/or seek injunctive relief in federal court.” Br. in Supp., Ex. D, Wright Letter dated August 27, 2007 at 2. The plaintiff responded to this letter with mailings on September 25 and October 8, 2007. In their September 25 correspondence, the plaintiff furnished the full Actuarial Valuation Report for 2005 and stated, “We will respond to your other requests for information in a separate letter.” Br. in Supp., Ex. E, Pl.’s Sept. 25, 2007 Response. However, in the “separate letter,” the plaintiff explained that it would not produce the “underlying documentation” for the “Allocation of Unfunded Vested Benefits” summary. Br. in Supp., Ex. F, Pl.’s Oct. 8, 2007 Response at 1. The plaintiff stated that it was not required to produce this information because the defendant’s request was not “specific and precise” and the information was not related to variables used in the “presumptive method” for allocating unfunded vested benefits. The plaintiff also refused (once again) to produce information regarding withdrawal liability of other employers, arguing that this information was not relevant to the validity of the defendant’s withdrawal liability. The defendant believes that the promise of a response in the “separate letter” was a bit of intentional misdirection to mislead the defendant into believing that a resolution without arbitration could be worked out. But time passed, and no payments were made. On November 14, 2007, the plaintiff sent the defendant a “Notice of Default and Acceleration of Liability.” The determination of default was premised on ERISA’s timing provisions and the plaintiff’s continued assertion that the initial (erroneous) notice of withdrawal liability (dated May 2, 2007) started the clock, which the defendant fiercely contests. According to the plaintiff’s calculation, default was triggered after -6- ninety days elapsed with no payments made and no arbitration being sought, that is, on November 5, 2007. Including interest, the plaintiff asserted that the defendant owed $31,225.00, which sum was immediately due in full. The defendant has still not made any payments, nor has it demanded review or arbitration. The defendant takes the position that the arbitration deadline was December 26, 2007. It believes that the plaintiff’s action of starting this lawsuit, which occurred on December 11, 2007, waives ERISA’s arbitration requirement. After the plaintiff filed its complaint, the defendant filed a counterclaim and a third-party complaint against Local 80. Both filings advance the theory that because the plaintiff trustees did not inform the defendant of the possibility of withdrawal liability and the trustees and union mismanaged fund assets and committed waste, an obligation to the defendant was created. The defendant’s allegations in these pleadings are sparse and largely conclusory, probably because the defendant has not received all the documents it requested from the plaintiff. The defendant seeks damages from Local 80 and the trustees, and requests an order authorizing an audit of the trustees’ books and records. The plaintiff filed its motions despite the lack of much formal discovery. The plaintiff contends that discovery is not necessary, which is the source of another disagreement with the defendant. II. The plaintiff first asks the Court to dismiss the counterclaim pursuant to Rule 12(b)(1) and Rule 12(b)(6) of the Federal Rules of Civil Procedure. The fund argues that the Court lacks subject matter jurisdiction or, in the alternative, the defendant has failed to state a claim. It contends that -7- the Court lacks jurisdiction over the defendant’s counterclaim because the defendant, as an employer, is not included among those authorized by the statute to complain about a breach of fiduciary duty by a plan trustee. The plan contends that the defendant fails to state a claim for the same reason. The defendant argues that ERISA section 4301, 29 U.S.C. § 1451, expressly authorizes an employer that is adversely affected by the acts or omissions of any party to bring a civil action; therefore the Court has jurisdiction over the defendant’s counterclaim alleging mismanagement of fund assets that produced the shortfall on which the plaintiff’s withdrawal-liability claim is predicated. The defendant also argues that federal common law supports the counterclaim. Rule 12(b)(1) authorizes dismissal where subject matter jurisdiction is wanting. Lack of subject matter jurisdiction may be asserted at any time, either in a pleading or a motion. Fed. R. Civ. P. 12(b)(1); Television Reception Corp. v. Dunbar, 426 F.2d 174, 177 (6th Cir. 1970). When subject matter jurisdiction is challenged, the plaintiff (or the defendant in the case of a counterclaim) has the burden of proving jurisdiction in order to survive the motion. Michigan Southern R.R. Co. v. Branch & St. Joseph Counties Rail Users Ass’n., Inc., 287 F.3d 568, 573 (6th Cir. 2002); see also Moir v. Greater Cleveland Reg’l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990). Rule 12(b)(6) allows for dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). The purpose of Rule 12(b)(6) is to allow a counter-defendant to test whether, as a matter of law, the counter-plaintiff is entitled to legal relief even if everything alleged in the counterclaim is true. Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). When deciding a motion under that Rule, the Court must construe the counterclaim in the light most favorable to the counter-plaintiff, accept all factual allegations as true, and determine whether the -8- counterclaim contains “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S., __, 127 S.Ct. 1955, 1974 (2007). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Ibid. Federal Rule of Civil Procedure 8(a) requires that the complaint give the defendant fair notice of the nature of the claim and the factual grounds upon which it rests. Twombly, 127 S. Ct. at 1964. Therefore, “[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 1964-65 (citations omitted) (alteration in original). “In practice, ‘a . . . complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.’” In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir. 1993) (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (1984 ; see also Ana Leon T. v. Fed. Reserve Bank, 823 F.2d 928, 930 (6th Cir. 1987) (per curiam) (mere conclusions are not afforded liberal Rule 12(b)(6) review). Of course, these pleading rules apply to counterclaims as well as “complaints.” The Court believes that the plaintiff’s motion to dismiss is more accurately addressed under Rule 12(b)(6) rather than Rule 12(b)(1). In alleging lack of subject matter jurisdiction, the plaintiff challenges the Court’s authority to adjudicate the merits of the claim. There can be no doubt, however, that federal courts have authority to adjudicate disputes arising under ERISA. See, e.g., 29 U.S.C. § 1132(e). In fact, “Congress has provided district courts with subject-matter jurisdiction -9- over ‘all civil actions arising under the Constitution, laws, or treaties of the United States.’” Primax Recoveries, Inc. v. Gunter, 433 F.3d 515, 518 (6th Cir. 2006) (quoting 28 U.S.C. § 1331). In Primax, the Sixth Circuit explained: In two very recent decisions, the Supreme Court has admonished courts to use the term “jurisdiction” with more precision, describing the term as “a word of many, too many, meanings,” Kontrick v. Ryan, , 453 (2004) (quoting Steel Co. v. Citizens for a Better Env't, , 90 (1998 . In Kontrick, a unanimous Court held that time requirements of Federal Rules of Bankruptcy Procedure 4004 and 9006 did not implicate subject-matter jurisdiction, but were instead “claim- processing rules.” Id. at 455. Just over one year later, in Eberhart v. United States, (2005) (per curiam), the Supreme Court similarly described Federal Rule of Criminal Procedure 33 with its time limitations as a nonjurisdictional “claim- processing rule.” “Clarity would be facilitated,” the Supreme Court remarked, “if courts and litigants used the label ‘jurisdictional’ not for claim-processing rules, but only for prescriptions delineating the classes of cases (subject-matter jurisdiction) and the persons (personal jurisdiction) falling within a court’s adjudicatory authority.” Id. at 405 (quoting Kontrick, 540 U.S. at 455). “Characteristically, a court’s subject-matter jurisdiction cannot be expanded to account for the parties’ litigation conduct . . . .” Kontrick, 540 U.S. at 456. Id. at 518-19. See also Long v. Adams, 411 F. Supp. 2d 701, 708 (E.D. Mich. 2006) (observing that “the fact that a complaint may not state a claim upon which relief can be granted is of no relevance to the question of subject matter jurisdiction”) (quoting Cherokee Exp., Inc. v. Cherokee Exp., Inc., 924 F.2d 603, 609 (6th Cir.1991) (internal quotes and citation omitted . Because the plaintiff is challenging the defendant’s ability to proceed on its counterclaim, as opposed to the Court’s authority to adjudicate it, the Court rejects the contention that subject-matter jurisdiction is lacking. The Court will determine instead whether the defendant has stated a viable claim for relief in its counterclaim. The counterclaim in this case plainly and simply alleges that the plan “[t]rustees have breached their fiduciary duties owed to W.G. Heating by failing to establish proper levels of funding for the Fund, as well as the mismanagement, waste, and misappropriation of Fund’s assets.” -10- Counterclm. at ¶ 12. The parties agree that ERISA imposes various fiduciary duties upon plan administrators. According to ERISA section 404, a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and-- (A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan; (B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; (C) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and (D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III of this chapter. 29 U.S.C. § 1104(a)(1). ERISA further provides that a fiduciary who breaches these duties “shall be personally liable” for the losses. 29 U.S.C. § 1109(a). However, 29 U.S.C. § 1132, ERISA’s civil enforcement provision, limits those who can proceed on such a claim to the Secretary of Labor, a participant, a beneficiary, or a fiduciary; only those individuals may seek relief under 29 U.S.C. § 1109. 29 U.S.C. § 1132(a)(2). The Act defines none of those individuals broadly enough to include employers. “‘[P]articipant’ means any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit.” 29 U.S.C. § 1002(7). “The term ‘beneficiary’ means a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.” 29 U.S.C. § 1002(8). “Employer,” which is a defined term in the Act, but is not included in the list of individuals authorized to bring -11- actions under section 1109, “means any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity.” 29 U.S.C. § 1002(5). An employer can also qualify as an ERISA plan fiduciary, but only “to the extent” that it exercises authority, control, or responsibility with respect to the plan or its assets. 29 U.S.C. § 1002(21)(A). The Sixth Circuit has held that an employer acting in its capacity as such has no authority under ERISA to sue a plan fiduciary for breach of a fiduciary duty. Great Lakes Steel v. Deggendorf, 716 F.2d 1101 (6th Cir. 1983). In Great Lakes Steel, an employer that administered an ERISA health benefits program sued for a judgment declaring that ERISA barred a state-court action seeking changes in disability benefits. The district court dismissed the case for want of subject matter jurisdiction, reasoning that the employer was chiefly acting as an employer rather than as a fiduciary. The court of appeals affirmed in part and reversed in part, finding that, although ERISA’s civil enforcement provision “confers no standing to an employer as employer administering an employee health benefit plan seeking the remedies provided by that subsection,” the district court failed to realize that the employer had sufficiently pleaded fiduciary status as well, and inseparability of these roles “does not destroy subject matter jurisdiction.” Id. at 1105. The holding of Great Lakes Steel is that an employer must qualify as a fiduciary in order to bring an action under 29 U.S.C. § 1132(a). Although the defendant is correct that Great Lakes Steel concerned an action under 29 U.S.C. § 1132(a)(3) (which authorizes actions to enjoin practices and to secure other equitable relief, such as a declaratory judgment), that distinction is of no consequence. Like section 1132(a)(3), section 1132(a)(2) (authorizing actions for breach of fiduciary duty) fails to include employers qua employers among those authorized to seek relief. The -12- only way an employer can sue for breach of fiduciary duty (or for a declaratory judgment) is by establishing that it is also a fiduciary or otherwise acting in a fiduciary capacity. See 29 U.S.C. § 1002(21)(A); Great Lakes, 716 F.3d at 1104-05. Unlike the employer in Great Lakes, however, the defendant in this case had no role in the administration of the ERISA plan; it has not claimed a fiduciary capacity and has no colorable basis to do so. This rule has been applied consistently by the Sixth Circuit. See DeMarco v. C & L Masonry, Inc., 891 F.2d 1236, 1241 (6th Cir. 1989) (“[A]n Employer does not have standing to sue a Trustee for a breach of a fiduciary duty owed to the beneficiaries of the plan.”) As noted above, however, the defendant points to another statute, 29 U.S.C. § 1451, as conferring authority to bring its counterclaim, suggesting that the rule changes when a multiemployer plan is involved. That statute, which deals with actions in the multiemployer, withdrawal liability context, states: A plan fiduciary, employer, plan participant, or beneficiary, who is adversely affected by the act or omission of any party under this subtitle [concerning withdrawal liability] with respect to a multiemployer plan, or an employee organization which represents such a plan participant or beneficiary for purposes of collective bargaining, may bring an action for appropriate legal or equitable relief, or both. 29 U.S.C. § 1451(a)(1) (emphasis added). The Sixth Circuit has not dealt with that statute in the present context. However, the Third Circuit has suggested that this statute cannot be used to pre-empt the rule that a plan fiduciary cannot be sued by an employer qua employer for breach of a fiduciary duty. See Carl Colteryahn Dairy, Inc. v. Western Pennsylvania Teamsters and Employers Pension Fund, 847 F.2d 113 (3d Cir. 1988). In Colteryahn, an employer sued a plan fiduciary on the theory that it was fraudulently induced to accede to a merger between its multiemployer fund and another plan, and therefore it should not be -13- saddled with withdrawal liability when it withdrew as a contributing employer. The district court dismissed the claim. On appeal, the fund defended the district court’s decision by arguing “that the fraud claim is really a claim for breach of fiduciary duty under 29 U.S.C. § 1132 which Colteryahn has no standing to bring.” Id. at 115. The appellate court disagreed, but not because it found statutory authorization for an employer to sue a plan trustee for breach of a fiduciary duty. The court explained: Colteryahn relies on 29 U.S.C. § 1451, which creates federal jurisdiction over MPPAA disputes. The Fund, however, contends that Colteryahn’s challenge is merely a thinly-disguised ERISA breach of fiduciary duty claim, and that Colteryahn, as an employer, cannot bring such a claim because only a participant, beneficiary, fiduciary, or the Secretary of Labor has standing to bring an ERISA breach of fiduciary duty suit. . . . The Fund’s legal proposition is correct. However, we agree with Colteryahn that it has not attempted to assert a breach of fiduciary duty claim. Fiduciary duties under ERISA, as a general rule, are owed to participants and beneficiaries only. . . . Colteryahn, however, has not alleged that the defendants acted contrary to the best interests of the participants or beneficiaries, in violation of such a duty. Rather, Colteryahn has alleged fraud and misrepresentation causing Colteryahn itself to suffer an injury that is separate and distinct from any possible injury to others. There is no claim that the Fund acted in breach of a statutory fiduciary duty to act in the best interests of Colteryahn, nor could there be one, because the Fund had no such duty. Thus we reject the Fund’s attempt to characterize Colteryahn’s suit as a breach of fiduciary duty suit under § 1132. Id. at 119. Unlike the employer in Colteryahn, W.G. Heating has not alleged fraud and misrepresentation by the plan trustees; it has alleged only that they breached their fiduciary duties to the defendant. Had that been the case in Colteryahn, it is apparent to this Court that the Third Circuit would not have permitted the employer to proceed, and it is equally plain that the Sixth Circuit would not do so either. The Sixth Circuit’s unequivocal statement in DeMarco v. C & L Masonry, Inc., 891 F.2d at 1241, – “an Employer does not have standing to sue a Trustee for a -14- breach of a fiduciary duty owed to the beneficiaries of the plan” – was made in the context of a multiemployer plan, so 29 U.S.C. § 1451 cannot be used to escape this result. In addition, W.G. Heating has made no effort to submit this claim to arbitration. The MPPAA contains a requirement that “[a]ny dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 [i.e., a withdrawal liability determination] of this title shall be resolved through arbitration.” 29 U.S.C. § 1401(a)(1). The Sixth Circuit has stated that under the MPPAA, “arbitration reigns supreme.” Mason and Dixon Tank Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 852 F.2d 156, 164 (6th Cir. 1988) (internal quotation marks omitted). “[A]rbitration is the appropriate forum if there is a dispute concerning whether the employer has completely or partially withdrawn from the pension fund, and, if so, the amount of liability. The same is true for the date an employer withdraws from the pension fund.” Ibid. (internal citations omitted). Further, “questions of statutory construction, standing alone, are not exempt from arbitration under the MPPAA.” Ibid. Although there are exceptions to the arbitration requirement – instances where an employer mounts a facial constitutional attack; makes a verifiable claim of irreparable injury; or raises the issue of whether it is an “employer” within the meaning of ERISA section 4221(a), id. at 165 – the defendant’s counterclaim falls in none of these categories. Because the defendant seeks to contest the amount of its withdrawal liability by challenging the plan fiduciary’s performance, it should have initiated its complaint in accordance with 29 U.S.C. § 1401(a) in an arbitral forum. Finally, there is an additional reason the defendant’s counterclaim is subject to dismissal for failure to state a claim under Rule 12(b)(6). As the court observed in Colteryahn, 847 F.2d at 113, and 29 U.S.C. § 1104(a)(1) makes clear (“a fiduciary shall discharge his duties with respect to a plan -15- solely in the interest of the participants and beneficiaries”), plan administrators do not owe fiduciary duties to employers, only to participants and beneficiaries. The plaintiff, therefore, cannot be liable to the defendant employer for breaching a fiduciary duty. For these reasons, the plaintiff’s motion to dismiss the counterclaim for failure to state a claim must be granted. III. The plaintiff also has moved to dismiss the defendant’s third-party complaint against Local 80 on the grounds that the pleading is not a proper action over as contemplated by Federal Rule of Civil Procedure 14(a) and because the issues of fraud and misrepresentation are not addressed properly in an ERISA collection proceeding. The defendant contests these arguments, asserting that it does not intend to use Local 80’s alleged misrepresentation as a defense to the plaintiff’s collection case. Rather, it asserts a right to indemnity for any withdrawal liability it might be found to owe the plaintiff. Rule 14(a) permits a defending party to implead another “who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff.” Fed R. Civ. P. 14(a). In Bank of India v. Trendy Sportswear, Inc., 239 F.3d 428 (2d Cir. 2000), the Second Circuit discussed what it takes to sustain an impleader case. The court explained: To sustain an impleader action, the third-party defendant . . . “must be liable secondarily to the original defendant, or . . . the third party . . . must necessarily be liable over to the defendant . . . for all or part of the plaintiff’s . . . recovery, or that the defendant . . . must attempt to pass on to the third party . . . all or part of the liability asserted against the defendant . . . .” [Int’l Paving Sys., Inc. v.] Van-Tulco, 866 F. Supp. [682, ]686 [(E.D.N.Y. 1994)] (internal quotation marks omitted); Wright, Miller & Kane, Federal Practice and Procedure § 1446 (1990); see also Telecom International, 1999 WL 777954, at *4. This means that the impleader action must be dependent on, or derivative of, the main . . . claim. -16- Id. at 438. “The purpose of Rule 14 is to permit additional parties whose rights may be affected by the decision in the original action to be joined so as to expedite the final determination of the rights and liabilities of all the interested parties in one suit.” American Zurich Ins. Co. v. Cooper Tire & Rubber Co., 512 F.3d 800, 804 (6th Cir. 2008). See also Wright & Miller, Federal Practice and Procedure § 1446 (“The secondary or derivative liability notion is central [to a Rule 14(a) impleader] and it is irrelevant whether the basis of the third-party claim is indemnity, subrogation, contribution, express or implied warranty, or some other theory.”). At its core, then, impleader is appropriate when the impleaded party may be liable to the defendant if the plaintiff is successful in its claim. Derivative liability is therefore the driving concept behind impleader. In this case, impleader is appropriate due to the relationship between the principal complaint and the third-party complaint. In the principal complaint, the plaintiff seeks to collect withdrawal liability. In the third-party complaint, the defendant states that Local 80 committed fraud and misrepresentation by failing to inform the defendant of the possibility of withdrawal liability. The defendant asserts that it has been harmed by Local 80’s conduct by virtue of the withdrawal liability action. The defendant explains, “W.G. has suffered injury and damages as a result of its reliance upon Local 80’s false material representation, including its attorney’s fees to defend in this matter, as well as any withdrawal liability that may be awarded to Plaintiff in this matter.” Third-Party Compl. at ¶ 19. Moreover, the relief sought by the defendant consists of “all damages incurred by W.G. as a result of Local 80’s fraud and misrepresentation, including its attorney’s fees and any monies that [are] awarded to Plaintiff in this matter.” Id. at 4. This is essentially a request for indemnification, and the harm alleged is only made real if the plaintiff -17- succeeds in its case for withdrawal liability. Therefore, the Court must reject the plaintiff’s argument that the third-party complaint fails to comply with Rule 14(a). In addition, Sixth Circuit precedent supports the propriety of an employer’s third-party complaint against a union for indemnity based on fraud or misrepresentation in a case for collection of fringe benefit contributions, according to Northwestern Ohio Admin., Inc. v. Walcher & Fox, Inc., 270 F.3d 1018 (6th Cir. 2001), whose facts parallel those in the present matter. That case started as a routine collection-of-fringe-benefits action brought by a non-profit company administering ERISA benefit plans. Defendant Walcher & Fox, an employer in the construction business, had signed certain project agreements with a union local that included an obligation to pay the fringe benefits. There was a fact dispute with the plan administrator over the scope of the agreements and the workers it included. However, Walcher & Fox also contended that the union and its official fraudulently misrepresented the scope of the project agreements and therefore they were liable to the employer for the amount of fringe benefits sought by the plan administrator. The employer therefore filed a third-party complaint against the union and its representative for contribution and indemnity based on the alleged fraud. The Sixth Circuit affirmed the district court’s refusal to dismiss the third-party complaint, concluding that the court had supplemental jurisdiction over the dispute with the union, and the employer’s state-law claim for fraud in the inducement was not preempted by federal law. See id. at 1026-31. Among other things, the court ruled that the third- party complaint was not subject to dismissal under Textron Lycoming Reciprocating Engine Div. AVCO Corp. v. U.A.W., 523 U.S. 653, 656 (1998), which held that section 301(a) of the LMRA “confers federal subject-matter jurisdiction only over ‘[s]uits for violation of contracts.’” The Sixth Circuit acknowledged the difference between suits that claim a contract is invalid and suits that -18- claim a contract has been violated, but stated that the plaintiffs made too much of this. The court explained: The Union and Helldobler have missed the point. While W & F has indeed asked for a determination that the Project Agreements are void or voidable, it has also asked for judgment against the Union and Helldobler for indemnification and damages in the event W & F is found liable to NOA for the additional contributions – liability that W & F claims arose only because of the Third-Party Defendants’ fraud and misrepresentation. The third-party complaint does not present a Textron situation, and it is immaterial that the fraud and misrepresentation claims are not cognizable under section 301. Those claims are clearly within the supplemental jurisdiction of the federal court as spelled out in 28 U.S.C. § 1367(a). Walcher & Fox, 270 F.3d at 1026. And so it is in the present case. W.G. Heating seeks indemnification from Local 80 for the fringe benefit payments the plaintiff claims are due as a result of withdrawal liability. The fraud claim arises from the same circumstances that give rise to the plaintiff’s contention that W.G. Heating must account for its statutory withdrawal obligations. The defendant’s third-party complaint asserting fraud and misrepresentation against Local 80 therefore is cognizable and within this Court’s supplemental jurisdiction. Although fraudulent inducement may not normally be a defense to ERISA collection actions of this sort, see Southwest Admin., Inc. v. Rozay’s Transfer, 791 F.2d 769, 774 (9th Cir. 1996), that rule does not preclude a third-party complaint seeking indemnification on such a theory. There is no material difference between this matter and Walker & Fox. Finally, the third-party complaint is not subject to arbitration under ERISA’s provisions because it is not a “dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination” as to withdrawal liability. 29 U.S.C. § 1401(a). Local 80 is not the plan sponsor. Therefore, the motion to strike the third-party complaint will be denied. -19- IV. Finally, the plaintiff moves for summary judgment on its principal claim against the defendant for collection of the withdrawal liability amount. The plaintiff maintains it is entitled to judgment because the undisputed facts show that the defendant withdrew from the fund, it received proper notice of the assessment of withdrawal liability, and it failed to seek arbitration within the permitted time. Therefore, the plaintiff argues, it is entitled to judgment since the defendant is now precluded from challenging the amount of withdrawal liability. The defendant, however, insists that the summary judgment motion is premature because it never received the information to which it was entitled within the window for demanding arbitration, and it has not been able to gather that information in the short time that discovery has been open in this case, especially with respect to its counterclaim alleging that waste and mismanagement precludes any amount of withdrawal liability. The defendant believes that the plaintiff waived the arbitration requirement of the statute by filing the lawsuit before the time to arbitrate expired. The plaintiff counters that the defendant has the timing wrong on the arbitration deadline. So the plaintiff’s summary judgment motion requires resolution of two issues: (1) whether the motion (and the lawsuit itself) is premature; and (2) whether the defendant is barred from disputing withdrawal liability by failing to seek arbitration. A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an -20- integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics and Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). Thus a factual dispute which “is merely colorable or is not significantly probative” will not defeat a motion for summary judgment which is properly supported. Kraft v. United States, 991 F.2d 292, 296 (6th Cir. 1993); see also Int’l Union, United Auto., Aerospace and Agric. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir. 1999). The resolution of the first issue – whether the summary judgment motion is premature – necessarily requires resolution of the second, since discovery would not matter if the defendant’s failure to demand arbitration precludes assertion of its defenses. “The general rule is that summary judgment is improper if the non-movant is not afforded a sufficient opportunity for discovery.” Vance by and through Hammons v. United States, 90 F.3d 1145, 1148 (6th Cir. 1998). But a party “complaining that the district court granted summary judgment without allowing adequate discovery -21- must be able to show that he could have obtained information through discovery that would disclose material facts. Nebulous assertions that more discovery time would have produced evidence to defeat summary judgment will be unavailing.” Lanier v. Bryant, 332 F.3d 999, 1006 (6th Cir. 2003) (internal citation omitted). The defendant says that it is too early to pass on summary judgment because the plaintiff’s claim will be defeated if it prevails on its counterclaim, and its counterclaim cannot be assessed until the defendant has had an opportunity to examine the fund’s papers to determine whether waste or mismanagement occurred. However, since the counterclaim will be dismissed, these arguments are unavailing. Certainly, discovery of the sort sought by the defendant may be needed on the third-party complaint against Local 80, but since that is an action for indemnification, it does not preclude summary judgment in favor of the plaintiff. The Court concludes that there are no material fact disputes surrounding the issues raised by the complaint. The parties do not contest the timing of the events that led to the commencement of this action. They only disagree as to the operation of the statutory deadlines and the legal consequences that flow therefrom. Summary judgment under Rule 56 is a particularly apt method of addressing an issue when the fact questions are settled and “the sole question at issue [is] a question of law.” United States v. Donovan, 348 F.3d 509, 511 (6th Cir. 2003); see also Wachovia Bank v. Watters, 431 F.3d 556, 559 (6th Cir. 2005); Progressive Corp. and Subsidiaries v. United States, 970 F.2d 188, 190-91 (6th Cir. 1992). In its pleadings, the defendant contests the plaintiff’s collection demand by denying that the amount demanded is an accurate amount (primarily because the plaintiff was not forthcoming with requested documentation), by denying that it has incurred any withdrawal liability at all, by contending that the plaintiff mismanaged the fund, and by asserting that the plaintiff failed to give -22- proper notice of the obligation due. Should the defendant first have presented these arguments in arbitration, and if so, did the plaintiff waive that requirement by filing its complaint when it did? The MPPAA sets forth a detailed procedure that speaks to these questions. The statute provides that a plan fiduciary must send a notice of withdrawal liability and a demand for payment “[a]s soon as practicable” after an employer withdraws from a multiemployer plan. 29 U.S.C. § 1399(b)(1). The employer then has 90 days to ask the plan sponsor to “review any specific matter relating to the determination of the employer’s liability,” after which the sponsor must notify the employer of its decision “[a]fter a reasonable review of any matter raised.” 29 U.S.C. § 1399(b)(2)(A), (B). If disputes remain, or if the plan sponsor fails to respond to the request for review, the Act sets forth the procedure that must be followed: (a) Arbitration proceedings; matters subject to arbitration, procedures applicable, etc. (1) Any dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 [i.e., a withdrawal liability determination] of this title shall be resolved through arbitration. Either party may initiate the arbitration proceeding within a 60-day period after the earlier of – (A) the date of notification to the employer under section 1399(b)(2)(B) of this title, or (B) 120 days after the date of the employer’s request under section 1399(b)(2)(A) of this title. The parties may jointly initiate arbitration within the 180-day period after the date of the plan sponsor’s demand under section 1399(b)(1) of this title. . . . (b) Alternative collection proceedings; civil action subsequent to arbitration; conduct of arbitration proceedings (1) If no arbitration proceeding has been initiated pursuant to subsection (a) of this section, the amounts demanded by the plan sponsor under section 1399(b)(1) of this title shall be due and owing on the schedule set forth by the plan sponsor. The plan -23- sponsor may bring an action in a State or Federal court of competent jurisdiction for collection. 29 U.S.C. § 1401(a), (b) (emphasis added). As noted above, the Sixth Circuit has held that “arbitration reigns supreme” as the preferred resolution mechanism for disputes in the nature of those raised by the defendant in this case. Mason and Dixon, 852 F.2d at 164. Also, the demand for arbitration must be timely, since “there are also strict time limits imposed on an employer that wishes to arbitrate.” Central States v. Carstensen Freight Lines, Inc., 221 F.3d 1338, *2 (7th Cir. 2000) (Table). The Seventh Circuit has described these time limits as follows: After a plan issues its demand, an employer has 90 days to ask the plan sponsor to review the case, identify inaccuracies, and furnish additional information. 29 U.S.C. § 1399(b)(2)(A). “After a reasonable review,” the plan is then required to notify the employer of its decision, its reasoning, and the basis for any change in the determination of liability. 29 U.S.C. § 1399(b)(2)(B). Once this happens, the arbitration clock begins to run. More specifically, the employer must seek arbitration within 60 days of its receipt of the plan’s decision (under 29 U.S.C. § 1399(b)(2)(B or 180 days of the employer’s request for review (under 29 U.S.C. § 1399(b)(2)(A , whichever comes earlier. 29 U.S.C. § 1401(a)(1). Ibid. And the statute specifically states that if arbitration is not initiated within these time periods, the amounts demanded by the plan sponsor shall be “due and owing,” and a collection action may be brought in federal court. 29 U.S.C. § 1401(b)(1). The weight of appellate authority holds that an employer that fails to initiate arbitration in a timely manner waives defenses and objections that could have been raised in arbitration. Board of Trustees Sheet Metal Workers’ Nat’l Pension Fund v. BES Services, Inc., 469 F.3d 369, 376 (4th Cir. 2006); Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Inc. v. Kero Leasing Corp., 377 F.3d 288, 294 n.5 (3d Cir. 2004); Central States, Southeast and Southwest Areas Pension Fund v. Midwest Motor Exp., Inc., 181 F.3d 799, 805 (7th Cir. 1999); see also Mason and Dixon, 852 F.2d at 166 n.11. -24- The challenges that the defendant makes go to questions whether it was liable for withdrawal payments and if so the amount. They do not constitute a facial constitutional attack on the statute, a verifiable claim of irreparable injury, or a challenge to whether it is an “employer” within the meaning of ERISA section 4221(a), which are the exceptions to the arbitration requirement recognized by the Sixth Circuit. Mason and Dixon, 852 F.2d at 165. The failure to demand arbitration within the prescribed time, therefore, amounts to a waiver of these issues. The parties dispute the starting date for the arbitration demand period. More accurately, they disagree over the date that triggered the informal review process that precedes arbitration, but that date ends up controlling the arbitration clock. The plaintiff says it is May 3, 2007, when the defendant received the first notice of assessment. The defendant asserts that the relevant date is July 2, 2007, when it received the revised notice of assessment. The Court believes the defendant has the better argument here. The plaintiff has cited no authority for the proposition that a revised notice does not restart the clock and the Court has found none. That is not surprising. It is sensible that the arbitration clock would start anew with the issuance of a revised notice, since changes in the notice that might include a new withdrawal liability assessment might moot the objections an employer originally had, or new objections might arise. And nothing in the statute commends the plaintiff’s view. See 29 U.S.C. § 1401(a)(1). The Court concludes, therefore, that the relevant starting date under 29 U.S.C. § 1399(b)(1) is July 2, 2007. The defendant had “90 days” from that date “to ask the plan sponsor to review the case, identify inaccuracies, and furnish additional information.” Carstensen, 221 F.3d 1338, *2 (citing 29 U.S.C. § 1399(b)(2)(A . The defendant in this case did so on July 20, 2007, well within the prescribed period. “After a reasonable review,” the plan is then required to notify the employer of -25- its decision, its reasoning, and the basis for any change in the determination of liability. 29 U.S.C. § 1399(b)(2)(B). The plan trustees concede that they did not make such a determination, but they argue that they failed to issue a decision under section 1399(b)(2)(B) “because there was no request for review.” Pl.’s Br. in Supp. of Mot. Summ. J. at 11 n.11. However, in light of attorney Steven Wright’s July 20, 2007 letter, this assertion is untenable. Wright specifically objected to the assessment, stated that he wished to audit the fund’s records supporting the determination, challenged “(1) the actuarial present value of vested benefit obligations, (2) the value of the plan’s assets, (3) the value of the plan’s vested but unfunded benefits, and (4) W.G. Heating’s proportionate share of unfunded vested benefits,” Def.’s Br. in Supp. of Ans. to Mot. Summ. J., Ex. B, Wright Letter, and requested additional information. It is difficult to see how that letter failed to qualify as a request to review matters “relating to the determination of the employer’s liability.” 29 U.S.C. § 1399(b)(2)(A)(i). Because the plan trustees did not issue a decision or explain “the basis for the decision,” 29 U.S.C. § 1399(b)(2)(B), the defendant had 180 days from the request for review to seek arbitration, 29 U.S.C. § 1401(a)(1), or until approximately December 20, 2007. Before the arbitration deadline expired, the plaintiff filed this case on December 11, 2007. The defendant argues, without citation, that this “cut off” its right to arbitrate withdrawal liability. Resp. Br. at 14. Because the time for an arbitration demand had not expired, the withdrawal liability payments were not “due and owing” at the time the plaintiff filed its complaint. But the Court does not see how that premature filing prevented the defendant from demanding arbitration at any time through the December 20 deadline. Had it done so, the amounts demanded by the plaintiff would have become due and owing until the arbitration concluded. See 29 U.S.C. § 1401(b)(1). In this -26- case, however, the time to arbitrate clearly has passed. That is so even though the revised notice controls the deadlines. Nor does the Court find that the plaintiff’s jumping the gun affects the validity of the complaint or the Court’s jurisdiction. The courts that have considered the question have concluded that “the arbitration provisions of the MPPAA do not constitute a bar to federal jurisdiction. Rather, the requirement of exhaustion of administrative remedies in this context is a prudential matter within our discretion.” T.I.M.E.-DC, Inc. v. Management-Labor Welfare & Pension Funds, of Local 1730 Intern. Longshoremen’s Ass’n, 756 F.2d 939, 945 (2d Cir. 1985) (collecting cases). There is no factual dispute that the arbitration deadline now has passed and the defendant employer did not demand arbitration of the issues relating to its withdrawal liability. The Court concludes, therefore, that the withdrawal liability assessed by the plaintiff is “due and owing” under 29 U.S.C. § 1401(b)(1). The defendant has waived any defenses and objections it could have raised in arbitration. Further, the plaintiff is entitled to interest and may be entitled to reasonable attorney’s fees. See 29 U.S.C. §§ 1451(b), 1132(g)(2); Fed. R. Civ. P. 54(d)(2). The motion for summary judgment, therefore, will be granted. V. The Court concludes that the counterclaim is subject to dismissal under Rule 12(b)(6), and the plaintiff is entitled to judgment in its favor as a matter of law on its principal complaint. However, the case is not finished because the defendant may proceed on its third-party complaint for indemnity. Accordingly, it is ORDERED that the plaintiff’s motion to dismiss the counterclaim [dkt # 8] is GRANTED. -27- It is further ORDERED that the plaintiff’s motion to strike the third-party complaint [dkt # 9] is DENIED. It is further ORDERED that the plaintiff’s motion for summary judgment [dkt # 14] is GRANTED. Dated: May 14, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 14, 2008. s/Felicia M. Moses FELICIA M. MOSES -28-

=== Limbright Opinion Granting Judgment ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 04-60270 Honorable David M. Lawson JAMES H. LIMBRIGHT and HENRY J. LIMBRIGHT, Judgment Plaintiffs, v. GEORGE HOFMEISTER and KAY RAMSAY HOFMEISTER, Judgment Defendants, DOUGLAS Q. HOLMES AS TRUSTEE OF THE GEORGE S. HOFMEISTER FAMILY TRUST f/b/o MEGAN G. HOFMEISTER, DOUGLAS Q. HOLMES AS TRUSTEE OF THE GEORGE S. HOFMEISTER FAMILY TRUST f/b/o SCOTT R. HOFMEISTER, and DOUGLAS Q. HOLMES AS TRUSTEE OF THE GEORGE S. HOFMEISTER FAMILY TRUST f/b/o JAMIE S. HOFMEISTER, Supplementary Defendants. ______________________________________/ OPINION AND ORDER GRANTING PLAINTIFFS’ MOTION TO REINSTATE CASE AND ENTER JUDGMENT This case was dismissed by agreement of the parties pursuant to a settlement agreement on February 1, 2007. The plaintiffs now seek to vacate the dismissal order and enter judgment against the supplementary defendants as a remedy for breach of the settlement agreement since, it is acknowledged, the defendants have failed to make the payments called for in that agreement. The defendants oppose the motion on the ground that the Court did not retain jurisdiction over the case. The parties have sought a continuance of oral argument on at least two occasions so they could attempt to resolve the dispute without court intervention. However, they have not been successful in that effort, and they seek a decision on the motion from the Court following oral argument on February 26, 2008 and a conference on March 27, 2008. The Court now finds that the dismissal order was expressly “subject to all the terms and conditions of the settlement agreement,” that agreement provides for entry of a “consent judgment” in the amount requested by the plaintiffs if the defendants fail to make the agreed payments, the payments were not made, and the Court has jurisdiction over the matter despite the dismissal because the parties’ citizenship is diverse and the amount in controversy well exceeds the jurisdictional limit set out in 28 U.S.C. § 1332(a). Because it is undisputed that the defendants are in default of the payments required by the settlement agreement, the Court will grant the plaintiffs’ motion and enter judgment against the supplementary defendants in the amount called for in the agreement. I. The present case was filed as a supplementary proceeding to aid in the collection of a judgment secured against defendant George and Kay Hofmeister in 2002 in the United States District Court for the Eastern District of Kentucky (the “Kentucky Judgment”). The plaintiffs, James and Henry Limbright, registered the Kentucky Judgment with this Court in June 2004. In December of that year, they filed a complaint for supplementary proceedings against the so-called supplementary defendants in this litigation, Douglas Q. Holmes as trustee of several trusts established by George Hofmeister for the benefit of his children. The gravamen of the complaint is that the Hofmeisters’ transfers of assets to their children’s trusts were intended to avoid their obligation under the Kentucky Judgment and should be set aside. After two years of litigation, marked by a number of discovery disputes, the parties finally came to a settlement agreement. -2- The parties signed the agreement on January 9, 2007, and informed this Court of the agreement on the same day. The principal terms of the agreement called for the supplementary defendants to pay $950,000 (the “Resolution Price”) in exchange for the release and dismissal of the plaintiffs’ claims. Mot. to Reinstate, Ex. 1, Sett. Agr. at 1-2. The supplementary defendants agreed to pay the Resolution Price as follows: (a) (b) (c) (d) (e) on or before January 31, 2007, the sum of Twenty-Five Thousand Dollars ($25,000); on or before March 31, 2007, an additional sum of Fifty Thousand Dollars ($50,000); on or before June 30, 2007, an additional sum of One Hundred Thousand Dollars ($100,000); on or before September 30, 2007, an additional sum of One Hundred Twenty- Five Thousand Dollars ($125,000); and on or before December 31, 2007, an additional sum of Six Hundred Fifty Thousand Dollars ($650,000). Sett. Agr. at ¶ 2. The settlement agreement provides that a default occurs if the supplementary defendants fail to make a payment when due “or within a grace period of fifteen (15) days after written notice of failure to receive such payment.” Id. at ¶ 4.2(a). The consequences of a default are rather severe, but they are intended to be certain: 4.3 Remedies. Upon the occurrence of an Event of Default which has not been timely cured, then without further notice or hearing or opportunity to cure: (a) Upon filing of a verified ex parte motion to reinstate the Lawsuit, the Limbrights may submit therewith the Consent Judgment against the Trust [i.e., the supplementary defendants] for immediate entry by the Court in the Lawsuit for the sum of One Million Three Hundred Thousand Dollars ($1,300,000.00) reduced by any payments previously received by the Limbrights under this Agreement, and execution upon the Consent Judgment may immediately issue. -3- (b) The Limbrights may immediately resume all efforts to collect the unpaid balance of the Limbright Judgment from the Hofmeisters reduced by any payments previously received under this Agreement. (c) The confidentiality provisions contained in paragraph 13 below shall no longer remain in effect. Id. at ¶ 4.3. The plaintiffs allege that the supplementary defendants made all the payments through September 30, 2007, but failed to pay the last installment. The supplementary defendants do not genuinely dispute this. Instead, they contend that this Court lacks jurisdiction over the matter as a result of its dismissal order. The Court entered the first dismissal order on January 9, 2007, when it received a telefax from the parties that the case had been settled. The order dismissed the case with prejudice and provided that either party could seek to reopen the case prior to May 9, 2007 to enforce the settlement agreement. The parties were unhappy with this order, apparently because it did not reflect the settlement agreement’s provision contemplating the streamlined enforcement mechanism. The parties therefore filed a stipulation twenty days later wherein they agreed to (1) submit an order vacating this Court’s January 9 order of dismissal; and (2) “file in the place and stead of said Order of Dismissal an agreed Order of Dismissal without prejudice and without costs to any party but subject to the terms and conditions of the Settlement Agreement.” Stip. to Set Aside Order of Dismissal [dkt # 128] at 2 (emphasis added). That same day, the parties submitted the following proposed order via email: AGREED ORDER OF DISMISSAL WITHOUT PREJUDICE . . . This Order having been submitted pursuant to the provisions of that certain Confidential Settlement Agreement dated as of January 9, 2007, by and between [the -4- parties] (the “Agreement”), and the Court having reviewed same and being otherwise fully advised in the premises, IT IS HEREBY ORDERED that Plaintiff’s action in the above-captioned cause be and the same is hereby dismissed without prejudice and without costs to any party. IT IS FURTHER ORDERED that this Order of Dismissal is expressly subject to all the terms and conditions of the Agreement. Mot. to Reinstate, Ex. 1, Proposed Order at 1-2. The Court acted on the parties’ stipulation, but did not enter the proposed order. Instead, on February 1, 2007 the Court vacated its previous order of dismissal and, later that day, it entered the following order: STIPULATED ORDER OF DISMISSAL This matter having come before the Court pursuant to the parties’ stipulation [dkt # 128], IT IS HEREBY ORDERED that the complaint is DISMISSED WITHOUT PREJUDICE and without costs to any party. IT IS FURTHER ORDERED that this Order of Dismissal is expressly subject to all the terms and conditions of the settlement agreement executed by the parties on January 9, 2007. IT IS FURTHER ORDERED that the Court will not retain jurisdiction over this matter. Feb. 1, 2007 Order of Dismissal [dkt # 130]. There was no further court activity in the case until the plaintiffs filed the present motion on January 23, 2008. Before filing that motion, the plaintiffs advised the supplementary defendants of their default in a letter dated and telefaxed January 2, 2008. More than fifteen days have elapsed since the notice, and the Limbrights have not received all or any portion of the remaining payments. -5- Based on an email sent by the supplementary defendants’ counsel on January 15, 2008, it appears that the supplementary defendants lack the funds to comply. II. There is no question that the supplementary defendants are in default of the payment terms of the settlement agreement and the agreement specifically provides for “the immediate entry” of a judgment against the supplementary defendants under the present circumstances in the amount of $1.3 million, less any payments received. The supplementary defendants contend that the Court has no jurisdiction to enter such a judgment. They rely heavily upon Kokkonen v. Guardian Life Ins. Co., (1994). However, that case presents no obstacle to the relief the plaintiffs seek in this case. In Kokkonen, the Supreme Court held that federal district courts do not have inherent power to enforce settlement agreements. The plaintiff in that case brought suit in state court alleging various state-law claims arising from the breach of an agency agreement. The defendant removed the matter to federal court, and the parties thereafter reached a settlement. Pursuant to Federal Rule of Civil Procedure 41(a)(1)(ii), the parties executed a stipulation and order of dismissal with prejudice, which did not mention the settlement agreement or reserve district-court jurisdiction to enforce it. The district judge signed the order, but then a dispute arose regarding the plaintiff’s obligations under the settlement agreement. The district court issued an order enforcing the agreement, reasoning that it had “inherent power” to do so. The Supreme Court disagreed. Justice Scalia spoke for the Court, and announced the following principles: Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute, see Willy v. Coastal Corp., 503 U.S. 131, 136-37 (1992); Bender v. Williamsport Area School Dist., 475 U.S. 534, 541 (1986), -6- which is not to be expanded by judicial decree, American Fire & Casualty Co. v. Finn, 341 U.S. 6 (1951). . . . The dismissal in this case issued pursuant to Federal Rule of Civil Procedure 41(a)(1)(ii), which provides for dismissal “by filing a stipulation of dismissal signed by all parties who have appeared in the action,” and causes that dismissal to be with prejudice if (as here) the stipulation so specifies. Neither the Rule nor any provision of law provides for jurisdiction of the court over disputes arising out of an agreement that produces the stipulation. It must be emphasized that what respondent seeks in this case is enforcement of the settlement agreement, and not merely reopening of the dismissed suit by reason of breach of the agreement that was the basis for dismissal. Some Courts of Appeals have held that the latter can be obtained under Federal Rule of Civil Procedure 60(b)(6). . . . Enforcement of the settlement agreement, however, whether through award of damages or decree of specific performance, is more than just a continuation or renewal of the dismissed suit, and hence requires its own basis for jurisdiction. Id. at 378 (emphasis added) (footnote omitted). The Court then held that supplementary jurisdiction did not stretch so far as to encompass a claim for breach of a settlement agreement. The facts underlying the claim for breach and those underlying the principal suit “ha[d] nothing to do with each other,” and enforcement of the settlement agreement was not essential “to the court’s power to protect its proceedings and vindicate its authority.” Id. at 380. However, in summing up, the Court noted that parties wishing to leave the district court enforcement power were not without options: The short of the matter is this: The suit involves a claim for breach of a contract, part of the consideration for which was dismissal of an earlier federal suit. No federal statute makes that connection (if it constitutionally could) the basis for federal-court jurisdiction over the contract dispute. The facts to be determined with regard to such alleged breaches of contract are quite separate from the facts to be determined in the principal suit, and automatic jurisdiction over such contracts is in no way essential to the conduct of federal-court business. If the parties wish to provide for the court’s enforcement of a dismissal-producing settlement agreement, they can seek to do so. When the dismissal is pursuant to Federal Rule of Civil Procedure 41(a)(2), which specifies that the action “shall not be dismissed at the plaintiff’s instance save upon order of the court and upon such terms and conditions as the court deems proper,” the parties’ compliance with the terms of the settlement contract (or the court’s “retention of jurisdiction” over the settlement contract) may, in the court’s discretion, -7- be one of the terms set forth in the order. Even when, as occurred here, the dismissal is pursuant to Rule 41(a)(1)(ii) (which does not by its terms empower a district court to attach conditions to the parties’ stipulation of dismissal) we think the court is authorized to embody the settlement contract in its dismissal order [(or, what has the same effect, retain jurisdiction over the settlement contract) if the parties agree. Absent such action, however, enforcement of the settlement agreement is for state courts, unless there is some independent basis for federal jurisdiction. Id. at 381-82 (emphasis added). The Sixth Circuit has applied and interpreted Kokkonen on several occasions. See Re/Max International, Inc. v. Realty One, Inc., 271 F.3d 633 (6th Cir. 2001); McAlpin v. Lexington 76 Auto Truck Stop, Inc., 229 F.3d 491 (6th Cir. 2000); Caudill v. North American Media Corp., 200 F.3d 914 (6th Cir. 2000). In Caudill, directors brought a derivative action alleging violation of federal statutes prohibiting wire securities fraud and therefore invoked the court’s federal question jurisdiction. After the case was dismissed pursuant to a settlement agreement, the company’s former president sued the directors for breach of the settlement agreement. On appeal, the Sixth Circuit adhered to the Supreme Court’s strict interpretation of supplementary jurisdiction and held that a dismissal that occurs “pursuant to the terms of” a settlement fails to incorporate the settlement agreement. Caudill, 200 F.3d at 917 (“The phrase ‘pursuant to the terms of the Settlement’ fails to incorporate the terms of the Settlement agreement into the order because ‘[a] dismissal order’s mere reference to the fact of settlement does not incorporate the settlement agreement in the dismissal order.’”) (quoting In re Phar-Mor, Inc. Securities Litigation, 172 F.3d 270, 274 (3rd Cir.1999 . In McAlpin, the original basis of jurisdiction was the violation of a federal statute (RICO), and when the plaintiff attempted to enforce a settlement agreement ending the case, the court held that “the district court’s incorporation in its dismissal order of only a single term of the parties’ 20-page -8- settlement agreement is insufficient to support the court’s exercise of ancillary jurisdiction over the entire agreement.” McAlpin, 229 F.3d at 503. In Re/Max, the court of appeals held that Kokkonen authorizes a district court to enforce a settlement agreement if the dismissal order contains one of two provisions: incorporation of the settlement agreement in the dismissal order, or language retaining jurisdiction. The dismissal order in Re/Max stated, “Any subsequent order setting forth different terms and conditions relative to the settlement and dismissal of the within action shall supersede the within order.” Re/Max, 271 F.3d at 641. In holding that the district court’s order preserved jurisdiction to enforce the settlement agreement, the court of appeals reasoned: Turning to the language of Judge Gwin’s order, we believe that it satisfied the second exception recognized in Kokkonen. The order stated that any “subsequent order setting forth different terms and conditions relative to the settlement and dismissal of the within action shall supersede the within order.” (J.A. at 693.) Of course, the court may only enter subsequent orders involving the settlement agreement if it has retained jurisdiction. Thus, the “continued role for the court that was contemplated after dismissal” is included in the language of the order itself. In re Bond, 254 F.3d at 676-77. We therefore find that this was a “separate provision” retaining jurisdiction in compliance with Kokkonen and hold that the district court properly asserted subject matter jurisdiction. Id. at 641-45 (footnotes omitted). In this case, the Court expressly stated that it did not retain jurisdiction in the case, but it did incorporate the entire settlement agreement in its dismissal order and made the dismissal “subject to all of [its] terms and conditions.” In so doing, the dismissal order satisfies at least one of the requisites of Kokkonen for continuing jurisdiction to enforce the settlement agreement. The confusion that arises in this case is the language inserted by the Court, which the parties did not propose or agree to, that disavows continuing jurisdiction. -9- But even with that confusion, there can be no doubt that Kokkonen stands as no obstacle to the authority of the Court to enter the judgment requested by the plaintiffs for several reasons. First, unlike Kokkonen, what the plaintiffs seek here is the reopening of the present lawsuit to enter an agreed judgment. That was a point of distinction noted by the Kokkonen Court. Kokkonen, 511 U.S. at 378 (“It must be emphasized that what respondent seeks in this case is enforcement of the settlement agreement, and not merely reopening of the dismissed suit by reason of breach of the agreement that was the basis for dismissal.”). Second, the plaintiffs are citizens of different states than the supplementary defendants, and the amount in controversy exceeds $75,000. Consequently, there is an independent basis for the Court to exercise jurisdiction over the present dispute. 28 U.S.C. § 1332(a). That basis did not exist in McAlpin and Caudill, where subject matter jurisdiction initially was based on the federal questions presented in the respective complaints. Third, the language of the dismissal order satisfies the requirement discussed in McAlpin and Caudill because the settlement agreement is incorporated in its entirety. Finally, inasmuch as the provision of the Court’s dismissal order stating that jurisdiction was not retained was in conflict with the terms of the settlement agreed to by all parties, the plaintiffs are entitled to relief from that provision of the order under Federal Rule of Civil Procedure 60(b)(6). That rule states: On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for . . . any other reason that justifies relief. Fed. R. Civ. P. 60(b)(6). Relief from an order pursuant to Rule 60(b)(6) “‘is appropriate to accomplish justice in an extraordinary situation.’” Johnson v. Unknown Dellatifa, 357 F.3d 539, 543 (6th Cir. 2004) (quoting Overbee v. Van Waters & Rogers, 765 F.2d 578, 580 (6th Cir. 1985 . -10- “[A] motion made under Rule 60(b)(6) is addressed to the trial court’s discretion which is ‘especially broad’ given the underlying equitable principles involved.” Hopper v. Euclid Manor Nursing Home, Inc., 867 F.2d 291, 294 (6th Cir.1989). Although relief under this portion of Rule 60 is “warranted ‘only in exceptional or extraordinary circumstances which are not addressed by the first five numbered clauses of [Rule 60(b)],’” Johnson, 357 F.3d at 543 (quoting Hopper, 867 F.2d at 294) (alteration in original), the Court finds that this case fits within that category. The other clauses of Rule 60(b) authorize relief in the case of “(1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence . . . ; (3) fraud . . . , misrepresentation, or misconduct by an opposing party; (4) the judgment is void; [and] (5) the judgment has been satisfied, released or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable.” Fed. R. Civ. P. 60(b). These provisions do not incorporate the circumstance of a dismissal order that expressly incorporates the terms of a settlement agreement yet contains a provision that is contrary to it, as we have in this case. Generally, courts do not retain jurisdiction to enforce settlement agreements because those controversies implicate state law and have little to do with the original controversy that invoked federal subject-matter jurisdiction. See Kokkonen, 511 U.S. at 377-81. However, when, as here, the parties agree to a dismissal, “the court is authorized to embody the settlement contract in its dismissal order [(or, what has the same effect, retain jurisdiction over the settlement contract) if the parties agree.” Id. at 381-82 (emphasis added). Yet Rule 41(a)(1)(ii) “does not by its terms empower a district court to attach conditions to the parties’ stipulation of dismissal,” id. at 381, and it likely does not allow a court to enter a provision that directly contradicts the parties’ agreement. -11- The Court’s determination to reject the parties’ conditions and instead include a provision disclaiming jurisdiction was not appropriate. This also differs significantly from the circumstances in McAlpin, where the court held that it was error to “constru[e] Rule 60(b) as a broad exception to the Supreme Court’s decision in Kokkonen.” McAlpin, 229 F.3d at 500. The court reached that conclusion reasoning that if Rule 60(b)(6) allowed for enforcement every time a settlement agreement was breached, then it “would create an exception to the holding in Kokkonen that would swallow the rule, giving the district court the type of broad enforcement jurisdiction that the Kokkonen Court reserved to courts that either specifically retain jurisdiction to enforce a settlement agreement or that expressly incorporate the terms of the agreement in a valid and enforceable order.” McAlpin, 229 F.3d at 504. But it is a different matter altogether where the injustice to be remedied is not the breach of the settlement agreement, but rather the order of dismissal itself. The parties’ stipulation called for entry of an order embodying the Kokkonen exceptions. If the Court was not inclined to accede to that condition, the better procedure would have been to notify the parties in advance of the order entry so they could assess whether they still desired a stipulated dismissal. The “extraordinary situation” that resulted is of the Court’s making, and it is one, the Court believes, that Rule 60(b)(6) was designed to accommodate. -12- III. The Court finds that it has jurisdiction to enter a judgment to which the parties expressly agreed as a remedy for the supplementary defendants’ failure to complete a settlement agreement, which was incorporated in its entirety into the previous order of dismissal. Accordingly, it is ORDERED that the plaintiffs’ motion to reinstate lawsuit and enter consent judgment [dkt # 131] is GRANTED. The appropriate consent judgment shall follow. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 6, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 6, 2008. s/Felicia M. Moses FELICIA M. MOSES -13-

=== Bobbitt Opinion and Order Granting Class Cert ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION TASHELIA BOBBITT, MISTY LATURNUS, SONYA PARKER, KIMBERLY DAVIS, TERRIE BUCHANAN, SHERITA FRAZIER, NICOLE ROSSITER, LONJA ALLEN, and DIANE POHL, on behalf of themselves and a class of all those similarly situated, v. Plaintiffs, Case Number 07-10742 Honorable David M. Lawson ACADEMY OF COURT REPORTING, INC., and DELTA CAREER EDUCATION CORP., _______________________________________/ Defendants. OPINION AND ORDER GRANTING IN PART PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION The plaintiffs in this case, current and former students at the Michigan campus of the Academy of Court Reporting (Academy), brought suit against the defendants, the Academy and its parent company, Delta Career Education Corporation (Delta), on a theory of fraud. The plaintiffs allege that the Academy duped them into enrolling into programs for court reporting and other law- related vocations by representing that it would confer upon them associate’s degrees, when it in fact had no authority to confer such degrees. The plaintiffs also allege that the Academy misrepresented to them graduation and job placement rates and salary figures. The plaintiffs have moved to certify a class of approximately 2,000 current and former students. The motion was argued by the parties in open court on April 3, 2008, along with the defendants’ motion to dismiss counts 1 and 8 of the second amended complaint alleging violations of the Michigan Consumer Protection Act and the Michigan Authentic Credentials in Education Act. The Court denied the motion to dismiss from the bench and has since denied a motion to reconsider that decision. The class certification motion was taken under advisement, and the Court granted the defendants leave to file a supplemental brief to address additional exhibits the plaintiffs filed in support of their position. The Court now finds that, despite the claims that the defendants’ misrepresentations were oral and not written, the plaintiffs have alleged that the defendants’ conduct was part of a calculated and uniform scheme perpetrated by the Academy’s directors and, coupled with other allegations in the second amended complaint, the plaintiffs have satisfied the prerequisites to certify a class under Federal Rule of Civil Procedure 23(b)(3). The Court, therefore, will grant the motion to certify the case as a class action. I. In their second amended complaint, the named plaintiffs, Tashelia Bobbitt, Kimberly Davis, Terrie Buchanan, Sherita Frazier, Nicole Rossiter, Lonja Allen, Diane Pohl-Kress, and Beatrice McKinney, assert ten counts against the defendants on behalf of themselves and all others similarly situated. The counts are based on (1) violations of the Michigan Consumer Protection Act, (2) fraud, (3) negligent or innocent misrepresentation, (4) breach of contract, (5) promissory estoppel, (6) unjust enrichment/breach of quasi-contract, (7) equitable estoppel, (8) violations of the Michigan Authentic Credentials in Education Act, (9) “concert of action,” and (10) civil conspiracy. The putative class includes all those individuals “who are now or have been enrolled as students at the Academy’s Michigan campus from early 2000 to the present to pursue associate degrees from the Academy’s Michigan campus,” Sec. Amend. Compl. at ¶ 19, which the plaintiffs believe amounts to more than 2,000 persons. The Academy’s Michigan campus, located first in Southfield and later in Clawson, offers programs in court reporting, paralegal work, private investigation, and legal secretarial work. The Academy is an Ohio corporation with its principal place of business in that state; Delta is a Delaware corporation and is the parent company of the Academy. -2- The thrust of the plaintiffs’ case centers on the allegation that the Academy misrepresented to prospective students its ability to grant valid associate’s degrees. The plaintiffs do not allege that the defendants reduced these misrepresentations to writing. However, they do contend that the oral misrepresentations were the product of a calculated and uniform scheme hatched by the Academy’s directors. According to the plaintiffs, the fraudulent plan (what they term the “Associate Degree Scheme”) was launched by the then-owners and controllers of the Academy, Kenneth Endres, Michael Endres, and Dennis Hagestrom (the “Endres parties”). The Endres parties maintained the scheme until they left their positions following the sale of the Academy in 2006. It appears to be undisputed that the defendants lacked authority to grant associate’s degrees from the Michigan campus, although apparently the defendants are authorized by the State of Ohio to grant such degrees to those students who pursued at least a part of their studies at the defendants’ facilities located in that State. The plaintiffs allege that the defendants’ representatives told prospective students that they would receive associate’s degrees upon completing their program of study at the Michigan campus, but since the defendants lacked such authority, they refrained from reducing those representations to writing in order to perpetrate the scheme. The plaintiffs claim that the Endres parties implemented this scheme in early 2000, despite advice that it was unlawful, in order to promote enrollment. According to the plaintiffs: 95. . . . 97. The Academy systematically represented to prospective and current students that the Academy’s Michigan campus had authority to grant associate degrees and told students that receipt of an associate degree from the Academy’s Michigan campus would provide them with numerous benefits, including a competitive edge in the job market and the ability to utilize the associate degree in the pursuit of further higher education, such as a bachelor’s degree. Academy employees and agents who have made misrepresentations to students at the Academy’s Michigan campus regarding the degree-granting -3- authority of the Academy’s Michigan campus have included Jay Krause, who is director of the Academy’s Michigan campus; Norman Rice, who is dean of education at the Academy’s Michigan campus; Cvetko Ostroznik, who was dean of legal studies at the Academy’s Michigan campus; Kimberly Garbey, who is director of “admissions” at the Academy’s Michigan campus; Darlita Berry, who is an “admissions” representative at the Academy’s Michigan campus; Trish Costanzo, who also is an “admissions” representative at the Academy’s Michigan campus; and JDerrick Wood, who also is an “admissions” representative at the Academy’s Michigan campus, and numerous others. As a result of fraudulent statements made by the Academy, Plaintiffs and more than 2,000 other current and former students enrolled or continued enrollment from early 2000 to the present in programs of study at the Academy’s Michigan campus that the Academy represented would result in the Academy’s Michigan campus granting of a Michigan associate degree upon the successful completion of the programs of study. Pursuant to the Associate Degree Scheme, the Academy’s Michigan campus systematically issued documents purporting to be Michigan associate degrees to graduates of programs of study at the Academy’s Michigan campus. Upon information and belief, at least 200 persons who successfully completed programs of study at the Academy’s Michigan campus were presented with documents purporting to be Michigan associate degrees, including Plaintiffs Kimberly Davis, Sherita Frazier, Terrie Buchanan and Nicole Rossiter. 98. . . . 100. Sec. Amend. Comp. at ¶¶ 95-100. At some point in time, the defendants apparently realized that their practices might expose them to legal difficulties. Therefore, according to the plaintiffs, the defendants developed a plan that would offer them the ability to plausibly claim that the representations concerning associate’s degrees were not actually false. The scheme, premised on the Academy’s authority to grant associate’s degrees at its Ohio campuses, utilized a number of tactics to make it seem as though students at the Michigan campus had actually received their degrees from the Akron, Ohio campus. For instance, “the Academy internally pretended that at least one required course for each student pursuing as associate degree at the Academy’s Michigan campus – the student’s apprenticeship or -4- internship course . . . – was completed ‘through the Academy’s Akron campus’ under the supervision of a faculty member at the Academy’s Akron campus more than 200 miles away.” Id. at ¶ 108. The plaintiffs allege that in reality, however, “students at the Academy’s Michigan campus consistently completed their apprenticeship and internship courses with no contact whatsoever by the Academy’s Akron campus or a faculty member at the Academy’s Akron campus.” Id. at ¶ 110. The Academy also pretended to transfer credits earned by students at the Michigan campus to the Akron campus, but the Academy never informed students of this procedure, and in fact never had authority to make such transfers from either State and failed even “to complete documents purporting to transfer credits.” See id. at ¶ 118. During graduation ceremonies, which were held in Troy, Michigan, students were identified as graduates of the Michigan campus, and the Academy identified these students as such in various documents. As a result, graduates frequently would represent that they had received an associate’s degree from the Academy’s Michigan campus, since they had no reason to believe that their degrees were not legitimate or that they were somehow connected with Ohio. The cover-up plan allegedly took another turn in 2006, just prior to the transfer of ownership of the Academy to Delta. According to the plaintiffs, the Academy and Delta jointly “devised, but did not disclose to prospective and current students, a new plan requiring all students at the Academy’s Michigan campus to travel to and complete courses at the Academy’s Akron, Ohio campus as a new requirement for successful completion [of] a course of study for which they would earn an associate degree.” Id. at ¶ 229. The defendants did not disclose this new requirement (the “New Akron Requirement”) until mid-January 2007. In fact, Dean Krause allegedly lied to students in 2006 to quell rumors about the new plan, informing them that they would not have to go to Akron -5- to obtain an associate’s degree. “As a result, hundreds of students continued to borrow money and pay tuition in late 2006 and early 2007 based on the Academy’s fraudulent representations that upon successful completion of a course of study at the Academy’s Michigan campus, the Academy’s Michigan campus would grant an associate degree.” Id. at ¶ 233. In mid-January 2007, “the Academy first distributed a document to students setting forth the New Akron Requirement and disclosed to students at the Academy’s Michigan campus that associate degrees can only be earned after completion of courses at the Academy’s Akron campus.” Id. at ¶ 235. Nevertheless, the degrees under this program are still not authorized by the State of Michigan; they are sanctioned only by Ohio. According to the plaintiffs, the Academy’s adoption of the New Akron Requirement “reveal[s] that its previous representations to students . . . regarding the attainability of a Michigan associate degree following the successful completion of a course of study at the Academy’s Michigan campus were fraudulent.” Id. at ¶ 240. However, the New Akron Requirement has affected the named plaintiffs and other class members in different ways. Some of the plaintiffs were still enrolled when the new program was announced: As a result of the New Akron Requirement, students, including[] Plaintiffs Tashelia Bobbitt . . . , Kimberly Davis, Lonja Allen, Beatrice McKinley, Misty Laturnus and Sonya Parker[,] were required to incur additional expense, hardship, debt and/or delay in order to pursue associate degrees that the Academy had previously represented could be attained at the Academy’s Michigan campus through the successful completion of a program of study at the Academy’s Michigan campus. Id. at ¶ 241. Others had already graduated: Through the New Akron Requirement, the Academy has revealed that it had no authority to issue to graduates of the Academy’s Michigan campus documents purporting to be associate degrees, as it did to . . . more than 200 persons from early 2000 to the present. Plaintiffs Kimberly Davis, Terrie Buchanan, Sherita Frazier and Nicole Rossiter are among the students from the Academy’s Michigan campus who were presented with documents purporting to be associate degrees from the Academy’s Michigan campus. -6- Id. at ¶ 243. In addition to the Academy’s misrepresentations regarding its degree-granting authority, the plaintiffs allege the Academy falsely inflated other institutional attributes, such as graduation and job placement rates, average income rates, and career services. For instance, the plaintiffs aver that the Academy informed prospective students that it had “placed greater than 90 percent of its graduates in . . . legal-related jobs,” when in fact the rate was far lower. Id. at ¶¶ 137, 141. In addition, the Academy told its court reporting students that they could expect to make salaries that were simply unrealistic. The plaintiffs allege that they relied to their detriment on the Academy’s misrepresentations because they would not have enrolled in the program had they known the truth and, as a result, they would not have given up other opportunities or incurred substantial student debt. Of course, the plaintiffs also allege that the Academy realized substantial profits from its wrongdoing. According to the plaintiffs, if it were not for the Academy’s misrepresentations, especially those regarding its ability to grant associate’s degrees, it would have attracted far fewer students. In the discovery that has taken place thus far, all of the named plaintiffs have testified that Academy officials represented to them that they would receive associate’s degrees upon successfully completing their programs in Michigan. Plaintiff Denise Davis testified that Jay Krause, director of the Michigan campus, convinced her to leave another court-reporting program because it, unlike the Academy, could not confer an associate’s degree. Her affidavit reads as follows: 4. In or about August 1998, I visited the Academy and met with Jay Krause . . . . Mr. Krause compared the Academy’s program with the one I had been pursuing at Elsa Cooper. . . . -7- 5. 6. One of the differences that Mr. Krause explained to me was that the Academy would grant me an associate degree following my successful completion of the program in Michigan, while Elsa Cooper would not. Mr. Krause told me that I could use the associate degree from the Academy to go on and attain a bachelor’s degree from another school. . . . . Mr. Krause’s statements to me about the opportunity to earn a Michigan associate degree played a huge part in my decision to go the Academy and to leave Elsa Cooper. Br. in Supp., Ex. 7, Aff. of D. Davis at ¶¶ 4-6. The testimony of Kevin Johnson, who is not a named plaintiff, is similar. Johnson says that he enrolled in the Academy’s paralegal program in 2002. Prior to enrollment, Johnson spoke with Kimberly Garbey, an officer in the admissions office, who told Johnson that he “would receive an associate degree after completing the paralegal program in Clawson.” Br. in Supp., Ex. 7, Aff. of K. Johnson at ¶ 5. Garbey also represented to Johnson “that the school had a placement rate of more than 90 percent for its students.” Ibid. Despite graduating magna cum laude, however, Johnson could not find a legal-related job; he works as a custodian at the post office. The testimony of the other named plaintiffs (and certain class members) is much the same, and need not be recited here in detail. Suffice it to say that they all testified they met with Academy officials who represented that they could earn Michigan associate’s degrees from the Clawson campus. See Br. in Supp., Ex. 8, Aff. of C. Jones at ¶ 5; Ex. 9, Aff. of F. Hollowell at ¶ 4; Ex. 10, Aff. of E. Smith at ¶ 2; Ex. 11, Aff. of S. Graves at ¶ 5; Ex. 12, Aff. of B. Portis at ¶ 6; Ex. 13, Aff. of K. McPherson at ¶ 2; Ex. 14, Dep. of L. Allen at 40-41, 46; Ex. 15, Dep. of T. Bobbitt at 48; Ex. 16, Dep. of S. Frazier at 155; Ex. 17, Dep. of K. Davis at 22-23. They all relied on these representations in deciding to enroll. Aff. of C. Jones at ¶ 6; Aff. of F. Hollowell at ¶ 4; Aff. of E. Smith at ¶ 2; Aff. of F. Graves at ¶ 8; Aff. of B. Portis at ¶ 6; Aff. of K. McPherson at ¶ 2 Some, -8- but not all, of the named plaintiffs also were told by Academy officials that the Academy had 90%- plus placement rates. See Aff. of C. Jones at ¶ 5; Aff. of S. Graves at ¶ 5; Aff. of K. McPherson at ¶¶ 2-3. This last allegation is substantiated by a document that the Academy released in 2005 summarizing placement rates. The summary ends with the following representation: “Placement History[:] 97.6% from 1970 through 2005[.] 3595 graduates seeking jobs[;] 3511 found jobs!” Br. in Supp., Ex. 13, Placement Summary. On the other hand, the defendants observe that none of the plaintiffs can recall the exact wording of the representations, nor can they point to written representations of a similar nature (i.e., representing that Clawson students would receive Michigan associate’s degrees). When Kim Davis was asked about the particulars of the misrepresentations, she responded as follows: Q. Now, what – how did you come to believe that what you were signing up for was an associate’s degree program in paralegal. . . . A. Okay. I was told from Kim and Trish. Q. Kim and Trish. Okay. Kim who? A. I don’t remember her last name. . . . A. They were an admission director. Q. And do you know Trish’s last name? A. No, don’t remember it. . . . [shows document] Q. Does that refresh your recollection as to what Trish’s last name was? A. Yes. Q. What was it, as best you can remember, that Trish Costanzo told you about an associate’s degree program? A. She told me that once I finished the program, receive an associate’s degree. No diploma was ever mentioned, about getting a diploma, because I would not have stayed if it was a diploma. I don’t remember exactly everything, but that was the main thing I remember. . . . Q. Did you get anything in writing saying that you were enrolled in an associate’s degree program? A. Don’t remember. . . . -9- A. . . . . She did not mention nothing as far as going to Akron, Ohio or anything like that. Resp. Br., Ex. 14, Dep. of K. Davis at 22-23, 78. This exchange is representative of the other plaintiffs’ testimony as well. See, e.g., Resp. Br., Ex. 15, Dep. of T. Buchanan at 126 (“Q. And, at that point, your belief that you would get an associate’s degree from the Academy of Court Reporting in Michigan came from the statement Norman Rice had made to you at the open house. A. Yes.”); id. at 277 (“What I believe is that they didn’t live up to their obligation of giving me an associate’s degree from the State of Michigan.”); Resp. Br., Ex. 17, Dep. of T. Bobbitt at 212 (“Q. Okay. . . . [Did] someone tell you . . . that upon completion of the diploma program at the Michigan campus, the Academy’s Michigan campus would grant you an associate degree? A. Not in those words, but yes.”). To be sure, the Academy’s course catalog and the enrollment agreements signed by the plaintiffs did not expressly indicate that the Academy had the ability to grant Michigan associate’s degrees. The catalog lists the following accreditation and approval information: ACCREDITATION Accredited by the Accrediting Council for Independent Colleges and Schools (ACICS) to award: # # Diploma Program: Court Reporting Paralegal Certificate Program: Paralegal Scopist APPROVALS Private Investigation Legal Secretary Legal Administrative Assistant # Clawson Branch is approved by the State of Michigan -10- # # # Approved by the National Court Reporters Association (NCRA) Approved by the Michigan Department of Labor and Economic Growth for the training of VA eligible students Diploma in * Court Reporting * Paralegal * Legal Secretary # Certificate in * Scopist * Paralegal * Legal Administrative Assist. Resp. Br., Ex. 1, Catalog at 17. The enrollment agreements signed by the plaintiffs stated that they were enrolling in “diploma” programs, and did not mention the attainability of an associate’s degree. See, e.g., Resp. Br., Ex. 2, Enrollment Agreement of S. Frazier. Nevertheless, other documents produced by the Academy bolster the claim that the school represented it had degree-conferring authority. For instance, in 2002, Director Krause wrote a letter of recommendation on behalf of a Clawson student stating that she “received her Associate Degree in Paralegal Studies.” Br. in Supp., Ex. 18, Letter of Rec. Similarly, Cvetko Ostronik, Dean of Legal Studies, wrote a letter in 2005 thanking an attorney for hosting a student as his intern, a requirement “for graduation in the Paralegal Associate of Applied Business program.” Br. in Supp., Ex. 19, Thank-you Letter. See also Br. in Supp., Ex. 20, Letter of Verification (verifying that a student was enrolled in school and would ultimately “receive an Associate in Applied Business Degree”). However, as alleged in the plaintiffs’ complaint, the Academy’s scheme was not static. Although the plaintiffs allege that they were told the Academy could and would grant them associate’s degrees approved by Michigan, certain documents show otherwise. As early as 2000, the Academy implemented a policy whereby it would ostensibly have the ability to grant associate’s -11- degrees by virtue of its authorization to do so in Ohio. The original policy called for Southfield students (before the campus was moved to Clawson) to transfer their credits to the Akron campus and take a course “through” that campus. However, they would never actually have to set foot in Ohio. The Academy described the concept as follows: When a student enrolls at the Southfield branch in the Court Reporting or Paralegal DIPLOMA program, he/she will, at the same time, enroll in the corresponding ASSOCIATE DEGREE program through the Akron branch. The student will then complete the program as usual at the Southfield branch, except for the AP102 (Apprenticeship) or AP103 (Internship). When the student is ready to take one of these courses, the course will be run out of the Akron Branch (i.e. supervised and graded by the appropriate Akron Dean (Court reporting or legal)[)]. Upon completion of all requirements (to include the AP courses), the student will request a transfer of credits to the Akron Branch. Upon approval of this transfer by the Akron Branch, the Akron Branch will issue an Associate Degree certificate to the student. . . . Upon receipt of the final transcript of grades from the Akron Education Director, the Southfield director can then order the appropriate Associate Degree diploma. Remember, the AA diploma must state that it came from the Akron branch. Br. in Supp., Ex. 25, March 7, 2000 Associate Degree Policy at 2-3. Despite this language, the diplomas received by Michigan students made no reference to Ohio, and graduation ceremonies were held in Michigan. On July 25, 2006, the Academy formally changed its policy. The new policy differed drastically in that it required Clawson students to actually attend classes in Akron during their final quarter. The Academy explained the policy to students as follows: # # The Academy of Court Reporting, Inc. is licensed by the State of Ohio to award associate degrees in applied business for students who complete the court reporting, paralegal (117 credit) and private investigation programs. Clawson students may earn an associate degree if they elect to take the transfer option during their last quarter at the Academy. HERE’S HOW THE TRANSFER OPTION WORKS -12- # # # # # # # Students enrolled in the Court Reporting Diploma Program, Paralegal Program, and Private Investigation Program are eligible. Students who are two quarters from graduation will be notified they are eligible for the transfer option. Students who select the option will sign an enrollment agreement for the Akron Branch. Students will be scheduled for their internship and one final class at the Akron Branch during their last quarter. The classes will be scheduled for Saturday. The Academy will provide students with free transportation to the Akron Branch every Saturday. Students who take the transfer option will transfer to the Akron Branch of the Academy of Court Reporting. To receive an associate degree the student must pass all of his/her classes with a minimum grade of “C.” Ex. 26, New Akron Requirement at 3. Although State of Michigan representatives did not object to this policy outright, an official contacted the Academy to stress that it must make this procedure clear to students at the Clawson campus. In a letter dated September 14, 2006, an officer of the Department of Labor and Economic Growth wrote as follows: As you know, the Academy of Court Reporting is not authorized by the State of Michigan to grant degrees but may issue diplomas or certificates to students. Therefore we concur with your correspondence of July 28, 2006 that provides a letter of instruction . . . detailing the transfer option for Michigan students to your Akron, Ohio campus in order to receive an Associate degree. Effective immediately, an addendum to your school catalog containing this letter of instruction must be provided to all current and prospective students. All future publications of your school catalog must also contain this information. -13- Sept. 14, 2006 Letter from State of Michigan Dept. of Labor. Later, in August 2007, the Department of Labor informed the Academy that the State required more information to assess the propriety of its policy, particularly the older policy that did not require students physically to attend classes in Ohio. See August 1, 2007 Letter from State of Michigan Dept. of Labor at 2 (“We have also learned that for some time ACR may have been issuing associates degrees to its Michigan students even though these students never physically attended classes or otherwise completed any coursework in Ohio. Essentially, the ACR may have used the authority granted by the State of Ohio to hand out associate degrees to its students attending in the State of Michigan.”). The plaintiffs also offer evidence of the uniformity of the defendants’ practice of misrepresenting the Academy’s authority to grant associate’s degrees in Michigan. For instance, the plaintiffs point to an email sent by Norman Rice, Dean of Education at the Academy’s Clawson campus, sent to an official at the Academy’s headquarters in August 2006. Pls.’ First Supp. Exs., Ex. 1, Aug. 2006 Rice Email and List at 1. Rice attached a list of Clawson graduates and asked the official to “prepare and send all certificates, diplomas, and associate’s degrees” to the Academy’s Clawson campus. Ibid. The attached list identified each student and the “degree” they were to receive. Id. at 2-5. Most of the students were to obtain an “associate of applied business” in a specified field (e.g., paralegal studies). Ibid. A similar email and list were sent in December 2006 and again in September 2007. See Pls.’ First Supp. Exs., Ex. 1, Dec. 2006 and Sept. 2007 Rice Emails and Lists. In addition, the plaintiffs offer the deposition testimony of Jderrick Wood, an admissions employee for the Academy. Wood testified that he was informed during employee training that associate’s degrees were available through the Clawson campus. He learned that “they had several -14- programs, certificate, diploma and associate’s, and . . . if you wanted to pursue the associate’s, then that was an option.” Pls.’ First Supp. Exs., Ex. 2, Wood Dep. at 74. Although he could not recall the exact words, Wood said a supervisor told him the school was accredited and “you could obtain an associate’s degree.” Id. at 75. The plaintiffs also point to an email by the dean of Northwood University, Rhonda C. Anderson. Pls.’ First Supp. Exs., Ex. 3, Anderson Email. Northwood had an “articulation agreement” with the Academy whereby it recognized the degrees purportedly earned by Academy students. Upon hearing of this lawsuit, however, Anderson sent an email informing other administrators of her decision to rescind the agreement. Ibid. In the same vein the plaintiffs cite the deposition testimony of Northwood’s 30(b)(6) representative, Donald E. Hunkins. Pls.’ First Supp., Exs., Ex. 4, Hunkins Dep. Hunkins confirmed that Anderson voided the articulation agreement because “Northwood assumed the Academy of Court Reporting had the authority to issue associate[’s] degrees in the State of Michigan,” and that assumption proved false. Id. at 17. The defendants filed a supplemental exhibit consisting of a portion of Jderrick Wood’s deposition testimony that was not included by the plaintiffs. The defendants contend this testimony shows that the representations concerning associate’s degrees were not uniform. However, although Wood’s testimony shows he knew relatively little about the process, it actually tends to establish the opposite. Wood testified that he first learned about the degree option during training. See id. at 76- 77. Prior to 2006, Wood took the following approach with students: Q. Okay. And when you started meeting with prospective students in 2005 to discuss the para – the private investigation program, would the topic of associate degrees arise in your meetings with them? A. Occasionally. Q. And when it did arise, what would you tell them about associate degrees and the Academy? -15- A. That that is an option. Q. And did you tell them more specifically what one could do to earn an associate degree? A. No. Q. Did you have any more specific knowledge about how one earned an associate degree? A. No, not at that time. Q. You just told them in 2005 during meetings when it would arise, that it was an option to get an associate degree at the Academy. A. Yes. Defs.’ Supp Exs., Ex. B, Wood dep. at 78-79. Wood testified that the protocol changed slightly in 2006. At that point in time, Wood was instructed to tell students that earning an associate’s degree was an option, but then refer the inquiring students to Jay Krause, director of the Clawson campus. II. According to Federal Rule of Civil Procedure 23, a matter may proceed as a class action in the name of representative parties if (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law and fact common to the class; (3) the claims and defenses of the representative parties are typical of the claims and defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. Amchem Prods., Inc. v. Windsor, , 613 (1997) (citing Fed. R. Civ. P. 23(a ; Olden v. LaFarge Corp., , 268 (E.D. Mich. 2001), aff’d 383 F.3d 495 (6th Cir. 2004). These factors are normally referred to as numerosity, commonality, typicality, and adequacy of representation. A class must meet all of the above prerequisites plus one of those listed in Federal Rule of Civil Procedure 23(b) to be certified. Amchem Prods., Inc., 521 U.S. at 614; Sprague v. General Motors Corp., 133 F.3d 388, 397 (6th Cir. 1998). The movant bears the burden of establishing that all prerequisites for class certification are satisfied. Thompson v. County of Medina, 29 F.3d 238, 241 (6th Cir. 1994). -16- When reviewing a motion for class certification, the Court must conduct a “rigorous analysis” of the requirements of Rule 23. Sprague, 133 F.3d at 397 (quoting General Telephone Co. of the Southwest v. Falcon, , 161 (1982 . The Court considers but is not bound to accept the allegations on the face of the complaint, and it will examine the discovery that is presented at the time the motion is adjudicated. Weathers v. Peters Realty Corp., 499 F.2d 1197, 1200 (6th Cir. 1974) (“[O]rdinarily, the determination should be predicated on more information than the pleadings will provide.”). It is against these considerations that the Court measures the plaintiffs’ motion to certify the following class: A class of all individuals who started or continued in a paralegal, court reporting, or private investigation program requiring completion of more than 100 credits at the Academy of Court Reporting in Michigan at any time from 2000 to present. The plaintiffs argue that they meet all the requirements of Rule 23(a), and they seek certification under Rule 23(b)(3). As for Rule 23(a), they contend that numerosity is satisfied because the proposed class consists of more than 2000 current and former students, rendering joinder impracticable. As for commonality, the plaintiffs observe that, although there need only be a common question of law or fact, here there are many. The most salient issues in this case – whether the Academy represented that it could and would confer associate’s degrees to graduates of its Michigan program, and whether this was a misrepresentation – pertain to all of the class members. Similarly, the claims of the representative parties are typical of the claims of the class, they argue, because the challenged conduct is collective in nature and the misrepresentations were part of a systematic attempt to draw students into the programs by promising results that the defendants were not capable of delivering. Finally, the plaintiffs contend that the adequacy-of-representation element -17- is met because “all the representative parties’ interests are aligned with the interests of all class members in obtaining redress for the Academy’s actions.” Pls.’ Br. in Supp. of Mot. to Cert. Class at 22. The plaintiffs contend that they meet the requirements of Rule 23(b)(3) because (1) common questions predominate; and (2) a class action is superior to other methods of adjudication. The defendants do not contest the numerosity requirement, but they insist that the plaintiffs have not demonstrated commonality, typicality, or adequacy of representation. Their argument rests on the view that oral representations of fraud will not support a collective-type action because the circumstances of the named plaintiffs vary greatly, and their claims are based on individual reliance on differing oral representations. The defendants believe that the plaintiffs’ testimony precludes the claim that they relied on uniform conduct that affected class members across the board. The defendants rely heavily on the Sixth Circuit’s decision in Sprague v. General Motors Corp., 133 F.3d 388 (6th Cir. 1998), where the court disapproved certification of a class in a fraud claim in which the plaintiffs each claimed reliance on oral representations of a variety of representatives of the defendant. With respect to adequacy of representation, the defendants contend that this element is lacking because (1) there is antagonism between the interests of the named plaintiffs and the interests of the class members, (2) the named plaintiffs are only concerned with their own claims, and (3) some of the named plaintiffs lack credibility. The defendants also contend that the named plaintiffs cannot represent a class adequately in the Michigan Authentic Credentials in Education Act (MACE) claim because of an inherent conflict of interest. According to the defendants, the MACE claim asks the Court to rule that associate degrees issued by the Academy during the class period are invalid (and therefore are “false credentials” in violation of the Act), but a class-wide judgment to that effect would be injurious and antagonistic to those class members who want their -18- degrees to remain valid. Finally, the defendants vigorously contest the contentions that common issues predominate among the class members and that class adjudication would be a superior mode of proceeding. A. The first prerequisite to class certification under Rule 23(a) is numerosity. Olden v. LaFarge Corp., , 268 (E.D. Mich. 2001), aff’d 383 F.3d 495 (6th Cir. 2004). There is no strict numerical test to determine when the class is large enough or too numerous to be joined under the Federal Rules of Civil Procedure. Senter v. General Motors Corp., 532 F.2d 523 n.24 (6th Cir. 1976). It is plain that the plaintiffs have satisfied the numerosity requirement with a class estimated to comprise approximately 2,000 individuals, and the defendants do not contest this point. The defendants vigorously contest the plaintiffs’ contentions that they have satisfied the commonality and typicality requirements of Rule 23(a). Their argument is based on the simple premise that the oral representations made to prospective students and the students’ subjective reliance thereon are so individualized that there can be no claim that is common or typical among the class members. The defendants posit, therefore, that fraud claims based on oral representations rarely, if ever, can be the subject of a class action. In support of that argument, the defendants cite Stout v. J.D. Byrider, 228 F.3d 709 (6th Cir. 2000), Sprague v. General Motors Corp., 133 F.3d 388 (6th Cir. 1998), and Yadlosky v. Grant Thornton, 197 F.R.D. 292 (E.D. Mich. 2000). As a general matter, the second prerequisite for class certification – commonality – simply means that “there are questions of law or fact common to the class.” Fed. R. Civ. P. 23(a)(2). This provision does demand that all questions of law and fact raised in the complaint are common. Olden, 203 F.R.D. at 269. “The standard is not [that] demanding. ‘Rule 23(a) simply requires a -19- common question of law or fact.’” Rockey v. Courtesy Motors, Inc., 199 F.R.D. 578, 583 (W.D. Mich. 2001) (quoting Bittinger v. Tecumseh Prods. Co., 123 F.3d 877, 884 (6th Cir. 1997 . The prerequisite of typicality requires that a “sufficient relationship exist[] between the injury to the named plaintiff and conduct affecting the class, so that the court may properly attribute a collective nature to the challenged conduct.” Stout, 228 F.3d at 717 (internal quotes omitted). Although the named plaintiffs’ claims must fairly encompass the class members’ claim, they need not always involve the same facts or law. See Sprague, 133 F.3d at 399; Senter, 532 F.2d at 525 n.31. The Supreme Court has explained that the commonality and typicality requirements “serve as guideposts for determining whether under the particular circumstances maintenance of a class action is economical and whether the named plaintiff[s]’ claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence.” General Tel. Co. of the Southwest v. Falcon, , 157 n.13 (1982). “The test for typicality, like commonality, is not demanding.” Rockey, 199 F.R.D. at 584. However, in Sprague, the Sixth Circuit, sitting en banc, found that the district court abused its discretion by certifying a class action involving 50,000 General Motors retirees who claimed the company unlawfully changed the terms of their health care benefits. The theory of liability was that the class members entered into a bilateral contract with General Motors to receive lifetime benefits as part of their agreement to take early retirement, and General Motors breached that contract when the benefit package was changed. Although the case started out with claims based on the company’s general practice, the district court did not certify the class until it had ruled on and dismissed many of those claims, leaving only the allegations that rested on proof of individual reliance by each class -20- member upon representations by a variety of company representatives at multiple sites across the Midwest. The court of appeals explained: The issues that remained after Sprague I were anything but common. Sprague I, as we have said, permitted the early retirees to proceed on a bilateral contract theory and an estoppel theory. Neither theory was susceptible to class-wide treatment. The premise of the bilateral contract theory was that GM had made an individual “side deal” with each early retiree. Each putative side deal involved any pertinent document the retiree might have signed – and the statements of acceptance, as we have seen, said nothing more about health insurance than that the early retiree accepted the “applicable” benefits – as well as any pertinent representations GM might have made to the retiree, whether orally, in writing, or both. A retiree might have signed a “long form” statement of acceptance, or a “short form,” or a “statement of intent” to retire, or nothing at all. He might have heard GM officials speak about the special early retirement program at a group meeting, or might have seen a program summary compiled by GM, or might have had a one-on-one meeting with his supervisor or with a GM benefits person. He might have retired from a particular plant in a particular division and been given a particular set of representations, or he might have retired from a different plant in a different division and been given a completely different set of representations. Proof that GM had contracted to confer vested benefits on one early retiree would not necessarily prove that GM had made such a contract with a different early retiree. The plaintiffs’ estoppel theory was even less susceptible to class-wide treatment. An estoppel claim requires proof of what statements were made to a particular person, how the person interpreted those statements, and whether the person justifiably relied on the statements to his detriment. . . . Because of their focus on individualized proof, estoppel claims are typically inappropriate for class treatment. . . . GM’s statements to the early retirees were not uniform. Among other things, the statements varied (1) based on the person making the representation, (2) based on the particular special early retirement program that applied, (3) from facility to facility, and (4) from time to time. Given the wide variety of representations made, there must have been variations in the early retirees’ subjective understandings of the representations and in their reliance on them. . . . Given these myriad variations, it seems to us that the plaintiffs’ claims clearly lacked commonality. . . . Because each plaintiff’s claim depended upon facts and circumstances peculiar to that plaintiff, class-wide relief was not appropriate. Sprague, 133 F.3d at 398. The court held that typicality was lacking for similar reasons: because the named plaintiffs’ claims (like those of the other class members) were based on unique -21- communications, it could not be said their claims encompassed those of the class. Id. at 399 (noting that “[a] named plaintiff who proved his own claim would not necessarily have proved anybody else’s claim. . . . The premise of the typicality requirement is simply stated: as goes the claim of the named plaintiff, so go the claims of the class”). Two years after Sprague, the Sixth Circuit decided Stout v. J.D. Byrider. The named plaintiffs in that case were two individuals who had purchased automobiles from a used car dealership who claimed that the dealership had committed fraud by selling them cars with concealed damage. The plaintiffs asserted counts for fraud, and violation of the Truth in Lending Act (TILA) and the Ohio Consumer Sales Practices Act (OCSPA), and they sought to represent a class comprising all persons who purchased vehicles at the dealership from 1993 to the present. The Sixth Circuit affirmed the denial of class certification because typicality and adequacy of representation were not present and that common issues did not predominate over individual ones. There was a lack of uniformity in the dealings of the individual plaintiffs with the dealership. Each used car purchase was a discrete transaction involving different representations by the defendant’s agents, different service agreements, and different levels of reliance. Since the fraud and TILA claims required an individual assessment of each transaction, with potentially differing results, the court concluded the district court did not abuse its discretion by not certifying a class action. The third case cited by the defendants, Yadlosky v. Grant Thornton, involved a district court’s refusal to certify a class of individuals at the behest of an investor who alleged that the defendants (officers and directors of MCA Financial Corporation, two accounting forms, and ten securities brokers) conspired to commit securities fraud by misrepresenting MCA’s financial condition and, thus, the value of its securities. The proposed class was comprised of approximately -22- 2,300 people who bought securities from the defendant over a thirteen-year period. In alleging common law fraud (among other things), the plaintiff argued that all class members were entitled to a presumption of reliance by virtue of “his allegations of a general scheme to defraud, accomplished, in part, by the dissemination of the same written offering materials to ‘virtually all’ class members.” See Yadlosky, 197 F.R.D. at 297. The court found that these written representations were not in fact at the heart of the case, because the plaintiff himself testified his action was prompted by oral statements. The defendants cite this case for the proposition that “[c]lass action status is usually inappropriate where oral representations are relied upon to support fraud claims, due to the highly individualized nature of the statements.” Id. at 299. However, the court identified an exception to this rule “where a standard presentation was made to all the members of the class.” Ibid. (citing Kaser v. Swann, 141 F.R.D. 337, 339 (M.D. Fla. 1991 . The court found this exception inapplicable because the plaintiff in that case had “sued ten separate brokers/dealers that allegedly made misrepresentations to 2811 individual investors over the course of thirteen years.” Ibid. Nevertheless, the case demonstrates that there is no immutable rule prohibiting class certification in fraud cases premised on oral misrepresentations. In fact, the Sixth Circuit approved class certification in an oral fraud case in Bittinger v. Tecumseh Products Co., 123 F.3d 877 (6th Cir. 1997), which involved an employer’s termination of retirement benefits. The company terminated its fully-funded health care benefit program and informed its workers that they could only receive partially-funded benefits. Eligibility for the new plan was conditioned on signing a release that waived all claims against the company; some class members signed releases but others did not. Those that did sought to vitiate the release based on -23- misrepresentations supposedly made by the defendant. That feature did not disqualify the case from class action treatment. The court explained: Tecumseh argues that the representations of company management on which the plaintiffs rely (most but not all of which were oral) were not uniformly communicated to all class members. All this may be true, but it does not disqualify the class under Rule 23(a). The plaintiffs’ evidence appears to follow a pattern, and the people they claim made the representations are largely the same people. More importantly, Bittinger – like each class member – contends that Tecumseh originally planned to provide lifetime, fully-funded benefits to retirees, as a general matter. That the evidence varies from plaintiff to plaintiff would not affect this basic claim (though the district court correctly notes that individual estoppel claims might be affected). See In re American Medical Systems, 75 F.3d at 1083 (holding that named plaintiffs’ claim is typical if it arises from the same course of conduct). Id. at 884-85. If the plaintiffs in this case had premised their right to recover solely on a claim of fraud, supported only by oral representations made by a variety of individuals, the defendants’ argument that no class member’s claim would be typical and there are no common questions of law would have more force. But the plaintiffs in this case have alleged multiple causes of action in their second amended complaint, some of which do not require proof of reliance. For instance, in Count 1 the plaintiffs plead a violation of the Michigan Consumer Protection Act (MCPA), which prohibits “[u]nfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce.” Mich. Comp. Laws § 445.903(1). A plaintiff injured as a result of an MCPA violation is entitled to damages and attorney’s fees under section 445.911(2), and section 445.911(3) specifically authorizes MCPA class actions. In Dix v. American Bankers Life Assurance Co., 429 Mich. 410, 415 N.W.2d 206 (1987), the Michigan Supreme Court held that a statutory misrepresentation claim under the MCPA does not require a showing of reliance. Id. at 418, 415 N.W.2d at 209 (“We hold that members of a class proceeding under the Consumer Protection Act -24- need not individually prove reliance on the alleged misrepresentations. It is sufficient if the class can establish that a reasonable person would have relied on the representations. Further, a defendant’s intent to deceive through a pattern of misrepresentations can be shown on a representative basis under the Consumer Protection Act.”) (footnote omitted). The claim under the Michigan Authentic Credentials in Education Act (MACEA), Mich. Comp. Laws § 390.1601 et seq. in Count 8 does not require proof of reliance either. MACEA provides that “[a] person shall not knowingly issue or manufacture a false academic credential in this state.” Mich. Comp. Laws § 390.1603. There is no element of relaince or fraud apparent from the text of this statute; a person suffering a violation of MACEA may bring a civil action and “may recover costs, reasonable attorney fees, and the greater of either the person’s actual damages or $100,000.00.” Mich. Comp. Law § 390.1605 On the other hand, the plaintiffs’ claims for fraud, negligent misrepresentation, promissory estoppel, and equitable estoppel found in Counts 2, 3, 5, and 7 require a showing of some measure of reliance. See Belle Isle Grill Corp v. Detroit, 256 Mich. App. 463, 477, 666 N.W.2d 271, 280 (2003) (fraud); Law Offices of Lawrence J. Stockler, P.C. v. Rose, 174 Mich. App. 14, 44 (1989) (negligent misrepresentation); Novak v. Nationwide Mut. Ins. Co., 235 Mich. App. 675, 686-87, 599 N.W.2d 546, 552 (1999) (promissory estoppel); Minerva Partners, Ltd. v. First Passage, LLC, 274 Mich. App. 207, 218, 731 N.W.2d 472, 479 (2007) (equitable estoppel). However, each of these counts also requires proof that the defendants promised to confer associate’s degrees and that they had no legal authority to do so. And although the defendants argue that proof of the false promise requires individualized proof, the Court is satisfied that the plaintiffs have put forth allegations and evidence that “appears to follow a pattern, and the people they claim made the representations are -25- largely the same people.” Bittinger, 123 F.3d at 895. Inasmuch as commonality “simply requires a common question of law or fact,” id. at 884, the Court has little trouble determining that this element is satisfied. Similarly, judging from the conduct alleged by the named plaintiffs the Court concludes that there is a “sufficient relationship . . . between the injury to the named plaintiff and conduct affecting the class.” Stout, 228 F.3d at 717. Therefore, typicality is established as well. The defendants also challenge the ability of the named plaintiffs to represent the class because (1) there is antagonism between the interests of the named plaintiffs and the interests of the class members, (2) the named plaintiffs are only concerned with their own claims, and (3) some of the named plaintiffs lack credibility. The antagonism argument asserts that the overarching injury alleged by the plaintiffs is that the defendants represented they had degree-granting authority when they did not; the lawsuit presupposes that the “degrees” are invalid. However, if the plaintiffs win that point, more than 200 members of the putative class would have the so-called associate’s degrees they earned nullified. The argument that the individual plaintiffs are not concerned with the claims of unnamed class members is based on deposition testimony by the named plaintiffs that they were speaking only for themselves. The credibility argument is directed to two of the named plaintiffs; the defendants contend that Kim Davis lied about her qualifications and Lonja Allen misrepresented her marital status to obtain financial aid. “Interests are antagonistic when there is evidence that the representative plaintiffs appear unable to vigorously prosecute the interests of the class.” Stout, 228 F.3d at 717 (internal quotes omitted). Certainly class certification is unwarranted in circumstances where the interests of class representatives and class members are antagonistic. In re Am. Med. Sys., Inc., 75 F.3d 1069, 1083 (6th Cir. 1996). To show adequacy of representation, after all, the named plaintiffs must -26- demonstrate that they will fairly and adequately protect the interests of the class. The central theme of the case is that the defendants never have had the authority to grant degrees in Michigan; this claim is not a feature of the case that is unique to the named plaintiffs. If there are others who do not subscribe to this theory, those persons can be accommodated through the opt-out procedure that is required under Rule 23(b)(3). The Court does have some concern that some of the named plaintiffs do not appear to understand their roles. However, it appears that this deficiency comes from a lack of information, not some inherent conflict or inability. The Court is satisfied that if class counsel explains the nature of the lead-plaintiff role in detail, the named plaintiffs will accept their charge and appreciate its significance. The defendants’ attempt to impeach the credibility of plaintiff Lonja Allen consists of pointing out that she lied about her marital status when completing a financial aid document. However, the plaintiff’s testimony is that an Academy official told her to list that she was separated, even though she was actually not, because that would “be best . . . for [her] financial situation.” Resp. Br., Ex. 18, Allen Dep. at 34. The defendants’ impeachment attempt is more successful with respect to Kim Davis. Davis admitted that she submitted a document representing that she had completed various hours at a law firm when in fact she had not. See Dep. of K. Davis at 49-50. However, the foibles of a single class representative do not disqualify the named plaintiffs as a group or render their representation inadequate. Finally, the defendants do not contest the competency of class counsel, and the Court is satisfied that they are qualified to prosecute the action. The Court concludes, therefore, that all the requirements of Rule 23(a) have been satisfied. -27- B. The plaintiffs in this case have chosen to proceed with their request for class certification under Rule 23(b)(3). In addition to the requirements specified in Rule 23(a), therefore, the plaintiffs must show that “the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). According to the Rule, the following matters are pertinent to these issues: (A) the class members’ interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action. Fed. R. Civ. P. 23(b)(3). The defendants’ argument that Rule 23(b)(3) cannot be satisfied is two-fold: they contend that common questions will not predominate because of the individual nature of the fraud-related claims, and the circumstances of the respective plaintiffs vary. For instance, Tashelia Bobbitt is presently taking courses in Akron, see Resp. Br., Ex. 17, Dep. of T. Bobbitt at 137; other plaintiffs received their diplomas before the New Akron Requirement, see Br. in Supp., Ex. 21, Diploma of T. Buchanan (dated Sept. 27, 2003); Ex. 22, Diploma of K. Davis (dated March 29, 2003); and still others chose to drop out, one before the New Akron Requirement was announced, see Resp. Br., Ex. 19, Exit Interview Data re D. Pohl, and another shortly thereafter, see Resp. Br., Ex. 18, Dep. of L. Allen at 122-23. The defendants also believe that the damage claims will vary widely among the plaintiffs and are highly individualized. The Sixth Circuit recently explained the predominance test as follows: -28- “The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.” [Amchem Prod., Inc. v.] Windsor, 521 U.S. [591,] 632 [(1997)]; see also In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 136 (2d Cir.2001). To satisfy the predominance requirement in Rule 23(b)(3), “a plaintiff must establish that ‘the issues in the class action that are subject to generalized proof, and thus applicable to the class as a whole, . . . predominate over those issues that are subject only to individualized proof.’” In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d at 136 (quoting Rutstein v. Avis Rent-A-Car Sys., Inc., 211 F.3d 1228, 1233 (11th Cir. 2000) (internal quotation marks omitted . Further, “the fact that a defense ‘may arise and may affect different class members differently does not compel a finding that individual issues predominate over common ones.’” Id. at 138 (quoting Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 296 (1st Cir. 2000 . Lastly, “[c]ommon issues may predominate when liability can be determined on a class-wide basis, even when there are some individualized damage issues.” Beattie v. CenturyTel, Inc., 511 F.3d 554, 564 (2007). As this Court has noted, the fact that damages may be individual in nature is typically not a problem since the Court can bifurcate the issue of liability from the issue of damages. Olden, 203 F.R.D. at 271 (citing Little Caesar Enters., Inc. v. Smith, 172 F.R.D. 236, 267 (E.D. Mich.1997 . “Once liability is found, the issue of damages can be decided by a special master or by another method.” Ibid. Although the predominance requirement is more difficult to satisfy than commonality under Rule 23(a), the predominance requirement is met if the common question identified “is at the heart of the litigation.” Powers v. Hamilton Co. Public Defenders Commission, 501 F.3d 592, 619 (6th Cir. 2007). Accordingly, “[c]ases alleging a single course of wrongful conduct are particularly well-suited to class certification.” Ibid. With respect to superiority, the Sixth Circuit has observed that this may be satisfied where the potential recovery for individual members is prohibitively small. See Beattie, 511 F.3d at 566-67 (citing Windsor, 521 U.S. at 617). However, Rule 23(b)(3) is designed “not solely as a means for assuring legal assistance in the vindication of small claims but, rather, to achieve the economies of -29- time, effort and expense.” In re Am. Med. Sys., Inc., 75 F.3d at 1084 (internal quotes omitted). The manageability of a class action is important in assessing whether these interests would be served, and hence, whether a class action is superior to other available methods. See Fed. R. Civ. P. 23(b)(3)(D); Beattie, 511 F.3d at 567. This “manageability” factor “encompass[es] the ‘whole range of practical problems that may render the class action format inappropriate for a particular suit.’” Andrews v. Am. Tel. & Tel. Co., 95 F.3d 1014, 1023 (11th Cir. 1996) (quoting Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 164 (1974 . The problems may include cases which “break[ ] down into an unmanageable variety of individual legal and factual issues.” Ibid. For many of the reasons discussed earlier assessing the commonality and typicality elements, the Court believes that common issues will predominate. The central allegation of the plaintiffs’ case is that Academy officials represented that the Academy could and would grant them associate’s degrees approved by the State of Michigan. Although the plaintiffs may not remember the exact words and some of the details may differ from student to student, the thrust of the misrepresentation remains the same. The Sixth Circuit has approved class certification when this is the case. See Bittinger, 123 F.3d at 884 (“Finally, Tecumseh argues that the representations of company management on which the plaintiffs rely (most but not all of which were oral) were not uniformly communicated to all class members. All this may be true, but it does not disqualify the class under Rule 23(a). The plaintiffs’ evidence appears to follow a pattern, and the people they claim made the representations are largely the same people. More importantly, Bittinger – like each class member – contends that Tecumseh originally planned to provide lifetime, fully-funded benefits to retirees, as a general matter. That the evidence varies from plaintiff to plaintiff would not affect this basic -30- claim.”). The common issues in the case plainly predominate over any individual issues that might arise. Because class issues predominate, the Court finds that the class action format is a superior method of adjudicating the claims of potentially 2,000 individuals. The prospect of individual damage determinations – “a common feature of class actions routinely dealt with at a remedial phase,” Bittinger, 123 F.3d at 885, – does not change that assessment. In Olden v. LaFarge Corp, 383 F.3d 495 (6th Cir. 2004), the Sixth Circuit rejected the argument that the specter of manifold individual damage determinations destroyed the predomination of the liability question. That case concerned a lawsuit brought by homeowners against the owner of a cement manufacturing plant alleging property and personal damages as a result of emissions. The defendant argued that “individual issues related to establishing causation will overwhelm the case because toxins: (a) originated from disparate sources within the one-square mile Lafarge facility and perhaps other industrial sources; (b) were dispersed to properties in varying concentrations; (c) allegedly caused a variety of personal injuries; and (d) allegedly caused widely varying property damages.” Id. at 508 (internal quotes omitted). However, the court concluded that the defendant’s arguments may suggest that individual damage determinations might be necessary, but the plaintiffs have raised common allegations which would likely allow the court to determine liability (including causation) for the class as a whole. . . . As the district court properly noted, it can bifurcate the issue of liability from the issue of damages, and if liability is found, the issue of damages can be decided by a special master or by another method. Fed. R. Civ. P. 23(c)(4)(A); see also Simon v. Philip Morris Inc., 200 F.R.D. 21, 30 (E.D.N.Y. 2001) (“By bifurcating issues like general liability or general causation and damages, a court can await the outcome of a prior liability trial before deciding how to provide relief to the individual class members.”). Therefore, the aforementioned minor complaints can be dealt with in the damages phase if necessary, and it is likely premature to address these issues at this point. -31- Id. at 508-509. Similarly, the questions of causation and damages in this case can be addressed later in the proceedings by means of a special master, representative trials, or other means. However, because the liability issue predominates, this case falls easily into the category of “cases in which a class action would achieve economies of time, effort, and expense, and promote . . . uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.” Amchem Products, Inc., 521 U.S. at 615 (internal quotes omitted). The Court concludes, therefore, that class certification under Rule 23(b)(3) is appropriate. III. The Court finds that the plaintiffs have satisfied all the requirements of Federal Rule of Civil Procedure 23(a) and the provisions of Rule 23(b)(3). Accordingly, it is ORDERED that the plaintiffs’ motion for class certification [dkt # 43] is GRANTED. The determination of class certification is conditional and may be altered or amended prior to the decision on the merits in light of any changes in circumstances that make such action advisable. See Fed. R. Civ. P. 23(c)(1). It is further ORDERED that pursuant to Federal Rule of Civil Procedure 23(b)(3), the following class is certified in this cause: A class of all individuals who (a) started or continued in a paralegal, court reporting, or private investigation program requiring completion of more than 100 credits at the Academy of Court Reporting in Michigan at any time from 2000 to present, and (b) were told by Academy officials prior to enrollment that they could earn a Michigan associate’s degree. -32- It is further ORDERED that counsel of record for the named plaintiffs in this matter, namely George Googasian, Esquire, Dean Googasian, Esquire, and Thomas Howlett, Esquire, shall be appointed counsel for the designated class. It is further ORDERED that the plaintiffs shall, at their expense, provide appropriate notice to all class members via first-class mail and in conformance with the requirements of Rule 23 of the Federal Rules of Civil Procedure. The notice shall provide putative class members until August 7, 2008 to notify the counsel for the parties and the Court of their intent to opt out of the proposed class. The notice shall also provide that class members wishing to enter their own appearance in the matter through counsel shall do so by that same date. It is further ORDERED that the parties shall confer and forward to the Court on or before May 15, 2008 an agreed document that will be used to serve notice upon all members of the class. If the parties are unable to agree on the proper text for said notice, the parties shall forward on that date the plaintiffs’ proposed text along with a detailed list of objections from the defendant. The notice shall not be sent until Court approval is given. It is further ORDERED that the parties appear for a Case Management and Scheduling Conference on May 27, 2008 at 2:00 p.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: May 1, 2008 -33- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on May 1, 2008. s/Felicia M. Moses FELICIA M. MOSES -34-

=== LL NJ Opinion Denying Cross ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. VINCENT L. CROCKETT, __________________________________/ Defendant. Case Number 07-20477 Honorable David M. Lawson OPINION AND ORDER DENYING DEFENDANT’S MOTION TO SUPPRESS EVIDENCE Defendant Vincent Crockett, a Detroit Police Officer accused of stealing cocaine from the police evidence room on March 27, 2007, challenges the constitutionality of the search and seizure of evidence from the his home pursuant to a search warrant. He alleges that the warrant’s supporting affidavit did not establish probable cause to search his home and seize bank records and approximately $7,000 in United States currency. The motion was argued by the parties on January 17, 2008, after which the parties were given leave to file supplemental briefs. The Court now finds that the search warrant affidavit does not provide sufficient facts from which probable cause could be found that contraband or evidence of a crime would be located at the defendant’s residence. However, the government agents’ reliance on the search warrant was made in good faith, which precludes the application of the exclusionary rule in this case. Therefore, the motion to suppress the evidence will be denied. I. The defendant, Vincent Crockett, was an officer for the Detroit Police Department. He was paid an annual salary of $48,500. In July 2005, the Detroit Police Department seized a substance weighing over six kilograms that was tested and found to be cocaine. This cocaine was given the identification number NO1906205 and stored in an evidence locker. On March 27, 2007, the defendant signed out the cocaine, presumably to take to the laboratory for further analysis. On April 25, 2007, the defendant made cash deposits of over $35,000 into his money market account. In July 2007, other Detroit police officers attempted to locate the cocaine but were unable to do so. In their search for the cocaine, they noted that the defendant was the last person to sign it out of the evidence room. When pressed for an explanation, the defendant stated that the cocaine was still at the laboratory. On July 13, 2007, the defendant brought a substance back to the evidence room in evidence bag NO1906205. The substance was retested and determined to no longer be cocaine, but a starch component. The laboratory technician who originally had tested the cocaine stated that the packaging of the substance was different than he remembered, and it appeared that someone had forged his initials on the packaging. Relying on the above information, on July 18, 2007, FBI special agent Michael Haynie submitted an affidavit for a search warrant to a United States Magistrate Judge seeking authority to search the defendant’s home at 43112 Providence Lane, Canton, Michigan. The warrant sought the seizure of narcotics ledgers, currency derived from the sale of drugs, evidence of travel, weapons, indicia of ownership of location, photographs of conspirators, address and telephone books, electronic communication devices, bank account records, controlled substances, Detroit Police Department packaging tape, evidence logs, corn starch, other items that may have been stolen from DPD. The affidavit set forth the facts noted above, which gave rise to the suspicion that Crockett had stolen the cocaine from the police evidence room and replaced it with a corn starch substance. -2- As to whether evidence of this wrongdoing would be located in Crockett’s townhouse, the affidavit contained only the following: Detroit Police Department records confirm that CROCKETT currently resides at the Subject Premises. I have debriefed individuals in the Detroit area in my current capacity as an FBI Special Agent, and have learned that the going rate per kilogram of cocaine is approximately $20,000. Thus, the six kilograms of cocaine, if sold wholesale, would have yielded approximately $120,000. It is my belief, based on my experience that narcotics traffickers often keep narcotics and proceeds at their residences for extended periods of time. Therefore, I believe that there is probable cause that cocaine and or cocaine proceeds will be located at the Subject Premises. Additionally, I believe that there is probable cause that other items associated with narcotics trafficking, including those described in paragraph 4 above, will be found at the Subject Premises. Def.’s Mot. to Suppress, Ex. A, Att. B, Haynie Aff. ¶ 11. The search warrant was issued and executed on July 18, 2007. Apparently the search did not turn up any drugs, but the agents seized $2,750 in cash found at the residence. The agents also found bank account records, and the agents also seized $7,764.93 from six bank accounts at JP Morgan Chase bank. Vincent Crockett was charged with possession with intent to distribute approximately six kilograms of cocaine and embezzlement of property from the Detroit Police Department. Count I charges the defendant with possession with intent to distribute more than five kilograms of cocaine, in violation of 21 U.S.C. § 841(a)(1), and identifies the March 27, 2007 theft of six kilograms of cocaine. Count II of the indictment charges embezzlement by an agent of a local government agency that receives federal funds, in violation of 18 U.S.C. § 666(a). Count III seeks criminal forfeiture of property derived from the illegal conduct charged in Counts I and II. The defendant has moved to suppress the evidence obtained at his residence. -3- II. The defendant does not contest the proposition that the search warrant affidavit establishes probable cause that he was involved in wrongdoing. Rather, he contends that the affidavit contains no information justifying the conclusion that any contraband or evidence would be found at his home, which is the place to be searched, according to the warrant. The government counters by citing a line a cases in which the Sixth Circuit has upheld warrants to search the homes of known drug dealers when the supporting affidavits contain language that the affiant, through experience, has learned the habits of drug dealers and knows they frequently keep drugs and records of drug sales in the places where they live. Under the command of the Fourth Amendment, applicable to the States as incorporated into the Fourteenth Amendment, “no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” U.S. Const. amend. IV; see Mapp v. Ohio, 367 U.S. 643, 654-55 (1961). The test for probable cause calls for an assessment of whether there is “a ‘fair probability,’ given the totality of the circumstances, that contraband or evidence of a crime will be found in a particular place.” United States v. Davidson, 936 F.2d 856, 859 (6th Cir. 1991) (quoting United States v. Loggins, 777 F.2d 336, 338 (6th Cir. 1985 . A magistrate properly reaches this conclusion only when the warrant affidavit sets forth sufficient facts that provide a “substantial basis” for concluding that “a search would uncover evidence of wrongdoing.” United States v. Sonagere, 30 F.3d 51, 53 (6th Cir. 1994) (quoting Illinois v. Gates, 462 U.S. 213, 236 (1983 . As the Sixth Circuit has explained, the concept of probable cause is not easily reducible to a simple formula: Probable cause is defined as reasonable grounds for belief, supported by less than prima facie proof but more than mere suspicion, that there is a fair probability that -4- contraband or evidence of a crime will be found in a particular place. This determination does not lend itself to the application of rigid legal rules . . . . Rather, the probable cause standard is a practical non- technical conception wherein we deal with probabilities which are the factual and practical considerations of everyday life on which reasonable and prudent men, not legal technicians, act. Stated otherwise, probable cause is a fluid concept – turning on the assessment of probabilities in particular factual contexts – not readily, or even usefully, reduced to a neat set of legal rules. United States v. King, 227 F.3d 732, 739 (6th Cir. 2000) (citations omitted). To encourage law enforcement officers to seek warrants, the Supreme Court has counseled that in close calls, doubtful warrants should be upheld. Gates, 462 U.S. at 237 n.10. And “‘reviewing courts are to accord the magistrate’s determination ‘great deference.’” United States v. Allen, 211 F.3d 970, 973 (6th Cir. 2000) (en banc) (quoting Illinois v. Gates, , 236 (1983 . As the defendant properly argues, “[t]here must . . . be a ‘nexus between the place to be searched and the evidence sought.’” United States v. Carpenter, 360 F.3d 591, 594 (6th Cir. 2004) (en banc) (quoting United States v. Van Shutters, 163 F.3d 331, 336-37 (6th Cir. 1998 . But as the government correctly notes, the Sixth Circuit has decided several cases upholding search warrants for the homes of known drug dealers and manufacturers based on the logical premise that incriminating evidence is likely to be found at the residences of drug dealers when there is probable cause to believe that an individual is a drug trafficker (and not merely in possession of controlled substance). United States v. Kenny, 505 F.3d 458, 461 (6th Cir. 2007) (upholding search of residence based on probable cause that the defendant was involved in the manufacture of a controlled substance in another location, and noting that “In United States v. Miggins, 302 F.3d 384, 393-94 (6th Cir.2002), we held, following a long line of precedents, that a sufficient nexus existed to search the residence of a known drug dealer after he had been arrested for possession of cocaine.”); United States v. Miggins, 302 F.3d 384, 393-94 (6th Cir. 2002) (collecting cases); United -5- States v. Blair, 214 F.3d 690, 696 (6th Cir. 2000) (“‘[i]n the case of drug dealers, evidence is likely to be found where the dealers live’” (quoting United States v. Jones, 159 F.3d 969, 975 (6th Cir. 1998 ; see also United States v. Yates, 132 F. Supp. 2d 559, 564-65 (E.D. Mich. 2001). However, following the injunction that the probable cause determination cannot be “reduced to a neat set of legal rules,” King, 227 F.3d at 739, the court has stopped short of establishing a categorical rule that an arrest of a known drug dealer ipso facto justifies the search of his home. See United States v. Frazier, 423 F.3d 526, 532-33 (6th Cir. 2005) (holding that “[w]here, as here, the warrant affidavit is based almost exclusively on the uncorroborated testimony of unproven confidential informants (none of whom witnessed illegal activity on the premises of the proposed search), the allegation that the defendant is a drug dealer, without more, is insufficient to tie the alleged criminal activity to the defendant’s residence”). Even in the cases cited above, there was evidence in addition to the defendant’s status as a drug dealer that pointed to a conclusion that contraband would likely be found in the residence. For instance, in United States v. Jones, 159 F.3d 969, 973-74 (6th Cir. 1998), the court found the affidavit to be sufficient where the defendant had sold drugs to an informant, drug transactions were both overheard and observed taking place on the defendant’s property outside of his residence, even though no evidence indicated that any activity actually occurred inside the defendant’s residence, and the affiant claimed that through knowledge and experience, he could expect to find drug-related materials inside. In United States v. Blair, 214 F.3d 690, 696 (6th Cir. 2000), a federal agent obtained a warrant to search the defendants’ residence for records of money laundering upon a showing that the defendants were operating a prostitution ring, they sold narcotics to the prostitutes and their customers, one of the defendants was listed under a false name as a subscriber for electric service for the prostitution houses, that defendant had filed -6- income tax returns using that same false name, and the officer affiant had stated that in his professional opinion, drug dealers usually keep such financial records and other essential materials at their homes. In Frazier, the court of appeals distinguished Miggins, Blair, Jones, and United States v. Caicedo, 85 F.3d 1184, 1193 (6th Cir. 1996), stating “None of these cases, however, supports the proposition that the defendant's status as a drug dealer, standing alone, gives rise to a fair probability that drugs will be found in his home.” Id. at 533. The court rejected the idea that the affidavit was sufficient to establish probable cause in that case because it did not tie the evidence sought to the place searched, noting that none of the informants from whom the information was received “witnessed illegal activity on the premises of the proposed search.” Ibid. The Court cited United States v. Savoca, 761 F.2d 292, 295 (6th Cir. 1985), explaining that the “inference that bank robbers tend to conceal evidence in motel rooms, standing alone, is insufficient to support the search of two bank robbers’ hotel room.” Ibid. In United States v. McPhearson, 469 F.3d 518(6th Cir. 2006), the court reiterated the idea that some nexus beyond the allegation of drug dealing alone is necessary to justify the search of a residence. The court explained: In some instances, even the fact that the residences to be searched were occupied by known drug dealers is insufficient to establish the nexus between the residences and criminal activity. In United States v. Frazier, we wrote that our case law does not “support[ ] the proposition that the defendant’s status as a drug dealer, standing alone, gives rise to a fair probability that drugs will be found in his home. Where . . . the warrant affidavit is based almost exclusively on the uncorroborated testimony of unproven confidential informants . . ., the allegation that the defendant is a drug dealer, without more, is insufficient to tie the alleged criminal activity to the defendant’s residence.” Frazier, 423 F.3d at 533. Thus, an allegation of drug dealing based on information from an untested confidential informant is insufficient to establish probable cause to search the alleged drug dealer’s home. However, where the allegation of drug dealing is coupled with independently corroborated -7- information from police officers, it may be sufficient to establish probable cause. See, e.g., United States v. Miggins, 302 F.3d 384, 393-94 (6th Cir. 2002). Whether probable cause can be established by an allegation of drug dealing is irrelevant to our resolution of this case, however. The allegation of drug dealing was absent from the affidavit supporting the warrant in this case, which presents a probable cause determination based on an even looser connection between the residence and the suspected criminal activity. McPhearson, 469 F.3d at 524 n. 3. The cases allowing searches of drug dealers’ homes generally rely on evidence in the affidavits that the defendant was involved in an ongoing enterprise rather than a discrete transaction. For instance, in Kenny, the affidavit established that the defendant was involved in manufacturing a large quantity of methamphetamine, which the Court noted was only a step away from distribution. 505 F.3d at 461-62. Although the court of appeals is silent as this point, there was a witness who had purchased the drugs from the defendant over a period of four months, suggesting an ongoing operation. In Blair, the defendant was accused of ongoing drug trafficking related to selling drugs to prostitutes who worked for the defendant for approximately eight years. Blair, 214 F.3d at 694. In Miggins, the defendant had been convicted of “numerous cocaine charges,” suggesting that the defendant was “involved in drug trafficking.” Miggins, 302 F.3d at 393. And in United States v. Newton, 389 F.3d 631 (6th Cir. 2004), vacated for reconsideration on other grounds, 546 U.S. 803 (2005), the court found that the defendant was “a drug dealer with continuing and ongoing operations.” Id. at 635 (emphasis added). None of these features is present in this case. In addition, the Sixth Circuit has held that an officer’s “training and experience” alone will not provide the particularized data necessary to support a conclusion that evidence is likely to be found in a particular place. See United States v. Schultz, 14 F.3d 1093 (6th Cir. 1994). In Schultz, the officer sought warrants for both a safe deposit box and an apartment. Although sufficient -8- evidence existed to search the apartment given the number of phone calls placed to others from the apartment to facilitate drug sales, the safe deposit boxes were viewed differently: Officer Ideker had not made any material connection between the bank and any criminal activity. Star Bank employees did not report any illegal activities related to either the loan or the safe deposit boxes, and Ideker had no other information connecting them to any illegal activity. In his affidavit for the first warrant, the only connection Ideker made was that, “Based on his training and experience, [he] believe[d] . . . that it is not uncommon for the records, etc. of such [drug] distribution to be maintained in bank safe deposit boxes.” While an officer’s “training and experience” may be considered in determining probable cause, see, e.g., Texas v. Brown, 460 U.S. 730, 742-43 (1983); U.S. v. Martin, 920 F.2d 393, 399 (6th Cir. 1990), it cannot substitute for the lack of evidentiary nexus in this case, prior to the search, between the safe deposit boxes and any criminal activity. Officer Ideker did not have anything more than a guess that contraband or evidence of a crime would be found in the boxes, and therefore the first warrant should not have been issued. To find otherwise would be to invite general warrants authorizing searches of any property owned, rented, or otherwise used by a criminal suspect – just the type of broad warrant the Fourth Amendment was designed to foreclose. Id. at 1097-98. The affidavit in this case contains no facts suggesting that illegal activity occurred at the defendant’s residence, or that the defendant was involved in a continuous and ongoing operation at his residence or anywhere else, or even that the defendant returned to the residence after handling the cocaine from the evidence room. The FBI agent recited his conclusion that “narcotics traffickers often keep narcotics and proceeds at their residences for extended periods of time.” Def.’s Mot. to Suppress, Ex. A, Att. B, Haynie Aff. ¶ 11. But there is no information set forth that tends to establish that Crockett was a known narcotics trafficker. Rather, the affidavit proves only that Crockett is a thief, and he may have attempted to “fence” some of the stolen cocaine. Even if one were to conclude that the money deposited in his money market account represented proceeds from the sale, and even if one were to surmise that the amount of the proceeds suggested only a partial -9- sale, there is no evidence of what Crockett did with the rest of the drugs, and there certainly is no evidence that the drugs or records of the transactions were in his townhouse. Such assertion was nothing “more than a guess” and “it cannot substitute for the lack of evidentiary nexus in this case, prior to the search, between the [townhouse] and any criminal activity.” Schultz, 14 F.3d at 1097. For these reasons, the Court must conclude that the affidavit in support of the search warrant does not establish “a ‘fair probability,’ given the totality of the circumstances, that contraband or evidence of a crime will be found in” the location sought to be searched. Davidson, 936 F.2d at 859. The search warrant, therefore, was issued in violation of the Fourth Amendment. However, even where the warrant was not supported by probable cause, the evidence obtained need not be suppressed when it was “‘seized in reasonable, good-faith reliance on a search warrant that is subsequently held to be defective.’” United States v. Hython, 443 F.3d 480, 484 (6th Cir. 2006) (quoting United States v. Leon, 468 U.S. 897 (1984 . “‘[T]he relevant question is whether the officer reasonably believed that the warrant was properly issued, not whether probable cause existed in fact.’” Id. at 487 (quoting United States v. Laughton, 409 F.3d 744, 752 (6th Cir. 2005). The good faith exception does not apply in four situations: (1) where the issuing magistrate was misled by information in an affidavit that the affiant knew was false or would have known was false except for his reckless disregard for the truth; (2) where the issuing magistrate wholly abandoned his judicial role and failed to act in a neutral and detached fashion, serving merely as a rubber stamp for the police; (3) where the affidavit was nothing more than a “bare bones” affidavit that did not provide the magistrate with a substantial basis for determining the existence of probable cause, or where the affidavit was so lacking in indicia of probable cause as to render official belief in its existence entirely unreasonable; and (4) where the officer’s reliance on the warrant was not in good faith or objectively reasonable, such as where the warrant is facially deficient. Id. at 484 (citing Leon, 468 U.S. at 923). The Court finds that none of those circumstances exists in this case. -10- The defendant has not claimed that the magistrate was misled, acted as a rubber stamp for the police, or that the affidavit was nothing more than “bare bones.” Rather, the defendant focuses on the fourth possibility, claiming that the agents unreasonably relied on the search warrant because it was facially deficient. However, in cases where the nexus between contraband likely possessed by the defendant and the defendant’s household has been lacking, the court of appeals has found the question to be sufficiently close to warrant a finding of good faith. Such is the case here. In United States v. Frazier, for example, the Sixth Circuit found that the search warrant was not supported by probable cause because there was an insufficient nexus between the defendant’s alleged conduct and his residence. The Court nevertheless found that the Leon exception applied and permitted the evidence to be introduced. The Court summarized Sixth Circuit precedent on this point as follows: For example, we held in [United States v.] Van Shutters, 163 F.3d at 336 [6th Cir. 1998)], that an officer relied in good faith on a warrant where the affidavit described the residence and the suspect’s criminal scheme but connected the place to the illegal activity only by stating that the residence “was available” to the suspect. In United States v. Schultz, 14 F.3d 1093, 1098 (6th Cir. 1994), we held that an officer reasonably relied on a warrant authorizing the search of a bank safety deposit box where the affidavit underlying the warrant connected the box and the defendant’s drug trafficking only by stating that the officer’s training and experience led him to believe that evidence would be located there. And in Savoca, we held that, in light of a Sixth Circuit case which says that bank robbers often conceal evidence of their crimes in public and private places, an officer’s reliance on a warrant to search a hotel room was reasonable when affidavit underlying the warrant connected the hotel room to a bank robbery only by stating that the robbers were seen in the room on two prior occasions. [United States v. Savoca,] 761 F.2d at 297-98 [6th Cir. 1985)]. Frazier, 423 F.3d at 536-37. Similarly, in this case, the affidavit provides probable cause that the defendant stole narcotics and was selling the stolen cocaine. The affidavit is silent to the connection between the defendant and the defendant’s residence, except that the officer stated his “belief, based on . . . experience” that -11- drugs or proceeds would be in the home. Although the affidavit is insufficient, it is not so facially defective that the agents’ reliance on it and the search warrant is rendered objectively unreasonable. As a consequence, the exception to the exclusionary rule established by United States v. Leon applies to this case. III. Although the search warrant in this case was not issued upon probable cause to believe that evidence of the crime would be found at the defendant’s residence, the agents relied on the warrant in good faith. Accordingly, the defendant’s motion to suppress evidence [dkt #11] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: April 25, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on April 25, 2008. s/Felicia M. Moses FELICIA M. MOSES -12-

=== Crockett Opinion on Suppression Motion ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. VINCENT L. CROCKETT, __________________________________/ Defendant. Case Number 07-20477 Honorable David M. Lawson OPINION AND ORDER DENYING DEFENDANT’S MOTION TO SUPPRESS EVIDENCE Defendant Vincent Crockett, a Detroit Police Officer accused of stealing cocaine from the police evidence room on March 27, 2007, challenges the constitutionality of the search and seizure of evidence from the his home pursuant to a search warrant. He alleges that the warrant’s supporting affidavit did not establish probable cause to search his home and seize bank records and approximately $7,000 in United States currency. The motion was argued by the parties on January 17, 2008, after which the parties were given leave to file supplemental briefs. The Court now finds that the search warrant affidavit does not provide sufficient facts from which probable cause could be found that contraband or evidence of a crime would be located at the defendant’s residence. However, the government agents’ reliance on the search warrant was made in good faith, which precludes the application of the exclusionary rule in this case. Therefore, the motion to suppress the evidence will be denied. I. The defendant, Vincent Crockett, was an officer for the Detroit Police Department. He was paid an annual salary of $48,500. In July 2005, the Detroit Police Department seized a substance weighing over six kilograms that was tested and found to be cocaine. This cocaine was given the identification number NO1906205 and stored in an evidence locker. On March 27, 2007, the defendant signed out the cocaine, presumably to take to the laboratory for further analysis. On April 25, 2007, the defendant made cash deposits of over $35,000 into his money market account. In July 2007, other Detroit police officers attempted to locate the cocaine but were unable to do so. In their search for the cocaine, they noted that the defendant was the last person to sign it out of the evidence room. When pressed for an explanation, the defendant stated that the cocaine was still at the laboratory. On July 13, 2007, the defendant brought a substance back to the evidence room in evidence bag NO1906205. The substance was retested and determined to no longer be cocaine, but a starch component. The laboratory technician who originally had tested the cocaine stated that the packaging of the substance was different than he remembered, and it appeared that someone had forged his initials on the packaging. Relying on the above information, on July 18, 2007, FBI special agent Michael Haynie submitted an affidavit for a search warrant to a United States Magistrate Judge seeking authority to search the defendant’s home at 43112 Providence Lane, Canton, Michigan. The warrant sought the seizure of narcotics ledgers, currency derived from the sale of drugs, evidence of travel, weapons, indicia of ownership of location, photographs of conspirators, address and telephone books, electronic communication devices, bank account records, controlled substances, Detroit Police Department packaging tape, evidence logs, corn starch, other items that may have been stolen from DPD. The affidavit set forth the facts noted above, which gave rise to the suspicion that Crockett had stolen the cocaine from the police evidence room and replaced it with a corn starch substance. -2- As to whether evidence of this wrongdoing would be located in Crockett’s townhouse, the affidavit contained only the following: Detroit Police Department records confirm that CROCKETT currently resides at the Subject Premises. I have debriefed individuals in the Detroit area in my current capacity as an FBI Special Agent, and have learned that the going rate per kilogram of cocaine is approximately $20,000. Thus, the six kilograms of cocaine, if sold wholesale, would have yielded approximately $120,000. It is my belief, based on my experience that narcotics traffickers often keep narcotics and proceeds at their residences for extended periods of time. Therefore, I believe that there is probable cause that cocaine and or cocaine proceeds will be located at the Subject Premises. Additionally, I believe that there is probable cause that other items associated with narcotics trafficking, including those described in paragraph 4 above, will be found at the Subject Premises. Def.’s Mot. to Suppress, Ex. A, Att. B, Haynie Aff. ¶ 11. The search warrant was issued and executed on July 18, 2007. Apparently the search did not turn up any drugs, but the agents seized $2,750 in cash found at the residence. The agents also found bank account records, and the agents also seized $7,764.93 from six bank accounts at JP Morgan Chase bank. Vincent Crockett was charged with possession with intent to distribute approximately six kilograms of cocaine and embezzlement of property from the Detroit Police Department. Count I charges the defendant with possession with intent to distribute more than five kilograms of cocaine, in violation of 21 U.S.C. § 841(a)(1), and identifies the March 27, 2007 theft of six kilograms of cocaine. Count II of the indictment charges embezzlement by an agent of a local government agency that receives federal funds, in violation of 18 U.S.C. § 666(a). Count III seeks criminal forfeiture of property derived from the illegal conduct charged in Counts I and II. The defendant has moved to suppress the evidence obtained at his residence. -3- II. The defendant does not contest the proposition that the search warrant affidavit establishes probable cause that he was involved in wrongdoing. Rather, he contends that the affidavit contains no information justifying the conclusion that any contraband or evidence would be found at his home, which is the place to be searched, according to the warrant. The government counters by citing a line a cases in which the Sixth Circuit has upheld warrants to search the homes of known drug dealers when the supporting affidavits contain language that the affiant, through experience, has learned the habits of drug dealers and knows they frequently keep drugs and records of drug sales in the places where they live. Under the command of the Fourth Amendment, applicable to the States as incorporated into the Fourteenth Amendment, “no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” U.S. Const. amend. IV; see Mapp v. Ohio, 367 U.S. 643, 654-55 (1961). The test for probable cause calls for an assessment of whether there is “a ‘fair probability,’ given the totality of the circumstances, that contraband or evidence of a crime will be found in a particular place.” United States v. Davidson, 936 F.2d 856, 859 (6th Cir. 1991) (quoting United States v. Loggins, 777 F.2d 336, 338 (6th Cir. 1985 . A magistrate properly reaches this conclusion only when the warrant affidavit sets forth sufficient facts that provide a “substantial basis” for concluding that “a search would uncover evidence of wrongdoing.” United States v. Sonagere, 30 F.3d 51, 53 (6th Cir. 1994) (quoting Illinois v. Gates, , 236 (1983 . As the Sixth Circuit has explained, the concept of probable cause is not easily reducible to a simple formula: Probable cause is defined as reasonable grounds for belief, supported by less than prima facie proof but more than mere suspicion, that there is a fair probability that -4- contraband or evidence of a crime will be found in a particular place. This determination does not lend itself to the application of rigid legal rules . . . . Rather, the probable cause standard is a practical non- technical conception wherein we deal with probabilities which are the factual and practical considerations of everyday life on which reasonable and prudent men, not legal technicians, act. Stated otherwise, probable cause is a fluid concept – turning on the assessment of probabilities in particular factual contexts – not readily, or even usefully, reduced to a neat set of legal rules. United States v. King, 227 F.3d 732, 739 (6th Cir. 2000) (citations omitted). To encourage law enforcement officers to seek warrants, the Supreme Court has counseled that in close calls, doubtful warrants should be upheld. Gates, 462 U.S. at 237 n.10. And “‘reviewing courts are to accord the magistrate’s determination ‘great deference.’” United States v. Allen, 211 F.3d 970, 973 (6th Cir. 2000) (en banc) (quoting Illinois v. Gates, , 236 (1983 . As the defendant properly argues, “[t]here must . . . be a ‘nexus between the place to be searched and the evidence sought.’” United States v. Carpenter, 360 F.3d 591, 594 (6th Cir. 2004) (en banc) (quoting United States v. Van Shutters, 163 F.3d 331, 336-37 (6th Cir. 1998 . But as the government correctly notes, the Sixth Circuit has decided several cases upholding search warrants for the homes of known drug dealers and manufacturers based on the logical premise that incriminating evidence is likely to be found at the residences of drug dealers when there is probable cause to believe that an individual is a drug trafficker (and not merely in possession of controlled substance). United States v. Kenny, 505 F.3d 458, 461 (6th Cir. 2007) (upholding search of residence based on probable cause that the defendant was involved in the manufacture of a controlled substance in another location, and noting that “In United States v. Miggins, 302 F.3d 384, 393-94 (6th Cir.2002), we held, following a long line of precedents, that a sufficient nexus existed to search the residence of a known drug dealer after he had been arrested for possession of cocaine.”); United States v. Miggins, 302 F.3d 384, 393-94 (6th Cir. 2002) (collecting cases); United -5- States v. Blair, 214 F.3d 690, 696 (6th Cir. 2000) (“‘[i]n the case of drug dealers, evidence is likely to be found where the dealers live’” (quoting United States v. Jones, 159 F.3d 969, 975 (6th Cir. 1998 ; see also United States v. Yates, 132 F. Supp. 2d 559, 564-65 (E.D. Mich. 2001). However, following the injunction that the probable cause determination cannot be “reduced to a neat set of legal rules,” King, 227 F.3d at 739, the court has stopped short of establishing a categorical rule that an arrest of a known drug dealer ipso facto justifies the search of his home. See United States v. Frazier, 423 F.3d 526, 532-33 (6th Cir. 2005) (holding that “[w]here, as here, the warrant affidavit is based almost exclusively on the uncorroborated testimony of unproven confidential informants (none of whom witnessed illegal activity on the premises of the proposed search), the allegation that the defendant is a drug dealer, without more, is insufficient to tie the alleged criminal activity to the defendant’s residence”). Even in the cases cited above, there was evidence in addition to the defendant’s status as a drug dealer that pointed to a conclusion that contraband would likely be found in the residence. For instance, in United States v. Jones, 159 F.3d 969, 973-74 (6th Cir. 1998), the court found the affidavit to be sufficient where the defendant had sold drugs to an informant, drug transactions were both overheard and observed taking place on the defendant’s property outside of his residence, even though no evidence indicated that any activity actually occurred inside the defendant’s residence, and the affiant claimed that through knowledge and experience, he could expect to find drug-related materials inside. In United States v. Blair, 214 F.3d 690, 696 (6th Cir. 2000), a federal agent obtained a warrant to search the defendants’ residence for records of money laundering upon a showing that the defendants were operating a prostitution ring, they sold narcotics to the prostitutes and their customers, one of the defendants was listed under a false name as a subscriber for electric service for the prostitution houses, that defendant had filed -6- income tax returns using that same false name, and the officer affiant had stated that in his professional opinion, drug dealers usually keep such financial records and other essential materials at their homes. In Frazier, the court of appeals distinguished Miggins, Blair, Jones, and United States v. Caicedo, 85 F.3d 1184, 1193 (6th Cir. 1996), stating “None of these cases, however, supports the proposition that the defendant's status as a drug dealer, standing alone, gives rise to a fair probability that drugs will be found in his home.” Id. at 533. The court rejected the idea that the affidavit was sufficient to establish probable cause in that case because it did not tie the evidence sought to the place searched, noting that none of the informants from whom the information was received “witnessed illegal activity on the premises of the proposed search.” Ibid. The Court cited United States v. Savoca, 761 F.2d 292, 295 (6th Cir. 1985), explaining that the “inference that bank robbers tend to conceal evidence in motel rooms, standing alone, is insufficient to support the search of two bank robbers’ hotel room.” Ibid. In United States v. McPhearson, 469 F.3d 518(6th Cir. 2006), the court reiterated the idea that some nexus beyond the allegation of drug dealing alone is necessary to justify the search of a residence. The court explained: In some instances, even the fact that the residences to be searched were occupied by known drug dealers is insufficient to establish the nexus between the residences and criminal activity. In United States v. Frazier, we wrote that our case law does not “support[ ] the proposition that the defendant’s status as a drug dealer, standing alone, gives rise to a fair probability that drugs will be found in his home. Where . . . the warrant affidavit is based almost exclusively on the uncorroborated testimony of unproven confidential informants . . ., the allegation that the defendant is a drug dealer, without more, is insufficient to tie the alleged criminal activity to the defendant’s residence.” Frazier, 423 F.3d at 533. Thus, an allegation of drug dealing based on information from an untested confidential informant is insufficient to establish probable cause to search the alleged drug dealer’s home. However, where the allegation of drug dealing is coupled with independently corroborated -7- information from police officers, it may be sufficient to establish probable cause. See, e.g., United States v. Miggins, 302 F.3d 384, 393-94 (6th Cir. 2002). Whether probable cause can be established by an allegation of drug dealing is irrelevant to our resolution of this case, however. The allegation of drug dealing was absent from the affidavit supporting the warrant in this case, which presents a probable cause determination based on an even looser connection between the residence and the suspected criminal activity. McPhearson, 469 F.3d at 524 n. 3. The cases allowing searches of drug dealers’ homes generally rely on evidence in the affidavits that the defendant was involved in an ongoing enterprise rather than a discrete transaction. For instance, in Kenny, the affidavit established that the defendant was involved in manufacturing a large quantity of methamphetamine, which the Court noted was only a step away from distribution. 505 F.3d at 461-62. Although the court of appeals is silent as this point, there was a witness who had purchased the drugs from the defendant over a period of four months, suggesting an ongoing operation. In Blair, the defendant was accused of ongoing drug trafficking related to selling drugs to prostitutes who worked for the defendant for approximately eight years. Blair, 214 F.3d at 694. In Miggins, the defendant had been convicted of “numerous cocaine charges,” suggesting that the defendant was “involved in drug trafficking.” Miggins, 302 F.3d at 393. And in United States v. Newton, 389 F.3d 631 (6th Cir. 2004), vacated for reconsideration on other grounds, 546 U.S. 803 (2005), the court found that the defendant was “a drug dealer with continuing and ongoing operations.” Id. at 635 (emphasis added). None of these features is present in this case. In addition, the Sixth Circuit has held that an officer’s “training and experience” alone will not provide the particularized data necessary to support a conclusion that evidence is likely to be found in a particular place. See United States v. Schultz, 14 F.3d 1093 (6th Cir. 1994). In Schultz, the officer sought warrants for both a safe deposit box and an apartment. Although sufficient -8- evidence existed to search the apartment given the number of phone calls placed to others from the apartment to facilitate drug sales, the safe deposit boxes were viewed differently: Officer Ideker had not made any material connection between the bank and any criminal activity. Star Bank employees did not report any illegal activities related to either the loan or the safe deposit boxes, and Ideker had no other information connecting them to any illegal activity. In his affidavit for the first warrant, the only connection Ideker made was that, “Based on his training and experience, [he] believe[d] . . . that it is not uncommon for the records, etc. of such [drug] distribution to be maintained in bank safe deposit boxes.” While an officer’s “training and experience” may be considered in determining probable cause, see, e.g., Texas v. Brown, 460 U.S. 730, 742-43 (1983); U.S. v. Martin, 920 F.2d 393, 399 (6th Cir. 1990), it cannot substitute for the lack of evidentiary nexus in this case, prior to the search, between the safe deposit boxes and any criminal activity. Officer Ideker did not have anything more than a guess that contraband or evidence of a crime would be found in the boxes, and therefore the first warrant should not have been issued. To find otherwise would be to invite general warrants authorizing searches of any property owned, rented, or otherwise used by a criminal suspect – just the type of broad warrant the Fourth Amendment was designed to foreclose. Id. at 1097-98. The affidavit in this case contains no facts suggesting that illegal activity occurred at the defendant’s residence, or that the defendant was involved in a continuous and ongoing operation at his residence or anywhere else, or even that the defendant returned to the residence after handling the cocaine from the evidence room. The FBI agent recited his conclusion that “narcotics traffickers often keep narcotics and proceeds at their residences for extended periods of time.” Def.’s Mot. to Suppress, Ex. A, Att. B, Haynie Aff. ¶ 11. But there is no information set forth that tends to establish that Crockett was a known narcotics trafficker. Rather, the affidavit proves only that Crockett is a thief, and he may have attempted to “fence” some of the stolen cocaine. Even if one were to conclude that the money deposited in his money market account represented proceeds from the sale, and even if one were to surmise that the amount of the proceeds suggested only a partial -9- sale, there is no evidence of what Crockett did with the rest of the drugs, and there certainly is no evidence that the drugs or records of the transactions were in his townhouse. Such assertion was nothing “more than a guess” and “it cannot substitute for the lack of evidentiary nexus in this case, prior to the search, between the [townhouse] and any criminal activity.” Schultz, 14 F.3d at 1097. For these reasons, the Court must conclude that the affidavit in support of the search warrant does not establish “a ‘fair probability,’ given the totality of the circumstances, that contraband or evidence of a crime will be found in” the location sought to be searched. Davidson, 936 F.2d at 859. The search warrant, therefore, was issued in violation of the Fourth Amendment. However, even where the warrant was not supported by probable cause, the evidence obtained need not be suppressed when it was “‘seized in reasonable, good-faith reliance on a search warrant that is subsequently held to be defective.’” United States v. Hython, 443 F.3d 480, 484 (6th Cir. 2006) (quoting United States v. Leon, 468 U.S. 897 (1984 . “‘[T]he relevant question is whether the officer reasonably believed that the warrant was properly issued, not whether probable cause existed in fact.’” Id. at 487 (quoting United States v. Laughton, 409 F.3d 744, 752 (6th Cir. 2005). The good faith exception does not apply in four situations: (1) where the issuing magistrate was misled by information in an affidavit that the affiant knew was false or would have known was false except for his reckless disregard for the truth; (2) where the issuing magistrate wholly abandoned his judicial role and failed to act in a neutral and detached fashion, serving merely as a rubber stamp for the police; (3) where the affidavit was nothing more than a “bare bones” affidavit that did not provide the magistrate with a substantial basis for determining the existence of probable cause, or where the affidavit was so lacking in indicia of probable cause as to render official belief in its existence entirely unreasonable; and (4) where the officer’s reliance on the warrant was not in good faith or objectively reasonable, such as where the warrant is facially deficient. Id. at 484 (citing Leon, 468 U.S. at 923). The Court finds that none of those circumstances exists in this case. -10- The defendant has not claimed that the magistrate was misled, acted as a rubber stamp for the police, or that the affidavit was nothing more than “bare bones.” Rather, the defendant focuses on the fourth possibility, claiming that the agents unreasonably relied on the search warrant because it was facially deficient. However, in cases where the nexus between contraband likely possessed by the defendant and the defendant’s household has been lacking, the court of appeals has found the question to be sufficiently close to warrant a finding of good faith. Such is the case here. In United States v. Frazier, for example, the Sixth Circuit found that the search warrant was not supported by probable cause because there was an insufficient nexus between the defendant’s alleged conduct and his residence. The Court nevertheless found that the Leon exception applied and permitted the evidence to be introduced. The Court summarized Sixth Circuit precedent on this point as follows: For example, we held in [United States v.] Van Shutters, 163 F.3d at 336 [6th Cir. 1998)], that an officer relied in good faith on a warrant where the affidavit described the residence and the suspect’s criminal scheme but connected the place to the illegal activity only by stating that the residence “was available” to the suspect. In United States v. Schultz, 14 F.3d 1093, 1098 (6th Cir. 1994), we held that an officer reasonably relied on a warrant authorizing the search of a bank safety deposit box where the affidavit underlying the warrant connected the box and the defendant’s drug trafficking only by stating that the officer’s training and experience led him to believe that evidence would be located there. And in Savoca, we held that, in light of a Sixth Circuit case which says that bank robbers often conceal evidence of their crimes in public and private places, an officer’s reliance on a warrant to search a hotel room was reasonable when affidavit underlying the warrant connected the hotel room to a bank robbery only by stating that the robbers were seen in the room on two prior occasions. [United States v. Savoca,] 761 F.2d at 297-98 [6th Cir. 1985)]. Frazier, 423 F.3d at 536-37. Similarly, in this case, the affidavit provides probable cause that the defendant stole narcotics and was selling the stolen cocaine. The affidavit is silent to the connection between the defendant and the defendant’s residence, except that the officer stated his “belief, based on . . . experience” that -11- drugs or proceeds would be in the home. Although the affidavit is insufficient, it is not so facially defective that the agents’ reliance on it and the search warrant is rendered objectively unreasonable. As a consequence, the exception to the exclusionary rule established by United States v. Leon applies to this case. III. Although the search warrant in this case was not issued upon probable cause to believe that evidence of the crime would be found at the defendant’s residence, the agents relied on the warrant in good faith. Accordingly, the defendant’s motion to suppress evidence [dkt #11] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: April 25, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on April 25, 2008. s/Felicia M. Moses FELICIA M. MOSES -12-

=== Hoving Opinion ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JAMES HOVING, Plaintiff, v. TRANSNATION TITLE INSURANCE COMPANY, Defendant. ____________________________________/ Case Number 07-15322 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS, AND SCHEDULING CLASS CERTIFICATION MOTION HEARING The plaintiff, James Hoving, has brought this putative class action to challenge the practice of the defendant title insurance company of overcharging its premium on title insurance policies issued to mortgage lenders in transactions involving refinancing residential properties within two years of a previous loan where a mortgage title police was issued. The defendant has moved to dismiss the complaint on grounds of lack of standing failure to state a claim for which this Court may grant relief. The Court heard oral argument on the motion on April 9, 2008 and finds that the plaintiff has standing to assert the claims in the complaint, the cause of action based on the Michigan Consumer Protection Act is barred by the specific provision rendering the Act inapplicable to unlawful conduct regulated by the Michigan Insurance Code, and the other counts of the plaintiff’s complaint state claims cognizable by this Court. Therefore, the Court will grant in part and deny in part the motion to dismiss and set a schedule for determining class certification. I. According to the complaint, plaintiff James Hoving refinanced his Brighton, Michigan residence on February 23, 2006. As part of the settlement procedure, Hoving was charged $1397.50 for a title insurance policy for the benefit of the mortgage lender with a face value of $345,000 Defendant Transnation Title Insurance Company (Transnation) issued the policy and charged the premium. This refinancing apparently occurred less than two years after a prior financing transaction on the same property where title insurance was purchased. the plaintiff alleges that the States of Michigan, Arizona, Colorado, Maryland, Minnesota, Missouri, New Jersey, Tennessee and Washington all have laws that require insurance companies to file with the state insurance commissioner their title insurance rates. The plaintiff complains that defendant Transnation made its filing with the state of Michigan under state insurance law in which it committed itself to charging only fifty percent of its prior policy premium if the second transaction was within two years of a previous policy issuance. The plaintiff’s complaint seeks relief for himself and for a class of plaintiffs for the defendant’s alleged overcharge. He defines the proposed class as follows: Persons in the states of Michigan, Arizona, Colorado, Maryland, Minnesota, Missouri, New Jersey, Tennessee and Washington who, in connection with a mortgage refinancing, paid a title insurance premium for a Transnation title insurance policy the amount of which exceeded the rate on file in those states and/or exceeded a lower, reissue rate for which such persons qualified. Compl. ¶ 14. The complaint alleges three counts and an amount in controversy over $5 million. Count I alleges a violation of the Michigan Consumer Protection Act and the “substantially similar laws of Class states Arizona, Colorado, Maryland, Minnesota, Missouri, New Jersey, Tennessee and Washington.” Count II alleges unjust enrichment for the inequitable retention of insurance premiums. Count III seeks a declaration that the rate charged for the reissued mortgage title policy is excessive and an injunction barring the practice of overcharging for policies eligible for the -2- reissue rate. The complaint expressly disavows that it is alleging a violation of the state insurance code. II. The defendant has filed a motion to dismiss the complaint under Fed. R. Civ. P. 12(b)(6). It claims that the plaintiff lacks standing to assert the rights of others under state laws other than Michigan’s, the Michigan Consumer Protection Act does not allow for a cause of action when other regulatory schemes are in place (including actions deemed illegal by the state insurance code), and the plaintiff cannot recover under an unjust enrichment theory. The plaintiff contests each of these arguments. Motions to dismiss are governed by Rule 12(b) of the Federal Rules of Civil Procedure and allow for dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.” Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). When deciding a motion under that Rule, the court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the complaint contains “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1974 (2007). “[A] judge may not grant a Rule 12(b)(6) motion based on a disbelief of a complaint’s factual allegations.” Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). “However, while liberal, this standard of review does require more than the bare assertion of legal conclusions.” Ibid. Federal Rule of Civil Procedure 8(a) requires that the complaint give the defendant fair notice of the -3- nature of the claim and the factual grounds upon which it rests. Twombly, 127 S. Ct. at 1964. Therefore, “[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detail factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 1964-65 (citations omitted) (alteration in original). “In practice, ‘a . . . complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.’” In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir. 1993) (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (1984 ; see also Ana Leon T. v. Fed. Reserve Bank, 823 F.2d 928, 930 (6th Cir. 1987) (per curiam) (mere conclusions are not afforded liberal Rule 12(b)(6) review). A. The defendant first observes that plaintiff Hoving’s claims are centered exclusively on his refinancing of a Michigan residence under a Michigan contract governed by Michigan law, and therefore, The defendant argues, Hoving has no standing to bring claims arising under the laws of other states. The plaintiff responds that the circumstances would change if his proposed class were certified, but the defendant cites some authority for the argument that standing should be determined before turning to class certification, which precludes consideration of unnamed potential class members. See Parks v. Dick’s Sporting Goods, Inc., 2006 WL 1704477, *2 (W.D.N.Y. June 15, 2006); Temple v. Circuit City Stores, Inc., 2007 WL 2790154, at *1 (E.D.N.Y. Sept. 25, 2007). Of course, “individual standing is a prerequisite for all actions, including class actions.” Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 423 (6th Cir. 1998) (citing O'Shea v. Littleton, , 494 (1974); Sierra Club v. Morton, 405 U.S. 727 (1972 . Although “[a] potential -4- class representative . . . cannot acquire . . . standing merely by virtue of bringing a class action, . . . ‘once an individual has alleged a distinct and palpable injury to himself he has standing to challenge a practice even if the injury is of a sort shared by a large class of possible litigants.’” Fallick, 162 F.3d at 423 (quoting Senter v. General Motors Corp., 532 F.2d 511, 517 (6th Cir. 1976 . The Supreme Court has spoken on at least two occasions to the issue of which determination should come first, standing or class certification. In Amchem Products, Inc. v. Windsor, (1997), the district court certified a class of plaintiffs who had been exposed to asbestos by the defendants over the class members’ objections to the adequacy of representation. The objectors to the class argued that “exposure-only claimants lack standing to sue” because they have not yet suffered an injury compensable by the proposed settlement and because they failed to meet the amount in controversy requirements of diversity jurisdiction. The Court concluded that addressing the requirements of Rule 23 before deciding the standing issues was appropriate: “We agree that the class certification issues are dispositive; because their resolution here is logically antecedent to the existence of any Article III issues, it is appropriate to reach them first.” Amchem Prod., 521 U.S. at 612 (citations, quotations, and alterations omitted). The Court once again applied the “logical antecedent” test in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), which also involved an asbestos injury settlement class. The Court stated: The nub of this case is the certification of the class under Rule 23(b)(1)(B) on a limited fund rationale, but before we reach that issue, there are two threshold matters. First, petitioners call the class claims nonjusticiable under Article III, saying that this is a feigned action initiated by Fibreboard to control its future asbestos tort liability, with the “vast majority” of the “exposure-only” class members being without injury in fact and hence without standing to sue. Brief for Petitioners 44-50. Ordinarily, of course, this or any other Article III court must be sure of its own jurisdiction before getting to the merits. Steel Co. v. Citizens for a Better Environment, , -5- 88-89 (1998). But the class certification issues are, as they were in Amchem, “logically antecedent” to Article III concerns, 521 U.S., at 612, and themselves pertain to statutory standing, which may properly be treated before Article III standing, see Steel Co., supra, at 92, 118 S.Ct. 1003. Thus the issue about Rule 23 certification should be treated first, “mindful that [the Rule's] requirements must be interpreted in keeping with Article III constraints. . . .” Amchem, supra, at 612-613. Id. at 830-31. As the parties have observed, “there is a split among the federal courts concerning whether the Ortiz ‘logical antecedent’ language creates a rule or an exception to the timing consideration for standing challenges in class action litigation.” Linda S. Mullenix, Standing and Other Dispositive Motions after Amchem and Ortiz: The Problem of “Logically Antecedent” Inquiries, 2004 Mich. St. L. Rev. 703, 729 (2004). Compare Parks v. Dick's Sporting Goods, Inc., 2006 WL 1704477, at *3 (W.D.N.Y. June 15, 2006) (holding that “the Court must look at the named plaintiff or plaintiffs, not the unnamed class members, and since here, there is just one named plaintiff, who lacks either statutory or Article III standing to sue for violations of state laws other than those of New York.), with Jepson v. Ticor Title Ins. Co., 2007 WL 2060856, at *2 (W.D. Wash. May 1, 2007) (stating that the “class-certification issue is logically antecedent because there is no question that the proposed class would have standing to assert non-Washington claims if it were certified”). The Seventh Circuit appears to have come down on the side of certification before standing in Payton v. County of Kane, 308 F.3d 673, 680 (7th Cir. 2002), when it considered whether a class action could be brought by plaintiffs alleging unconstitutional practices on behalf of individuals against counties other than the ones in which the named plaintiffs live. The court decided that the propriety of class certification should be considered prior to a decision on standing, and remanded to the district court to develop a factual record. Id. at 680-81. It noted that “[t]he certification of a class changes the standing aspects of a suit.” Id. at 680. That result is echoed in other published district court -6- decisions. See In re Buspirone Patent Litigation, 185 F. Supp. 2d 363, 377 (S.D.N.Y. 2002) (opting to decide class certification issues before ruling on a standing challenge grounded in the lack of named plaintiff to assert claims based in other states’ laws because “[i]f certification is granted, the proposed class would contain plaintiffs who have personal standing to raise claims under the laws governing purchases in all of the fifty states”); In re Pharmaceutical Industry Average Wholesale Price Litigation, 263 F. Supp. 2d 172, 193-94 (D. Mass. 2003) (citing Ortiz and deferring decision about whether the representative plaintiffs had standing). The Sixth Circuit has not addressed the issue directly, but the case of Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410 (6th Cir. 1998), supports the plaintiff’s position. In that case, the court held that “an individual in one ERISA benefit plan can represent a class of participants in numerous plans other than his own, if the gravamen of the plaintiff’s challenge is to the general practices which affect all of the plans.” Id. at 422. The Court reasoned that once the district court correctly determined that Fallick had standing to bring suit under ERISA against Nationwide with respect to its application of reasonable and customary limitations to its determination of medical benefits-a methodology which, by Nationwide’s own admission, it employs in all the benefits plans which Fallick wishes to include under the aegis of the proposed class-the court should then have analyzed whether Fallick satisfied the criteria of Rule 23 with respect to the absent class members. Id. at 423. The Court finds no reason not to apply the same rationale to the present case. Even if the plaintiff has standing to assert claims in this jurisdiction (which is not challenged here), to proceed as a representative of a class he must still establish that his claim is typical of those individuals whose claims arise under the laws of other states and he can represent those individuals adequately. See Fed. R. Civ. P. 23(a). That determination must be made before the Court can decide whether -7- the plaintiff has standing to maintain a class action as the named plaintiff; and therefore the decision on class certification is logically antecedent to the determination of standing. For example, with the facts presented in the complaint, the plaintiff certainly could not file an individual suit only seeking relief under Arizona law; however, a member of his proposed class from that state likely would have suffered an injury that could be redressed under Arizona law. The defendant has not seriously challenged the plaintiff’s standing to assert his claims arising from the alleged overcharge on his own refinancing transaction. The question whether he has standing to proceed as a class representative will be subsumed in the class certification decision, but it the argument does not support the defendant’s requested dismissal presently. B. The defendant next argues that count I of the complaint based on the Michigan Consumer Protection Act (MCPA), Mich. Comp. Laws § 445.901, et seq., should be dismissed because of language in the Act itself that makes the law inapplicable to the claims advanced by the plaintiff. The MCPA prohibits “Unfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce,” which includes “Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has sponsorship, approval, status, affiliation, or connection that he or she does not have,” Mich. Comp. Laws § 445.903(1)(c), and “Failing to reveal a material fact, the omission of which tends to mislead or deceive the consumer, and which fact could not reasonably be known by the consumer.” Mich. Comp. Laws § 445.903(1)(s). However, the MCPA does not apply to any “transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States.” Mich. Comp. Laws § -8- 445.904(1)(a). And the “act does not apply to or create a cause of action for an unfair, unconscionable, or deceptive method, act, or practice that is made unlawful by chapter 20 of the insurance code of 1956, 1956 PA 218, MCL 500.2001 to 500.2093.” Mich. Comp. Laws § 445.904(c). “The burden of proving an exemption from this act is upon the person claiming the exemption.” Mich. Comp. Laws § 445.904(1)(d). With respect to the exemption under the MCPA relating to conduct rendered illegal by the insurance code, the Michigan courts appear to read the language broadly. In Logan v. Blue Water Title Co., 1996 WL 33356941, at *1 (Mich. Ct. App. Oct. 1, 1996), an unpublished decision, the state court of appeals held that the plaintiff could not maintain an action under the MCPA against the defendants, who were “unquestionably engaged in the business of insurance,” because regulation of the alleged deceptive practices fell within the statutory authority granted to the state insurance commissioner. The defendant points to a section in Chapter 24 of the Michigan Insurance Code, which it believes encompasses the practice challenged by the plaintiff in this case. The provision reads: Every insurer shall file with the commissioner every manual of classification, every manual of rules and rates, every rating plan, and every modification of any of the foregoing that it proposes to use. Every such filing shall state the proposed effective date thereof and shall indicate the character and extent of the coverage contemplated. Mich. Comp. Laws § 500.2406(a). The plaintiff insists that he is not basing his action on a violation of this statute, and therefore the exemption in the MCPA does not apply. However, the language in the MCPA does not require that the plaintiff allege a violation of Chapter 20. Instead, the contested “method, act, or practice” simply must be unlawful under Chapter 20. Mich. Comp. Laws § 445.904(c). This conclusion is bolstered by the use of the phrase “does not apply to or create a cause of action.” Ibid. The use of the words “apply to” indicates that the exclusion meant to -9- encompass claims based on a “method, act, or practice” deemed unlawful under the insurance code, regardless of whether the claim actually is brought under the code itself. Here, the plaintiff contends that the defendant charged rates in excess of those scheduled in the manual on file with the insurance commissioner. Under Chapter 20 of the insurance code, the commissioner of insurance is permitted to abate any “act or practice [that] is unfair or deceptive” by an insurance company, such as departing from the schedule of rates. Mich. Comp. Laws § 500.2043(1). Any act that could be deemed “unfair or deceptive” (like the plaintiff’s claim here) is exempted from the MCPA as long as the act was performed by an insurance company subject to regulation by the insurance commissioner. The plaintiff attempts to distinguish unfair policies from deceptive rates, but this effort is unavailing because the exemption speaks to a “method, act or practice,” which plainly encompasses both policies and rates. The Court finds, therefore, that count I of the complaint fails to state a claim under the MCPA and must be dismissed. C. The defendant next contends that the plaintiff is not entitled to recover on an unjust enrichment theory because the complaint merely alleges an inequity without supporting facts. The defendant also argues that no inequity can be alleged credibly because the lender is made aware of its entitlement to a lower reissue rate for mortgage title policies through a booklet furnished to each borrower as required by 12 U.S.C. § 2604 and 24 C.F.R. § 3500.6, which discloses the potential availability of a reissue rate. This argument misses the mark because the focus of the plaintiff’s unjust enrichment claim is the borrower, not the lender. Although the title policy premium is charged to the lender (for whose benefit the policy is issued), that charge is passed through directly to the borrower. A -10- borrower who is made aware of the theoretical possibility of a lower title policy premium but is charged a higher amount in her own transaction may still be the victim of an inequity. It would be a rare customer indeed who actually was aware of an entitlement to a lower premium but elected to pay a higher one. Under Michigan law, unjust enrichment is established by proof of “‘the receipt of a benefit by a defendant from a plaintiff, which benefit it is inequitable that the defendant retain.’” Michigan Educ. Employees Mut. Ins. Co. v. Morris, 460 Mich. 180, 198, 596 N.W.2d 142, 151 (1999) (quoting Moll v. Wayne Co., 332 Mich. 274, 278-279, 50 N.W.2d 881 (1952 . There must be more than a benefit received by a party, the party “is liable to pay therefor only if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it.” Dumas v. Auto Club Ins. Ass'n, 437 Mich. 521, 546, 473 N.W.2d 652, 663 (1991). “[I]f reasonable minds could differ” whether the alleged retention of benefit is unjust, then dismissal is inappropriate. Kammer Asphalt Paving Co., Inc. v. East China Tp. Schools, 443 Mich. 176, 186, 504 N.W.2d 635, 640 (1993). Numerous cases have held that a benefit may be unjustly obtained by a defendant through an intermediary, especially if there is some wrongdoing on the defendant’s part. See, e.g., ibid.; Morris Pumps v. Centerline Piping, Inc., 273 Mich. App. 187, 729 N.W.2d 898 (2006) (contractor held liable to subcontractor’s supplier when subcontractor failed to pay). Here, if the defendant charged more than it was permitted, the distribution of the booklet required under a section of the Real Estate Settlement Procedures Act will not attenuate the inequity that would result from permitting the defendant to keep the money. The defendant also mentions in a footnote its brief that the existence of an express contract precludes an unjust enrichment claim, and reasons that because the title insurance policy is an -11- express contract governing the rates, the plaintiff cannot bring such a claim. However, if the Court assumes that the policy constitutes a contract dealing with the price, that contract is unenforceable if the plaintiff’s claim is correct because the contract would violate the state insurance regulations. The insurance policy itself, therefore, does not preempt the unjust enrichment claim. D. The defendant’s argument that count III of the complaint should be dismissed is entirely dependent upon the success of its arguments that the other two counts ought not survive. The defendant also argues that Count III is legally deficient because it does not allege imminent harm or continuing irreparable injury. These arguments lack merit as well. Declaratory relief may be sought “[i]n a case of actual controversy . . . whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). Injunctive relief may be had “upon showing 1) a continuing irreparable injury if the court fails to issue the injunction, and 2) the lack of an adequate remedy at law.” Kallstrom v. City of Columbus, 136 F.3d 1055, 1067 (6th Cir. 1998). The pleadings allege sufficient facts to satisfy these requirements. III. The Court rejects the defendant’s argument that the plaintiff lacks standing to proceed. The Court finds that count I of the complaint based on the Michigan Consumer Protection Act fails to state a claim and must be dismissed, but the plaintiff may proceed based on the rest of the complaint. A schedule must be established to address the class certification issue. Accordingly, it is ORDERED that the defendant’s motion to dismiss [dkt #11] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that count I of the complaint is DISMISSED WITH PREJUDICE. -12- It is further ORDERED that the plaintiff must file his motion for class certification on or before August 15, 2008. It is further ORDERED that the defendant’s answer to the class certification motion must be filed on or before September 2, 2008. It is further ORDERED that discovery may commence immediately, but it shall be limited to class certification issues. Discovery must be relevant to the issues of class certification, including numerosity, typicality, commonality, adequacy of representation, and the definition of a proposed class. It is further ORDERED that oral argument on the class certification motion shall be held on September 29, 2008, at 3 p.m. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: April 14, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on April 14, 2008. s/Felicia M. Moses FELICIA M. MOSES -13-

=== McBroom Opinion Granting Habeas Corpus ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION BRUCE ARMAND McBROOM, Petitioner, v. MILLICENT WARREN, _______________________________/ Respondent. Case Number 04-10224 Honorable David M. Lawson OPINION AND ORDER CONDITIONALLY GRANTING PETITION FOR A WRIT OF HABEAS CORPUS The question presented in the habeas corpus case is whether defense counsel’s advice concerning the remedy for a previous attorney’s ineffective assistance was itself so erroneous as to render the petitioner’s no contest plea unknowing and involuntary. The Court finds that the petitioner’s first attorney’s performance was constitutionally deficient when he failed to convey a plea offer to the petitioner, and the second attorney’s performance was constitutionally deficient when he misinformed the petitioner of the proper remedy for the first attorney’s failing. This misinformation resulted in prejudice to the petitioner because he entered a no contest plea based upon it and received a sentence much greater than he would have received if the original (unconveyed) plea bargain were reinstated, which would have been the proper remedy for his first attorney’s defective performance. The Court is convinced, therefore, that the petitioner is now in custody in violation of his rights under the Sixth Amendment, and a conditional writ of habeas corpus will issue. I. The petitioner, Bruce Armand McBroom, is a state prisoner confined at the Boyer Road Correctional Facility in Carson City, Michigan. In his petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 and a supplemental memorandum filed by appointed counsel in this matter, the petitioner challenges his conviction for assault with intent to commit murder, Mich. Comp. Laws § 750.83, and his sentence of eleven years, three months to seventeen years in prison. The conviction resulted from a no contest plea that followed a jury trial. As noted above, the petitioner contends that bad legal advice resulted in a plea that was not knowing and voluntary. The respondent has filed an answer to the petition claiming that the petition lacks merit. The petitioner’s conviction arises from an incident in which he shot his girlfriend in the neck with a shotgun on July 22, 2001 at their home in Macomb County, Michigan. The case actually proceeded to jury trial in the Macomb County circuit court. However, just before the start of that trial, the following discussion occurred between the Court, assistant prosecutor Steven Kaplan, and defense counsel Cyril Pessina: THE COURT: Okay. You have tried to settle it and there’s no settlement? MR. KAPLAN: There is nothing offered, your Honor. MR. PESSINA: There was an offer at one point. I never had a chance to go to the jail to discuss that over with my client. THE COURT: What was that? MR. PESSINA: Attempt GBH with a one-year cap. MR. KAPLAN: We view it differently. I trust my brother counsel implicitly, but I remember a ten-year felony with a one-year cap, but the way I see it the offer is not on the table right now. THE COURT: I guess that’s your choice. MR. KAPLAN: Thanks, Judge. THE COURT: No last gasp effort Mr. Kaplan? MR. KAPLAN: No Judge. Nov. 20, 2001, Trial Tr. at 3 (emphasis added). -2- The trial proceeded and the petitioner was convicted of assault with intent to murder. Following his conviction, the petitioner retained new defense counsel, Brian Legghio, who negotiated a plea bargain with the prosecution prior to sentencing. The agreement called for the prosecution to ask the trial court to vacate the jury conviction and allow the petitioner to plead no contest to assault with intent to murder with a sentencing recommendation of eleven years, three months to seventeen years imprisonment. The prosecution also dismissed a third habitual offender charge. In exchange, the petitioner agreed to waive his appellate rights concerning the pre-trial and trial proceedings. The parties indicated that they negotiated this agreement, in part, because prior defense counsel had failed to communicate the more favorable pre-trial plea offer to the petitioner prior to the trial. Defense counsel explained: MR. LEGGHIO: Your Honor, what has precipitated the issue, your Honor, is that there is clear evidence in the transcripts that a former plea offer, that was much more beneficial to Mr. McBroom, had not been effectively communicated. Now, I realize that the prosecution has taken a position contrary to our own. The defense advances the argument that at a Ginther hearing case law is absolutely on all fours and he would be entitled to a new trial, and entitled to go back to the starting gate. That’s why we sat down to negotiate these issues with Mr. Kaplan because even if you were to grant the motion on the Ginther hearing and give us a new trial, Mr. Kaplan is not compelled to reauthorize that plea agreement. March 26, 2002, Plea Tr. at 6-7 (emphasis added). The prosecutor’s view was slightly different: He's been convicted but the question is could he then challenge his conviction based on some legal issue. My offer is that he will plead – he will admit the crime now and he will be sentenced. The bottom line for him is the sentence. He wants a lower sentence, and he’s receiving it because of our grace and his having a good lawyer. Or he can have nothing as far as I'm concerned. He's been convicted by a jury. . . . [W]e do not share in his view that he would gain a reversal on appeal, but that’s what makes horse races. -3- Id. at 5, 11-12. The trial court praised the defense counsel for doing “really good” and “pull[ing] a rabbit out of a hat,” id. at 7, 13, vacated the jury conviction, accepted the no contest plea negotiated by the parties, and sentenced the petitioner in accordance with the plea agreement to a term of eleven years, three months to seventeen years imprisonment. The petitioner subsequently moved to withdraw his no contest plea claiming that it was not knowing and voluntary due to the ineffective assistance of defense counsel. The petitioner asserted that defense counsel erred in advising him to accept the no contest plea with the sentencing recommendation of eleven years, three months to seventeen years imprisonment because counsel was under the mistaken belief that the petitioner was not entitled to receive the original plea offer of a ten-year felony with a one-year cap, which original defense counsel had failed to convey to the petitioner. The state trial court denied the petitioner’s motion via a written order. The court found that the motion was untimely, as it was required to be filed within twenty-one days of the sentence, but it addressed the merits nonetheless. The court also concluded that because the defendant “waived his right to challenge pre-trial issues” such as the initial plea offer by pleading no contest, the court found no grounds to vacate the plea. The court did not pass on the issue of ineffective assistance of counsel. The defendant filed an appeal from this ruling in the Michigan Court of Appeals on the following grounds: JUDGE MILLER ERRED IN DENYING THE MOTION FOR PLEA WITHDRAWAL WHERE IT IS UNCONTESTED THAT THE PROSECUTION OFFERED A PLEA BARGAIN AND DEFENSE COUNSEL FAILED TO CONVEY THAT BARGAIN TO MR. MCBROOM. JUDGE MILLER ERRED IN DENYING THE MOTION FOR PLEA WITHDRAWAL WHERE IT IS UNCONTESTED THAT SUBSTITUTE COUNSEL GAVE INCORRECT LEGAL ADVICE TO MR. MCBROOM BY -4- STATING ON THE RECORD THAT THE PROSECUTION WAS NOT OBLIGATED TO EXTEND AN ORIGINAL PLEA OFFER THAT ORIGINAL DEFENSE COUNSEL ADMITTED HE NEVER CONVEYED TO MR. MCBROOM. The Michigan Court of Appeals denied leave to appeal for lack of merit in the grounds presented. People v. McBroom, No. 248855 (Mich. App. July 18, 2003) (unpublished). The Michigan Supreme Court denied leave to appeal. People v. McBroom, 469 Mich. 987, 673 N.W.2d 760 (2003) (table). The petitioner’s habeas application was filed on August 25, 2004. He seeks habeas relief asserting the following claims: I. II. The lower court erred in denying the motion for plea withdrawal where it is uncontested that the prosecution offered a plea bargain and defense counsel failed to convey that bargain to petitioner. The lower court erred in denying the motion for plea withdrawal where it is uncontested that substitute counsel gave incorrect legal advice to petitioner by stating on the record that the prosecution was not obligated to extend an original plea offer that original defense counsel admitted he never conveyed to petitioner. The respondent concedes that the petitioner presented “essentially these same claims” to the Michigan courts. Nevertheless, the respondent opposes the petition, contending that the petitioner’s claims lack merit and do not warrant habeas relief. II. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the standard of review federal courts must apply when considering applications for a writ of habeas corpus raising constitutional claims, including claims of ineffective assistance of counsel. See -5- Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) imposes the following standard of review for habeas cases: An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim – (1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or (2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding. 28 U.S.C. § 2254(d). Therefore, federal courts normally are bound by a state court’s adjudication of a petitioner’s claims unless the state court’s decision was contrary to or involved an unreasonable application of clearly established federal law. Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Mere error by the state court will not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) ( internal quotes omitted . Additionally, this Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). The Supreme Court has explained the proper application of the “contrary to” clause as follows: -6- A state-court decision will certainly be contrary to [the Supreme Court’s] clearly established precedent if the state court applies a rule that contradicts the governing law set forth in our cases. . . . A state-court decision will also be contrary to this Court’s clearly established precedent if the state court confronts a set of facts that are materially indistinguishable from a decision of this Court and nevertheless arrives at a result different from [the Court’s] precedent. Williams, 529 U.S. at 405-06. The Supreme Court has held that a federal court should analyze a claim for habeas corpus relief under the “unreasonable application” clause of § 2254(d)(1) “when a state-court decision unreasonably applies the law of this Court to the facts of a prisoner’s case.” Id. at 409. The Court defined “unreasonable application” as follows: [A] federal habeas court making the “unreasonable application” inquiry should ask whether the state court’s application of clearly established federal law was objectively unreasonable. . . . [A]n unreasonable application of federal law is different from an incorrect application of federal law. . . . Under § 2254(d)(1)’s “unreasonable application” clause, then, a federal habeas court may not issue the writ simply because that court concludes in its independent judgment that the relevant state-court decision applied clearly established federal law erroneously or incorrectly. Rather, that application must also be unreasonable. Id. at 409, 410-11; see also Eady v. Morgan, 515 F.3d 587, 594-95 (6th Cir. 2008); Davis v. Coyle, 475 F.3d 761, 766-67 (6th Cir. 2007); King v. Bobby, 433 F.3d 483, 489 (6th Cir. 2006); Harbison v. Bell, 408 F.3d 823, 828-29 (6th Cir. 2005); Rockwell v. Yukins, 341 F.3d 507, 512 (6th Cir. 2003) (en banc). However, in this case, the state trial court did not address the ineffective assistance of counsel claim, and Michigan Court of Appeals denied the petitioner’s application for appeal “for lack of merit in the grounds presented” and did not address the petitioner’s claims as matters of -7- federal law. Where a state court declines to address the merits of a properly raised issue, this Court conducts an independent review of the issue. Harris v. Stovall, 212 F.3d 940, 943 (6th Cir. 2000). The deferential standard of review prescribed by the AEDPA does not apply because “[t]his statute by its own terms is applicable only to habeas claims that were adjudicated on the merits in State court. . . . Where, as here, the state court did not assess the merits of a claim properly raised in a habeas petition . . . questions of law and mixed questions of law and fact [are reviewed] de novo.” Maples v. Stegall, 340 F.3d 433, 436 (6th Cir. 2003) (internal citations and quotations omitted). This Court’s review of the issues raised by the petitioner is “not circumscribed by a state court conclusion” because none of the state courts produced a reasoned opinion on these issues. Wiggins, 539 U.S. at 510; see also Maldonado v. Wilson, 416 F.3d 470, 476 (6th Cir. 2005). A claim of ineffective assistance of counsel is a mixed question of law and fact. Rickman v. Bell, 131 F.3d 1150, 1153 (6th Cir. 1997) Both the petitioner’s claims can be collapsed into one: whether he was denied the effective assistance of counsel when his second attorney gave him bad advice on which the petitioner based his decision to enter a no contest plea. The state trial court construed the petitioner’s issue as an attack on his first lawyer’s performance, which that court considered waived by the subsequent plea. The court ruled on the petitioner’s motion to withdraw his plea as follows: Further, the Court determines that the judgment of sentence is presumptively valid and that defendant has failed to rebut such presumption. See People v. Winegar, 380 Mich 719, 729; 158 NW2d 395 (1968). In this regard, the Court is satisfied that the prosecution was entitled to withdraw and did in fact withdraw the plea upon which defendant presently seeks to rely. Judge Montgomery opined that the plea upon which defendant had been sentenced had been made “knowingly, freely and voluntarily.” See 3-26-02 Tr. at 22-23. Even defendant’s new counsel stated on the record, with defendant present, that former counsel had failed to obtain a plea offer “that was much more beneficial” to defendant. Id. at 6. In any event, defendant has apparently lost sight of the fact that he waived his right to challenge pre-trial issues, -8- which includes the initial plea offer. Under the totality of the circumstances, the Court concludes that a miscarriage of justice would occur if defendant were permitted to withdraw his plea and rely on the initial revoked plea. People v. McBroom, No. 01-2557-FC (Macomb Co. Cir. Ct. May 9, 2003). Of course, it is well established that a valid guilty or nolo contendere plea in a criminal proceeding generally forecloses claims arising from the alleged deprivation of constitutional rights occurring before the entry of the plea. See United States v. Broce, 488 U.S. 563, 569 (1989); Tollett v. Henderson, 411 U.S. 258, 267 (1973). The Supreme Court has explained: [A] guilty plea represents a break in the chain of events which has preceded it in the criminal process. When a criminal defendant has solemnly admitted in open court that he is in fact guilty of the offense with which he is charged, he may not thereafter raise independent claims relating to the deprivation of constitutional rights that occurred prior to the entry of the guilty plea. He may only attack the voluntary and intelligent character of the guilty plea by showing that the advice he received from counsel was not within [constitutional standards]. Tollett, 411 U.S. at 267. Simply stated, a defendant who pleads guilty or nolo contendere generally waives any non-jurisdictional claims that arose before his plea. See United States v. Ormsby, 252 F.3d 844, 848 (6th Cir. 2001); Siebert v. Jackson, 205 F. Supp. 2d 727, 733-34 (E.D. Mich. 2002). In applying the waiver doctrine, however, it appears that the state court misapprehended the thrust of the petitioner’s challenge to the voluntariness of his plea. The petitioner was not challenging the constitutional deprivation caused by his first attorney’s performance; rather he was alleging a new constitutional injury resulting from his second lawyer’s performance that would vitiate his no contest plea. See Tollett, 411 U.S. at 267. In such a case, the Court’s inquiry still is limited to whether the plea was knowing, intelligent, and voluntary. See Broce, 488 U.S. at 569. But there was no waiver, and the state court’s conclusion to the contrary is incorrect. -9- In assessing whether the petitioner was deprived of effective assistance of counsel by his second attorney, the two-prong test set forth in Strickland v. Washington, (1984), governs. Towns v. Smith, 395 F.3d 251, 258 (6th Cir. 2005). To show a violation of the Sixth Amendment right to effective assistance of counsel, a petitioner must establish that his attorney’s performance was deficient and that the deficient performance prejudiced the defense. Strickland, 466 U.S. at 687. An attorney’s performance is deficient if “counsel’s representation fell below an objective standard of reasonableness.” Id. at 688. The defendant must show “that counsel made errors so serious that counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment.” Id. at 687. “Judicial scrutiny of counsel’s performance must be highly deferential.” Id. at 689. The Court has “declined to articulate specific guidelines for appropriate attorney conduct and instead [has] emphasized that the proper measure of attorney performance remains simply reasonableness under prevailing professional norms.” Wiggins v. Smith, , 521 (2003) (quoting Strickland, 466 U.S. at 688) (internal quotes omitted). An attorney’s deficient performance is prejudicial if “counsel’s errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable.” Strickland, 466 U.S. at 687. The petitioner must show “a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.” Id. at 694. Unless the petitioner demonstrates both deficient performance and prejudice, “it cannot be said that the conviction [or sentence] . . . resulted from a breakdown in the adversary process that renders the result unreliable.” Id. at 687. The Strickland framework applies to claims of ineffective assistance of counsel arising from a guilty or nolo contendere plea. Hill v. Lockhart, 474 U.S. 52, 58 (1985); Carter v. Collins, 918 -10- F.2d 1198, 1200 (5th Cir. 1990). The first prong of the test remains the same. Hill, 474 U.S. at 58. However, the prejudice requirement focuses on whether counsel’s constitutionally ineffective performance affected the outcome of the plea process. Id. at 59. In other words, the defendant must show “that there is a reasonable probability that, but for counsel’s errors, he would not have pleaded [nolo contendere] and would have insisted on going to trial.” Ibid.; Carter, 918 F.2d at 1200; see also Smith v. United States, 348 F.3d 545, 551-52 (6th Cir. 2003). It is quite clear from the record that the petitioner’s first attorney did not measure up to prevailing professional norms when he failed to convey the plea offer with the one-year sentencing cap to the petitioner. It also appears that the petitioner was prepared to accept the offer on the trial day. The petitioner states that he would have accepted the plea offer if he had been aware of it. The petitioner is not required to support his own assertion that he would have accepted the offer with additional objective evidence. Magana v. Hofbauer, 263 F.3d 542, 548 n.1 (6th Cir. 2001). Since a defense attorney’s failure to notify his client of a prosecutor’s plea offer is defective performance, Griffin v. United States, 330 F.3d 733, 737 (6th Cir. 2003), and prejudice resulted, the petitioner had a strong case for challenging his jury conviction. Apparently the prosecutor also recognized the folly of pressing onward and therefore was willing to negotiate. During those negotiations, the petitioner’s second attorney undoubtedly believed that the petitioner had no right to insist that the original one-year plea deal be reinstated, and he so advised the petitioner. As a result, the petitioner accepted a plea with a sentence over ten times longer than the original proposal called for. However, in United States v. Allen, 53 F. App’x 367, 373-74 (6th Cir. 2002) (unpublished), when confronting a nearly identical situation, the Sixth Circuit held that “if it were shown that -11- defense counsel provided ineffective assistance, the remedy is to compel the government to reinstate the prior plea offer, restoring [the defendant] to where he was before ineffective assistance was rendered.” The court based its holding on in part on Turner v. Tennessee, 858 F.2d 1201 (6th Cir. 1988), vacated on other grounds, 492 U.S. 902 (1989), reinstated, 726 F. Supp. 1113 (M.D. Tenn. 1989), aff'd, 940 F.2d 1000 (6th Cir. 1991), cert. denied, 502 U.S. 1050 (1992), in which the court held that “remedies for the deprivation of the Sixth Amendment right to the effective assistance of counsel ‘should be tailored to the injury suffered from the constitutional violation and should not unnecessarily infringe on competing interests.’” Id. at 1207. The Turner court found that the only way to remedy deficient performance by defense counsel regarding a rejected guilty plea was to compel the State to reinstate the prior offer. Michigan law is consistent on that point. See People v. Carter, 190 Mich. App. 459, 463, 476 N.W.2d 436, 438-39 (1991), vacated on other grounds, 440 Mich. 870, 486 N.W.2d 740 (1992). The petitioner’s second attorney should have been so informed and passed that information on to the petitioner, which he did not. In Magana v. Hofbauer, the court “held that, as a remedy [for ineffective assistance of counsel that causes rejection of a plea bargain], the prosecution [is] free to offer the defendant another plea bargain, but that any plea offer in excess of the original offer must overcome a rebuttable presumption of prosecutorial vindictiveness.” 263 F.3d at 553. The record fails to disclose that any of these considerations were discussed with the petitioner before he entered his no contest plea. To the contrary, the advice appears to have been that the state prosecutor was “entitled to go back to the starting gate” and could “not be compelled to reauthorize that [original] plea agreement.” March 26, 2002, Plea Tr. at 6-7. That advice was not correct. The petitioner has satisfied the deficient performance prong of the Strickland test. See Hill, 474 U.S. at 58; see also -12- Dando v. Yukins, 461 F.3d 791, 800 (6th Cir. 2006) (finding deficient performance by counsel at plea stage “because [counsel] simply failed to assess a possible defense, due in part to his incorrect understanding of the law”). The petitioner has also shown prejudice sufficient to satisfy the second part of the Hill and Strickland framework. The petitioner pled no contest under a plea agreement where his minimum sentence was eleven years, three months. However, he was presumptively entitled to plead to a “ten-year felony with a one-year cap.” The sentence he agreed to was significantly lengthier than he would have faced had his counsel pressed for reinstatement of the original offer. The petitioner has shown that he was deprived of effective assistance counsel during his plea bargaining process, and his plea is therefore invalid. The petitioner is entitled to relief. III. The Court finds that the petitioner’s second attorney rendered ineffective assistance during the plea process by misinforming the petitioner of his presumptive entitlement to a plea with a lower sentence. Therefore, he has established that he is in custody in violation of his federal constitutional rights. See 28 U.S.C. § 2254(d). Accordingly, it is ORDERED that the petition for a writ of habeas corpus [dkt # 1] is conditionally GRANTED. It is further ORDERED that the respondent shall release the petitioner from custody unless the State offers the petitioner a new plea offer within seventy days. If the new plea offer is greater than that originally offered by the prosecution, the state must rebut the presumption of prosecutorial -13- vindictiveness. Dated: March 31, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 31, 2008. s/Felicia M. Moses FELICIA M. MOSES -14-

=== Fharmacy Opinion on Cross Motions for Summary Judgment ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION FHARMACY RECORDS a/k/a, FHARMACY RECORDS PRODUCTION CO., FHARM I PUBLISHING COMPANY, SHELTON RIVERS, Plaintiffs, v. SALAAM NASSAR,CURTIS JACKSON, DARRIN DEAN, DEF JAM RECORDING, RUFF RYDERS, JANICE COMBS PUBLISHING, UNIVERSAL MUSIC PUBLISHING, UNIVERSAL MUSIC & VIDEO DISTRIBUTION CORPORATION, EMI APRIL, INC., SOO SOOS SWEET SWISHER MUSIC, JOHN DOE, ET AL., ______________________________________ / Defendants. Case Number 05-72126 Honorable David M. Lawson OPINION AND ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT, GRANTING DEFENDANTS’ MOTION TO DISMISS, DENYING PLAINTIFFS’ MOTIONS FOR SUMMARY JUDGMENT, AND ADJUDICATING OTHER PENDING MOTIONS This is a copyright infringement action in which plaintiff Shelton Rivers claims to be the original author of a rhythm line – or “beat” – that was duplicated – that is, “sampled” – by defendant Salaam Nassar and incorporated into a rap tune, which enjoyed commercial success. Both Rivers and Nassar claim to be the original creator of the beat. However, the plaintiff’s sole remaining theory of liability is based on a claim of unlawful sampling under 17 U.S.C. § 114(b), which has not been established by the evidence before the Court regardless of which of the two is the original author. The parties have filed several motions, some of which raise disturbing allegations of misconduct by the plaintiffs and their attorney, Gregory Reed, Esq. The Court finds that the cross motions for summary judgment must be decided in favor of the defendants because the plaintiffs have not come forward with evidence that establishes that the accused work, a rap tune called “Shot Down,” contains a direct or indirect “recapture [of] the actual sounds fixed in the recording” Rivers said he made or a rearrangement of “the actual sounds fixed in [Rivers’s] sound recording.” Ibid. The Court also finds that the plaintiffs or their representatives have altered, lost, and destroyed evidence in the case, which warrants dismissal under this Court’s inherent authority to address such abuses. The Court, therefore, will grant the defendants’ motion for summary judgment, grant the defendants’ motion for sanctions, and deny the plaintiffs’ motion for summary judgment. The Court also will deny the defendants’ motion to exclude the plaintiffs’ witness as moot, and the deny the plaintiffs’ reciprocal motion directed at the defendants’ expert, and deny other pending motions. I. Facts and Proceedings The parties’ claims involve the testimony of a number of witnesses, affidavits, and several items of physical evidence. Therefore, a detailed recitation of the facts is required to address the issues that are necessary to the Court’s decision. A. Background The plaintiffs are Fharmacy Records, Fharm I Publishing Company, and Shelton Rivers. The remaining defendants are Salaam Nassar, Curtis Jackson (a.k.a. 50 Cent), Darrin Dean (a.k.a. Dee), Def Jam Recording, Ruff Ryders, Justin Combs Publishing, Universal Music Publishing, Universal Music and Video Distribution Corporation, EMI April, Inc., Soo Soo Sweet Swisher Music, and John Doe agents and attorneys. Several other defendants have been terminated from the litigation. The plaintiffs allege that the defendants sampled portions of the plaintiffs’ copyrighted instrumental rhythm line, “ESS Beats,” without authorization to create a rap song entitled “Shot Down,” which was recorded by the rap artist DMX. The plaintiffs claim the defendants distributed and sold the -2- infringing material throughout the United States and Europe, reaping substantial profits, as they sold over three million infringing albums. Although the plaintiffs commenced this litigation on May 31, 2005, the case finds its origins in the release of DMX’s fifth rap album in 2003 entitled Grand Champ. DMX’s album featured the song “Shot Down” as the seventh cut. Although the track attracted some attention due to a cameo appearance by hip-hop icon 50 Cent, it was otherwise unremarkable. Nevertheless, like DMX’s previous releases, Grand Champ went platinum. See Grand Champ at http://en.wikipedia.org /wiki/Grand_Champ (last visited March 31, 2008). Although mediocre at best, the beat in “Shot Down” nonetheless forms the heart of the present controversy. The dispute is simple: while defendant Salaam Nassar claims that he created the beat, plaintiff Shelton Rivers claims that he engineered the beat two to three years beforehand, and the defendants simply copied it, thereby infringing the sound recording. The other plaintiffs in this case, Fharmacy Records Production Co. (a/k/a Fharmacy Records) and Fharm I Publishing Co., are related entities that allegedly acquired ownership of “ESS Beats” following assignments in 2001 and 2004. Rivers is a composer and performer known as “Essman” or “Ess.” According to Rivers, he composed the beat at issue, which he called “Ess Beats,” in 2000 or 2001. Despite that claim, however, the plaintiffs did not file an application for registration of the beat with the United States Copyright Office until 2004. The application was granted on May 5, 2005. In their complaint, the plaintiffs initially asserted counts for copyright infringement in violation of the Copyright Act, 17 U.S.C. § 101 et seq.; unfair competition in violation of California Civil Code § 3369 and California Business and Professional Code § 17500; and intentional -3- interference with contractual relationships. See Compl. [dkt # 1] at ¶¶ 21-37, 38-39, 40-48. Pursuant to an order entered in January 2006 by Judge Victoria Roberts, however, the state-law counts were dismissed as preempted by the Copyright Act. In addition, Judge Roberts ordered the plaintiffs to reimburse the defendants under 28 U.S.C. § 1927 for their costs and fees incurred in bringing the motion for partial dismissal. Judge Roberts observed that the plaintiffs had no basis for asserting the state-law counts and they had tried to defend such action by advancing a frivolous argument. B. Initial Phase of Discovery The parties first focused on proof that might substantiate the competing claims of Rivers and Nassar as to which one was the original composer of ESS Beats. The discovery proceedings were quite contentious. 1. Written discovery In their April 17, 2006 responses to the defendants’ interrogatories, the plaintiffs stated that “ESS Beats was created by Shelton Rivers in 2001.” Defs.’ Mot. for Sanctions, Ex. 2, First Set of Interrogatories at 4. The plaintiffs further stated their belief that Salaam Nassar obtained access to “ESS Beats” by way of Rivers and Nassar’s mutual connection to the rap group D12, for whom Nassar functioned as a disc jockey (DJ). The plaintiffs said D-12 took Rivers “under [its] wing” in 2001, and he made music at its studio that year. Id. at 5. While doing so, Rivers distributed “numerous copies” of a compact disc (CD) with “ESS Beats” on it to D-12 and its affiliates, including manager Mark Hicks and producer Denaun Porter. Nassar supposedly then obtained a copy from either Hicks or Porter. When asked for specific details of Rivers’s involvement in the creation of “ESS Beats,” however, the plaintiffs were evasive. They refused to state when Rivers -4- created the beat and what steps he took in doing so. Nevertheless, the plaintiffs did indicate that in addition to Hicks and Porter, R.J. Rice and Jared Gusselin had knowledge of the creation of “ESS Beats.” Rice, as the plaintiffs would later reveal, is the owner of R.J. Rice Studios in Southfield where Rivers supposedly played “ESS Beats” for an interested rap group, Slum Village. Defs.’ Mot. for Sanctions, Ex. 10, Rice Aff. Gusselin was a sound engineer at Rap Game Studios where Rivers did some work, although it is unclear whether “ESS Beats” ever made an appearance there. See Defs.’ Mot. for Sanctions, Ex. 6, Rivers Dep. at 84-86. The plaintiffs also responded to the defendants’ first set of document requests on April 17, 2006. In response to the defendants’ request for “the original recording of ‘ESS Beats’ in the original medium in which it was recorded,” the plaintiffs responded that the “master recording” was available for inspection at counsel’s office. Defs.’ Mot. for Sanctions, Ex. 2, First Set of Doc. Requests at 3-4. The defendants also requested all “documents evidencing the creation of ‘ESS Beats.’” Id. at 5. The plaintiffs answered that they were in the process of searching for such materials and would produce them when found. The defendants further requested all documents evidencing the nature of the relationship between the plaintiffs, but the plaintiffs objected to this request for vagueness and overbreadth. In the end, the plaintiffs only produced two items in response to the defendants’ document requests. These were two documents concerning the assignment of “ESS Beats” from Rivers to the Fharmacy entities. The first, dated May 18, 2001, is entitled “Transfer of ESS Beats Assignment,” and reads as follows: For the value received, SHELTON RIVERS, the undersigned writer, creator, and composer of the music and beats of the song titled Ess Beats, developed and created on January 7, 2001, transfers and assigns his rights and interests in Ess Beats to FHARMACY RECORDS, which can be transferred to any entity affiliated with -5- entities herein that are known as Fharmacy Records, Fharmacy Records Production Co., and Fharm I Publishing Co. or any entity or venture elected by the entities. The composer authorizes the assignee to secure any valid copyright registration of the music and beats. Defs.’ Mot. for Sanctions, Ex. 4, 2001 Assignment Doc. This 2001 assignment document raised suspicion because Jeffrey Seaton, co-owner of the Fharmacy entities, testified that Fharmacy Records Production Co. and Fharm I Publishing Co. were not created until 2004. Defs.’ Mot. for Sanctions, Ex. 8, Seaton Dep. at 8, 27-30. Seaton stated that he created this document on his mother’s computer, and he said that he gave the original of both this and the second assignment document to his attorney, Gregory Reed. The second assignment document, styled “Co-Owners Ess Beats Assignment,” is dated April 2, 2004. It reads: For the value received, the undersigned, JEFFREY SEATON, individually and on behalf of WILLIAM ALLEN, as the corporate officers of Fharmacy Records (“Claimants”) transfers, assigns and sells his rights and interests, individually and on behalf of WILLIAM ALLEN in the song titled Ess Beats, created by Shelton Rivers on January 7, 2001, to Fharmacy Records, Fharmacy Records Production Co., and Fharm I Publishing Co. Defs.’ Mot. for Sanctions, Ex. 4, 2004 Assignment Doc. The plaintiffs also produced a CD with “ESS Beats” and “Shot Down” on it, but they had done that earlier in March 2006, following a Rule 16 conference. 2. Depositions With this discovery in hand, the defendants proceeded to depose Shelton Rivers, Jeffrey Seaton, and William Allen. -6- a. Shelton Rivers’s deposition Rivers testified that he first met Seaton and Allen in 2000 while making beats at Rap Game Studios in Birmingham, Michigan. They listened to his beats and liked what they heard, so they asked him if they could use his work. Rivers agreed, and he provided music for an artist known as M.C. Breed. Sometime later, Rivers says that he created “ESS Beats.” Rivers testified that he created “ESS Beats” in 2000 or 2001, but he does not know the exact day. Defs.’ Mot. for Sanctions, Ex. 6, Rivers Dep. at 33. According to Rivers, he made the beat at 1050 Lafayette Street in Detroit, where he was living at the time with his fiancé. He made the beat using a synthetic drum machine called an MPC 2000 and a keyboard, and it took him only fifteen minutes. Upon completion, Rivers saved the beat, which was in digital electronic format, to a zip disk and also recorded it onto a CD. The MPC 2000 apparently lacks internal electronic storage capability, so to preserve the beat it is necessary either to save it to an external zip disk, “dump” the beat into a “board” (using “Pro Tools” software) by way of a MIDI, or burn it onto CD. Rivers explained that if the “dumping” method is chosen, all eight “leads” or “tracks” (i.e., sound loops) are transferred into the board intact. If the CD method is chosen, the beat is collapsed into only two tracks, resulting in an inferior product. Rivers made a dozen or so copies of the “ESS Beats” CD and gave them to Mark Hicks, his manager at the time. He also gave a copy to Allen and Seaton. Hicks apparently distributed the CDs widely, because Rivers stated that “[t]he whole hip hop community heard that beat.” Id. at 34. Rivers stated that among others, D12 and its various members (including Nassar) heard the beat, since Hicks was D12’s manager and Rivers worked with Nassar from time to time. Nothing immediately came of “ESS Beats,” however, and Rivers parted ways with Hicks sometime in 2001. -7- At the time of his desposition, Rivers stated that he still had the zip disk containing the original “ESS Beats” file that he saved upon creation. Id. at 71-72, 101. In addition to Hicks’s attempts, Rivers says he made his own efforts to interest artists in “ESS beats.” In 2001 or 2002, Rivers met with rap group Slum Village at R.J. Rice Studios in Southfield. Id. at 40-42. Rivers brought his MPC 2000 to the studio, hooked up all eight leads, and “put into their system three beats, one of which was Ess Beats.” Id. at 42. Slum Village ended up using one of the beats other than “ESS Beats.” The only other time Rivers made the beat available in its original, eight-lead format was “sometime between 2001 and 2003” at Fharmacy Records studio in Ypsilanti. Id. at 43. He did this because he was “comfortable” with Seaton and Allen, and he transferred the beat through a MIDI onto the computer program “Pro Tools.” Id. at 44-45. Rivers did not have a specific project in mind, but gave them the beat for “whatever they wanted to do with [it].” Id. at 45. Rivers later met “Sticky Fingers,” a hip hop producer, artist, and manager, in Los Angeles. Sticky Fingers became Rivers’s manager, and Rivers moved to Los Angeles to work with Sticky, where he apparently remains to this day. Id. at 38. While sitting in a car in Los Angeles, one of Rivers’s friends told him that Rivers’s “boy,” Salaam Nassar, had “landed” a beat on DMX’s new album, Grand Champ. Id. at 49-50. Rivers said that he was intially happy for Nassar, and Rivers asked his friend to play the DMX song. “Shot Down” was played, and Rivers insists that he immediately recognized the instrumental as “ESS Beats.” Rivers states that he was “hurt,” but he says that he could not take any action right away because he had to travel to Africa to work on a project with Sticky Fingers. -8- When he returned from Africa around Christmas 2003, Rivers started talking with people from D-12 and eventually made contact with Nassar over the phone. They spoke a number of times, but “th[e] last conversation wasn’t very good.” Id. at 54. According to Rivers, Nassar told him that he had earned $7,500, and he offered to split that sum with Rivers. Rivers refused, and the conversation devolved into “cussing and hollering.” Id. at 55. At some point, Rivers acknowledged that he “actually taped some of the conversation because he admitted so many times that he took the beat.” Ibid. Rivers stated that he still had the tape in Los Angeles but said it was “not significant” because his “tape recorder [may have] messed up at the time,” and there was so much yelling. Id. at 55-56; see also id. at 61-62. Nevertheless, plaintiffs’ counsel, Gregory Reed, stated that he would acquire and distribute a copy of the tape. Id. at 123. During at least one of their conversations (it is unclear whether it was the recorded one), Nassar tried to say that he made the beat and, later, that they made the beat together. That apparently agitated Rivers, because Nassar was “lying all the way around,” he says. Id. at 62. Additional proof of this proposition came from an interesting source, a rapper named “Proof.” Proof, who was famously slain outside a Detroit nightclub in 2006, was part of D12 and had heard “ESS Beats.” When Rivers returned from Africa, he says Proof called him and said it was terrible that Nassar had stolen the beat. See id. at 53 (“Proof’s like, yo man, what Salaam did was messed up, that was terrible.”). When asked how Nassar could have obtained access to the beat, Rivers explained that there were a number of possibilities: [W]hen I first heard [“Shot Down”], I thought he took it off the two track or the CD and he just, you know, manipulated some type or played it over. But actually we worked at his house – I worked at his house like I told you about. He could have took it off my zip [disc], you know what I’m saying, while I left for anything, went to the store or something, and we were working at Rap Game Studios. I brung him and Proof [from D12] and a lot of those guys around over there, you know, and, you -9- know, my zips like even Denaun Porter from D12 ended up with one of my zips one time. You know what I’m saying? And they – they run in cahoots and mess around. So, yeah, I was looking for every which – every way like. Id. at 64-65. Rivers later clarified that he indeed brought a zip disc with “ESS Beats” on it to Nasssar’s home when we worked with Nassar on one occasion. When questioned whether there are any differences between “ESS beats” and the beat on “Shot Down,” Rivers gave answers that can be considered contradictory: Q. A. Q. A. . . . . Based on your experience in the music industry do you believe that there are any differences at all between your beat and the beat used on the DMX song? Any differences? No. I can’t say – actually, I think mine sounds better coming off the MP[C 2000] than what he did with it, you know. But honestly it’s the same. It’s the same beat. They’re ain’t no difference. . . . So there’s some minor, what would you call them, textual differences or textual? How would you characterize – When you drop a beat, producers mix – everybody has different ears. People mix different. But actually he didn’t really mix it too good, you know what I mean? He didn’t mix it. It’s the same beat. Id. at 67-68. Rivers testified that he thinks he owned the beat when “Shot Down” was released, but he acknowledged that Seaton and Allen may have had some interest in it at the time. Id. at 57-58. At another point, however, Rivers testified that Allen, Seaton, and the Fharmacy entities did not acquire the rights to “ESS Beats” until 2004. Id. at 87-88. He doubled-back once more, however, acknowledging that he signed the 2001 assignment agreement. Id. at 93, 96-97. Nevertheless, Rivers apparently thought this was not a full assignment, but simply a way for him to “share” his beats with Fharmacy. See id. at 96-97. Rivers thinks that he talked with Seaton and Allen the day after he first heard “Shot Down,” and they expressed frustration and shock at Nassar’s theft. Seaton -10- and Allen told Rivers that they would help him take legal action, and they paired Rivers up with attorney Gregory Reed. According to Rivers, Seaton approached him in 2004 and told him they were going to file an application for registration with the Copyright Office. Even though Rivers saw the application before it was filed in June 2004, it was filed with an error as to Rivers’s birth-date (the year was listed as 1976 instead of 1973). Rivers said he actually thought a copyright application had been filed in 2001, but he realized this was not the case when the 2004 application was filed. b. William Allen’s deposition William Allen, co-owner of the Fharmacy entities, confirmed that Rivers downloaded “ESS Beats” from his MPC to Fharmacy’s studio computer sometime in late 2000 or early 2001. He says that in addition to Rivers, Allen and Seaton were present at the studio. “ESS Beats” was transferred to Fharmacy’s Macintosh G4, which Allen says he still possesses. Allen could not say whether the “ESS Beats” file was still on the computer, although he had no reason to believe that it was not. c. Jeffrey Seaton’s deposition Seaton testified somewhat differently. He stated that “ESS Beats” found its way onto the Fharmacy computer by way of a CD that Rivers had burned from his MPC. The CD files were transferred to the computer and loaded to the program “I Tunes.” To the best of Seaton’s knowledge, therefore, he has “no Pro Tools files with recordings of Ess Beats . . . either on [his] computer or on a backup disk.” Defs.’ Mot. for Sanctions, Ex. 8, Seaton Dep. at 97. Rivers’s testimony on the point may reconcile that of Seaton and Allen. According to Rivers, he transferred to Fharmacy the eight-track version from his MPC, and also “dumped the two track” version. Rivers Dep. at 43. Based on his earlier testimony – that an MPC-to-CD transfer -11- results in a two-track song – it would appear that Rivers’s reference to “the two track” signified a CD. Seaton also testified that he gave the original CD containing “ESS Beats” (which he received from Rivers in 2001) to Mr. Reed. Seaton emphasized that this disk was important to establishing the prior creation of “ESS Beats”: Q. Okay. Other than Mr. Rivers telling you that he created Ess Beats in approximately January of 2001, have you seen or are you aware of any evidence that substantiates or supports this claim. A. Q. A. Q. A. Q. A. Yes. What evidence? I also have a beat. Okay. How did you get it? Through Mr. Rivers. And approximately when did you receive that? 2001. . . . What’s on this disk? Beats. Ess beat. Q. A. Q. A. Q. A. . . . So Ess Beats is one of many on this disk? Correct. . . . And you still have this disk? Yes. I gave it to Mr. Reed. Seaton Dep. at 53. When defense counsel asked Mr. Reed if he had that disk with him, he stated that he thought he did, but a search revealed that he did not. Id. at 58. Reed promised to produce the CD allegedly given him by Seaton (in addition to the tape recording and zip disk), assuming he could find it. Id. at 83-84. -12- d. Salaam Nassar’s deposition The plaintiffs’ counsel deposed Salaam Nassar on August 31, 2006. At that time, Nassar was still acting as a DJ for D12, and he was also working with Obie Trice, another Detroit rap artist of national fame. Nassar stated that he did not know Seaton, but he met Allen once when Allen came to pick Rivers up from Nassar’s home. Although he cannot recall the number of times, Nassar stated that Rivers has been to his home on multiple occasions and sometimes spent the night. When Rivers went to Nassar’s home, the two would “hang out” and work on music. Defs.’ Mot. for Summ. J, Ex. 34, Nassar Dep.; Pls.’ Mot. for Summ. J., Ex. P, Nassar Dep. at 14-16. Nassar met Rivers through Denaun Porter, one of the members of D12, in 2000 or 2001. Nassar admitted that the two “reviewed” each other’s music, but he described it as an informal arrangement. Nassar said that Rivers would sometimes play his music while he, Nassar, was doing other things. Nassar stated that he too made his music with a drum machine (an MPC 2000), and he described the process similarly. He would create the beat on a drum machine and then either burn it to CD or load it onto a computer. In the latter scenario, he would use software that would separate all the different instrument tracks, and from there he could make changes as desired. Turning to the creation of the beat in “Shot Down,” Nassar testified as follows: Q. Based upon the subject of why we are here today, did you work with anyone with that creation of “Shot Down”? A. No. Q. And where was that created? A. At my house. Q. What was that recorded on? A. It was made with an MPC. Q. And what year did you make that? A. I want to say between 2000, 2001. -13- Id. at 28. According to Nassar, he was indeed “the original creator” of the beat at issue. After making the beat, Nassar says he burned it to a CD, but he did not save it to a computer. He did not bother getting the work copyrighted; however, once it was used by a major artist, “they had copywritten it so [he] had no need to copyright it.” Id. at 30. Once he landed the spot on DMX’s album in either 2002 or 2003, Nassar said he saved his beat to computer using ProTools software. He then sent the ProTools file (saved on CD) to either the studio DMX was using or to Def Jam, the record label, and they went forward with it. Nassar was ultimately paid $7,500 for his work, and he has not received any royalties. Nassar says that he first learned about the present dispute when papers were served at his parents’ house notifying him of the action. He was “upset,” and he considered suing Rivers for “falsifying” but decided against this. Id. at 33-34. Nassar testified that Rivers never gave any beats to him, but he recalled that Rivers had used his drum machine to play beats before. As to the conversation that he had with Rivers after the release of “Shot Down,” Nassar confirmed that they argued; however, he denied that he ever admitted stealing the song. Nassar thought it was “silly” because it was his creation. On the other hand, Nassar stated that he “might have” offered Rivers a small amount of money “to calm him down,” but he could not recall for certain. Id. at 48-49. In relevant part, the deposition reads: Q. Did you ever – just to calm him down, did you ever offer him any money? A. No, not that I know of. I don’t know about offering money. Q. Or a payment? A. I might’ve. I tried to just like talk like to confirm I wanted to meet him, just to confirm. Because I had already – people had already come and, like, gossiped saying that he was going around saying that. Q. Just to calm him down, did you offer him a thousand dollars? A. I can’t recall. Q. Would you be willing to pay him any money today? A. No. -14- Q. Just to get rid of this? A. No. Q. Is there any particular reason? A. He – for what? Why should I pay him money? He didn’t do nothing. It’s my song. I did the music. Id. at 48-49. When questioned whether there was anyone who could confirm when he made the song, Nassar identified Tonytta Martinez. Martinez owned the studio that Nassar “laid the music in.” Id. at 50. Nassar said he used Martinez’s studio around 2000, and he knows that he played the beat for him. Nassar apparently used Martinez’s ProTools software, as Nassar did not own the program himself. However, although Nassar played the beat for Martinez in 2000 or so, he did not transfer it to ProTools until 2003. According to Nassar, there was no need to transfer it to ProTools until DMX used the beat in 2003. Nassar thinks that Rivers took the beat from him. He thinks this would have been fairly easy for Rivers to do because Nassar and Rivers spent time together and Rivers had access to his equipment. C. Discovery relating to the physical evidence Based on the deposition testimony of Rivers, Allen, and Seaton, it would appear that there was one CD (given by Rivers to Seaton and Allen), a zip disk (containing the original “ESS Beats” file), and possibly files from Fharmacy’s computer and R.J. Rice Studios, all of which had not been disclosed in response to the defendants’ discovery requests. As of August 2006, Mr. Reed had promised to produce the CD, the zip disk, the tape recording, and the original assignment documents, but these promises largely went unfulfilled. -15- 1. Efforts to compel production Following several motions to compel discovery that were ultimately withdrawn, the present action was reassigned to the undersigned on October 3, 2006. That same day, Mr. Reed sent defense counsel a letter representing that he had been in contact with R.J. Rice of R.J. Rice Studios and that contact provided “irrefutable evidence” of Rivers’s prior creation of “ESS Beats.” Defs.’ Mot. for Sanctions, Ex. 9, Oct. 3, 2006 Reed Letter at 1. Mr. Reed wrote: We presently have irrefutable evidence of the date that our client Mr. Shelton Rivers created the musical composition, “ESS Beats.” Mr. R.J. Rice, the owner of R.J. Rice Studios, has provided our office with a dated archived computer disc and a signed declaration indicating that he was present when Mr. Rivers was creating and working on the musical composition during 2000 and 2001. The archived disc confirms that “ESS Beats” was transferred to a computer disc file during 2001, which is date stamped October 2001. Mr. Rice’s declaration and a copy of the computer disc are enclosed. Also, enclosed is a copy of Ms. O’Reilly’s declaration confirming the creation date during 2000. There are seven (7) pieces of irrefutable evidence that support Plaintiffs’ claims. [1) computer disc; 2) filed copyright; 3) R.J. Rice’s declaration; 4) Emily O’Reiley’s declaration; 5) Shelton Rivers’ deposition; 6) William Allen’s deposition; and 7) Jeff Seaton’s deposition] Ibid. As represented, Rice’s declaration supported the plaintiffs’ theory. According to Rice, he “was present when Shelton Rivers was working on and creating the musical sound beats known as ‘ESS Beats,’ during the latter part of 2000 and the beginning of 2001 . . . at R.J. Rice Studio.” Defs.’ Mot. for Sanctions, Ex. 10, Rice Decl. at ¶ 1. According to defense counsel, however, the enclosed disc “simply has a copy of ‘Ess Beats’ on it, but no other relevant data, and certainly nothing ‘dated’ as claimed by Plaintiffs.” Defs.’ Mot. for Sanctions at 7 n.2. As for Emily O’Reiley, although it is unclear exactly who she is, she stated in her declaration that she was present when Rivers was working on “ESS Beats” at R.J. Rice Studios. Defs.’ Oct. 30 Mot to Compel [dkt # 127], Ex. 34, O’Reiley Decl. -16- After receiving this letter and corresponding information, the defendants filed another motion to compel discovery on October 30, 2006. At that point, discovery was closed under the terms of Judge Roberts’s scheduling order, so the defendants sought to re-open discovery and compel the production of (1) the original CD that Seaton testified he received from Rivers and gave to Mr. Reed; (2) Rivers’s zip disk; (3) the original assignment documents; and (4) the Rivers-Nassar tape recording. The defendants also requested an opportunity to test and inspect (a) the Fharmacy computer to which Allen stated “ESS Beats” had been downloaded, and (b) the computer belonging to Seaton’s mother that Seaton said he used to create the 2001 assignment document. Among other things, the defendants alleged that plaintiffs’ counsel had thwarted their attempts to inspect the Fharmacy computers. After four separate e-mail requests, Mr. Reed finally responded on September 7, 2006. He said that the equipment did not “presently . . . exist,” but Seaton was “seeking to find out what happened.” Defs.’ Oct. 30, Mot. to Compel, Ex. 13. The defendants also observed that Mr. Reed had failed to produce the original CD allegedly given to him by Seaton, despite Reed’s months-old promise to do so. The defendants reported the same road-block vis-à-vis the zip disk. Finally, with respect to the tape-recorded phone conversation, the defendants stated that they never received the tape and had not heard from Mr. Reed about it since August 2006. On November 29, 2006, Magistrate Judge Donald Scheer granted in part the plaintiffs’ motion to compel. Although his order did not discuss the rationale it length, it is clear that Judge Scheer believed the defendants to be in the right. He granted virtually all of the relief sought, including (1) expedited production of the Fharmacy Macintosh G4 for analysis and testing, (2) expedited production of Rivers’s zip disk, (3) submission of a sworn declaration by Mr. Reed stating why he no longer had the original CD that was given him by Seaton, (4) submission of a sworn -17- declaration by Seaton stating that neither he nor his mother had possession of the computer that was used to draft the 2001 assignment document (a representation to that effect was apparently made at the hearing, and shortly beforehand), (5) expedited production of the original assignment agreements, (6) an opportunity to depose R.J. Rice, and (7) an opportunity to subpoena Rice in order to analyze his studio equipment and computers. MJ Order Granting Mot. to Compel [dkt # 139] at 1-3. Despite this order, compliance on the part of the plaintiffs and their counsel was marginal at best. Shortly after Judge Scheer granted the motion to compel, this Court issued a new scheduling order on December 11, 2006, extending discovery to late March 2007 and establishing a new dispositive motion deadline. 2. Evidence of tampering and spoliation of the physical evidence a. The CD With respect to the original CD, Mr. Reed had a declaration ready to give to defense counsel at the hearing on the motion to compel. Strictly speaking, therefore, he complied with that part of Judge Scheer’s order. In terms of content, however, Reed’s declaration raaises additional questions. Reed stated: 1. 2. 3. During the 2001 calendar year, Jeffrey Seaton presented me with a CD that he received from Shelton Rivers containing multiple tracks with beats, which included “Ess Beats.” I listened to the disc in 2001 containing “Ess Beats” and later compared it to the “Shot Down” recording by DMX on the Grand Champ album. The instrumental music from “Ess Beats” was identical to the instrumental music in “Shot Down.” To date, I have been unable to locate the CD that Jeffrey Seaton presented to the undersigned that had multiple tracks containing “Ess Beats.” -18- Defs.’ Mot. for Sanctions, Ex. 15, Reed Dec. (dated Nov. 19, 2006). There is a major problem with this testimony (apart from the fact that Reed admitted losing key evidence). Although it bolsters the plaintiffs’ theory of prior creation if Seaton gave Reed the disk in 2001, Seaton testified that he had absolutely no dealings with Reed before 2003. Defs.’ Mot. for Sanctions, Ex. 8, Seaton Dep. at 53 (“Q. Had you had prior dealings with Mr. Reed? A. Before 2003? No.”). And this of course is logical because there was no need to seek counsel until Rivers, Seaton, and Allen had heard “Shot Down,” released in 2003. Allen and Rivers also testified that they had no dealings with Reed in 2003. Allen stated that his first dealings with Reed were in either 2003 or 2002 in connection with a contract issue for an unrelated artist. Defs.’ Mot. for Sanctions, Ex. 7, Allen Dep. at 15. Rivers testified that he did not retain Reed until 2004 or 2005. See Defs.’ Mot. for Sanctions, Ex. 6, Rivers Dep. at 58 (stating that he switched to Reed from another NY-based attorney because Reed appeared to have a better sense of his interests). Further undermining Reed’s declaration is the fact that his office did not file an application for copyright registration until 2004. b. The zip disc Turning to the zip disk, the plaintiffs did produce this item, but it was not what it was represented to be. The defendants hired Ives R. Portrafka, a senior examiner with the Center for Computer Forensics, to forensically analyze the zip disk and other electronic data in this case, and his findings were disturbing. Potrafka acquired the zip disk from Mr. Reed’s office on December 14, 2006. He found that although it was labeled “Ess-Beat/D.W.,” the zip disk contained “no data” whatsoever. Thinking this odd, Potrafka conferred with technical support from Iomega, the disk’s manufacturer. Technical support confirmed that Iomega “does not ship disks void of data” but -19- rather formats and “places Iomega data on its Zip Disks.” Defs.’ Mot. for Sanctions, Ex. 18, Potrafka Report at 2. Potrafka therefore concluded that ! This Zip Disk was “wiped clean” using some type of wiping utility. A view of the disk in Hex show[s] that every bit on the Zip Disk was “00.” If the data on the Zip Disk had been deleted or had the Zip Disk been formatted, the disk would not have been totally blank. The wiping of the Zip Disk is an intentional act by a user to destroy all data on the Zip Disk. ! Iomega Technical Support stated that they have NEVER shipped an Iomega Zip Disk without Iomega data contained on the disk, thus making a totally blank disk impossible without user interaction to wipe the disk. Id. at 6. The plaintiffs have offered no evidence to rebut Potrafka’s conclusion regarding the zip disk. The only argument they advance with respect to this point is contained in the following two sentences: “Defendants’ assertion that the original zip disk was intentional erased [sic], is without factual foundation and is ludicrous. If in fact the original zip disk was erased it was not erased by Plaintiffs: there would be no point in submitting a zip disk under these circumstances.” Pls.’ Resp. to Mot. for Sanctions at 9. c. The Fharmacy computer Potrafka’s analysis of the Fharmacy computer, once it was finally made available, is equally troubling. As noted above, Allen testified that Rivers downloaded “ESS Beats” from his MPC 2000 to Fharmacy’s studio computer (a Macintosh G4) sometime in late 2000 or early 2001. Defs.’ Mot. for Sanctions, Ex. 7, Allen Dep. at 36. Allen stated that Fharmacy still had that computer, but he was not certain whether “ESS Beats” was still on it. Id. at 37-39. Based on Potrafka’s rather extensive review, this testimony cannot be accurate because the Fharmacy Macintosh did not even exist until 2003. Potrafka acquired the Macintosh from Reed’s office and analyzed its two internal hard drives. See Potrakfa Report at 1. Before turning to the hard drives, he attempted to determine -20- the manufacture date of the computer by speaking with Apple technical support. The computer bore serial number XB304ZXHN1W, and tech support informed Potrafka that the third character of the serial number represents the year of manufacture and the fourth and fifth characters represent the week of manufacture. Id. at 3. Hence, the Fharmacy computer was made in the fourth week of 2003. With respect to the first hard drive, made by Western Digital, Potrafka observed a “[m]anufacture date of ‘18 Feb 2005’ stamped on the label.” Ibid. Potrafka found no manufacture date on the second hard drive and was unable to obtain any records from Seagate, its manufacturer. Analyzing the files on the hard drives that were supposedly related to “ESS Beats,” Potrafka found that although those files bore creation dates consistent with the plaintiffs’ theory, they had been intentionally backdated, evidently by the plaintiffs’ computer “expert,” Bernard Terry. Accordingly, Potrafka concluded: 1. It is the opinion of this computer expert that the Fharmacy computer could not have been in operation any earlier than 2003. This conclusion is based on the following facts: ! The computer was manufactured 4th week of January 2003 ! The hard drive (Item #1a) containing the “new cuts” and “shelton_rotweiler” files was manufactured on “18 Feb 2005” ! “bernard terry” user file was created May 31, 2005 ! A review of all .AIF music files for all three volumes shows the majority of creation dates after March 21, 2003. Of the files with creation dates before March 21, 2003, 10 have creation dates in 2001 (“new cuts”). In addition, 1771 files have either 1970 dates or the Macintosh default date of January 1, 1904 as creation dates. 2. It is the opinion of this computer forensic examiner that the “new cuts” and “shelton_rotweiler” files were written to the Fharmacy computer, Item #1a, volume OSX START UP 2, between September 19, 2006 and September 28, 2006 based on the following facts: ! The folder containing the “shetlon_rotweiler” file was created on September 28, 2006 -21- ! The folder containing the “.aif” sound files was created on September 19, 2006. ! The FileID’s are in the number range for September of 2006 ! A review of the Fharmacy computer for the keywords, “shelton”, “rivers”, or “ESS” revealed no files, created before 2003, other than “shelton_rotweiler” identified above. Id. at 5-6. If Potrafka’s conclusion – that the files were actually written to the Fharmacy computer between September 19, 2006 and September 28, 2006 – is correct, then Reed’s “irrefutable evidence” letter (dated October 3, 2006) and Rice’s declaration (dated September 22, 2006) would have come on the heels of this subterfuge. The plaintiffs’ response to Potrafaka’s conclusion is limited to argument and speculation (they cite no evidence other than Potrafka’s report itself), and the plaintiffs essentially concede that the Fharmacy Macintosh G4 was not in existence in 2001. The whole of the plaintiffs’ response (mistakes included) reads as follows: Defendants accuse Plaintiffs of backdating the files on it G4 Apple computer with Shelton Rivers included somewhere in the file name. Defendants repeatedly reference the report of their forensic expert, Ives Potrafka, however nowhere in Mr. Potrafka’s report does it state the Plaintiffs’ backdated any files on their computer. Instead, the report identifies files named “shelton_rotweiler” with a creation date of 9-28-2001 and a modification date of 9/28/2001 [sic – should read 8/28/01 on both]. The report is indefinite about the date that “shelton_rotweiler” was actually copied to Plaintiffs G-4 computer [and] guesstimates that the date may have been sometime in September 2006. This is consistent with the Apple computer files infrastructure in that it maintains two dates[,] the date the file was actually created (whether or not it was created on the G4 computer or not[)] in addition to the date that the file is save to the G4 computer. Accordingly, while Mr. Allen may have been mistaken when he said that he had the same computer that Fharmacy Records had in 2001, the findings in defense counsel’s expert report confirms that Plaintiff Shelton Rivers had created the song “Ess Beats” by August 28, 2001. Pls.’ Resp. to Mot. for Sanctions at 9-10. -22- d. The tape recording of the conversation between Rivers and Nassar The tape recording of the conversation between Rivers and Nassar (in which Nassar supposedly admitted that he stole the beat) presents yet another cause for concern. Although Rivers unequivocally stated that he had the tape at home in California, it too managed to disappear. In a letter dated August 18, 2006, Reed stated that he would forward counsel a copy of the recording “upon receipt of the tape from [Rivers].” Defs.’ Mot. for Sanctions, Ex. 19, Reed Letter (dated Aug. 18, 2006). However, in a letter dated November 10, 2006, Reed represented that “Mr. Rivers cannot locate the tape.” Defs.’ Mot. for Sanctions, Ex. 20, Reed Letter (dated Nov. 10, 2006). The plaintiffs now downplay the importance of the recording, averring that even if Rivers had been able to find it, “it would have been inadmissible because the conversation was recorded without Mr. Nassar’s knowledge and consent.” Pls.’ Resp. to Mot. for Sanctions at 8 (no law cited). e. The assignments Production of the original assignment agreements has raised additional concerns. These documents were suspicious for a variety of reasons, including the fact that the first document (dated 2001) referenced entities that were not founded until 2004. Hence, the defendants understandably sought to examine these documents to determine their authenticity, and Magistrate Judge Scheer ordered production of the same. That never happened. Shortly after Seaton testified that he gave the originals of both documents to Mr. Reed, Reed responded that he was unable to find the first assignment document drafted in 2001. (He did find and forward the 2004 document.) On August 18, 2006, Reed wrote defense counsel and stated: “Please be advised that we have researched our files, and we do not have the original [2001] agreement that Mr. Seaton refers to in your letter. Mr. Seaton has also researched his file and has -23- been unable to locate the document.” Defs.’ Mot. for Sanctions, Ex. 21, Reed Letter (dated Aug. 18, 2006). On September 18, 2006, Reed provided defense counsel with an update: “[O]ur office does not have the original [2001] agreement that Mr. Jeff Seaton mistakenly indicated that he provided our office with. As of September 13, 2006, he indicated he checked all of his other files and was unable to locate the original. If he is able to locate the document subsequent to his letter, we will be glad to provide the document to you.” Defs.’ Mot. for Sanctions, Ex. 22, Reed Letter (dated Sept. 18, 2006). Since the original never turned up, the defendants sought examination of Seaton’s mother’s computer, which Seaton allegedly used to draft the 2001 document. Seaton Dep. at 103. That effort was stymied as well. Prior to Judge Scheer’s order on the motion to compel, Seaton submitted a declaration stating as follows: 1. 2. I reviewed the computer at my mother’s house and it does not have the “Ess’ Beats” Assignment document on the hard drive. As of this date, the Acer equipment is the only equipment located at my mother’s home. All previous equipment up to the year 2001 was disposed of and discarded due to obsolescence. Defs.’ Mot. for Sanctions, Ex. 23, Seaton Dec (dated Oct. 20, 2006). Following Judge Scheer’s order requiring a more complete statement, Seaton furnished a supplemental declaration: 1. 2. I reviewed the present computer at my mother’s house on October 18, 2006 and it did not have the “Ess’ Beats” Assignment document on its hard drive. That I nor my mother are currently in possession of the computer that was used to draft the transfer of “Ess Beats” assignment that refers to the various entities related to Fharmacy that were not formally incorporated but were used by Fharmacy involving various entertainment projects during the year 2001 to this date. -24- 3. The computer equipment used during 2001 was discarded due to obsolescence. The computer was discarded for trash pick up by me at the request of my mother. Defs.’ Mot. for Sanctions, Ex. 24, Seaton Dec (dated Dec. 8, 2006). The plaintiffs’ response to the defendants’ challenge to the validity of the 2001 assignment document is unsatisfying. The plaintiffs state that, “[a]lthough Fharmacy Records Production Co. and Fharm I Publishing did not formally exist at the time the assignments were signed[,] the Plaintiffs conducted business in those names at that time and consider[ed] them to exist based on that fact.” Pls.’ Resp. to Mot. for Sanctions at 8. However, other than Seaton’s declaration, the Court has found no testimony that substantiates this assertion, even though Seaton and Allen were specifically questioned about the genesis of Fharmacy Records Production Co. and Fharm I Publishing. See Seaton Dep at 27-32; Allen Dep. at 51-53. f. The R.J. Rice declaration Pursuant to Judge Scheer’s order, the defendants also took the opportunity to depose R.J. Rice on December 4, 2006 to question him about his earlier declaration. At the deposition, defense counsel played a CD with “ESS Beats” on it, and Rice stated that he did not recognize it. Defs.’ Mot. for Sanctions, Ex. 25, Rice Dep. at 22-24, 33-35. Rice stated that he knew Rivers to be a producer, having first met him in the late ‘90s when he came by R.J. Rice Studios to interest Rice in his beats. Even though he did not recognize “ESS Beats” when played, Rice stated that he purchased three beats from Rivers, one of which was “ESS Beats,” for possible use with the recording group Slum Village. For some reason, “ESS Beats” never made it onto Slum Village’s album, but another one of Rivers’s beats did. Rice said that they “were going to use [“ESS Beats”] on one of Slum’s future albums, but [they] never did because it was taken by . . . DMX.” Id. at 33. -25- When questioned further about why he did not recognize “ESS Beats,” the following exchange took place: Q. A. Q. A. Q. A. Q. A. Q. A. I’ll represent to you that that is what the plaintiffs are telling us is the track called Ess Beats. Okay. And you’ve never heard – you’ve never – you wouldn’t recognize that, sitting here today, if I played that for you? No, no, I wouldn’t recognize it. Had you ever heard that before? Yeah – I don’t know if I heard that before, I don’t know. But have you heard something called Ess Beats before? Yes. But you don’t know if that, what I played on the CD, was ESS Beats or not? No. I’ve heard thousands of tracks over the five years I’ve heard – Id. at 34-35. Rice went on to state that he met with Rivers regarding “ESS Beats” and other songs somewhere around 2000. Rivers met with Slum Village at Rice’s studio and they selected three beats to use, one of which was “ESS beats.” Before Rice purchased the beats, he went to the “back room” where the equipment was and listened to each of the beats as Rivers played them through his MPC 2000. After Rice paid Rivers for the songs, Rivers loaded the beats on “[t]wo tracks from the drum machine to a computer system” at Rice’s studio. Id. at 48. In this fashion, “ESS Beats” supposedly made it onto one of Rice’s hard drives. Rice stated that he listened to “Shot Down” “years ago,” shortly after it came out, but he hadn’t heard it since. Id. at 81. According to Rice, he and Rivers own “ESS Beats,” and he tends to think the Fharmacy entities have no legitimate claim to it. When presented with his earlier declaration (which is in some tension with the fact that he did not recognize “ESS Beats” when played), Rice stated that it was prepared by Gregory Reed’s office, and he signed after looking it over. See id. at 88-90 (stating that he only “half-read it”). However, Rice never disavowed his statements in the declaration. -26- In response to the defendants’ contention that the veracity of Rice’s declaration is undermined by the fact that he did not recognize “ESS Beats” when it was played for him some three months later, the plaintiffs simply observe that “[t]he declaration does not clearly contradict Mr. Rice’s testimony.” Pls.’ Resp. to Mot. for Sanctions at 9. Strictly speaking, this is true. However, it is unusual that Rice would swear the two songs were “identical” in September 2006, see Rice Dec. at ¶ 3, and then fail to recognize “ESS Beats” at his deposition in December of that year, see Rice Dep. at 22-23, 33-35. R.J. Rice brought an external hard drive to the deposition with him that supposedly contained “ESS Beats” files dated from 2001. It was detained at Mr. Reed’s office for a few days, after which Ives Potrafka picked it up for inspection. Analyzing this hard drive, Potrafka found that although it contained sound files corresponding to “ESS Beats” that had creation dates consistent with the plaintiffs’ theory, it was impossible to verify their accuracy. Potrafka concluded: It is the opinion of this computer forensic examiner that the dates for the “new cuts” and “shelton_rotweiler” files found on the R.J. Rice Studios external hard drive cannot be accurately determined based on the following facts: ! The files contain the default Macintosh creation date of January 1, 1904 ! Without the computer on which that files [sic] were created it is impossible to verify the creation dates. Potrafka Report at 6. It appears that the original computer used to download the “ESS Beats” files to the Rice external hard drive no longer exists. The plaintiffs have not contradicted the defendants’ assertion that the dates on the Rice hard drive cannot be verified. -27- D. The musicology experts The parties each retained experts in the field of musicology to give opinions on the similarities between the two works. A cursory review suggests that both experts are qualified in the field and competent to opine on the similarities between “ESS Beats” and “Shot Down.” As to their conclusions, they are, in an important respect, consistent with one another. Although the experts differ when it comes to the degree of similarity, they both conclude that there are some differences between the two works. In addition, the defendants’ expert suggests that there are salient differences among the various copies of “ESS Beats,” confirming in some measure the defendants’ suspicions about the legitimacy of the plaintiffs’ sources. The plaintiffs’ expert is Judith Finell. After listening to “ESS Beats” and “Shot Down,” she concluded that 7. “ESS [Beats]” and “Shot Down” are strikingly similar musical works. 8. This is because they are nearly identical, both in each of their individual instrumental parts, as well as in the way these parts are simultaneously combined, for the entirety of both songs. 9. The two songs also share several particularly distinguishing features. 10. In comparing the instrumental material in “ESS [Beats]” and “Shot Down,” the two songs sound like virtually the same recording, with a few very minor differences. 11. It is unlikely that “Shot Down” was created independently of “ESS [Beats]. Pls.’ Mot for Dismissal [dkt # 219], Ex. E, Finell Report at ¶¶ 7-11. Finell described the differences between the two tracks, which she classified as “slight technical differences,” as follows: 29. The keyboard part would sound identical between the two songs to the average listener. While in-depth analysis shows that there are slight technical differences between the two songs here, these differences do not detract from the overall reality of their striking similarity. . . . -28- a. In “ESS [Beats],” scale degree 1 occurs in the first, third, and fourth bars of each “loop.” b. In “Shot Down,” scale degree 1 occurs irregularly, from loop to loop. For example, in bars 5-16 of the song (after the introductory section), scale degree 1 occurs in bars 5, 8, 12, 13, and 16. c. Regardless of these small technical differences, the ordinary listener would hear them as the same. . . . 37. In listening to “ESS [Beats]” and “Shot Down,” they sound like an instrumental version and vocal version (respectively) of the same song, except for the irregularity in the keyboard melody in “Shot Down’s” “loop” repetitions. Id. at ¶¶ 29-30, 37. The defendants’ musicology expert, Anthony Ricigliano, found the contrasts to be more pronounced. Moreover, Ricigliano concluded that from a musicological perspective, it is more likely that Nassar created the beat first. Ricigliano stated his ultimate conclusion as follows: After listening to, comparing and analyzing these compositions as well as the various compact discs containing individual instrumental tracks, I concluded that although the composition Shot Down and the work Ess Beats both contain essentially the same musical material in the accompaniment, they are overall two distinctively different recordings. Furthermore, the musical material contained in the synthesizer parts is so distinctive in execution that the possibility of independent creation seems very remote. Since the Shelton Rivers individual tracks are often defective, while the Nassar tracks are “clean,” it is appropriate to conclude that the Nassar tracks served as the basis for creating the composition Shot Down. Pls.’ Mot. for Dismissal, Ex. F, Ricigliano Report at ¶ 1. Among other things, Ricigliano noted that “Shot Down” does not contain some of the “varied instrumental patterns” that are present in “ESS Beats,” id. at ¶ 18, which observation corresponds with Finell’s assessment, see Finell Report at ¶¶ 29-30, 37. And he found some further oddities. In conducting his analysis, Ricigliano reviewed a number of recordings, including “[t]wo sound recordings titled Ess Beats,” “[a] compact disc -29- containing the composition entitled Shot Down,” and “[c]ompact discs containing individual music discs supplied by both plaintiffs and defendants.” Id. at ¶ 1. With respect to the last group of CDs, Ricigliano reported as follows: 19. Also examined were several compact discs containing separate tracks that represent the individual instrumental tracks shown above. There are significant differences between the various versions produced by Rivers and between those versions created for Shot Down. 20. The plaintiffs’ disc labeled Shelton rotweiler (from Rice and Fharmacy disc drives) contains instrumental tracks numbers #85 through #94. For example, track # 85 contains continuous repetition of the snare drum pattern and track # 88 continuous repetition of the high-hat cymbal parts . . . . 21. While track # 85 and # 92 (from Rice) are free of extraneous noises, the remainder of these tracks are not “clean,” tracks # 86, #89, #90, #94 contain what appears to be “bleeding” of one track (primarily track #93) into another. That is, the unwanted musical material can be heard in the background. In addition, track #89 begins with “hum” while many of these tracks #87, #88, #89 and #90 have noises or “pops,” often at the same time mark (1:39). Therefore these defective tracks undoubtedly were not used to create the accompaniment in Shot Down. 22. In contrast the defendant’s [sic] nine tracks (labeled Nassar) are without blemish or extraneous noises and represent “clean” tracks that contain only the specific musical material designation for each track. This suggests that these tracks, rather than the individual defective tracks provided by Rivers, were used to create the recording of Shot Down. This conclusion appears to be supported by the other U[niveral ]M[usic ]G[roup]-produced discs reviewed that memorialize the production process of Shot Down. 23. Also reviewed was another compact audio disc (from Reed) with nine tracks dated August 3, 2006. These tracks differ from the Shelton rotweiler (Rice) tracks in several ways. First, these tracks do not have the “bleeding” present in the Rice or F[h]armacy tracks. Secondly, the Rice tracks are all over 4 minutes in length whereas the Reed tracks are approximately 14 seconds in length. Thirdly, there are two “f sample” and two “sample” tracks that are labeled L and R (for left channel and right channel), however, each channel is identical. Since these tracks are dated August 3, 2006, they may have been produced after the fact as a recreation of the Shot Down tracks. Id. at ¶¶ 19-23. -30- E. Other “expert” discovery As mentioned earlier, Salaam Nassar stated that he played his beat for Tonytta Martinez sometime in 2000. Apparently Martinez is a former client of Gregory Reed. Reed filed an affidavit stating that he spoke to Martinez three times in December 2000 and learned that Martinez possessed a computer disc that might contain files to help establish when the beat line for the “Shot Down” creation was made. After some difficulty, Mr. Martinez turned over his laptop to Mr. Reed during a court hearing on June 27, 2007 so Reed could have his computer expert, Bernard Terry, analyze it. The plaintiffs were to arrange for a mirror image to be made (by someone other than Terry, since he is “not a computer forensic expert”), and return the lap top afterwards. Order Directing Martinez to Turn Over Comp. [dkt # 195] at 1-2. The hand-off apparently went smoothly, but it is unclear what, if any, analysis Terry performed on the materials obtained from Martinez. The plaintiffs have offered Mr. Terry as an expert in both musicology and computer forensics, but it is doubtful that Terry is adequately qualified in either field. To date, Terry has produced three “reports” (but none based on the Martinez materials). The first “report” consists only of a brief email message that Terry sent to Reed on December 29, 2006 following his “examination” of the zip disk that Nassar had produced. In one short paragraph, Terry stated that he was unable to determine the creation dates for the files in the zip disk. When defense counsel informed Mr. Reed that this was submission inadequate under Rule 26(a)(2), Terry, assisted by Mr. Reed, furnished a more formal document styled “Forensic Computer Expert Report” on March 21, 2007. Therein, Terry reiterated his ultimate conclusion that it was impossible to determine the creation dates for the files found on Nassar’s zip disk. In addition to the conclusion, -31- however, Terry’s second report reveals two things: (1) that Terry did not perform the operative steps of the analysis; and (2) that Terry is not qualified in computer forensics. In describing his methodology, Terry explained that he tried to access the zip disk by using Nassar’s zip drive, but the zip drive did not work. Accordingly, he took the zip disk to “a computer speciality shop” called IO Software, where technicians pulled up the files so they could be read. Defs.’ Mot. to Exclude, Ex. D, Second Terry Report at 2. Although Terry states in his report that he “read the files from the zip disk” at IO Software, ibid., his deposition testimony contradicts that, see Defs.’ Mot. to Exclude, Ex. E, Terry Dep. at 40-41. It is clear from Terry’s deposition that he simply stood by and watched as IO Software staff performed tests and relayed the results. See, e.g., id. at 41 (“They told me that the MPC that created this data did not time stamp the data . . . . That’s the conclusion. That’s the details that I learned from IO Software.”). Terry’s purported “qualifications” are even more revealing: QUALIFICATION OF WITNESS: The forensic computer examiner has been the music production and engineering mastermind behind major label releases from Flint based artists since the late 1980’s. MCA recording group Ready for the World, Top Authority, the Dayton Family, MC Breed, Mary Davis of the SOS Bank, Howard Hewitt and others, are just a sampling of the artists that the forensic computer examiner produced or engineers session for more than a quarter century. The forensic computer examiner has an intimate knowledge of recording and production equipment acquired over the past 35 years from prior work experiences. Second Terry Report at 2 (mistakes in original). The plaintiffs have not explained how these experiences have a bearing on computer expertise. Moreover, Mr. Terry admitted in his deposition that he was not a computer forensics expert: Q. Okay. Have you ever called yourself in any of your professional dealings a forensic computer examiner? A. Not – no. -32- Q. Have you ever been retained as a forensic computer examiner other than by Mr. Reed on this case? A. No. . . . Q. Do you know whether there is any kind of college class or training class on the topic of forensic computer examination? A. No. Q. Have you ever attended any kind of college class or training class on the topic of forensic computer examination? A. No. Q. Did you know before today that Mr. Reed would in this document [i.e., Terry’s “Forensic Computer Expert Report”] be referring to you as a forensic computer examiner? A. I did not. Q. Would you purport to hold yourself out to the Court or to others as a forensic computer examiner? A. No. Defs.’ Mot. to Exclude, Ex. E, Terry Dep. at 63-64. Terry later confirmed that he did not prepare the report, because he does not type. Instead, Terry took some notes with a pencil and relayed his findings to Reed over the telephone. Reed then drafted the report, and read it back to Terry over the phone. It seems unlikely to the Court that Reed read the entire report to Terry, since it refers to Terry twelve times as a forensic computer expert and mistakenly refers to his studio as “Silver Star Studios.” See Second Terry Report at 1-2; but see Terry Dep. at 63 (confirming that his studio is called “Silversun”). Later in the deposition, Reed made an anemic attempt to rehabilitate Terry’s credibility as a forensics expert. After eliciting testimony to establish Terry’s exploits as a music producer and engineer, Reed questioned Terry as follows: Q. So would you consider yourself after going through this [i.e., a long tenure of music production] a forensic computer expert? A. Prior to having this conversation about forensic, I honestly didn’t know what forensic meant. I have clarity now and understand what the term is and yes, I do. Yes, I am. -33- Id. at 79-80. According to Terry, he gained this “clarity” by looking up the word “forensic” in a dictionary during a break. Id. at 91. The third report submitted by Terry was offered to rebut the findings of Anthony Ricigliano, the defendants’ expert musicologist. Given the stated purpose of this report – to “assess the approach used by Mr. Ricigiliano [sic]” – it appears that Terry was holding himself out as a musicologist. Defs.’ Mot. to Exclude, Ex. F, Third Terry Report at 1. Terry apparently believes that Ricigliano’s report fails to address whether “ESS Beats” and “Shot Down” are “substantially similar,” which is not useful since Ricigliano never purported to engage that issue and in fact specifically stated that he found the works substantially similar, although he found salient differences that lent themselves to the conclusion that Nassar made the beat first. Ricigliano Report at ¶ 11. In his deposition, Terry disqualified himself as a musicologist: Q. Are you familiar with what a musicologist is? A. Yes. Q. What is a musicologist? A. It’s a person that analyzes music for record companies and just provides music analyzation services. . . . Q. Do you recognize musicology as an expertise like accounting or law? A. Sure. Absolutely. Q. Would you purport to hold yourself out as a musicologist? A. I am not a musicologist. Terry dep. at 70. With Terry’s credibility and qualifications impeached, Mr. Reed intervened once again in an attempt to rehabilitate Terry through submission of an additional affidavit. In an affidavit dated August 20, 2007, Terry explains that he truly is a computer forensic expert, and his report rebutting -34- the findings of Mr. Ricigliano is legitimate based on Terry’s knowledge of studio equipment. See Pls.’ Resp. [dkt # 210], Ex.C, Terry Dec. at ¶¶ 1-7 (stating, inter alia, “I have worked with MPC 2000 sequencing and tracking machine [sic] since they were introduced to the market during the 1990s”). In an attempt to explain why he “mistakenly”confessed to not being a computer forensic expert, Terry states: 9. On the date of the examination, Mr. Quick asked me about the term “forensic examiner” I thought I knew what term means during the break I was puzzled by his tone and manner in how he asked me. I looked up the term in the dictionary during the break to refresh my understanding then I recognized that is what I had been doing for the past 20 years or so. 10. I was able to readdress Mr. Quick’s question, and I did when Mr. Reed asked me a similar question in regards to the term “forensic.” . . . 12. I was never coached by Mr. Reed but he reminded me I must tell the truth and stay calm. . . . 18. Mr. Reed’s office retyped one of my reports and inserted the term and title “Forensic Computer Examiner” and read the report to me. As his office read back my report, I focused on the content, substance and text to make sure that it was not changed. I did not focus on the word “forensic” since I knew the report and the examiner was one and the same and the content was on point. Id. at 9-10, 12, 18 (mistakes in original). II. Cross motions for summary judgment The defendants have moved for summary judgment asserting three distinct grounds. First, they claim that the plaintiffs’ copyright registration is invalid because the plaintiffs cannot state with certainty that the CD sent to the Copyright Office is virtually identical to the original, and the plaintiffs do not know when the original was created. Second, the defendants contend that the plaintiffs have produced no real evidence that Shelton Rivers is the original author of the beat line -35- that appears on the “Shot Down” recording, and the plaintiffs cannot prove sampling because there is no evidence that sounds on “Shot Down” are the actual sounds from Rivers’s recording. Third, they argue that their own evidence of independent creation defeats the plaintiffs’ infringement claim. The plaintiffs also have moved for summary judgment on the issue of infringement, contending that their “irrefutable evidence” conclusively demonstrates that the rhythm track on “Shot Down” is “substantially similar” to ESS Beats, and Rivers was the original author of the latter. In fact, despite the clear indication that their complaint exclusively pleads a cause of action based on sampling of a sound recording – not the infringement of a musical composition copyright – the plaintiffs spend considerable effort discussing the substantial similarity test, which, as discussed below, is inapplicable to their claim. Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact.” Fed. R. Civ. P. 56(c). The parties have filed cross motions for summary judgment, which might imply that there are no facts in dispute. Nonetheless, the Court must apply the well-recognized standards when deciding such cross motions; “[t]he fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate.” Parks v. LaFace Records, 329 F.3d 437, 444 (6th Cir. 2003). Therefore, when this Court considers cross motions for summary judgment, it “must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party.” Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003). A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences -36- in favor of the non-moving party and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 587 (1986). In Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792 (6th Cir. 2005), the Sixth Circuit drew clear and explicit distinctions between musical composition copyright infringement claims and sound recording infringement claims like the one now before the Court. It found the source of those distinctions in the relevant statutes, to which this Court turns as well. Copyright law protects an owner’s rights to creative works of authorship including “sound recordings” and “musical works.” 17 U.S.C. § 102(a)(2), (7). “‘Sound recordings’ are works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work, regardless of the nature of the material objects, such as disks, tapes, or other phonorecords, in which they are embodied.” 17 U.S.C. § 101. “[A] musical composition ‘is a particular sequence and arrangement of lyrics and/or music that comprise what most people refer to as a “song.”’” Bridgeport Music, Inc. v. Still N The Water Pub., 327 F.3d 472, 475 n.3 (6th Cir. 2003). A copyright owner has the exclusive rights to do and authorize the following: (1) to reproduce the copyrighted work in copies or phonorecords; (2) to prepare derivative works based upon the copyrighted work; (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; -37- (4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; (5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission. 17 U.S.C. § 106. “The exclusive rights of the owner of copyright in a sound recording are limited to the rights specified by clauses (1), (2), (3) and (6) of section 106, and do not include any right of performance under section 106(4).” 17 U.S.C. § 114(a). The exclusive right of the owner of copyright in a sound recording under clause (1) of section 106 is limited to the right to duplicate the sound recording in the form of phonorecords or copies that directly or indirectly recapture the actual sounds fixed in the recording. The exclusive right of the owner of copyright in a sound recording under clause (2) of section 106 is limited to the right to prepare a derivative work in which the actual sounds fixed in the sound recording are rearranged, remixed, or otherwise altered in sequence or quality. The exclusive rights of the owner of copyright in a sound recording under clauses (1) and (2) of section 106 do not extend to the making or duplication of another sound recording that consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording. 17 U.S.C. § 114(b). Based on those statutes, the Dimension Films court observed that “[s]ound recordings and their underlying musical compositions are separate works with their own distinct copyrights.” Dimension Films, 410 F.3d at 796 n.3. It has been accepted, therefore, that “‘[w]hen a copyrighted song is recorded on a phonorecord, there are two separate copyrights: one in the musical composition and the other in the sound recording.’” Newton v. Diamond, 204 F. Supp. 2d 1244, 1249 (C.D. Cal. 2002) (quoting T.B. Harms Co. v. Jem Records, Inc., 655 F. Supp. 1575, 1576 n.1 (D. N.J. 1987 . “A musical composition’s copyright protects the generic sound that would -38- necessarily result from any performance of the piece . . . [while] the sound recording is the sound produced by the performer’s rendition of the musical work.” Id. at 1249-50 (citing Nimmer on Copyright § 2.10). “[A] sound recording owner has the exclusive right to ‘sample’ his own recording.” Dimension Films, 410 F.3d at 801. The protection afforded sound recordings in a digital sampling case such as the one now before the Court, therefore, does not extend to the “generic sound”; it only protects the recorded sound – the stored electronic data digitally preserved by the composer. The substantial similarity test thus has no place in determining whether infringement occurred. As the Sixth Circuit explained, “‘[i]n most copyright actions, the issue is whether the infringing work is substantially similar to the original work. . . . The scope of inquiry is much narrower when the work in question is a sound recording. The only issue is whether the actual sound recording has been used without authorization. Substantial similarity is not an issue.’” Dimension Films, 410 F.3d at 798 n.6 (quoting Bradley C. Rosen, Esq., 22 CAUSES OF ACTION § 12 (2d ed. 2003 . “Section 114(b) makes it clear that the digital sampling of a copyrighted sound recording must typically be licensed to avoid an infringement. . . . The import of this language is that it does not matter how much a digital sampler alters the actual sounds or whether the ordinary lay observer can or cannot recognize the song or the artist’s performance of it. Since the exclusive right encompasses rearranging, remixing, or otherwise altering the actual sounds, the statute by its own terms precludes the use of a substantial similarity test.” Id. at 801 n.10 (quoting Susan J. Latham, Newton v. Diamond: Measuring the Legitimacy of Unauthorized Compositional Sampling – A Clue Illuminated and Obscured, 26 Hastings Comm. & Ent. L.J. 119, 125 (2003 (internal quotes omitted). Applying the proper test, it is quite clear from the record that the defendants are entitled to judgment as a matter of law. In their complaint, the plaintiffs leave no doubt that their claim is for -39- unauthorized sampling of a digital sound recording. See Compl. [dkt # 1] at ¶¶ 6-10, 24-25, 30, 32- 33. For instance, the heart of the copyright claim reads: 24. Plaintiffs are informed and believe and therefore allege that Defendant DMX is a rap artist whose unauthorized use of the musical composition “ESS Beats” was sampled and incorporated on the Defendants’ track and appears on DMX’s “Shot Down feat. 50 Cent and Styles,” recording. 25. That Defendants’ unauthorized sampling of the song “ESS Beats” has infringed upon the rights of Plaintiffs under the Copyright Act. Id. at ¶¶ 24-25 (mistakes in original). In a sampling claim, “‘[t]he exclusive rights of the owner of a copyright in a sound recording . . . do not extend to the making or duplication of another sound recording that consists entirely of an independent fixation of other sounds, even though sounds imitate or simulate those in the copyrighted sound recording.” Dimension Films, 410 F.3d at 799- 800 (quoting 17 U.S.C. § 114(b . A reasonable jury in this case could not conclude that the defendants actually sampled “ESS Beats.” Although he equivocated on the issue, even Rivers himself testified that he thinks his version of the beat “sounds better . . . than what [Nassar] did with it.” Rivers Dep. at 67. Moreover, both the plaintiffs’ and the defendants’ expert opined that, although substantially similar, the two songs contain differences. Judith Finell, the plaintiffs’ expert, stated that “the two songs sound like virtually the same recording, with a few very minor differences.” Finell Report at ¶ 10 (emphasis added). Anthony Ricigliano, the defendants’ expert, found “significant differences between the various versions produced by Rivers and between those versions created for Shot Down” and concluded that Rivers’s tracks “undoubtedly were not used to create the accompaniment in Shot Down.” Ricigliano Report at ¶¶ 19, 21. Of course, if those differences resulted from electronically manipulating the recorded sample, such as by changing the pitch of the actual recording or “looping” -40- samples of it, see Dimension Films, 410 F.3d at 796, the plaintiffs’ claim might survive. But there is no evidence that any of that was attempted or accomplished by the defendants here. Because of the differences between the track submitted by the plaintiffs and the rhythm line recorded in “Shot Down,” as confirmed by experts on both sides, the plaintiffs have failed to offer proof that Rivers’s sound recording was duplicated. Simply put, the track on “shot Down” is different from “ESS Beats.” There is no genuine issue of fact with respect to the one issue that matters – “whether the actual sound recording has been used without authorization.” Id. at 798 n.6 (internal quotes omitted). Therefore, the defendants are entitled to summary judgment, and the plaintiffs are not. III. The defendants’ motion to dismiss In their motion for sanctions, the defendants contend that the plaintiffs and their attorney have engaged in intentional misconduct and have committed a fraud upon the court by manipulating, fabricating, and destroying evidence. The defendants insist that the Court should levy the ultimate sanction for such abuses and dismiss the case. The Court agrees. The conduct exhibited by the plaintiffs and their attorney is deeply disturbing and requires a sanction that incorporates punishment and deterrence in equal measures. The plaintiffs have failed to rebut many of the factual allegations articulated by the defendants. In fact, in response to the defendants’ motion, the plaintiffs hardly attempt to challenge the allegations of misconduct, choosing instead to develop the argument that the defendants’ motion is simply a “litigation tactic to avoid dealing with the issues of liability and damages.” Resp. Br. at 15. The plaintiffs continually stress that the defendants “have been unable to produce any evidence to corroborate . . . Nassar’s allegation that he created the instrumental music portion of ‘Shot Down.’” Id. at 2. The plaintiffs brush off most of the allegations of lost or destroyed evidence -41- (such as the tape-recorded conversation, Rivers’s erased zip-disc, and the strange assignment documents) as immaterial to the true issues in the case and nothing more than an attempt at distraction. See id. at 6-11. The defendants cite Federal Rule of Civil Procedure 37(b)(2)(C) but do not rely on it as a basis to justify the court action they seek. As the defendants rightly acknowledge, the authority to dismiss an action pursuant to Rule 37(b)(2)(C) is unavailable in this case because the alleged wrongdoing does not involve violation of a court order. See Brandt v. Vulcan, Inc., 30 F.3d 752, 756 (7th Cir. 1994) (“The rule’s plan language limits its applicability to situations where a court order had been violated. Moreover, the case law reveals that Rule 37(b)(2) has been invoked only against parties who have disobeyed a discovery ruling of some sort.”); accord Moore’s Fed. Practice 3d § 37.40. However, “the inherent authority of the Court is an independent basis for sanctioning bad faith conduct in litigation.” First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501, 511 (6th Cir. 2002). This does not mean that a court should exercise its inherent authority lightly, but it does mean that there is a time and place for invoking this power. As the Supreme Court has stated in the context of attorney’s fees, inherent authority is not displaced merely because positive law exists on the issue: There is, therefore, nothing in the other sanctioning mechanisms or prior cases interpreting them that warrants a conclusion that a federal court may not, as a matter of law, resort to its inherent power to impose attorney’s fees as a sanction for bad-faith conduct. This is plainly the case where the conduct at issue is not covered by one of the other sanctioning provisions. But neither is a federal court forbidden to sanction bad-faith conduct by means of the inherent power simply because that conduct could also be sanctioned under the statute or the Rules. A court must, of course, exercise caution in invoking its inherent power, and it must comply with the mandates of due process, both in determining that the requisite bad faith exists and in assessing fees. Furthermore, when there is bad-faith conduct in the course of litigation that could be adequately sanctioned under the Rules, the court ordinarily should rely on the Rules rather than the inherent power. But if in the informed -42- discretion of the court, neither the statute nor the Rules are up to the task, the court may safely rely on its inherent power. Chambers v. Nasco, Inc., 501 U.S. 32, 50 (1991) (internal citation omitted). In Chambers, the Supreme Court enumerated a number of acts that lie within a court’s inherent authority. Id. at 43. Among these is the power “to fashion an appropriate sanction for conduct which abuses the judicial process . . . [including] dismissal of a lawsuit.” Ibid.; see also Bank of Merietta, 307 F.3d at 512. Notwithstanding that Rule 37(b)(2)(C) is not controlling when a court relies on its inherent authority, courts have held that the factors pertinent to that Rule are instructive in analyzing the propriety of dismissal pursuant to inherent authority. See Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006). Under Rule 37(b)(2)(C), dismissal as a sanction is assessed in light of the four factors identified by the Sixth Circuit in Regional Refuse Sys. v. Inland Reclamation Co., 842 F.2d 150, 154 (6th Cir. 1988), which were succinctly summarized by the court in United States v. Reyes, 307 F.3d 451 (6th Cir. 2002), as follows: “(1) whether the party’s failure is due to willfulness, bad faith, or fault; (2) whether the adversary was prejudiced by the [disobedient] party’s conduct; (3) whether the [disobedient] party was warned that failure to cooperate could lead to dismissal; and (4) whether less drastic sanctions were imposed or considered before[hand].” Id. at 458 (internal quotes omitted). In any event, “[d]ismissal of an action . . . is a sanction of last resort,” Regional Refuse, 842 F.2d at 154, and due process appears to require a finding of bad faith or willfulness, see ibid.; see also Chambers, 501 U.S. at 50. It must be emphasized that this is not a case involving mere gamesmanship or garden variety discovery abuses. The actions of the plaintiffs and their attorney in this case are so egregious that they have forfeited their right to proceed in court. The plaintiffs clearly have no respect for the civil justice system, and it would be unfair to require the defendants to defend this case any further. -43- Looking to Regional Refuse and progeny for guidance, the first factor is whether the misconduct by the plaintiffs and their counsel results from “willfulness, bad faith, or fault.” Reyes, 307 F.3d at 458. In the present case, this factor is plainly satisfied. Although some of the events in this litigation might be excused as resulting from mere negligence when viewed in isolation (e.g., Mr. Reed’s loss of the CD allegedly furnished by Seaton), considering them in the aggregate invariably leads to the conclusion that the plaintiffs and their attorney have conducted a campaign of fraud. The list of abuses is extensive. In addition to Mr. Reed’s loss of the “original” CD furnished by Seaton, Rivers’s zip disk was intentionally wiped of data; Rivers lost the tape recording allegedly containing Nassar’s confession; the Fharmacy computer that was allegedly used in 2001 did not even exist until 2003; that computer contained files that were intentionally backdated; the 2001 assignment document referenced entities that were not even formed until 2004; the original assignment documents were lost; the computer that was used to draft such documents was thrown away; and the R.J. Rice hard drive contained file dates that could not be verified. And this list does not even include the material inconsistencies in the plaintiffs’ testimony, late disclosure of evidence, misrepresentation of evidence, and prevarications by Mr. Reed in his representations to opposing counsel. If this is not bad-faith litigation, nothing is. The second factor is whether the defendants have been prejudiced by the plaintiffs’ misconduct, Reyes, 307 F.3d at 458, and that element too has been satisfied. The plaintiffs seem to think that dismissal would just be a windfall to the defendants because they have come forward with relatively little evidence in support of their version of events. However, the plaintiffs forget that the burden of proof lies with them, and the defendants have a right to test the evidence brought against them. Due to the conduct of the plaintiffs and their attorney, the defendants’ right to rebut the -44- plaintiffs’ allegations has meant little because the evidence has either been lost, tampered with, or irretrievably compromised. There is simply no way that this case can go forward. The third factor under Regional Refuse is whether the plaintiffs were “warned that failure to cooperate could lead to dismissal.” Reyes, 307 F.3d at 458. This is the one factor that does not clearly militate in favor of dismissal but, on balance, it is not dispositive. There is nothing in the record showing that the plaintiffs were warned by a judicial officer that dismissal was a possibility. However, this factor seems less relevant in a case such as this, where the conduct at issue is not merely contestable, but in contravention of basic notions of fairness and professional responsibility. A party does not need formal notice to know that spoliation of evidence and misrepresentations may lead to dismissal. The fourth and final factor is whether less drastic sanctions were imposed or considered before resorting to dismissal. Reyes, 307 F.3d at 458. This factor reflects the concept that dismissal is a sanction of last resort and should be issued only in extreme situations. See Regional Refuse, 842 F.2d at 154. This factor also favors dismissal of the instant case because lesser sanctions were imposed for earlier discovery violations, see Order Granting Mot. for Partial Dismissal and Sanctions [dkt # 55], and anything less than dismissal would be futile. That is, the evidence in this case has been so tainted that pushing onward to a decision on the merits (save granting summary judgment in favor of the defendants, as explained above) would be practically impossible. For these reasons, the Court will grant the defendants’ motion for dismissal pursuant to its inherent authority. -45- IV. Motions challenging experts Each side has filed a motion challenging the other side’s expert witness. The defendants argue that Bernard Terry is not qualified to offer opinions as a computer forensic expert or a musicologist. In light of the Court’s rulings on the dispositive motions, the defendants’ expert witness motion is moot. The plaintiffs have filed their own motion to exclude the testimony of defense expert Ives R. Potrafka on the grounds that he is not qualified as an expert in the relevant field and his opinions are unreliable. The details of the plaintiff’s argument are not altogether clear, but the Court draws the following argument from the plaintiffs’ submissions: The plaintiffs believe that Potrafka is not qualified because he had to rely on the assistance of James Rice II in order to examine the hard drive. That need, according to the plaintiffs, evidences Potrafka’s inability to analyze hard drives in general and unfamiliarity with Logic Software in particular. Since Potrafka relied on Rice, the plaintiffs contend that Potrofka’s report is “not reliable without the support of . . . Rice.” [cite] at 7. Because Potrafka cannot describe or understand the methodology used by Rice, and because Potrafka’s opinion relies so heavily on Rice’s work, the plaintiffs believe it is rendered unreliable. The plaintiffs’ motion has no merit. It is no more than a vexatious response to the defendants’ motion, as evidenced by the fact that it is mostly plagiarized from the defendants’ motion, it was not filed until seven months after Mr. Potrafka submitted his report, and the predicate facts do not support the plaintiffs’ theory. (This tit-for-tat approach also cropped up in the plaintiffs’ recently-filed motion for sanctions, which the Court will deny for want of merit as well.) Mr. Potrafka stated in his report that five hard drives were produced by R.J. Rice Studios. Rather than search through all those files, Potrafka met with Mr. Rice so that Rice could identify the original -46- files containing “ESS Beats.” None of the files apparently contained identification suggesting their content. It was sensible for Potrafka to seek Rice’s assistance in narrowing the scope of his search. This request does not suggest a lack of qualification on Potrafka part. Therefore, the plaintiffs’ motion to exclude Mr. Potrafka’s testimony will be denied. V. Conclusion The Court finds that the plaintiffs’ complaint fails on the merits as a matter of law. Moreover, the conduct of the plaintiffs and their attorney has been so egregiously improper and abusive that the ultimate sanction of dismissal is the only appropriate response. Other pending motions will be dismissed as well. Accordingly, it is ORDERED that the defendants’ motion for summary judgment [dkt #206] is GRANTED. It is further ORDERED that the defendants’ motion to dismiss as a sanction for discovery abuses [dkt # 185, 186] is GRANTED. It is further ORDERED that the plaintiffs’ motion and amended motion for summary judgment [dkt #160, 205] is DENIED. It is further ORDERED that the defendants’ motion to exclude Bernard Terry from testifying as an expert witness [dkt #204] is DENIED as moot. It is further ORDERED that the plaintiffs’ motion to exclude Ives R. Potrafka from testifying as an expert witness [dkt #211] is DENIED. It is further ORDERED that the plaintiffs’ motion to compel payment of expert witness fees for witness Bernard Terry [dkt #222] is DENIED. It is further ORDERED that the plaintiffs’ motion for sanctions [dkt # 241] is DENIED. -47- It is further ORDERED that the complaint is DISMISSED WITH PREJUDICE. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 31, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 31, 2008. s/Felicia M. Moses FELICIA M. MOSES -48-

=== Randle Opinion Denying Habeas Corpus ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION JAMAL RANDLE, Petitioner, v. ANDREW JACKSON, Respondent. _________________________________/ Case Number: 04-10322 Honorable David M. Lawson OPINION AND ORDER DENYING PETITION FOR WRIT OF HABEAS CORPUS The petitioner, Jamal Randle, presently confined at the Boyer Road Correctional Facility in Carson City, Michigan, has filed a pro se application for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 challenging his convictions and prison sentences for armed robbery, Mich. Comp. L. § 750.529, and possession of a firearm in the commission of a felony, Mich. Comp. L. § 750.227b. The robbery in this case took place on January 10, 1994, Randle was arrested for the offense sometime in December 1998, and trial began in the Wayne County, Michigan circuit court on November 14, 1999. The petitioner contends that the delay both before and after his arrest deprived him of rights under the Constitution. He also alleges that his attorney’s performance was substandard. The respondent has filed an answer to the petition asserting that the claims lack merit because the state court of appeals decided the federal issues correctly. The Court agrees; therefore, the petition will be denied. I. The petitioner’s convictions arise from the January 10, 1994, robbery of Frank Harris. The petitioner was not formally charged with the alleged crime until five years later, on December 30, 1998. The trial evidence showed that the pre-arrest delay resulted from the inability to identify the petitioner by name and locate him. The petitioner defended at trial against the charges on the bases that he was not the robber, and he was not physically capable of performing the acts described by the State’s witnesses. Frank Harris, the robbery victim, testified that on January 10, 1994 at around 7 p.m. he was with his eight-year-old son on Superior Street in Detroit, Michigan in front of the home of Ms. Annie Cook (his son’s grandmother). A man with a rifle ran up to him, pointed the rifle at his head, and ordered him to lie face down on the ground. Harris complied. As he was lying face down, the robber took his cash, his wallet, and other personal items. Harris testified that in spite of the darkness, he was able to see the robber’s face because of the street light. Harris also said that he could see the robber’s face because the robber was standing directly over him. He said that when the robber went through his pockets, the robber’s face was very close to his; and when the robber asked him questions Harris said that he turned and looked directly at the robber’s face. Harris said that he had never seen the robber before. At trial, he identified the petitioner as the robber. According to Harris, hiding behind a dumpster was a second man who was wearing an overcoat and had something covering his eyes, like goggles or a ski mask. Harris testified that the second man had his hand positioned at his waist, suggesting that he had a weapon. It was Harris’s impression that the second man was a lookout. Harris said that after robbing him, the robber told him to run. Harris complied, and as he did so he looked behind him and saw the robber and the other man running at a slow pace in the opposite direction. Harris did not see whether the robber was limping. That night Harris went to the police department and reported the robbery to an Officer Clarence Lucas, whom he knew. Harris could not identify the robber by name, but he gave the -2- officer a general description of him. Officer Lucas then gave the report to the detectives at the precinct; the detectives however did not talk to Harris. About three to six months after the robbery while Harris was working at a pawn shop, he saw the man who robbed him come into the shop carrying a large television set. Harris testified that the robber was with an older gentleman who appeared to be around fifty or sixty years old. Harris was behind a one-way glass when the men entered the shop so they could not see him. Harris said that he recognized the man carrying the television as soon as he came into the shop. Harris was on the phone with a customer at the time. He said that he put the customer on hold, walked out to where the man was standing, and looked him right in the face. The man looked at Harris and then immediately dropped his head, turned around, and walked quickly out of the shop. Harris said that he did not talk to the man, but he told co-workers, “This is the S.O.B. that robbed me.” Trial Tr., Nov. 14, 1999 at 26. Harris said that he tried to go after the man, but his co-workers stopped him. By the time Harris broke free of the co-workers, the man was out of the shop and in his car. Nevertheless, Harris was able to see the license number of the man’s car and he called the police, who came to the shop. Harris testified that he gave the license number of the car to the responding officer and also to a couple of his police officer friends who periodically came into the pawn shop. The older man was still in the shop when Harris returned, and he asked the man if he knew the person who was carrying the television. The older man denied knowing the individual. However, when the older man pawned the television Harris got his address from the store computer. An unknown bystander told Harris that he knew the man who had held the television; Harris heard -3- the man say that his name was “Jamal Rando.” Harris entered that name into the store computer, but no such name came up. Harris testified that he also conveyed that information to the police. Harris testified that after the incident at the pawn shop, he periodically called the police inquiring about the status of the case and continued to do so for a few months after the robbery. Then in December 1998, four years after the robbery, Harris testified that his son, Loren, saw a picture of the man who had robbed him on the television nightly news. Harris said that his son called him to look at the man that was on the television, and when he did Harris saw the picture of the man who had robbed him in 1994. Harris testified that he heard the man’s name as Jamal Randle several times on the television news; he said that Randle was being sought for a police shooting. Harris testified that he immediately recognized the image as the man who had robbed him four years earlier. It was only then that Harris realized that he had the incorrect spelling of the robber’s name. Harris then went to the police and reported that he had seen Jamal Randle’s photograph on the television and told them he was the man who had robbed him. Harris spoke with Sergeant David Mallory, who arranged for an in-person line-up at the police station for Harris and his son Loren. However, Randle refused to stand for the in-person line-up; he believed it was not a fair line- up because Harris had seen his photograph repeatedly on television. So Harris and his son viewed a photograph show-up. Harris testified that both he and his son picked Randle out of the photograph show-up as the robber. Loren Harris also testified at trial. He said that on the day that his father was robbed, he was at his grandmother’s home because she was babysitting him that day. Loren was nine years old at the time of the robbery. On that night his father came to pick him up, and as they were leaving his -4- grandmother’s house a man with a gun came from the side of the house and told his father to get down on the ground. Loren said that when he saw the gun he got scared and ran back to his grandmother’s house and went inside. He said that he went to a window, looked out, and saw the man take his father’s wallet and his coat. He testified that he saw the man’s face. He then saw the man run away after he took the property from his father. Loren then went upstairs to tell his grandmother what he had witnessed. Then Loren, his father, and his grandmother went to the police station. Loren testified that he did not see the person who robbed his father again until he saw him on television. When Loren saw a picture of the man on television, he called to his father, who was in the bathroom at the time. His father came out of the bathroom and saw the television picture, and then they then went to the police station. At the police station, Loren was asked to look at a man in person to see if he was the one who had robbed his father. Loren testified that he never actually saw that man in person at the police station, but he did identify a photograph of the man who robbed his father. At trial, Loren identified the petitioner as the man that robbed his father. Annie Cook next testified that she lived on Superior Street in Detroit, Michigan where she was babysitting her grandson Loren on the night in question. After Frank Harris picked him up Loren and left her apartment, Cook opened the door to lock the screen door and saw Frank Harris lying on the ground. Ms. Cook testified that she saw two men. One of the men told her to go back into the house, but she said that she simply froze at the door. Ms. Cook testified that eventually Frank Harris came back into the house and told her what had happened and they talked about going to the police. -5- Marion Davis, the pawnbroker, testified that he was working at the pawn shop in 1994 where Frank Harris also worked. Davis recalled an incident in which a man came into the pawn shop and Harris said to him, “Hey, that’s the guy that robbed me right there.” Davis said that the guy left the store at that point and Harris tried to follow him, but he stopped Harris because he did not think that there was anything that Harris could do at that point. At trial, Davis identified the petitioner as the man in the pawn shop that day. Detroit Police Officer Clarence Lucas testified that in 1994 he was assigned to the Seventh Precinct and employed as a patrol officer. He said that he saw Frank Harris. Officer Lucas said that he was not working on the day of the pawn shop incident but did have the occasion to go there, which he did frequently. When Officer Lucas entered the shop, Harris told him that he had been robbed at gun point. Because Officer Lucas was not on duty, he told Harris to go to the Seventh Precinct and make an armed-robbery report. Officer Lucas testified that he also made his own written report of what Harris told him about the armed robbery, a copy of which was allegedly given to the detective squad at the Seventh Precinct. Officer Lucas testified that he and Harris were acquaintances, and that he saw Harris on nearly a daily basis. According to Lucas, at some point Harris gave him some information about a license-plate number. Lucas recalled running a check of the license-plate number, but he did nothing further because he was not the investigating officer in the case. Detroit Police Sergeant David Mallory testified that in 1994 he was the officer in charge of the investigation. That changed from 1995 to 1998, when Mallory received a new job assignment. Mallory said that when he initially received the case in 1994, he only had descriptions of the individuals involved in the robbery; he did not have any names of the individuals who might have -6- been involved. According to Mallory, it was not until December 9, 1998 that he was given the name of “Jamal Randle” as the individual involved in the robbery. When Sergeant Mallory became aware of the robbery suspect’s name, he responded by taking statements from Annie Cook, Loren Cook, and two witnesses at the pawn shop. Sergeant Mallory explained that he “went to Homicide and ascertained if any weapons that fit the description that were used in the holdup had been confiscated in search warrants and a number of locations. [He also] reviewed some of the statements at Homicide in regards to Mr. Jamal’s arrest [and] went to the Wayne County Jail and took a statement from or as much information as [he] could get from him at that time.” Trial Tr., Nov. 14, 1999 at 113. Sergeant Mallory also testified that he was aware of the incident that occurred at the pawn shop about three months after the robbery. When asked if he searched for a police report of the pawn shop incident, Sergeant Mallory testified as follows: At the time I typed out the warrant I had spent something like three hours looking through our archives to find the police report or an activity log that would indicate that there was a police run to [the pawn shop] and possibly the reports indicating that the [petitioner] was in fact involved in the holdup either by his actual spelling of his name or close spelling of that name. Since then, I have repeatedly gone back to those same archives in attempts to locate either the report or an activity log so that I could substantiate in fact that those things had occurred. I did substantiate that they did occur or that an incident had occurred at [the pawn shop], that the complainant had gone outside, had taken down a license number and at some point that it was in regards to the holdup. . . . I was unable to obtain a police report indicating that either the scout car was sent to the scene at [the pawn shop] or that information was put in a report that should have or would have been forwarded to me in regards to the case. -7- Trial Tr., Nov. 14, 1999 at 114-15. Sergeant Mallory said that after he learned the identity of the robber, he asked Frank and Loren Harris to come to the police station to attend an in-person lineup. He made the necessary arrangements to have a defense attorney present and notified the jail that he wanted the petitioner in this case available for the in-person lineup. However, the petitioner refused to participate. As a result, Sergeant Mallory testified that he arranged for a photograph show-up with six photographs. An attorney was present for that as well, and he did not object to the array. Mallory explained that at the photograph show-up, he first brought in Frank Harris to view the array. Sergeant Mallory testified that Harris immediately identified the petitioner as the robber before Harris even sat down. Sergeant Mallory then brought Loren in to look at the photographs. After about two minutes, Loren identified the petitioner as the man who robbed his father. The petitioner called several defense witnesses and testified in his own behalf. His defense theory was that he was not the person who robbed Harris or the person who was identified at the pawn shop. He insisted that at the time of the robbery he suffered from injuries sustained in a 1993 shooting, and he was shot again before the pawn shop incident, which required that he either use crutches or walk with a limp, and could not carry heavy objects. Harris contended that the “older man” who came into the pawn shop with the person carrying the television was his father, who did not testify at trial. The person carrying the television was Daniel Purvis, who was killed by the police during a robbery sometime between 1994 and 1998. It was the petitioner’s position that Purvis also was the robber. Earline Webb, the petitioner’s grandmother, was the first defense witness. She testified that on or about December 3, 1993 the petitioner was shot in the knee, and she said that the petitioner -8- was on crutches for a month or more. According to Ms. Webb, although the petitioner no longer needed the crutches, he walked with a limp. She said that she took care of the petitioner during this time because the woman that he lived with, Felicia Pickett, worked during the day and the petitioner needed attendant care. Ms. Webb also testified that the petitioner was shot in the back in 1994 around Valentine’s Day. She said that as a result of that shooting, the petitioner lost a lung. He was in the hospital for about two weeks, she said, and he had physical therapy for about nine months afterward. Ms. Webb testified that she took care of the petitioner during the day for that period of time, and she described him as having difficulty breathing and walking. It was her testimony that the petitioner was not able to walk upright. Felicia Pickett, the petitioner’s girlfriend from 1992 to 1998, corroborated Ms. Webb’s testimony. She confirmed that the petitioner was shot in the leg in 1993, and he could not walk, stand, or prepare his own meals, and he was on crutches for about six weeks. According to Ms. Pickett, the petitioner was not able to lift things until he was able to walk without crutches. Ms. Pickett also confirmed that the petitioner was shot in the back on Valentine’s Day in 1994. She testified that the petitioner was hospitalized for about two weeks, after which he was bedridden for about one month and was unable to do much of anything. Ms. Pickett also testified that the petitioner had difficulty standing, and he was not able to do so until after months of physical therapy. She said that he also had difficulty breathing, and at one point he thought he was having a heart attack because he could not breathe. It was Ms. Pickett’s impression that the petitioner could not have carried a television set into a pawn shop in April or May of 1994 because he could not even carry groceries into the house. However, Ms. Pickett acknowledged that during that time, the -9- petitioner lived for periods with her and also spent some time with his grandmother. She testified that during April and May of 1994, he also had contact with his father, Dexter Randle. Michelle Coleman, the petitioner’s stepmother, testified that she took care of the petitioner several times during March or April of 1994. She said that after he was injured, the petitioner frequently was in pain and had trouble with shortness of breath. On cross-examination, Ms. Coleman testified that during the months of March, April, May, and June of 1994, it would have been out of the ordinary for the petitioner to be carrying something around, but it would not have been out of character for him to be walking around. The petitioner testified that he was shot in the knee in 1993. He said that he had gone to a neighborhood store with Ms. Pickett, and upon exiting the store a man approached them demanding money. As the man was leaving, he shot the petitioner in the knee. He said he was admitted to the hospital and released the next day on crutches. He testified that he could not walk without the assistance of crutches for approximately six weeks. The petitioner then stated that he was shot in the back on Valentine’s Day 1994. He said that he was at a club with a friend when he stopped at a pay phone to make a call. He was approached by a man while he was in the phone booth, and as he tried to run away he was shot in the back. His friend who was waiting in the car was also shot. The petitioner testified that he had surgery to remove part of his lung. He testified that he was hospitalized for about two weeks as a result. The petitioner said that he was discharged to home where he remained on total bed rest for one month. He said that he could not even sit up and feed himself during that period of time. He said that he began physical therapy around March 1994 to help him correct his posture. He could not raise his arm above his shoulder without feeling pain, and he could not lift anything over ten -10- pounds. The petitioner testified that he would not have been able to carry a television set during that period of time. He said that he did not leave the house except to go to physical therapy. The petitioner acknowledged that he had applied for disability payments after he was shot. The trial court admitted the petitioner’s medical records from his 1994 hospitalization and his subsequent physical therapy visits. The records were voluminous. Before trial, defense counsel discovered that the physical therapist who treated the petitioner had moved to the Philippines and was unavailable to testify. The doctor who treated the petitioner after his second surgery had moved to Ohio. There was no expert medical testimony. On December 15, 1999, the jury sent out a note to the trial court saying that it had reached a verdict, whereupon the petitioner left the courtroom. The trial court took the verdict in his absence; the jury found the petitioner guilty as charged. The trial court then issued a capias for the petitioner’s arrest and ordered his bond forfeited. The petitioner was not found until November 1, 2000, almost one year later, and he was sentenced on November 15, 2000 to prison for seven to twenty years for the armed robbery conviction and two years for the felony firearm conviction, with the terms to be served consecutively. The petitioner filed a timely direct appeal in the Michigan Court of Appeals raising the following claims: I. II. The trial court committed legal error in denying the motion to dismiss, because the five-year delay between the alleged crime and Randle’s arrest violates due process. The trial court committed legal error by not entering a directed verdict of acquittal, because the loss of witnesses and evidence, due to the pre-arrest delay, violated Randle’s right to compulsory process under the Sixth and Fourteenth Amendments. -11- III. IV. A new trial is warranted, because counsel was ineffective for failing to investigate a supporting witness, failing to digest the medical reports for the jury, and failing to investigate an important witness. Trial counsel was ineffective for not moving for a mistrial after a police witness told the jury about [the petitioner’s] arrest for homicide, in violation of an order in limine. On February 25, 2003, the Michigan Court of Appeals affirmed the convictions in an unpublished per curiam opinion. People v. Randle, 2003 WL 550004 (Mich. Ct. App. Feb. 25, 2003). The petitioner then filed a delayed application for leave to appeal in the Michigan Supreme Court raising the same claims raised in the Michigan Court of Appeals. On August 29, 2003, the Michigan Supreme Court denied the petitioner’s delayed application for lack of merit. People v. Randle, 469 Mich. 879, 668 N.W.2d 151 (2003). Thereafter, the petitioner filed his petition for a writ of habeas corpus in this Court presenting the following claims: I. II. III. The trial court committed legal error in denying the motion to dismiss because the five-year delay between the alleged crime and Randle’s arrest violates due process. The trial court committed legal error by not entering a directed verdict of acquittal because the loss of witnesses and evidence due to the pre-arrest delay violated Randle’s right to compulsory process under the Sixth and Fourteenth Amendments. A new trial is warranted because counsel was ineffective for failing to digest the medical reports for the jury, and for failing to investigate an important witness. II. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214, which govern this case, “circumscribe” the standard of review federal courts must apply when considering applications for a writ of habeas corpus raising -12- constitutional claims, including claims of ineffective assistance of counsel. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) imposes the following standard of review for habeas cases: An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim – (1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or (2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding. 28 U.S.C. § 2254(d). Therefore, federal courts are bound by a state court’s adjudication of a petitioner’s claims unless the state court’s decision was contrary to or involved an unreasonable application of clearly established federal law. Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Mere error by the state court will not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) ( internal quotes omitted . Additionally, this Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). -13- The Supreme Court has explained the proper application of the “contrary to” clause as follows: A state-court decision will certainly be contrary to [the Supreme Court’s] clearly established precedent if the state court applies a rule that contradicts the governing law set forth in our cases. . . . A state-court decision will also be contrary to this Court’s clearly established precedent if the state court confronts a set of facts that are materially indistinguishable from a decision of this Court and nevertheless arrives at a result different from [the Court’s] precedent. Williams, 529 U.S. at 405-06. The Supreme Court has held that a federal court should analyze a claim for habeas corpus relief under the “unreasonable application” clause of § 2254(d)(1) “when a state-court decision unreasonably applies the law of this Court to the facts of a prisoner’s case.” Id. at 409. The Court defined “unreasonable application” as follows: [A] federal habeas court making the “unreasonable application” inquiry should ask whether the state court’s application of clearly established federal law was objectively unreasonable. . . . [A]n unreasonable application of federal law is different from an incorrect application of federal law. . . . Under § 2254(d)(1)’s “unreasonable application” clause, then, a federal habeas court may not issue the writ simply because that court concludes in its independent judgment that the relevant state-court decision applied clearly established federal law erroneously or incorrectly. Rather, that application must also be unreasonable. Id. at 409, 410-11; see also Eady v. Morgan, 515 F.3d 587, 594-96 (6th Cir. 2008); Davis v. Coyle, 475 F.3d 761, 766 (6th Cir. 2007); King v. Bobby, 433 F.3d 483, 489 (6th Cir. 2006); Harbison v. Bell, 408 F.3d 823, 828-29 (6th Cir. 2005); Rockwell v. Yukins, 341 F.3d 507, 512 (6th Cir. 2003) (en banc). -14- A. The main focus of the petition is on the claims of prejudice that resulted from the long delay in arresting the petitioner after the robbery and bringing him to trial. The delay is at the heart of the petitioner’s first two claims: the five-year delay between the crime and the arrest infringed his rights under the Due Process Clause, and the delay trenched upon his right to compulsory process secured by the Sixth Amendment. He also argues that his Sixth Amendment right to a speedy trial was violated by this delay. These issues were fully litigated in the state courts. Before trial, the petitioner’s attorney filed three motions to dismiss because of the delay in his arrest. The trial court denied the first motion finding that the police did not know the identity of the perpetrator. The court observed however that the police should have done more to follow up on the information from the pawn shop, run various spellings of the last name listed in the pawn shop computer, and gone to the address derived from the license-plate number. The second motion was treated as a motion to reconsider the first, and it also was denied because it did not contain any new information. The third motion to dismiss was based on the fact that the physical therapist who treated the petitioner after his second gunshot wound had moved to the Philippines. In defense counsel’s opinion, she was the best witness to testify to the petitioner’s disabilities. But the trial court denied that motion because there was no showing when the therapist left the United States, and there were other persons who were able to testify to the petitioner’s disabilities, including friends, relatives, and other medical professionals who treated him during that time. The petitioner’s trial counsel also filed a post-trial motion for a directed verdict of acquittal or in the alternative a new trial, which was denied. -15- The Michigan Court of Appeals agreed with the trial court’s findings and rejected the petitioner’s claims that the delay warranted dismissal of the case. It stated: We find no abuse of discretion. The delay in this case resulted from an erroneous transcription of defendant’s last name as “Rando” and an apparent recordkeeping error at the police department, which kept helpful information from reaching the appropriate investigating officer. Defendant has not shown that the prosecution intended a tactical advantage from these errors. Moreover, defendant has not shown substantial prejudice. His claim that he may have been receiving physical therapy during isolated portions of certain days beginning in April 1994 does not establish an alibi for the pre-dawn robbery in January 1994. It is unduly speculative to conclude that a “therapy” alibi would contradict the complainant’s testimony that defendant was the person at the pawn shop – the therapy sessions only lasted between 45 minutes and an hour, once or twice a week, for about five weeks. Defendant also argues that the “real” robber, who he alleges was a Mr. Purvis (now deceased) could have been subpoenaed to attend defendant’s trial and confess to the crime had defendant been arrested and charged sooner. We agree with the trial court, however, that it is unreasonable to conclude that Purvis would admit that he accompanied defendant’s father to the pawn shop and confess to the crime. We also agree with the trial court that photographs of Purvis and defendant do not exhibit similarities. Accordingly, we do not believe it is likely that the complainant would have identified Purvis as the robber had Purvis been available for a live in-court viewing. Randle, 2003 WL 550004 at *2. The petitioner contends that this ruling misapplies federal law. However, the Supreme Court has held consistently that “[t]here is no constitutional right to be arrested.” Hoffa v. United States, 385 U.S. 293, 310 (1966). Elaborating on that concept, the Court explained: The police are not required to guess at their peril the precise moment at which they have probable cause to arrest a suspect, risking a violation of the Fourth Amendment if they act too soon, and a violation of the Sixth Amendment if they wait too long. Law enforcement officers are under no constitutional duty to call a halt to a criminal investigation the moment they have the minimum evidence to establish probable cause, a quantum of evidence which may fall far short of the amount necessary to support a criminal conviction. Ibid. -16- The Due Process Clause does provide some measure of protection against preindictment delay. United States v. Lovasco, 431 U.S. 783, 789 (1977); see also United States v. Marion, 404 U.S. 307, 324 (1971). But the Court once again has observed that “no one’s interests would be well served by compelling prosecutors to initiate prosecutions as soon as they are legally entitled to do so.” Lovasco, 431 U.S. at 792. Proof of prejudice is a necessary element of a due process claim for preindictment delay. Lovasco, 431 U.S. at 790. The Sixth Circuit has consistently read Lovasco to hold that dismissal for preindictment delay is warranted only when the defendant shows both substantial prejudice to his right to a fair trial and that the delay was intentionally imposed by the government to gain a tactical advantage. See United States v. Brown, 959 F.2d 63, 66 (6th Cir.1992). The prosecution of a defendant following an investigative delay does not necessarily deprive him of due process, even if his defense is somewhat prejudiced by the lapse of time. Lovasco, 431 U.S. at 796. The petitioner in this case does not contend that the almost five-year delay was intentional or used by the prosecution to gain a tactical advantage. The state trial court found that the delay was not intentional and appeared to be the result of bureaucratic negligence at worst. The Court accepts that factual finding, which is consistent with the record. See 28 U.S.C. 2254(e)(1). However, the petitioner does argue that the delay caused him substantial prejudice. Nonetheless, the Sixth Circuit has found long periods of delay do not ipso facto deny due process. Brown, 959 F.2d at 67 (citing cases in which pre-indictment delay was thirty-three months, twenty-nine months, and five years). The Supreme Court has acknowledged that substantial delays in charging a suspect carry the potential for prejudice, but the procedural protection against such harm is found in statutes of limitation. Marion, 404 U.S. at 325-26. More must be shown to establish a deprivation of due -17- process when a prosecution is commenced within the period of limitation. The Supreme Court explained: Appellees rely solely on the real possibility of prejudice inherent in any extended delay: that memories will dim, witnesses become inaccessible, and evidence be lost. In light of the applicable statute of limitations, however, these possibilities are not in themselves enough to demonstrate that appellees cannot receive a fair trial and to therefore justify the dismissal of the indictment. Ibid. The Court believes that the state court of appeals’s determination that the petitioner did not demonstrate sufficient prejudice was reasonable. The petitioner claims that because of the delay he was unable to locate witnesses to support his alibi defense. But he has never alleged with specificity where he was at the time of the armed robbery, and except for Mr. Purvis not being available, he has not named any other witnesses who were denied him due to the delay in arresting him. The petitioner suggests that witnesses’ memories faded over the time between the crime and his arrest. But a vague assertion that memories have diminished, witnesses have been lost, and documents have been misplaced does not establish actual prejudice from a pre-charge delay. United States v. Beszborn, 21 F.3d 62, 67 (5th Cir.1994); United States v. Mask, 154 F. Supp. 2d 1344, 1348 (W. D. Tenn. 2001). When the claimed prejudice from a preindictment delay is the unavailability of a witness, courts require the petitioner to identify the witness that would have been called, show with specificity what the witness was expected to say, demonstrate a serious attempts to find the witness, and establish that the information that the witness would have provided was not available from other sources. Jones v. Angelone, 94 F.3d 900, 908 (4th Cir.1996). The petitioner has done none of this. -18- The petitioner’s defense at trial was that he was not the one on the street on January 14, 1994 who committed the pre-dawn robbery (nor could he have done that because he was walking with crutches after having been shot in the knee about one month prior), and he was not the man who carried a television into the victim’s pawn shop two to three months later because he was shot again in February 1994 and his lung had been surgically removed. No aspect of the pre-arrest delay prevented the jury from assessing these claims. Rather, the petitioner’s delay argument hinges on the unreasonable expectation that Mr. Purvis would have exonerated him by coming to court and confessing to the crime. It is, of course, convenient to blame a crime on a dead man; it is far fetched to suggest that the dead man would have readily accepted the blame were he alive. The denial of such an “opportunity” to one accused of the crime is not fundamentally unfair. The petitioner does not allege that he was prosecuted in violation of the applicable statute of limitations. The Michigan Court of Appeals found that the petitioner had not shown prejudice or an intent by the State to gain an advantage. These findings are well supported by the record. The Court concludes, therefore, that the state court’s findings regarding this claim were not contrary to or an unreasonable application of federal law. The petitioner is not entitled to habeas relief regarding this claim. B. The petitioner also argues that the state courts should have dismissed his case on speedy trial grounds. This Court cannot agree. To be sure, individuals charged with crimes “enjoy the right to a speedy and public trial.” U.S. Const. amend. VI. However, the mere passage of time does not necessarily signal the denial of that right. For instance, courts have held that a delay of five-and-a-half years between the filing -19- of charges and trial abridged the right, see United States v. Brown, 169 F.3d 344 (6th Cir. 1999), while a delay of twenty-two years did not, see Wilson v. Mitchell, 250 F.3d 388 (6th Cir. 2001). In Barker v. Wingo, 407 U.S. 514 (1972), it was observed that the speedy trial right was “vague,” “amorphous,” and “slippery,” and that it was not possible to ascertain with precision the time that the right was violated. Barker, 407 U.S. at 521-22. See also United States v. Schreane, 331 F.3d 548, 553 (6th Cir. 2003) (holding that “no one factor constitutes a ‘necessary or sufficient condition to the finding of a deprivation of the right of speedy trial’”) (quoting Barker, 407 U.S. at 553). The Court therefore counseled against a “rigid approach[]” and established instead a functional, four- factor test intended to account for all relevant facts, and to be applied “on an ad hoc basis.” Barker, 407 U.S. at 530. The four factors identified by the Court are: “Length of delay, the reason for the delay, the defendant’s assertion of his right, and prejudice to the defendant.” Ibid. In Doggett v. United States, 505 U.S. 647, 651 (1992), the Court stated the test slightly differently: “whether delay before trial was uncommonly long, whether the government or the criminal defendant is more to blame for that delay, whether, in due course, the defendant asserted his right to a speedy trial, and whether he suffered prejudice as the delay’s result.” In this case, approximately eleven months elapsed between arrest and trial. That delay, although substantial, is not uncommonly long, and it does not plainly cross the threshold separating those cases that warrant further examination because of presumptive prejudice. See id. at 651-52 (“Simply to trigger a speedy trial analysis, an accused must allege that the interval between accusation and trial has crossed the threshold dividing ordinary from ‘presumptively prejudicial’ delay.”); Schreane, 331 F.3d at 553 (“[I]f the delay is not uncommonly long, judicial examination ceases.”); Wilson, 250 F.3d at 394 (“Twenty-two years is an extraordinary delay that far exceeds this -20- court’s guideline that a delay longer than a year is presumptively prejudicial.”). Courts generally have found post-conviction delays that approach one year to be presumptively prejudicial. Doggett, 505 U.S. at 652 n.1; United States v. Brown, 90 F. Supp. 2d 841, 846 (E.D. Mich. 2000); see also Wilson, 250 F.3d at 394 (twenty-two years presumed prejudicial); United States v. O’Dell, 247 F.3d 655, 667 (6th Cir. 2001) (seven years presumed prejudicial); United States v. Brown, 169 F.3d 344, 348-49 (6th Cir. 1999) (five-and-one-half years presumed prejudicial). Nevertheless, skipping forward to the last factor in Barker, the Supreme Court recognized that several different forms of prejudice can result from delay: loss of liberty that comes from lengthy pretrial incarceration; “anxiety” that stems from the uncertainty of a pending criminal charge; and the impairment of one’s ability to mount a defense due to fading memories and other loss of exculpatory evidence. See Barker, 407 U.S. at 532. The third of these reasons is the most pernicious, because it “skews the fairness of the entire system.” Ibid. Of course, in the present case almost five years elapsed from the time of the crime to when the petitioner was charged. During that time, the petitioner’s identity remained unknown until late 1998 when Harris’s son recognized the petitioner’s face in a television news report. That delay does not impact the petitioner’s rights under the Sixth Amendment, however, because he was not yet within the criminal justice system. He has not pointed to any prejudice resulting from the delay between his arrest and trial. Nor could he, since the record is silent as to when his physical therapist left the country or his doctor moved to Ohio. There is nothing to suggest that any of this occurred in the eleven months that intervened between arrest and trial. Nor has the petitioner shown a violation of the Compulsory Process Clause of the Sixth Amendment. Certainly, the Compulsory Process Clause of the Sixth Amendment “stands on no -21- lesser footing than the other Sixth Amendment rights that [the Supreme Court has] previously held applicable to the States.” Taylor v. Illinois, 484 U.S. 400, 409 (1988). In fact, “[f]ew rights are more fundamental than that of an accused to present witnesses in his own defense.” Id. at 408 (citing Chambers v. Mississippi, 410 U.S. 284, 302 (1973 . But the petitioner was able to call witnesses in his defense, and the State did not interfere with his ability to procure witnesses with the state court’s assistance. The Court finds no Sixth Amendment violation, and habeas relief premised on a violation of the federal rights protected by that amendment is not warranted. C. Finally, the petitioner alleges that trial counsel was ineffective for failing to (1) “digest” the medical reports for the jury and locate and call as a witness the physical therapist who treated him, (2) investigate an important witness for the defense, namely his father who accompanied “the robber” to the pawn shop, and (3) move for a mistrial after the officer-in-charge referred to a homicide investigation that was the cause of the petitioner’s television exposure. Each of these claims was presented to the state court of appeals, which rejected them in turn. The first claim concerning the manner of presentation of medical proof was relegated to a decision of trial strategy. The appellate court stated: We will not second-guess [defense counsel’s] decision not to call defendant’s physical therapist as a witness. See People v. Rice (On Remand), 235 Mich App 429, 445; 597 NW2d 843 (1999). Other defense witnesses supplied ample medical testimony. Counsel’s decision not to summarize the medical records, and his closing argument in which he stated that the records were voluminous and confusing, also did not constitute ineffective assistance. The records were indeed voluminous and not easily translated by lay persons. Contrary to defendant’s argument, however, trial counsel did not urge the jury to ignore the records. Instead, he asked them to focus on those portions that were written in “plain English” rather than concentrate on confusing portions. Because counsel presented ample evidence of defendant’s -22- medical condition through witnesses, we cannot say that a different presentation of the medical records would have led to a different result. Randle, 2003 WL 550004 at *4. On the claim that trial counsel made a mistake by not calling the petitioner’s father’s, the court stated: Even assuming counsel was aware of defendant’s father’s testimony, based on the evidence presented, it is clear the witness’ credibility would have been called into question. Counsel’s reasons for failing to call defendant’s father do not appear on the record and, therefore, cannot support reversal. Therefore, on this record, we are unable to find counsel was ineffective for failing to present defendant’s father as a witness. Ibid. Finally, the court refused to find deficient performance in defense counsel’s failure to move for a mistrial, stating: [T]here are no evidentiary proofs or judicial findings regarding whether a mistrial motion would have been successful or whether counsel was ineffective for failing to make such a motion. We are not persuaded that the police officer’s non-responsive testimony violated the specific terms of the order in limine. The order focused on defendant’s connection to the killing of a police officer; the trial testimony did not link him to the killing of a police officer or to any other killing. Id. at *5. The federal law against which these state court rulings must be measured is found in Strickland v. Washington, (1984). There, the Court held that to show a violation of the Sixth Amendment right to effective assistance of counsel, a petitioner must establish that his attorney’s performance was deficient and the deficient performance prejudiced the defense. Id. at 687. An attorney’s performance is deficient if counsel’s representation falls below an “objective standard of reasonableness.” Id. at 688. The defendant must show “that counsel made errors so serious that counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth -23- Amendment.” Id. at 687. “Judicial scrutiny of counsel’s performance must be highly deferential.” Id. at 689. An attorney’s deficient performance is prejudicial if “counsel’s errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable.” Id. at 687. The defendant must show “a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.” Id. at 694. Unless the petitioner demonstrates both deficient performance and prejudice, “it cannot be said that the conviction . . . resulted from a breakdown in the adversary process that renders the result unreliable.” Strickland, 466 U.S. at 687. The standards quoted above are precisely the ones used by the state court in assessing the petitioner’s ineffective assistance of counsel claim. That court’s discussion was thorough, analytical, and faithful to the record. More importantly, it properly applied Supreme Court precedent. Little would be added in rehashing the analysis. It is enough to say that the decision of the Michigan Court of Appeals was consistent with and a reasonable application of federal law. III. The Court concludes that the petitioner has not established that he is in custody in violation of the Constitution or laws of the United States. Accordingly, it is ORDERED that the petition for a writ of habeas corpus [dkt. # 3] is DENIED. Dated: March 31, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge -24- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 31, 2008. s/Felicia M. Moses FELICIA M. MOSES -25-

=== Proposal 2: Motion Granting Summary Judgment ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case No. 06-15024 Hon. David M. Lawson COALITION TO DEFEND AFFIRMATIVE ACTION, INTEGRATION AND IMMIGRATION RIGHTS AND FIGHT FOR EQUALITY BY ANY MEANS NECESSARY (BAMN), UNITED FOR EQUALITY AND AFFIRMATIVE ACTION LEGAL DEFENSE FUND, RAINBOW PUSH COALITION, CALVIN JEVON COCHRAN, LASHELLE BENJAMIN, BEAUTIE MITCHELL, DENESHA RICHEY, STASIA BROWN, MICHAEL GIBSON, CHRISTOPHER SUTTON, LAQUAY JOHNSON, TURQOISE WISE- KING, BRANDON FLANNIGAN, JOSIE HUMAN, ISSAMAR CAMACHO, KAHLEIF HENRY, SHANAE TATUM, MARICRUZ LOPEZ, ALEJANDRA CRUZ, ADARENE HOAG, CANDICE MOTION TO DISMISS, YOUNG, TRISTAN TAYLOR, WILLIAMS FRAZIER, DENYING CANTRELL JERELL ERVES, MATTHEW GRIFFITH, LACRISSA BEVERLY, D’SHAWNM FEATHERSTONE, DANIELLE NELSON, JULIUS CARTER, KEVIN SMITH, KYLE SMITH, PARIS BUTLER, TOUISSANT KING, AIANA SCOTT, ALLEN VONOU, RANDIAH GREEN, BRITTANY JONES, COURTNEY DRAKE, DANTE DIXON, JOSEPH HENRY REED, AFSCME LOCAL 207, AFSCME LOCAL 214, AFSCME LOCAL 312, AFSCME LOCAL 836, AFSCME LOCAL 1642, AFSCME LOCAL 2920, and the DEFEND AFFIRMATIVE ACTION PARTY, PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT, GRANTING ATTORNEY GENERAL’S MOTION FOR SUMMARY JUDGMENT, AND DISMISSING CASES OPINION AND ORDER GRANTING IN PART AND DENYING IN PART UNIVERSITY DEFENDANTS’ Plaintiffs, v. THE REGENTS OF THE UNIVERSITY OF MICHIGAN, the BOARD OF TRUSTEES OF MICHIGAN STATE UNIVERSITY, the BOARD OF GOVERNORS OF WAYNE STATE UNIVERSITY, the TRUSTEES of any other public college or university, community college, or school district, ATTORNEY GENERAL MICHAEL COX, and ERIC RUSSELL, Defendants, CONSOLIDATED CASES Case No. 06-15637 Hon. David M. Lawson -and- CHASE CANTRELL, M.N., a minor child, by Karen Nestor, Mother and Next Friend, KAREN NESTOR, Mother and Next Friend of M.N., a minor child, C.U., a minor child, by Paula Uche, Mother and Next Friend, PAULA UCHE, Mother and Next Friend to C.U., a minor child, JOSHUA KAY, SHELDON JOHNSON, MATTHEW COUNTRYMAN, M.R., a minor child, by Brenda Foster, Mother and Next Friend, BRENDA FOSTER, Mother and Next Friend of M.R., a minor child, BRYON MAXEY, RACHEL QUINN, KEVIN GAINES, DANA CHRISTENSEN, T.J., a minor child, by Cathy Alfaro, Guardian and Next Friend, CATHY ALFARO, Guardian and Next Friend of T. J., a minor child, S. W., a minor child, by Michael Weisberg, Father and Next Friend, MICHAEL WEISBERG, Father and Next Friend of S. W., a minor child, CASEY KASPER, SERGIO EDUARDO MUNOZ, ROSARIO CEBALLO, KATHLEEN CANNING, EDWARD KIM, M.C.C. II, a minor child, by Carolyn Carter, Mother and Next Friend, CAROLYN CARTER, Mother and Next Friend of M.C.C., II, a minor child, J.R., a minor child, by Matthew Robinson, Father and Next Friend, MATTHEW ROBINSON, Father and Next Friend of J.R., a minor child, Plaintiffs, v. ATTORNEY GENERAL MICHAEL COX and ERIC RUSSELL, Defendants, _____________________________________________________/ OPINION AND ORDER GRANTING IN PART AND DENYING IN PART UNIVERSITY DEFENDANTS’ MOTION TO DISMISS, DENYING CANTRELL PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT, GRANTING ATTORNEY GENERAL’S MOTION FOR SUMMARY JUDGMENT, AND DISMISSING CONSOLIDATED CASES -2- The plaintiffs in these consolidated actions challenge the constitutionality of an amendment to Michigan’s state constitution that was adopted by a majority vote of the electorate at the November 2006 election. The amendment, referred to throughout this opinion as Proposal 2, prohibits the State and its political subdivisions from “discriminat[ing] against, or grant[ing] preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.” Mich. Const. art. I, § 26(1). Before the Court are several dispositive motions filed by the parties, which were fully briefed and presented at oral argument held on February 6, 2008. For reasons discussed in detail below, the Court determines that there are no material fact issues that require a trial on any of the claims, and the Court must find that Proposal 2 does not violate the United States Constitution. Therefore, the Court will grant in part and deny in part the university defendants’ motion to dismiss, deny the Cantrell plaintiffs’ motion for summary judgment, grant the attorney general’s motion for summary judgment, and dismiss these consolidated cases. I. Facts and Proceedings A. Background In the 1960s, minority racial groups in Michigan began lobbying the University of Michigan Board of Regents to consider an applicant’s race in making admissions determinations, thereby treating minority status as a positive factor. In 1992, the University of Michigan law school crafted an admission policy that used an applicant’s race as one of many factors in assembling classes consisting of “a mix of students with varying backgrounds and experiences who will respect and learn from each other.” Grutter v. Bollinger, 539 U.S. 306, 314 (2003) (internal quotes omitted). -3- The undergraduate school considered race in its admissions decisions since at least 1995. Gratz v. Bollinger, 539 U.S. 244, 254-55 (2003). In 1997, white applicants who were rejected under those systems challenged the state schools’ admission policies in federal court, arguing that they violated the Equal Protection Clause of the Fourteenth Amendment because race was considered as a factor in deciding whom to admit. However, the Supreme Court eventually held that “student body diversity is a compelling state interest that can justify the use of race in university admissions.” Grutter, 539 U.S. at 325. In the case of the law school, the Court held that its admissions system “bears the hallmarks of a narrowly tailored plan,” id. at 334, and upheld it against the constitutional challenge. The Court invalidated the undergraduate school’s program because it resembled a quota system bereft of the necessary individualized consideration found in the law school’s program, and therefore the system was not narrowly tailored to achieve the compelling state interest. Gratz, 539 U.S. at 275-76. Not satisfied with that result, the plaintiff in Gratz joined forces with Ward Connerly and the Michigan Civil Rights Initiative (MCRI) to place on the November 2006 statewide ballot a proposal to amend Michigan’s constitution to bar programs for state school admission, public employment, and public contracting that grant preferential treatment on the basis of race or gender. The petition drive eventually was designated officially as Proposal 06-2, although throughout the process and this litigation it is known as Proposal 2, and it has been characterized by the Michigan Attorney General at oral argument in this case as an anti-affirmative action measure. The signature-gathering phase of the initiative process generated considerable controversy. The Sixth Circuit found that “the solicitation and procurement of signatures in support of placing Proposal 2 on the general election ballot was rife with fraud and deception. . . . By all accounts, -4- Proposal 2 found its way on the ballot through methods that undermine the integrity and fairness of our democratic processes.” Operation King’s Dream v. Connerly, 501 F.3d 584, 591 (6th Cir. 2007). Nevertheless, Proposal 2 was allowed to remain on the ballot, and the Michigan voters approved the constitutional amendment with approximately 57.9% of the voters in favor and 43.1% disapproving. See State Proposal-06-2: Constitutional Amendment: Ban Affirmative Action Programs, at http://miboecfr. nictusa.com/election/results/06GEN/90000002.html (last visited Feb. 10, 2008). Only three of Michigan’s 83 counties rejected the measure; the rest approved it. Proposal 2 amended the state constitution by adding the following provisions: (1) The University of Michigan, Michigan State University, Wayne State University, and any other public college or university, community college, or school district shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting. (2) The state shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting. (3) For the purposes of this section “state” includes, but is not necessarily limited to, the state itself, any city, county, any public college, university, or community college, school district, or other political subdivision or governmental instrumentality of or within the State of Michigan not included in sub-section 1. (4) This section does not prohibit action that must be taken to establish or maintain eligibility for any federal program, if ineligibility would result in a loss of federal funds to the state. (5) Nothing in this section shall be interpreted as prohibiting bona fide qualifications based on sex that are reasonably necessary to the normal operation of public employment, public education, or public contracting. (6) The remedies available for violations of this section shall be the same, regardless of the injured party’s race, sex, color, ethnicity, or national origin, as are otherwise available for violations of Michigan anti-discrimination law. -5- (7) This section shall be self-executing. If any part or parts of this section are found to be in conflict with the United States Constitution or federal law, the section shall be implemented to the maximum extent that the United States Constitution and federal law permit. Any provision held invalid shall be severable from the remaining portions of this section. (8) This section applies only to action taken after the effective date of this section. (9) This section does not invalidate any court order or consent decree that is in force as of the effective date of this section. Mich. Const. art. I, § 26. Although an exit poll conducted by Edison Media Research found that 86% of black voters voted “No” on Proposal 2, the reliability of that poll has been questioned. See Eric Russell Resp. to Cantrell Mot. for Summ. J., Ex. 1, Wilson Dec. at ¶ 4 (explaining that the reliability of this figure cannot be determined without knowing the sample size and how many people refused to respond). The day after the election, a collection of interest groups and individuals (the Coalition plaintiffs) brought suit alleging that the state constitutional amendment violated the United States Constitution and federal law. They filed their complaint in this Court on November 8, 2006. Another group (the Cantrell plaintiffs) brought suit on December 19, 2006, contending that Proposal 2 was unconstitutional as it is applied to public colleges and universities. This Court consolidated these cases on January 5, 2007. Proposal 2 took effect on December 23, 2006. Although the Court granted the plaintiffs and the University defendants a measure of relief by entering a stipulated order temporarily enjoining Proposal 2’s implementation at Michigan’s universities, that injunction was short-lived. On December 29, 2006, the Sixth Circuit issued a stay of the injunction pending a full appeal as to the injunction only. See Coal. to Defend Affirmative Action v. Granholm, 473 F.3d 237, 253 (6th Cir. 2006). That appeal subsequently was dismissed as moot, since the injunction merely put off the -6- effective date of Proposal 2 until July 1, 2007. The universities thereafter implemented Proposal 2 and applied its requirements to the 2006-2007 admissions cycle. The Coalition plaintiffs amended their complaint on December 17, 2006, and again on March 28, 2007. The Cantrell plaintiffs amended their complaint on January 17, 2007. Thereafter, the Court instructed the parties to attempt a stipulation of facts that would have permitted the issues to be adjudicated promptly by dispositive motion, but the attempt failed and the parties proceeded with discovery. On May 15 and 16, 2007, the plaintiffs filed motions to certify the matter as a class action. Those motions were argued and taken under advisement, and they will be adjudicated in a separate order. On October 5, 2007, the Cantrell plaintiffs filed a motion for summary judgment as to intervening defendant Eric Russell. The University defendants filed their motion to dismiss on October 17, 2007. On November 30, 2007, the Michigan attorney general filed a motion to dismiss or for summary judgment, intervening defendant Russell filed a motion for summary judgment, and the Cantrell plaintiffs fled a motion for summary judgment. These motions were submitted for decision after oral argument on February 6, 2008. These motions raise issues of standing, the propriety of joining the Michigan universities as defendants, and challenges to the plaintiffs’ arguments that Proposal 2 violates the Equal Protection Clause, Title VI of the Civil Rights Act of 1964, and Title IX of the Education Amendments of 1972. A discussion of the allegations in the complaints and the facts elicited through discovery, therefore, is necessary. -7- B. The Amended Complaints 1. The Cantrell Plaintiffs The thrust of the Cantrell plaintiffs’ complaint is that Proposal 2 violates the Equal Protection Clause of the Fourteenth Amendment, but not in the traditional sense. Unlike the Coalition plaintiffs, whose complaint is discussed below, the Cantrell plaintiffs do not base their challenge on the argument that denying preferential treatment to minority students is unlawful per se, but rather on the idea that Proposal 2 places an undue burden on the ability of minority groups to effect changes in policy by altering the political structure. Their theory is tied to language in Hunter v. Erickson, (1969), Washington v. Seattle School Dist. No. 1, (1982), and Romer v. Evans, (1996). The Cantrell plaintiffs exclusively challenge Proposal 2 as it is applied to Michigan’s public universities, and the University of Michigan in particular. The named plaintiffs are eighteen individuals who all bear some connection to the University of Michigan and believe Proposal 2 is bad for that institution’s future. Three of the named plaintiffs are students at the law school; four are undergraduate students; six are high school students who plan to apply to the university; one is a Ph.D. candidate; and four are professors. The majority of the named plaintiffs are members of a minority racial group, although a handful are Caucasians who believe that racial diversity is important to their educational experience. The plaintiffs purport to “represent a class of all present and future students and faculty at the University of Michigan who applied to, matriculated at, or continue to be enrolled at or employed by the University of Michigan in reliance upon the University’s representation that it would continue to admit and enroll a diverse group of students -8- at the school consistent with its former policies, which took race into account among other factors.” Cantrell Amend. Compl. at ¶ 31. These plaintiffs claim that Proposal 2 places an undue political burden on individuals or groups who would seek to alter public university polices regarding the consideration of race in the admissions process, because the only way to alter the policy is a state-wide ballot initiative rather than a petition to the governing body of the university, to which they would have had access before Proposal 2’s passage. According to the Cantrell plaintiffs, persons seeking to alter admissions policies with respect to other factors, such as legacy status or geographic origin, can simply appeal to the individual colleges or schools. On the other hand, “[t]his avenue is foreclosed . . . to those seeking beneficial admissions policies that include consideration of race . . . in the decision-making process.” Id. at ¶ 51. These plaintiffs support their claim that obtaining a voter-approved constitutional amendment is more difficult than successfully petitioning individual university governing bodies to alter admissions policies by alleging, inter alia, the fact that access to the state ballot requires gathering signatures totaling “‘not less than eight percent . . . of the total vote cast for all candidates for governor at the last preceding general election.’” Id. at ¶ 53 (quoting Mich. Const. art. 2, § 9). Citing Hunter and Seattle for the proposition that “a state law violates the Equal Protection Clause when it ‘disadvantage(s) any particular group by making it more difficult to enact legislation in its behalf,’” Cantrell Amend. Compl. at ¶ 57 (quoting Hunter, 393 U.S. at 393, and citing Seattle, 458 U.S. at 468), the Cantrell plaintiffs argue that “[b]y creating a political process that sets aside race, among other categories, for consideration ‘at a new and remote level of government,’ Proposal 2 imposes a ‘substantial and unique burden on racial minorities.’” Id. at ¶ 58 (quoting Seattle, 458 -9- U.S. at 470, 483). Based on this theory, the plaintiffs seek to permanently enjoin application of Proposal 2 at the University of Michigan and other public universities. 2. The Coalition Plaintiffs Like the Cantrell plaintiffs, the Coalition plaintiffs focus principally, if not exclusively, on Proposal 2’s impact on public universities. In contrast to the Cantrell plaintiffs, however, the Coalition plaintiffs include persons and entities that bear a connection to schools other than the University of Michigan. The named plaintiffs include the following organizations and individuals: (1) the Coalition to Defend Affirmative Action, Integration, and Immigrant Rights and Fight for Equality By Any Means Necessary (BAMN); (2) the United for Equality and Affirmative Action Legal Defense Fund (UEAALDF), a non-profit corporation founded by BAMN; (3) the Rainbow PUSH coalition; (4) the Defend Affirmative Action Party (DAAP), a student organization at the University of Michigan; (5) some twenty-seven minority high school students who plan to attend either the University of Michigan, Michigan State University, or Wayne State University; (6) three recent graduates from the University of California at Berkeley who plan to attend graduate school at one of either Michigan, Michigan State, or Wayne State; (7) two minority community college students who plan to apply to either Michigan, Michigan State, or Wayne State; (8) three other individuals with “substantial college credits” who plan to apply to either Michigan, Michigan State, or Wayne State; (9) one minority student currently attending Michigan; (10) an individual who helped circulate the petition for Proposal 2; and (11) six local unions with large minority memberships. The named plaintiffs purport to represent three classes of individuals: the first class is comprised of all African American, Latino, and Native American applicants to or students at Michigan, Michigan State, and -10- Wayne State; the second class is made up of all women applicants to or students at those schools; and the third includes all African American, Latino, and Native American citizens who want to lobby for or vote for changes in the admission and other policies at the University of Michigan, Michigan State University, and Wayne State University that benefit African American, Latino, and Native American citizens. These plaintiffs present a political-burden argument that is similar to the one made by the Cantrell plaintiffs, except that it extends to gender. The Coalition plaintiffs also claim that Proposal 2 directly discriminates against university applicants on the basis of their race and gender because “Proposal 2 has as its primary aim reducing the admission of black, Latino, and Native American students and of women students into some programs,” Coalition Sec. Am. Compl. at ¶ 107, by eliminating the “desegregation plans that have resulted in the admission of significant numbers” of such students, id. at ¶ 106. Paradoxically, the Coalition plaintiffs contend that elimination of so- called preferential treatment actually amounts to discrimination, explaining: In its history, in its evident purpose, in its defiance of the state tradition of control of the universities by the governing boards, and in its adoption of explicit race and gender classifications, Proposal 2 violates the Equal Protection Clause of the Fourteenth Amendment by intentionally discriminating against black, Latino/a, Native American and women students. Id. at ¶ 111. In addition, the Coalition plaintiffs contend that Proposal 2 violates the First Amendment and is preempted by Title VI of the Civil Rights Act of 1964 and Title IX of the Education Amendments of 1972. The Coalition plaintiffs’ First Amendment argument is premised on the Supreme Court’s pronouncement in Grutter v. Bollinger that institutions of higher learning have a right to academic freedom rooted in that Amendment. According to the Coalition plaintiffs, -11- universities have a First Amendment right to consider race and gender in the selection of faculty and students in order to promote diversity and fruitful education; and students, in turn, are the beneficiaries of that right, which Proposal 2 violates. The Coalition plaintiffs also argue that Proposal 2 conflicts with Title VI of the Civil Rights Act of 1964 and is therefore preempted by that Act. They contend that Title VI, specifically 42 U.S.C. § 2000d, prohibits race- and national origin-based discrimination in programs that receive federal funding. Pursuant to Title VI, the Department of Education promulgated regulations that prohibit universities receiving federal funds from using admission criteria that either discriminate on the basis of race or impede the goal of eliminating racial discrimination. See 34 C.F.R. 100.3(b)(2). In light of California’s experience with Proposition 209, the Coalition plaintiffs allege that Proposal 2 will “result in a devastating decline in the number of black, Latino/a and Native American students, in direct violation of the purpose of Title VI and of the specific prohibitions of the regulations that implement Title VI.” Coalition Sec. Amend. Compl. at ¶ 127. Finally, the Coalition plaintiffs claim that Proposal 2 is preempted by Title IX of the Education Amendments of 1972, the gender-based analog to Title VI. See 20 U.S.C. § 1681; 34 C.F.R. § 106.23). Based on these claims, the Coalition plaintiffs ask the Court to enjoin permanently the implementation of Proposal 2 at the University of Michigan, Michigan State University, and Wayne State University. C. Facts Presented From Discovery The information gathered by the parties through discovery falls into two categories: the prospect for minority enrollment after Proposal 2’s implementation compared with beforehand; and the difficulty involved in amending the state constitution. -12- 1. Minority Admissions Before and After Proposal 2 Pursuant to the state constitution, the University of Michigan, Michigan State University, and Wayne State University are controlled by boards of regents. Mich. Const. art. VIII, § 5. These boards are endowed with a high degree of autonomy; each enjoys the power of “general supervision of its institution and the control and direction of all expenditures from the institution’s funds.” Ibid. These governing bodies have delegated the responsibility to establish admissions policies to departments within the respective institutions. These “admitting units” have “establish[ed] admissions systems that allow for the consideration of a variety of factors.” Cantrell Mot. for Summ. J as to Russell [dkt # 172], Ex. I, Univ. RFA Resp. at ¶ 5. Over time and partly as a result of lobbying efforts, the universities’ admissions systems and standards have evolved. Students and other individuals have always been “free to lobby the Universities for or against the adoption of particular admissions policies.” Id. at ¶ 7. Beginning in the 1960s, African Americans and other groups of minorities lobbied for the consideration of race in admissions, and it appears that the universities embraced the concept. As noted above, in 2003 the United States Supreme Court weighed in on the legitimacy of the admissions policies at Michigan and Michigan Law in Gratz v. Bollinger and Grutter v. Bolinger, invalidating the undergraduate admission plan and sustaining the law school’s plan. Following these decisions, Michigan amended its undergraduate admissions policy to comply with the Supreme Court’s instruction. According to Theodore Spencer, associate vice-provost and director of undergraduate admissions, the Grutter decision provided a “great road map of what a holistic [and permissible] review process should look like.” Cantrell Mot. for Summ. J., Ex. D, Spencer Dep. at 38. The key to this “holistic” process was that no single factor was dispositive. -13- “[H]olistic means that the decisions are not just based on grades and test scores, it means that it’s not just based on perhaps being an alum or any one particular factor, race or anything else, but rather on the composite review of all the information that the student provides.” Ibid. Race was still considered, but admissions officers would consider “50 to 80 different categories” in conducting their review. Id. at 35. Frank H. Wu, dean at Wayne State University Law School, testified similarly that prior to Proposal 2, the admissions committee considered a wide variety of non-academic factors that “contribute to a diverse and engaged law student body.” Cantrell Mot. for Summ. J., Ex. F, Wu Dep. at 32. Therefore, if a minority applicant failed to possess an LSAT score and GPA that would on their own qualify her for admission, the admissions committee would consider race, in addition to other factors that might “reduce[] the reliability of GPA as an index of academic achievement and promise.” Ibid. In response to Proposal 2’s passage, the universities eliminated race from their admissions criteria but continued to consider various other non-academic factors, such as geography, alumni connections, socioeconomic status, and athletic ability. At Michigan Law, for instance, “the meat of th[e] [pre-Proposal 2] policy is the same [as the post-Proposal 2 policy] . . . with the exception of race.” Cantrell Mot. for Summ. J., Ex. E, Zearfoss Dep. at 192. It is the undisputed testimony of university officials that Proposal 2 prohibits them from considering race to any degree. Based on the information offered by the parties, the most that can be said is that it is not clear exactly how Proposal 2 will affect minority admissions in the long run. What evidence there is suggests that minority admissions will fall at the state’s more selective schools, but the degree to which this will occur is subject to debate. Two different types of evidence have been submitted on -14- the matter: (1) testimony by admissions officials; and (2) testimony by outside experts. Both draw heavily on California’s experience under Proposition 209. Theodore Spencer, Sarah Zearfoss (dean of admissions at Michigan Law), and Frank Wu all testified that Proposal 2 will depress minority enrollment. Spencer expressed doubts over the ability to maintain minority enrollment through the use of a proxy, like socioeconomic status. He explained that university officials in California, Washington, Texas, and Georgia (states with laws similar to Proposal 2) “cannot achieve the same sort of racial and ethnic diversity that they had prior to such measures . . . without considering race.” Spencer Dep. at 100-01. Similarly, Zearfoss testified that she excepts a decline in minority admissions because, in her view, it is impossible “to get a critical mass of underrepresented minorities . . . without considering race.” Zearfoss Dep. at 56-57, 193. Wu stated that although some creative approaches might mitigate the effects of Proposal 2, he “did not think that any one of these proposals or any combination of these proposals was reasonably likely to result in the admission of a class that had the same or similar or higher numbers of African Americans, Latinos and Native Americans as the prior policy.” Wu Dep. at 78. Even Ward Connerly, the architect of Proposal 2, admitted that, following the amendment, “the University of Michigan would be virtually resegregated as the University of California Berkeley and UCLA have,” Cantrell Mot. for Summ. J., Ex. K, Connerly Dep. at 120, although he stated that this was not his intent. In terms of expert testimony, the Cantrell plaintiffs offer the declarations of two purported experts in the field of race and admissions, William Bowen and Jeannie Oakes. Mr. Bowen is a former president of Princeton University and the author of two books on race-conscious admissions policies. In addition to highlighting the salutary effects of affirmative action, Bowen states that -15- “[t]he available evidence indicates that race-neutral alternatives are unlikely to be as effective as race-conscious admissions in enrolling a diverse student body.” Cantrell Mot. for Summ. J., Ex. L, Bowen Decl. at ¶ 11. In particular, “income-based strategies are unlikely to be good substitutes” because, although African Americans and Latinos are “overrepresented in the country’s poor population, the great majority of that population is still white.” Id. at ¶ 12. Jeannie Oakes, Presidential Professor in Educational Equity at UCLA, is of a similar mind. In her study, Oakes “dr[ew] from the experiences of Texas and California and contrast[ed] relevant circumstances in these states with those in Michigan.” Cantrell Mot. for Summ. J., Ex. M, Oaks Decl., Ex. 1, The Viability of Race-Neutral Approaches for Achieving Diversity at the University of Michigan, at 2. In 2005 and 2006, Oakes found that blacks at the University of Michigan were underrepresented by almost 300% when compared with K-12 enrollment figures at public schools in the state. She used these and other pre-Proposal 2 figures to calibrate a baseline; she did not assume that these numbers constituted sufficient diversity, but simply inquired whether these levels (whether adequate or not) could be maintained. She stated her findings as follows: A. Race-neutral admissions strategies (e.g., Percent Plans) have not been effective as replacements for race-conscious strategies in maintaining or increasing diversity in the public universities in Texas and California, two states with restrictions on race-conscious practices in university admissions similar to those required under Michigan’s Proposal 2. Race-neutral Percent Plans that guarantee admission to the top ranked graduates of each public high school have not been successful in either California or Texas in maintaining levels of racial diversity comparable to those achieved with race-conscious policies prior to the Hopwood case in Texas or the passage of Proposition 209 in California that made race- conscious policies impermissible. B. Michigan differs from California and Texas in ways that make it even more unlikely that race-neutral approaches would result in the diversity required at the University of Michigan. In fact, such strategies would likely exclude -16- from admission in-state African American and Latino high school graduates with academic preparation sufficient to succeed at the university. B.1. Whereas the top-tier universities in California and Texas draw their freshman classes almost exclusively from graduates of California [and Texas] high schools, a majority of those offered admission as first-time freshmen at the University of Michigan (including a majority of those from underrepresented minority groups) are not Michigan residents. Race-neutral admissions criteria (e.g., Percent Plans) and outreach strategies focused on Michigan high schools would not benefit the large percentage of underrepresented minority students who are drawn from other states. Moreover, given the substantially lower scores on academic admissions criteria of non- resident underrepresented admits, to non- underrepresented admits, few of these underrepresented out-of-state admits would likely be admitted were race not a consideration in the admissions processes. in comparison B.2. B.3. The high degree of racial segregation in Michigan high schools means that students from underrepresented minority groups are concentrated in a very small percentage of the state’s high schools. As a result, a plan guaranteeing admission to high ranking students at each of the state’s high schools would have its greatest benefit to students in schools with predominantly white populations and yield a relatively small number of underrepresented minority students. The small number of Michigan high schools with predominantly URM populations produces relatively few graduates with the academic records that would make them competitive for admission at the University of Michigan. This, in part, results from the relationship between the high concentration of poverty at racially isolated minority schools and the low level of opportunity associated with these schools. Lower levels of opportunity, in turn, affect the academic performance of students, specifically their ability to meet state standards on assessment tests, qualifying for state merit aid for college. These low levels of achievement are related to the racial and/or poverty composition of a student’s high school. Consequently, race-neutral “Percent Plans” would likely result in the admission of underrepresented minority students with academic preparedness far below that required to succeed in an “elite” university. Id. at 3-4. -17- Although the defendants have not produced evidence directly contradicting these conclusions, they have taken the position that they are mere speculation. See Cox Resp. Br. at 20- 21. In addition, defendant Eric Russell challenges the underlying assumption that preferential treatment is good for racial minorities. In support of this argument, he submits the declaration of Richard H. Sander, a law professor at UCLA who has garnered much attention for his development of the “mismatch effect” theory, first introduced in an article appearing in the Stanford Law Review. See A Systemic Analysis of Affirmative Action in American Law Schools, 57 Stan. L. Rev. 367 (2004). The driving principle of that theory is that affirmative action harms minorities in the long run by placing them in institutions where they cannot compete or keep up with the pace of instruction. According to Sander, this theory finds support in the case of the University of Michigan’s law school: data from 2004, 2005, and 2006 “show very large disparities in bar passage rates across racial lines,” with black graduates of Michigan Law “about eight times as likely to fail on their first attempt as were white graduates.” Russell Reply [dkt # 181], Ex. 1, Sander Decl. at ¶ 6. In addition, the Coalition plaintiffs offer evidence and argument that the conditions that necessitated resort to affirmative action programs to achieve parity in opportunity for minority students still exist after the passage of Proposal 2. They cite as examples de facto residential segregation, unequal resources for K through 12 schools for minorities, limited minority access to resources and programs, and racial stereotyping. According to Dr. Gary Orfield, who testified at the Grutter trial in this Court, even with affirmative action programs in effect, minority students’ SAT scores typically are significantly lower that white students’ scores regardless of income levels, and minority students do not have the same access to honors or advanced placement classes that can -18- boost grade point average. Coalition Resp. Br., Ex. M, Orfield testimony, at 11, 92, 103-104. In 2005, the University of Michigan undergraduate program offered no admission to students from fourteen different Detroit high schools which are intensely segregated. Coalition Resp. Br., Ex. J, Miller Decl. at 9. The attorney general did not reply to the Coalition plaintiffs’ brief. Intervening defendant Russell replies to the Coalition plaintiffs’ arguments primarily by referring to Ward Connerly’s deposition testimony that he believes eliminating racial preferences favoring minorities will benefit minority students in the long run by eliminating artificial equalizers and forcing them to compete in the larger society on the basis of merit. 2. Difficulty Amending the State Constitution There is also some ambiguity concerning just how onerous it would be to secure an amendment repealing Proposal 2. Kristina Wilfore, executive director of Ballot Initiative Strategy Center, Inc., a non-profit organization that researches and trains people in the ballot initiative process, has submitted a declaration on behalf of the Cantrell plaintiffs positing that state-wide ballot initiatives are typically expensive and time-consuming and often unsuccessful. She has also suggested that repealing Proposal 2 would be particularly difficult due to unique features in Michigan’s ballot initiative process and specific factors inherent in the subject matter of affirmative action. According to Wilfore, Michigan poses obstacles because (1) it is a “politically competitive state . . . with a large number of initiatives vying for voters’ attention on any given ballot”; (2) its media market is expensive when compared with other states; (3) the state constitution requires signatures from 8% of the total vote cast for all candidates for governor in the preceding general election; and (4) “Michigan has an unusually short time frame for the gathering of signatures and -19- filing of petitions.” Cantrell Mot. for Summ. J, Ex. C, Wilfore Decl. at ¶¶ 29-32. In addition, she says that Proposal 2 would be particularly challenging to repeal due to the fact that (1) polling data regarding affirmative action is unreliable, i.e., individuals often behave differently when they get to the voting booth; (2) affirmative action is a tough cause to market because it is complex and elicits emotional responses; and (3) “[t]here is no single obvious financial benefactor who would support the pro-affirmative action policy.” Id. at ¶¶ 36-37. Intervening defendant Russell counters this evidence with the testimony of Jennifer Gratz, director of the Michigan Civil Rights Initiative Committee, who believes that “Ms. Wilfore exaggerates both the effort and expense associated with putting an initiative or referendum on the ballot in Michigan.” Russell Resp. Br., Ex. 3, Gratz Decl. at ¶ 4. According to Gratz, polling is not necessary; a popular initiative can be passed with less than $5 million; and Michigan does not have a particularly short signature-gathering period (California, Oklahoma, and Massachusetts have shorter periods). Moreover, the funding marshaled in opposition to Proposal 2 shows that monetary support would not be a major obstacle. “One United Michigan (‘OUM’), the ballot initiative committee that was the chief opponent of Proposal 2 in the 2006 election, received and spent just a little less than $4.8 million,” including contributions from General Motors Corporation, Chrysler Corporation, and Ford Motor Company. Id. at ¶¶ 10, 12. II. The University Defendants’ Motion The Coalition plaintiffs (but not the Cantrell plaintiffs) sued the university defendants seeking mandatory injunctive relief with respect to Proposal 2’s effect on admissions policies that include consideration of race. The university defendants now ask this Court to dismiss them from the action pursuant to Federal Rule of Civil Procedure 21 on the grounds that they are not proper -20- parties to the case. They also contend that Count 6 of the Coalition plaintiffs’ amended complaint – alleging a violation of the First Amendment – should be dismissed for lack of standing. As to the Rule 21 argument, the university defendants point out that although they must follow Proposal 2, they did not draft or enact it; they cannot repeal it, amend it, or ignore it; and they have no responsibility to enforce it against anyone or defend it in court. Therefore, they argue, they are not proper parties from whom relief can be obtained. The university defendants contend that the Coalition plaintiffs have no standing to assert a First Amendment claim because the right to academic freedom does not belong to any of the plaintiffs, but rather to the universities. Because of Supreme Court authority generally stating that there is a prohibition against asserting the constitutional rights of others, these defendants argue that the Coalition plaintiffs cannot establish standing. Federal Rule of Civil Procedure 21 states: Misjoinder of parties is not a ground for dismissing an action. On motion or on its own, the court may at any time, on just terms, add or drop a party. The court may also sever any claim against a party. Fed. R. Civ. P. 21. The Rule allows dismissal of misjoined parties; “[t]he cases make it clear that parties are misjoined when they fail to satisfy either of the preconditions for permissive joinder of parties set forth in Rule 20(a).” Wright, Miller & Kane, Federal Practice and Procedure § 1683 (3d ed. 2001) (citing Michaels Bldg. Co. v. Ameritrust Co., 848 F.2d 674 (6th Cir. 1988 . According to Rule 20, defendants are properly joined when the claims asserted against them arise from a common transaction or occurrence and those claims present some common question of law or fact. Fed. R. Civ. P. 20(a). -21- With these criteria in mind, the Sixth Circuit has held that dismissal for misjoinder is proper where the party is not responsible for the alleged harm and does not have the power to accord relief. See Sutherland v. Mich. Dep’t of Treas., 344 F.3d 603, 612-13 (6th Cir. 2003) (approving dismissal of the State of Michigan where the only claim brought against the State was for employment discrimination and the State was not the plaintiff’s employer). The one instance where a court may dismiss a party under Rule 21 notwithstanding her satisfaction of the Rule 20(a) requirements lies in the context of diversity jurisdiction. See Soberay Mach. & Equip. Co. v. MRF Ltd., 181 F.3d 759, 763 (6th Cir. 1999) (noting that “[i]t is well settled that Rule 21 invests district courts with authority to allow a dispensable nondiverse party to be dropped at any time, even after judgment has been rendered,” to preserve complete diversity). The Court believes that the university defendants are properly joined as parties to this case, and dismissal for misjoinder is not appropriate, because the claims brought against the universities are intertwined with those challenging Proposal 2 in general. The Coalition plaintiffs allege that it is discriminatory (in a conventional sense) to abolish preferential treatment in admissions policies, and both groups of plaintiffs claim that Proposal 2’s impact on admissions amounts to a discriminatory restructuring of the political process. Because the claims against the university defendants and the attorney general share common questions of law and fact and arise out of the same occurrence, the preconditions of joinder under Rule 20(a) have been met, and dismissal is unwarranted. Although it is true that the universities are not responsible for the alleged harm resulting from the passage of Proposal 2, and they have no authority to repeal it, striking down that amendment would not grant the plaintiffs the relief they ultimately seek without action on the universities’ part. If this Court were to find Proposal 2 unconstitutional, affirmative action would -22- not automatically be reinstated into the admissions process. Rather, the universities would have to choose to do so on their own. And given the undeniable stake that the universities have in all these issues, it would simply be inappropriate to cast them aside, even if they desire the ultimate result the plaintiffs seek to achieve. The standing issue requires a different analysis. A plaintiff who establishes Article III standing requirements faces the additional “rule that a party ‘generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties.’” Kowalski v. Tesmer, , 129 (2004) (quoting Warth v. Seldin, , 499 (1975 . There is an “exception” to this rule when “the party asserting the right has a ‘close’ relationship with the person who possesses the right,” and “there is a ‘hindrance’ to the possessor’s ability to protect his own interests.” Id. at 130. The “close relationship” element requires consideration of whether “‘the relationship between the litigant and the third party [is] such that the former is fully, or very nearly, as effective a proponent of the right as the latter.’” Powers v. Ohio, 499 U.S. 400, 413 (1991) (quoting Singleton v. Wulff, 428 U.S. 106, 115 (1976 . This prudential barrier is also “‘lessen[ed]’” in cases involving a First Amendment attack, but only when the challenge is premised on vagueness or overbreadth. Kowalski, 543 U.S. at 130; Prime Media, Inc. v. City of Brentwood, 485 F.3d 343, 348 (6th Cir. 2007) (citing Broadrick v. Oklahoma, 413 U.S. 601, 612 (1973 ; Brandywine, Inc. v. City of Richmond, Kentucky, 359 F.3d 830, 835 (6th Cir. 2004) (“[P]laintiffs may not assert third party standing in every First Amendment facial challenge; rather plaintiffs may only do so in vagueness and overbreadth challenges.”). Proposal 2 is not challenged here on grounds of vagueness or overbreadth. Rather, the right upon which the Coalition plaintiffs focus is the First Amendment right to academic freedom, which -23- began to take shape in the concurring opinion of Justice Felix Frankfurter in Sweezy v. New Hampshire, 354 U.S. 234 (1957), where he stated: It is the business of a university to provide that atmosphere which is most conducive to speculation, experiment and creation. It is an atmosphere in which there prevail ‘the four essential freedoms’ of a university – to determine for itself on academic grounds who may teach, what may be taught, how it shall be taught, and who may be admitted to study. Id. at 263 (Frankfurter, J., concurring) (internal quotes omitted). In Regents of University of Michigan v. Ewing, 474 U.S. 214 (1985), the Court noted that academic freedom embodies both a freedom among professors and students to express ideas and “somewhat inconsistently, on autonomous decisionmaking by the academy itself.” Id. at 226 n.12 (citing University of California Regents v. Bakke, 438 U.S. 265, 312 (1978) (opinion of Powell, J.) and Sweezy v. New Hampshire, 354 U.S. at 263 (Frankfurter, J., concurring in result . “Discretion to determine, on academic grounds, who may be admitted to study, has been described as one of ‘the four essential freedoms’ of a university.” Ibid. Justice Powell, in providing the fifth vote to uphold the affirmative action program in Bakke, implied that the university’s academic freedom had a constitutional dimension by emphasizing that “[a]cademic freedom, though not a specifically enumerated constitutional right, long has been viewed as a special concern of the First Amendment. The freedom of a university to make its own judgments as to education includes the selection of its student body.” Bakke, 438 U.S. at 312 (Powell, J.). Yet Justice Powell noted that “[a]lthough a university must have wide discretion in making the sensitive judgments as to who should be admitted, constitutional limitations protecting individual rights may not be disregarded.” Id. at 314. The idea of academic autonomy in the area of admissions provided an important foundational element for the majority in Grutter v. Bollinger -24- in upholding Michigan Law’s affirmative action program. The Court determined that the university’s interest in obtaining a diverse student body was a compelling state interest, choosing to “defer” to the “Law School’s educational judgment.” Grutter, 539 U.S. at 328. It is plain that the First Amendment right to academic freedom in the area of admissions belongs to the universities. Yet the Coalition plaintiffs insist that they have standing to assert their own First Amendment right to a racially diverse education because students are the primary beneficiaries of the right to academic freedom. They argue in the alternative that to the extent that academic freedom rights are the exclusive province of universities, they have third-party standing to assert the right. Both of these positions, however, are fundamentally at odds with the academy’s right to determine who may be admitted to study. In making their argument that Proposal 2 is unconstitutional because it denies students the right to a racially diverse educational environment, the Coalition plaintiffs necessarily must claim a right unto themselves to select – or at least influence – who may be admitted to the universities. However, under the First Amendment, that right does not belong to them, but to the academy. The Grutter Court explained: We have long recognized that, given the important purpose of public education and the expansive freedoms of speech and thought associated with the university environment, universities occupy a special niche in our constitutional tradition. See, e.g., Wieman v. Updegraff, 344 U.S. 183, 195 (1952) (Frankfurter, J., concurring); Sweezy v. New Hampshire, 354 U.S. 234, 250 (1957); Shelton v. Tucker, 364 U.S. 479, 487 (1960); Keyishian v. Board of Regents of Univ. of State of New York, 385 U.S. at 603. In announcing the principle of student body diversity as a compelling state interest, Justice Powell invoked our cases recognizing a constitutional dimension, grounded in the First Amendment, of educational autonomy: “The freedom of a university to make its own judgments as to education includes the selection of its student body.” Bakke, supra, at 312. From this premise, Justice Powell reasoned that by claiming “the right to select those students who will contribute the most to the ‘robust exchange of ideas,’” a university “seek[s] to achieve a goal that is of paramount importance in the fulfillment of its mission.” 438 U.S., at 313 (quoting Keyishian v. Board of Regents of Univ. of State of New York, supra, at 603). -25- Grutter, 539 U.S. at 329. Consistent with this view, Justice Powell in Bakke and the Court in Grutter invoked this right as a shield for the universities against the claims of students seeking admission on equal protection grounds. These precedents convince the Court that the Coalition plaintiffs do not have a personal right to a diverse student body grounded in the First Amendment. Their third-party standing argument likewise does not find support in the jurisprudence. Schools routinely are granted standing to seek redress for injuries to their students. Runyon v. McCrary, 427 U.S. 160, 175 n.13 (1976) (“It is clear that the schools have standing to assert these arguments [involving the student’s right to privacy and free association and the parent’s right to direct the child’s education] on behalf of their patrons.”); Ohio Ass'n of Independent Schools v. Goff, 92 F.3d 419, 422 (6th Cir. 1994) (holding that “schools . . . have standing to assert the constitutional right of parents to direct their children’s education”). Other business enterprises may assert the rights of their costumers. Craig v. Borden, 429 U.S. 190, 195 (1976) (holding that vendor of alcoholic beverages may assert equal protection claims of male patrons and stating “vendors and those in like positions have been uniformly permitted to resist efforts at restricting their operations by acting as advocates of the rights of third parties who seek access to their market or function”); Connection Distributing Co. v. Reno, 154 F.3d 281, 295 (6th Cir. 1998) (holding that newsletter may assert rights of readers in first amendment challenge because readers value anonymity and may be unwilling to come forward). However, the courts have not been as willing to permit students to assert the rights of their schools. See, e.g., Eulitt ex rel. Eulitt v. Maine, 386 F.3d 344, 352 (1st Cir. 2004) (holding that students could not assert Equal Protection Clause rights of school because there was no showing that the school lacked the ability to assert its -26- own rights, and because the student may not share the interest of the school). In fact, it would be ironic if the plaintiffs here are permitted to sue the universities to assert the universities’ rights. The Coalition plaintiffs cannot establish the grounds for third-party standing to assert a First Amendment claim for two more reasons. First, the students lack a “close relationship” with the universities within the framework of academic freedom. See Powers, 499 U.S. at 413. As noted above, it is the universities that enjoy the right to chose which students to admit, a right that inherently is in tension with the interests of students and prospective students seeking to influence the admissions system. Second, the students have not established that the universities are burdened by some hindrance to the assertion of their First Amendment rights. The universities have mounted a rigorous defense of their admissions policies in the past. Even in the present case, although nominal defendants, the universities supported the initial injunction to postpone the effective date of Proposal 2 and pressed an academic freedom argument before the Sixth Circuit on appeal of that injunction. See Coalition to Defend Affirmative Action v. Granholm, 473 F.3d 237, 247 (6th Cir. 2006). Because the Coalition plaintiffs lack standing to assert their First Amendment claim, the Court will grant the universities’ motion to dismiss Count 6 of the Coalition plaintiffs’ amended complaint. III. The Attorney General’s Motion and the Cantrell Plainitffs’ Motion Attorney General Cox has moved in the alternative to dismiss under Rule 12(b)(6) or for summary judgment under Rule 56(c). Although a party may file a motion for summary judgment that is contingent upon the court’s denial of its motion for dismissal, if matters outside the pleadings are submitted, the motion more properly should be considered under Rule 56, and courts will treat -27- the motion as one for summary judgment. Fed. R. Civ. P. 12(b) (stating that “if, on a motion . . . to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56”); Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 533 (6th Cir. 2002) (quoting Soper v. Hoben, 195 F.3d 845, 850 (6th Cir. 1999 . The parties have filed a number of exhibits with their motions. These documents plainly are relevant to the defendant’s motion and should be examined by the Court. Therefore, the Court will treat the motion as one for summary judgment and apply the standards required by Rule 56. Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact.” Fed. R. Civ. P. 56(c). The Cantrell plaintiffs and the defendants have filed cross motions for summary judgment, which might imply that there are no facts in dispute. Nonetheless, the Court must apply the well-recognized standards when deciding such cross motions; “[t]he fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate.” Parks v. LaFace Records, 329 F.3d 437, 444 (6th Cir. 2003). Therefore, when this Court considers cross motions for summary judgment, it “must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party.” Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003). A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party and determine “whether the evidence presents a sufficient -28- disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 587 (1986). The attorney general contends that both sets of plaintiffs lack standing to sue, and, failing that, they have failed to state a claim upon which relief can be granted. The Cantrell plaintiffs, seeking summary judgment, argue that Proposal 2 is unconstitutional as a matter of law: first, because it singles out race while leaving various other elements of diversity untouched, thereby creating a classification that triggers Fourteenth Amendment scrutiny; and second, because Proposal 2 makes achieving race-conscious admissions policies more difficult than securing other types of beneficial legislation, thereby imposing an unequal and impermissible burden on people of color. A. Standing The attorney general divides his attack on the Coalition plaintiffs’ standing to challenge Proposal 2 on equal protection and preemption grounds by categorizing these plaintiffs into two groups: organizational plaintiffs and individual plaintiffs. He contends that the organizational plaintiffs cannot satisfy the requirements that the organization’s members would have standing to sue in their own right, the interests at stake are central to the organization’s purpose, and neither the claim asserted nor the relief requested dictates the participation of individual members. He says that the individual plaintiffs cannot show actual or imminent harm because the individual Coalition plaintiffs do not have a legally protected right to attend college or receive preferential treatment in the admissions process. And even if this were not the case, the attorney general contends, none of -29- the plaintiffs have shown that they would be admitted in the absence of Proposal 2. With respect to the petition circulator, it is unclear what legal interest he has in the matter at all. The attorney general also divides the Cantrell plaintiffs into two groups, faculty and students, and divides the latter into the subgroups of students currently attending the University of Michigan, high school students who have applied to the University of Michigan, and high school students who intend to apply there. He then posits that all of these students have failed to establish a legally cognizable injury in fact. This point overlaps the merits argument, since the attorney general reasons that the plaintiffs lack standing to pursue their political-restructuring claim because they are not and cannot be injured by an amendment that prohibits discriminatory treatment. He says that the faculty plaintiffs, while grounding their claim on a right to academic freedom under the First Amendment (since they are third-party beneficiaries of the universities’ affirmative action programs), have failed to satisfy the requirements for third-party standing. Standing, of course, is “the threshold question in every federal case.” Warth v. Seldin, , 498 (1975). There are “three constitutional requirements for standing, see McConnell v. Fed. Election Comm’n, 540 U.S. 93, 225-26 (2003) (reiterating that ‘the irreducible constitutional minimum of standing’ consists of ‘an injury in fact, which is concrete, distinct and palpable, and actual or imminent,’ ‘a causal connection between the injury and the conduct complained of – the injury has to be fairly traceable to the challenged action of the defendant, and not the result of some third party not before the court,’ and a ‘substantial likelihood that the requested relief will remedy the alleged injury in fact’) (internal quotes and citations omitted), as well as [three] prudential requirements, see Coyne v. American Tobacco Co., 183 F.3d 488, 494 (6th Cir. 1999) (reviewing the three elements that ‘a plaintiff must assert his own legal rights and interests,’ the claim ‘must be -30- more than a generalized grievance,’ and ‘in statutory cases, the plaintiff’s claim must fall within the “zone of interests” regulated by the statute in question’) (internal quotes and citations omitted).” City of Cleveland v. Ohio, 508 F.3d 827, 835 (6th Cir. 2007). In addition, “[a]n association has standing to bring suit on behalf of its members when its members would otherwise have standing to sue in their own right, the interests at stake are germane to the organization’s purpose, and neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., , 181 (2000) (citing Hunt v. Washington State Apple Advertising Comm’n, 432 U.S. 333, 343 (1977 . Applying these well-established rules, it is easy to conclude that all of the parties have standing to bring their respective claims (save the First Amendment claim) except the petition circulator and the labor unions. The Coalition and Cantrell plaintiffs both contend that they have suffered harm in that they have been hindered unconstitutionally in advancing their legal objectives through the political process. The Coalition plaintiffs also allege that Proposal 2 directly discriminates against them by making it more difficult for minorities and females to gain admission to Michigan’s public universities. In conducting the standing analysis, the Court must take the claims as they are fairly pleaded. The claims as pleaded plainly identify injuries recognized in the law. Similarly, the professors who call themselves plaintiffs in this case have standing because of the limited nature of their claims. There are four professor-plaintiffs who signed on to the Cantrell complaint. Because the Cantrell plaintiffs have only asserted an equal protection claim based on Hunter v. Erickson, the professors do not face the problem that they would if they were -31- also asserting a conventional equal protection claim (i.e., the issue of third-party standing). Since all of the professors have asserted that they support affirmative action in the admissions process, their allegations include facts that give rise to the injury recognized by Hunter: heightened difficulty in securing legislation or policies, such as affirmative action, that inure primarily to the benefit of minorities. Likewise, the professor- and student-plaintiffs also have shown that there is a causal connection between their alleged injuries and the enforcement of Proposal 2 as enacted, and the requested remedy – a declaration of unconstitutionality and an injunction against its enforcement – will bring them relief. These plaintiffs are asserting their own rights under the Equal Protection Clause, their grievances are specific, and their claims fall within the Clause’s zone of interests. The challenge to their standing is not well taken. On the other hand, it is difficult to see how the petition circulator has a stake in any of this. The sole allegation concerning this plaintiff is: “The plaintiff Joseph Henry Reed was a petition circulator for Proposal 2.” Coalition Sec. Am. Compl. at ¶ 29 (emphasis added). There is no explanation in the complaint why a supporter of Proposal 2 would now seek to attack it. Without an allegation that Mr. Reed has had a change of heart and a protectable interest, there is no basis to conclude that he has standing to attack the measure. Mr. Reed will be dismissed as a plaintiff. A closer question is presented as to the standing of the organizational plaintiffs. To show that they have standing, these plaintiffs, all of which are parties to the Coalition case, must show that their members would otherwise have standing to sue, the interests at stake are germane to the organizations’ purposes, and neither the claims asserted nor the relief requested require the participation of individual members. Friends of the Earth, Inc., 528 U.S. at 181. Most of the organizations satisfy these requirements. Apart from the labor unions, all of the organizations have -32- the achievement of racial equality as their stated mission, and the majority of them have the defense of affirmative action as their more specific goal. The Coalition to Defend Affirmative Action, Integration, and Immigrant Rights and Fight for Equality By Any Means Necessary (BAMN), the United for Equality and Affirmative Action Legal Defense Fund (UEAALDF), the Rainbow PUSH coalition, and the Defend Affirmative Action Party (DAAP), all meet the requirement that the subject matter of the lawsuit be germane to their purposes. In addition, they satisfy the requirement that their members otherwise would have standing to sue in their own right. Although some of the members of these organizations are not prospective students, and therefore it is unlikely that they have a stake in the conventional equal protection claim, they all appear to support affirmative action and have an interest in pursuing legislation and policies incorporating such programs. Therefore, they all have standing to pursue the Hunter claim. Finally, the last element for associational standing is met because the nature of the claims (constitutional) and the relief sought (declaratory and injunctive) do not necessarily require the participation of their individual members in the action. The Court does not find that the six labor unions have standing to pursue these claims, however. They fail the test for associational standing because their fundamental purpose – the advancement of their workers’ rights – bears a tenuous connection to the rights claimed in this lawsuit. The only connection the unions can claim is that they have large minority memberships. Although this feature might possibly satisfy the standing requirements if the Coalition plaintiffs were challenging Proposal 2 as it relates to preferential treatment in public contracting, they are not. The labor unions will be dismissed as plaintiffs. -33- B. “Conventional” Equal Protection Argument The Coalition plaintiffs (but not the Cantrell plaintiffs) allege that Proposal 2 violates the Equal Protection Clause by discriminating against them on account of race. The attorney general, relying heavily on the Proposition 209 case, Coalition for Economic Equity v. Wilson, 122 F.3d 692 (9th Cir. 1997), asserts that it is simply ludicrous to contend that Proposal 2 discriminates against racial minorities and women because the terms of the provision explicitly outlaw disparate treatment on account of race and gender. As noted earlier, the attorney general acknowledges that the clear effect – if not the purpose – of Proposal 2 is to ban affirmative action programs in public university admissions, public employment, and public contracting. Although in that regard the provision implicates race, the attorney general insists that it does so in a constitutionally permissible way. To understand the Coalition plaintiffs’ response, the Court finds it necessary to review the ideological premise that undergirds their position. Unlike many defenders of affirmative action, who acknowledge that such programs accord unequal treatment but who justify this inequity on utilitarian grounds, the Coalition plaintiffs do not view affirmative action as preferential treatment. Instead, they see affirmative action as fundamentally necessary to desegregation and as a system that embodies equality by offsetting systemic handicaps (e.g., having grown up poor and having attended an underfunded school); and therefore affirmative action is a “benign” race-conscious policy. As a corollary, they deem Proposal 2 discriminatory because it eliminates affirmative action as an “equalizer.” Therefore, they implore the Court to look at the “reality of the situation” – including evidence of de facto segregation – and not just focus on “verbal formulas.” Following that line of thinking, the Coalition plaintiffs insist that a trial is required to demonstrate the need to use race-conscious admission policies in order to allow minority students -34- to compete on an equal footing and overcome past disadvantages, which presumably result from past discrimination and social and economic privation. They contend that facts at a trial will show that affirmative action programs are the only way that universities in Michigan will remain desegregated, and university admissions policies that do not consider race are per se discriminatory against blacks, Latinos, and Native Americans. Unfortunately, however, college admission at elite universities is a zero-sum enterprise, and programs that prefer some students on the basis of race must do so necessarily at the expense of other applicants not of the preferred race. That stark reality led Justice Powell to reject the proposition that race-based governmental action designed to benefit historically disadvantaged groups should be subject to a less exacting examination than “strict scrutiny,” when he wrote in Bakke that “[t]he guarantee of equal protection cannot mean one thing when applied to one individual and something else when applied to a person of another color.” 438 U.S. at 289-90 (opinion of Powell, J.). Although some opinions by members of the Supreme Court have advanced the idea that race- based state action designed to “remed[y] the present effects of past racial discrimination” should be allowed if it is “substantially related” to an “important governmental objective,” Fullilove v. Klutznick, 448 U.S. 448, 518-19 (1980) (Marshall, J., concurring); Regents of the Univ. of Cal. v. Bakke, 438 U.S. 265, 359 (1978) (Brennan, J., concurring) – that is, under the less demanding review standard of intermediate scrutiny – that view never has commanded a majority of the Court except once, in Metro Broadcasting, Inc. v. FCC, 497 U.S. 547 (1990), where the Court went slightly farther. In that case, the Court held that “benign race-conscious measures mandated by Congress – even if those measures are not ‘remedial’ in the sense of being designed to compensate -35- victims of past governmental or societal discrimination – are constitutionally permissible to the extent that they serve important governmental objectives within the power of Congress and are substantially related to achievement of those objectives.” Id. at 564-65. The life span of that rule was relatively short, however, since Metro Broadcasting was overruled five years later. Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 227 (1995) (holding that “all racial classifications, imposed by whatever federal, state, or local governmental actor, must be analyzed by a reviewing court under strict scrutiny. In other words, such classifications are constitutional only if they are narrowly tailored measures that further compelling governmental interests. To the extent that Metro Broadcasting is inconsistent with that holding, it is overruled”). Under a traditional equal protection analysis, therefore, it does not appear that the issues upon which the Coalition plaintiffs seek a trial will materially impact the result in this case; and therefore they cannot forestall summary judgment on the ground of the existence of a “genuine issue as to a[] material fact.” Fed. R. Civ. P. 56(c). The Equal Protection Clause commands that “[n]o State shall . . . deny to any person within its jurisdiction the equal protection of the laws.” U.S. Const. amend. XIV, § 1. This language prohibits “official conduct discriminating on the basis of race,” Washington v. Davis, 426 U.S. 229, 229 (1976), and its ultimate goal is to extinguish such discrimination, Palmore v. Sidoti, 466 U.S. 429, 432 (1984). Therefore, “whenever the government treats any person unequally because of his or her race, that person has suffered an injury that falls squarely within the language and spirit of the Constitution’s guarantee of equal protection.” Adarand, 515 U.S. at 230. Because official discrimination can be imposed either expressly on the face of legislation or under the guise of a facially-neutral enactment, the first step in a conventional equal protection analysis is to determine whether the challenged legislation draws any classification. Coalition for -36- Economic Equity v. Wilson, 122 F.3d 692, 702 (9th Cir. 1997); United Black Firefighters v. City of Akron, 976 F.2d 999, 1007 (6th Cir. 1992). The determining factor is not whether the enactment has race as its subject matter, but whether it facially purports to accord unequal treatment across racial lines. See Crawford v. Bd. of Education of City of Los Angeles, 458 U.S. 527, 538 (1982) (distinguishing “between state action that discriminates on the basis of race and state action that addresses, in neutral fashion, race-related matters”). Proposal 2 is facially neutral. Although it certainly deals with racial classifications, it declares in essence that when public bodies make official decisions to admit students, offer employment, or let contracts, no race may be burdened and no race may be benefitted. The law, therefore, points the Court to a different standard by which it must assess the Coalition plaintiffs’ challenge: “Where facially neutral legislation is challenged on the grounds that it discriminates on the basis of race, the enactment will be required to withstand strict scrutiny only if the plaintiff can prove that it ‘was motivated by a racial purpose or object,’ or ‘is unexplainable on grounds other than race.’” Moore v. Detroit Sch. Reform Bd., 293 F.3d 352, 368 (6th Cir. 2002) (quoting Hunt v. Cromartie, 526 U.S. 541, 546 (1999 . Mere awareness of discriminatory consequences is inadequate. Personnel Administrator of Massachusetts v. Feeny, 442 U.S. 256, 279 (1979). The requirement of discriminatory purpose “implies that the decisionmaker . . . selected or reaffirmed a particular course of action at least in part ‘because of,’ not merely ‘in spite of,’ its adverse effects upon an identifiable group.” Ibid. In addition, a plaintiff challenging facially neutral legislation must show disparate impact. To show disparate impact, a plaintiff must demonstrate that a facially neutral law has the effect of discrimination. Graoch Assoc. # 33, L.P., v. Louisville/Jefferson County Metro Human Relations Comm., 508 F.3d 366, 371 (6th Cir. 2007). However, proving that a law -37- has a racially disparate impact, without more, is insufficient to establish a violation of the Fourteenth Amendment. Village of Arlington Heights v. Metro. Housing Dev. Corp., 429 U.S. 252, 264-65 (1977). “In Village of Arlington Heights, the Supreme Court identified five factors that are relevant for determining whether facially neutral state action was motivated by a racially discriminatory purpose: (1) the impact of the official action on particular racial groups, (2) the historical background of the challenged decision, especially if it reveals numerous actions being taken for discriminatory purposes, (3) the sequence of events that preceded the state action, (4) procedural or substantive departures from the government’s normal procedural process, and (5) the legislative or administrative history.” Moore, 293 F.3d at 369 (citing Village of Arlington Heights, 429 U.S. at 266-68). Examining intent in the context of a ballot initiative presents a unique problem due to the sheer number of individuals whose intent is relevant. The Sixth Circuit took a hard line in Arthur v. Toledo, 782 F.2d 565 (6th Cir. 1986), holding that “absent a referendum that facially discriminates racially, or one where although facially neutral, the only possible rationale is racially motivated, a district court cannot inquire into the electorate’s motivations in an equal protection clause context.” Id. at 574. Although this standard remains good law, the Sixth Circuit has since expressed doubts about its legitimacy. Buckeye Comm. Hope Foundation v. City of Cuyahoga Falls, 263 F.3d 627, 638 n.2 (2001), rev’d on other grounds 538 U.S. 188 (2003). As the Buckeye panel noted, the Supreme Court’s decision in Seattle casts doubt on the Arthur standard and shows that, whatever its legitimacy in other cases, it cannot be right in the case of a Hunter challenge to a referendum. Buckeye Comm. Hope Foundation, 263 F.3d at 638 n.2 (citing Seattle, 458 U.S. at 465). But the -38- parties have cited no authority that undercuts Arthur’s precedential application to a traditional equal protection challenge. When a plaintiff has triggered strict scrutiny, either by showing an express racial classification or disparate impact and discriminatory purpose, the law will be deemed unconstitutional unless the State can justify it by establishing that it is narrowly tailored to serve a compelling state interest. Johnson v. California, 543 U.S. 499, 509 (2005). In the Proposition 209 case, the Ninth Circuit made short work of the plaintiffs’ conventional equal protection argument, observing that the measure did not classify individuals by race or gender, and therefore it could not run afoul of the Equal Protection Clause. Coalition for Economic Equity, 122 F.3d at 702 (“Rather than classifying individuals by race or gender, Proposition 209 prohibits the State from classifying individuals by race or gender. A law that prohibits the State from classifying individuals by race or gender a fortiori does not classify individuals by race or gender.”). That court held: “Proposition 209’s ban on race and gender preferences, as a matter of law and logic, does not violate the Equal Protection Clause in any conventional sense.” Ibid. In staying this Court’s preliminary injunction, the Sixth Circuit noted that “the color-blind goal of the Equal Protection Clause is to do away with all governmentally imposed discrimination based on race,” 473 F.3d at 249 (internal quotes and citations omitted), and held that “[i]n the end, a law eliminating presumptively invalid racial classifications is not itself a presumptively invalid racial classification.” Id. at 250. Neither of these cases discussed the idea that at least one purpose of the respective proposals was to eliminate affirmative action programs, which benefit minorities exclusively. Therefore, they did not consider the prospect that the facially neutral legislation might violate the Clause under the rationale of Village of Arlington Heights, Graoch Assoc., and Moore. Neither of -39- these cases is binding precedent, Cross Mountain Coal v. Ward, 93 F.3d 211, 217 (6th Cir. 1996) (holding that although “decisions of other circuits are entitled to respect, they are not binding upon us”); Certified Restoration Dry Cleaning Network, L.L.C. v. Tenke Corp., 511 F.3d 535, 542 (6th Cir. 2007) (noting that “a party is not required to prove his case in full at a preliminary injunction hearing and the findings of fact and conclusions of law made by a court granting the preliminary injunction are not binding at trial on the merits”) (internal quotes omitted), and they do not obviate this Court’s obligation to give the issues a fresh look. The Coalition plaintiffs have offered sufficient evidence to establish a fact question on the disparate impact part of the test. The deposition testimony and affidavits of Theodore Spencer, Sarah Zearfoss, Frank Wu, William Bowen, Jeannie Oakes, Gary Orfield, and even Ward Connerly plainly show that Proposal 2’s elimination of affirmative action programs will fall the heaviest on minorities while having little effect on white students. This conclusion is supported by some of these witnesses’ statistics, but it also is intuitive: if affirmative action programs have had a positive effect on university admissions of minority students, eliminating them likely will have a negative effect. It is difficult to see how Proposal 2 could not have a disparate impact on minorities. It is the demonstration of a discriminatory purpose that vexes the Coalition plaintiffs and dooms their conventional equal protection argument, since the plaintiffs must show that Proposal 2 was enacted “because of, not merely in spite of, its adverse effects upon an identifiable group.” Feeny, 442 U.S. at 279 (quotations omitted). First, there is the hurdle presented by the Arthur standard, which bars “a district court [from] inquir[ing] into the electorate’s motivations in an equal protection clause context” when reviewing a facially neutral law (unless “the only possible rationale [for a referendum] is racially motivated”). Arthur, 782 F.2d at 574. Based on the evidence -40- presented, the Court cannot say that the only purpose of Proposal 2 is to discriminate against minorities. For instance, Ward Connerly testified that he was motivated to eliminate affirmative action programs because he thinks they are harmful to minorities, who would be better served by being forced to compete without official help with more advantaged white and Asian students. See Cantrell Mot. for Summ. J., Ex. K, Connerly Dep. at 120 (expressing the view “that the only way we’re going to close this academic gap between black and Latino on the one hand and Asian and white on the other, is not to keep papering over it with preferences, but to apply the tough love that’s necessary to get black and Latino students up to the bar”). Jennifer Gratz appears to have been motivated by the desire to gain admission to the University of Michigan herself without having to yield to a minority candidate who would take her place with the benefit of a racial preference. Whether one accepts or rejects Connerly’s view that there is virtue in tossing minority students into the deep end and letting them sink or swim on their own (regardless that some might drown in the meantime), or the more craven approach of Gratz that affirmative action deprives her of her own slice of the pie, both of these viewpoints illustrate that racial discrimination is not the only rationale behind Proposal 2. Second, even if the Coalition plaintiffs could overcome Arthur’s strict rule, they cannot satisfy the test for discriminatory intent using the traditional factors from Village of Arlington Heights. The first factor courts normally consider in determining whether facially neutral legislation was motivated by a racially discriminatory purpose is the impact of the legislation on particular racial groups. Moore, 293 F.3d at 369 (citing Village of Arlington Heights, 429 U.S. at 266-68). For the reasons discussed above, that factor favors the plaintiffs. Most of the other factors, however, cut in the opposite direction. The historical background of Proposal 2 and sequence of events that -41- preceded its passage do not suggest discriminatory intent. The public arguments made in support of Proposal 2 did not appeal to racism or amount to a call for segregation; rather, they attempted to appeal to the public’s belief in fairness and just treatment. Although Ward Connerly and other major supporters of the amendment knew that Proposal 2 might lead to fewer minority admissions, there is no evidence that they intended this. On the other hand, the fact that fraud was committed in the process of securing Proposal 2’s place on the ballot does lend some credence to the idea that ulterior motives were at work. Nevertheless, the factor of “procedural or substantive departures from the government’s normal procedural process,” Moore, 293 F.3d at 369, clearly militates against a finding of discriminatory intent when one considers the most salient departure of all: Proposal 2 was a ballot initiative. To impugn the motives of 58% of Michigan’s electorate, in the absence of extraordinary circumstances which do not exist here, simply is not warranted on this record. To the extent that the Coalition plaintiffs’ conventional equal protection argument is based on gender discrimination, it is even less compelling. Laws challenged under the Equal Protection Clause based on gender are subject to the less rigorous standard of “intermediate scrutiny,” Tuscon Woman’s Clinic v. Eden, 379 F.3d 531, 543 (2004), which requires “showing an ‘exceedingly persuasive justification’ for the classification.” Mississippi Univ. for Women v. Hogan, 458 U.S. 718, 724 (1982). There is little evidence in this record showing that Proposal 2 will have a disparate impact on the admission of women at Michigan’s colleges and universities, and virtually no evidence of an intent to discriminate against women in the historical background or procedures that led to the passage of the measure. -42- Because Proposal 2 is facially neutral, and the Coalition plaintiffs cannot show that the measure was enacted with a discriminatory intent, their conventional equal protection challenge must fail as a matter of law. C. Hunter/Seattle Equal Protection Challenge Both the Coalition and the Cantrell plaintiffs argue that Proposal 2 unlawfully restructures the political process to disadvantage minorities in achieving equal opportunity in higher education. They reason that before Proposal 2, minority groups could petition university officials to implement affirmative action programs, or at least consider race among a host of non-academic factors in making admissions decisions. However, after Proposal 2, the only way racial minorities can secure programs that account for race in the assembly of a student body is to seek and obtain passage of another constitutional amendment. That daunting process, they contend, imposes a unique and heavy burden upon them as a class and unconstitutionally distances them from the political process when they seek what the law allows, even if what they seek can be characterized as an advantage. The attorney general advances five arguments against the plaintiffs’ challenge. First, he contends that women and racial minorities together constitute a majority of Michigan’s population, and therefore Proposal 2, no matter how it is read, cannot constitute discrimination against a minority group. Second, the attorney general notes that unlike the laws in Hunter v. Erickson, Washington v. Seattle Sch. Dist. No. 1, and Romer v. Evans, Proposal 2 does nothing to facilitate discrimination; it prohibits discrimination. Third, the attorney general submits that the political restructuring argument requires proof of purposeful racial discrimination, which is absent here. Fourth, the attorney general states that women and racial minorities remain free to advocate practices -43- promoting diversity as long as they do not amount to discrimination. Fifth, the attorney general posits that the university admissions process is not a political process as contemplated in the Hunter line of cases, since at Wayne State University the admissions criteria are formulated exclusively by a committee and students are not allowed to vote on these criteria, and at the University of Michigan the faculty are the primary architects of the admissions policy and there is no formal process by which members of the public or prospective students can even comment on the policy. The Equal Protection Clause affords protection against laws that grant benefits or impose burdens on the basis of racial classifications, which have been acknowledged to be inherently suspect. See, e.g. McLaughlin v. Florida, 379 U.S. 184, 191-92 (1964). The lesson of the Hunter/Seattle line of cases is that the Clause also protects equal access to the political process against different sorts of discrimination. See Romer v. Evans, , 633 (1996) (observing that “[a] law declaring that in general it shall be more difficult for one group of citizens than for all others to seek aid from the government is itself a denial of equal protection of the laws in the most literal sense”). In Hunter v. Erickson, (1969), the citizens of Akron, Ohio amended the city charter at a referendum election to require that city ordinances regulating the use or sale of real property on the basis of race be approved by a majority of voters at a general election before such ordinances could become effective. The plaintiff unsuccessfully sought to enforce an open housing ordinance that had been adopted by the city council but not submitted to the voters. The Supreme Court held the charter amendment unconstitutional because, although the amendment “declare[d] no right to discriminate in housing” and “place[d] no ban on the enactment of fair housing ordinances,” it “was an explicitly racial classification treating racial housing matters differently from -44- other racial and housing matters.” Id. at 389. More importantly, the charter amendment imposed more burdensome rules on those who would seek to win legislation combating race-based housing discrimination. Id. at 390 (“Those who sought, or would benefit from, most ordinances regulating the real property market remained subject to the general rule [of council approval only]. . . . But for those who sought protection against racial bias, the approval of the City Council was not enough.”). This constituted a classification based on race because, although the amendment applied equally to all races, it “nevertheless disadvantage[d] those who would benefit from laws barring racial . . . discriminations as against those who would bar other discriminations or who would otherwise regulate the real estate market in their favor.” Id. at 391. Further, despite the amendment’s facial neutrality, there was no doubt that it discriminated against minority interests: [A]lthough the law on its face treats Negro and white, Jew and gentile in an identical manner, the reality is that the law’s impact falls on the minority. The majority needs no protection against discrimination and if it did, a referendum might be bothersome but no more than that. Like the law requiring specification of candidates’ race on the ballot, Anderson v. Martin, 375 U.S. 399 (1964), § 137 places special burden on racial minorities within the governmental process. This is no more permissible than denying them the vote, on an equal basis with others. Id. at 391. To be sure, the Court did not hold unconstitutional the mere act of conditioning legislation on the approval of the people themselves. Rather, it was the way in which this was selectively done that denied equal protection: Even though Akron might have proceeded by majority vote at town meeting on all its municipal legislation, it has instead chosen a more complex system. Having done so, the State may no more disadvantage any particular group by making it more difficult to enact legislation in its behalf than it may dilute any person’s vote or give any group a smaller representation than another of comparable size. Id. at 392-93. -45- In Washington v. Seattle Sch. Dist. No. 1, (1982), the Court invalidated a statewide voter initiative that prohibited school boards from assigning students beyond the schools in their neighborhoods. The initiative contained so many exceptions that it effectively prevented desegregative busing only. In most areas concerning assignment of pupils, the school boards retained their authority, but this was not the case when it came to efforts at desegregation. As in Hunter, the Supreme Court held that the initiative drew a racial classification by “remov[ing] the authority to address a racial problem – and only a racial problem – from the existing decisionmaking body, in such a way as to burden minority interests.” Id. at 474. That selective restructuring of school board authority burdened future attempts to integrate (and hence minority interests) “by lodging decision-making authority over the question at a new and remote level of government.” Id. at 483. The Court noted that this was not “‘the simple repeal or modification of desegregation or antidiscrimination laws[, which], without more, never has been viewed as embodying a presumptively invalid racial classification.’” Ibid. (quoting Crawford, 458 U.S. at 539). Rather, it stacked the deck against minority interests by subjecting them “to a debilitating and often insurmountable disadvantage.” Id. at 484. These cases yield a simple but central principle. As Justice Harlan noted while concurring in the Court’s opinion in Hunter, laws structuring political institutions or allocating political power according to “neutral principles”– such as the executive veto, or the typically burdensome requirements for amending state constitutions – are not subject to equal protection attack, though they may “make it more difficult for minorities to achieve favorable legislation.” 393 U.S., at 394. Because such laws make it more difficult for every group in the community to enact comparable laws, they “provid[e] a just framework within which the diverse political groups in our society may fairly compete.” Id., at 393. Thus, the political majority may generally restructure the political process to place obstacles in the path of everyone seeking to secure the benefits of governmental action. But a different analysis is required when the State allocates governmental power nonneutrally, by explicitly using the racial nature of a decision to determine the decisionmaking process. State action of this kind, the Court said, “places special burdens on racial -46- minorities within the governmental process,” id., at 391 (emphasis added), thereby “making it more difficult for certain racial and religious minorities [than for other members of the community] to achieve legislation that is in their interest.” Id., at 395 (emphasis added) (Harlan, J., concurring). Such a structuring of the political process, the Court said, was “no more permissible than [is] denying [members of a racial minority] the vote, on an equal basis with others.” Id. at 391. Id. at 469 (alterations in original). Drawing heavily upon this passage, the Cantrell plaintiffs reason that in order to make out an equal protection violation under ths line of authority, they must establish only that Proposal 2 has a racial focus, and it places an unequal impediment to achieving official action that racial minorities perceive to be in their interest. They insist that they have satisfied both those elements. First, they argue that Proposal 2 singles out race while leaving various other elements of diversity untouched, thereby creating a classification that triggers Fourteenth Amendment scrutiny. Second, they contend that Proposal 2 makes it more difficult to achieve race-conscious admissions policies than other types of beneficial legislation, thereby imposing an unequal and impermissible burden on people of color. The Court cannot accept entirely the arguments of either the attorney general or the plaintiffs. First, contrary to the attorney general’s assertion, there can be no question that Proposal 2 has a racial focus. As noted above, Proposal 2’s ban against “grant[ing] preferential treatment to[] any individual or group on the basis of race” can mean nothing less than barring affirmative action programs. Although it is true that no racial group – minority or majority – can benefit from affirmative action programs under the plain language of Proposal 2, to suppose that races other than minority races would feel the impact of such a restriction defies logic and contemporary reality. “[T]he reality is that the law’s impact falls on the minority.” Hunter, 393 U.S. at 391. To that extent, the related argument that racial minorities plus women constitute a majority of the -47- population, and therefore Proposal 2 does not discriminate against minorities, likewise borders on nonsense. The attempt to cobble together an artificial coalition of women and racial minorities in an effort to construct a numerical majority of citizens ignores the fact that affirmative action programs generally are targeted to benefit insular groups that separately have suffered from discriminatory practices in the past because of perceived traits unique to that group alone. Lumping minority groups into a contrived category does not allow any greater political influence over the process of advocating for affirmative action programs to achieve racial parity or otherwise render the process of changing the state constitution “bothersome but no more than that.” Ibid. The Ninth Circuit accepted this premise in the Proposition 209 case. Coalition for Economic Equity, 122 F.3d at 705. Second, the idea that a political restructuring claim must be based on purposeful discrimination finds no support in the cases. Rather, the Supreme Court requires only that “an inquiry into intent is necessary to determine whether the legislation in some sense was designed to accord disparate treatment on the basis of racial considerations.” Seattle School Dist., 458 U.S. at 485 (emphasis added). Proposal 2 plainly deals with racial considerations, and it was designed, among other purposes, to prohibit programs that granted racial preferences, that is, affirmative action programs, at least according to Ward Connerly, its principal drafter. Citation to Crawford v. Board of Educ. of City of Los Angeles, 458 U.S. 527 (1982), provides no help to the attorney general’s position. In that case, the Court upheld an amendment to the state constitution that limited school districts’ authority to reassign and bus students to those instances necessary to remedy a violation of the Equal Protection Clause, that is, when a school district had to respond to prior de jure segregation. In holding “that the Equal Protection Clause is not violated by the mere repeal of race- -48- related legislation or policies that were not required by the Federal Constitution in the first place,” id. at 538, the Court made a point to distinguish that case from both Hunter and Seattle School District because the constitutional amendment in the California case did not involve political restructuring. Third, the governance of a university, including the regulation of admissions criteria, is part of the political process. As the plaintiffs observe, the universities derive their authority from the state constitution. See Mich. Const. art VIII, § 5. Although the admissions criteria are not subject to a vote, prospective students have a right to ask university officials to take into consideration certain factors when they decide how to constitute an admissions class. That, after all, is how race- conscious admissions programs developed in the first place. The clear effect of Proposal 2 is to prohibit the State and its political subdivisions – including university admissions departments – from adopting affirmative action programs; groups that would like to see such programs implemented now must seek a constitutional amendment that allows them. There is no question, therefore, that Proposal 2 makes it more difficult for minorities to obtain official action that is in their interest. However, the distinction drawn by the Ninth Circuit in the Proposition 209 case between laws that protect against unequal treatment on the basis of race and those that seek advantageous treatment on the basis of race is one yielded by precedent. As that court put it: Plaintiffs challenge Proposition 209 not as an impediment to protection against unequal treatment but as an impediment to receiving preferential treatment. The controlling words, we must remember, are “equal” and “protection.” Impediments to preferential treatment do not deny equal protection. It is one thing to say that individuals have equal protection rights against political obstructions to equal treatment; it is quite another to say that individuals have equal protection rights against political obstructions to preferential treatment. While the Constitution -49- protects against obstructions to equal treatment, it erects obstructions to preferential treatment by its own terms. Coalition for Economic Equity, 122 F.3d at 708 (footnote omitted). Since Coalition for Economic Equity was decided, the Supreme Court has stated that it is permissible for universities to consider race among several criteria for admission, since such schools have “a compelling interest in attaining a diverse student body.” Grutter, 539 U.S. at 328. The Supreme Court has also since reaffirmed that states have a “compelling interest [in] remedying the effects of past intentional discrimination” with race-conscious programs. Parents Involved in Community Schools v. Seattle School Dist. No. 1, 127 S. Ct. 2738, 2752 (2007). It also appears that a majority of the justices agree that schools may employ race-based programs to address “the problem of de facto resegregation in schooling.” Id. at 2791-92 (Opinion of Kennedy, J.) (declaring that “[i]n the administration of public schools by the state and local authorities it is permissible to consider the racial makeup of schools and to adopt general policies to encourage a diverse student body, one aspect of which is its racial composition”). But these decisions do not change the fact that affirmative action programs not mandated by the obligation to cure past discrimination are fundamentally different than laws intended to protect against discrimination. According to the Ninth Circuit, “[e]ven a state law that does restructure the political process can only deny equal protection if it burdens an individual’s right to equal treatment.” Coalition for Economic Equity, 122 F.3d at 707. If the plaintiffs were to demonstrate that an admissions program that included racial preferences were required to combat racial discrimination or prevent resegregation, then perhaps Proposal 2’s prohibition against racial preferences might become unconstitutional as applied, although the measure would then be at odds with itself, since it also bars “discriminat[ion] against . . . any individual or group on the basis of race.” Mich. Const. art. I, § -50- 26(1). However, the Hunter/Seattle line of cases does not prohibit the State from banning programs that give an advantage on the basis of race as a remedy to combating other social disadvantages. The Court believes that Michigan may limit the ability of discrete groups to secure an advantage based upon a racial classification without offending the Fourteenth Amendment. Neither Hunter, Seattle, nor Romer v. Evans holds otherwise. Because the political restructuring effectuated by Proposal 2 does not offend the Equal Protection Clause by distancing racial minority groups from the means of obtaining equal protection, the plaintiffs’ challenge to the measure based on these cases cannot prevail. D. Preemption Arguments The Coalition plaintiffs’ final claims allege that Proposal 2 is preempted by Title VI of the Civil Rights Act of 1964 and Title IX of the Education Amendments of 1972. Title VI amounts to a blanket prohibition against racial discrimination in the context of federally-funded programs, stating as follows: No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance. 42 U.S.C. § 2000d. By its terms, Title VI recognizes conflict preemption only. 42 U.S.C. § 2000h-4 (“Nothing contained in any title of this Act shall be construed as indicating an intent on the part of Congress to occupy the field in which any such title operates to the exclusion of State laws on the same subject matter . . . [or] as invalidating any provision of State law unless such provision is inconsistent with any of the purposes of this Act, or any provision thereof”). The Supreme Court has explained that conflict preemption “arises when compliance with both federal and state regulations is a physical impossibility, or when state law stands as an obstacle to the -51- accomplishment and execution of the full purposes and objectives of Congress.” Fidelity Fed. Sav. and Loan Assoc. v. de la Cuesta, 458 U.S. 141, 153 (1982) (internal quotations and citations omitted). Title IX is the gender-based analog to Title VI, although it is limited to educational programs that receive federal funds. 20 U.S.C. § 1681(a). Although Title IX does not contain a clause defining the scope of its preemptive effect, the plaintiffs have not argued that it occupies the entire field of legislation to which it relates. However, Title IX expressly provides that it shall not be construed to mandate preferential treatment: Nothing contained in subsection (a) of this section shall be interpreted to require any educational institution to grant preferential or disparate treatment to the members of one sex on account of an imbalance which may exist with respect to the total number or percentage of persons of that sex participating in or receiving the benefits of any federally supported program or activity, in comparison with the total number or percentage of persons of that sex in any community, State, section, or other area: Provided, That this subsection shall not be construed to prevent the consideration in any hearing or proceeding under this chapter of statistical evidence tending to show that such an imbalance exists with respect to the participation in, or receipt of the benefits of, any such program or activity by the members of one sex. 20 U.S.C. § 1681(b). Proposal 2 contains a failsafe provision that avoids conflicts with federal law insofar as federally funded programs (such as those ordained by Title VI and Title IX) are involved, which states that the measure “does not prohibit action that must be taken to establish or maintain eligibility for any federal program, if ineligibility would result in a loss of federal funds to the state.” Mich. Const. art. I, § 26(4). The language in the federal statutes and Proposal 2 therefore creates a cross-ruff of sorts that deftly avoids conflicts and at once resolves conflicts in favor of federal law. If either Title VI or Title IX require certain action as a condition of federal funding, then Proposal -52- 2 will allow that action by its own terms. And Proposal 2 is not subject to field preemption because neither federal Act purports to occupy the field. However, the Coalition plaintiffs contend that Proposal 2 is nevertheless preempted because it conflicts with federal regulations promulgated pursuant to Titles VI and IX. In the case of Title VI, the Coalition plaintiffs point to 34 C.F.R. § 100.3(b)(2), which states: A recipient, in determining the types of services, financial aid, or other benefits, or facilities which will be provided under any such program, or the class of individuals to whom, or the situations in which, such services, financial aid, other benefits, or facilities will be provided under any such program, or the class of individuals to be afforded an opportunity to participate in any such program, may not, directly or through contractual or other arrangements, utilize criteria or methods of administration which have the effect of subjecting individuals to discrimination because of their race, color, or national origin, or have the effect of defeating or substantially impairing accomplishment of the objectives of the program as respect individuals of a particular race, color, or national origin. 34 C.F.R. § 100.3(b)(2) (emphasis added). The validity of this regulation has been questioned to the extent it purports to condemn acts that would be permissible under Title VI. See Alexander v. Sandoval, 532 U.S. 275, 282 (2001). But even if the Court assumes section 100.3(b)(2) is wholly valid, it still does not conflict with Proposal 2. Proposal 2 does not have the effect of racial discrimination any more than does a law or policy whose use of neutral criteria leads to a disparate impact. Disparate impact alone does not equate to racial discrimination; rather, illegal discrimination results in the case of neutral criteria only when the actors are motivated by a desire to discriminate. Proposal 2 allows universities to use neutral criteria – grades, test scores, schools of origin, community geographics, economic factors, and a host of others – in the admissions process. If these factors are not suitable proxies that generate racially diverse student populations, the universities will be all the poorer, but not because of conscious discrimination. -53- The plaintiffs’ case is even weaker in terms of Title IX. With respect to that act, the plaintiffs rely on 34 C.F.R. § 106.23(a). The regulation reads as follows: Nondiscriminatory recruitment. A recipient to which this subpart applies shall not discriminate on the basis of sex in the recruitment and admission of students. A recipient may be required to undertake additional recruitment efforts for one sex as remedial action pursuant to § 106.3(a), and may choose to undertake such efforts as affirmative action pursuant to § 106.3(b). 34 C.F.R. § 106.23(a). To the extent this regulation requires preferential treatment, it may be inconsistent with Title IX itself. See 20 U.S.C. § 1681(b) (providing that it shall not be “interpreted to require any educational institution to grant preferential or disparate treatment to the members of one sex” over another). If affirmative action recruitment programs are required by this section to become eligible for or maintain federal funding, Proposal 2 expressly would allow such action. There is no conflict, therefore, between Proposal 2 and federal law. IV. Conclusion The Court finds that all plaintiffs except Joseph Henry Reed, AFSCME Local 207, AFSCME Local 214, AFSCME Local 312, AFSCME Local 836, AFSCME Local 1642, and AFSCME Local 2920 have standing to bring this action. The Coalition plaintiffs’ claims against the university defendants are all properly brought in this case, except the alleged violation of First Amendment rights alleged in Count 6 of the amended complaint. The Court finds no merit in the Coalition plaintiffs’ conventional equal protection argument, and is constrained to conclude that the plaintiffs’ allegations that Proposal 2 violates the Equal Protection Clause under the theory based on Hunter v. Erickson and progeny must fail as well. There is no conflict between Proposal 2 and the federal funding provisions discussed above. -54- Accordingly, it is ORDERED that the motion to dismiss by the university defendants [dkt #179] is GRANTED IN PART AND DENIED IN PART. Count 6 of the Coalition plaintiffs’ second amended complaint is DISMISSED WITH PREJUDICE. It is further ORDERED that the claims of plaintiffs Joseph Henry Reed, AFSCME Local 207, AFSCME Local 214, AFSCME Local 312, AFSCME Local 836, AFSCME Local 1642, and AFSCME Local 2920 are DISMISSED for lack of standing. It is further ORDERED that the attorney general’s motion for summary judgment [dkt #201] is GRANTED. It is further ORDERED that the motion for summary judgment by the Cantrell plaintiffs [dkt #203] is DENIED. It is further ORDERED that the amended complaints and these consolidated actions are DISMISSED WITH PREJUDICE. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 18, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 18, 2008. s/Felicia M. Moses FELICIA M. MOSES -55-

=== Proposal 2: Miscellaneous Motions ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case No. 06-15024 Hon. David M. Lawson OPINION AND ORDER ADJUDICATING CERTAIN MOTIONS COALITION TO DEFEND AFFIRMATIVE ACTION, INTEGRATION AND IMMIGRATION RIGHTS AND FIGHT FOR EQUALITY BY ANY MEANS NECESSARY (BAMN), UNITED FOR EQUALITY AND AFFIRMATIVE ACTION LEGAL DEFENSE FUND, RAINBOW PUSH COALITION, CALVIN JEVON COCHRAN, LASHELLE BENJAMIN, BEAUTIE MITCHELL, DENESHA RICHEY, STASIA BROWN, MICHAEL GIBSON, CHRISTOPHER SUTTON, LAQUAY JOHNSON, TURQOISE WISE- KING, BRANDON FLANNIGAN, JOSIE HYMAN, ISSAMAR CAMACHO, KAHLEIF HENRY, SHANAE TATUM, MARICRUZ LOPEZ, ALEJANDRA CRUZ, ADARENE HOAG, CANDICE YOUNG, TRISTAN TAYLOR, WILLIAMS FRAZIER, JERELL ERVES, MATTHEW GRIFFITH, LACRISSA BEVERLY, D’SHAWNM FEATHERSTONE, DANIELLE NELSON, JULIUS CARTER, KEVIN SMITH, KYLE SMITH, PARIS BUTLER, TOUISSANT KING, AIANA SCOTT, ALLEN VONOU, RANDIAH GREEN, BRITTANY JONES, COURTNEY DRAKE, DANTE DIXON, JOSEPH HENRY REED, AFSCME LOCAL 207, AFSCME LOCAL 214, AFSCME LOCAL 312, AFSCME LOCAL 836, AFSCME LOCAL 1642, AFSCME LOCAL 2920, and the DEFEND AFFIRMATIVE ACTION PARTY, Plaintiffs, v. THE REGENTS OF THE UNIVERSITY OF MICHIGAN, the BOARD OF TRUSTEES OF MICHIGAN STATE UNIVERSITY, the BOARD OF GOVERNORS OF WAYNE STATE UNIVERSITY, the TRUSTEES of any other public college or university, community college, or school district, ATTORNEY GENERAL MICHAEL COX, and ERIC RUSSELL, Defendants, -and- CONSOLIDATED CASES Case No. 06-15637 Hon. David M. Lawson CHASE CANTRELL, M.N., a minor child by Karen Nestor, Mother and Next Friend, KAREN NESTOR, Mother and Next Friend of M.N., a minor child, C.U., a minor child, by Paula Uche, Mother and Next Friend, PAULA UCHE, Mother and Next Friend to C.U., a minor child, JOSHUA KAY, SHELDON JOHNSON, MATTHEW COUNTRYMAN, M.R., a minor child, by Brenda Foster, Mother and Next Friend, BRENDA FOSTER, Mother and Next Friend of M.R., a minor child, BRYON MAXEY, RACHEL QUINN, KEVIN GAINES, DANA CHRISTENSEN, T.J., a minor child, by Cathy Alfaro, Guardian and Next Friend, CATHY ALFARO, Guardian and Next Friend of T. J., a minor child, S. W., a minor child, by Michael Weisberg, Father and Next Friend, MICHAEL WEISBERG, Father and Next Friend of S. W., a minor child, CASEY KASPER, SERGIO EDUARDO MUNOZ, ROSARIO CEBALLO, KATHLEEN CANNING, EDWARD KIM, M.C.C. II, a minor child, by Carolyn Carter, Mother and Next Friend, CAROLYN CARTER, Mother and Next Friend of M.C.C., II, a minor child, J.R., a minor child, by Matthew Robinson, Father and Next Friend, MATTHEW ROBINSON, Father and Next Friend of J.R., a minor child, Plaintiffs, v. ATTORNEY GENERAL MICHAEL COX and ERIC RUSSELL, Defendants, _____________________________________________________/ OPINION AND ORDER GRANTING CANTRELL PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT AS TO INTERVENING DEFENDANT ERIC RUSSELL, DENYING MOTION TO INTERVENE BY JENNIFER GRATZ, AND DENYING AS MOOT PLAINTIFFS’ RESPECTIVE MOTIONS TO CERTIFY THE MATTERS AS CLASS ACTIONS, INTERVENING DEFENDANT ERIC RUSSELL’S MOTION FOR SUMMARY JUDGMENT, CANTRELL PLAINTIFFS’ MOTION TO COMPEL DISCOVERY, AND INTERVENING DEFENDANT ERIC RUSSELL’S MOTION TO COMPEL DISCOVERY FROM THE UNIVERSITY DEFENDANTS -2- Today the Court filed an opinion and order granting the Michigan Attorney General’s motion for summary judgment and a judgment dismissing the challenge by the plaintiffs in these consolidated cases to the constitutionality of an amendment to Michigan’s constitution, which is generally referred to as Proposal 2. There are several motions before the Court that remain pending, and the Court will address them in this order. The plaintiffs in the Cantrell case move for summary judgment against intervening defendant Eric Russell on the ground that the basis for his interest in the litigation has evaporated following the rejection of his application to the University of Michigan’s law school, which was considered under post-Proposal 2 criteria. The Court finds that Mr. Russell no longer has an interest in the subject matter of this case that cannot be protected adequately by the parties before the Court. Therefore, the Court will grant the motion for summary judgment and dismiss Mr. Russell as a party defendant. One Jennifer Gratz has filed a belated motion to intervene. The Court finds that Ms. Gratz fails to satisfy the requirements to permit her to intervene by right or permissably, and the Court will deny her motion. The Court also finds that its opinion and judgment on the State’s summary judgment motion moots the pending discovery and class certification motions, and consequently those motions will be denied. I. As explained in the Court’s opinion and order filed today adjudicating the parties’ other motions for summary judgment, this litigation was commenced on November 8, 2006 by a group of organizations and individuals (the Coalition plainitffs), immediately after the adoption by the Michigan electorate of a state constitutional amendment that effectively banned affirmative action programs by the State and its political subdivisions “in the operation of public employment, public education, or public contracting.” Mich. Const. art. I, § 26(1). Another group of individuals with -3- ties to the University of Michigan (the Cantrell plaintiffs) brought suit on December 19, 2006, contending that Proposal 2 is unconstitutional as it is applied to public colleges and universities. On December 18, 2006, Eric Russell, who had applied for admission at the University of Michigan’s law school, filed a motion to intervene as a party defendant. Russell was accepted by Wayne State University Law School beforehand, but his application to Michigan’s law school was still pending. Russell argued in his motion to intervene that he had a substantial interest in this case because, as a white male applicant to Michigan, he stood to gain or lose depending on whether Proposal 2 remained in full force and effect, and he was concerned about “both his interest in being treated equally in the admissions process and in maximizing his chances of being admitted.” Russell Mot. to Int. [dkt # 27] at 7. Russell argued that these interests would possibly be impaired if the Court denied intervention because he sought to have Proposal 2 become effective “as soon as possible,” while the plaintiffs and the university defendants sought its invalidation. See id. at 9. In addition, Russell contended that his interests would not be represented adequately by the then-present parties to the case because the university defendants and Governor Granholm had expressed strong disapproval of Proposal 2. Presciently, Russell also made this argument with respect to Attorney General Cox on the grounds that he might have the inclination to resolve this litigation by permitting the university defendants to temporarily ignore Proposal 2 during the 2006- 2007 admissions cycle. Id. at 10. Such a resolution, sounding in eventual compliance, “would not do Eric Russell much good at all.” Ibid. Unlike some members of the public, Russell represented that his interest was “to have a non-discriminatory and non-preferential system instituted right now, while his application is still under consideration.” Ibid. -4- At around the same time Mr. Russell filed his motion for intervention, several other entities filed motions seeking the same relief. Before ruling on these matters, however, the Court entertained a stipulation requesting entry of a preliminary injunction that would have exempted the university defendants from complying with Proposal 2 through the 2006-2007 admissions cycle. The stipulation was signed by Michigan Attorney General Michael Cox, who had been ordered to intervene in the case. The Court entered an order pursuant to the stipulation, but that order was stayed pending appeal by the Sixth Circuit on December 29, 2006. Coalition to Defend Affirm. Action v. Granholm, 473 F.3d 237 (6th Cir. 2006). On December 27, 2006, the Court issued an opinion and order addressing all of the motions to intervene, denying them all except Russell’s. Coalition to Defend Affirmative Action v. Granholm, 240 F.R.D. 368 (E.D. Mich. 2006), aff’d, 501 F.3d 775 (6th Cir. 2007). The Court determined that Russell qualified for intervention of right under Federal Rule of Civil Procedure 24(a) because he satisfied the four elements recognized in the controlling jurisprudence where the other putative intervenors did not. The Court stressed the uniqueness of Russell’s situation: as a white male with an application under consideration by the University of Michigan, Russell represented a tangible interest that no other party (or would-be intervenor) could claim. For instance, with respect to the element of timeliness, the Court explained that Russell satisfied this element because it was sensible for him to seek intervention only upon learning that the university defendants sought to forestall Proposal 2’s effective date. Id. at 374. Similarly, the Court found that Russell had a substantial legal interest in intervention because, “if the present plaintiffs are successful in obtaining a ruling that the constitutional amendment is invalid, Russell’s chances of gaining admission to the University of Michigan law school may be diminished.” Id. at 375. -5- Subsequently, the Court held a scheduling conference with both the Coalition and Cantrell plaintiffs to establish dates and an approach for handling the litigation. The actions were consolidated, and the Court ordered that all of the defendants in one action would be deemed defendants in the other action. The Court then requested the parties to submit joint stipulations of fact with the hope that the issues might be pared down to only those that were genuinely disputed. That attempt failed, however, as the parties found no meaningful common ground. In mid-May 2007, the Coalition and Cantrell plaintiffs each submitted a motion for class certification. Attorney General Cox and Governor Granholm each opposed the motions for class certification, while Eric Russell concurred in the relief sought. The Court held a hearing on the motions on August 15, 2007 and took them under advisement. In the meantime, on January 27, 2007 Eric Russell was denied admission to the University of Michigan Law School. It is undisputed that this decision was made in compliance with Proposal 2. Sarah Zearfoss, Assistant Dean and Director of Admissions at the University of Michigan, testified that she initially reviewed Mr. Russell’s application on December 22, 2007 and then placed it on “hold” along with other applications that had been filed before Proposal 2’s effective date. She then “looked at it without taking race into account as a factor.” Mot. for Summ. J as to Russell, Ex. L, Zerfoss dep. at 199. She explained: Q. And do you recall the reasons, the primary reasons that you decided to deny Eric Russell’s application? A. Again, it’s really impossible to identify the particular thing that made a decision. I do recall what I thought were weaknesses in the application. Q. And what were those? A. Well, there were a lot of them. -6- . . . Q. And given all those qualities that you’ve just talked about, would you characterize Mr. Russell’s application for admission as a close case for admission. A. No, it was not. Q. Would you say that’s the case whether you were applying the pre-Proposal 2 policy or the post-Proposal 2 policy? A. That’s correct. Id. at 200, 205. It is also undisputed that Michigan did consider race in the initial application process prior to Proposal 2. Assistant Dean Zearfoss also discussed how Russell would be treated should he submit a transfer application upon completion of his first year at Wayne State University Law School, as well as financial aid considerations if he were accepted. Zearfoss testified that race was not a factor, and in fact never had been when transfer applications were considered. As for financial aid, Zearfoss’s testimony was less illuminating, but she did indicate that Proposal 2 has not impacted the process. Turning to Wayne State University, law school Dean Frank H. Wu testified that race does not and will not affect Eric Russell’s participation in law school activities and, more importantly, his eligibility for financial aid and scholarships. With respect to student activities, including participation in law review, Dean Wu stated that Proposal 2 had changed nothing. Dean Wu’s testimony concerning financial aid was equally unequivocal, stating that he had “no reason to believe that if Proposal 2 were struck down at any point by a court, that any financial aid decision made as to Eric Russell or any other student would turn out differently because of race.” Mot. for Summ. J. as to Russell, Ex. M, Wu dep. at 185-86. Dean Wu also testified that Wayne State was in the process of amending scholarships to ensure conformity with Proposal 2. He stated that -7- thirteen or fourteen scholarships funded in part by private donors contained impermissible criteria, and the school was therefore “systematically approaching donors . . . to indicate to them that following passage of Prop 2, references to race, gender or ethnicity and so on are impermissible.” Id. at 238. Wu further stated that he had reached resolutions with some of the donors, thereby continuing funding for the scholarships. Wu confirmed that, as a Wayne State student, Eric Russell would be eligible to receive those scholarships provided that he met the criteria not referring to race, ethnicity, or gender. Finally, Dean Wu said that if a court declared Proposal 2 unconstitutional, he had “no way of predicting what the behavior of individual donors would be, but . . . [w]e would not expect even if Prop 2 were struck down tomorrow by a court, that we would go back and renegotiate the agreements.” Id. at 239-40. The Cantrell plaintiffs filed the present motion for summary judgment on October 5, 2007. The university defendants and the Coalition plaintiffs concur in the request, and Attorney General Cox takes no position on the matter. During the litigation, the parties filed various motions to compel discovery. Those motions are rendered moot by this Court’s disposition of the attorney general’s motion for summary judgment, and they will be denied. Finally, on February 1, 2008, Jennifer Gratz belatedly filed a motion to intervene as a defendant in the consolidated matters through the same attorney that represents intervening defendant Eric Russell. Gratz argues that she has an interest in this litigation because she once lived in Michigan and she might apply to the University of Michigan law school for admission in 2009 or 2010. She explains that she did not move to intervene until after the dispositive motion deadline -8- passed in this case because it only recently occurred to her that she might want to apply to a law school in Michigan. II. A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). The “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy and inexpensive determination of every action.” Celotex Corp. v. Catrett, , 327 (1986) (internal quotes omitted). A fact is “material” if its resolution affects the outcome of the lawsuit. Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001). “Materiality” is determined by the substantive law claim. Boyd v. Baeppler, 215 F.3d 594, 599 (6th Cir. 2000). An issue is “genuine” if a “reasonable jury could return a verdict for the nonmoving party.” Henson v. Nat’l Aeronautics and Space Admin., 14 F.3d 1143, 1148 (6th Cir. 1994) (quoting Anderson, 477 U.S. at 248). Irrelevant or unnecessary factual disputes do not create genuine issues of material fact. St. Francis Health Care Centre v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000). When the “record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,” there is no genuine issue of material fact. Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir. 2002). -9- The Cantrell plaintiffs argue that intervening defendant Russell should be dismissed from the case because the sole basis justifying his intervention – his pending application for admission to the University of Michigan Law School – no longer exists. Russell was denied admission to Michigan based on post-Proposal 2 criteria and he presently is a student at Wayne State University Law School. Russell concedes that he no longer has a pending application to Michigan’s law school, but he says that he might want to transfer there, and he may also apply to either Wayne or Michigan for financial aid. He contends that absent Proposal 2, those institutions might consider race as a factor in deciding those applications. Russell also believes that the Michigan attorney general remains unable to protect his interests adequately. When a party that has been granted intervention as of right no longer meets the requirements for such intervention, a court properly dismisses that party from the case. See Morgan v. McDonough, 726 F.2d 11, 14 (1st Cir. 1984) (affirming dismissal of intervenor where intervenor’s interest had become adequately represented by party to the suit); see also Advisory Committee Notes to Fed. R. Civ. P. 24 (“An intervention of right . . . may be subject to appropriate conditions or restrictions responsive among other things to the requirements of efficient conduct of the proceedings.”). This rule applies to permissive intervention as well. See Morgan, 726 F.2d at 15. Intervention, both as of right and by permission, is governed by Rule 24 of the Federal Rules of Civil Procedure. With respect to both types of intervention, the Sixth Circuit has stated that “Rule 24 should be ‘broadly construed in favor of potential intervenors,’” but has also warned that “this does not mean Rule 24 poses no barrier to intervention at all.” Stupak-Thrall v. Glickman, 226 F.3d 467, 472 (6th Cir. 2000) (quoting Purnell v. Akron, 925 F.2d 941, 950 (6th Cir. 1991 . Rule 24(a) deals with intervention as a matter of right and states: -10- On timely motion, the court must permit anyone to intervene who: (1) is given an unconditional right to intervene by a federal statute; or (2) claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant’s ability to protect its interest, unless existing parties adequately represent that interest. Fed. R. Civ. P. 24(a). “[T]o intervene as of right under Rule 24(a)(2), a proposed intervenor must establish the following four elements: (1) the motion to intervene is timely; (2) the proposed intervenor has a substantial legal interest in the subject matter of the case; (3) the proposed intervenor’s ability to protect that interest may be impaired in the absence of intervention; and (4) the parties already before the court may not adequately represent the proposed intervenor’s interest.” United States v. Michigan, 424 F.3d 438, 443 (6th Cir. 2005). The first criterion is irrelevant since Russell already is a party to the case. The question is whether he should be permitted to remain in light of his changed circumstances. With the benefit of the parties’ briefing on the summary judgment motions, the Court has little trouble concluding that there is no longer a good reason for Russell to remain in the litigation. The main reason undergirding Russell’s presence in this case has evaporated, he has no interest at risk in the matter, and even if he did, it appears that the attorney general now has settled on a position that accords adequate representation to individuals in Russell’s position. The Sixth Circuit has adopted a liberal view of the nature of an interest that supports intervention of right, but it has consistently noted that “[t]he inquiry into the substantiality of the claimed interest is necessarily fact-specific.” Michigan State AFL-CIO v. Miller, 103 F.3d 1240, 1245 (6th Cir. 1997). In Coalition to Defend Affirmative Action v. Granholm, 501 F.3d 775 (6th Cir. 2007), the Sixth Circuit reiterated this rule while affirming this Court’s December 2006 decision -11- denying intervention to the Michigan Civil Rights Initiative Committee, the American Civil Rights Foundation, and Toward a Fair Michigan. See id. at 780-84; cf. id. at 780 (“Although we have noted that this Circuit ‘has opted for a rather expansive notion of the interest sufficient to invoke intervention of right,’ Michigan State AFL-CIO v. Miller, 103 F.3d 1240, 1245 (1997), this does not mean that any articulated interest will do.”). The court held that these organizations’ interest in the case was inadequate because, once Proposal 2 had been passed, “[t]heir interest in seeing Proposal 2 enforced . . . ‘[wa]s greatly diminished due to the state’s responsibility in enforcing and defending [Proposal 2] as written.’” Coalition, 501 F.3d at 781 (quoting Northland Family Planning Clinic, Inc. v. Cox, 487 F.3d 323, 346 (6th Cir. 2007 . In line with this conclusion, the Sixth Circuit has consistently held that a generalized political or ideological interest is not sufficient to support intervention by right. See Northland, 487 F.3d at 345 (observing that an organization had a weak case for intervention where it had “only an ideological interest in the litigation”); Providence Baptist Church v. Hillandale Comm., Ltd., 425 F.3d 309, 316-17 (6th Cir. 2005) (holding that petition- circulating committee was not entitled to intervention in an action challenging the constitutionality of an ordinance because its stake in the case was “‘so generalized it will not support a claim for intervention of right’”) (quoting Athens Lumber Co., Inc. v. Fed. Elec. Comm’n, 690 F.2d 1364, 1366 (11th Cir. 1982 . Intervening defendant Russell argues that the nature of the injury in an equal protection claim of the present variety consists not in denial of the ultimate benefit, but in unequal treatment. Northeastern Florida Chapter of the Associated General Contractors of America v. City of Jacksonville, 508 U.S. 656 (1993), and Regents of Univ. of California v. Bakke, 438 U.S. 265 (1978), support his position. Russell contends that he has a substantial legal interest in this action -12- in that he has an interest in having his prospective transfer application reviewed without regard to race, gender, or ethnicity. Similarly, he claims an interest premised on a desire to obtain financial aid without regard to these considerations. Although these are not the same interests upon which Russell relied in seeking intervention, they likely suffice for the present. However, once a substantial legal interest has been established, the Court asks a related question: whether the “intervenor’s ability to protect that interest may be impaired in the absence of intervention,” or, in this case, in the absence of continued intervention. Michigan, 424 F.3d at 443. Generally speaking, satisfaction of the latter inquiry entails only a “minimal” burden. Grutter, 188 F.3d at 399. In this case, although Eric Russell has shown a substantial legal interest, he has failed to satisfy the impairment element. As noted earlier, he no longer has an application pending at the Michigan law school. All the evidence suggests that Russell’s transfer application would receive the same treatment regardless of the outcome of this case. Although the parties have submitted less evidence on the topic of financial aid at Michigan, what they have proffered likewise suggests that Russell’s treatment would be the same whether Proposal 2 stands or falls. In other words, irrespective of Eric Russell’s participation in this case and the arguments he might make, Michigan’s treatment of Eric Russell will remain the same. Assistant Dean Zearfoss’s undisputed testimony establishes that race is not considered in evaluating transfer applications; this was the case even before Proposal 2 (dating back to at least 2001, when Zearfoss took over); and Michigan would not change this policy if Proposal 2 were struck down. Russell makes a valid point that, notwithstanding Zearfoss’s representation, the university could legally consider race in transfer applications if the Court invalidated Proposal 2. “It is well settled that a defendant’s voluntary cessation of a challenged practice does not deprive -13- a federal court of its power to determine the legality of the practice.” City of Mesquite v. Aladdin’s Castle, 455 U.S. 283, 289 (1982). The theory behind this rule seems to be that, when the defendant is able to commence the practice once more and has only stopped following the initiation of litigation, voluntary cessation of the practice is inherently suspect. See ibid. However, the Sixth Circuit and other courts have confirmed that the holding in Aladdin’s Castle hinged largely on the fact that the defendant in that case had expressed an intent to take up the challenged practice once more if the case were dismissed as moot. Kentucky Right to Life, Inc. v. Terry, 108 F.3d 637, 645 (6th Cir. 1997) (“Critical to the Court’s decision [in Aladdin’s Castle], however, was the City’s announced intention to reenact the unconstitutional ordinance if the case was dismissed as moot.”) (citing Aladdin’s Castle, 455 U.S. at 289-90); see also Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 901 (9th Cir. 2007) (stating that Aladdin’s Castle is limited to the “rare situation where it is virtually certain that the repealed law [will] be reenacted,” and the fact that litigation may have prompted the repeal does not alone evince an intent to reenact) (internal quotes omitted). In this case it is inappropriate to second-guess Michigan’s representation when the evidence suggests its historical and future avoidance of consideration of race in transfer applications is not mere lip-service. Where a defendant’s voluntary cessation of a challenged practice may be inherently suspect, see Aladdin’s Castle, 455 U.S. at 289, there is nothing suspicious about a defendant proclaiming that it will continue to abide by a policy it has employed for years and which has not been changed materially by the commencement of litigation or the predicate events of that litigation. Michigan has not voluntarily ceased a challenged practice; it has simply stood by a course of action that is valid under Proposal 2. -14- On a related note, Russell suggests that Zearfoss’s testimony leaves open the possibility that Michigan may consider ethnicity, as opposed to race, in the transfer application process. This argument finds no support in the record. Although the definitions of race and ethnicity may be distinct, when Zearfoss referred to ethnicity, she used the term as if it were interchangeable with race. Whatever ambiguity may exist on this point does not alter Zearfoss’s testimony that Mr. Russell will not be treated differently than others because he is white. The evidence in this case also suggests that Russell’s other interest concerning Michigan – equal treatment in financial aid decisions – will likewise not be impaired if his participation in this litigation is discontinued. Although Zearfoss stated that financial aid was within her area of expertise “to a certain degree,” she represented unequivocally that Proposal 2 has not impacted the financial aid process. Zearfoss dep. at 215-16. This testimony has not been contradicted, and there is no reason to think that Michigan would consider race in its financial aid process in the event Proposal 2 were struck down. The same conclusion can be made with respect to Russell’s matriculation through Wayne’s law school. Dean Wu testified that “[r]ace will not affect any financial aid decision made as to Eric Russell or any other student at Wayne State University Law School.” Wu dep. at 185. Further, he stated that he has no reason to believe this would change in the event Proposal 2 were invalidated. It is unclear whether race was considered in the context of need-based financial aid before Proposal 2; there is in fact no evidence on the point. However, it is clear that race, ethnicity, or gender were factors in approximately fourteen annual scholarships. Wu dep. at 238. Wu testified that, following the passage of Proposal 2, he or a development officer “systematically approach[ed]” the donors to inform them that such criteria were impermissible. Ibid. Some of the donors – it is unclear how -15- many – agreed to continue funding the scholarships with elimination of the impermissible criteria. Id. at 239. Accordingly, assuming he met the remaining criteria (for instance, one or more of the scholarships have been set aside for people from a particular geographic area), Russell “would be eligible to receive those scholarships.” Ibid. This evidence remains unrebutted. The Court concludes, therefore, that Eric Russell has failed to establish that impairment of his substantial legal interest with respect to both Michigan and Wayne State is possible if continued intervention is denied. Although proof of impairment need only be “minimal,” Grutter, 188 F.3d at 399, this element poses a burden nonetheless, which Russell has failed to carry. Finally, having the benefit of reviewing the summary judgment briefs, it is apparent that Russell’s interest in the litigation now parallels that of the attorney general. At one point in this litigation, the attorney general’s lack of consistency in its acceptance of Proposal 2 was characterized by the court of appeals as “puzzl[ing],” Coalition to Defend Affirm. Action v. Granholm, 473 F.3d 237, 246 (6th Cir. 2006), and rightly so. However, it now appears that the attorney general has resolved to defend the measure, making arguments in his motion brief that Russell himself echoes in his own filings. The fact that the two summary judgment motions duplicate each other convinces the Court that Russell’s presence in the litigation is a mere make- weight that adds nothing of substance to the debate over Proposal 2’s constitutionality. Therefore, it is apparent that the attorney general – the party now before the Court – adequately represents the intervening defendant’s interest, which has now matured into a judgment in the State’s favor. The motion for summary judgment as to intervening defendant Eric Russell, therefore, will be granted. -16- III. The motion by Jennifer Gratz to intervene as a defendant can be disposed of quite easily based on her failure to satisfy any of the four factors required to establish a right to intervene. First, the motion is untimely. Timeliness is “evaluated in the context of all relevant circumstances.” Stupak-Thrall, 226 F.3d at 472-73 (internal quotation marks omitted). Several factors are considered, including the developments in the case, the purpose for intervention, and how long the proposed intervenors knew of their interest in the property or transaction at issue before they sought permission to intervene. Id. at 473-74. This case has now proceeded to a final disposition, and Gratz did not seek intervention until after discovery closed and all the parties filed their summary judgment motions. The purpose for intervention Gratz cites is to take up the cause of white law students defending Proposal 2 in the event Mr. Russell is dismissed from the case because of his changed circumstances. However, Mr. Russell’s application to the Michigan law school was decided adversely to him in January 2007, and he was admitted to and began attending Wayne’s law school in August 2007. Ms. Gratz has been aware of this case throughout its pendency. She has not explained the delay in applying for intervention. Second, Ms. Gratz has not identified a substantial legal interest in the subject matter of the case. She has no application to any Michigan school pending. She represents in her motion that she might apply to Michigan’s law school, but she testified under oath in her deposition in San Francisco in this case that she is a resident of California and has no immediate plans to return to Michigan. The Court finds no credible evidence that Ms. Gratz has an interest in the legal issues in this case that derives from her attempt to situate herself similarly to Russell’s pre-admission-decision posture. Of course, Ms. Gratz also directed the activities of the Michigan Civil Rights Initiative Committee, -17- which was the driving force behind the passage of Proposal 2, suggesting that she has an ideological interest in defending the enforcement of the state constitutional amendment. However, the Sixth Circuit has deemed a mere interest in the “subsequent enforcement of the rule after its enactment” an insufficient reason to support intervention by right. Northland Family Planning Clinic, Inc. v. Cox, 487 F.3d 323, 345 (6th Cir. 2007). The court explained: [T]he public at large – including public interest groups – has an interest in the procedure by which a given legal requirement is enacted as a matter of democratic legislative process. On the other hand, in a challenge to the constitutionality of an already-enacted statute, as opposed to the process by which it is enacted, the public interest in its enforceability is entrusted for the most part to the government, and the public’s legal interest in the legislative process becomes less relevant. Ibid. Gratz’s ideological interest is no different than that of the organization she directed, the MCRI, to which the Court already denied intervention. Her ability to press these issues is cast into doubt by her apparent “confusion at the evidentiary hearing [on the propriety of MRCI’s conduct in obtaining petition signatures] as to the purpose of the MCRI’s proposal.” Operation King’s Dream v. Connerly, 501 F.3d 584, 590 (6th Cir. 2007). Moreover, the Sixth Circuit has held that “the MCRI’s . . . status as [an] organization[] involved in the process leading to the adoption of Proposal 2 is insufficient to provide [it] with a substantial legal interest in a lawsuit challenging the validity of those portions of Michigan’s constitution amended by Proposal 2.” Coalition to Defend Affirmative Action v. Granholm, 501 F.3d 775, 782 (6th Cir. 2007). Third, since Gratz has not demonstrated a sufficient interest to support intervention by right, she cannot show that denial of intervention will impair her ability to protect a substantial interest. Coalition to Defend Affirmative Action, 240 F.R.D. at 375 (“Of course, the inability to protect one’s interest posits the existence of an interest to begin with.”). The disposition of the summary -18- judgment motions reinforces the fact that intervention is not necessary to defend the ballot proposal as well. Fourth, as with Eric Russell, the attorney general will adequately represent Gratz’s interest, such as it is, in matters before the Court. Gratz also seeks permissive intervention under Rule 24(b). An applicant for permissive intervention “must prove that the motion for intervention is timely, there is at least one common question of law or fact, and the balancing of undue delay, prejudice to the original parties, and any other relevant factors favors intervention.” Coalition to Defend Affirmative Action, 240 F.R.D. at 377 (citing Michigan State AFL-CIO v. Miller, 103 F.3d 1240, 1248 (6th Cir. 1997 . It is apparent that Gratz’s motion has come too late. The case in the district court is over, at least for now. Allowing another party into the litigation would do nothing but prolong the process and delay the parties’ inevitable date with the court of appeals. For these reasons, the motion to intervene as a party defendant by Jennifer Gratz will be denied. IV. Because the attorney general’s motion for summary judgment was granted, there is no need for the Court to address the class certification motions. Rule 23(c) provides: “At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.” Fed. R. Civ. P. 23(c)(1)(A). Although the Sixth Circuit has not interpreted this language, other courts and commentators have noted that a district court may decide dispositive motions, including motions for summary judgment, prior to entertaining class certification. A district court enjoys discretion in determining whether and when -19- to certify a case, Reeb v. Ohio Dept. of Rehabilitation and Correction, 435 F.3d 639, 643 (6th Cir. 2006), and postponing a ruling on that matter in the interest of overall efficiency is appropriate. The Manual for Complex Litigation reflects the basic idea: The court may rule on motions pursuant to Rule 12, Rule 56, or other threshold issues before deciding on certification; however, such rulings bind only the named parties. Most courts agree, and Rule 23(c)(1)(A) reflects, that such precertification rulings on threshold dispositive motions are proper, and one study found a substantial rate of precertification rulings on motions to dismiss or for summary judgment. Precertification rulings frequently dispose of all or part of the litigation. Manuel for Complex Litigation (Fourth ed.) § 21.133. As Rule 23 suggests, extensive discovery is often needed to rule on motions for class certification. See Fed. R. Civ. P. 23(a)-(b). Although conceptually distinct, the facts discovered often pertain to the merits. See Oscar Private Equity Investments, Inc. v. Allegiance Telecom, Inc., 487 F.3d 261, 268 (5th Cir. 2007) (observing that merits and certification questions often overlap); Miles v. Merrill Lynch, 471 F.3d 24, 41 (2d Cir. 2006) (“[T]he obligation to make [certification] determinations is not lessened by overlap between a Rule 23 requirement and a merits issue, even a merits issue that is identical with a Rule 23 requirement.”); Fed. R. Civ. P. 23 Advisory Committee Notes to the 2003 Amendments (“[I]t is appropriate to conduct controlled discovery into the ‘merits,’ limited to those aspects relevant to making the certification decision on an informed basis.”). Therefore, if it becomes apparent that the case cannot proceed on the merits, it makes little sense to devote scare judicial resources to a merely academic certification analysis. See Wright v. Schock, 742 F.2d 541, 544 (9th Cir. 1984) (“It is reasonable to consider a Rule 56 motion first when early resolution of a motion for summary judgment seems likely to protect both the parties and the court from needless and costly further litigation.”). As the Oscar court explained, the authorities’ recognition of this and other -20- circumstances has “shaped the evolution of class certification and Rule 23. Rule 23(c)(1)(A) no longer demands that the district court rule on class certification ‘as soon as practicable,’ but instead insists only upon a ruling ‘at an early practicable time.’” See Oscar, 487 F.3d at 267. Dismissal prior to certification is res judicata as to the class representatives, but has no effect on the putative class members. Wright, 742 F.2d at 544. Entry of summary judgment dismissing the claims of class representatives normally has the effect of mooting a motion for class certification. Cowen v. Bank United of Texas, 70 F.3d 937, 941 (7th Cir. 1995); see also Holman v. Rock Financial Corp., 388 F.3d 930, 941 (6th Cir. 2004) (concluding that “[w]e need not address the district court’s denial of Plaintiff’s motion for class certification because, as held above, the district court appropriately dismissed her complaint on the merits”). The Court’s decision to grant summary judgment in favor of the State moots the class certification motions. Therefore, these motions will be denied. V. The Court finds that Eric Russell no longer has a sustainable position to support intervention. Likewise, Jennifer Gratz has failed to demonstrate that she should intervene either by right or by leave. The decision on the merits of the plaintiffs’ claims in the summary judgment proceedings renders a decision on class certification unnecessary. Similarly, the dismissal of the action renders moot the pending discovery motions. Accordingly, it is ORDERED that the Cantrell plaintiffs’ motion for summary judgment as to intervening defendant Eric Russell [dkt #172] is GRANTED. Eric Russell is dismissed as a party defendant to these consolidated actions. -21- It is further ORDERED that intervening defendant Eric Russell’s motion for summary judgment [dkt #202] is DENIED as moot. It is further ORDERED that the plaintiffs’ respective motions to certify the matters as class actions [dkt #107, 121] are DENIED as moot. It is further ORDERED that the Cantrell plaintiffs’ motion to compel discovery [dkt #156] is DENIED as moot. It is further ORDERED that intervening defendant Eric Russell’s motion to compel discovery from the university defendants [dkt #169] is DENIED as moot. It is further ORDERED that the motion to intervene by Jennifer Gratz [dkt #241] is DENIED. Dated: March 18, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 18, 2008. s/Felicia M. Moses FELICIA M. MOSES -22-

=== Norfolk Opinion on Preliminary Injunction ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ROBERT NORFOLK and JUDITH THOMPSON, Plaintiffs, v. COBO HALL CONFERENCE AND EXHIBITION CENTER, TOM TUSKEY, CITY OF DETROIT, ATTORNEY GENERAL MICHAEL COX and JOHN DOES 1, 2, AND 3, ___________________________________________/ Defendants. Case Number: 08-10570 Honorable David M. Lawson OPINION AND ORDER GRANTING MOTION FOR PRELIMINARY INJUNCTION The plaintiffs, Robert Norfolk and Judith Thompson, commenced this action on Thursday, February 7, 2008 seeking, among other things, an ex parte temporary restraining order and a preliminary injunction. The Court denied the former and set a hearing for the latter on February 11, 2008. At the hearing, attorneys for the plaintiffs and all defendants appeared, argued, and offered exhibits into the record. The exhibits were filed as part of the briefing submitted. The action is based on the plaintiffs’ claim that their First Amendment rights will be violated unless they are permitted to distribute leaflets at a February 12, 2008 conference to be held at Cobo Hall in Detroit, Michigan. The event is sponsored by the Michigan attorney general as a forum to provide the public with information concerning home mortgage foreclosures. Although the Court concludes that Cobo Hall is a nonpublic forum for the purpose of this event, it appears from the attorney general’s briefing that its restriction against the plaintiffs’ leafletting is not content-neutral, and limiting the plaintiffs from distributing leaflets violates the First Amendment. Therefore, the Court will grant the motion for a preliminary injunction. I. Defendant Michigan attorney general has advertised an event to occur at the Riverfront Ballroom of Detroit’s Cobo Center by distributing flyers that state: AVOID FORECLOSURE TOOLS TO HELP SAVE YOUR HOME A free forum from Attorney General Mike Cox All forums will be open to the public from noon until 7:00 p.m. Def. Br. in Resp. to Mot. for Prelim. Inj., Ex. 4. According to the verified complaint, the plaintiffs are members of the Michigan Emergency Committee Against War and Injustice and have mounted a campaign for a moratorium on foreclosures. Defendant Cobo Hall Conference and Exhibition Center is a convention center owned and operated by defendant City of Detroit. Defendant Tom Tuskey is the Director of Cobo Hall. Attorney General Cox is sued in his official capacity. The plaintiffs state that they seek to educate people who may be facing foreclosure about their campaign. It appears to be undisputed that on December 13, 2007, the plaintiffs attempted to distribute leaflets about their cause at an “Avoid Foreclosure” conference at Cobo Hall. Invitations consisting of flyers similar to the one quoted above were sent to tens of thousands of homeowners stating that “[t]he forum was open to the public and specifically those who are having problems with their mortgages in southeastern Michigan. 4,200 individuals attended the forum.” Mot. ¶ 10-11. However, the plaintiffs were removed from Cobo Hall by three unknown police officers, identified as John Does I, II, and III, who stated they were acting on behalf of Mr. Tuskey and Attorney General Cox. The plaintiffs complain that the only way to reach attendees is by leafletting on the -2- premises because the parking is in the facility. “While each and every bank was welcomed to this forum and allowed to speak and set up shop inside the forum, Plaintiffs were excluded from being able to talk to individuals being affected by mortgage problems who would potentially be interested in the moratorium campaign because of the content of the campaign which challenges the same financial institutions which were being welcomed by Attorney General Michael Cox and Cobo Hall, Defendants in this case.” Mot. ¶ 28. As noted, another “Avoid Foreclosure” forum will take place tomorrow from noon to 7:00 p.m. at Cobo Hall. The plaintiffs desire to leaflet at this forum. The plaintiffs attempted to obtain permission from Attorney General Cox’s office and Mr. Tuskey, but their phone calls were not returned. The plaintiffs also have learned of two additional forums: one to be held at the Dow Event Center in Saginaw on February 13, 2008, and one to be held at the DeltaPlex Entertainment and Event Center in Grand Rapids on February 14, 2008. The plaintiffs also desire to leaflet at these forums, but their motion for a temporary restraining order and preliminary injunction apparently does not seek injunctive relief on this ground, and the Court does not address those gatherings in this order. Defendant Cox has responded to the motion with assertions that the seminar is entitled “Avoid Foreclosure: Tools to Help Save Your Home,” and is meant “to provide homeowners with a chance to have face-to-face contact with their individual loan services and loan counselors to find remedies to help avoid foreclosure.” Def.’s Resp. at 5. “The Attorney General invited several servicers, HUD approved loan counselors and state and federal regulatory agencies to attend the seminar and assist homeowners.” Ibid. Although the literature states that the event is open to the -3- public, the defendant asserts that individuals were invited to attend on the basis of their loan provider’s determination that they may be at risk for foreclosure. Apparently other groups attempted to leaflet or distribute information at the December 13, 2007 workshop, but “outside groups were not permitted to disrupt the seminar.” The written response states that “Cobo Hall permits people to gather and protest in designated area surround the facility.” Def.’s Resp. at 14 [sic]. However, at argument on the motion, the defendant clarified that the places designated for protesting are the public sidewalks and roadways leading to the facility. The plaintiffs point out that most Cobo Center attendees arrive by motor vehicle and park in garages under the building, arriving inside by elevator or stairway. Consequently, there is no access to the individuals short of stopping traffic on the public streets as the vehicles approach the parking garage. The plaintiffs seek an order permitting them to hand out leaflets and obtain petition signatures at an area designated by the building operators inside the lobby of the building. The defendant contends that the plaintiffs’ leafletting would “turn the non-political seminar into a vehicle to further their political agenda.” It is inconsistent with the purpose of the seminar because Plaintiffs’ moratorium only delays the issues. It is not a solution. Further, Plaintiffs’ position could disrupt the cooperation of the mortgage servicers who are participating voluntarily. Plaintiffs’ position is hostile to the servicers and focuses blame on them. Def.’s Resp. at 12. The attorney general contends that the plaintiffs have not shown that the injunction serves the public interest because “[b]orrowers . . . would be unnecessarily bombarded with literature designed to create cynicism and mistrust against servicers.” Def.’s Resp. at 15. The attorney general continues: -4- Norfolk and Thompson want to impose their political beliefs on all the participants involved in the seminar. This does not serve the public interest in any way. The public interest would not be served if such an uncooperative adversarial environment were to flourish. Only by avoiding conflicting messages or conflicting signals during the foreclosure seminars could the public interest be served. Ibid. II. A court considering whether to issue a preliminary injunction should “consider[] and balance[]” four factors: (1) whether the plaintiff has established a substantial likelihood or probability of success on the merits; (2) whether there is a threat of irreparable harm to the plaintiff; (3) whether issuance of the injunction would cause substantial harm to others; and (4) whether the public interest would be served by granting injunctive relief. Hamilton's Bogarts, Inc. v. Michigan, 501 F.3d 644, 649 (2007) (quoting Nightclubs, Inc. v. City of Paducah, 202 F.3d 884, 888 (6th Cir.2000), overruled on other grounds, City of Littleton v. Z.J. Gifts D-4, L.L.C., 541 U.S. 774, 784 (2004 . In a case implicating the First Amendment, “the crucial inquiry is usually whether the plaintiff has demonstrated a likelihood of success on the merits. This is so because, as in this case, the issues of the public interest and harm to the respective parties largely depend on the constitutionality of the [rule or restriction].” Ibid. To determine whether the government has violated an individuals free speech rights, the Sixth Circuit employs a three-step analysis: (1) we ask whether the speech is protected under the First Amendment; (2) if so, using the public-forum doctrine, we ascertain whether the applicable forum is public or nonpublic; and (3) applying the appropriate standard for the forum, we ask whether the government's prohibition on speech passes muster under the First Amendment. -5- S.H.A.R.K. v. Metro Parks Serving Summit County, 499 F.3d 553, 559 (6th Cir. 2007). The first part of the test is easily met here. The Sixth Circuit has emphasized the centrality of the First Amendment to the action of distributing leaflets: In its traditional form, leafletting occurs when individuals offer handbills, pamphlets, tracts, advertisements, notices and other information to individuals on the street or sidewalk who remain free to accept or reject the document. Taxpayers for Vincent, 466 U.S. at 809-10 (“The [leafletting] right recognized in Schneider [ v. New Jersey, 308 U.S. 147 (1939),] is to tender the written material to the passerby who may reject it or accept it, and who thereafter may keep it, dispose of it properly, or incur the risk of punishment if he lets it fall to the ground.”). It is a venerable and inexpensive method of communication that has permitted citizens to spread political, religious and commercial messages throughout American history, starting with the half a million copies of Thomas Paine’s Common Sense that fomented the American Revolution. See Lovell v. City of Griffin, 303 U.S. 444, 452 (1938) (noting that “pamphlets and leaflets . . . have been historic weapons in the defense of liberty, as the pamphlets of Thomas Paine and others in our own history abundantly attest”); Murdock v. Pennsylvania, 319 U.S. 105, 108 (1943) (“The hand distribution of religious tracts is an age-old form of missionary evangelism-as old as the history of printing presses.”). . . . In each of these settings, the Supreme Court has made it clear that leafletting and related activities represent a method of speech protected by the First and Fourteenth Amendments. The Court has invalidated bans on leafletting on public streets. See, e.g., United States v. Grace, 461 U.S. 171, 183-84 (1983) (striking statute forbidding leafletting on the sidewalks surrounding the Supreme Court); Jamison v. Texas, 318 U.S. 413, 414 (1943) (striking ordinance forbidding leafletting on public streets); Schneider, 308 U.S. at 162-63 (striking ordinances forbidding leafletting on public streets). It has invalidated bans on door-to-door leafletting, where individuals offer the homeowner informational tracts at the same time that they try to engage the homeowner about the religious, political or commercial message they wish to convey. See, e.g., Martin v. City of Struthers, 319 U.S. 141, 149 (1943) (striking ordinance that forbade ringing a doorbell or otherwise summoning a resident to the door to receive handbills); Schneider, 308 U.S. at 165 (striking ordinance that forbade door-to-door leafletting). And it has invalidated licensing requirements for door-to-door solicitors and leafletters. See Watchtower Bible & Tract Soc'y of New York, 536 U.S. at 168 (striking ordinance prohibiting canvassers from going door-to-door among residences without a permit because it was “not tailored to the Village's stated interests”); Lovell, 303 U.S. at 451 (striking ordinance prohibiting “the distribution of literature of any kind at any time, at any place, and in any manner without a permit”). -6- At the same time that the Court has invalidated bans on leafletting and unyielding licensing requirements for leafletting, it has indicated that the reserved police powers of the States (and cities) permit them to impose reasonable time, place and manner restrictions on leafletting. See Frisby v. Schultz, 487 U.S. 474, 488 (1988) (upholding ban on leafletting in front of a targeted residence); Heffron v. Int'l Soc'y for Krishna Consciousness, Inc., 452 U.S. 640, 654-55 (1981) (upholding regulation restricting leafletting at a state fair to assigned booths); Hill, 530 U.S. at 723 (upholding regulation prohibiting leafletters within 100 feet of a health care facility from knowingly coming within eight feet of another person without first receiving that person's consent); cf. Schenck v. Pro-Choice Network of Western New York, 519 U.S. 357, 380 (1997) (upholding injunction creating fixed buffer zones that prevented leafletters and protestors from approaching within 15 feet of health clinic doorways). Jobe v. City of Catlettsburg, 409 F.3d 261, 263-65 (6th Cir. 2005). The plaintiffs contend that they wish to hand out leaflets to members of the public attending the event at Cobo Center, which the attendees may accept or decline to take. The leaflets espouse the plaintiffs’ view that a moratorium on foreclosures of residential mortgages should be declared, and that the current foreclosure crisis was brought about by predatory lending. They also wish to obtain signatures on a petition, presumably seeking official action along those lines. The Court finds that the plaintiffs’ proposed leafletting activity advancing that viewpoint and seeking such political action is protected by the First Amendment. Turning to the second step of the test, there are three types of public fora: “the traditional public forum, the public forum created by government designation, and the nonpublic forum.” Id. at 266 (citing Cornelius v. NAACP Legal Defense & Educ. Fund, Inc., 473 U.S. 788, 802 (1985 . The traditional public forum includes places like parks and streets that are “‘government property that has traditionally been available for public expression.’” Ibid. (quoting Int'l Soc'y for Krishna Consciousness v. Lee, 505 U.S. 672, 678 (1992 . “The designated public forum consists of public -7- property ‘that the State has opened for expressive activity by part or all of the public.’” Ibid. (quoting Lee, 505 U.S. at 678). The plaintiffs contend that Cobo Hall is at least a designated public forum (which also is known in the cases as a “limited public forum”), while the defendant insist it is a nonpublic forum. “To determine whether the government intended to create a limited public forum, we look to the government’s policy and practice with respect to the forum, as well as to the nature of the property at issue and its ‘compatibility with expressive activity.’” Kincaid v. Gibson, 236 F.3d 342, 349 (6th Cir. 2001) (quoting Cornelius, 473 U.S. at 802). In determining that the parking lots and walkways of schools that were opened up for the limited purpose of voting were not a designated public forum, the Sixth Circuit held: [T]hese types of forums [limited or designated public forums] are characterized by discourse, and discourse is what is absent here. That some expressive activity occurred within the context of the forum created “does not imply that the forum thereby [became] a public forum for First Amendment purposes.” Cornelius, 473 U.S. at 805. In the absence of evidence of an intent on the part of the government to open these nontraditional forums for public discourse, limited or otherwise, we conclude that the parking lots and walkways leading to the polling places are nonpublic forums, with no different status than the remaining areas on school and private property. United Food & Commercial Workers Local 1099 v. City of Sidney, 364 F.3d 738, 750 (6th Cir. 2004). “A designated public forum is not created when the government allows selective access for individual speakers rather than general access for a class of speakers.” Arkansas Educ. Television Com’n v. Forbes, 523 U.S. 666, 679 (1998). According to the Supreme Court cases illustrate the distinction between ‘general access,’ [Cornelius], at 803, which indicates the property is a designated public forum, and “selective access,” id., at 805, which indicates the property is a nonpublic forum. On one hand, the government creates a designated public forum when it makes its property generally available to a certain class of speakers, as the university made its facilities generally available to student groups in Widmar. On the other hand, the government does not -8- create a designated public forum when it does no more than reserve eligibility for access to the forum to a particular class of speakers, whose members must then, as individuals, “obtain permission,” 473 U.S., at 804, to use it. For instance, the Federal Government did not create a designated public forum in Cornelius when it reserved eligibility for participation in the CFC drive to charitable agencies, and then made individual, non-ministerial judgments as to which of the eligible agencies would participate. Ibid. Id. at 679-80. Based on the information presented so far, it appears to the Court that Cobo Center is a nonpublic forum for the purpose of tomorrow’s event. The Court understands the program to be a forum open to members of the public to meet with certain mortgage lenders who have been selected to participate; to attend seminars where speakers will provide information on various topics concerning lending options, refinancing, and obtaining other financial assistance; and to obtain information from various government agencies that might be able to provide assistance to borrowers who are in jeopardy of defaulting on their home mortgage obligations. Although members of the public are invited to attend and receive information, those allowed to present information must obtain permission to maintain a booth or a table. Under Supreme Court and Sixth Circuit precedent, the following have been found to be nonpublic fora: a city’s website with various hyperlinks, Putnam Pit, Inc. v. City of Cookeville, Tenn., 221 F.3d 834, 841 (6th Cir. 2000), an office in a government building, Helms v. Zubaty, 495 F.3d 252 (6th Cir. 2007), a courtroom, Mezibov v. Allen, 411 F.3d 712 (6th Cir. 2005), common areas of a sports complex, United Church of Christ v. Gateway Economic Development Corp. of Greater Cleveland, 383 F.3d 449 (6th Cir. 2004), a school district’s internal mail system that had been opened up to certain mail, Perry Educ. Ass'n v. Perry Local Educators' Ass'n, 460 U.S. 37 (1983), an airport, Int'l Soc. for Krishna Consciousness, Inc. v. Lee, (1992), or an internal government employee fundraising program. Cornelius -9- v. NAACP Legal Defense and Educational Fund, Inc., 473 U.S. 788 (1985). The Court believes that the event at Cobo Center more closely approximates those fora than, say, the public square, a library, or a fairground. See, e.g., Neinast v. Board of Trustees of Columbus Metropolitan Library, 346 F.3d 585 (6th Cir. 2003) (library); Heffron v. International Soc. for Krishna Consciousness, Inc., 452 U.S. 640 (1981) (state-owned fairgrounds). Because the event is limited to “a particular class of speakers, whose members must then, as individuals, obtain permission,” Arkansas Educ. Television Com’n, 523 U.S. at 680, the likelihood is that the forum will be found to be nonpublic. The third part of the analysis requires an assessment of whether the government’s action is reasonable in light of the nature of the forum. Although “[c]ontent-based restrictions on speech in public and designated public fora are subject to strict scrutiny,” Helms v. Zubaty, 495 F.3d 252, 256 (6th Cir. 2007) – a test that does not apply here – “[t]he government may lawfully restrict speech in a nonpublic forum so long as the restrictions are viewpoint neutral and reasonable in light of the purpose served by the forum.” Id. at 257. “The Supreme Court has made clear that any regulation that requires reference to the content of speech to determine its applicability is inherently content-based.” Pagan v. Fruchey, 492 F.3d 766, 779 (6th Cir. 2007) (en banc) (citing City of Cincinnati v. Discovery Network, 507 U.S. 410, 429 (1993 . For rules that restrict speech in nonpublic fora, the Court “appl[ies] the traditional time-place-and-manner test to the regulation.” Jobe, 409 F.3d at 267 (citing Members of City Council of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789, 808, 815 (1984 . “To qualify as a reasonable time-place-and-manner regulation of speech, the law must (1) be content-neutral, (2) serve a significant government interest, (3) be narrowly tailored to serve that government interest and (4) leave open ample alternative channels of communication.” Ibid. -10- In Int’l Soc. for Krishna Consciousness, Inc. v. Lee, (1992), a plurality of the Supreme Court concluded that an airport terminals was a nonpublic forum. Id. at 680. The Court found that the airport terminal’s restriction on face-to-face solicitation to a sidewalk outside of the terminal was reasonable, and therefore could be upheld. The Court found it significant that This sidewalk area is frequented by an overwhelming percentage of airport users, see [Sloane Affidavit], at ¶ 14, App. 515-516 (noting that no more than 3% of air travelers passing through the terminals are doing so on intraterminal flights, i.e., transferring planes). Thus the resulting access of those who would solicit the general public is quite complete. In turn we think it would be odd to conclude that the Port Authority's terminal regulation is unreasonable despite the Port Authority having otherwise assured access to an area universally traveled. Id. at 684-85. Yet in a companion case, the Supreme Court found that a total ban by airports on distribution of literature was invalid. No one opinion garnered a majority, however. Finding the flat ban on distribution invalid, Justice O’Connor wrote for herself. Justice Kennedy and Justice Souter authored separate opinions, joined by Justices Blackmun and Stevens, concluding that the airports were public forums. Chief Justice Rehnquist, joined by Justices White, Scalia, and Thomas dissented. Justice O’Connor provided the deciding vote, finding the airport to not be a public forum, and voting to affirm the ban on face-to-face solicitation while striking down the ban on leafletting. Because Justice O’Connor’s decision was on the narrowest ground, it provides the controlling rule of law. Marks v. United States, 430 U.S. 188, 193 (1977). Justice O’Connor’s opinion read, in relevant part: In my view, however, the regulation banning leafletting – or, in the Port Authority’s words, the “continuous or repetitive . . . distribution of . . . printed or written material” – cannot be upheld as reasonable on this record. I therefore concur in the judgment in No. 91-339, 505 U.S. 830, striking down that prohibition. While the difficulties posed by solicitation in a nonpublic forum are sufficiently obvious that its regulation may “rin[g] of common-sense,” Kokinda, 497 U.S., at 734 (internal quotation marks and citation omitted), the same is not necessarily true of leafletting. To the contrary, we have expressly noted that leafletting does not entail the same -11- kinds of problems presented by face-to-face solicitation. Specifically, “[o]ne need not ponder the contents of a leaflet or pamphlet in order mechanically to take it out of someone's hand. . . . ‘The distribution of literature does not require that the recipient stop in order to receive the message the speaker wishes to convey; instead the recipient is free to read the message at a later time.’ ” Ibid. (plurality opinion), quoting Heffron, supra, 452 U.S., at 665 (Blackmun, J., concurring in part and dissenting in part). With the possible exception of avoiding litter, see Schneider v. State ( Town of Irvington), 308 U.S. 147, 162 (1939), it is difficult to point to any problems intrinsic to the act of leafletting that would make it naturally incompatible with a large, multipurpose forum such as those at issue here. We have only once before considered restrictions on speech in a nonpublic forum that sustained the kind of extensive, nonforum-related activity found in the Port Authority airports, and I believe that case is instructive. In Greer v. Spock, 424 U.S. 828 (1976), the Court held that even though certain parts of a military base were open to the public, they still did not constitute a public forum in light of “ ‘the historically unquestioned power of [a] commanding officer summarily to exclude civilians from the area of his command.’ ” Id., at 838, quoting Cafeteria & Restaurant Workers v. McElroy, 367 U.S. 886, 893 (1961). The Court then proceeded to uphold a regulation banning the distribution of literature without the prior approval of the base commander. In so doing, the Court “emphasized” that the regulation on leafletting did “not authorize the Fort Dix authorities to prohibit the distribution of conventional political campaign literature.” Rather, the Court explained, “[t]he only publications that a military commander may disapprove are those that he finds constitute ‘a clear danger to [military] loyalty, discipline, or morale’ ” and that “[t]here is nothing in the Constitution that disables a military commander from acting to avert what he perceives to be a clear danger to the loyalty, discipline, or morale of troops on the base under his command.” 424 U.S., at 840 (citation omitted). In contrast, the regulation at issue in this case effects an absolute prohibition and is not supported by any independent justification outside of the problems caused by the accompanying solicitation. Moreover, the Port Authority has not offered any justifications or record evidence to support its ban on the distribution of pamphlets alone. Its argument is focused instead on the problems created when literature is distributed in conjunction with a solicitation plea. Although we do not “requir[e] that . . . proof be present to justify the denial of access to a nonpublic forum on grounds that the proposed use may disrupt the property’s intended function,” Perry, 460 U.S., at 52, n. 12, we have required some explanation as to why certain speech is inconsistent with the intended use of the forum. . . . Because I cannot see how peaceful pamphleteering is incompatible with the multipurpose environment of the Port Authority airports, I cannot accept that a total ban on that activity is reasonable without an explanation as to why such a restriction “preserv[es] the property” for the several uses to which -12- it has been put. Perry, supra, 460 U.S. at 50-51 (internal quotation marks and citation omitted). International Society for Krishna Consciousness, Inc. v. Lee, , 690-93 (1992) (O’Connor, J.). The attorney general contends that the ban on leafletting is content neutral and serves an important governmental interest. His supporting reasons, however, undercut these conclusions. The asserted government interest is that leafletting should be banned because the ideas contained within the leaflets are “not a solution” to the foreclosure problem. He also asserts that the plaintiffs’ viewpoint conflicts with that of the lenders who have been invited to participate in the event. It seems to the Court that this position badly misunderstands what is an appropriate governmental interest in the First Amendment context, and actually makes the restriction more questionable because it is based on the content of the leaflets. The attorney general argues that the leafletting should not be allowed in Cobo Center because the plaintiffs will espouse an idea that “is hostile to the [loan] servicers and focuses blame on them.” Whether lenders should share the blame for Michigan’s foreclosure crisis is, perhaps, a debatable point. However, shielding lenders and the public who will come to see them from this viewpoint certainly cannot be a governmental interest (and more certainly, not a significant one) that justifies curtailing speech. At the motion argument, the defendant suggested that the ban on leafletting would keep congestion to a minimum, avoid harassment, and allow easy access to the buildings. Yet the distribution of handbills in a large conference center does not implicate these concerns. The lobby of Cobo Center is vast, extending for several blocks indoors from the corner of Congress and Washington Boulevard to the entrance of the Riverfront Ballroom. It is difficult to apprehend how -13- two people passing out leaflets and asking for signatures on petitions would be disruptive or cause congestion. The defendants propose a total ban on leafletting inside Cobo Center. They do not seek to restrict the location of leafletting, limit the time during which information can be distributed, restrict the size of the brochures or the number of leafletters, or otherwise impose limits on the activity that might address their asserted concerns, such as asking that members of the public avoid mentioning a mortgage moratorium. The Court does not believe that a total ban under the circumstances of this case can amount to a restriction that is “narrowly tailored to serve [a] government interest. Pagan, 492 F.3d at 779. Finally, according to the plaintiffs, there are no alternative channels of communication because the underground parking and the conference areas are connected, so there are no other ways for the plaintiffs to distribute leaflets to the conference attendees approaching the facilities. The Court agrees. Members of the public traveling to Cobo Center generally park in underground lots and enter by elevator into the main structure. Since there is a small percentage of foot traffic that enters the building from the sidewalk, that leaves the plaintiffs with the option of stopping motor vehicle traffic on busy city streets to convey their message. The Supreme Court’s decision in Lee is instructive on this point. Finding that solicitation could be regulated by the airports, the Court noted that there was a place designated for those activities that was highly effective in reaching a large audience. That fact is missing here. Justice O’Connor found that leafletting should be allowed in the airport, noting that the nature of leafletting was consistent with the overall flow of the airport. That same logic applies here. -14- The Court concludes that although Cobo Center is a nonpublic forum for the purpose of tomorrow’s event, the defendants’ total ban on leafletting does not pass the test for a regulation of speech in a way that the First Amendment allows. Therefore, the plaintiffs have demonstrated a likelihood of success on the merits of their claim. The Court also believes that if the plaintiffs lose out on the ability to offer their message to the thousands of attendees, they would suffer irreparable harm. There is little reason to suspect grave harm will incur to the defendants or others if the plaintiffs distribute their leaflets. Finally, given the Court’s conclusion that the plaintiffs’ First Amendment rights would be abridged, the public interest factor weighs in favor of the injunction. For these reasons, the Court finds that the plaintiffs have demonstrated that they are entitled III. to a preliminary injunction. Accordingly, it is ORDERED that the plaintiffs’ motion for a preliminary injunction [dkt # 2] is GRANTED. It is further ORDERED that the defendants, their officers, servants, agents, employees, attorneys, and those in active concert and participation with them who receive actual notice of this order, are restrained and enjoined from prohibiting the plaintiffs, ROBERT NORFOLK and JUDITH THOMPSON, or either of them, from distributing leaflets or asking members of the public to sign a petition in the lobby of Cobo Center during business hours on Tuesday, February 12, 2008; provided that the defendants may restrict the plaintiffs’ activity to an area of reasonable size in the lobby of Cobo Center as long as the area permits access to public traffic, including members of the public who are attending the event at the Riverfront Ballroom. -15- It is further ORDERED that no security shall be required because it is unlikely that the defendants will incur costs, damages, or other monetary harm from the issuance of this temporary injunction. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 11, 2008 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 11, 2008. s/Felicia M. Moses FELICIA M. MOSES -16-

=== SPX Order Re Claims ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION SPX CORPORATION, Plaintiff, vs. BARTEC USA, LLC, BARTEC AUTO ID LTD., SCHRADER-BRIDGEPORT INTERNATIONAL, INC., MYERS TIRE SUPPLY DISTRIBUTION, INC., Defendants. ______________________________________/ Case No. 06-14888 Hon. David M. Lawson Magistrate Judge Steven D. Pepe OPINION AND ORDER CONSTRUING CLAIMS AND MODIFYING CASE MANAGEMENT ORDER In this patent infringement action, plaintiff SPX Corporation (SPX) alleges that Bartec USA, LLC (Bartec) copied its design for a handheld tool used in servicing tires on motor vehicles equipped with remote tire monitoring systems. The design and function of the device is described in U.S. Patent 6,904,796 (the ‘796 patent). The ‘796 patent contains four figures and a twelve- column specification, and it asserts twenty-two claims. The parties have reached substantial agreement on several of the limitations in the claim terms, but there remain disputes as to other terms. A hearing was held on October 25, 2007 at which the parties made their presentations. The Court determines that the claim terms will be construed as set forth below. I. The Tool Described by the ‘796 Patent The tool described in the ‘796 patent is a handheld device designed to assist mechanics in changing and rotating tires in vehicles equipped with remote tire monitoring systems (RTMS). Although RTMS is not a novel development (the first vehicle equipped with RTMS was a 1986 Porsche), it has proliferated in recent years. See Tire Pressure Monitoring System at http://en.wikipedia.org/wiki/Tire_Pressure_Monitoring_System (last visited Oct. 22, 2007). Therefore, motor vehicle technicians must work on RTMS-equipped vehicles with increasing frequency, and tools that make the task more efficient are useful. One difficulty in rotating tires on RTMS-equipped vehicles is that the system must be re-calibrated following rotation. When tires with RTMS are first installed, the vehicle’s on-board computer recognizes the position of each tire, and data corresponding to those tires (e.g., air pressure and temperature) is communicated to the computer and presumably reported to the driver. However, when the tires are rotated, the on-board computer does not automatically recognize that a change has occurred; without further action, the computer will continue to report changes in the various tires as if they remained in their former positions. So after a mechanic rotating tires on an RTMS-equipped vehicle swaps the tires, the mechanic must re-calibrate the system by activating each tire sensor and associating the tire sensor’s discrete identification with its location on the vehicle. ‘796 Patent at 1:55-67, 2:1-7. The tire sensors communicate with the on-board computer by way of radio signal sent to a receiver on the vehicle. ‘796 Patent at 1:18-23. To rotate tires properly, the mechanic puts the receiver into “learn mode” and activates the tire sensors in a sequence specified by the vehicle manufacturer. ‘796 Patent at 1:40-47. The tire sensors then transmit their respective sensor identifications to the vehicle’s receiver, informing the on-board computer of their new positions. ‘796 Patent at 1:64-67, 2:1-7. Rotating tires with RTMS is further complicated by the fact that the way in which tire sensors are activated varies with the manufacturer. ‘796 Patent at 38-40. A tire sensor may be activated by a magnet, a change in air pressure, or by a radio frequency signal in the form of a -2- continuous wave signal or a modulated signal. Id. at 2:23:37. The unique feature of the tool described in the ‘796 patent is its ability to interact with tire sensors that use any of these methods of activation. Id. at 2:49-64. In other words, the ‘796 patent envisions a single tool of universal applicability, eliminating the need to acquire a range of tools to work on RTMS vehicles. Id. at 2:6- 64. As the patent abstract puts it: A tire positioning tool is provided that can be utilized to work with remote tire monitoring systems made by different manufacturers. The tire positioning tools are capable of activating RTMS tire sensors using one of a plurality of methods. Tire positioning tools can be manufactured that are ca[pa]ble of receiving signals from RTMS tire sensors using a plurality of different frequencies. Tire positioning tools can be manufactured that are also capable of transmitting data to a RTMS receiving unit and/or receiving data from a RTMS receiving unit using a plurality of signal frequencies. Using the provided tire positioning tool, a technician tasked to install a new tire or to rotate tires can utilize a single tool to work with remote tire monitoring systems made by different manufacturers. ‘796 Patent at 1. In addition to re-calibrating tire sensors on a range of vehicles, the patented tool also has the ability to receive tire sensor signals itself. The purpose of this feature appears to be two-fold: (1) in order to know when the tire sensor signals have been transmitted, the tool must be able to receive those signals and report them to the technician; and (2) after receiving tire sensor signals, the tool may display information about the tire, such as air-pressure. The ‘796 patent contains four figures and a twelve-column specification, and it asserts twenty-two claims. The specification recites the invention’s background by referring to the fact that manufacturers of vehicles equipped with RTMS do not use uniform methods or means of detecting tire status parameters or communicating that data to on-board display units. The display units indicate tire data for each tire by its position on the vehicle. “A technician installing new tires on a vehicle or changing the positions of tires (that is, rotating tires) on a vehicle can program the -3- vehicle’s RTMS receiving unit to associate the tires on the vehicle with their tire positions by first putting the receiving unit into learn mode or programming mode and then activating the tire sensors in a sequence specified by the manufacturer of the RTMS receiving unit.” ‘796 Patent at 1:41-47. The specification explains: As each tire sensor is activated, it transmits a signal (“tire sensor signal”) to the receiving unit. The tire sensor signal will typically contain a unique ID that identifies the particular tire . . . that is transmitting the tire sensor signal. The receiving unit associates this unique ID with the position of the tire from which the signal is being transmitted. In this manner, the receiving unit learns the position of each tire as it is being activated. ‘796 Patent at 1:63-2:3. According to the invention summary: The present invention provides for a tire positioning tool that can be utilized to work with remote tire monitoring systems made by different manufacturers. Tire positioning tools of the present invention are capable of activating RTMS tire sensors using one of a plurality of means. Preferred tire positioning tools of the present invention are capable of receiving signals of a plurality of frequencies transmitted by activated RTMS tire sensors. Preferred tire positioning tools of the present invention are also capable of transmitting data to a RTMS receiving unit and/or receiving data from a RTMS receiving unit using one of a plurality of signal frequencies. In this manner, a technician asked to install a new tire or to rotate tires can utilize a single tool to work with remote tire monitoring systems made by different manufacturers. ‘796 Patent at 2:49-64. The specification then recites a detailed description of the preferred embodiment of the invention, which is supplemented by four figures. The operation of the tool is as follows: First, the technician turns on the tool’s power by pressing the “start” button. See ‘796 Patent at Fig. 2; id. at 11:30-33. Second, the technician attempts to activate the first tire sensor by using one of the various means available (i.e., by creating a magnetic field, by letting air out of the tire through use of the valve core depressor, or by sending a continuous wave or modulated signal). See id. at Fig 2; id. at 11:33-44. If successful, the tire sensor will transmit a signal to both the vehicle receiving unit and -4- the patented tool. See id. at Fig. 2; id. at 1:63-67, 2:7, 2:49-64, 6:43-65, 7:24-31, 12:3-9 ; id. at clms. 7-20. Moreover, the tool will record the means used when successful and automatically default to that means for the remaining tires. Id. at 11:45-67, 12:1-2. To accomplish the bare minimum of re- calibrating the RTMS system during tire rotation, the technician will repeat step two at each tire. See id. at Fig. 2; id. at 1:63-67, 2:1-7, 12:38-47. Along the way, the signal sent from the tire sensor will also transmit information regarding the tire (e.g., air pressure), which will then be displayed on the tool. Id. at 8:23-36, 10:57-65. If, however, the technician wishes to use the tool to communicate directly with the vehicle’s receiving unit, she may do so. See id. at Fig. 2; id. at 8:24-26, 8:53-55, 9:10-12, 9:50-55, 10:2-5; id. at clm. 16. In this way, the technician may re-calibrate the system and input new data into the receiving unit. See ‘796 Patent at 9:50-54 (“In this manner, preferred tire positioning tools of the present invention can receive a signal from an activated RTMS tire sensor, decode the signal, add additional data such as tire position as necessary or desired, encode the data, and transmit the encoded data via a signal to the vehicle’s receiving unit.”). It is clear, therefore, that the tool “can interact with a vehicle’s receiving unit by both receiving signals from and transmitting signals to the vehicle’s receiving unit.” ‘796 Patent at 10:2-5. The specification concludes with the following claims: 1. 2. 3. A tool comprising a plurality of means for activating remote tire monitoring system tire sensors, the plurality of means selected from the group consisting of a magnet, a valve core depressor, means for generating continuous wave signals, and means for generating modulated signals, wherein the tool is capable of activating a plurality of tire sensors, each of the plurality of tire sensors utilizing a different method for activating the said tire sensor. The tool of claim 1, wherein the tool comprises a magnet and at least one means for generating a continuous wage signal. The tool of claim 1, wherein the tool comprises a magnet and at least one means for generating a modulated signal. -5- 4. 5. 6. 7. 8. The tool of claim 1, wherein the tool comprises at least one means for generating a continuous wave signal and at least one means for generating a modulated signal. The tool of claim 1, wherein the tool comprises a plurality of means for generating continuous wave signals. The tool of claim 1, wherein the tool comprises a plurality of means for generating modulated signals. A tool, comprising: a plurality of means for activating remote tire monitoring system tire sensors, the plurality of means selected from the group consisting of a magnet, a valve core depressor, means for generating continuous wave signals, and means for generating modulated signals; and a means for receiving tire sensor signals, wherein the tool is capable of activating a plurality of tire sensors, each of the plurality of tire sensors utilizing a different method for activating the said tire sensor. The tool of claim 7, wherein the means for receiving tire sensor signals is selected from the group of means capable of receiving tire sensor signals at frequencies of 125 KHz, 13.56 MHz, 315 MHz, 433 MHz, 848 MHz, 916 MHz, and 2.4 Ghz. 9. A tool comprising: a plurality of means for activating remote tire monitoring system tire sensors, the plurality of means selected from the group consisting of a magnet, a valve core depressor, means for generating continuous wave signals, and means for generating modulated signals; and a plurality of means for receiving tire sensor signals, wherein the tool is capable of activating a plurality of tire sensors, each of the plurality of tire sensors utilizing a different method for activating the said tire sensor. 10. The tool of claim 9, wherein the plurality of means for receiving tire sensor signals is selected from the group of means capable of receiving tire sensor -6- signals at frequencies of 125 KHz, 13.56 MHz, 315 MHz, 433 MHz, 848 MHz, 916 MHz, and 2.4 GHz. 11. A tool, comprising: a plurality of means for activating remote tire monitoring system tire sensors, the plurality of means selected from the group consisting of a magnet, a value core depressor, means for generating continuous wave signals, and means for generating modulated signals; a means for receiving tire sensor signals; and display apparatus for displaying data received from tire sensor signals, wherein the tool is capable of activating a plurality of tire sensors, each of the plurality of tire sensors utilizing a different method for activating the said tire sensor. 12. The tool of claim 11, wherein the display apparatus is a LED device, a LCD device, or a VF device. 13. A tool, comprising: a plurality of means for activating remote tire monitoring system tire sensors, the plurality of means selected from the group consisting of a magnet, a valve core depressor, means for generating continuous wave signals, and means for generating modulated signals; a means for receiving tire sensor signals; and a means for transmitting signals to remote tire monitoring system receiving units, wherein the tool is capable of activating a plurality of tire sensors, each of the plurality of tire sensors utilizing a different method for activating the said tire sensor. 14. The tool of claim 13, wherein the means for transmitting signals to remote tire monitoring receiving units is selected from the group of means capable of transmitting signals at frequencies of 125 KHz, 13.56 MHz, 315 MHz, 433 MHz, 848 MHz, 916 MHz, and 2.4 Ghz. 15. A tool comprising: -7- a plurality of means for activating remote tire monitoring system tire sensors, the plurality of means selected from the group consisting of a magnet, a valve core depressor, means for generating continuous wave signals, and means for generating modulated signals; a means for receiving tire sensor signals; a means for transmitting signals to remote tire monitoring system receiving units; and a means for receiving signals transmitted by remote tire monitoring system receiving units, wherein the tool is capable of activating a plurality of tire sensors, each of the plurality of tire sensors utilizing a different method for activating the said tire sensor. 16. A tool comprising: a means for receiving tire sensor signals; and a means for transmitting signals to remote tire monitoring system receiving units, wherein the tool is capable of adding data to a received tire sensor signal and transmitting the said added data to a remote tire monitoring system receiving unit. 17. A method, comprising the steps of: attempting to activate a remote tire monitoring system tire sensor using a first means for activating remote tire monitoring system tire sensors; waiting to receive a tire sensor signal; attempting to activate the remote tire monitoring system tire sensor using a different means for activating remote tire monitoring system tire sensors if no tire sensor signal has been received; and repeating the waiting step and the second attempting step until either a tire sensor signal is received or no different means for activating remote tire monitoring system tire sensors is available. 18. A method, comprising the steps of: -8- attempting to activate a remote tire monitoring system tire sensor using a first means for activating remote tire monitoring system tire sensors; waiting to receive a tire sensor signal; attempting to activate the remote tire monitoring system tire sensor using a different means for activating remote tire monitoring system tire sensors if no tire sensor signal has been received; recording the most recent means used for attempting to activate the remote tire monitoring tire sensor if a tire sensor signal is received; and repeating the waiting step and the second attempting step until either a tire sensor signal is received or no different means for activating remote tire monitoring system tire sensors is available. 19. A method, comprising the steps of: attempting to activate a first remote tire monitoring system tire sensor using a first means for activating remote tire monitoring system tire sensors; waiting to receive a tire sensor signal; attempting to activate the first remote tire monitoring system tire sensor using a different means for activating remote tire monitoring system tire sensors if no tire sensor signal has been received; recording the most recent means used for attempting to activate the remote tire monitoring tire sensor if a tire sensor signal is received; repeating the waiting step and the second attempting step until either a tire sensor signal is received or no different means for activating remote tire monitoring system tire sensors is available; and activating a second remote tire monitoring system tire sensor using the recorded means. 20. A method comprising the steps: activating a remote tire monitoring system tire sensor; receiving a tire sensor signal containing data from the activated tire sensor; and -9- transmitting some or all of the data received from the tire sensor to a remote tire monitoring system receiving unit, wherein the activating step, the receiving step, and the transmitting step are all performed by a single tool, and wherein the tool comprises a plurality of means for activating remote tire monitoring system tire sensors. 21. 22. The method of claim 20, wherein the data transmitted to the remote tire monitoring system includes additional data added to the data received from the remote tire monitoring tire sensor. The method of claim 21, wherein the additional data includes the tire position of the remote tire monitoring system tire sensor. ‘796 Patent at clms. 1-22. II. Commercial Developments The plaintiff in this case, SPX Corporation, did not actually invent the tool described in the ‘796 patent. Instead, the tool was invented by associates of G-5 Electronics, Inc., a small “think- tank company” located in Troy, Michigan. See Pl.’s Cl. Const. Br., Ex. 1, ‘796 Patent. The patent application was filed on April 21, 2003, and the PTO awarded the patent on June 14, 2005. Id. at 1. G-5 introduced the tool covered by the ‘796 Patent in late 2004. See Pl.’s Cl. Const. Br., Ex. 2, G-5 Ad. Bartec USA, LLC followed suit and introduced a similar product in late 2005. See Pl.’s Const. Br., Ex. 3, Bartec Ad. In 2006, SPX purchased the ‘796 patent from G-5 for “multiple millions of dollars.” Pl.’s Cl. Const. Br. at 1. Photos of the tools offered by Bartec and SPX demonstrate their similarity, at least in terms of outside appearance. Compare Pl.’s Cl. Const. Br., Ex. 2, G-5 Ad. with Pl.’s Const. Br., Ex. 3, Bartec Ad. III. Agreed and Disputed Claim Terms -10- The parties stipulated to the construction of some of the limitations in the claims, and by the time of the hearing held on October 25, 2007, they agreed on several others. The stipulated construction of the respective terms are set forth in the following chart: Affected Claim(s) Claim Limitation Stipulated Construction 1-22 1-22 1-15; 20-22 13-16; 20-22 17-19 tire sensor tire sensor signals a sensor and transmitter unit associated with a tire of a vehicle a signal from a tire sensor representing information about the tire remote system A plurality of means for tire activating tire monitoring sensors, the plurality of means selected the group consisting of a magnet, a valve core depressor, means for generating continuous wave signals, and means for generating modulated signals from [3] means 2 or more different means selected from the following: [1] a magnet, [2] a valve core depressor, for generating continuous wave signals, and [4] means for generating modulated signals, tire for activating monitoring tire sensors. remote system remote tire monitoring system receiving unit a receiver separated from the tire sensors for receiving tire sensor signals [3] means [1] a magnet, [2] a valve core depressor, for generating continuous wave signals, or [4] means for generating modulated signals, for activating tire monitoring system tire sensors remote first means for activating remote tire monitoring system tire sensors -11- 17-19 for a different means activating tire remote monitoring system tire sensors [3] means [1] a magnet, [2] a valve core depressor, for generating continuous wave signals, or [4] means for generating modulated signals, for activating tire monitoring system tire sensors that is different from the first means remote The claim limitations to which the parties agreed by the time of the hearing are as follows: Affected Claim(s) Claim Limitation Agreed Construction 1-15 1-15 11-12 16 16 activating remote tire monitoring system tire sensors causing the RTMS tire sensor to activate and transmit a tire sensor signal wherein the tool is capable of activating a plurality of tire sensors, each of the plurality of tire sensors utilizing a different method for activating the said tire sensor wherein the tool is capable of activating two or more tire sensors where the method for activating one tire sensor is different than the method for activating another tire sensor d i s p l a y a p p a r a t u s f o r displaying data received from tire sensor signals d i s p l a y a p p a r a t u s f o r displaying data received from tire sensor signals in a manner making it readable to the technician the tool is capable of adding data to a received tire sensor signal the tool is capable of receiving a tire sensor signal and adding data to the received signal to a transmitting the said added tire data monitoring system receiving unit remote to a transmitting the said added tire data monitoring system receiving unit remote -12- 17-18 the most recent recording means used for attempting to activate tire monitoring tire sensor if a tire sensor signal is received remote the the most recent recording attempted means for activating RTMS tire sensors if a tire sensor signal is received 20-22 single tool one tool The Court adopts the foregoing agreed construction of the terms stated above, and it is so ORDERED. The disputed claim terms identified by the parties are summarized in the table below: Affected Claim(s) Claim Limitation Plaintiff’s Construction Defendants’ Construction 1-15 means for generating continuous wave signals 1-15 means for generating modulated signals indefinite indefinite frequency generating circuitry, an amplifier or driver circuit, and (plus an inductor equivalents thereof) f o r g e n e r a t i n g continuous wave signals for activating remote tire monitoring system tire sensors a microprocessor in addition to frequency generating circuitry, an amplifier or driver c i r c u i t , a n d a n i n d u c t o r ( p l u s thereof) equivalents f o r g e n e r a t i n g modulated signals for activating remote tire monitoring system tire sensors -13- 7-8; 11-16 means for receiving tire sensor signals 9-10 13-16 15 a plurality of means for tire receiving sensor signals means for transmitting signals to remote tire monitoring system receiving units f o r r e c e i v e r a receiving tire sensor s i g n a l s ( n o equivalents) two or more receivers tire for receiving sensor signals (no equivalents) for transmitter a transmitting signals to remote tire monitoring system receiving units (no equivalents) an antenna connected to receiving circuitry or a receiver (plus thereof) equivalents for tire sensor signals receiving an antenna connected to receiving circuitry or receiver(s) (plus equivalents thereof) tire receiving for sensor signals at two or more frequencies an antenna connected t r a n s m i t t i n g t o c i r c u i t r y o r a (plus transmitter equivalents thereof) f o r t r a n s m i t t i n g signals to remote tire system monitoring receiving units means for receiving signals transmitted by remote tire monitoring system receiving units an antenna connected to a receiver(s) (plus equivalents thereof) for receiving signals transmitted by remote tire monitoring system receiving units a receiver for receiving signals transmitted by remote tire monitoring system receiving units (no equivalents) The arguments as to each of these disputes are set forth in the discussion of the claim limitations that follows. IV. Governing Law The patent claims define the invention “to which the patentee is entitled the right to exclude.” Innova/Pure Water, Inc. v. Safari Water Filtration Systems, Inc., 381 F.3d 1111, 1115 (Fed. Cir. 2004) (citing Aro Mfg., Co. v. Convertible Top Replacement Co., 365 U.S. 336, 339 (1961 . When -14- there is a dispute as to the meaning of a claim term or an allegation that a claim is ambiguous, courts must “construe claims by considering the evidence necessary to resolve [such] disputes . . . to assign a fixed, unambiguous, legally operative meaning to the claim.” Liquid Dynamics Corp. v. Vaughan Co., Inc., 355 F.3d 1361, 1367 (Fed. Cir. 2004) (citing Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996 . Claim construction and interpretation is a question of law for the court to decide. Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996). A. General Rules of Claim Construction “The construction of claims is simply a way of elaborating the normally terse claim language in order to understand and explain, but not to change, the scope of the claims.” DeMarini Sports, Inc. v. Worth, Inc., 239 F.3d 1314, 1322 (Fed. Cir. 2001) (internal quotations omitted). The process begins with consideration of the patent itself because “[i]t is a bedrock principle of patent law that the claims of a patent define the invention.” Phillips v. AWH Corp., 415 F.3d 1303, 1312 (Fed. Cir. 2005) (internal quotations omitted). The words used in a claim are generally “deemed to have their ordinary and customary meaning in their normal usage in the field of the invention.” Anchor Wall Sys., Inc. v. Rockwood Retaining Walls, Inc., 340 F.3d 1298, 1306 (Fed. Cir. 2003). That is, the terms of a claim presumptively bear the meaning that would be given them by one of ordinary skill in the art at the time of invention. Research Plastics, Inc. v. Fed. Packaging Corp., 421 F.3d 1290, 1295 (Fed. Cir. 2005). This presumption may be overcome, however, “where the patentee chooses to be his or her own lexicographer by clearly setting forth a definition for a claim term in the specification” or where the written description and drawings of the invention indicate that “the patentee has disclaimed subject matter or has otherwise limited the scope of the claims.” Anchor Wall, 340 F.3d at 1306. -15- In addition, a given claim should not be construed in an isolated or piecemeal fashion since “[i]t is presumed that the person of ordinary skill in the art read the claim in the context of the entire patent, including the specification, not confining his understanding to the claim at issue.” Research Plastics, 421 F.3d at 1295. As the Federal Circuit has summarized, [u]ltimately, the interpretation to be given a term can only be determined and confirmed with a full understanding of what the inventors actually invented and intended to envelop with the claim. The construction that stays true to the claim language and most naturally aligns with the patent’s description will be, in the end, the correct construction. Renishaw PLC v. Marposs Societa’ per Azioni, 158 F.3d 1243, 1250 (Fed. Cir. 1998) (internal citation omitted). Of course, the Court’s task is limited to construing claim terms that are controverted. Vivid Technologies v. American Science & Engineering, Inc., 200 F.3d 795, 803 (Fed. Cir. 1999) (stating that “only those terms need be construed that are in controversy, and only to the extent necessary to resolve the controversy”). In addition to the words set forth in the patent, “a court ‘should also consider the patent’s prosecution history.’” Phillips, 415 F.3d at 1317 (quoting Markman v. Westview Instruments, Inc., 52 F.3d 967, 980 (Fed. Cir. 1995) (en banc), aff'd, 517 U.S. 370 (1996 . The prosecution history is considered “intrinsic evidence” and “consists of the complete record of the proceedings before the PTO and includes the prior art cited during the examination of the patent.” Ibid. “Like the specification, the prosecution history provides evidence of how the PTO and the inventor understand the patent.” Ibid. On the other hand, “because the prosecution history represents an ongoing negotiation between the PTO and the application, rather than the final product of that negotiation, it often lacks the clarity of the specification and thus is less useful for claim construction purposes.” Ibid. -16- Although not as probative as intrinsic evidence, the Federal Circuit has also “authorized district courts to rely on extrinsic evidence, which ‘consists of all evidence external to the patent and prosecution history, including expert and inventor testimony, dictionaries, and learned treatises.’” Ibid. (quoting Markman, 52 F.3d at 980). Technical dictionaries can be particularly helpful because they provide sound evidence of “the way in which one of skill in the art might use the claim terms.” Id. at 1318. Likewise, expert testimony can be useful insofar as it “provide[s] background on the technology at issue, . . . explain[s] how an invention works, . . . ensure[s] that the court’s understanding of the technical aspects of the patent is consistent with that of a person with skill in the art, [and] establish[es] that a particular term in the patent or the prior art has a particular meaning in the pertinent field.” Ibid. B. Means-Plus-Function Some of the disputed claims are defined in terms of means plus function to incorporate a structure as part of the invention (but not unique to it) without identifying that structure in the claims. Federal statutory law governs construction of claim limitations drafted as “means-plus- function” limitations and permits broad claiming ability in such cases: An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof. 35 U.S.C. § 112, ¶ 6. When a claim includes the word “means,” it is presumed that the statutory mandate of § 112, ¶ 6 applies. Rodime PLC v. Seagate Technology, Inc., 174 F.3d 1294, 1302 (Fed. Cir. 1999). However, this presumption is overcome in two situations. Ibid. “First, a claim element that uses the word ‘means’ but recites no function corresponding to the means does not invoke § 112, ¶ 6.” Ibid. “Second, even if the claim element specifies a function, if it also recites sufficient -17- structure or material for performing that function, § 112, ¶ 6 does not apply.” Ibid. See also Linear Technology Corp. v. Impala Linear Corp., 379 F.3d 1311, 1319 (Fed. Cir. 2004). In addition, when the word “means” is not used, a reverse presumption arises that the element is not to be construed in accordance with § 112, ¶ 6. John D. Watts v. XL Sys., 232 F.3d 877, 880 (Fed. Cir. 2000). “Once a court concludes that a claim limitation is a means-plus-function limitation, two steps of claim construction remain: 1.) the court must first identify the function of the limitation; and 2.) the court must then look to the specification and identify the corresponding structure for that function.” Biomedino, LLC v. Waters Technologies Corp., 490 F.3d 946, 950 (Fed. Cir. 2007). If there is no structure in the specification pertaining to the means-plus-function limitation in the claim, the claim will be deemed invalid for indefiniteness. Ibid. In such instances, the inventor has breached the terms of the bargain envisioned in § 112, ¶6: “[I]n return for generic claiming ability, the applicant must indicate in the specification what structure constitutes the means.” Id. at 948. “‘If the specification is not clear as to the structure that the patentee intends to correspond to the claimed function, then the patentee has not paid the price but is rather attempting to claim in functional terms unbounded by any reference to structure in the specification.’” Ibid. (quoting Med. Instrumentation & Diagnostics Corp. v. Elekta AB, 344 F.3d 1205, 1211 (Fed. Cir. 2003 . On the other hand, “[w]hile the specification must contain structure linked to claimed means, this is not a high bar.” Id. at 950. “All one needs to do in order to obtain the benefit of [§ 112, ¶ 6] is to recite some structure corresponding to the means in the specification, as the statute states, so that one can readily ascertain what the claim means.” Atmel Corp. v. Info. Storage Devices, Inc., 198 F.3d 1374, 1382 (Fed. Cir. 1999). A party contending that a claim is invalid for indefiniteness must prove, by clear and convincing evidence, “that the specification lacks adequate disclosure of -18- structure to be understood by one skilled in the art as able to perform the recited functions.” Intel Corp. v. VIA Technologies, Inc., 319 F.3d 1357, 1366 (Fed. Cir. 2003). When § 112, ¶ 6 applies, the protected structure is not only that disclosed in the specification but also “equivalents thereof.” 35 U.S.C. § 112, ¶ 6; see also Al-Site Corp. v. VSI Int’l, 174 F.3d 1308, 1320 (Fed. Cir. 1999). Nevertheless, the protection afforded by this rule is not as broad as it may sound. See Al-Site Corp., 174 F.3d at 1320; Patent Law & Practice § 5.III.C (3d ed. 2001). “An equivalent structure or act under § 112 cannot embrace technology developed after the issuance of the patent,” and “the accused device must perform the identical function as recited in the claim element.” Al-Site Corp., 174 F.3d at 1320 (emphasis added). See also id. at 1320-21 (distinguishing the equivalents rule of § 112, ¶ 6 from the “doctrine of equivalents,” which “may be satisfied when the function performed by the accused device is only substantially the same”). C. Person of Ordinary Skill in the Art Because the claim terms must be construed according to their meaning to one skilled in the art at the time of the invention, one task in construing the claims is identifying such a hypothetical individual. Ferguson Beaurergard/Logic Controls v. Mega Sys., LLC, 350 F.3d 1327, 1338 (Fed. Cir. 2003) (stating that claim terms “are examined through the viewing glass of a person skilled in the art”). Of course, the parties dispute the qualifications of such a person. The plaintiff believes that the proper definition in this case is an individual with an electronics background and a year of experience working with tire pressure sensors of a particular manufacturer. The defendant contends that the level of ordinary skill in this art requires an individual who has a working understanding of radio frequency (rf) communication in identification technology systems including the transmitters and receivers incorporated in the invention and the way in which these components activate and -19- operate. The defendant believes the person must have a Bachelor’s degree (or equivalent) in electronics or electrical engineering and two to three years industry experience in designing, developing, or testing rf identification components or systems, and an understanding of or general familiarity with the components, communication protocol, operations, and environment of an RTMS. This issue ultimately will be for the jury to decide, but the Court will resolve it tentatively for the purpose of construing the claims. See Alza Corp. v. Mylan Labs, Inc., 464 F.3d 1286, 1289 (Fed. Cir. 2006) (labeling ordinary skill in the art “an underlying factual question”); accord Pharma Stem Therapeutics, Inc. v. ViaCell, Inc., 491 F.3d 1342, 1359-60 (Fed. Cir. 2007); see also Dippin’ Dots, Inc. v. Mosey, 476 F.3d 1337, 1343 (Fed. Cir. 2007) (stating that jury’s determination of obviousness is reviewed de novo and underlying factual determinations, including the level of ordinary skill in the art, are reviewed for substantial evidence). “The person of ordinary skill in the art is a hypothetical person who is presumed to know the relevant prior art.” In re GPAC, Inc., 57 F.3d 1573, 1579 (Fed. Cir. 1995). In ascertaining this skill level, the Court may consider a number of factors, including the “the educational level of the inventor; the type of problems encountered in the art; the prior art solutions to those problems; the rapidity with which innovations are made; the sophistication of the technology[;] and the educational level of workers in the field.” Helifix, Ltd. v. Blok-Lok, Ltd., 208 F.3d 1339, 1347 (Fed. Cir. 2000); see also In re GPAC, 57 F.3d at 1579 (quoting Custom Accessories, Inc. v. Jeffrey-Allan Indus., Inc., 807 F.2d 955, 962-63 (Fed. Cir. 1986 . After considering the relevant factors in light of the evidence submitted by the parties, the Court believes that the defendants’ description of the person of ordinary skill in the art is accurate. The defendants’ proposed definition does not mandate possession of a B.S. in electronics or -20- electrical engineering; it simply states such credential is a good proxy for possession of the requisite knowledge. This is an accurate assessment. The plaintiffs have cited the fact that one of the inventors of the ‘796 patent (Kenny Thomas) has a degree in advertising, and another (Robert Gilling) has only a high school education. However, it is not clear how much input these individuals had in the design of the patented tool, and, at least as to Mr. Thomas, it is doubtful that he actually qualifies as one of ordinary skill in the art. When asked whether the patented tool used a different protocol depending on the type of tire sensor, Thomas responded that his “understanding” was that it did, but he stressed that he was not sure whether he was qualified to speak on the matter. Pl.’s Cl. Const. Br., Ex. 20, Thomas Dep. at 10. On the other hand, to the extent that Thomas has the requisite knowledge despite not having a degree in the relevant field, it appears this may be a product of special circumstances: Thomas owns a company that is a “contract manufacturer of diagnostic equipment that is sold into the automobile industry.” Id. at 11. Apart from Thomas and Gilling, the other inventors possess university degrees in electrical engineering. See Pl.’s Cl. Const. Br., Ex. 18, Pacsai Dep. at 12; Ex. 19, Szasz Dep. at 5-6. Moreover, the Court finds that the plaintiff’s definition is simply too vague. “[A]n electronics background and a year of experience working with tire pressure sensors of a particular manufacturer” provides little insight into the actual knowledge and experience of an individual. For instance, someone could have worked with tire pressure sensors for a year, and yet have no knowledge of the inner workings of the tools that activate those sensors. Knowing to push a button and knowing the effects of that action is quite different than knowing what happens inside the tool and the precise ways with which the tool interacts with the sensors and receiving unit. Therefore, the defendants’ suggestion – that the person of ordinary skill in the art would have knowledge of “(i) -21- the components which comprise the transmitters and receivers and the way in which these components activate and operate; (ii) the transmission of signals from a transmitter in the system; and (iii) the reception of signals by a receiver in the system” – seems far more helpful. Therefore, the Court will adopt the defendants’ proposed definition for the purpose of construing the claims. V. Discussion of the Disputed Claims A. Equivalents Several of the claims are stated as means plus function, which suggests, of course, that the limitation includes the structure identified in the specification plus equivalents. The defendant contends that the plaintiff may not claim equivalents, however, because the plaintiff failed to comply with the terms of this Court’s scheduling order setting a deadline for identifying all equivalent structures. The Court’s scheduling order, originally issued on March 14, 2007 and then modified on August 22, 2007, stated that each party must furnish its proposed claim construction statement on or before August 15, 2007. See Orig. and Mod. Sched. Orders [dkt #s 15 and 98] at 1. In describing the contents of that statement, the Court’s order provided that, for each claim, the submitting party needed to provide an analysis “defining and identifying equivalents asserted.” Orig. and Mod. Sched. Orders at 2. Although that statement is clear, the parties expressed some confusion over other parts of the scheduling order, so on September 27, 2007, the Court granted the parties’ joint motion for clarification. The clarifying order provided that the parties would file their joint claim construction statement and respective Markman briefs on or before October 3, 2007, with response briefs due on October 8, 2007. Order Granting Mot. for Clar. [dkt # 106] at 2. The Court’s order was silent on the issue of proposed claim construction statements because the parties had expressed no confusion -22- with respect to that issue. It is not readily apparent to the Court, therefore, why the plaintiff did not identify equivalents in its proposed claim construction statement. In that statement, the plaintiff set forth its proposed claim constructions, many of which included the language, “plus equivalents thereof.” Defs.’ Cl. Const. Br., Ex. A, Pl.’s Proposed Claim Const. St. at 3-5. The plaintiff did not, however, identify the nature of those equivalents. It was not until October 3, 2007, when the plaintiff filed its Markman brief, that it identified a “microprocessor” as the equivalent of “frequency generating circuitry” and a “transceiver” as the equivalent of a “receiver.” Pl.’s Cl. Const. Br. at 21 n.8, 28 n.14. The plaintiff violated the terms of the scheduling order, but since the defendants have not even suggested that they were prejudiced, the Court believes the claim construction should proceed with consideration of these two equivalents. However, because the plaintiff has disclosed no further equivalents, it will be barred from asserting any additional equivalents in the future. The plaintiff appears to believe that, the Court’s order notwithstanding, it had no obligation to identify equivalents because “the scope of equivalents . . . is a factual question for the jury.” Pl.’s Cl. Const. Br. at 21 n.8 (citing Odetics, Inc. v. Storage Tech. Corp., 185 F.3d 1259, 1268-69). In making this assertion, the plaintiff has missed the point of the scheduling order and fails to apprehend the Court’s authority to establish deadlines for the orderly progress of the litigation. It is true that “[w]hether an accused device infringes a § 112, ¶ 6 claim as an equivalent is a question of fact,” Odetics, Inc., 185 F.3d at 1268, so it would be improper for the Court to determine, at the claim construction stage, whether an alleged equivalent in fact qualifies as such. See Patent Law & Practice § 5.III.C (“Determining whether a particular means for performing the recited function is a § 112, ¶ 6 equivalent has not been treated as a claim construction issue.”). However, this does not mean that the Court oversteps its bounds in ordering -23- the parties to identify alleged equivalents and thereby state the fact issues that will require resolution. The plaintiff has cited no law to the contrary. Any further attempt to expand the range of equivalents will not be permitted absent a modification of the scheduling order for good cause shown. As to merits of the issue, the Court cannot accept the defendants’ invitation to hold as a matter of law that a “microprocessor” cannot be an equivalent of “frequency generating circuitry.” As noted, adjudicating the validity of a proffered equivalent is not a task for the Court during claim construction. See Odetics, Inc., 185 F.3d at 1268; Patent Law & Practice § 5.III.C. The defendants contend that a “microprocessor” cannot be equivalent to “frequency generating circuitry” because it was disclosed in the specification but not linked to the function performed by frequency generating circuitry – generating continuous wave signals. However, the law cited by the defendants in fact undermines their position. In Medical Instrumentation and Diagnostics Corp. v. Elekta AB, 344 F.3d 1205 (Fed. Cir. 2003), the Federal Circuit held that when structure is disclosed in the specification and linked to one function but not another, it is impermissible for a district court to construe that structure as additional corresponding structure to the latter function. See id. at 1216 (“In the past, we have rejected similar attempts to include as additional corresponding structure for a particular function a structure that is dislcosed in the specification but is not associated with the particular claimed function.”). But that is not presented by the competing constructions in this case. The plaintiff has not claimed that a microprocessor works in conjunction with frequency generating circuitry to produce continuous wave signals, but has claimed that it is the equivalent of frequency generating circuitry. The Medical Instrumentation decision did not turn on the identification of equivalents; it was concerned with “additional corresponding structure.” Medical Instrumentaion, -24- 344 F.3d at 1216; see also ibid. (rejecting claim of additional corresponding structure in the form of software “where the specification clearly links the framegrabber and CVP to the converting function, but does not link software to that function, though software is disclosed in the specification”). Although the distinction between equivalents and additional corresponding structure is, perhaps, a fine one, it is significant. Coupled with the rule that the existence of an equivalent is a question for the jury, See Odetics, Inc., 185 F.3d at 1268; Patent Law & Practice § 5.III.C, the Court finds that the Medical Instrumentation decision counsels against deciding that a microprocessor cannot be an equivalent of frequency generating circuitry. B. “Means for generating continuous wave signals” The parties agree that this claim limitation is in means-plus-function format, invoking the rubric of § 112, ¶ 6. However, the defendants contend that the limitation should be deemed void for indefiniteness. The Court finds that the defendants have failed to carry their burden of proving by clear and convincing evidence “that the specification lacks adequate disclosure of structure to be understood by one skilled in the art as able to perform the recited function[].” Intel Corp., 319 F.3d at 1366. Initially, it is clear that the structure proffered by the plaintiff – “frequency generating circuitry, an amplifier or driver circuit, and an inductor” – is linked to the recited function in the specification – generating a continuous wave signal. In fact, it does not appear that the defendants dispute this idea; they simply claim that the structure is too vague. In relevant part, the specification provides: Means for generating CW [continuous wave] signals at a specific frequency are known in the art and any means known in the art can be utilized for generating a CW signal in tire positioning tools of the present invention. One means for producing a CW signal in tire positioning tools of the present invention is to include frequency -25- generating circuitry to generate the CW signal and then amplify the CW signal with an amplifier or a driver circuit. ‘796 Patent at 5:11-18. Figure 1, a technical diagram of the tool, contains icons corresponding to these devices, and it also references an inductor. See ‘796 Patent at Fig. 1; see also id. at 10:22-25 (“Frequency generator 108, amplifier 110, and inductor 112 are used to send signals for activating RTMS tire sensors (that is, activation signals).”) The defendants contend that this disclosure of structure is insufficient for purposes of § 112, ¶ 6. Both parties have cited Linear Technology Corp. v. Impala Linear Corp., 379 F.3d 1311 (Fed. Cir. 2004), as relevant to the question whether a “circuit” or “circuitry” can be an adequate structure for purpose of § 112, ¶ 6. The Court finds that case is helpful to the plaintiff’s position, but does not resolve the matter entirely. In Linear Technology, the district court held during claim construction that a claim containing the word “circuit” was in means-plus-function format (even though the word “means” was not used in the claim), and § 112, ¶ 6 had not been satisfied. Linear Technology, 379 F.3d at 1319. On appeal, the Federal Circuit held that this was error because the claim did not include the word “means,” therefore the claim limitation presumptively was not a means-plus-function limitation, and the defendant failed to rebut the presumption. However, on the way to that conclusion, the court held that “the term ‘circuit’ connotes structure.” Id. at 1320. “Thus, when the structure-connoting term ‘circuit’ is coupled with a description of the circuit’s operation, sufficient structural meaning generally will be conveyed to persons of ordinary skill in the art.” Ibid. Nonetheless, Linear Technology does not stand for the proposition that “circuitry” is always sufficient structure for purposes of § 112, ¶ 6. The Linear Technology court decided only whether § 112, ¶ 6 applied, not whether it had been satisfied. Furthermore, the claim description of the -26- operation of the circuitry in that case was quite detailed when compared to that in the case at bar. Therefore, although Linear Technology militates in favor of the plaintiff’s position, the Court’s analysis cannot rest on that decision alone. In addition, however, extrinsic evidence supports the view that a skilled artisan would understand “frequency generating circuitry” to amount to structure sufficient to perform the recited function. See Biomedino, LLC, 490 F.3d at 953. A declaration was filed by Gregory W. Davis, who holds a Ph.D. in Mechanical Engineering from the University of Michigan, teaches in the area of automotive engineering, and has “substantial experience in the design of electrical communications for automotive applications.” Pl.’s Cl. Const. Br., Ex. 14, Davis Dec. at ¶ 3. Mr. Davis, who was not an inventor of the patented tool and appears to have no other potential for bias, averred as follows: I understand that the defendants claim that “frequency generating circuitry” is not an identification of structure. I disagree with that assertion. The structure described is “circuitry” which is commonly understood in basic electronics to identify structure. The term “circuit” is commonly defined as a structure. For example, the Dictionary of Computing 75 (4th Ed. 1996) defines “circuit” as “the combination of a number of electrical devices and conductors that, when interconnected to form a conducting path, fulfill some desired function.” The Modern Dictionary of Electronics 116 (7th Ed. 1999) defines “circuit” as “the interconnection of a number of devices in one or more closed paths to perform a desired electrical or electronic function. Examples of simple circuits are high- or low-pass filters, multivibrators, oscillators, and amplifiers.” When the term “circuitry” is coupled with a description of the circuit’s operation, in this case “frequency generating,” a specific structure is clearly identified to one skilled in the basic electronics art. When the term “frequency generating circuitry” is used, one of skill in the art would easily be able to identify the structure. “Frequency generating circuitry” is very common to one skilled in electronics, is simple to construct, and is learned early in electronics training as a rudimentary circuit. In fact, “frequency generating circuitry” is so common in the electronics art, that some have used the term “oscillator” to refer to the same circuit. Indeed, Newton’s Telecom Dictionary defines “oscillator” as an: “electronic circuit that creates a single frequency signal.” -27- Id. at ¶ 12. Based on this testimony and the patent document itself, the Court concludes that the defendants have not met their burden of proving by clear and convincing evidence “that the specification lacks adequate disclosure of structure to be understood by one skilled in the art as able to perform the recited function[].” Intel Corp., 319 F.3d at 1366. Finally, the defendants have asserted an anemic challenge to the structural terms “an amplifier or driver circuit, and an inductor” stated in the specification. See Defs.’ Cl. Const. Br. at 20-21. The defendants do not contend that these terms do not amount to structure, but they suggest that the terms are not linked to the recited function – “generating continuous wave signals.” Although this argument may appear meritorious when a portion of the specification is read in isolation, it fails when the specification is read in context. See ‘796 Patent at 5:11-18. The defendants contend that “means for generating continuous wave signals” must be strictly limited to “frequency generating circuitry” because the specification indicates that the circuitry generates the signal, and the amplifier or driver circuit simply amplify it after the fact. Defs.’ Cl. Const. Br. at 21. However, it is clear from the language of the claims that “generating” a continuous wave signal includes amplification as well. Whenever the language “means for generating continuous wave signals” appears in a claim, it is always surrounded by other, significant words. Claim 9, for instance, claims in relevant part A tool, comprising: a plurality of means for activating remote tire monitoring system tire sensors, the plurality of means selected from the group consisting of a magnet, a valve core depressor, means for generating continuous wave signals, and means for generating modulated signals. ‘796 Patent at Cl. 9. Therefore, it is clear that “means for generating continuous wave signals” is just one form of “means for activating remote tire monitoring system tire sensors.” To accomplish -28- this successfully, the specification and accompany figures indicate that the continuous wave signal must be produced and amplified. See ‘796 Patent at 10:22-25 (“Frequency generator 108, amplifier 110, and inductor 112 are used to send signals for activating RTMS tire sensors (that is, activating signals . Therefore, the Court will adopt the plaintiff’s construction, limited to the one equivalent it has identified, i.e., a microprocessor. The claim terms noted above will be construed to mean “frequency generating circuitry (plus the alleged equivalent, a microprocessor), an amplifier or driver circuit, and an inductor for generating continuous wave signals for activating remote tire monitoring system tire sensors.” C. “Means for generating modulated signals” The defendants contend that this claim must be declared void for indefiniteness because the designation of the corresponding structure as “a microprocessor” is insufficient. The defendants argue that, when the disclosed structure is a microprocessor or computer, an algorithm must also be disclosed; and no algorithm has been identified in the specification. The Court agrees. The structure disclosed in the specification for “generating modulated signals” is as follows: Means for generating modulated signals at a specific frequency are known in the art and any means known in the art can be utilized for generating a modulated signal in tire positioning tools of the present invention. One means for producing a modulated signal in tire positioning tools of the present invention is to include a microprocessor in addition to frequency generating circuitry. As is known in the art, the microprocessor can provide the modulation to the frequency generator circuitry. An amplifier or driver circuit can also be included to amplify the signal. ‘796 Patent at 5:48-57. Figure 1, a technical illustration of the tool’s overall structure, shows a microprocessor connected to a power supply, receivers, transmitters, a display device, and a frequency generator. ‘796 Patent at Fig. 1. -29- It is now well settled that “[a] computer-implemented means-plus-function term is limited to the corresponding structure disclosed in the specification, and the corresponding structure is the algorithm.” Harris Corp. v. Ericsson, Inc., 417 F.3d 1241, 1253 (Fed. Cir. 2005); see also Tehrani v. Hamilton Medical, Inc., 331 F.3d 1355, 1361-62 (Fed. Cir. 2003); WMS Gaming, Inc. v. Intl Game Tech., 184 F.3d 1339, 1348-49 (Fed. Cir. 1999). This rule also applies to a “means-plus- function limitation implemented by a microprocessor.” Harris Corp., 417 F.3d at 1253. The plaintiff does not contest this rule, but it insists it merely applies when the only disclosed structure for performing the recited function is a microprocessor or computer, and it does not apply when the structure consists of a microprocessor working alongside other apparatuses. The Court cannot accept that argument: nothing in the Federal Circuit decisions commends this interpretation, and the plain language of the applicable cases in fact cuts against it. Since the claim at issue is a microprocessor-implemented means-plus-function term, disclosure of an algorithm is required. That leaves the issue of what constitutes an algorithm. The requirement of an algorithm “does not mean that the patentee must disclose specific source code for the computer. And, the term ‘algorithm’ is not limited to a formula of mathematical symbols.” Finisar Corp. v. The DirecTV Group, Inc., 416 F. Supp. 2d 512, 518 (E.D. Tex. 2006). On the other hand, simply stating that the microprocessor or computer performs the function in the claim is not tantamount to disclosing an algorithm. See ibid. (rejecting alleged disclosure of algorithm on the grounds that it was “nothing more than a restatement of the function, as recited in the claim”) Rather, the patentee must at least disclose the basic steps that the microprocessor takes to enable one skilled in the art to determine the limitations on what is claimed. See Budde v. Harley-Davidson, Inc., 250 F.3d 1369, 1381-82 (Fed. Cir. 2001); In re Dossel, 115 F.3d 942, 946-47 (Fed. Cir. 1997); see also Harris Corp., 417 -30- F.3d at 1254; Finisar Corp., 416 F. Supp. 2d at 518-19. This can be accomplished in a number of ways. “For example, the steps, formula, or procedures to be performed by the computer might be expressed textually, or shown in a flow chart.” Finisar Corp., 416 F. Supp. 2d at 518. In the present case, no algorithm has been disclosed, and therefore the microprocessor- implemented means-plus-function claim is void for indefiniteness. The closest the specification comes to disclosing an algorithm is the statement that “the microprocessor can provide the modulation to the frequency generator circuitry.” ‘796 Patent at 5:54-56. But this is simply restating the function recited in the underlying claim. The function in the claim is “generating modulated signals.” See, e.g., ‘796 Patent at cl. 9. Although one might argue that “providing the modulation” to the frequency generating circuitry is not a pure restatement of the function (since the signal is produced by the circuitry and not the microprocessor), that argument must fail. “Providing modulation” cannot, under any reasonable understanding, be considered an algorithm because that phrase describes what the microprocessor does, not how that task is accomplished. Therefore, although “a precise mathematical formula or flow chart” is not required, Finisar Corp., 416 F. Supp. 2d at 519, the disclosure in this case is inadequate, and the claim limitation fails for indefiniteness. D. “Means for receiving tire sensor signals” The parties agree that the term denotes a means-plus-function claim, and the defendants have not asserted indefiniteness. The only question is whether an antenna should be included in the corresponding structure. The specification states: Preferred tire positioning tools of the present invention can also receive tire sensor signals. Preferred tire positioning tools of the present invention will comprise an antenna connected to receiving circuitry capable of receiving a single frequency, a -31- single receiver capable of receiving a plurality of frequencies, or multiple receivers each of which is capable of receiving a single frequency. ‘796 Patent at 7:27-35 (emphasis added). Figure 1 shows an antenna connected to two receivers set at different frequencies, and it contains a notation that other receivers can be installed as well. ‘796 Patent at Fig. 1; see also ‘796 Patent at 10:33-43 (stating, inter alia, that “[a]ntenna 116 is designed to receive signals from either a RTMS tire sensor or a RTMS receiving unit”). The defendants have not offered any reason for excluding an antenna from the structure, and the Court cannot think of one. The specification and related figure plainly disclose an antenna attached to receivers as the means for receiving tire sensor signals, and the claim will be construed accordingly. E. “A plurality of means for receiving tire sensor signals” The parties agree that this is a means-plus-function claim, but they dispute both the function and structure of this claim. The defendants state that the only disclosed structure for receiving tire sensor signals is two or more receivers, and they state that the function simply is the receipt of tire sensor signals. The plaintiff, on the other hand, argues that a “plurality of means for receiving tire sensor signals” has been defined in the specification and the Court must adopt that meaning. The Court agrees with the plaintiff. The Federal Circuit has recognized the right of the patentee to be his own lexicographer. Finnigan Corp. v. Int’l Trade Com’n, 180 F.3d 1354, 1364 (Fed. Cir. 1999). Therefore, a patentee is free to “define [a] term in a manner different from its plain meaning.” Sextant Avionique, S.A. v. Analog Decives, Inc., 172 F.3d 817, 825 (Fed. Cir. 1999). “[A]s long as the special definition of the term is clearly stated in the specification or file history,” the Court’s role is limited to pronouncing that definition as the acquired meaning. See Vitrionics Corp., 90 F.3d at 1582; Voice -32- Tech. Group, Inc. v. VMC Systems, Inc., 164 F.3d 605, 614-15 (Fed. Cir. 1999) (“When the meaning of a term as used in a patent is clear, that is the meaning that must be applied in the construction of the claim and in the infringement analysis.”); Patent Law & Practice § 5.I.A.2 (3d ed. 2001). Here, there can be no question that the patentees invoked their lexicographic rights, as they expressly defined “a plurality of means for receiving tire sensor signals” in the specification. After describing the structure, the specification states that, “if a tire positioning tool of the present invention comprises means for receiving tire sensor signals at a plurality of frequencies then the tire position tool comprises a plurality of means for receiving tire sensor signals.” ‘796 Patent at 7:47- 51. Therefore, to the extent the defendants resist defining the function in “a plurality of means for receiving tire sensor signals” as structure “for receiving tire sensor signals at two or more frequencies,” the specification clearly forecloses such resistance. As to the exact structure that accomplishes this function, the specification likewise supports the plaintiff’s offering of “an antenna connected to receiving circuitry or receiver(s).” The defendants argue that the structure must be limited to two or more receivers, but the specification shows that a single receiver may receive tire sensor signals at multiple frequencies. The defendants also resist inclusion of an antenna, but, as before, this position lacks merit. The specification provides: Preferred tire positioning tools of the present invention will comprise an antenna connected to receiving circuitry capable of receiving tire sensor signals. The receiving circuitry may comprise a single receiver capable of receiving a plurality of frequencies, or multiple receivers each of which is capable of receiving a single frequency. . . . Typically, preferred tire positioning tools will be capable of receiving a plurality of frequencies of tire sensor signals. This can be accomplished by including a plurality -33- of receivers into tire positioning tools of the present invention, wherein each receiver is designed to receive a signal of a particular frequency. Alternatively, this can be accomplished by including a single receiver capable of receiving multiple frequencies. ‘796 Patent at 7:29-36, 52-59 (emphasis added). Based on this language and the definition set forth above, the Court finds that the plaintiff’s proposed construction is accurate. F. “Means for transmitting signals to remote tire monitoring system receiving units” The parties agree that this claim is in means-plus-function format, and they agree that the function needs no construction. The only question is the nature of the corresponding structure, which can be quickly resolved by reference to the specification. In pertinent part, the specification provides: Preferred embodiments of tire positioning tools of the present invention will additionally comprise means for transmitting signals to RTMS receiving units. Such means will typically comprise an antenna connected to transmitting circuitry for transmitting signals . . . . The transmitting circuitry may comprise a single transmitter capable of transmitting a single frequency, a single transmitter capable of transmitting a plurality of frequencies, or multiple transmitters each of which is capable of transmitting a single frequency. ‘796 Patent at 8:53-62. The defendants have failed to offer any legitimate reason for excluding an antenna as part of the structure. As to the inclusion of “transmitting circuitry,” the defendants state that this is simply “restating the function,” and they argue that the only disclosed structure is a transmitter. Defs.’ Cl. Const. Br. at 29. However, the Court has found that “circuitry” qualifies as structure, and so the Court rejects the defendants’ argument that “transmitting circuitry” merely restates the function. However, the plaintiff’s construction will be modified to reflect the fact that “[t]he transmitting circuitry may comprise a single transmitter . . . . or multiple transmitters,” ‘796 Patent at 8:58-61 (emphasis added), and to reflect the Court’s ruling limiting equivalents. Therefore, the -34- Court will construe the term to mean “an antenna connected to transmitting circuitry or transmitter(s) for transmitting signals to remote tire monitoring system receiving units, with no equivalents.” G. “Means for receiving signals transmitted by remote tire monitoring system receiving units” The parties’ dispute with regard to this phrase centers around the propriety of including an antenna, the number of receivers, and the plaintiff’s right to equivalents. The parties agree that § 112, ¶ 6 applies, and they agree that the function is properly stated in the claim limitation as a structure “for receiving signals transmitted by remote tire monitoring system receiving units.” ‘796 Patent at Cl. 15. The specification reveals that the purpose of the tool’s ability to receive signals from receiving units, as opposed to signals transmitted by tire sensors, is to enable it to communicate directly with the receiving unit. With that background in mind, however, it is clear that the structure linked to “receiving signals transmitted by remote tire monitoring system receiving units” includes an antenna. Figure 1 shows an antenna connected to receivers set at two different frequencies, and the specification provides that Antenna 116 is designed to receive signals from either a RTMS tire sensor or a RTMS receiving unit. FIG. 1 illustrates an embodiment of a tire positioning tool comprising two receivers, the first receiver 118 is capable of receiving signals at a frequency of 315 MHz, and the second receiver 120 is capable of receiving signals at a frequency of 433 MHz. The ellipses between the two receivers is an indication that other embodiments of tire position tools may comprise additional receivers capable of receiving signals at other frequencies. ‘796 Patent at 10:34-43. On the other hand, it is equally clear that “means for receiving signals transmitted by remote tire monitoring system receiving units” is limited to a single receiver, not multiple receivers. The -35- specification plainly indicates that multiple receivers (or one receiver capable of receiving more than one frequency) constitute a “plurality of means,” but the claim at issue is for “means” alone. See ‘796 Patent at Cl. 15. According to the specification, Similar to having means for receiving tire sensor signals at multiple different frequencies, preferred embodiments of tire positioning tools of the present invention may also include means for receiving signals transmitted by RTMS receiving units. In this manner, the tire positioning tool can interact with a vehicle’s receiving unit by both receiving signals from and transmitting signals to the vehicle’s receiving unit. Different makes of RTMS receiving units may transmit different frequencies of signals. Thus, each different frequency of such signal that tire positioning tools of the present invention are capable of receiving constitutes a different means for receiving signals. That is, if a tire positioning tool of the present invention comprises means for receiving signals from RTMS receiving units at a plurality of different frequencies then the tire position tool comprises a plurality of means for receiving such signals. ‘796 Patent at 9:65-57, 10:1-12 (emphasis added). The plaintiff has argued successfully that a “plurality of means” in the context of “receiving tire sensor signals” includes one or more receivers, such that the structure is capable of receiving multiple frequencies. The plaintiff cannot construe the term “means” to denote the same thing. The specification defines a “plurality of means” in a similar fashion in the context of receiving signals sent by receiving units. Therefore, the claim for “means” alone must be limited to one receiver (able to receive a single frequency); two receivers would necessarily imply the ability to receive two or more frequencies, bringing the structure into the realm of “a plurality of means.” This interpretation honors the language in the specification, and is particularly strong given the distinction elsewhere between “means” and “a plurality of means.” Finally, for reasons stated earlier, the plaintiff will be limited to the alleged equivalent of a transmitter. Therefore, the disputed term will be construed to mean “an antenna connected to a -36- receiver (plus the alleged equivalent, a transceiver) for receiving signals transmitted by remote tire monitoring system receiving units. VI. Conclusion For the reasons stated above, the Court adopts the constructions of the claim terms agreed by the parties. The Court determines that the disputed claim terms shall have the construction discussed above. Accordingly, it is ORDERED that the following disputed terms in the ‘796 patent are construed as follows: A. “Means for generating continuous wave signals” is construed to mean “frequency generating circuitry (plus the alleged equivalent, a microprocessor), an amplifier or driver circuit, and an inductor for generating continuous wave signals for activating remote tire monitoring system tire sensors”; B. “Means for generating modulated signals” is void for indefiniteness; C. “Means for receiving tire sensor signals” is construed to mean “an antenna connected to receiving circuitry or a receiver (plus the alleged equivalent, a transceiver) for receiving tire sensor signals”; D. “A plurality of means for receiving tire sensor signals” is construed to mean “an antenna connected to receiving circuitry or receiver(s) (plus the alleged equivalent, transceiver(s for receiving tire sensor signals at two or more frequencies”; E. “Means for transmitting signals to remote tire monitoring system receiving units” is construed to mean “an antenna connected to transmitting circuitry or transmitter(s) for -37- transmitting signals to remote tire monitoring system receiving units, with no equivalents”; and F. “Means for receiving signals transmitted by remote tire monitoring system receiving units” is construed to mean “an antenna connected to a receiver (plus the alleged equivalent, a transceiver) for receiving signals transmitted by remote tire monitoring system receiving units.” It is further ORDERED that the Case Management and Scheduling Order is MODIFIED with respect to the deadline for filing dispositive motions, and the new deadline is January 22, 2007. The balance of the Case Management and Scheduling Order shall remain in effect. Dated: January 7, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 7, 2008. s/Felicia M. Moses FELICIA M. MOSES -38-

=== SPX Order Re Opinions of Counsel ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION SPX CORPORATION, Plaintiff, vs. BARTEC USA, LLC, BARTEC AUTO ID LTD., SCHRADER-BRIDGEPORT INTERNATIONAL, INC., MYERS TIRE SUPPLY DISTRIBUTION, INC., Defendants. ______________________________________/ Case No. 06-14888 Hon. David M. Lawson Magistrate Judge Steven D. Pepe OPINION AND ORDER GRANTING MOTION TO COMPEL DISCOVERY OF ATTORNEY DOCUMENTS RELATING TO OPINIONS OF COUNSEL This matter is before the Court on the plaintiff’s renewed motion for an order compelling defendant Bartec USA, LLC (Bartec) to produce various documents withheld on the basis of the attorney-client privilege and work-product doctrine. In this patent infringement action, plaintiff SPX Corporation (SPX) alleges that Bartec copied its design for a handheld tool used in servicing tires on motor vehicles equipped with remote tire monitoring systems. The plaintiff originally moved to compel the production of counsel’s opinions in early June 2007. The defendant opposed this request for a time but eventually agreed to produce various attorney-client communications following its definitive election to rely on an advice-of-counsel defense to the plaintiff’s charge of wilful infringement. Bartec made that election within the deadline set by the Court; however, the defendant did not furnish all of the information sought by the plaintiff, and the plaintiff now seeks the remaining documents. The defendant contends that the documents it has withheld do not fall within the scope of the waiver of the attorney-client and work-product privileges, but the privilege log it submitted does not allow the Court to make that determination. The Court finds that the plaintiff has overstated the scope of the privilege waiver, but the defendant has not established that the documents it seeks to protect fall outside the proper scope of the waiver recognized by the controlling cases. Therefore, the Court will grant the plaintiff’s motion and order production of the documents. I. SPX filed its complaint with this Court on October 30, 2006. The named defendant at that time was Bartec USA, LLC, and the plaintiff asserted one count for willful infringement of U.S. Patent 6,904,796 (the ‘796 patent). The ‘796 patent is for a handheld tool that helps motor vehicle mechanics in rotating and changing tires on vehicles equipped with “remote tire monitoring systems.” See Compl., Ex. A, U.S. Patent 6,904,796. In a nutshell, remote tire monitoring systems (RTMS) measure the air pressure in tires through sensors and then transmit that data to an instrument in the passenger compartment, signaling to the driver when air pressure is low. The patented tool is useful because tires with RTMS cannot simply be rotated like traditional tires; they must be electronically calibrated after rotation. Not only does the patented tool facilitate this process, but it can be utilized with any remote tire monitoring system, no matter the tire or vehicle, saving mechanics hundreds of dollars that would otherwise be spent on a range of brand-specific tools. On December 5, 2006, Bartec filed its answer and counterclaims seeking declaratory relief asserting that the ‘796 patent was invalid, unenforceable, or both, and its product did not infringe the ‘796 patent. -2- Following a period of discovery, SPX filed an amended complaint on April 2, 2007 adding as defendants Bartec Auto ID, Ltd., Schrader-Bridgeport International, Inc., General Parts, Inc., and Myers Tire Supply Distribution, Inc. Bartec Auto ID, a British company, is the parent corporation of Bartec, and the other added defendants are entities that allegedly were involved in the distribution and sale of Bartec’s infringing product. Once more, SPX asserted that the infringement was willful. Bartec renewed its counterclaims for invalidity, unenforceability, and non-infringement. The other defendants answered the amended complaint shortly thereafter, with Bartec Auto ID joining in the counterclaims interposed by Bartec. In June 2007, Bartec Auto ID filed an amended answer wherein it asserted invalidity and unenforceability on the additional grounds that the ‘796 patent was obtained through inequitable conduct before the PTO because the applicants had intentionally failed to disclose two prior patents in an attempt to mislead the PTO. The pleadings were amended once again in August 2007. On August 27, 2007, the Court issued an order dismissing the case against General Parts pursuant to the parties’ stipulation. Throughout this process, the parties engaged each other in discovery disputes. The plaintiff filed a motion to compel in March 2007 (decided by Magistrate Judge Steven Pepe in April), and then filed two motions to compel discovery in May and another in June. Magistrate Judge Pepe ruled on the first two motions on July 11, 2007, and this Court held a hearing in mid-August on the third, which, like the present motion, sought to compel the production of all communication relating to the possible invalidity, unenforceability, and non-infringement of the ‘796 patent given by counsel to Bartec. In its original and renewed motions, SPX observes that on February 7, 2006, Ryan Massey, one of Bartec’s attorneys, sent a letter to Robert Gilling of G-5 Electronics, LLC (the predecessor -3- of SPX to the ‘796 patent), advising him that the ‘796 patent was invalid as preempted by prior art and potentially unenforceable due to inequitable conduct before the PTO. In the letter, Massey acknowledged that he “recently provided Bartec USA and Bartec Auto ID Limited with our opinion that the claims of [the] ‘796 patent are invalid.” Mot. to Comp., Ex. B, Opinion Letter at 1. Massey then proceeded at length to support his view that the patent was invalid and unenforceable. This was not a typical “opinion letter” as that term is used in patent parlance. A typical opinion letter is prepared by opinion counsel and directed to his client; the letter quoted above was prepared by opinion counsel but directed to the accusing party. Nevertheless, the parties regularly refer to the above document as the predicate “opinion letter,” and, although Massey makes mention of similar advice given directly to his clients (and Bartec acknowledges that there was another letter), no other letter has been produced to the Court. Based on the February 7, 2006 letter and its belief that Bartec was attempting to rely on an advice-of-counsel defense, SPX filed its original motion asking the Court “to order (1) that Bartec has already waived privilege by issuance of the February 7, 2006 advice of counsel letter and direct disclosure of all attorney-client communications on the subject, or alternatively (2) bar Bartec from reliance in any way on the February 7, 2006 letter in defense of SPX’s willful infringement claims.” Mot. to Compel at 2. By the time SPX filed its motion, however, the issue already had received some attention by Magistrate Judge Pepe. On April 12, 2007, the magistrate judge heard oral argument on SPX’s motion to compel responses to interrogatories, leading to the following exchange: MR. LORELLI: Interrogatory No. 6 was asking for information regarding opinions of counsel. THE COURT: Right. This is on the willfulness, reliance - - yes. -4- MR. LORELLI: Correct. They supplemented their interrogatory answer saying that there was - - and referenced a written opinion from a Ryan Massey on or about February 7th, 2006. Now it just so happens that Ryan Massey sent a letter to the plaintiff on February 7th, 2006. If that’s the opinion that the plaintiff is referring to, or if there’s another opinion, the fact that they sent it to the plaintiff really waives whatever else was provided to the client. . . . MR. DOERR: And, Your Honor, I think I can provide some clarity on that issue. There were two communications, in other words Mr. Lorelli was I think asking whether that letter to Mr. Gilling was the intending letter we’re referencing. And the answer is, it is not. There were two separate communications on the same day from Attorney Ryan Massey. One was directed to Mr. Gilling which plaintiff now has that correspondence and has attached it. There was a separate correspondence to the client. That communication we are asserting attorney/client privilege on and as we say in our papers – THE COURT: You’ve not yet decided whether you’re going to rely on the defense. MR. DOERR: That’s correct. THE COURT: Or advice of counsel yet. MR. DOERR: That’s correct. THE COURT: Have you talked with Judge Lawson as to whether he wants a date by which that decision must be made? MR. LORELLI: We have not, Your Honor. But here’s - - here’s the fundamental problem. If they intend to rely in any way on the letter that was sent to Mr. Gilling, the - - that is waived. The letter that was sent to Mr. Holloway on the same date regarding the same subject matter. MR. DOERR: I disagree with that statement, Judge. And the reason is the attorney/client privilege is done on a communication basis. In other words communication to the client is what is protected. THE COURT: Right. If you were going to assert that you relied on advice of counsel, that opens the door to all advice of counsel. MR. DOERR: Right. -5- THE COURT: If you’re not going to try to assert that through the letter to - - and you can’t you know, protect the letter to Holloway by using the letter to Gilling as your advice of rights, or advice of counsel. But the mere fact that your - - that Mr. Massey wrote a public disclosure that’s not going to be the basis for your claim as a defense in this case as advice of counsel, then that does not waive private communications Mr. Massey had with his client on whose behalf he wrote the public communication. But again if you’re going to rely on the letter to Massey [sic] as part of your defense, then that will open the door to all communications to your client with regard to advice of counsel. MR. DOERR: Okay. THE COURT: Okay. So I guess Mr. Lorelli will have to wait until they formally indicate whether they’re going to assert that defense. Mot. to Compel, Ex. F, Tr. of 4/12/07 Hrg. before Judge Pepe at 4-7. The matter came before this Court for a hearing on August 13, 2007, but the Court continued the hearing based on defense counsel’s assertion that Bartec still had not decided whether it would rely on the advice-of-counsel defense. The Court therefore ordered Bartec to decide whether it would assert advice of counsel as a defense and notify the plaintiff and the Court of its decision by September 13, 2007. On September 13, 2007, having received word that Bartec would be relying on the advice-of- counsel defense and that it had agreed to furnish the “documents at issue,” the Court denied the motion to compel as moot. Two weeks later, however, the plaintiff filed the present motion to renew its motion to compel on the grounds that Bartec had only produced a portion of the relevant documents. According to SPX, many of the documents listed in Bartec’s most recent privilege log come within the waiver effected by Bartec’s election. The privilege log provides rudimentary information but is significantly lacking in pertinent detail. It states: -6- THIRD AMENDED PRIVILEGE LOG OF DEFENDANTS BARTEC USA, LLC AND BARTEC AUTO ID LIMITED FOR DOCUMENTS PRIOR TO OCTOBER 30, 2006 AND PATENT PROSECUTION FILES DOC NO. DATE TYPE FROM TO PRIVILEGE ASSERTED SUBJECT 7/12/05 Notes Ryan Massey Work Product Notes regarding U.S. Patent No. 6,904,796 Patent application prosecution Patent application prosecution Patent application prosecution Client Attorney/ Client Attorney/ Client OTC/SPX presentation Attorney/ Client, Work Product OTC and TIPS Attorney/ Client Bartec Tools Attorney/ Client, Work Product Bartec Tools Attorney/ Client, Work Product Bartec tools and letter to Garrett Miller 9/13/05 Email Ryan Massey Glen Harm Attorney/ Client 9/14/05 Email - forwarded Glen Harm Colin Webb Attorney/ 9/27/05 Email Colin Webb 7/21/06 Email Scot Holloway Charles Beal and Ryan Massey Ryan Massey and Colin Webb 7/24/06 Email Ryan Massey Scot Holloway Ryan Massey and David McClaughry Scot Holloway and Ryan Massey Scot Holloway and Ryan Massey 8/8/06 Email Scot Holloway 8/8/06 Email David McClaughry 8/9/06 Email David McClaughry -7- 1 2 2 2 3 4 5 6 7 8 9 8/10/06 Email Scot Holloway 8/10/06 Email David McClaughry 10 8/14/06 Email Scot Holloway 10 8/14/06 Email David McClaughry David McClaughry and Ryan Massey Scot Holloway and Ryan Massey David McClaughry and Ryan Massey Scott Holloway and Ryan Massey 11 8/17/06 Email Ryan Massey Scot 12 8/21/06 Email Scot Holloway 12 8/22/06 Email 13 8/23/06 Email David McClaughry David McClaughry Holloway and David McClaughry David McClaughry and Ryan Massey Scot Holloway and Ryan Massey Scot Holloway, Colin Webb, Ryan Massey Attorney/ Client Bartec Tools Attorney/ Client, Work Product Attorney/ Client Attorney/ Client, Work Product Attorney/ Client, Work Product Attorney/ Client Bartec Tools and letter to Garrett Miller Bartec tools Bartec tools Bartec tools and Letter to Garrett Miller Bartec tools Bartec tools Attorney/ Client, Work Product Attorney/ Client, Work Product Conference with Robert Spence -8- 14 8/23/06 Emails Scot Holloway 14 8/23/06 Email David McClaughry 15 8/23/06 Email Scot Holloway Attorney/ Client Conference with Robert Spence Attorney/ Client, Work Product Conference with Robert Spence Attorney/ Client, Work Product Conference with Robert Spence David McClaughry , Colin Webb, Ryan Massey Colin Webb, Scot Holloway, Ryan Massey David McClaughry , Colin Webb, and Ryan Massey 16 17 8/31/06 Email 9/8/06 Email 18 9/8/06 Email Scot Holloway David McClaughry Attorney/ Client David McClaughry David McClaughry Scott Holloway and Ryan Massey Scot Holloway and Ryan Massey 19 9/20/06 Email Ryan Massey Colin Webb 20 9/27/06 Email 21 10/3/06 Email and Scot Holloway Scot Holloway and Ryan Massey Scot Holloway and Ryan Massey David McClaughry David McClaughry -9- Patent indemnity Patent Indemnity Attorney/ Client, Work Product Attorney/ Client, Work Product Patent indemnity Attorney/ Client, Work Product Attorney/ Client, Work Product Inventors for TPM diagnostic tool Patent indemnity Attorney/ Client, Work Product Indemnity Agreement 22 10/5/06 Email David McClaughry Scot Holloway and Ryan Massey Attorney/ Client, Work Product Indemnity agreement 23 No date Notes Ryan Massey Work Product Notes 24 25 26 27 28 3/23/07- 8/3/07 6183- 000005 Harness Dickey 9/20/06- 9/6/07 6183- 000004/P S1 Harness Dickey 8/23/06- 9/20/06 6183- 500002 Harness Dickey 9/22/05- 9/20/06 6183- 000003 Harness Dickey 9/13/05- 9/20/06 6183- 000002 Harness Dickey 29 9/21/05 6183- 000001 Harness Dickey regarding Patent No. 6,904,796 Patent Prosecution Work File Patent Prosecution Work File Invention Disclosure Work File Patent Prosecution Work File Patent Prosecution Work File Patent Prosecution Work File Work Product, Attorney/ Client Work Product, Attorney Client Work Product, Attorney/ Client Work Product, Attorney/ Client Work Product, Attorney/ Client Work Product, Attorney/ Client Notice of Supp. Ex, Ex. 1, Third Amend. Privilege Log. The record discloses that David McClaughry is trial counsel for Bartec, along with attorney Michael P. Doerr. According to information posted by Bartec on the Internet, Scot Holloway is -10- General Manager for Bartec; and Colin Webb is Managing Director for Bartec Auto ID. It is unclear what affiliation Glen Harm had with Bartec, but it appears that he presently works for Dominion Technology Group, Inc. as manager of its Tire Pressure Monitoring Systems Division. Bartec has filed a response in opposition to the renewed motion to compel, standing by its privilege log, and SPX has replied. The Court held a hearing on the matter on December 20, 2007. II. The plaintiff asks the Court for an order “compelling defendant Bartec to produce all of its pre-suit attorney-client communications relating to the ‘796 patent,” as well as certain work product. Br. in Supp. at 1. According to the plaintiff, such materials would include “at least” twenty-five documents listed in the first amended privilege log. Ibid. The plaintiff believes it is entitled to all communications between Ryan Massey and the defendant bearing on the ‘796 patent because it intends to depose Massey and such information will be needed to question him on how he formed the opinions expressed in the February 7, 2006 communication. The plaintiff also contends that every communication that came to or from Ryan Massey after the opinion was given is relevant in the evaluation of whether Mr. Massey should have updated his opinion. In addition, the plaintiff demands “[a]ll documents related to the subject matter of the ‘796 patent,” regardless of whether Massey was the author or recipient, and regardless of whether the memoranda actually were communicated to Bartec. Id. at 6-7. The plaintiff also claims that the defendant has improperly withheld uncommunicated work product. This argument appears to target Massey’s work product, but the boundaries of the request are unclear. The defendant concedes that it is obligated to produce (and in fact has produced) Massey’s February 7, 2006 opinion letter to the client and all other confidential attorney-client -11- communications between Bartec and Massey having the same subject matter as Massey’s February 7, 2006 opinion letter. However, the defendant insists that its waiver of privilege extends only to advice given and opinion counsel’s work product that embodies or discusses an attorney-client communication regarding the possible invalidity, unenforceability, or non-infringement of the ‘796 patent. Therefore, Bartec maintains, it may assert its privileges for confidential attorney-client communications with trial counsel, work product of trial counsel, confidential attorney-client communications with Massey addressing matters different from the February 7, 2006 opinion, and Massey’s work product that fails to discuss a confidential attorney-client communication between him and Bartec, even if the subject matter of such communication is the same as the subject matter of the February 7, 2006 opinion letter. The parties agree on the basic premises that undergird the obligation of Bartec’s attorneys to produce certain otherwise-privileged documents. Bartec, of course, proposes to fend off SPX’s allegations that any infringement was willful by contending it acted reasonably in relying on the advice of counsel that the ‘796 patent was invalid or its activity did not amount to infringement. See Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389-90 (Fed. Cir.1983) (observing that when “a potential infringer has actual notice of another’s patent rights, he has an affirmative duty to exercise due care to determine whether or not he is infringing. Such an affirmative duty includes, inter alia, the duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity”); but see In re Seagate Technology, LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (overruling Underwater Devices to establish that “there is no affirmative obligation to obtain opinion of counsel”). Asserting that defense is tantamount to announcing an intention to make public theretofore confidential communications between lawyer and client, which constitutes -12- a waiver of the privilege. It may waive other privileges as well, such as the work-product privilege. See In re EchoStar Commc’ns. Corp., 448 F.2d 1294, 1299 (Fed. Cir. 2006). It is the extent of that waiver that is presently in dispute. The elements of the attorney-client privilege were summarized decades ago by Dean Wigmore as follows: (1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) unless the protection is waived. 8 Wigmore, Evidence (McNaughton rev. ed. 1961), §2292, p. 554; see also Reed v. Baxter, 134 F.3d 351, 355-56 (6th Cir. 1998). To invoke the work-product doctrine, a party must show that the documents were prepared principally to assist in anticipated or ongoing litigation. See Fed. R. Civ. P. 26(b)(3); In re Powerhouse Licensing, LLC, 441 F.3d 467, 473 (6th Cir. 2006). The law of the Federal Circuit governs when substantive issues such as willful infringement and the scope of waiver accompanying the advice of counsel defense impact discovery issues. Advanced Cardiovascular Sys. v. Medtronic, Inc., 265 F.3d 1294, 1307 (Fed. Cir. 2001). Since the essence of the advice-of-counsel defense is the advice sought and received by the infringer, the Federal Circuit has held that communications by counsel to the infringer concerning the infringement, validity, or enforceability of a patent fall squarely within the scope of the privilege waiver. Documents that memorialize oral communications to the client are discoverable as well. The court explained: [W]hen an alleged infringer asserts its advice-of-counsel defense regarding willful infringement of a particular patent, it waives its immunity for any document or opinion that embodies or discusses a communication to or from it concerning whether that patent is valid, enforceable, and infringed by the accused. This waiver of both the attorney-client privilege and the work-product immunity includes not -13- only any letters, memorandum, conversation, or the like between the attorney and his or her client, but also includes, when appropriate, any documents referencing a communication between attorney and client. In re EchoStar Communications Corp., 448 F.3d 1294, 1304 (Fed. Cir. 2006). However, “counsel’s legal opinions and mental impressions that were not communicated do not acquire such factual characteristics and are, therefore, not within the scope of the waiver.” Ibid. The rationale for that limitation is elementary: “It is what the alleged infringer knew or believed, and by contradistinction not what other items counsel may have prepared but did not communicate to the client, that informs the court of an infringer’s willfulness.” Id. at 1303. Once a waiver is effectuated, all communications on the same subject matter are subject to disclosure and are not protected by the attorney-client privilege. See Fort James Corp. v. Solo Cup Co., 412 F.3d 1340, 1350-51 (Fed. Cir. 2005). “The waiver extends beyond the document initially produced out of concern for fairness, so that a party is prevented from disclosing communications that support its position while simultaneously concealing communications that do not.” Id. at 1349. The same cannot be said for the scope of the waiver of the work-product privilege, especially when opinion counsel and trial counsel are not the same. In In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc), the Federal Circuit “clarif[ied] the scope of the waiver of attorney-client privilege and work product protection that results when an accused patent infringer asserts an advice of counsel defense to a charge of willful infringement.” Id. at 1365. The issue in that case was the extent to which an advice-of-counsel defense impacts a waiver of privileges for communications with, and work product of, trial counsel, which, according to the privilege log, is part of the claim in the present case. The court reasoned that the question of an infringer’s willfulness necessarily focuses on pre-suit activity. Consequently, “communications of trial counsel -14- have little, if any, relevance warranting their disclosure, and this further supports generally shielding trial counsel from the waiver stemming from an advice of counsel defense to willfulness.” Id. at 1374. On the waiver of the attorney-client privilege, the court concluded: In sum, we hold, as a general proposition, that asserting the advice of counsel defense and disclosing opinions of opinion counsel do not constitute waiver of the attorney-client privilege for communications with trial counsel. We do not purport to set out an absolute rule. Instead, trial courts remain free to exercise their discretion in unique circumstances to extend waiver to trial counsel, such as if a party or counsel engages in chicanery. Id. at 1374-75. As to the work-product privilege, the court similarly held: An advice of counsel defense asserted to refute a charge of willful infringement may also implicate waiver of work product protection. Again, we are here confronted with whether this waiver extends to trial counsel’s work product. We hold that it does not, absent exceptional circumstances. Id. at 1375. Based on these precedents, it is apparent that the demands of SPX for all documents in the possession of Bartec’s attorneys is overbroad. Plainly, uncommunicated work product that does not memorialize a conversation between lawyer and client does not fall within the scope of a waiver recognized by the Federal Circuit and remains protected by the work-product privilege. In addition, communications with trial counsel that post-date the filing of the lawsuit – which in this case is October 30, 2006 – most likely have little bearing on the question of willfulness or Bartec’s reliance upon counsel’s advice to shape its accused pre-suit conduct. Furthermore, confidential communications that do not relate to the invalidity, unenforceability, or non-infringement of the ‘796 patent remain privileged. However, it is impossible to determine from the privilege log submitted by Bartec in this case whether any of the documents not produced fall within the protected categories. -15- Rule 26(b)(5) of the Federal Rules of Civil Procedure requires a party withholding information on the basis of a privilege to provide sufficient information to enable evaluation of that claim. The Rule states: When a party withholds information otherwise discoverable under these rules by claiming that it is privileged or subject to protection as trial-preparation material, the party shall make the claim expressly and shall describe the nature of the documents, communications, or things not produced or disclosed in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the applicability of the privilege or protection. Fed. R. Civ. P. 26(b)(5). The burden of establishing the existence of a privilege rests with the party asserting it. United States v. Dakota, 197 F.3d 821, 825 (6th Cir. 2000). To meet the dictates of Rule 26(b)(5), a privilege log is customarily provided. See United States v. Construction Products Research, Inc., 73 F.3d 464, 473 (2d Cir. 1996). According to the Second Circuit, the privilege log should identify each document and the individuals who were parties to the communications, providing sufficient detail to permit a judgment as to whether the document is at least potentially protected from disclosure. Other required information, such as the relationship between . . . individuals not normally within the privileged relationship, is then typically supplied by affidavit or deposition testimony. Even under this approach, however, if the party invoking the privilege does not provide sufficient detail to demonstrate fulfillment of all the legal requirements for application of the privilege, his claim will be rejected. Ibid. (internal quotes omitted). As noted earlier, the parties agree that “[o]nce a party announces that it will rely on advice of counsel . . . in response to an assertion of willful infringement, the attorney-client privilege is waived,” EchoStar, 448 F.3d at 1299, and that when the attorney-client privileged is waived as to one communication, “the waiver applies to all other communications relating to the same subject matter,” Fort James, 412 F.3d at 1349. Bartec has failed to sustain its burden of demonstrating that -16- the withheld documents fall outside its acknowledged waiver, and therefore it has not established that either privilege applies to the documents. According to the privilege log, even the communications with trial counsel occurred before the lawsuit was filed, so they are not presumptively beyond the scope of relevancy identified by the Seagate court. There is not even a notation suggesting that some or all of the documents were not communicated to the client. At the time of the motion hearing, Bartec submitted its third iteration of its privilege log (set forth above). Like its predecessors, it is woefully lacking in the detail necessary for Bartec to sustain its claims of privilege. As noted above,“when an alleged infringer asserts its advice-of- counsel defense regarding willful infringement of a particular patent, it waives its immunity for any document or opinion that embodies or discusses a communication to or from it concerning whether that patent is valid, enforceable, and infringed by the accused.” Echostar, 448 F.3d at 1304 (emphasis added). The Court cannot determine from Bartec’s submissions that the withheld documents concern anything other than that. Therefore, the Court cannot sustain Bartec’s claim of privilege. III. Because the Court cannot discern from the privilege log that any of the withheld documents are beyond the scope of the privilege waivers recognized by the Federal Circuit, despite Bartec’s repeated submission of the various versions of those logs, the Court concludes that Bartec has failed to sustain the burden of demonstrating that any valid privilege applies to the discovery sought by the plaintiff. Accordingly, it is ORDERED that the plaintiff’s motion to compel production of documents [dkt #s 54 and 107] is GRANTED. -17- It is further ORDERED that the defendants produce the withheld documents on or before January 9, 2008. Dated: January 2, 2008 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 2, 2008. s/Felicia M. Moses FELICIA M. MOSES -18-

=== Chesterfield Opinion Striking Jury Demand ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 07-12254 Honorable David M. Lawson CHESTERFIELD EXCHANGE, LLC, Plaintiff and counter-defendant, v. SPORTSMAN’S WAREHOUSE, INC., Defendant, counter-plaintiff, and third-party plaintiff, v. DEVELOPERS DIVERSIFIED REALTY CORP., Third-party defendant. _____________________________________________/ OPINION AND ORDER GRANTING PLAINTIFF’S MOTION TO STRIKE JURY DEMAND The question presented by the plaintiff’s motion to strike a jury demand filed by the defendant, Sportsman’s Warehouse, Inc., is whether a lease provision waiving a jury trial is vitiated by Sportsman’s allegations that it was fraudulently induced to enter the lease, despite the absence of any allegations that the jury trial waiver provision itself was induced by fraudulent representations. The parties argued their positions in their briefs and at oral argument held on December 13, 2007. Although there is no Sixth Circuit precedent on point, the Court believes that the Sixth Circuit would follow the lead of two other Circuits that have addressed the issue and would hold that, as with contractual arbitration clauses, a claim that a contract is void as induced by fraud is not sufficient to invalidate a jury waiver contained therein where the alleged fraud does not relate to the jury waiver provision itself. Therefore, the Court will grant the plaintiff’s motion and strike the jury demand. I. According to the pleadings, Sportsman’s is a nationwide “big box” retailer of hunting, fishing, and camping gear, with over sixty stores across the country. In mid-2004, Chesterfield Exchange, LLC caused its agent, Developers Diversified Realty Corporation, to contact Sportsman’s and solicit its agreement to lease retail space in Chesterfield, Michigan. The proposed site was in a new retail plaza known as “Chesterfield Marketplace,” which Chesterfield represented would house a Wal-Mart store (later to be expanded into a Super Wal-Mart) and two other “big box” retailers. Although Sportsman’s was to operate the store, Chesterfield would construct the physical premises. For slightly over a year, Chesterfield and Sportsman’s tried to negotiate an agreement, but the process was complicated by a number of issues. Ultimately, Sportsman’s decided to abandon the negotiations. However, on January 24, 2006, Diversified’s vice-president called Sportsman’s CEO and informed him that Sam’s Club had agreed to be a tenant. This information apparently rekindled Sportsman’s interest in the site. However, Sam’s Club wanted the space that originally had been offered to Sportsman’s, and Diversified told Sportsman’s that it would have to accept a new location in the shopping center and change its building design. Sportsman’s agreed. On July 11, 2006, Sportsman’s and Chesterfield executed a lease. The lease term was to run for fifteen years following the opening of the store, with Sportsman’s to retain the option to renew for twenty additional years. The rent was to be based on the square footage of the store, which, as construction had not yet begun, was still to be determined. The agreement specified that -2- Chesterfield would be responsible for building the “pad” and constructing the building, and Sportsman’s would be responsible for retaining an architect. Among several other legal provisions, the lease contained a waiver of the right to a trial by jury. It reads as follows: 43. Waiver of Jury Trial. Landlord and Tenant waive trial by jury in any action brought by either of them against the other on all matters arising out of this Lease or the use and occupancy of the Premises. Compl., Ex. A, Lease at ¶ 43. On March 15, 2007, Sportsman’s CEO called Diversified to inquire as to the progress on the construction of the Sam’s Club and the expansion of Wal-Mart to a Super Wal-Mart. For the first time, Diversified informed Sportsman’s that a Sam’s Club would not be built and the Wal-Mart store would not be expanded. According to Sportsman’s, Chesterfield and Diversified knew before Sportsman’s executed the lease that Sam’s Club would not be building at the plaza and that Wal- Mart would not be expanding. On March 16, 2007, Sportsman’s notified Chesterfield in writing of its intention not to perform its obligations under the lease. Following its demand to Sportsman’s for performance, Chesterfield commenced the present action for breach of contract in the Macomb County, Michigan circuit court on April 25, 2007. Sportsman’s removed the case to this Court. .According to Chesterfield, it performed all of its obligations under the lease prior to Sportsman’s repudiation, and it asserts claims for breach of contract seeking (1) specific performance, (2) damages, and (3) a declaratory judgment. Based on its belief that the agreement was induced by fraud, Sportsman’s has filed a counterclaim against Chesterfield and a third-party complaint against Diversified. Its fraud allegations are as follows: -3- 12. Chesterfield, personally and through its agent [Diversified], made oral and written representations to Sportsman’s regarding Sam’s Club and Super Wal- Mart as alleged above. 13. 14. 15. 16. 17. 18. 19. Those oral and written representations were false as described above. The oral and written representations made by Chesterfield and [Diversified] as alleged herein have to do with past or present material facts that were susceptible of knowledge. Chesterfield and [Diversified] made the oral and written representations knowing them to be false and with intent to deceive and defraud Sportsman’s and to induce Sportsman’s to enter the Lease. Chesterfield and [Diversified] failed to correct their oral and written misrepresentations with intent to deceive and defraud Sportsman’s and to induce Sportsman’s to enter the Lease. Sportsman’s, justifiably believing the oral and written representations to be true and in reliance thereon, was induced to enter the Lease. Sportsman’s would not have entered into the Lease and would not have incurred more than $100,000.00 in costs attendant to the re-design of its proposed building from an “end entry” building to a “side entry” building if it had known the truth of the misrepresented facts recited above. As a direct and proximate result of the oral and written fraudulent misrepresentations made by Chesterfield and [Diversified], Sportsman’s has suffered damages in an amount to be determined at trial in excess of $75,000.00. Counterclaim and Third-Party Compl. at ¶¶ 12-19. Sportsman’s claims for negligent misrepresentation and recision proceed along the same basic theory. There are no allegations that Chesterfield fraudulently induced Sportsman’s to agree to waive a jury trial. Chesterfield did not demand a jury trial, but Sportsman’s did. Chesterfield moved to strike the jury demand on September 27, 2007. -4- II. The right to a jury trial in civil cases is guaranteed by the Seventh Amendment. Although this case is before the Court on diversity jurisdiction, the question of one’s right to a jury trial, even where that right has been addressed through a contractual provision, is governed by federal law, not state law. K.M.C. Co., Inc. v. Irving Trust Co., 757 F.2d 752, 755 (6th Cir. 1985). As the Sixth Circuit has explained, “the constitutional right to jury trial may only be waived if done knowingly, voluntarily and intentionally” and “whether this standard [has been] met in a given case is a constitutional question separate and distinct from the operation of substantive rules of contract law.” Id. at 755-56. However, although another Circuit has held otherwise, see Leasing Serv. Corp. v. Crane, 804 F.2d 828, 833 (4th Cir. 1986), “in the context of an express contractual [jury] waiver the objecting party should have the burden of demonstrating that its consent to the provisions was not knowing and voluntary,” K.M.C., 757 F.2d at 758. Sportsman’s insists that it has meet its burden through its allegations that it was fraudulently induced to enter the lease by Chesterfield’s knowing misrepresentations about Sam’s Club’s intentions to take a place at the shopping center. Sportsman’s reasons that since Chesterfield’s fraud voids the lease in its entirety, the jury trial waiver language contained therein cannot survive, and it should not be bound by it. Recognizing that the fraud allegations do not stand proven at this point in the proceedings, Sportsman’s proposes that the case ought to be allowed to proceed to trial with a jury deciding the fraudulent-inducement claim, and if the jury determines that the lease was not procured by fraud, the Court can decide all remaining issues. Chesterfield states that Sportsman’s allegations are not sufficient even to support the novel procedural approach Sportsman’s proposes because there is no allegation that the jury trial waiver -5- provision was procured by fraud. It points to Telum, Inc. v. E.F. Hutton Credit Corp., 859 F.2d 835 (10th Cir. 1988), and Merrill Lynch & Co. v. Allegheny Energy, Inc., 500 F.3d 171 (2d Cir. 2007), in support of that argument. In Telum, the plaintiff contended that it was fraudulently induced to enter a lease of an oil drilling rig based on a misrepresentation that the rig was finished and ready for use when in fact it was not. The trial court refused to enforce the jury waiver provision in the lease, and the defendant appealed the jury verdict for the plaintiff. When the court of appeals addressed the argument that the plaintiff’s broad claim of fraud vitiated the jury waiver provision, the court analogized to the cases challenging contractual arbitration clauses on the same basis, particularly Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04 (1967), in which the Supreme Court held that “if the claim is fraud in the inducement of the arbitration clause itself – an issue which goes to the ‘making’ of the agreement to arbitrate – the federal court may proceed to adjudicate it. But the statutory language does not permit the federal court to consider claims of fraud in the inducement of the contract generally.” Id. at 403-04 (footnote omitted). The Telum court answered the argument that the analogy to the arbitration cases is imperfect because of the fundamental nature of the right to a jury trial (an argument also made by Sportsman’s in the present case), stating, “This analogy is especially appropriate here because submission of a case to arbitration involves a greater compromise of procedural protections than does the waiver of the right to trial by jury.” Telum, 859 F.2d at 838. The court ultimately held “that the trial judge erred in ruling that general allegations of fraud are sufficient to invalidate a jury waiver provision.” Ibid. Sportsman’s criticizes Telum’s reliance on the contractual arbitration clause case analogy because of the national policy that favors arbitration as reflected in the Federal Arbitration Act, -6- whereas a policy that actually favors jury trials is embodied in the Seventh Amendment. The Telum court dismissed that argument as follows: Although this result was based on language found in § 4 of the United States Arbitration Act of 1925, the Court noted that “the purpose of Congress in 1925 was to make arbitration agreements as enforceable as other contracts, but not more so.” Prima Paint Co. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967). Thus, according to the Court, to make enforceability of arbitration clauses consistent with other contracts, arbitration could be suspended if fraud were specifically alleged to have induced the making of the arbitration agreement. Id. at 837 n.1. The Second Circuit recently followed Telum in Merrill Lynch & Co., Inc. v. Allegheny Energy, Inc., 500 F.3d 171, 188 (2d Cir. 2007) (“We join the Tenth Circuit in holding that unless a party alleges that its agreement to waive its right to a jury trial was itself induced by fraud, the party’s contractual waiver is enforceable vis-à-vis an allegation of fraudulent inducement relating to the contract as a whole.”). The court acknowledged that there is a presumption favoring trial by jury, although it recognized that the right can be waived if the waiver is knowing, intentional, and voluntary. In using the contractual arbitration clause cases as a template for contractual jury trial waivers, the court reconciled the conflict between the presumption against jury waiver and the presumption in favor of arbitration as follows: Telum drew an analogy to the arbitration context, in which the Supreme Court has held that an agreement to arbitrate is effective with respect to claims of fraudulent inducement that relate to the contract generally, but not to the agreement to arbitrate specifically. . . . Although we do not disagree with appellant that the arbitration cases rely on a federal statutory scheme favoring arbitrability that runs contrary to the presumption against waiver applicable here, we think the analogy persuasive as a matter of logic. A promise to bring proceedings before a judge, not a jury, is akin to an agreement to arbitrate in that both express the parties’ consent as to how to handle differences that may arise. Indeed, arbitration represents a more dramatic departure from the judicial forum than does a bench trial from a jury trial. . . . If one litigant alleges that -7- an agreement’s dispute resolution provision itself was procured by fraud, the fairest course is to afford that litigant the protections he would have enjoyed had he never been fraudulently induced to forsake them by contract. If, on the contrary, the litigant does not challenge the provision as being the product of fraud, we see no reason to replace the agreed upon mode of dispute resolution with another. Id. at 188 (citations omitted). This Court is persuaded that the Sixth Circuit would follow this line of thinking when dealing with broad fraud allegations against contracts that contain jury trial waivers. First, the court has held unequivocally that a contract action asserting fraud in the inducement is not sufficient to implicate an arbitration clause where there is no claim of fraud specifically relating to that clause. Highlands Wellmont Health Network, Inc. v. John Deere Health Plan, Inc., 350 F.3d 568, 575-76 (6th Cir. 2003). Second, in the case of parties with equal bargaining power, the court has not hesitated to find that an agreement to waive a jury trial can satisfy the requirement that constitutional rights can be waived if the waiver is knowingly, intelligently, and voluntarily made. K.M.C., 757 F.2d at 756 (holding that “the Magistrate was correct in applying the knowing and voluntary standard in this instance”). Third, the court has relied on the rationale of K.M.C. in its decisions holding that the validity of a waiver of trial rights must be measured against the knowing and voluntary standard. See, e.g., Walker v. Ryan’s Family Steak Houses, Inc., 400 F.3d 370, 381 (6th Cir. 2005) (where the court looked to K.M.C. to support its conclusion that the “knowing and voluntary standard” applied in evaluating the validity of arbitration clauses). Fourth, the court has held that other clauses that are severable from a contract challenged on the ground of fraud in the inducement can remain valid, provided that there is no “well-founded claim of fraud in the inducement of the clause itself, standing apart from the whole agreement.” Moses v. Business Card Exp., Inc. 929 F.2d 1131, 1138 (6th Cir. 1991) (addressing a forum selection clause). -8- This Court concludes, therefore, that business entities of equal bargaining power that enter into written agreements that contain jury trial waiver provisions knowingly and voluntarily waive their right to a jury trial under the Seventh Amendment absent exceptional circumstances. Although such a waiver may be attacked on the ground of fraud, the fraud allegation must be well-founded and state that the inclusion of that particular clause in the contract was the product of fraud or coercion. Sportsman’s has cited cases from the New York state courts that suggest a procedure for dealing with cases in which a jury may decide the fraudulent-inducement claim and then, if it is determined that the lease was not procured by fraud, the Court would decide all remaining issues. See Bank of New York v. Royal Athletic Industries, Ltd., 637 N.Y.S.2d 478, 479 (N.Y. App. Div. 1996); Federal Housecraft, Inc. v. Faria, 216 N.Y.S.2d 113, 114 (N.Y. App. Div. 1961 . After reviewing these cases, the Court must reject their rationale because of controlling federal authority dealing with jury trial waivers, their failure to recognize that an agreement as to the mode of resolving a controversy may be completely unaffected by a general claim of fraud in the inducement, and the fact that an allegation of fraud in the inducement should not be treated as proof of such fraud. That appears to be the reasons that the Southern District of New York recently declined to follow their rationale. See Russell Stanley Holdings, Inc. v. Buonanno, 327 F. Supp. 2d 252, 257 (S.D.N.Y. 2002). That is not to say that the procedure may merit consideration if a party presents a well-founded claim that the jury trial waiver clause itself was procured by fraud. However, that is not the case here. The Court finds that Sportsman’s knowingly, intelligently, and voluntarily waived the right to have a jury resolve its disputes relating to the lease with Chesterfield. Sportsman’s has not -9- alleged that this waiver was procured by fraud. Therefore, the Court finds that the parties must be bound by their agreement to keep their disputes from a group of fellow citizens and instead submit them to the Court to resolve. Sportsman’s jury demand contravenes that agreement. Therefore it must be stricken. III. The Court concludes that the jury trial waiver contained in the disputed lease must be enforced. Accordingly, it is ORDERED that the motion to strike the jury demand by plaintiff Chesterfield Exchange, LLC [dkt # 22] is GRANTED and the jury demand is STRICKEN. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: December 18, 2007 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 18, 2007. s/Felicia M. Moses FELICIA M. MOSES -10-

=== Thoroughbred Opinion Denying Motion for Attorney's Fees ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION THOROUGHBRED SOFTWARE INTERNATIONAL, INC., Plaintiff, v. DICE CORPORATION, CLIFFORD V. DICE, FRED WAGER, and JOHN DOES 1-10, ______________________________________/ Defendants. Case Number 03-CV-10259 Honorable David M. Lawson OPINION AND ORDER DENYING MOTION FOR ATTORNEY’S FEES This copyright dispute was tried to the Court without a jury in 2006. The Court filed an opinion finding for the plaintiff on part of its claims and awarding damages in a significantly smaller amount than sought. On the issue of attorney’s fees, the Court held: “The Court finds that no party except Fred Wager has prevailed in full in this case, so the award of attorney fees is inappropriate.” Thoroughbred Software Intern., Inc. v. Dice Corp., 439 F. Supp. 2d 758, 773 (E.D. Mich. 2006). On appeal, the Sixth Circuit affirmed the finding of liability, reversed the damage award and remanded for entry of a judgment for additional damages, and reversed the denial of attorney’s fees and remanded. As to the attorney’s fee issue, the court stated: Contrary to relevant precedent, the district court required a party to prevail “in full” in order to constitute the “prevailing party.” We therefore find that the district court erred in this determination. Furthermore, Thoroughbred has now fully prevailed on its claim for actual damages . . . . The fact that Thoroughbred did not succeed on its claim for profits does not preclude it from being the prevailing party. However, our finding that the district court erroneously failed to find that Thoroughbred was the prevailing party does not automatically entitle Thoroughbred to an award for attorney’s fees. . . . As the district court did not find that any party besides Wager had prevailed, it neglected to discuss the discretionary factors as to Thoroughbred. Therefore, we vacate the district court’s denial of attorney’s fees and remand for a determination of whether Thoroughbred, as the prevailing party, is entitled to an award for attorney's fees. Thoroughbred Software Intern., Inc. v. Dice Corp., 488 F.3d 352, 362 (6th Cir. 2007). This Court entered an corrected amended judgment pursuant to the mandate on August 9, 2007. Thoroughbred filed a motion for attorney’s fees on October 4, 2007, requesting $80,459.10 in attorney’s fees and $9,408.55 in costs paid to primary counsel, Lindsey Taylor of Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein of New Jersey. The plaintiff also requests $14,542.00 in attorney’s fees and $705.78 in costs paid to local counsel Beadle Smith, for a total fee request of $95,001.10 in attorney’s fees and $10,114.26 in disbursements. Although the motion for attorney’s fees is out of time under Federal Rule of Civil Procedure 54(d)(2)(B)(1) (stating that such a motion must “be filed no later than 14 days after the entry of judgment”), this Court will consider the motion because of the command stated in the court of appeals’ mandate. Moreover, the mandate instructed the Court to consider attorney’s fees as to Thoroughbred only, despite the fact that attorney’s fees also were denied to defendant Fred Wager. Therefore, the Court will not reconsider an award of attorney’s fees to Mr. Wager because of the terms of the mandate and because Mr. Wager has not asked for such reconsideration. Section 505 of the Copyright Act of 1976 states: In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs. 17 U.S.C. § 505. In this case, the court of appeals found that Thoroughbred is the prevailing party, and for the purpose of the present motion, the defendants agree. Therefore, the Court will proceed to evaluate the claim for attorney’s fees using the factors set down in the controlling cases. -2- The court of appeals has held that “[t]he discretion to grant attorney fees in copyright infringement cases is to be exercised in an evenhanded manner with respect to prevailing plaintiffs and prevailing defendants, and in a manner consistent with the primary purposes of the Copyright Act.” Bridgeport Music v. Diamond Time, 371 F.3d 883, 893 (6th Cir. 2004). The panel in this case noted that “[i]n copyright infringement cases, attorney’s fees are not awarded automatically. . . . However, they are awarded routinely.” Thoroughbred, 488 F.3d at 362 (citation omitted). The Supreme Court has approved a non-exclusive list of factors for trial courts to consider in exercising discretion under Section 505, which includes “frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Fogerty v. Fantasy, Inc., 510 U.S. 517, 534, n.19 (1994). The Sixth Circuit adopted that four-factor test in Coles v. Wonder, 283 F.3d 798, 804 (6th Cir. 2002). Additional considerations include: the primary objective of the Copyright Act to “encourage the production of original literary, artistic, and musical expression for the good of the public”; the fact that defendants as well as plaintiffs may hold copyrights and run the “gamut” from large corporations to “starving artists”; the need to encourage “defendants who seek to advance a variety of meritorious copyright defenses . . . to litigate them to the same extent that plaintiffs are encouraged to litigate meritorious claims of infringement”; and the fact that “a successful defense of a copyright infringement action may further the policies of the Copyright Act every bit as much as a successful prosecution of an infringement claim by the holder of a copyright.” Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792, 807 n.23 (6th Cir. 2005) (citing Fogerty, 510 U.S. at 524, 527). Although attorney fees are awarded to prevailing parties in copyright cases routinely, the Sixth Circuit has held that when the plaintiff’s claims were “colorable, albeit meritless,” a district court should not award attorney’s fees. Murray Hill Publications, Inc. v. ABC Communications, Inc., 264 F.3d 622, 640 (6th Cir. 2001); see also Fogerty v. MGM Group Holdings Corp., Inc., 379 -3- F.3d 348, 357 (6th Cir. 2004); Matthew Bender & Co., Inc. v. West Pub. Co., 240 F.3d 116, 122 (2d Cir. 2001) (observing that “the imposition of a fee award against a copyright holder with an objectively reasonable litigation position will generally not promote the purposes of the Copyright Act.”). The Court believes that the defendants’ position at trial was not frivolous and was objectively reasonable. The defendants’ position largely was adopted by this Court, and the Sixth Circuit’s disagreement was expressed through a published opinion, suggesting that it was a significant statement of law. Nor do the other factors favor an award of attorney’s fees here. The defendants did not act with an improper motivation. As the Court found at trial, the defendants copied the constituent elements of the software on customers’ computers but did not activate any modules for which they had no licenses. They acted in a way that was convenient to them, but they did not profit – nor did they intend to profit – from their activity. The defendants testified without contradiction that they wrote their own software to ensure that their end-user customers could not access the copied-but-dormant modules. When a customer desired an additional feature, the defendants would purchase a license from the plaintiff and then activate the module. Although the Court found that the defendants’ activity violated the Copyright Act, the defendants’ motivation was not predatory, larcenous, or avaricious. There is no need to further compensate the plaintiff. In fact, the damages now awarded could be considered a “windfall,” because the defendants had no use for the plaintiff’s software in most of the infringing instances. As noted earlier, although the defendants “stored” the infringing software on their customers’ computers, they took affirmative steps to ensure that the customers had no access to it. Although copying occurred, the plaintiffs lost nothing as a result and the defendants gained nothing. See Alexander v. Chesapeake, Potomac, and Tidewater Books, Inc., 60 F. Supp. 2d -4- 544, 551 (E.D. Va. 1999) (declining to award fees, and noting that “[t]he damages award adequately compensates Alexander for his loss due to the defendants’ copyright violation.”), aff’d, 2 Fed. Appx. 298 (4th Cir. 2001). Nor do the defendants need to be further deterred. They did not profit from their infringing activities. The facts of this case do not suggest that the defendants took a risk by violating the copyright law with a large potential return looming if they were able to avoid detection. If that were the case, there would be some force to the plaintiff’s argument that a forced payment of the licensing fee (which would have been due all along), once caught, is insufficient deterrence. Rather, the defendants’ pay-as-you-go approach reflects respect for the plaintiff’s property rights despite the technical violation of the Act. Declining to award attorney’s fees in this case is not inconsistent with the primary objective of the Copyright Act, which is to “encourage the production of original literary, artistic, and musical expression for the good of the public.” Fogerty, 510 U.S. at 524. Thoroughbred was fully compensated for the violations, and those damages should be sufficient to encourage the company to stretch its imagination and provoke its originality. The defendant has paid a substantial penalty for its transgressions, and the justice of the cause requires no additional tribute to be extracted from them. Accordingly, it is ORDERED that the plaintiff’s motion for attorney’s fees [dkt #53] is DENIED. Dated: December 19, 2007 s/David M. Lawson DAVID M. LAWSON United States District Judge -5- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 19, 2007. s/Felicia M. Moses FELICIA M. MOSES -6-

=== Long Opinion Granting Habeas Corpus ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION LAZZERICK ANTOINE LONG, Petitioner, Civil No. 04-10326 Honorable David M. Lawson v. TOM BELL, _______________________________/ Respondent. OPINION AND ORDER CONDITIONALLY GRANTING PETITION FOR WRIT OF HABEAS CORPUS The issue presented by the petition for writ of habeas corpus in this case is whether the Supreme Court’s decision in Halbert v. Michigan, 545 U.S. 605 (2005), declaring unconstitutional Michigan’s practice of denying counsel to plea-convicted indigent criminal defendants in their first- tier appeals should apply to the petitioner, who requested and was denied appellate counsel before Halbert was decided. The issue of the extent of Halbert’s application presently is under consideration by the Sixth Circuit in en banc review. This Court concludes that Halbert did not announce a new rule of law, and even if it did, the rule should be applied retroactively according to Teague v. Lane, 489 U.S. 288 (1989). Therefore, the Court will conditionally grant the petition for a writ of habeas corpus and direct the State of Michigan either to appoint counsel to assist the petitioner in his pursuit of leave to appeal his convictions or release him from custody. I. The facts of the case are not complicated. Petitioner Lazzerick Antoine Long was charged with armed robbery, first-degree home invasion, and two counts of possession of a firearm during the commission of a felony for his participation in a crime that occurred on January 8, 2003. On January 17, 2003, he pleaded guilty to the armed robbery charge in the Berrien County, Michigan circuit court. In exchange for his guilty plea, the prosecutor dismissed the remaining charges. He was sentenced on February 10, 2003 to ten years, six months to twenty years imprisonment. The petitioner states that he submitted a request for counsel to appeal his sentence immediately after sentencing by completing the “Concerning Right to Appeal after Plea of Guilty” form. He states that the request was never addressed. The petitioner next submitted another request for appointed appellate counsel on July 10, 2003. That request was denied in a letter from the Honorable Casper O. Grathwohl, the sentencing judge, on July 25, 2003. The petitioner filed yet another request for appointed appellate counsel on July 15, 2003, following the Sixth Circuit’s decision in Tesmer v. Granholm, 333 F.3d 683 (6th Cir. 2003) (en banc) (holding that the Michigan statute denying appointed counsel for first-level applications of leave to appeal from plea-based conviction was unconstitutional). The trial court again denied appointment of counsel, this time in a formal order. People v. Long, No. 03-400146-FC (Berrien County Circuit Court Sept. 9, 2003). On November 26, 2003, the petitioner filed a pro se application for leave to appeal in the Michigan Court of Appeals, raising the following claims: (1) the trial court incorrectly scored his offense variables and departed from the sentencing guidelines without complying with the departure requirements; and (2) the failure to appoint appellate counsel violated the United States Constitution. The Michigan Court of Appeals denied leave to appeal on February 11, 2004. People v. Long, No. 252388 (Mich. Ct. App. Feb. 11, 2004). The petitioner thereafter filed an application for leave to appeal in the Michigan Supreme Court raising the same claims raised in the Michigan Court of Appeals. The Michigan Supreme Court denied leave to appeal on May 28, 2004. People v. Long, 470 Mich. 868, 680 N.W.2d 898 (May 28, 2004) (Table). -2- Following the Michigan Supreme Court’s decision, the petitioner filed the present petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 on November 23, 2004 raising the same claims presented to the state courts. The petitioner presently is confined at the Gus Harrison Correctional Facility in Adrian, Michigan. The respondent has filed an answer to the petition, and the matter is now ready for decision. II. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the standard of review federal courts must apply when considering applications for a writ of habeas corpus raising constitutional claims, including claims of ineffective assistance of counsel. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) imposes the following standard of review for habeas cases: An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim – (1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or (2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding. 28 U.S.C. § 2254(d). Therefore, federal courts are bound by a state court’s adjudication of a petitioner’s claims unless the state court’s decision was contrary to or involved an unreasonable application of clearly established federal law. Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Mere error by the state court will not justify issuance of the writ; rather, the state court’s -3- application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) ( internal quotes omitted . Additionally, this Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). The Supreme Court has explained the proper application of the “contrary to” clause as follows: A state-court decision will certainly be contrary to [the Supreme Court’s] clearly established precedent if the state court applies a rule that contradicts the governing law set forth in our cases. . . . A state-court decision will also be contrary to this Court’s clearly established precedent if the state court confronts a set of facts that are materially indistinguishable from a decision of this Court and nevertheless arrives at a result different from [the Court’s] precedent. Williams, 529 U.S. at 405-06. The Supreme Court has held that a federal court should analyze a claim for habeas corpus relief under the “unreasonable application” clause of § 2254(d)(1) “when a state-court decision unreasonably applies the law of this Court to the facts of a prisoner’s case.” Id. at 409. The Court defined “unreasonable application” as follows: [A] federal habeas court making the “unreasonable application” inquiry should ask whether the state court’s application of clearly established federal law was objectively unreasonable. . . . -4- [A]n unreasonable application of federal law is different from an incorrect application of federal law. . . . Under § 2254(d)(1)’s “unreasonable application” clause, then, a federal habeas court may not issue the writ simply because that court concludes in its independent judgment that the relevant state-court decision applied clearly established federal law erroneously or incorrectly. Rather, that application must also be unreasonable. Id. at 409, 410-11. See also Davis v. Coyle, 475 F.3d 761, 766 (6th Cir. 2007); King v. Bobby, 433 F.3d 483, 489 (6th Cir. 2006); Harbison v. Bell, 408 F.3d 823, 828-29 (6th Cir. 2005); Rockwell v. Yukins, 341 F.3d 507, 512 (6th Cir. 2003) (en banc). A. In 1994, the Michigan constitution was amended to provide that “an appeal by an accused who pleads guilty or nolo contendere shall be by leave of the court.” Mich. Const., Art. 1, § 20. Thereafter, “several Michigan state judges began to deny appointed appellate counsel to indigents” convicted by plea. Kowalski v. Tesmer, , 128 (2004). The Michigan legislature codified this practice in 2000. Mich. Comp. Laws § 770.3a (West 2000). The Michigan Supreme Court upheld the practice of denying plea-convicted indigent defendants appointed counsel on appeal in People v. Harris, 470 Mich. 882, 882 (2004), and People v. Bulger, 462 Mich. 495, 511 (2000). In 2002, the Sixth Circuit addressed the validity of section 770.3a in Tesmer v. Granholm, 295 F.3d 536 (6th Cir. 2002) (panel decision). Although the initial panel held that the statute was constitutional, that decision was overturned on rehearing en banc. Tesmer v. Granholm, 333 F.3d 683, 701 (6th Cir. 2003) (en banc). Thereafter, this Court held that People v. Bulger, which approved Michigan’s practice of denying counsel on appeal to indigent plea-convicted defendants, was an unreasonable application of Douglas v. California, 372 U.S. 353 (1963), because Michigan’s -5- practice as codified in the statute violated the Equal Protection Clause. Bulger v. Curtis, 328 F. Supp. 2d 692 (E.D. Mich. 2004). Although the en banc Tesmer decision was reversed on procedural grounds, Kowalski v. Tesmer, (2004) (holding that the plaintiffs did not have standing to bring suit), the Supreme Court addressed the merits of Michigan’s practice shortly thereafter in Halbert v. Michigan, 545 U.S. 605 (2005). Agreeing with the substance of the Sixth Circuit’s en banc Tesmer decision, the Supreme Court held that the “Due Process and Equal Protection Clauses require the appointment of counsel for defendants, convicted on their pleas, who seek access to first-tier review in the Michigan Court of Appeals.” Id. at 610. Based on Halbert, the petitioner argues that since he was denied appointed appellate counsel on his first-tier review, his rights under the Due Process and Equal Protection Clauses were violated. The respondent concedes that if Halbert is applied retroactively, the petitioner is entitled to habeas relief. However, the respondent argues that the Halbert decision does not apply retroactively to cases on habeas review. The determination of the retroactivity of a Supreme Court decision is governed by Teague v. Lane, 489 U.S. 288 (1989), which, as the Court later explained, sets forth a three-step inquiry: First, the date on which the defendant’s conviction became final is determined. Lambrix v. Singletary, , 527 (1997). Next, the habeas corpus court considers whether “‘a state court considering [the defendant’s] claim at the time his conviction became final would have felt compelled by existing precedent to conclude that the rule [he] seeks was required by the Constitution.” Ibid., (quoting Saffle v. Parks, 494 U.S. 484, 488 (1990 (alterations in Lambrix). If not, then the rule is new. If the rule is determined to be new, the final step in the Teague analysis requires the court to determine whether the rule nonetheless falls within one of the two narrow exceptions to the Teague doctrine. . . . The first, limited exception is for new rules “forbidding criminal punishment of certain primary conduct [and] rules prohibiting a certain category of punishment for a class of defendants because of their status or offense.” Penry v. Lynaugh, 492 U.S. 302, 330 (1989). The second, -6- even more circumscribed, exception permits retroactive application of “watershed rules of criminal procedure implicating the fundamental fairness and accuracy of the criminal proceeding.” Graham, 506 U.S. 461, 478 (1993). O’Dell v. Netherland, 521 U.S. 151, 156-57 (1997). The first step of the inquiry is easily resolved in this case. State convictions are final “for purposes of retroactivity analysis when the availability of direct appeal to the state courts has been exhausted and the time for filing a petition for a writ of certiorari has elapsed or a timely filed petition has been finally denied.” Caspari v. Bohlen, 510 U.S. 383, 390 (1994). The petitioner’s conviction became final on August 27, 2004, when the time for filing a timely petition for a writ of certiorari to the United States Supreme Court expired. The petitioner’s conviction was final before Halbert was decided in 2005. Next, the Court must assess whether the rule announced in Halbert was new or, on the other hand, “whether the rule later announced in [Halbert] was dictated by then-existing precedent.” Lambrix v. Singletary, , 527-28 (1997) (emphasis in original). This Court already has determined that the failure to appoint counsel for a first-tier appeal to indigent plea-convicted state defendants was unconstitutional under precedent that pre-dated Halbert, and the state supreme court’s contrary conclusion was an unreasonable application of Douglas v. California, 372 U.S. 353 (1963). Bulger, 328 F. Supp. 2d at 700-03. An examination of the Supreme Court’s rationale in Halbert fortifies that decision. In Halbert, the petitioner, who pleaded nolo contendere in state trial court to two counts of second-degree criminal sexual conduct, challenged in a federal habeas proceeding the state court’s denial of his request as an indigent for appointed counsel on appeal. The petitioner argued that his application for leave to appeal to the Michigan Court of Appeals was a first-tier appellate proceeding -7- requiring appointment of counsel under Douglas v. California. The State argued that the appeal instead fell within the rule of Ross v. Moffitt, 417 U.S. 600 (1974), which held that a state need not appoint counsel to aid an indigent person in a discretionary appeal to the state’s highest court. The Supreme Court held that even though review by the Michigan Court of Appeals in a guilty plea case was discretionary, as was the appeal in Ross, the review provided by the Michigan Court of Appeals was analogous to that provided in Douglas rather than Ross. Important to the Court’s holding were two aspects of the Michigan appellate process. First, “in determining how to dispose of an application for leave to appeal, Michigan’s intermediate appellate court looks to the merits of the claims made in the application.” Halbert, 545 U.S. at 617. The error-correction review provided by the Michigan Court of Appeals is identical to the review provided by the State in Douglas, and it is different from the review provided by the state supreme court in Ross, which did not “sit as an error-correction instance.” Id. at 617-19. The Court reasoned that “[w]hether formally categorized as the decision of an appeal or the disposal of a leave application, the Court of Appeals’ ruling on a plea-convicted defendant’s claims provides the first, and likely the only, direct review the defendant’s conviction and sentence will receive.” Id. at 619. The second factor that persuaded the Court that Michigan’s scheme was governed by the rule in Douglas is that indigent defendants pursuing first-tier review are particularly ill-prepared to act as their own representatives because many “lack the most basic literacy skills . . . [and m]any . . . have learning disabilities and mental impairments.” Id. at 621. In addition, although the Court recognized that states have a legitimate interest in reducing the workload of their judiciary, the Court found that appointing appellate counsel for indigent defendants would ultimately conserve judicial resources as the applications filed would be easier to comprehend. Id. at 623. The Court concluded -8- that defendants who plead nolo contendere or guilty have a constitutionally guaranteed right to appointed counsel for first-level appellate review, as Douglas required. Should it have been “apparent to all reasonable jurists” based on “then-existing precedent,” Lambrix, 520 U.S. at 527-28, in 2004 that first-tier indigent criminal appellants must have counsel appointed by the State to assist them? This Court believes that it should have been. Douglas held that in first appeals by right, States must appoint counsel to represent indigent defendants. Douglas, 372 U.S. at 357. Ross did not hold otherwise, but rather addressed the different circumstance of appeals to the State’s highest court. Ross, 417 U.S. at 610-12. The main distinction between these two precedents is not the discretionary nature of the appeal in Ross, but rather the fact that a first-tier appeal necessarily plows new ground: trial court records must be gathered, errors must be identified, arguments must be framed, and research must be conducted afresh. A second, discretionary appeal rarely requires any of that. Ross is distinguishable from Douglas not because the appeal in that case was discretionary, but because it was a second appeal that did not focus on mere error correction. The features of an appeal by a defendant appealing a guilty plea to the Michigan Court of Appeals plainly do not touch any of the operative factors of Ross. Equally plain, therefore, is that the Halbert holding was compelled by the holding in Douglas. A panel of the Sixth Circuit reached that same conclusion in Simmons v. Kapture, 474 F.3d 869 (6th Cir. 2007), although the panel opinion has been vacated and rehearing en banc granted. Simmons v. Kapture, No. 03-2609 (6th Cir. May 15, 2007). Nonetheless, the panel opinion does provide some guidance. See DHX, Inc. v. Allianz AGF MAT, Ltd., 425 F.3d 1169, 1175-76 (9th Cir. 2005) (a vacated opinion may carry persuasive value); In re Memorial Hosp. of Iowa County, Inc., 862 F.2d 1299, 1302 (7th Cir.1988) (vacated decisions have persuasive force; however, vacation -9- “clouds and diminishes the significance” of such decisions). In that opinion, the Court held that the decision in Halbert requiring the appointment of counsel for indigent defendants appealing a plea- based conviction was not a “new rule” under Teague v. Lane, and therefore applied retroactively to the petitioner’s case. Simmons, 474 F.3d at 876-78. In fact, the panel majority insisted that the holding in Halbert was “virtually compelled by the analysis in both [Douglas and Ross], and cannot be said to represent a new rule.” Simmons, 474 F.3d at 877. Rather, the court concluded,“the result in Halbert is really an application of the ‘old rule’ from Douglas.” Id. at 876. This Court agrees. The respondent points out that the Halbert opinion was not unanimous. When determining whether a Supreme Court case establishes a new rule of law, it is appropriate to consider the distribution of votes in the case purportedly establishing the new rule of law. Beard v. Banks, 542 U.S. 406, 415-16 (2004). However,“the mere existence of a dissent” does not establish that a rule is new. Id. at 416 n.5. The split decision in Halbert does not convince the Court that Halbert announced a new rule. Instead, the Court believes that reasonable jurists must view Halbert as the necessary and inevitable application of Douglas to Michigan’s unique system of appointing appellate counsel to indigents on their first appeal to the State’s intermediate appellate court of errors. Even if a case announces a new rule, that case should be applied retroactively if its holding falls within one of two recognized exceptions to Teague’s general prescription of non-retroactivity of new rules to cases on collateral review. First, the new rule should be applied retroactively “if it places certain kinds of primary, private individual conduct beyond the power of criminal law- making authority to proscribe.” Teague, 489 U.S. at 307 (internal quotation omitted). That exception plainly does not apply here. Second, the new rule will be applied retroactively on -10- collateral review “if it requires the observance of those procedures that . . . are implicit in the concept of ordered liberty.” Id. at 311 (internal quotation omitted). This exception is “reserved for watershed rules of criminal procedure . . . [that] properly alter our understanding of the bedrock procedural elements.” Ibid. (internal quotation omitted). Although the second Teague exception is a narrow one, there can be no question that an accused’s right to counsel ranks high among those procedural rights that must be considered fundamental. The Supreme Court consistently has declared that “[a]n accused’s right to be represented by counsel is a fundamental component of our criminal justice system. Lawyers in criminal cases ‘are necessities, not luxuries.’ Their presence is essential because they are the means through which the other rights of the person on trial are secured.” United States v. Cronic, 466 U.S. 648, 653 (1984). In a case extending the holding of Alabama v. Shelton, 535 U.S. 654 (2002), to a federal habeas prisoner, the Eleventh Circuit observed: Overshadowing our consideration of whether Shelton’s extension of the right to counsel should be made retroactively applicable is one momentous fact: Every extension of the right to counsel from Gideon [v. Wainwright, 372 U.S. 335 (1963),] through Argersinger [v. Hamlin, 407 U.S. 25 (1972),] has been applied retroactively to collateral proceedings by the Supreme Court. Howard v. United States, 374 F.3d 1068, 1077 (11th Cir. 2004). The Supreme Court held the right to counsel on appeal, recognized in Douglas, was retroactive to cases on collateral review in McConnell v. Rhay, 393 U.S. 2, 3 (1968). The right to counsel at plea hearings was held retroactive in Arsenault v. Massachusetts, 393 U.S. 5 (1968). And the right to counsel at probation revocation hearings was held retroactive in McConnell as well. McConnell, 393 U.S. at 3-4. After the Supreme Court held that an indigent criminal defendant had a right to counsel in Gideon v. Wainwright, 372 U.S. 335 (1963), the Supreme Court repeatedly has used Gideon as a paradigmatic example of the -11- type of case fitting within the second Teague exception. See Beard, 542 U.S. at 417; O’Dell v. Netherland, 521 U.S. 151, 167 (1997); Gray v. Netherland, 518 U.S. 152, 170 (1996); Saffle v. Parks, 494 U.S. 484, 495 (1990). The rule in Halbert, like the other spawn of Gideon cited above, invokes a fundamental component of our criminal justice system. “[T]here can be no equal justice where the kind of an appeal a man enjoys depends on the amount of money he has.” Douglas, 372 U.S. at 355 (internal quotation omitted). The ineluctable conclusion must be, therefore, that Halbert falls within Teague’s narrow second exception. Because the petitioner was denied his right to counsel in his first-tier appeal by the State, he is entitled to habeas corpus relief. B. The petitioner also raises the claim that the trial court incorrectly scored his offense variables and departed from the sentencing guidelines without complying with the departure requirements, which, of course, is the argument he wanted to make to the state appellate courts. That claim raises an issue of state law. As this Court explained in Adams v. Burt, 471 F. Supp. 2d 835 (E.D. Mich. 2007), a claim “that the trial court erred in scoring offense variables of the state sentencing guidelines is not cognizable on habeas review.” Id. at 844. “A federal court may not issue the writ on the basis of a perceived error of state law.” Pulley v. Harris, , 41 (1984). Moreover, because of the disposition of this case, the petitioner may present this claim to the state appellate court. III. The Court finds that the state courts’ decisions denying the petitioner counsel to assist with his request for leave to appeal his conviction and sentence resulting from a plea of guilt was an -12- objectively unreasonable application of clearly established Supreme Court precedent. See 28 U.S.C. § 2254(d)(1). Accordingly, it is ORDERED that the petition for a writ of habeas corpus is CONDITIONALLY GRANTED. It is further ORDERED that the State of Michigan shall, within fifty-six days, either appoint counsel for the petitioner to prepare an application for leave to appeal and accept said appeal for filing within fifty-six days thereafter, or release the petitioner from its unlawful custody, in which case the petitioner’s conviction shall be vacated. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: December 6, 2007 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 6, 2007. s/Felicia M. Moses FELICIA M. MOSES -13-

=== Iverson Opinion on Cross MSJs ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION IVERSON INDUSTRIES, INC. Plaintiff, v. METAL MANAGEMENT OHIO, INC. Defendant. ____________________________________/ Case Number 06-14835 Honorable David M. Lawson OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT The principal issue presented by the parties’ cross motions for summary judgment now before the Court is whether there is evidence establishing an agreement to extend a contract for the purchase and sale of scrap metal beyond its express termination date. The motions present other issues as well, namely, whether the defendant breached the express contract by paying less than the prescribed contract formula for scrap metal and assessing a fuel surcharge during the contract term, whether the plaintiff’s claim is barred by laches, whether the defendant is entitled to a setoff for payments in excess of the formula after the expiration of the express contract, and whether the defendant was unjustly enriched. The Court heard oral argument on these motions on November 26, 2007. The Court now finds that the plaintiff is entitled to summary judgment on its claim that the fuel surcharge was improperly imposed during the term of the express contract, fact issues preclude summary judgment for either party on the question whether the express contract was breached or extended, the doctrine of laches does not bar the plaintiff’s claim, and the plaintiff’s unjust enrichment claim cannot proceed. Therefore, the Court will grant each party’s motion for summary judgment in part and deny them in part. I. The plaintiff, Iverson Industries, Inc., is an automotive materials and parts finisher that operates three facilities in southern Michigan. A byproduct of Iverson’s precision machining operations is scrap metal in the form of shavings and solids from machine shop turnings and cast iron borings. There is a market for this industrial waste, and the defendant, Metal Management Ohio, Inc., is in the business of buying this type of scrap metal from manufacturers and selling it on the open market. According to the parties, Metal Management has been purchasing Iverson’s scrap metal for the past ten years. Metal Management typically calculates the price it will pay for scrap metal each month according to the fluctuating market, taking into account its costs and a profit margin. In 2002, Iverson and Metal Management entered into a contract whereby Iverson would sell all of its scrap metal from two of its Michigan plants exclusively to Metal Management, and in exchange Metal Management guaranteed its pricing according to a formula tied to an industry publication, Iron Age Scrap Price Bulletin, Detroit, which is printed monthly, with fixed adjustments. The pricing provision of the contract stated: The following formulas will be used to determine the value of each scrap commodity at your plants. All prices will be based on the Iron Age Scrap Price Bulletin, Detroit, high side pricing. Pricing is in dollars per gross ton (S/GT). FOB shipping point loaded MTLM Ohio container. (1 GT = 2240 lbs). Steel Turnings Cast Iron Borings Solids Machine shop turnings plus $4 Cast iron borings plus $12 Cupola cast minus $18 The above pricing structure is the minimum you will receive, based on current production levels. The formulas can be changed at any time with mutual consent of both parties. -2- Compl. Ex. 1; Def.’s Mot. for Summ. J., Ex. 1. To facilitate the operation, Metal Management agreed to place its covered “rolloff boxes” at Iverson’s two plants so that scrap could be deposited there by Iverson on site, and Metal Management could empty them regularly. The contract was for a fixed two-year term, which was measured as follows: This Scrap Agreement will be in effect for a period of two (2) years from the date the six (6) new rolloff boxes are put into service, and can be amended at any time with mutual consent of both parties. Ibid. As are many of the facts in this case, the precise date the rolloff boxes were placed is in doubt, and neither party can furnish definitive proof on this point; but it appears that the parties agree that the rolloff boxes were delivered no earlier than September 2002 and no later than November 2002. Therefore, this contract would expire of its own terms no later than November 2004. The parties have maintained their business relationship, even through the pendency of this lawsuit, but a dispute has arisen over Metal Management’s pricing of the scrap metal it continues to purchase from Iverson. Iverson alleges that Metal Management departed from the contract pricing formula for some of the months in early 2004, and it added fuel surcharges that were unauthorized. Iverson also insists that the parties also engaged in a course of conduct that establishes an intent to continue, extend, or renew the contract and its formula pricing scheme well after the November 2004 expiration, and Metal Management breached this contract implied in fact by underpaying for scrap metal after 2004. There is no dispute that Metal Management regularly has picked up scrap metal from Iverson’s two Michigan plants, delivered detailed statements each month documenting the quantity and price paid for each type of scrap metal, and issued monthly checks to Iverson throughout this period. However, Iverson did not bring its objections to light until July 2006. -3- The undisputed facts establish that beginning in 2003, Metal Management started deducting a fuel service charge from the price paid to Iverson. Metal Management deducted $197.62 for this charge in 2003, $2,050.60 in 2004, $3,995.09 in 2005, and $1,172.36 in 2006, for a total of $7,415.67. Although it is not clear how the fuel service charge was calculated, Metal Management claims that it imposed this charge on all customers consistent with the industry standard. The parties agree that Iverson otherwise was paid consistent with the contract throughout 2002-2004 (with some disparities during a few isolated months). Beginning in January 2005, it appears that Metal Management no longer paid under the contract formula. However, it appears that both companies forgot about the 2002 contract. Iverson employee Marie Zak testified at her deposition that she began reviewing the Metal Management file in the spring of 2006 when she discovered that Metal Management was paying much less for scrap metal than Metal Management’s competitor, Zalev Brothers, Co. Iverson began getting quotes from other scrap metal dealers. Ms. Zak then discovered that Iverson was being underpaid under the 2002 contract in June of 2006 when she “actually found the contract.” Def.’s Resp. to Pl.’s Mot. for Summ. J., Ex. 2, Dep. of Marie Zak 23:16, July 10, 2007. Larry Finnell, CEO of Iverson, testified that he first became aware of the written contract (which apparently was signed before he became CEO) in 2006. Metal Management had significant attrition in 2004 and periods of turmoil in upper management thereafter, which led to a gap in knowledge of how Iverson was being paid, or even which employee was handling the account. Christopher Beck was Metal Management’s account executive assigned to Iverson’s account until 2003 or 2004, and when he left, it is unclear who took over. David Hammer testified that he took over the account in early 2005 from “[n]o one.” Pl.’s -4- Resp. to Def.’s Mot. for Summ. J., Ex. 5, Dep. of David Hammer 12:10, Sept. 7, 2007. He stated that “[t]here was a void on the Iverson account where accounting was looking for information, pricing . . . There was no information.” Id. at 12:6-8. Mr. Hammer was unaware of the existence of the 2002 contract until the present lawsuit was filed, and he set prices each month based on the market accounting for expense in order to target a profit margin of $80 per gross ton. According to Mr. Hammer, approximately ninety percent of Metal Management’s relationships are based on monthly pricing without a written contract, and half are priced unilaterally by Metal Management. Mr. Hammer turned over the Iverson account to Alan Moll in early 2005. In July 2006, Iverson first complained to Metal Management about the prices it was being paid for its scrap metal. On August 2, 2006, David Hammer met with Marie Zak and Kenneth Pociask from Iverson to attempt to salvage the account, according to Hammer. Mr. Hammer offered to pay the difference from the contract back to April 2006, but he could not pay beyond that without authorization from upper management, which was not forthcoming. For future purchases, Mr. Hammer offered to “cut the margins to the bone and to a minimally acceptable margin.” Def.’s Resp. to Pl.’s Mot. for Summ. J., Ex. 1, Aff. of David Hammer at ¶ 33. The parties continue to do business, although “margins being made [by Metal Management] on the current scrap purchases is way lower than the average margins acceptable to Metal Management’s Defiance facility.” Ibid. No agreement was reached, however, and this lawsuit was commenced in October 2006. After discovery, the cross motions for summary judgment followed. II. Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to -5- any material fact.” Fed. R. Civ. P. 56(c). The parties have filed cross motions for summary judgment, which might imply that there are no facts in dispute. Nonetheless, the Court must apply the well-recognized standards when deciding such cross motions; “[t]he fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate.” Parks v. LaFace Records, 329 F.3d 437, 444 (6th Cir. 2003). Therefore, when this Court considers cross motions for summary judgment, it “must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party.” Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003). A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., , 251-52 (1986). When the “‘record taken as a whole could not lead a rational trier of fact to find for the nonmoving party,’” there is no genuine issue of material fact. Howard ex rel. Estate of Howard v. Bayes, 457 F.3d 568, 571 6th Cir. 2006) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., , 587 (1986 . The party who bears the burden of proof must present a jury question as to each element of the claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to prove an essential element of a claim renders all other facts immaterial for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991). It must be emphasized, however, that “[i]n evaluating the evidence, [the court] ‘draw[s] all reasonable inferences therefrom -6- in a light most favorable to the non-moving party.’” Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003) (quoting PDV Midwest Ref., L.L.C. v. Armada Oil & Gas Co, 305 F.3d 498, 505 (6th Cir. 2002 . The plaintiff has invoked this Court's diversity jurisdiction. In federal cases based upon diversity jurisdiction, the Court must apply the law of the forum state’s highest court. Erie R.R. v. Tompkins, , 78 (1938). If the state's highest court has not decided an issue, then “the federal court must ascertain the state law from ‘all relevant data.”’ Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995) (quoting Bailey v. v. & O Press Co., 770 F.2d 601, 604 (6th Cir. 1985 . “Relevant data includes the state’s intermediate appellate court decisions, as well as the state supreme court's relevant dicta, restatements of the law, law review commentaries, and the majority rule among other states.” Ososki v. St. Paul Surplus Lines, 156 F. Supp. 2d 669, 674 (E.D. Mich. 2001) (internal quotes and citation omitted) (citing Angelotta v. Am. Broad. Corp., 820 F.2d 806, 807 (6th Cir. 1987 . There is no dispute by the parties that Michigan law governs in this case. A. At the center of this dispute is the question whether the 2002-2004 express contract’s pricing scheme should be extended beyond the contract’s stated two-year term. The plaintiff insists that it is entitled to summary judgment because the parties continued for a time after September 2004 to buy and sell scrap metal based on the price formula contained in the contract, which gives rise to a presumption that Metal Management cannot rebut due to its “knowledge void” in the early months of 2005. Metal Management, on the other hand, contends that it is entitled to summary judgment -7- based on the plain and explicit contract language, which states that the agreement expired after two years. The parties’ transactions in scrap metal is nothing more than a sale of goods, which in Michigan is governed by Article 2 of the Uniform Commercial Code. As adopted in Michigan, the UCC permits a contract to be formed “in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.” Mich. Comp. Laws § 440.2204(1). In this case, the parties continued to do business with each other after the contract expired, but on what terms? Section 2-208 of the UCC states that “any course of performance accepted or acquiesced in without objection shall be relevant to determine the meaning of the agreement.” Mich. Comp. Laws § 440.2208(1). However, that section also creates a hierarchy of evidence that establishes contract terms when performance is inconsistent with other proof, under which express contract provisions prevail over course of performance, which in turn prevails over custom and usage and trade practices. Mich. Comp. Laws § 440.2208(2) (stating that “[t]he express terms of the agreement and any such course of performance, as well as any course of dealing and usage of trade, shall be construed whenever reasonable as consistent with each other; but when such construction is unreasonable, express terms shall control course of performance and course of performance shall control both course of dealing and usage of trade (section 1205)”). Since the contract expressly expired after two years, for the plaintiff to be able to rely on the contract’s pricing scheme, it must produce evidence to show a modification (i.e., an extension) of the two-year term or a renewal of the agreement. Section 2-208(3) states that “course of performance shall be relevant to show a waiver or modification of any term inconsistent with such course of performance.” Mich. Comp. Laws § 440.2208(3). -8- These provisions are consistent with Michigan’s common law, which “supplement [the UCC’s] provisions.” Mich. Comp. Laws § 440.1103; Firwood Mfg. Co., Inc. v. General Tire, Inc., 96 F.3d 163, 172 (6th Cir. 1996). Under certain circumstances, Michigan law permits a contract to be renewed implicitly, such as in the case of fixed-term employment contracts. See Paxson v. Cass County Rd. Comm’n, 325 Mich. 276, 280-81, 38 N.W.2d 315, 317 (1949); see also Sines v. Superintendents of the Poor, 58 Mich. 503, 506-07, 25 N.W. 485, 487 (Mich. 1885). However, if the evidence suggests contrary intentions, a contract does not necessarily continue and is not implicitly renewed. See Howell Elec. Light & Power Co. v. Village of Howell, 132 Mich. 117, 120, 92 N.W. 940, 941 (1903) (stating that continued performance may imply an intent to renew, but “[i]f there be anything to show a contrary intention, the renewal of the contract for the stated period will not be inferred”). Under Michigan common law, “an implied-in-fact contract arises between parties when those parties show a mutual intention to contract.” Kingsley Associates, Inc. v. Moll PlastiCrafters, Inc., 65 F.3d 498, 504 (6th Cir. 1995). “A contract is implied in fact where the intention as to it is not manifested by direct or explicit words between the parties, but is to be gathered by implication or proper deduction from the conduct of the parties, language used or things done by them, or other pertinent circumstances attending the transaction.” Erickson v. Goodell Oil Co., 384 Mich. 207, 212, 180 N.W.2d 798, 800 (1970). “In deciding whether there was mutual assent to a[n implied contract term], [Michigan courts] use an objective test, ‘looking to the expressed words of the parties and their visible acts.’” Rowe v. Montgomery Ward & Co., Inc., 437 Mich. 627, 640, 473 N.W.2d 268, 273 (1991) (emphasis in original). -9- Michigan’s statement of the controlling principle appears to be consistent with the prevailing view. For example, the Arkansas Supreme Court has written: When an agreement expires by its own terms, if without more the parties continue to perform as before, an implication arises that they have mutually assented to a new contract containing the same provisions as the old, and the existence of the new contract is determined by an “objective” test, i. e., whether a reasonable man would think, from the actions, that they intended to make a new binding agreement. In such a case, when the parties continue to do business together, their conduct may permit, or even constrain, a finding that they impliedly agree that their rights and obligations should continue to be measured as provided in the old contract. Steed v. Busby, 268 Ark. 1, 7, 593 S.W.2d 34, 38 (1980) (citations omitted). Similarly, the New York Court of Appeals has explained: Where, after the expiration of a contract fixing the reciprocal rights and obligations of the parties, they continue to do business together, the conduct of the parties may at times permit, or even constrain, a finding that the parties impliedly agree that their rights and obligations in connection with such business should continue to be measured as provided in the old contract. Even in such case, however, the reciprocal obligations arise from the new implied contract and, unless an intent to make such a new contract is expressed or may be fairly inferred from the conduct of the parties, the obligations of the parties are as matter of law not measured by the terms of the contract which has expired. New York Telephone Co. v. Jamestown Telephone Corp., 282 N.Y. 365, 371, 26 N.E.2d 295, 297 (1940). The plaintiff argues that evidence of continued performance creates a presumption of a contract extension, citing Comenos v. Viacom Int’l, Inc., 857 F. Supp. 1160 (E.D. Mich. 1994). It is true that the court in Comenos appeared to treat the evidence of continued performance of an employment contract following its one-year expiration date as giving rise to a “presumption” that the defendant was obliged to “rebut” under New York law, which was applied in that case. However, a careful review of the basis of the court’s choice of language reveals that evidence of continued performance under that State’s laws establishes no presumption at all, but only a -10- permissible inference that the parties intended to continue the contract. The court stated: “As a general rule, under New York law, ‘even where [an] agreement expires by its terms, if the parties continue to perform as before, an implication arises that they have mutually assented to a new contract containing the same provisions as the old.’” Id. at 1165 (quoting Teachers Ins. & Annuity v. Ormesa Geothermal, 791 F. Supp. 401, 415 n. 4 (S.D.N.Y. 1991 . Similarly, the Court finds that the plaintiff here exaggerates the effect of such evidence and in doing so mischaracterizes the state of the law. There is no “presumption” that arises from post- expiration conduct that is consistent with the terms of the contract. Rather, the cases state that an “implication” arises from which the parties’ intent to continue the contract “may” be inferred. The inference of an intent to continue or renew a contract is not mandatory, and there is no shift in the burden to proof the intent of the parties to contract. Rather, to create or modify a contract, there must be a meeting of the minds. Port Huron Educ. Ass’n. v. Port Huron Area School Dist., 452 Mich. 309, 326-27, 550 N.W.2d 228, 238 (1996) (citing Universal Leaseway Sys., Inc. v. Herrud & Co., 366 Mich. 473, 115 N.W.2d 294 (1962 . The plaintiff bears the burden of proving the existence of a contract. Lambert v. Jim Causley Pontiac, Inc., 47 Mich. App. 620, 622, 209 N.W.2d 619, 619-20 (1973). Where, as here, there is contrary evidence, it must be left to the fact finder to decide whether the permissible inference that results from such consistent conduct establishes a contract implied in fact. In the plaintiff’s favor there is proof that for a few months after September 2004 Metal Management paid the formula price for scrap metal. However, weighing against the plaintiff’s position is the fact that the actual expiration date of the contract may have been as late as November 2004, thereafter neither party recalled that the contract existed until it was discovered by Iverson’s -11- staff in the summer of 2006, Metal Management’s reversion to market pricing in the early months of 2005, and Metal Management’s lack of awareness of a prior contract from the time David Hammer took over the account in mid 2005. Continuation of formula pricing for two or three months certainly does not create an iron-clad inference that the contract was renewed; and if neither party knew there even was a contract, it would be difficult to construct an inference that the parties mutually agreed to continue to be bound by it. Because there are facts from which a fact finder could infer an intent to continue the contract beyond its expiration date, the defendant cannot prevail on this point as a matter of law. Similarly, because there are facts that cast considerable doubt on the proposition that the parties mutually intended to continue the contract beyond November of 2004, the plaintiff is not entitled to summary judgment on its contract-implied-in-fact theory. The defendant contends that the plaintiff’s implied-in-fact theory must yield to the Statute of Frauds. The statute of fraud states that “a contract for the sale of goods for the price of $1,000.00 or more is not enforceable . . . unless there is a writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought.” Mich. Comp. Laws § 440.2201(1). There is an exception“[w]ith respect to goods for which payment has been made and accepted or that have been received and accepted under [Mich. Comp. Laws § 440.]2606.” Mich. Comp. Laws § 440.2201(3)(c). In this case, the performance of the parties confirmed the existence of an agreement for the sale of scrap metal. The dispute centers on the price term. The Statute of Frauds does not bar that claim as a matter of law. The defendant also contends that the plaintiff’s claim is barred by the doctrine of laches. Under Michigan law, laches requires “a lack of due diligence on the part of the plaintiff resulting -12- in some prejudice to the defendant.” Gallagher v. Keefe, 232 Mich. App. 363, 369, 591 N.W.2d 297, 300 (1998); see also Brown v. State, Dept. of Military Affairs, 386 Mich. 194, 199, 191 N.W.2d 347, 350 (1971). The doctrine reflects “‘the exercise of the reserved power of equity to withhold relief otherwise regularly given whether in the particular case the granting of such relief would be unfair and unjust.’” Lothian v. Detroit, 414 Mich. 160, 168, 324 N.W.2d 9, 14 (1982), quoting Walsh, Equity, § 102, p 472. The Sixth Circuit recently elaborated on the concept of laches: In this circuit, laches is understood to be “a negligent and unintentional failure to protect one’s rights.” Elvis Presley Enters., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 894 (6th Cir.1991). “A party asserting laches must show: (1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting it.” Herman Miller, Inc. v. Palazzetti Imports and Exports, Inc., 270 F.3d 298, 320 (6th Cir.2001). Thus: [L]aches does not result from a mere lapse of time but from the fact that, during the lapse of time, changed circumstances inequitably work to the disadvantage or prejudice of another if the claim is now to be enforced. By his negligent delay, the plaintiff may have misled the defendant or others into acting on the assumption that the plaintiff has abandoned his claim, or that he acquiesces in the situation, or changed circumstances may make it more difficult to defend against the claim. 11A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure § 2946 at 117 (2d ed.1995) (quoting de Funiak, Handbook of Modern Equity § 24 at 41 (2d ed.1956 . Chirco v. Crosswinds Communities, Inc., 474 F.3d 227, 231 (6th Cir. 2007). The defendant in this case has not shown that it changed its position in reliance on the plaintiff’s failure to assert its rights under the contract, or that it may be more difficult to defend against the claim that the parties intended to continue their agreement as to pricing. Moreover, the plaintiff has brought its action within the allowable statute of limitation for such claims. See Mich. Comp. Laws § 440.2725(1) (“An action for breach of any contract for sale must be commenced within 4 years after the cause of action has accrued.”). Laches does not bar the plaintiff’s claim. -13- The Court concludes, therefore, that neither party is entitled to summary judgment on the plaintiff’s claim that formula pricing should have been maintained after the written contract expired by its express terms two years after it went into effect. B. The plaintiff also contends that it was underpaid throughout 2002 and 2003 because the defendant did not follow the formula pricing schedule during some of the months when the contract was in effect. The defendant did not respond to the specific claims on a month-by-month basis because the plaintiff only raised the argument for the first time in a footnote in its final Reply Brief. See Pl.’s Reply Br. 1, n. 1. Rather, in its initial motion for summary judgment, the plaintiff merely stated that it was investigating whether there was an underpayment during this period. It believes that it was underpaid $9,357.87 in 2002 and 2003. However, it has not pointed to anything in the record that supports this claim. The plaintiff has also claimed that it was underpaid in 2004 by $19,777.73, not counting the fuel service charges. It relies on a printout of a spreadsheet prepared by Marie Zak for this amount. The plaintiff argues that, although the amount of damages remains contested, the Court can issue summary judgment on liability. The defendant has not replied to the argument about 2002 and 2003 because the argument was first advanced in the plaintiff’s final brief. However, the defendant believes that it actually paid more than the contract price during 2004, and points to Mr. Hammer’s affidavit and accompanying spreadsheet. It is apparent that a fact issue is presented here. The Court therefore will deny the plaintiff’s motion for summary judgment on this aspect of its claim. -14- C. The plaintiff also argues that the defendant’s act of reducing its payment for a fuel service charge breached the contract, because the contract contains no provision allowing such charges. The defendant argues that the 2002 contract is silent as to fuel service charges, and therefore does not preclude what is widely practiced in the industry. The 2002 contract explicitly sets forth the price terms. It contains no allowance for an adjustment for a fuel surcharge. Although industry practice may be relevant to show that a fuel surcharge became part of the agreement to set prices according to market conditions, as the defendant claims was done after the 2002 contract expired, the provisions of the UCC set forth above doe not permit a contract modification based on industry practice that is inconsistent with the parties’ express agreement. Mich. Comp. Laws § 440.2208. To be sure, “course of performance shall be relevant to show a waiver or modification of any term.” Mich. Comp. Laws § 440.2208(3). However, “‘a waiver is a voluntary and intentional abandonment of a known right.’” Johnson Controls, Inc. v. Jay Industries, Inc., 459 F.3d 717, 725 (6th Cir. 2006) (quoting Quality Prods. & Concepts, Co. v. Nagel Precision, Inc., 469 Mich. 362, 666 N.W.2d 251, 258 (Mich. 2003 . And although course of conduct can constitute a waiver, there must be “evidence that [the other party] intentionally relinquished its rights.” Ibid. There is no evidence that the plaintiff intentionally waived its right to the pricing schedule set forth in the contract during the two-year term. The defendant’s adjustment of the price it paid for scrap metal for the increased cost of fuel during that period breached the express terms of the contract. Therefore, the plaintiff is entitled to summary judgment on its claim that the defendant underpaid it during the two-year term of the 2002 contract. As noted above, there is a dispute as to -15- when the roll-off boxes were placed, and therefore the Court cannot determine with precision when the express contract began and ended as a matter of law. However, the parties do agree that the roll- off boxes were placed no earlier than September 6, 2002, making the earliest contractual expiration date September 6, 2004. Thus, the plaintiff is entitled to damages in the amount of $197.62 for the fuel surcharge in 2003, and $1,094.41 for the fuel surcharge for January through September 6, 2004. Whether the plaintiff is entitled to payment for the fuel surcharge underpayment in October and November 2004 must abide a determination at trial. D. Finally, the defendant contends that it is entitled to summary judgment on the plaintiff’s unjust enrichment claim. “Whether a specific party has been unjustly enriched is generally a question of fact . . . [however,] whether a claim for unjust enrichment can be maintained is a question of law.” Morris Pumps v. Centerline Piping, Inc., 273 Mich. App. 187, 193, 729 N.W.2d 898, 903 (2006), appeal denied, 740 N.W.2d 200 (Mich. 2007). “Under Michigan law, the elements of an unjust enrichment claim are ‘(1) receipt of a benefit by the defendant from the plaintiff and, (2) which benefit it is inequitable that the defendant retain.’” Wysong Corp. v. M.I. Industries, 412 F. Supp. 2d 612, 624-24 (E.D. Mich. 2005) (quoting Dumas v. Auto Club Ins. Ass’n, 437 Mich. 521, 546, 473 N.W.2d 652, 663 (1991 . There is no claim for unjust enrichment when there exists a valid contract covering the same subject matter. Morris, 273 Mich. App. at 195, 729 N.W.2d at 904. The defendant contends that it paid the market rate for the metal, and the plaintiff has not countered this contention. The only evidence offered by the plaintiff is Ms. Zak’s realization that another company was paying a higher price for scrap metal. This evidence fails to establish that the low price paid led to an inequitable benefit to the defendant. -16- Moreover, even if the defendant underpaid, there is no allegation of inequitable conduct that would render the low payment actionable. There is no claim that the defendant took more scrap metal than claimed or was fraudulent in hiding its price. To the contrary, the defendant provided the plaintiff with documentation of its pricing each month. The plaintiff has not explained why it was inequitable for the defendant to pay the prices it did, except under the implicit theory that the plaintiff was entitled to the 2002 contract price. This analysis is inapplicable to an unjust enrichment claim, which cannot be brought if there is a contract covering the subject matter. Summary judgment for the defendant is appropriate on this count. III. The Court finds that the plaintiff is entitled to summary judgment on its claim that it was undercharged for scrap metal in 2003 and 2004 by the amount of the fuel surcharge. The defendant is entitled to summary judgment on the plaintiff’s unjust enrichment claim. Fact questions preclude summary judgment for either side on the remaining arguments. Accordingly, it is ORDERED that the plaintiff’s motion for summary judgment [dkt #21] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the defendant’s motion for summary judgment [dkt #20] is GRANTED IN PART AND DENIED IN PART. It is further ORDERED that the plaintiff may recover from the defendant the amount of underpayment for the fuel surcharge of $197.62 in 2003 and $$1,094.41 in 2004. It is further ORDERED that count three of the plaintiff’s complaint alleging unjust enrichment is DISMISSED WITH PREJUDICE. s/David M. Lawson DAVID M. LAWSON -17- Dated: December 4, 2007 United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 4, 2007. s/Felicia M. Moses FELICIA M. MOSES -18-

=== Kucharski Opinion Granting Reconsideration ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION WILLIAM KUCHARSKI, SR. and WILLIAM KUCHARSKI, JR., Plaintiffs, v. TODD LEVEILLE, JOHN GRIMSHAW, and GERALD BOCKHAUSEN, Defendants. ____________________________________/ Case Number 05-73669 Honorable David M. Lawson OPINION AND ORDER GRANTING PLAINTIFFS’ MOTION FOR RECONSIDERATION, REOPENING CASE, AND SETTING CALENDAR DATES This case is before the Court on the plaintiffs’ motion asking the Court to reconsider an order dismissing the lawsuit on statute of limitations grounds. Previously, the Court had granted the plaintiffs summary judgment on liability and denied the defendants’ motion for summary judgment on the statute of limitations issue. However, the Court ordered supplemental briefing after a Supreme Court decision cast doubt on the Court’s ruling. In the plaintiffs’ motion for reconsideration, the plaintiffs point out that in actions under 42 U.S.C. § 1983, such as this, federal courts must look to state law to determine the applicable statute of limitations and the manner of its operation, including the effect of tolling rules. In its memorandum order dismissing this case, the Court neglected to consider Michigan’s equitable tolling rules. The Court believes that this lapse amounts to palpable error, the correction of which will result in a different disposition of the case. Therefore, the Court will grant the motion for reconsideration, reinstate the action, and schedule a trial on damages. I. The facts of the case are discussed briefly in the Court’s last memorandum order dismissing the case, Kucharski v. Leveille, 478 F. Supp. 2d 928 (E.D. Mich. 2007), and in more detail in the prior opinion and order adjudicating the cross motions for summary judgment, Kucharski v. Leveille, 2007 WL 522715 (E.D. Mich. Feb. 12, 2007). To summarize, on March 24, 2001, police officers from the department of state police received a report of a motor vehicle accident and proceeded to the home of the plaintiffs, William Kucharski, Sr. and William Kucharski, Jr., in St. Clair County, Michigan. They entered the house without a warrant, arrested Kucharski, Jr., took him to have his blood tested for alcohol, and arrested Kucharski, Sr. for interfering. The plaintiffs were prosecuted in state court, but some of the convictions were reversed by the state court of appeals on the grounds of Fourth Amendment violations on September 30, 2004. Thereafter, the plaintiffs filed the present case on September 26, 2005 alleging claims based on 42 U.S.C. § 1983 (for the illegal seizure in violation of the Fourth Amendment) and gross negligence. After discovery was completed, the parties each filed motions for summary judgment. The defendants’ motion was based on a statute of limitations, the asserted validity of the police officers’ conduct, and qualified immunity. The plaintiffs alleged in their motion that the undisputed facts established a constitutional violation. On February 12, 2007, the Court granted the plaintiffs’ motion on the issue of liability, and granted in part and denied in part the defendants’ motion for summary judgment. The Court dismissed the gross negligence claim but rejected the defendants’ argument that the section 1983 claim was barred by the statute of limitations. On February 21, 2007, the Court ordered the parties to file briefs addressing the effect of the Supreme Court’s decision in Wallace v. Kato, 127 S. Ct. 1091 (2007), on the statute of limitations -2- issue. After the briefs were filed, on March 21, 2007, the Court granted summary judgment for the defendants because the plaintiffs’ claims are barred by the statute of limitations. The Court based its decision on Wallace, which held that a section 1983 claim based on an illegal arrest accrues at the time of the arrest, not when the convictions were reversed by a state court, and Heck v. Humphrey, 512 U.S. 477 (1994), does not require otherwise. The Court did not examine the question of equitable tolling, but merely observed that “although the practice announced by the Supreme Court was somewhat at odds with the general understanding of Heck, the Court did not allow equitable tolling.” Kucharski, 478 F. Supp. 2d at 931. The plaintiffs timely filed their motion for reconsideration alleging that the doctrine of equitable tolling should save their claim. The Court ordered the defendants to respond, which they did. II. Motions for reconsideration may be granted pursuant to E.D. Mich. LR 7.1(g)(1) when the moving party to shows (1) a “palpable defect,” (2) that misled the court and the parties, and (3) that correcting the defect will result in a different disposition of the case. E.D. Mich. LR 7.1(g)(3). “A ‘palpable defect’ is a defect which is obvious, clear, unmistakable, manifest, or plain.” Mich. Dep’t of Treasury v. Michalec, 181 F. Supp. 2d 731, 734 (E.D. Mich. 2002) (citations omitted). The Local Rules provide that any “motions for rehearing or reconsideration which merely present the same issues ruled upon by the Court, either expressly or by reasonable implication, shall not be granted.” E.D. Mich. LR 7.1(g)(3). In its last order, the Court held that the plaintiffs’ complaint was filed out of time because the cause of action accrued at the time of the illegal seizure, not when the state court convictions -3- were overturned. Although the later conclusion was ordained by a well-established line of Sixth Circuit precedent, see, e.g., Swiecicki v. Delgado, 463 F.3d 489, 493 (6th Cir. 2006) (citing Shamaeizadeh v. Cunigan, 182 F.3d 391, 396 (6th Cir. 1999 , that precedent was overturned by the Supreme Court in Wallace. The Court in Wallace held that a false arrest claim accrues when the illegal detention ends – in Wallace’s case, when the arrested suspect was taken before a judicial officer. A section 1983 case must be filed, the Court held, within the period of limitations measured from that date. With respect to the complication potentially caused by Heck, the Court noted that a district court could “stay the civil action until the criminal case or the likelihood of a criminal case is ended.” Wallace, 127 S. Ct. at 1098. Then, “[i]f the plaintiff is ultimately convicted, and if the stayed civil suit would impugn that conviction, Heck would require dismissal; otherwise, the civil action will proceed, absent some other bar to suit.” Ibid. Because the Wallace Court did not allow equitable tolling to save the plaintiff’s claim in that case, this Court did not consider the possibility in the present matter. However, just as limitations periods are taken from state law, so are the rules regarding equitable tolling. Wallace, 127 S. Ct. at 1098 (“We have generally referred to state law for tolling rules, just as we have for the length of statutes of limitation.”); Hardin v. Straub, 490 U.S. 536, 539 (1989) (“Limitations periods in § 1983 suits are to be determined by reference to the appropriate ‘state statute of limitations and the coordinate tolling rules’; New York’s legislative choices in this regard were therefore ‘binding rules of law.’”); Fox v. DeSoto, 489 F.3d 227, 233 (6th Cir. 2007) (dismissing section 1983 claim on the basis on Wallace and observing that “[a]bsent some tolling or delay in accrual, all of these claims would be untimely because they were not brought [for] more than two years after the arrest”). Wallace involved a case from Illinois. The Court noted that it was -4- not aware of any “Illinois cases providing tolling in even remotely comparable circumstances.” Wallace, 127 S. Ct. at 1099. The Court declined “to adopt a federal tolling rule” for application in all such section 1983 cases. Ibid. Moreover, the Seventh Circuit had explicitly held that Fourth Amendment claims were exempt from the Heck rule. Copus v. City of Edgerton, 151 F.3d 646, 647- 48 (7th Cir. 1998) (“Fourth Amendment claims for unlawful searches or arrests do not necessarily imply a conviction is invalid, so in all cases these claims can go forward.”). In a footnote, the Court stated, Had petitioner filed suit upon his arrest and his suit then been dismissed under Heck, the statute of limitations, absent tolling, would have run by the time he obtained reversal of his conviction. If under those circumstances he were not allowed to refile his suit, Heck would produce immunity from § 1983 liability, a result surely not intended. Because in the present case petitioner did not file his suit within the limitations period, we need not decide, had he done so, how much time he would have had to refile the suit once the Heck bar was removed. Wallace, 127 S. Ct. at 1099 n.4. Michigan courts, however, recognize the concept of equitable tolling to relieve a party of the effect of a statute of limitations in certain circumstances. For instance, the Michigan Supreme Court has allowed tolling, thereby allowing a case to proceed, when the plaintiff’s failure to comply with the statute is a result of the confusing state of the law. Bryant v. Oakpointe Villa Nursing Centre, 471 Mich. 411, 684 N.W.2d 864 (2004). In Bryant, the plaintiff was the personal representative of her deceased aunt. The plaintiff alleged that the nursing home failed to give proper care, leading to her aunt’s death. The plaintiff’s complaint alleged that the defendant’s actions constituted negligence. The circuit court ruled that the plaintiff’s claims actually sounded in medical malpractice and dismissed the case. The plaintiff refiled her case as a medical malpractice case, which the defendant unsuccessfully moved to dismiss as barred by the statute of limitations. On -5- appeal, the Michigan Supreme Court first determined that some of the plaintiff’s claims were medical malpractice claims, for which the limitation period is two years. Although other claims sounded in ordinary negligence, the court held that the plaintiff’s medical malpractice claims would be barred if the limitations period were strictly construed. But the court declined to do so, holding: The equities of this case, however, compel a different result. The distinction between actions sounding in medical malpractice and those sounding in ordinary negligence is one that has troubled the bench and bar in Michigan, even in the wake of our opinion in Dorris. Plaintiff’s failure to comply with the applicable statute of limitations is the product of an understandable confusion about the legal nature of her claim, rather than a negligent failure to preserve her rights. Accordingly, for this case and others now pending – that involve similar procedural circumstances, we conclude that plaintiff’s medical malpractice claims may proceed to trial along with plaintiff’s ordinary negligence claim. . . . However, in future cases of this nature, in which the line between ordinary negligence and medical malpractice is not easily distinguishable, plaintiffs are advised as a matter of prudence to file their claims alternatively in medical malpractice and ordinary negligence within the applicable period of limitations. Bryant, 471 Mich. at 432-33, 684 N.W.2d at 876. In Ward v. Siano, 272 Mich. App. 715, 730 N.W.2d 1 (2006), the Michigan Court of Appeals took a stricter approach to the two-year limitations period in the wrongful death saving statute. But the court recognized that the doctrine of equitable tolling can apply “to a specific extraordinary situation in which it would be unfair to allow a statute of limitations defense to prevail because of the defendant’s bad faith or other particular and unusual inequities.” Id. at 718, 730 N.W.2d at 2. The court cautioned, however, that “[i]nequities that justify judicial tolling must arise independently of the plaintiff’s failure to diligently pursue the claim in accordance with the statute.” Ibid. Recent state supreme court decisions have limited Bryant’s scope. In Devillers v. Auto Club Ins. Ass’n, 473 Mich. 562, 702 N.W.2d 539 (2005), the court overruled precedent recognizing the doctrine of judicial tolling in no-fault insurance cases that effectively extended the one-year-back -6- rule for first-party claims against an automobile insurer. The court noted that the specific statutory command that a claimant “may not recover benefits for any portion of the loss incurred more than 1 year before the date on which the action was commenced,” Mich. Comp. Laws § 500.3145(1), left no room for equity to expand the period. Later, in Trentadue v. Buckler Lawn Sprinkler, 479 Mich. 378, 738 N.W.2d 664 (2007), that court declared that the common law discovery rule would not toll the statute of limitations, since the court did not recognize the common law and the legislature had not provided for suspending the period of limitation during the time that a plaintiff could not have discovered all the elements of her claim. In that case, the court held that the family of a rape and murder victim could not sue the murderer and his employer because the lawsuit was filed 16 years after the crime, despite the fact that the plaintiffs could not have discovered the identity of the murderer until DNA evidence provided the connection only months before the lawsuit was commenced. The court did not overrule Bryant, but rather distinguished it by observing that the court’s “use of equity in Bryant is limited to those circumstances when the courts themselves have created confusion.” Trentadue, 479 Mich. at 406, 738 N.W.2d at 679. Based on the foregoing state court precedents, this Court finds that Michigan recognizes the doctrine of equitable tolling, and that a plaintiff may obtain relief from a statute of limitations thereunder if the delay in filing “is the product of an understandable confusion about the legal nature of her claim,” Bryant, 471 Mich. at 432, 684 N.W.2d at 876, that confusion is created by the courts themselves, Trentadue, 479 Mich. at 406, 738 N.W.2d at 679, and the delay does not result simply from the plaintiff’s lack of diligence, Ward, 272 Mich. App. at 715, 730 N.W.2d at 2. Moreover, where a specific statute controlling the period of limitation is found to abrogate the common law, courts must resort to the statutory tolling rules. -7- The Court believes that this case qualifies under Michigan law for the application of equitable tolling. First, there is confusion in the jurisprudence that is not clarified by any statutory pronouncement. The confusion results not from the length of the applicable statute of limitations, but from a determination when the statute starts to run. That confusion has been created by the courts themselves, as evidenced by Wallace’s overruling of this Circuit’s precedents. Wallace altered the understanding of Heck v. Humphrey’s effect on the time a section 1983 claim for unlawful arrest accrues. The Supreme Court decided Heck v. Humphrey in 1994. Heck was convicted of manslaughter, and while his conviction was pending on direct appeal he sued state officials alleging that they improperly investigated the case and destroyed evidence. The Court held that habeas corpus, not a civil tort action, is the proper vehicle to challenge the validity of a criminal judgment, and a claim under 42 U.S.C. § 1983 that implies the invalidity of a criminal conviction cannot be brought until that conviction is reversed, vacated, or called into question in a habeas corpus proceeding. In a footnote, the Court commented on Heck’s implications for section 1983 cases alleging an illegal search: [A] suit for damages attributable to an allegedly unreasonable search may lie even if the challenged search produced evidence that was introduced in a state criminal trial resulting in the § 1983 plaintiff’s still-outstanding conviction. Because of doctrines like independent source and inevitable discovery, and especially harmless error, such a § 1983 action, even if successful, would not necessarily imply that the plaintiff’s conviction was unlawful. In order to recover compensatory damages, however, the § 1983 plaintiff must prove not only that the search was unlawful, but that it caused him actual, compensable injury, which, we hold today, does not encompass the “injury” of being convicted and imprisoned (until his conviction has been overturned). Heck, 512 U.S. at 487 n.7 (citations omitted). Some courts interpreted footnote seven to mean that the Heck bar did not apply to Fourth Amendment illegal search claims. See, e.g., Copus v. City of Edgerton, 151 F.3d 646, 647-48 (7th -8- Cir. 1998) (“Fourth Amendment claims for unlawful searches or arrests do not necessarily imply a conviction is invalid, so in all cases these claims can go forward.”). However, the Sixth Circuit interpreted footnote seven as holding that the reversal of the conviction is an element of a criminal defendant’s section 1983 claim that must be shown before a plaintiff may proceed. In Schilling v. White, 58 F.3d 1081 (6th Cir. 1995), the plaintiff’s car was searched after he was in a car accident. Drugs were found, and the plaintiff was arrested. The plaintiff pleaded guilty. He then filed a section 1983 suit alleging the search of his car and his arrest constituted an illegal search and seizure in violation of the Fourth Amendment. The Sixth Circuit affirmed dismissal of the plaintiff’s claim because his conviction had not been overturned. According to the Sixth Circuit, Heck “concluded that proof of the illegality of a conviction is a necessary element of the § 1983 cause of action. Unless that conviction has been reversed, there has been no injury of constitutional proportions, and thus no § 1983 suit may exist.” Schilling, 58 F.3d at 1086. After quoting footnote seven from Heck, the court stated that “[t]he language of Heck plainly refutes the argument that Fourth Amendment claims are exempted from the requirement that a conviction must be set aside as a precondition for this type of § 1983 suit.” Ibid. Although Heck involved a plaintiff who already had been convicted in state court, most if not all circuits concluded that Heck barred a section 1983 claim by a plaintiff with criminal charges pending against him if success in the 1983 suit would be inconsistent with a future conviction. In Shamaeizadeh v. Cunigan, 182 F.3d 391, 396 (6th Cir. 1999), the Sixth Circuit held that “the concerns of Heck apply pre-conviction as well as post-conviction.” [A] prisoner seeking to challenge an allegedly unconstitutional search and seizure in a § 1983 claim must show that a decision in his favor would not imply the invalidity of his outstanding conviction . . . [and] that a decision in his favor would not imply the invalidity of a future conviction. -9- Shamaeizadeh, 182 F.3d at 398 (emphasis added). Other circuits agreed. See, e..g., Covington v. City of New York, 171 F.3d 117, 124 (2d Cir. 1999) (“[I]f ‘success on [a § 1983] claim would necessarily imply the invalidity of a conviction in a pending criminal prosecution, such a claim does not accrue so long as the potential for a judgment in the pending criminal prosecution continues to exist.’”); Smith v. Holtz, 87 F.3d 108, 113 (3d Cir. 1996) (“[W]e hold that a claim that, if successful, would necessarily imply the invalidity of a conviction on a pending criminal charge . . . does not accrue so long as the potential for a judgment in the pending criminal prosecution continues to exist.”); Washington v. Summerville, 127 F.3d 552, 556 (7th Cir. 1997) (“If success on these claims would have necessarily implied the invalidity of a potential conviction on the murder charge, then Washington’s claims did not accrue until the day on which the murder charge was dismissed.”); Harvey v. Waldron, 210 F.3d 1008, 1014 (9th Cir. 2000) (“Heck applies to pending criminal charges, and that a claim, that if successful would necessarily imply the invalidity of a conviction in a pending criminal prosecution, does not accrue so long as the potential for a conviction in the pending criminal prosecution continues to exist.”); Beck v. City of Muskogee Police Dep’t, 195 F.3d 553, 557 (10th Cir. 1999) (“Heck precludes § 1983 claims relating to pending charges when a judgment in favor of the plaintiff would necessarily imply the invalidity of any conviction or sentence that might result from prosecution of the pending charges. Such claims arise at the time the charges are dismissed.”). Based on these principles, the Sixth Circuit dismissed section 1983 cases filed by plaintiffs with pending criminal charges. See Gorenc v. City of Westland, 72 Fed. Appx. 336 (6th Cir. 2003); Shamaeizadeh, 182 F.3d at 399. -10- In Wallace v. Kato, 127 S. Ct. 1091 (2007), the Supreme Court overruled all the precedents in the circuits applying Heck to bar section 1983 claims filed by persons with criminal charges pending in state court or deferring the accrual date of such claims. Heck only applies if the plaintiff has actually been convicted. The Court held that a section 1983 claim based on an illegal arrest accrues at the time of the arrest, not when the convictions were reversed by a state court, and Heck v. Humphrey, does not require otherwise. Shamaeizadeh, plainly, was overruled. There can be no question that the plaintiffs relied on Sixth Circuit precedent to their prejudice in this case. The untimeliness of the plaintiffs’ complaint results from an understandable confusion about the state of the law as to when their claim accrued. That confusion was created by the courts themselves. The delay did not result from the plaintiffs’ failure to diligently pursue the claim. In fact, the plaintiffs filed their complaint less than one year after their convictions were reversed. Moreover, strict application of Wallace to this case effectively deprives the plaintiffs of their cause of action. If the plaintiffs had filed their case immediately after the search on May 4, 2001, Sixth Circuit precedent would have required dismissal of the case as barred by Heck. Once the law changed, the plaintiffs’ convictions having been reversed on September 30, 2004, the plaintiffs would be barred by the statute of limitations under Wallace. This is “a result surely not intended.” Wallace, 127 S. Ct. at 1099 n.4. Rather, this is the unusual case that fits neatly within the doctrine of equitable tolling. The Court concludes that Michigan law tolled the three-year statute of limitations while the plaintiffs’ convictions were still viable, and filing this case within three years of the reversal of those convictions does not result in a statute of limitations bar. -11- Accordingly, it is ORDERED that the plaintiffs’ motion for reconsideration [dkt # 51] is GRANTED. It is further ORDERED that the judgment dismissing the complaint [dkt #50] is VACATED and the complaint is REINSTATED. It is further ORDERED that this Court’s order dated February 12, 2007 [dkt #41] is REINSTATED. It is further ORDERED that plaintiffs shall appear for a final pretrial conference in accordance with the Case Management and Scheduling Order on February 19, 2008, at 3:00 o’clock in the afternoon, the proposed joint final pretrial order shall be submitted to chambers on or before February 12, 2008, motions in limine shall be filed on or before January 22, 2008, pretrial disclosures under Fed. R. Civ. P. 26(a)(3) shall be served on or before January 4, 2008, and trial on the remaining issues shall commence on March 4, 2008. Dated: December 5, 2007 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 5, 2007. s/Felicia M. Moses FELICIA M. MOSES -12-

=== Lang Opinion on Cross MSJs ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION WILLIAM J. LANG LAND CLEARING, INC., v. Petitioner, ADMINISTRATOR, WAGE AND HOUR DIVISION, U.S. DEPARTMENT OF LABOR, and ADMINISTRATIVE REVIEW BOARD, U.S. DEPARTMENT OF LABOR, _______________________________________/ Respondents. Civil Case Number 04-10336 Honorable David M. Lawson Magistrate Judge Charles E. Binder OPINION AND ORDER SUSTAINING IN PART AND OVERRULING IN PART OBJECTIONS TO MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION, ADOPTING RECOMMENDATION IN PART AND REJECTING IN PART, GRANTING RESPONDENTS’ MOTION FOR SUMMARY JUDGMENT, AND DENYING PETITIONER’S MOTION FOR SUMMARY JUDGMENT Several Acts of Congress, most notably the Davis-Bacon Act, require that employers on federal projects pay employees a minimum wage equal to “the wages the Secretary of Labor determines to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the civil subdivision of the State in which the work is to be performed.” 40 U.S.C. § 3142(b) (formerly cited as 40 U.S.C. § 276a). Under the Act and corresponding Department of Labor regulations, the compensation paid to workers is calculated by adding to the periodic wage payments credits for certain qualifying fringe benefits; the total must meet or exceed the “minimum wage” under the Act. The petitioner in this case, William J. Lang Land Clearing, Inc., performed work under several government contracts subject to the Act’s minimum wage requirements. The petitioner filed an action in this Court under the Administrative Procedures Act challenging determinations by the Department of Labor’s Wage and Hour Division disallowing credit for fringe benefits in three categories claimed by the petitioner against the minimum wage requirement; and a separate determination that certain workers were classified by the petitioner improperly in a lower prevailing wage category. The parties filed cross motions for summary judgment, which were referred to Magistrate Judge Charles E. Binder for a report and recommendation under 28 U.S.C. § 636(b)(1)(B). Judge Binder filed his report on March 28, 2006 recommending that the respondents’ motion for summary judgment be granted in part and the Wage and Hour Division Administrator’s decision be sustained as to disallowing credit against the minimum wage for non-qualifying fringe benefits. Judge Binder also recommended that the petitioner’s motion be granted in part and the Administrative Review Board’s (the Board) decision reversed as to the classification of workers. Both sides filed timely objections and the matter is before the Court for a de novo review of the matter presented. However, a court’s review of an agency determination under the Administrative Procedures Act is highly deferential, and the Court now finds that the Board’s decision in each of the four areas of challenge is supported by substantial evidence, and it is not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Therefore, the Court will overrule the petitioner’s objections to the report and recommendation, sustain the respondents’ objection, grant the respondent’s motion for summary judgment, deny the petitioner’s motion for summary judgment, and affirm the Board’s decision. I. The dispute in this case focuses on the Board’s decision of four issues that underlie its determination that William J. Lang Land Clearing, Inc. (Lang, Inc.) did not pay minimum wage to its workers performing certain contracts as required by the Davis-Bacon Act, 40 U.S.C. § 3141- 3148, and other related acts, including the Federal Aid Highway Act, 23 U.S.C. § 101, the Airport -2- and Airway Improvement Act, 49 U.S.C. § 47112(b), Reorganization Plan No. 14 of 1950, 5 U.S.C. App., the Contract Work Hours and Safety Standards Act, 40 U.S.C. § 3701-3708, and the related regulations under 19 C.F.R. Part 5. The Administrator found that in calculating the wages it reported as having been paid to its workers, Lang, Inc. (1) took improper credit for meals and lodging provided to employees; (2) improperly used an annual across-the-board average of its health insurance premium payments to compute hourly fringe benefit credit; (3) improperly took prevailing wage credit for vacation payouts; and (4) misclassified power equipment operators to a lower paid group classification (Class IV instead of Class I, where the Administrator said they belonged). The magistrate judge’s report contains a brief factual summary, which the Court believes should be expanded to address the cross motions for summary judgment. Lang, Inc. is a construction contractor located in Beaverton, Michigan that performs land clearing work. The petitioner originally cleared mostly farmland and forests, primarily using bulldozers to clear the land. The petitioner categorized the bulldozer operators as Class I employees under the applicable wage determinations, which includes employees who use heavy earth-moving, highway construction, and paving equipment. The petitioner recently has focused more on clearing land around roads and highways. It uses different equipment for this work, including a recycler or “tub grinder,” hydro-axes, skidders (used to drag bundles of trees to a chipper), chippers, and wheel grinders. The Board’s opinion describes the various pieces of equipment in Lang, Inc.’s arsenal: The hydro-ax is similar to an end loader and is a relatively large piece of equipment; it is 10 feet tall and approximately 20 feet long.. Hydro-axes are used to cut down trees up to 20 inches in diameter and can also clear underbrush. Skidders also measure approximately 10 feet tall and 20 feet long. This type of equipment is used with a grappling attachment to pick up and transport trees that are cut by the hydro- axes. . . . The tree chipper is used to process felled trees (and brush) into wood chips; it is 30 to 40 feet long, 15 to 16 feet high, and is capable of reducing a 20-inch diameter tree to wood chips in less than one minute. The final piece of disputed -3- equipment is the stump grinder, used to grind away the tree stumps which remain after the trees have been removed by the hydro-ax. The stump grinder, a modified excavator or backhoe, weights 70 to 80 thousand pounds and in less than two minutes can grind a stump up to 22 inches in diameter. A.R. at 2005, Board’s Final Decision and Order. The parties also used a “bulldozer in at least some capacity” on one project. A.R. at 1729, ALJ Decision and Order. The petitioner still keeps a few bulldozers as backup for other equipment or to retrieve equipment that gets stuck. The petitioner classifies all its operators as Class IV operators, which includes users of miscellaneous equipment such as farm, trucking, and forestry equipment. The petitioner has worked as a subcontractor for five different prime contractors on six contracts that received federal funds. The cases under review involve the following work: in Case No. 98-DBA-1 as a subcontractor under Peters Construction Company on a Michigan Department of Transportation (MDOT) new construction project in Kalamazoo County during mid-1996. in Case No. 98-DBA-2 as a subcontractor under Zito Construction on a MDOT road- widening project in Genesse County during late 1996. in Case No. 98-DBA-3 as a subcontractor under Kamminga and Roodvooets, Inc., on a MDOT road-extension project in Kent County from May 1995 through October 1996. in Case No. 98-DBA-4 as a subcontractor under John Carlo, Inc. on a MDOT road construction project in Macomb County from June 1990 through August 1996. in Case No. 98-DBA-5 as a subcontractor under John Carlo, Inc. on a MDOT road construction project in Macomb County from August 1996 through May 1998. in Case No. 98-DBA-6 as a subcontractor under Dan’s Excavating, Inc., MDOT pavement reconstruction project in Oakland County from July 1996 through July 1998. A.R. at 1725-26, ALJ Decision and Order. -4- Over the course of two years, the petitioner employed twenty-two employees on these six contracts. Class I employees were to receive between $17.85 and $21.13 per hour, with benefits valued between $8.15 and $10.28 per hour. Class IV were paid between $14.79 and $17.50 per hour, with fringe benefits valued between $8.15 and $9.89 per hour. The petitioner also provided meals and lodging to its employees while they were working on federal projects. In addition, the petitioner provided health insurance to its employees and credited the cost towards its wage obligations. In 1995, it claimed a credit for $1.65 per hour per employee, which was increased to $1.91 in 1996. On July 13, 1995, August 3, 1995, and December 29, 1995, the petitioner made extra payments to its employees, the nature of which was vigorously disputed at the administrative hearing. The petitioner claimed a credit for all these payments as qualifying fringe benefits that were added to the actual wages to measure against the minimum wage required by the Davis-Bacon Act and other federal laws and rules. In 1996, the United States Department of Labor, Wage and Hour Division (referred to by the parties as the Administrator) investigated the petitioner’s practices regarding their obligation to pay prevailing wages under the relevant federal requirements. The investigation began after the Department of Labor received a complaint from some anonymous employees. As a result of its investigation, the respondent began proceedings against the petitioner. On May 18 through 20, 1999, a hearing was held before ALJ Daniel Roketenetz in Midland, Michigan. Several current and former employees of the petitioner testified as this hearing. The ALJ found that Lang, Inc. wrongfully had taken fringe benefit credit for bonus payments that it had improperly characterized as vacation payments. But he also found that Lang, Inc. did not classify its equipment operators as Class IV instead of I improperly; it was entitled to credit for reimbursement for meals and -5- lodging; and it could average his health insurance costs for the purposes of determining the amount of the credit against the minimum wage. Both parties appealed to the Administrative Review Board. The Board issued its decision on September 28, 2004, reversing the ALJ’s rulings in favor of the petitioner and affirming the ruling in favor of the Administrator. The Board rejected the ALJ’s conclusion that Lang, Inc. could take credit for the meals and lodging it provided its employees. Additionally, the Board reversed the ALJ’s determination that Lang’s health insurance credit calculation was proper. Finally, the Board turned to the dispute regarding the classification of equipment operators and found that the local practice of classifying workers followed categories found in certain collective bargaining agreements, and the prevailing wages must track those classifications. The Board found that the witnesses for the government had presented “copious, uniform, and unrebutted testimony” that Lang’s equipment operators should be classified in Group I, and the ALJ erred by holding otherwise. A.R. at 2027-28. On December 3, 2004, the petitioner filed the present action seeking review of these decisions. Cross motions for summary judgment were filed on July 18, 2005 and referred to the magistrate judge. On March 28, 2006, Magistrate Judge Binder issued his report and recommendation agreeing with the petitioner on the equipment (worker) classification issues and the respondent on the other three issues. Both parties filed timely objections. II. Objections to a report and recommendation are reviewed de novo. 28 U.S.C. § 636(b)(1). The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be -6- clear enough to enable the district court to discern those issues that are dispositive and contentious.” Miller v. Currie, 50 F.3d 373, 380 (6th Cir.1995). “‘[O]bjections disput[ing] the correctness of the magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380). Review of actions by an administrative agency is generally conducted under the Administrative Procedures Act, 5 U.S.C. § 701, et seq. According to section 706 of the Act, a federal court must “hold unlawful and set aside agency action, findings and conclusions found to be . . . arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with the law.” 5 U.S.C. 706(2)(A); L.P. Cavett Co. v. U.S. Dept. of Labor, 101 F.3d 1111, 1113 (6th Cir. 1996). The magistrate judge suggested that when the Administrative Review Board disagrees with the ALJ, a less deferential standard of review applies. R&R at 4 (citing Miree Constr. Corp. v. Dole, 930 F.2d 1536, 1541 (11th Cir. 1991). However, as the Sixth Circuit has explained: We may disturb the Secretary of Labor’s decision “only if we find that the decision ‘is unsupported by substantial evidence’ or if it is ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’” Varnadore v. Secretary of Labor, 141 F.3d 625, 630 (6th Cir. 1998) (quoting the Administrative Procedure Act at 5 U.S.C. 706(2)(A . The ARB acts for the Secretary of Labor and is responsible for issuing “final agency decisions.” Id. at 630. To satisfy the substantial evidence standard, the Board’s decisions must be supported by “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” ITT Auto v. NLRB, 188 F.3d 375, 384 (6th Cir. 1999). “The substantial evidence standard is a lower standard than weight of the evidence and ‘the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency’s finding from being supported by substantial evidence.’” Painting Co. v. NLRB, 298 F.3d 492, 499 (6th Cir. 2002) (quoting NLRB v. Kentucky May Coal Co. Inc., 89 F.3d 1235, 1241 (6th Cir. 1996 . “This highly deferential standard of review is not altered merely because the Secretary disagrees with the ALJ, see Universal Camera Corp. v. NLRB, 340 U.S. 474, 496 (1951), and we ‘defer to the inferences that the Secretary derives from the evidence, not to those of the ALJ.’” Varnadore, 141 F.3d at 630 (quoting Lockert v. United States Dep’t of Labor, 867 F.2d 513, 519 n.2 (9th Cir. 1989 . -7- Sasse v. United States Dep’t of Labor, 409 F.3d 773, 778-79 (6th Cir. 2005) (emphasis added). “The scope of review under the ‘arbitrary and capricious’ standard is narrow and a court is not to substitute its judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). Nonetheless, the agency must articulate a “rational connection between the facts found and the choice made.” Id. (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962 . An abuse of discretion is found when, based on the evidence, the explanation offered for a particular outcome is unreasonable. Perry v. United Food & Commercial Workers Dist. Unions 405 and 442, 64 F.3d 238, 242 (6th Cir. 1995). An agency ruling that is contrary to law likewise must be set aside. A court may invalidate an agency adjudication or rule making if it is “inconsistent with the statutory mandate or frustrate[s] the policy that Congress sought to implement.” Lansing Dairy, Inc. v. Espy, 39 F.3d 1339, 1350 (6th Cir. 1994). “An agency which violates its regulations is acting contrary to law.” Chrysler Corp., v. Schlesinger, 412 F. Supp. 171, 177 (D. Del. 1976), vacated on other grounds sub nom Chrysler Corp. v. Brown, 441 U.S. 281 (1979); S.&S. Logging Co. v. Barker, 366 F.2d 617, 624 n.6 (9th Cir. 1966); Delaware v. Bender, 370 F. Supp. 1193, 1203 (D. Del. 1974). The Davis-Bacon Act requires employers on federal projects to pay employees the prevailing wage in a community. The twin purposes of the act are to “give local laborers and contractors fair opportunity to participate in building programs when federal money is involved and to protect local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the area.” L.P. Cavett, 101 F.3d at 1113. The Davis-Bacon Act is a “remedial act for the benefit of construction workers, . . . and is therefore liberally construed to effectuate its -8- beneficent purpose.” Drivers, Local Union No. 695 v. NLRB, 361 F.2d 547, 553 n. 23 (D.C. Cir. 1966) (citing United States v. Binghamton Construction Co., 347 U.S. 171, 176-178 (1954 . To determine the applicable wage, the Davis-Bacon Act allows “the basic hourly rate of pay” to be added to the value of certain fringe benefits, calculated as: the rate of contribution irrevocably made by a contractor or subcontractor to a trustee or to a third person pursuant to a fund, plan, or program; and the rate of costs to the contractor or subcontractor which may be reasonably anticipated in providing benefits to laborers and mechanics pursuant to an enforceable commitment to carry out a financially responsible plan or program which was communicated in writing to the laborers and mechanics affected . . . for medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, or insurance to provide any of the foregoing, for unemployment benefits, life insurance, disability and sickness insurance, or accident insurance, for vacation and holiday pay, for defraying costs of apprenticeship or other similar programs, or for other bona fide fringe benefits, but only where the contractor or subcontractor is not required by other Federal, State, or local law to provide any of such benefits[.] 40 U.S.C. § 276a (2000). This language was rearranged but not modified in 2002 (except the last line replaced “any of such benefits” with “any of those benefits”). Compare 40 U.S.C. § 3141(2) with 40 U.S.C. § 276a(b) (2000). In 2002, there was a deletion of the provision (although it is still applicable to this case): Provided, That the obligation of a contractor or subcontractor to make payment in accordance with the prevailing wage determinations of the Secretary of Labor, insofar as sections 276a to 276a-5 of this title and other Acts incorporating sections 276a to 276a-5 of this title by reference are concerned may be discharged by the making of payments in cash, by the making of contributions of a type referred to in paragraph (2)(A), or by the assumption of an enforceable commitment to bear the costs of a plan or program of a type referred to in paragraph (2)(B), or any combination thereof, where the aggregate of any such payments, contributions, and costs is not less than the rate of pay described in paragraph (1) plus the amount referred to in paragraph (2). Compare 40 U.S.C. § 3141(2) with 40 U.S.C. § 276a(b) (2000). -9- As mentioned, there are four areas of dispute presented by the petitioner’s complaint, the magistrate judge’s report, and the parties’ objections. The Court will address each in turn. A. Meals and Lodging The magistrate judge concluded that the Board’s decision should stand that Lang’s provision of food and lodging at the work site do not count as a fringe benefit. The petitioner objected and insists that its payments were bona fide fringe benefits under a commitment to carry out a responsible plan or program, or alternatively as a payment of cash toward the hourly rate. It argues that the payments provide a real benefit to the employees, and are not a sham; therefore they are bona fide and should be allowed. Alternately, the petitioner argues that the Fair Labor Standards Act (FLSA) permits it to count as “wages” the reasonable cost of meals and lodging, and it met all record-keeping requirements of that Act. The petitioner also contends that a like practice was approved in Soler v. G & U, Inc., 833 F.3d 1104 (2nd Cir. 1987). Finally, it asserts that the Administrator’s ruling will result in an increased tax burden for employees if living expenses away from home are compensated in an increase in taxable wages rather than reimbursement. “[I]n order for board and lodging reimbursement to be creditable toward the employer’s obligations under the Davis-Bacon Act, such subsistence payments must be determined to be either part of the basic rate of pay or a bona fide fringe benefit.” In re Calculus, Inc., 1993 WL 537381 (Wage Appeal Board, October 29, 1993). The regulations discuss the meaning of “other bona fide fringe benefits”: (c) The term “other bona fide fringe benefits” is the so-called “open end” provision. This was included so that new fringe benefits may be recognized by the Secretary as they become prevailing. It was pointed out that a particular fringe benefit need not -10- be recognized beyond a particular area in order for the Secretary to find that it is prevailing in that area. (S. Rep. No. 963, p. 6). (d) The legislative reports indicate that, to insure against considering and giving credit to any and all fringe benefits, some of which might be illusory or not genuine, the qualification was included that such fringe benefits must be “bona fide” (H. Rep. No. 308, p. 4; S. Rep. No. 963, p. 6). No difficulty is anticipated in determining whether a particular fringe benefit is “bona fide” in the ordinary case where the benefits are those common in the construction industry and which are established under a usual fund, plan, or program. This would be typically the case of those fringe benefits listed in paragraph (a) of this section which are funded under a trust or insurance program. Contractors may take credit for contributions made under such conventional plans without requesting the approval of the Secretary of Labor under § 5.5(a)(1)(iv). (e) Where the plan is not of the conventional type described in the preceding paragraph, it will be necessary for the Secretary to examine the facts and circumstances to determine whether they are “bona fide” in accordance with requirements of the act. This is particularly true with respect to unfunded plans. Contractors or subcontractors seeking credit under the act for costs incurred for such plans must request specific permission from the Secretary under § 5.5(a)(1)(iv). . . . (f) . . . While each situation must be separately considered on its own merits, payments made for travel, subsistence or to industry promotion funds are not normally payments for fringe benefits under the Act. The omission in the Act of any express reference to these payments, which are common in the construction industry, suggests that these payments should not normally be regarded as bona fide fringe benefits under the Act. 29 C.F.R § 5.29 (1999). Another regulation permits an employer to deduct as credit towards “wage”: (j) Any deduction not more than for the “reasonable cost” of board, lodging, or other facilities meeting the requirements of section 3(m) of the Fair Labor Standards Act of 1938, as amended, and Part 531 of this title. When such a deduction is made the additional records required under § 516.25(a) of this title shall be kept. 29 C.F.R. § 3.5 (1999). This regulation was promulgated “to aid in the enforcement of the minimum wage provisions of the Davis-Bacon Act.” 29 C.F.R. § 3.1 (1999). The regulation expressly incorporates section 3(m) of the FLSA, and its interpreting regulations. Section 3(m) of the FLSA states that: -11- “Wage” paid to any employee includes the reasonable cost, as determined by the Administrator, to the employer of furnishing such employee with board, lodging, or other facilities, if such board, lodging, or other facilities are customarily furnished by such employer to his employees 29 U.S.C. § 203(m) (1994). “Customarily furnished,” in turn, is defined in the regulations as “furnished regularly by the employer to his employees or if the same or similar facilities are customarily furnished by other employees engaged in the same or similar trade, business, or occupation in the same or similar communities.” 29 C.F.R. § 531.31 (1995). However, reimbursement for expenses incurred primarily for the benefit of the employer are not credited to the employee’s wages under this section. 29 C.F.R. § 778.217(a). The regulation offers as an example of a reimbursement not credited to the employee: “The actual or reasonably approximate amount expended by an employee, who is traveling ‘over the road’ on his employer's business, for transportation (whether by private car or common carrier) and living expenses away from home, other travel expenses, such as taxicab fares, incurred while traveling on the employer’s business.” 29 C.F.R. § 778.217(b)(3) (1995). The agency promulgated a Field Office Handbook, that, given the agency’s expertise, “while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which the courts and litigants may properly resort for guidance.” Reich v. Miss Paula's Day Care Center, Inc., 37 F.3d 1191, 1194 (6th Cir. 1994) (quoting Mabee v. White Plains Publishing Co., 327 U.S. 178, 182 (1946) and citing Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944 ; see also Battle Creek Health System v. Leavitt, --- F.3d ----, 2007 WL 2301506, at *11 (6th Cir. August 14, 2007) (looking to agency’s Medicare manual for guidance). “The weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those -12- factors which give it power to persuade, if lacking power to control.” Skidmore, 323 U.S. at 140. The Handbook notes that, under FLSA: The crediting by an employer of facilities furnished to employees as wages will depend on whether such facilities are furnished primarily for the benefit or convenience of the employee, as determined by WH. Where the primary benefit of such facilities is to the employer’s business interest, credit will be denied. The following are commonly viewed as furnished primarily for the benefit or convenience of employees: (1) Meals Meals furnished by the employer are regarded as primarily for the benefit and convenience of the employees. This rule does not apply, however, to the meal expenses incurred by an employee while traveling away from home on the employer’s business. (2) Lodging Lodging, like meals, is ordinarily considered for the benefit and convenience of the employee. Circumstances may exist, however, where housing is of little benefit to employees, as where . . . the employee must travel away from home to further the employer’s business. In such circumstances, the housing will be considered as primarily benefiting [sic] the employer. Field Operations Handbook § 30c03 (6/29/1990), available at http://www.dol.gov/ esa/whd/FOH/FOH_Ch30.pdf. Case law interpreting this section provides insight into when room and board qualifies as benefitting the employer or employee. One factor that is not relevant for determining whether meals or lodging count towards the wage is whether the employees are given a choice whether to accept the benefit. Herman v. Collis Foods, Inc., 176 F.3d 912, 917-18 (6th Cir. 1999) (meals); Donovan v. Miller Properties, Inc., 711 F.2d 49, 50 (5th Cir. 1983) (per curiam) (lodging). The Administrative Review Board’s predecessor, the Wage Appeals Board, determined that an employer could not credit $50 per day per diem payments designated towards their prevailing wage requirements. Calculus, Inc., WAB Case No. 93-06, 1993 WL 537381 (1993). The Board decided that “subsistence payments are not wages, are not considered to be bonafide fringe benefits, -13- and do not constitute permissible deductions from employees' wages.” Id. at *2 (citing Handbook § 15f18). The Board based this conclusion on several grounds: that the employer did not keep any records of the payments; the payments were not customarily furnished except for that particular contract; and evidence was wanting that the payments primarily benefitted the employee. Id. at *3- 4. The determination of whether the employer or employee benefits requires a case-by-case inquiry. Without benefit of a Department of Labor ruling in the case, the Fifth Circuit found that a per diem payment to an employee was for the benefit of the employer, and so should not be included in his wage for the purposes of calculating overtime compensation. Berry v. Excel Group, Inc., 288 F.3d 252, 254 (5th Cir. 2002) (noting that meals and lodging for out-of-town work “were in addition to his regular recurring household expenses in Brookewood where his family lived and where he maintained his primary residence”). In contrast, the Second Circuit found that housing facilities for migrant workers were for the benefit of the employee, and therefore should be counted towards their wages under the FLSA. Soler v. G. & U., Inc., 833 F.2d 1104 (2nd Cir. 1987). Against a challenge under the APA, the court found the Board’s decision was not arbitrary and capricious. The court introduced the idea that there is a presumption that lodging is provided for the benefit of the employee, particular when the workers had no other residences and the cost of on-site housing was found reasonable. The agency handbook says that, under the Davis-Bacon Act: Where an employer sends empoyees [sic] who are regularly employed in their home community away from home to perform a special job at a location outside daily commuting distances from their homes so that, as a practical matter, they can return to their homes only on weekends, the assumption by the employer of the cost of the board and lodging at the distant location, not customarily furnished the empoyees [sic] in their regular employment by the employer, and of weekend transportation -14- costs of returning to their homes and reporting again to the special job at the end of the weekend, are considered as payment of travel expenses properly reimbursable by the employer and incurred for its benefit. Such payments are not considered bona fide fringe benefits within the meaning of the DBRA, are not part of the empoyees’ [sic] wages, and do not constitute board, lodging, or other facilities customarily furnished which are deducible from the predetermined wage pursuant to Regs 3.5(j). Field Operations Handbook § 15f18 (6/29/1990), available at http://www.dol.gov/esa/whd/ FOH/FOH_Ch15.pdf. At the administrative hearing, it was established that Lang, Inc. provided meals and lodging to its employees while they were working on federal projects. The petitioner’s projects were scattered throughout Michigan, often far away from the company’s headquarters in Beaverton. The petitioner decided to require the employees to stay in a motel chosen by the petitioner during the work week and not permit them to return home until the weekend. The employees were given a company credit card and permitted to charge these expenses or seek reimbursement. The petitioner chose to do this rather than increase the pay for its employees while they were working out of town. Employees testified that, had Lang not reimbursed them for these expenses, they would have quit. A.R. at 156, Hr’g Tr., May 18, 1999 (testimony of Kurt Cameron). The government also introduced testimony that the industry custom is to not take fringe benefit credit for meal and lodging reimbursement. Ken Swartz is a regional manager for Walsh Construction Company, which performs shrub-clearing and site-clearing services. He testified that his company covers its employees’ meals and lodging but does not claim a fringe benefit credit for this. He reasoned that his company was the one that “primarily” benefitted from the payment because it is cheaper to keep the same employees and pay their travel than to pay to retrain. He believes that his company’s practice was consistent with general industry practices. Craig Sickmiller, of Sunset Excavating -15- testified that when his company pays for meals and lodging for workers away from home, it is done primarily for the benefit of the company. The Board rejected the ALJ’s conclusion that Lang could take credit for the meals and lodging it provided its employees. The Board noted that the statute and interpreting regulations expressly exclude such payments in most situations. The Administrator’s Handbook is not to the contrary, the Board held, because the handbook’s exclusion of payments for “special jobs” includes jobs that are “outside a commuting zone which would allow employees to return home nightly after each day’s work shift.” A.R. at 2012-13. Moreover, “[t]he employee lodging and food expenses in this case were clearly undertaken for Lang’s benefit. Lang could only perform its far distant [Davis-Bacon Act] contracts (and benefit thereby) if its employees incurred the substantial detriment of traveling to locals far from their homes for most of every work week.” Id. at 2014-15. The Board also pointed to the 1993 Board decision in Calculus, Inc., which did not permit the employer to claim a credit for food and lodging when the employees were required to be away from home during the week. The Court believes that this is a reasonable application of the law to the facts developed below. It also appears to be consistent with the prevailing practice of Michigan contractors. See A.R. at 470, Hr’g Tr., May 19, 1999 (testimony of Sickmiller). The petitioner has cited no case, either by a court or the Board, that compels a contrary finding. The cases the petitioner relies upon provide, at best, isolated suggestions in dicta or an inference that might support it, yet are easily distinguishable on their facts from the present case. The decision also is consistent with the agency’s handbook, a longstanding document informed by the agency’s expertise. The Court finds that Administrator’s ruling is not arbitrary, capricious, or contrary to law, and it is supported by -16- substantial evidence in the record. The petitioner’s objection will be overruled and the Administrator’s decision affirmed. B. Health Insurance The petitioner next objects to the magistrate judge’s conclusion that the Board’s decision denying credit for health insurance payments should stand. The administrative record shows that the petitioner provided health insurance to its employees and credited the cost towards its wage obligations. In 1995, it claimed a credit for $1.65 per hour per employee, which was increased to $1.91 in 1996. A.R. at 50-51, Hr’g Tr., May 18, 1999. The health insurance was available for the employee and the worker’s family and continued during seasonal lay-offs, but became effective only ninety days after the employee’s hiring. The petitioner calculated the credit amount by taking the total annual health insurance cost from the previous year for each job classification and dividing it by the number of hours worked by an employee in each classification that year to come to a cost per hour for each classification. John Hamilton testified on behalf of the local union before the ALJ that the bargaining agreement between his union and contractors sets an hourly amount for health insurance. Id. at 265, Hr’g Tr., May 19, 1999. The hourly rate is the same whether the employee has dependents or not. The ALJ found in favor of Lang, Inc., but the Board reversed. It held that because the company pays more for employees that receive family insurance, averaging the credits between employees with and without additional insureds is improper because “Lang failed to pay its single- insured employees their required DBA prevailing wage because the average wage overstated the cash value of their insurance benefit.” Id. at 2017-18. The Board also found that Lang’s inclusion of employees who were not yet eligible for the insurance during their first ninety days was improper, -17- because “[e]mployees who are excluded from a plan for whatever reason and for whom the employer makes no contribution must be paid in cash.” Id. at 2019 (quoting Handbook Section 15f12 (emphasis omitted . The petitioner argues that there are extreme fluxuations from month to month in the value of the insurance benefit employees received per hour, but the value of the insurance to the employee remained constant. The petitioner defends its method of annualizing the benefit by pointing to an Eleventh Circuit decision affirming a decision of the Wage Appeals Board, which approved an employer’s calculation of payments to an apprenticeship program fringe benefit on an annual basis. Miree Construction Corp. v. Dole, 930 F.2d 1536 (11th Cir. 1991 . The petitioner notes that it is allowed to average expenses spent on other fringe benefits – such as food and lodging when permitted – among all employees, despite varying costs between them, referring to Herman v. Collis Foods, 176 F.3d 912, 917-18 (6th Cir. 1999), a Sixth Circuit case that permitted an employee to average the cost of meals from all employees regardless of whether the employee actually took the meals or not for the purposes of determining wages under FLSA. The petitioner also cites the Handbook, which states “it is not required that all employees participating in the bona fide fringe benefit plan be entitled to receive benefits from that plan at all times.” Pet’r.’s Obj. at 28 (citing Handbook § 15f12). Finally, it argues that its practice is the same as the practice of many contractors and the provisions of applicable collective bargaining contracts. Id. at 28-30 (citing A.R. 265-67 (testimony of Hamilton); A.R. 1554, Agreement between the Labor Relations Division of the Michigan Road Builders Association and the International Union of Operating Engineers, Local 324 (June 1, 1998) (permitting the credit of four dollars per hour for health care . -18- The Davis-Bacon expressly permits employers to include, when calculating an employee’s wage: the rate of costs to the contractor or subcontractor which may be reasonably anticipated in providing benefits to laborers and mechanics pursuant to an enforcible [sic] commitment to carry out a financially responsible plan or program which was communicated in writing to the laborers and mechanics affected, for medical or hospital care . . . or insurance to provide any of the foregoing . . . 40 U.S.C. § 276a (1994). The agency’s handbook states that credit may not be taken during a waiting period before an employee is eligible to receive the benefit: Eligibility standards are permissible in an otherwise “bona fide” fringe benefit plan under DBRA. However, an employer must make payments or incur costs in the applicable specified amounts with respect to each individual laborer or mechanic performing covered contract work. Employees who are excluded from a plan for whatever reason and for whom the employer makes no contribution must be paid in cash. For example, many hospitalization plans require a waiting period of 30 days before the employee can participate in the plan. Since the employee normally makes no contribution for the employee during the waiting period, the employee must be paid the fringe benefit in cash or furnished other bona fide fringe benefits equal in monetary value. If the plan requires contributions to be made during the eligibility waiting period, credit may be taken for such contributions, since it is not required that all employees participating in a bona fide fringe benefit plan be entitled to receive benefits from that plan at all times. However, credit may not be taken for contributions for employees who by definition are not eligible to participate, such as employees who are excluded because of age or part-time employment. Handbook § 15f12, available at http://www.dol.gov/esa/whd/FOH/FOH_Ch15.pdf The handbook also instructs that the employer may not average benefits when the employer’s contribution varies between employees: In computing cash equivalents, it should be kept in mind that under certain kinds of fringe benefit plans the rate of contribution for employees may vary. For example, under a hospitalization plan the employer often contributes at different rates for single and family plan members. In such situations, an employer cannot take an across the board average equivalent for all employees; rather, the cash equivalent can only be credited based on the rate of contributions for each individual employee. -19- Id. at § 15f11(d). The statute and regulations are also silent as to what time period should be used in calculating the credit. However, the Handbook specifies that the credit should be calculated using the same period as the contribution: In determining cash equivalent credit for fringe benefit payments, the period of time to be used is the period covered by the contribution. For example, if an employer contributes to a hospitalization plan on a weekly basis, the total hours worked (DBRA covered and noncovered) each week by each employee should be divided into the contribution made by the employer on behalf of each employee to determine the hourly cash equivalent for which the employer is entitled to take credit for each employee. If contributions are made bi-weekly, cash equivalents would be computed bi-weekly. If contributions are made quarterly, cash equivalents would be computed quarterly, etc. Id. at § 15f11(a). The magistrate judge appears to have rested his affirmation of the Board solely on Lang Inc.’s failure to distinguish between single and family plan members. See Rep. and Rec. at 10 (“Since Lang did not distinguish between single and family plan members in its across-the-board computation, Lang failed to properly calculate its fringe benefit according to Agency policy.”). The magistrate judge was correct, as far as he went. The handbook, although not controlling, expressly contemplates different amounts will be credited for different family or single-person health care premium costs. That is not inconsistent with the statute and the regulations. In fact, the regulations require that the employer certify “[t]hat each laborer or mechanic (including each helper, apprentice, and trainee) employed on the contract during the payroll period has been paid the full weekly wages earned, without rebate, either directly or indirectly.” 29 C.F.R. § 5.5(ii)(B)(2) (1995). This language suggests a general policy that each employee receive the prevailing full wage. -20- The petitioner’s reliance on Herman for a contrary proposition is misplaced. There, the Court rejected the agency’s reliance on the handbook and held that an employer could average the cost of meals among all employees for the purposes of the FLSA. Herman, 176 F.3d at 920. In so doing, however, the Court relied on the express statutory grant in the FLSA that contemplates the determination of “the fair value of such board, lodging, or other facilities for defined classes of employees and in defined areas, based on average cost to the employer or to groups of employers similarly situated, or average value to groups of employees, or other appropriate measures of fair value.” 29 U.S.C. § 203(m). This reasoning is inapplicable to the calculation of health care benefits under the Davis-Bacon Act, which contains no such language. Herman may support the petitioner’s policy argument that it is illogical to require it to individually determine the health insurance costs. Yet there are grounds for treating health care premiums differently than meal reimbursement. For instance, tracking meal expenses is much more difficult than the less-varied health care premiums. Moreover, the Board must be affirmed on its rejection of the petitioner’s inclusion of the waiting period and method of calculating the hourly benefit. The petitioner does not dispute the meaning of the applicable passages of the Handbook, but instead argues that they should be ignored in its case. This argument fails, however, because the Board’s reliance on the handbook is itself eminently reasonable. The petitioner’s reliance on Miree Construction to challenge the handbook’s relevant provisions likewise is unpersuasive because the case does not support this contention. In Miree Construction, the Board and the Eleventh Circuit found that calculation of the fringe benefit – the cost of an apprenticeship program – should be annualized over all projects worked by the employer whether governed by the Davis-Bacon Act or not. The issue in dispute was whether the employer -21- had to include non-Davis-Bacon Act projects in its calculation of hours. The parties were not disputing the time period denominator. Miree Const. Corp., 930 F.2d at 1546. The petitioner’s argument that agency-approved contracts permit the employer to average the costs among all employees (including between those with and without dependents, and those in an eligibility-waiting period) is without evidentiary support. Lang, Inc. cites to union president Hamilton’s admission that the contractors pay the same hourly rate for all employees, and it points to the union contract calling for the payment of $4 for each employee on the contract. However, as the respondent argues, that practice is permissible only if the contractor pays the same amount regardless of the family coverage or whether the employee is currently receiving benefits. There is no evidence that the union’s contract did not comply with this rule. On such a fact question, deference to the Board is particularly appropriate. Finally, the petitioner advances a general policy argument that its method is dictated by “common sense” and is “sound, more equitable to all parties involved.” Pet.’s Obj. at 23-24. That may be true, but this alternate rationale does not establish that the Board’s decision is unreasonable. Policy considerations are better dealt with by the agency charged with administering the act. The Court concludes that the objection on this ground must be overruled. C. Cash payments The magistrate judge suggested affirmance of the Board’s decision that certain sporadic cash payments did not qualify as a fringe benefit because they failed to meet consistency requirements. According to the administrative record, on July 13, 1995, August 3, 1995, and December 29, 1995, the petitioner made extra payments to its employees. There is a controversy as to the nature of these payments. The petitioner credited these payments towards its wage obligations and contends that -22- “there is no dispute that these payments were made to employees specifically to meet prevailing wage obligations.” Pet’r’s Obj. at 2. During his testimony before the ALJ, the petitioner’s owner William Lang explained that during the summer of 1995, he realized that his employees were not receiving enough wages plus fringe benefits to satisfy the Davis-Bacon Act. Therefore, he paid the employees the lump sums: the amount of the deficiency per hour multiplied by the applicable number of hours as vacation pay, and the remainder as a bonus. He explained further: Because of this hourly fringe benefit requirement and the way that our fringe benefits are paid, which are not really by the hour, there is difficulty in knowing an established hourly rate. So we would be into the job for a while and see how these costs would be calculated on an hourly basis. And then when you would determine if there was a deficiency, then I thought that vacation pay would be a good way to rectify that so that we met the requirement for fringe benefits. [I chose vacation pay in particular b]ecause vacation pay is something that is paid out like several times a year and that would fit into what we had to do to comply with the fringe benefit requirement. I told . . . [the bookkeeper] to make some calculations based on representative weeks and come up with what a good representative number would be for the value of our fringe benefits and initially she gave me some figures. I determined that it was deficient. So then I decided to make payments that I knew would cover the deficiency. A.R. at 686-87, Hr’g Tr., May 20, 1999. In contrast to the petitioner’s assertions, however, the Board found that “the record contains no evidence (other than uncorroborated testimony by Lang’s owner) to support the contention that these disputed sporadic payments were made for vacation fringe benefits.” Id. at 2007, Board Final Decision at Order. Although at the hearing he claimed he could not remember, at a deposition Mr. Lang admitted that he “probably told [his employees] that [the payment] was their bonus.” Id. at 57, Hr’g. Tr., May 18, 1999. -23- Various employees testified at the hearing before the ALJ that Mr. Lang told them that the payments were for a bonus or just for doing a good job. Id. at 65, Hr’g Tr., May 18, 1999 (testimony of Frank Roza) (payments were “just for doing a good job. Keep up the good work.”); id. at 96 (testimony of Gary Stanger) (payments were a “bonus,” “basically, just for doing a good job”). Other employees said that Lang was silent as to the purpose of the money. Id. at 137 (testimony of Kurt Cameron) (“didn’t hear what [the payment] was for” and doesn’t have “any idea” what payment was for). One employee testified that the company told him that “it was something in the pay that the hours weren’t right” and that it was somehow related to a Department of Labor investigation. Id. at 172 (testimony of Arthur Good). The check stubs given to the employees contain the notation “bonus” by the payment. A.R. at 119, Hr’g Tr., May 18, 1999 (testimony of Paul Warner); id. at 875 (check stub of Gary Stenger); id. at 890 (check stub of Paul Warner). The petitioner claimed approximately $11,000 in credit in this manner. The ALJ found that the payments were not qualifying fringe benefits because Lang, Inc. did not follow the correct procedure in making the payments and they were too irregular to comport with the applicable regulations. The Board affirmed that part of the decision, and, as noted, the magistrate judge recommended affirmance. The petitioner objects on the ground that the regulation is inconsistent with the spirit and purpose of the Davis-Bacon Act itself and should be disregarded, citing Thompson v. Diocese of Saginaw, 2004 WL 45519 (E.D. Mich. 2004). The Davis-Bacon Act permits employers to credit towards their wage obligations the rate of contribution irrevocably made by a contractor or subcontractor to a trustee or to a third person pursuant to a fund, plan, or program; and the rate of costs to the contractor or subcontractor which may be reasonably anticipated in providing benefits to laborers and mechanics pursuant to an -24- enforceable commitment to carry out a financially responsible plan or program which was communicated in writing to the laborers and mechanics affected, . . . for vacation and holiday pay . . . or for other bona fide fringe benefits . . . 29 U.S.C. § 276a(a) (1994). Bonus payments are not a listed fringe benefit, and the government has consistently denied to extend credit to such payments. The regulations permit employers to make “an additional cash payment in lieu of the required benefits,” 29 C.F.R. § 5.31 (1995), but they impose timing requirements on cash payments under the statute: All laborers and mechanics employed or working upon the site of the work . . . will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR Part 3 , the full amount of wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor . . . regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics. Contributions made or costs reasonably anticipated for bona fide fringe benefits under section 1(b)(2) of the Davis-Bacon Act on behalf of laborers or mechanics are considered wages paid to such laborers or mechanics, subject to the provisions of paragraph (a)(1)(iv) of this section; also, regular contributions made or costs incurred for more than a weekly period (but not less often than quarterly) under plans, funds, or programs which cover the particular weekly period, are deemed to be constructively made or incurred during such weekly period. Such laborers and mechanics shall be paid the appropriate wage rate and fringe benefits on the wage determination for the classification of work actually performed, without regard to skill, except as provided in § 5.5(a)(4). 29 C.F.R. § 5.5(a)(1)(i) (1999) (emphasis added). The handbook explains that “Reg 5.5(a)(1)(I) requires that contributions to fringe benefit plans made by a contractor or subcontractor must be made on a regular basis, i.e., not less often than quarterly.” Handbook § 15f10. -25- The Board’s conclusion is correct that the weight of the evidence proves that the payments were bonuses. William Lang’s testimony that the payments were actually vacation payments is not corroborated by any other source. In contrast, several witnesses testified that they were told the payments were “bonuses” or for “doing a good job,” and the check stubs verify this claim. The Board’s decision on this ground certainly is supported by substantial evidence and is reasonable. The petitioner’s claim that the regulation is inapplicable or invalid fails as well. Its reliance on Thompson v. Diocese of Saginaw for a contrary proposition is misplaced. Thompson simply noted that the FMLA regulation relied upon in that case had been criticized by the Supreme Court as contravening the purposes of the statute. 2004 WL 45519 at 6-7 (citing Ragsdale v. Wolverine World Wide, Inc., 535 U.S. 81, 88-89 (2002 . In contrast, the Davis-Bacon Act actually requires payment “unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account, the full amounts accrued at time of payment.” 40 U.S.C. s- 276a (1994). The agency’s regulation promotes the statutory preference for the weekly payment of wages and fringe benefits. The regulation “accords with the text and structure of the” Davis-Bacon Act. Ragsdale, 535 U.S. at 88. The petitioner’s objection on this ground lacks merit. D. Categorization of Workers The magistrate judge concluded that the Board’s decision on the categorization of Lang’s employees should be overturned. The government objected to this conclusion. The record developed at the administrative hearing contains evidence relating to the classification of equipment, which in turn determines the category of the worker who operates it. Each Lang, Inc. contract contains a section entitled “POWER EQUIPMENT OPERATOR CLASSIFICATIONS.” Under Group 1, the following pieces of equipment are listed: -26- Backfiller tampler; Backhoe; Batch plant operator (concrete); Clamshell; Concrete paver (2 or more drums or larger); Conveyor loader (Euclid type); Crane (crawler, truck type or pile driving); Dozer; Dragline; Elevating grader; Endloader; Gradall (and similar type machine); Grader; Mechanic; Power shovel; Roller (asphalt); Scraper (self-propelled or tractor drawn); Side boom tractor (type D-4 or equivalent and larger); Slip form paver; Slope paver; Trencher (over 8 ft. digging capacity); Well drilling rig A.R. at 1000. Group 4 lists the following: Boiler; concrete aw (40 hp or over); Curing machine (self-propelled); Farm tractor (with attachment); Finishing machine (concrete); Fire tender; Hydraulic pipe pushing machine; Mulching equipment; Oiler; Pumps (2 or more up to 4-in. discharge, if used 3 hours or more a day, or diesel powered - excluding submersible pumps); Roller (other than asphalt); Stump remover; Trencher (service); Vibrating compaction equipment, self-propelled (6 ft. wide or over) Ibid. Below these lists is the notation “ENGIO324F.” Ibid. The Board took “judicial notice” that such a notation “means that the Administrator determined that the prevailing wage rates for heavy equipment operators were the International Union of Operating Engineers, Local 324’s collectively- bargained wage rates.” Ibid. Several members of the industry testified regarding local industry practices regarding the classification of equipment. Ken Swartz, manager of a Michigan general contractor, testified that his company uses the “same equipment [with] different attachments” as Lang, and that the differences due to the attachments would not change the equipment’s classification. Id. at 217. He admitted that his company does not actually use a stump grinder as such, but he said that the “level of controls” is the same between Lang’s stump grinder and equipment that he used. Ibid. He testified that he expects a high level of skill and experience from an employee before he would permit that employee to operate such equipment. -27- John Hamilton is the president of union Operating Engineers, Local 324, which represents 12,000 Michigan construction workers. He testified that he is not sure how many land-clearing companies are covered by his union’s contracts. He testified that when negotiating with employers, the union classifies equipment categories based on the machine’s size and power, and the “expertise required to operate it.” Id. at 227. Class IV workers have the “lowest skill,” and operate smaller machines. Id. at 232. On cross-examination, he admitted that under the union agreements, several pieces of equipment designed to remove or grind stumps are classified as Class IV equipment. Id. at 260-61. He also admitted that the 1800-pound pump operator falls into Class I, even though it is vastly different in weight. Id. at 236. In contrast, a crusher, a winch truck, and a farm tractor can be much larger than a concrete pump, yet are classified into Class IV. Id. at 240, 248, 257. Sam Hart, business manager of Local 324, testified that the union rate is “normally” the prevailing wage rate among contractors. Id. at 285, 288. Mr. Hart testified that based on the size of the equipment, the grapple skidders, stump grinders, and hydro-axes would normally be classified as Category I. Id. at 288-96. He based this conclusion on the size of the machine and the skill needed of the operator. Id. at 289-90. Mr. Hart testified that Lang Inc.’s stump remover is not what was contemplated by the union’s designation of “mulching equipment” in Class IV because it is “actually . . . on an excavator.” Id. at 298-300. In fact, “98 to 99 percent of people working on road jobs would be classified as Group I,” because “really the only things they use out there anymore [in Group IV] is . . . a grease man with a grease truck or a mechanic helper.” Id. at 320. He testified that he is not aware of any disagreement in the industry on how to classify the equipment, but admitted that his experience was only with unionized land clearing companies, which are only a portion of -28- all land clearing companies in the state. He did note, however, that the department of labor uses the union’s collective bargaining agreements as the basis for the wage determinations. Harry Fox, owner of a land clearing company, testified that classification depends on the skill of the operator, as well as the size and power of the equipment, but the “size and weight is the determining factor.” id. at 392, Hr’g Tr., May 19, 1999. Mr. Fox testified that he classifies his equipment – including hydro-ax, skidder, tree chipper, stump grinder, and the bulldozer – in Class I, consistent with industry practice. All of his employees are paid at the Class I rate except for two individuals who are classified as apprentices and are outside of the classification structure. He stated that he has not had any employees grouped in Class IV in fifteen or twenty years. He thought if he were to buy a Lang, Inc. stump grinder, he would classify its operators as Class I. He further stated that Lang Inc.’s equipment would not count as “mulching equipment” under the contract given the size of the machines. Id. at 385-86. On cross-examination, he admitted that bulldozers are always in Class I regardless of size. He admitted that a crusher weighs twice as much as some small bulldozers, but is classified in Class II. Some farm tractors can be extremely large, the “same size, weight and power as the equipment that [Mr. Fox] use[s] in [his] operation,” with a measure of skill to operate. Id. at 412. David Park, the treasurer of B&V construction, which is an earth moving contractor that has subcontracted out land clearing work on federal projects, testified that he would put the stump grinder, hydro-ax and bulldozer into Class I due to the “size and the type of equipment is appears to have been modified from.” Id. at 446-47. Out of the company’s 250 employees, approximately 240 are classified in Class I, with “probably eight” as Class IV. Id. at 454. -29- Craig Sickmiller, Vice President of Finance of excavating contractor Sunset Excavating, testified that his company has hired land clearing subcontractors that usually use bulldozers, backhoes, skidders, and stump grinders. The classification categories depend on “the skill required to use [the equipment], and the nature of the equipment itself.” Id. at 461. He noted that Class I equipment “are pieces of equipment that you operate from within the equipment itself,” while Class IV “are pieces of equipment that are operated almost externally.” Ibid. He testified that the Lang hydro-ax, grapple skidder, and tree chipper should all be classified as Class I. Id. at 463-68. The equipment could not be considered mulching equipment or a “stump remover” under Class IV, because these terms refer to landscaping type equipment that are “hand propelled.” Id. at 467-69. The ALJ opined that the labels assigned to the equipment in the contracts should take precedence and found in favor of Lang, Inc. on this issue. The Board reversed because the “ALJ’s reasoning and rulings betray a basic misunderstanding of the legal principles governing employee classification disputes under the Act.” Id. at 2021. The Board found that if union rates are used as the prevailing wage for a region, “proper classification of duties under the wage determination must be determined by the area practice of the unions that are party to the agreement.” Id. at 2022 (internal citations and quotations and alterations omitted). According to the Board, because the Administrator used Local 324’s collective bargaining agreements to determine the prevailing wage rates, the union’s practice controls. The Board concluded that the ALJ had “no rational support” for rejecting the testimony of the union officials on the grounds that there were examples of Class IV equipment larger than Class I, because these “minor examples” were but a “tiny fraction of the total number of different pieces of heavy equipment listed among the four equipment operator subclassifications in the wage determinations.” Id. at 2023-24. The Board was persuaded by Hart’s -30- testimony that “Lang’s four unlisted pieces of equipment were most similar to the generally larger equipment listed in Group I (such as the bulldozers Lang used).” Id. at 2025. “Conversely, Lang’s four pieces of disputed heavy equipment were clearly dissimilar to the vast majority of the smaller, less powerful pieces of machinery listed in the wage determinations’ Group IV classification.” Id. at 2025-26. The Board found that the witnesses for the government had presented “copious, uniform, and unrebutted testimony” that Lang’s equipment should be classified in Group I, and the ALJ erred by holding otherwise. Id. at 2027-28. The magistrate judge disagreed and adopted reasoning similar to the ALJ’s. The respondent levels two objections at the magistrate judge’s conclusion: first, they state that the question of the agency’s classification of workers is beyond the scope of judicial review; second, they contend that the magistrate judge’s conclusion violates standard of review prescribed by the Administrative Procedure Act, 5 U.S.C. 706(2) because the magistrate judge improperly substituted his judgment for that of the Board. The Administrative Procedures Act authorizes judicial review of all final agency actions except when “(1) statutes preclude judicial review; or (2) agency action is committed to agency discretion by law.” 5 U.S.C. § 701(a). The Davis-Bacon Act requires that contractors pay their employees: the wages that will be determined by the Secretary of Labor to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the city, town, village, or other civil subdivision of the State in which the work is to be performed. 40 U.S.C. § 276a (1994). The regulations provide for the following procedure for determining how to classify workers: -31- (A) The contracting officer shall require that any class of laborers or mechanics, including helpers, which is not listed in the wage determination and which is to be employed under the contract shall be classified in conformance with the wage determination. The contracting officer shall approve an additional classification and wage rate and fringe benefits therefore only when the following criteria have been met: (1) Except with respect to helpers as defined in 29 CFR 5.2(n)(4), the work to be performed by the classification requested is not performed by a classification in the wage determination; and (2) The classification is utilized in the area by the construction industry; and (3) The proposed wage rate, including any bona fide fringe benefits, bears a reasonable relationship to the wage rates contained in the wage determination; and (4) With respect to helpers as defined in 29 CFR 5.2(n)(4), such a classification prevails in the area in which the work is performed. (B) If the contractor and the laborers and mechanics to be employed in the classification (if known), or their representatives, and the contracting officer agree on the classification and wage rate (including the amount designated for fringe benefits were appropriate), a report of the action taken shall be sent by the contracting officer to the Administrator of the Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor, Washington, D.C. 20210. The Administrator, or an authorized representative, will approve, modify, or disapprove every additional classification action within 30 days of receipt and so advise the contracting officer or will notify the contracting officer within the 30-day period that additional time is necessary. (C) In the event the contractor, the laborers or mechanics to be employed in the classification or their representatives, and the contracting officer do not agree on the proposed classification and wage rate (including the amount designated for fringe benefits, where appropriate), the contracting officer shall refer the questions, including the views of all interested parties and the recommendation of the contracting officer, to the Administrator for determination. The Administrator, or an authorized representative, will issue a determination within 30 days of receipt and so advise the contracting officer or will notify the contracting officer within the 30-day period that additional time is necessary. (D) The wage rate (including fringe benefits where appropriate) determined pursuant to subparagraphs (1)(B) or (C) of this paragraph, shall be paid to all workers performing work in the classification under this contract from the first day on which work is performed in the classification. 29 C.F.R. § 5.5(a)(ii) (1995). The Supreme Court held that under the Davis-Bacon Act, “Congress . . . direct[ed] the Secretary of Labor to determine, on the basis of prevailing rates in the locality, the appropriate -32- minimum wages for each project. The correctness of the Secretary’s determination is not open to attack on judicial review.” United States v. Binghamton Const. Co., 347 U.S. 171, 177 (1954). The Supreme Court has “expressed no view” on whether the “practices and procedures” of the wage determination may be reviewed under the APA. Univ. Research Ass’n, Inc. v. Coutu, 450 U.S. 754, 761 n. 10 (1981). The Courts of Appeals have expressed differing views on the scope of review of Department of Labor worker classifications. Without discussing Binghamton, the Sixth Circuit reviewed and struck down the Department of Labor’s regulation that applied Davis-Bacon requirements to truck drivers hauling asphalt to a work site. L.P. Cavett Co. v. U.S. Dept. of Labor, 101 F.3d 1111, 1113- 14 (6th Cir. 1996); see also North Georgia Bldg. & Constr. Trades Council v. Goldschmidt, 621 F.2d 697, 707 (5th Cir. 1980) (court could review under the APA the Board’s determination that the Davis-Bacon Act did not apply to project). The D.C. Circuit recently ruled that it could review the agency’s determination of which classification the workers fell into for purposes of determining the appropriate prevailing wage. Mistick PBT v. Chao, 440 F.3d 503, 508 (D.C. Cir. 2006). The court held that it could review under the APA agency application of the regulations to the contractor’s situation. Id. at 509. The court found that there was nothing in the Davis-Bacon Act, let alone clear and convincing evidence, demonstrating that Congress sought to preclude judicial review of the Secretary’s compliance with the conformance regulations [at 29 C.F.R. § 5.5(a)(ii)(A)] or, looking even to the broader administrative activity at issue here, the Department's alleged failure to follow its own regulations in its post-bid dealings with a contractor. Ibid. The court added that APA review was especially necessary for situations after the contractor has entered into a contract, because the contractor could not simply not bid on a project governed by an arbitrary and capricious wage determination. Id. at 510. In performing its review, the court -33- held that the agency did not act in an arbitrary or capricious manner by comparing the wage rates of unclassified workers. The Court believes, consistent with Mistick, that it has the authority to review the manner in which certain workers have been slotted into classes established by the Department of Labor. This determination leaves untouched the Department’s determination of the prevailing wage; it only examines wither certain workers fall into the categories determined by the agency. Upon examining the Board’s determination in this case under the deferential review standard established by the APA, the Court must conclude that the Board did not act in an arbitrary and capricious manner. The petitioner’s challenge is leveled at both the procedural aspects of the Board’s decision and the substantive outcome. See BP Exploration & Oil, Inc.(93-3310) v. U.S. E.P.A., 66 F.3d 784, 792 (6th Cir. 1995) (observing that “a court’s administrative review function as divisible into three categories: statutory, procedural, and substantive”). Procedurally, the petitioner believes that the Board erred by taking judicial notice of the meaning of the designation “ENGIO324" on the contract and lacked evidence for its decision. Substantively, the petitioner believes that the Board’s decision is incorrect, contrary to the wage determinations. Procedurally, the Board’s decision-making process was not arbitrary. It considered all evidence and answered the objections raised by the petitioner. For example, although the petitioner is correct that many witnesses’ testimony was challenged during cross-examination by pointing out pieces of equipment inconsistent with their theories, the Board explained why it still believed their testimony was persuasive. See, e.g., A.R. at 2023-24. The witnesses were not rendered unreliable nor were they completely discredited; therefore the Board did not act arbitrarily by relying on their testimony. The Board also took judicial notice of the meaning of an abbreviation on a contract, -34- which is capable of accurate determination. See Fed. R. Evid. 201 (judicial notice of adjudicative facts). Substantively, the Board’s decision that Group I workers operate larger machinery or have greater skill as a general rule than Group IV workers, and therefore are paid more, likewise is reasonable. Moreover, the classifications are consistent with prevailing practices, based on the overwhelming evidence in the record. There is no dispute that the several categories of the petitioner’s equipment are large and require skilled operators. The finding that the workers who operate them ought to classified in Group I is supported by substantial evidence, and it is not arbitrary, capricious, or contrary to law. The Court, therefore, disagrees with the magistrate judge on this point and will sustain the respondents’ objection. III. The Court has considered the cross motions for summary judgment de novo in light of the magistrate judge’s report and the parties’ objections. The Court finds that the petitioner’s objections lack merit, the respondents’ objections are well taken, the magistrate judge correctly determined that Board properly disallowed credit for fringe benefits in the three categories discussed above, and erred in suggesting that the Board incorrectly determined that certain workers were classified by the petitioner improperly in a lower prevailing wage category. Accordingly, it is ORDERED that the magistrate judge’s report and recommendation [dkt #29] is ADOPTED IN PART AND REJECTED IN PART. It is further ORDERED that the petitioner’s objections to the magistrate judge’s report [dkt #32] are OVERRULED. -35- It is further ORDERED that the respondents’ objections to the magistrate judge’s report [dkt #30] are SUSTAINED. It is further ORDERED that the respondents’ motion for summary judgment [dkt #18] is GRANTED. It is further ORDERED that the petitioner’s motion for summary judgment [dkt #19] is DENIED. It is further ORDERED that the findings and decision of the United States Department of Labor’s (DOL) Administrative Review Board are AFFIRMED, and the complaint is DISMISSED with prejudice. Dated: September 29, 2007 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on September 29, 2007. s/Felicia M. Moses FELICIA M. MOSES -36-

=== Brown Opinion Denying HC ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION MICHAEL BROWN, Petitioner, v. KENNETH McKEE, Respondent. ____________________________________/ Case No. 04-10080 Honorable David M. Lawson OPINION AND ORDER DENYING PETITION FOR WRIT OF HABEAS CORPUS The petitioner, Michael Brown, presently confined at the Oaks Correctional Facility in Manistee, Michigan, has filed a pro se petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 alleging that he is in custody in violation of his constitutional rights. The petitioner was sentenced to fourteen to thirty years in prison following a guilty plea to armed robbery, Mich. Comp. Laws § 750.529, in the Saginaw County, Michigan circuit court. The petitioner asserts one ground for habeas relief: that he was denied due process because his sentence was substantially more severe than agreed upon as part of the plea agreement. The Court has carefully reviewed the petitioner’s submissions and now concludes that this claim lacks merit. I. On March 19, 2002, the petitioner pleaded guilty in Saginaw County, Michigan circuit court to armed robbery. During the plea colloquy, he also acknowledged being a habitual offender and that this crime was his fourth offense. Pursuant to People v. Cobbs, 443 Mich. 276, 505 N.W.2d 208 (1993), the parties and the trial court agreed to a minimum sentence of not more than fourteen years in prison. On June 6, 2002, the trial court sentenced the petitioner to imprisonment for a minimum term of fourteen years and a maximum term of thirty years. The petitioner subsequently moved for re-sentencing on the ground that his plea was not voluntary or intelligently made. He claimed that the trial court did not sentence him according to the plea agreement or permit him to withdraw his plea when the court imposed a sentence greater than the sentence agreed upon by the parties. The trial court denied the petitioner’s motion after concluding that it had not diverged from the plea bargain. The petitioner appealed his sentence to the Michigan Court of Appeals, which denied leave to appeal “for lack of merit in the grounds presented.” People v. Brown, No. 248170 (Mich. Ct. App. Aug. 13, 2003). On January 27, 2004, the Michigan Supreme Court denied leave to appeal because it was not persuaded that the question presented should be reviewed. See People v. Brown, No. 124590 (Mich. Sup. Ct. Jan. 27, 2004). The petitioner filed the instant habeas corpus petition on March 31, 2004. The ground for relief reads: Petitioner was deprived of due process of law when the sentencing court imposed a sentence that was substantially more severe than that agreed upon by the parties and denied his motion to be resentenced pursuant to the specified terms of the plea agreement. The respondent has filed a response, urging the Court to deny the habeas petition because the petitioner’s sentence was not an objectively unreasonable application of Supreme Court precedent. II. The provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub. L. No. 104-132, 110 Stat. 1214 (Apr. 24, 1996), which govern this case, “circumscribe[d]” the standard of review federal courts must apply when considering applications for a writ of habeas corpus raising constitutional claims. See Wiggins v. Smith, , 520 (2003). As amended, 28 U.S.C. § 2254(d) imposes the following standard of review for habeas cases: -2- An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim – (1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or (2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding. 28 U.S.C. § 2254(d). Therefore, federal courts are bound by a state court’s adjudication of a petitioner’s claims unless the state court’s decision was contrary to or involved an unreasonable application of clearly established federal law. Franklin v. Francis, 144 F.3d 429, 433 (6th Cir. 1998). Mere error by the state court will not justify issuance of the writ; rather, the state court’s application of federal law “must have been objectively unreasonable.” Wiggins, 539 U.S. at 520-21 (quoting Williams v. Taylor, , 409 (2000) ( internal quotes omitted . Additionally, this Court must presume the correctness of state court factual determinations. 28 U.S.C. § 2254(e)(1) (“In a proceeding instituted by an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court, a determination of a factual issue made by a State court shall be presumed to be correct.”); see also West v. Seabold, 73 F.3d 81, 84 (6th Cir. 1996) (stating that “[t]he court gives complete deference to state court findings of historical fact unless they are clearly erroneous”). The Supreme Court has explained the proper application of the “contrary to” clause as follows: A state-court decision will certainly be contrary to [the Supreme Court’s] clearly established precedent if the state court applies a rule that contradicts the governing law set forth in our cases. . . . -3- A state-court decision will also be contrary to this Court’s clearly established precedent if the state court confronts a set of facts that are materially indistinguishable from a decision of this Court and nevertheless arrives at a result different from [the Court’s] precedent. Williams, 529 U.S. at 405-06. The Supreme Court has held that a federal court should analyze a claim for habeas corpus relief under the “unreasonable application” clause of § 2254(d)(1) “when a state-court decision unreasonably applies the law of this Court to the facts of a prisoner’s case.” Id. at 409. The Court defined “unreasonable application” as follows: [A] federal habeas court making the “unreasonable application” inquiry should ask whether the state court’s application of clearly established federal law was objectively unreasonable. . . . [A]n unreasonable application of federal law is different from an incorrect application of federal law. . . . Under § 2254(d)(1)’s “unreasonable application” clause, then, a federal habeas court may not issue the writ simply because that court concludes in its independent judgment that the relevant state-court decision applied clearly established federal law erroneously or incorrectly. Rather, that application must also be unreasonable. Id. at 409, 410-11. See also Davis v. Coyle, 475 F.3d 761, 766 (6th Cir. 2007); King v. Bobby, 433 F.3d 483, 489 (6th Cir. 2006); Harbison v. Bell, 408 F.3d 823, 828-29 (6th Cir. 2005); Rockwell v. Yukins, 341 F.3d 507, 512 (6th Cir. 2003) (en banc). The petitioner’s claim that he was deprived of due process of law when the trial court imposed a sentence that was substantially more severe than the sentence agreed upon by the parties has two components. He first argues that the trial court violated the terms of the plea bargain by sentencing the petitioner to more than the maximum sentence for which he bargained. The petitioner insists that the plea bargain called for a maximum sentence of fourteen years and the trial -4- court improperly attempted to rewrite the plea agreement by sentencing him to a maximum of thirty years in prison. In support of his argument, the petitioner points to Santabello v. New York, 404 U.S. 257, 262 (1971), in which the Supreme Court held that, “when a plea rests in any significant degree on a promise or agreement of the prosecutor, so that it can be said to be part of the inducement or consideration, such promise must be fulfilled.” That case, however, concerned the prosecutor’s breach of the plea agreement, not the trial court’s as alleged here. The petitioner has cited no Supreme Court decision holding that a sentencing court is obligated to honor a prosecutor’s recommendation as to an appropriate sentence, but that distinction, in the Court’s view, is immaterial. The Sixth Circuit has held that a defendant has no right to withdraw his guilty plea when a state judge does not follow a prosecutor’s recommendation when the state court makes clear to the defendant at the plea hearing that it may depart from the recommended sentence. Carwile v. Smith, 874 F.2d 382, 385-86 (6th Cir. 1989). However, “there is a critical difference between an entitlement and a mere hope or expectation that the trial court will follow the prosecutor’s recommendation.” Ibid. (quoting Mabry v. Johnson, 467 U.S. 504, 507 n. 5 (1984). Under Michigan law, the trial judge’s participation in the plea bargaining process was outlined (and approved) by the state supreme court in People v. Cobbs. When the judge approves a so-called Cobbs plea, the sentencing court is not bound by the sentencing recommendation, but the defendant is given an absolute right to withdraw the guilty plea if expectation is not realized. The Cobbs court explained: -5- At the request of a party, and not on the judge’s own initiative, a judge may state on the record the length of sentence that, on the basis of the information then available to the judge, appears to be appropriate for the charged offense. To avoid the potential for coercion, a judge must not state or imply alternative sentencing possibilities on the basis of future procedural choices, such as an exercise of the defendant’s right to trial by jury or by the court. The judge’s preliminary evaluation of the case does not bind the judge’s sentencing discretion, since additional facts may emerge during later proceedings, in the presentence report, through the allocution afforded to the prosecutor and the victim, or from other sources. However, a defendant who pleads guilty or nolo contendere in reliance upon a judge’s preliminary evaluation with regard to an appropriate sentence has an absolute right to withdraw the plea if the judge later determines that the sentence must exceed the preliminary evaluation. Cobbs, 443 Mich. at 283, 505 N.W.2d at 212 (emphasis added) (footnote omitted). “[I]t is not the province of a federal habeas court to reexamine state-court determinations on state-law questions. In conducting habeas review, a federal court is limited to deciding whether a conviction violated the Constitution, laws, or treaties of the United States. 28 U.S.C. § 2241; Rose v. Hodges, 423 U.S. 19, 21 (1975) (per curiam ).” Estelle v. McGuire, , 67-68 (1991). Nonetheless, if the petitioner pleaded guilty on the basis of a promise that was not fulfilled, he ought not be bound by his plea. The Sixth Circuit has recognized that the “failure to adhere to [a] plea agreement in good faith has been held to implicate a defendant’s due process rights.” Elzy v. United States, 205 F.3d 882, 884 (6th Cir. 2000). A petitioner’s entitlement to relief as a result of an alleged broken plea agreement depends in the main on the precise language of the agreement itself. The Sixth Circuit has explained: This court has held that “[p]lea agreements are contractual in nature. In interpreting and enforcing them, we are to use traditional principles of contract law.” United States v. Robison, 924 F.2d 612, 613 (6th Cir. 1991). One fundamental principle of contract interpretation is that “primary importance should be placed upon the words of the contract. Unless expressed in some way in the writing, the actual intent of the parties is ineffective, except when it can be made the basis for reformation of the -6- writing.” 11 Williston on Contracts § 31:4 (4th ed. 2000). Consistent with the principle articulated by Williston, this court has held that the state will be held to the literal terms of the plea agreement. United States v. Mandell, 905 F.2d 970, 973 (6th Cir. 1990) (citing United States v. Kamer, 781 F.2d 1380, 1387 (9th Cir. 1986 . Smith v. Stegall, 385 F.3d 993, 999 (6th Cir. 2004). Focusing on the precise language of the Cobbs plea in this case, the Court must conclude that the state trial court did not violate the terms of the plea agreement. The agreement obligated the prosecutor to recommend a minimum sentence of not more than fourteen years. Plea Hr’g Tr. at 18 (Mar. 19, 2002). The trial court honored this agreement by sentencing the petitioner to a minimum sentence of fourteen years. The petitioner attempts here to parlay that promise into an agreement with respect to the maximum sentence in the case. Whether due to a good faith misunderstanding or an attempt to manipulate the record, however, the petitioner’s argument must fail. Michigan uses an indeterminate sentencing scheme for custodial sentences in which the sentencing court sets a minimum term of imprisonment that may be as long as two-thirds of the statutory maximum sentence. See Mich. Comp. Laws § 769.34(2)(b); People v. Babcock, 469 Mich. 247, 255 n. 7, 666 N.W.2d 231, 237 n.7 (2003) (citing People v. Tanner, 387 Mich. 683, 690, 199 N.W.2d 202 (1972 . If the statutory maximum sentence is life in prison, as in the case of armed robbery, then the sentencing court has discretion to set the maximum term as well. Babcock, 469 Mich. at 256 n. 7, 666 N.W.2d at 237 n. 7. The Michigan parole board has the discretion to release a prisoner after he has served his minimum sentence. Mich. Comp. Laws § 791.233(1); Hopkins v. Michigan Parole Bd., 237 Mich. App. 629, 646, 604 N.W.2d 686, 695 (1999). The plea agreement in this case addressed only the minimum sentence. To complete the criminal sentence under the indeterminate sentence law, the sentencing court also must establish a maximum term, which, as -7- noted earlier, is set automatically by statute or established by the sentencing judge’s unrestricted discretion. Although there may have been some ambiguity during the discussion on the record in this case, as discussed below, a careful review leads to the conclusion that the maximum sentence was not discussed at the time of the plea hearing, and played no part in the Cobbs plea agreement. Therefore, the assertion that the trial court violated the terms of the plea bargain therefore has no basis in fact. The petitioner also alleges that his guilty plea was not voluntary, knowing, and intelligent because he failed to receive the benefit of his bargain. The petitioner claims that he thought the maximum sentence would not exceed fourteen years and that he could not have anticipated a more severe sentence because both the prosecutor and defense counsel assured him the sentence would be “capped” at fourteen years. Because a plea is a waiver of certain constitutional rights, it must be a voluntary, knowing, and intelligent act “done with sufficient awareness of the relevant circumstances and likely consequences.” Brady v. United States, 397 U.S. 742, 748 (1970). The voluntariness of a plea “can be determined only by considering all of the relevant circumstances surrounding it.” Brady, 397 U.S. at 749. For a guilty plea to be voluntary, “the defendant need only be aware of the direct consequences of the plea” and “the maximum sentence that could be imposed.” King v. Dutton, 17 F.3d 151, 153-54 (6th Cir. 1994). Affirmative misstatements of the maximum possible sentence can invalidate a guilty plea. Pitts v. United States, 763 F.2d 197, 201 (6th Cir. 1985). Moreover, federal courts cannot exclude all possibility that a defendant’s representations at the time of his guilty plea were the product of misunderstanding, duress, or misrepresentation by others so as to make the -8- guilty plea a constitutionally inadequate basis for imprisonment. Blackledge v. Allison, 431 U.S. 63, 75 (1977). As noted above, in Michigan the sentencing guidelines set forth a range for the sentence. However, it is well established under Michigan law that the sentencing-guideline range only applies to a defendant’s minimum sentence. See Administrative Order No.1984-1, 418 Mich. xxiv; People v. Ridley, 142 Mich. App. 129, 133-34, 369 N.W.2d 274 (1985). The upper limit of the sentencing guidelines is sometimes referred to as the “maximum minimum.” The prosecutor in this case stated at the plea proceeding that the mid-range for the sentencing guidelines – that is, the prescribed minimum sentence – was 175.5 months, which he had rounded down to fourteen years. He then said, It would have been about 14-1/2 years, and we’re going to cap any potential sentence for the defendant at 14 years. I understand the Court does not have to follow that, but if the Court chose to sentence higher, then it would allow the defendant to withdraw his plea. Plea Hr’g Tr. at 9 (Mar. 19, 2002) (emphasis added). Defense counsel agreed, stating that in exchange for a plea of guilty to armed robbery and acknowledgment of the petitioner’s habitual offender status, the People are agreeing to recommend to the Court a cap of not more than 14 years, this being roughly the mid-point of what was believed to be the appropriate guidelines in this case. That is a sentence bargain cap in this, the understanding being if the Court were to exceed that at the time of sentencing, Mr. Brown would have a right to withdraw his plea and proceed to a jury trial. Id. at 10 (emphasis added). The trial court subsequently engaged in a colloquy with the petitioner, who was then thirty- six years of age and had completed the eighth grade. The petitioner stated that he had discussed his -9- plea with his attorney and that he was pleading guilty freely and voluntarily. Id. at 13, 15. When the trial court asked the petitioner whether he understood that he was pleading guilty to a felony that carried a maximum penalty of life imprisonment or any term of years, the petitioner responded, “I pray to God I don’t get it” and “I pray to God I don’t receive that.” Id. at 15. The court then asked, “But do you understand that that’s what you’re pleading guilty to?” Ibid. The petitioner responded, “Yes.” Ibid. The petitioner went on to reassure the court that he understood the rights he was waiving by pleading guilty. Then the trial court said: Now it’s my understanding, Mr. Brown, that the plea agreement that’s been entered into between you and your attorney and the prosecutor’s office in this case is the prosecutor is recommending that the Court sentence you to no more than 14 years in prison, the maximum-minimum being no more than 14 years. You understand that? Id. at 18 (emphasis added). The petitioner answered, “Yes.” Id. at 15. The court explained that it was not required to follow the prosecutor’s recommendation, but that the court would provide an opportunity for the petitioner to withdraw his plea if the court did not follow the prosecutor’s recommendation. The petitioner said he understood and he was pleading guilty of his own choice. Id. at 19-20. Thus, the record indicates that the petitioner was informed of the maximum statutory penalty that the court could impose. And although the attorneys stated that the sentence would be “capped” at fourteen years, they obviously were referring to the minimum sentence because their comments were made in the context of a discussion about the sentencing guidelines. Although that point may not have been so obvious to the petitioner when listening to the words used by the lawyers, the trial court clarified the terms of the plea bargain when it stated that the “maximum-minimum” sentence -10- would be no more than fourteen years. The petitioner responded to this comment by saying that he understood. His contention that he thought the maximum sentence could be no more than fourteen years is undermined by the fact that neither he nor his attorney objected or even questioned the trial court’s comment about the maximum-minimum sentence of fourteen years. There is no doubt that defense counsel understood the import of the agreement. The petitioner does not allege that his attorney failed to explain these terms or gave him bad advice. The petitioner also stated at the plea hearing that no other promises were made to him to induce his guilty plea. Both the prosecutor and defense counsel informed the trial court that no other promises or inducements were made that had not already been disclosed to the court on the record. Id. at 19-20. It was incumbent on the petitioner to object or to seek clarification if his understanding of the plea bargain differed from the trial court’s statement that the maximum minimum would be no more than fourteen years. See Baker v. United States, 781 F.2d 85, 89-90 (6th Cir. 1986). The petitioner was not inexperienced with the criminal justice system. His criminal record included three prior felony convictions, all of which were subject to Michigan’s indeterminate sentencing law. The petitioner’s allegations also are undermined by his comment that he hoped he would not receive a maximum sentence of life imprisonment. This comment suggests that the petitioner was aware of the possibility that he could receive a maximum sentence of more than fourteen years. Although the petitioner asserts that he misunderstood the maximum penalty that could be imposed, the state courts’ implicit conclusion that the petitioner’s plea was knowingly and voluntarily entered into was not objectively unreasonable. The petitioner therefore is not entitled to habeas relief. -11- III. The decision of the state court of appeals affirming the petitioner’s convictions was neither contrary to nor an unreasonable application of clearly established federal law as determined by the Supreme Court. 28 U.S.C. § 2254(d)(1). The state court’s findings of fact, presumed correct on habeas review, are supported by the record. See 28 U.S.C. §§ 2254(d)(2) and (e)(1). Accordingly, it is ORDERED that the petition for a writ of habeas corpus is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: August 27, 2007 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 27, 2007. s/Felicia M. Moses FELICIA M. MOSES -12-

=== Vericorr Order of Dismissal ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION VERICORR PACKAGING, LLC, v. Plaintiff, OSIRIS INNOVATIONS GROUP, LLC, _____________________________________/ Defendant. Case Number 07-12415 Honorable David M. Lawson ORDER OF DISMISSAL FOR WANT OF JURISDICTION On June 5, 2007, plaintiff VeriCorr Packaging, LLC filed this case against Osiris Innovations Group, LLC. The complaint alleges that this Court has jurisdiction pursuant to 28 U.S.C. § 1332, which requires complete diversity of citizenship. The defendant does not dispute subject matter jurisdiction. However, “federal courts are not allowed simply to assume jurisdiction and then proceed to resolve a case on the merits.” Patterson v. Haskins, 470 F.3d 645, 667 (6th Cir. 2006). In every case, “‘the first and fundamental question is that of jurisdiction. . . . This question the court is bound to ask and answer for itself, even when not otherwise suggested, and without respect to the relation of the parties to it.’” Steel Co. v. Citizens for a Better Env’t, , 94 (1998) (quoting Great So. Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 453 (1900 . The “Court has an obligation to address jurisdiction in every case,” Sault Ste. Marie Tribe of Chippewa Indians v. Granholm, 475 F.3d 805, 811 (6th Cir. 2007), “even if the parties fail to properly present the issue,” Vill. of Oakwood v. State Bank & Trust Co., 481 F.3d 364, 366 (6th Cir. 2007). “In the absence of jurisdiction, the court’s only function is to announce the lack of jurisdiction and dismiss or remand the case.” Vill. of Oakwood, 481 F.3d at 366-67. As a general rule, “a limited liability company is not treated as a corporation and has the citizenship of its members.” Homfeld II, L.L.C. v. Comair Holdings, Inc., 53 Fed. Appx. 731, 732 (6th Cir. 2002) (unpublished) (citing Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir. 1998 ; Trident-Allied Assoc., LLC. v. Cypress Creek Assoc., LLC., 317 F. Supp. 2d 752, 753, 2004 WL 1070677, *1 (E.D. Mich. 2004) (“For purposes of diversity, the citizenship of limited liability companies is the citizenship of each of its members.”); Int’l Flavors and Textures, LLC v. Gardner, 966 F. Supp. 552, 554-55 (W.D. Mich. 1997) (holding that “citizenship of an unincorporated association, at least for purposes of diversity jurisdiction, is the citizenship of each of its members” and this rule “applies to entities created pursuant to the Michigan limited liability act.”). The jurisdiction statement in the complaint indicated only the principal place of business of each LLC but does not identify the citizenship of the LLC members. So on June 20, 2007 and July 12, 2007, the Court issued orders requiring the parties to disclose the citizenship of their members to determine whether diversity jurisdiction exists. On June 29, 2007, the plaintiff filed a statement disclosing the requested information. According to the submission, the plaintiff has eleven members situated as follows: Member Sabeli, LLC Knot Tee Time, LLC MarBry Holdings, LLC Janet B. Simpson John G. Sutlive John Blanton Adriana Avila Rick Nickerson Larry Larkin Citizenship North Carolina LLC whose sole member is North Carolina citizen North Carolina LLC whose sole member is Florida citizen Florida LLC whose sole member is Florida citizen North Carolina Georgia North Carolina Michigan Michigan Georgia -2- Kathy McClure Keith Souther Illinois North Carolina Pl.’s Statement of LLC Membership [dkt # 7]. On July 20, 2007, the defendant filed a statement indicating it has one member, David A. Saroli, who is a citizen of Michigan. Def.’s Statement of LLC Membership [dkt # 10]. On July 20, 2007, the plaintiff filed a brief in which it argues that a limited liability company is a citizen of the state where it is organized and has its principal place of business under the Entity Rule. The plaintiff believes the Sixth Circuit has abandoned what the plaintiff refers to as the Members Composing Rule. The plaintiff points to cases in which jurisdiction is based on diversity of citizenship and identifying the principal place of business of an LLC party rather than the citizenship of its membership. The plaintiff also argues that the so-called Entity Rule is easier to apply and the results are fairer because corporations and LLCs are similarly-situated entities. Although there may be some merit to the plaintiff’s ease-of-application argument, it does not reflect prevailing law. The Supreme Court has never ruled on the issue of diversity jurisdiction involving LLC parties. However, it has noted that the federal courts of appeals determine diversity jurisdiction by looking to the citizenship of the LLC members. Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 585 n.1 (2004) (stating that “[a]lthough the Court has never ruled on the issue, Courts of Appeals have held the citizenship of each member of an LLC counts for diversity purposes”). The First, Second, Fourth, Seventh, Eight, Ninth, and Eleventh Circuit Courts of Appeals have all held in published cases that the citizenship of an LLC for diversity purposes is determined by looking to the citizenship of its members. See Wetmore v. MacDonald, Page, Schatz, Fletcher & Co., LLC, 476 F.3d 1, 1 (1st Cir. 2007) (holding that parties were diverse because none -3- of LLC’s members shared plaintiff’s citizenship); Handelsman v. Bedford Vill. Assoc. Ltd. P’ship, 213 F.3d 48, 52 (2d Cir. 2000) (holding that LLCs “for diversity purposes [were] citizens of Florida because both entities have Florida members”); Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 120 (4th Cir. 2004) (holding that an LLC “has the citizenship of its members”); Thomas v. Guardsmark, LLC, 487 F.3d 531, 534 (7th Cir. 2007) (stating that “[f]or diversity jurisdiction purposes, the citizenship of an LLC is the citizenship of each of its members”); OnePoint Solutions, LLC v. Borchert, 486 F.3d 342, 346 (8th Cir. 2007) (holding that “[a]n LLC’s citizenship, for purposes of diversity jurisdiction, is the citizenship of each of its members”); Johnson v. Columbia Prop. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006) (“We therefore join our sister circuits and hold that, like a partnership, an LLC is a citizen of every state of which its owners/members are citizens.”); Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir. 2004) (joining all other federal circuits “that have answered this question . . . in the same way: like a limited partnership, a limited liability company is a citizen of any state of which a member of the company is a citizen”). Unpublished circuit court or district court cases from the remaining circuits have made similar holdings that the citizenship of an LLC is determined by its members. Pippett v. Waterford Dev., LLC, 166 F. Supp. 2d 233, 236 (E.D. Pa. 2001); Deep Marine Tech., Inc. v. Conmaco/Rector, L.P., No. H-05-3690, 2007 WL 1850423, *2 (S.D. Tex. 2007) (unpublished); Homfeld II, L.L.C. v. Comair Holdings, Inc., 53 Fed. Appx. 731, 732 (6th Cir. 2002) (unpublished); Trident-Allied Assoc., LLC. v. Cypress Creek Assoc., LLC., 317 F. Supp. 2d 752, 753 (E.D. Mich. 2004); Birdsong v. Westglen Endoscopy Ctr., L.L.C., 176 F. Supp. 2d 1245, 1248 (D. Kan. 2001); Wright v. Herman, 230 F.R.D. 1, 6 (D. D.C. 2005). -4- As contrary authority, the plaintiff cites cases in which the courts made reference to the place of business of the LLC parties. See Kalamazoo Acquisitions, L.L.C. v. Westfield Ins. Co., Inc., 395 F.3d 338 (6th Cir. 2005); Ferrer v. MedaSTAT USA, LLC, 145 Fed. Appx. 116 (6th Cir. 2005). In neither of those cases, however, did the courts state that the place of business, instead of the citizenship of members, determined the citizenship of an LLC. And in none of those cases was it shown that a member of an LLC party was a citizen of the state of an opposite party. The plaintiff also cites Wachovia Bank, NA v. Schmidt, 546 U.S. 303 (2006), in support of its argument. In that case, the Fourth Circuit had held that a national bank was located in all the states in which it operated branches, which restricted the banks’ access to federal courts. The Supreme Court reversed, stating: Were we to hold, as the Court of Appeals did, that a national bank is additionally a citizen of every State in which it has established a branch, the access of a federally chartered bank to a federal forum would be drastically curtailed in comparison to the access afforded state banks and other state-incorporated entities. Congress, we are satisfied, created no such anomaly. Id. at 945. The plaintiff believes the “Court recognized the importance of making diversity jurisdiction equally available to similarly-situated entities.” Pl.’s Br. at 5. The plaintiff makes too much of this case. National banks are “corporate entities chartered not by any State, but by the Comptroller of the Currency of the U.S. Treasury.” Id. at 944. It would be odd indeed if federally created entities were denied access to federal court. That rationale does not apply to LLCs created under state law. For the purpose of determining diversity jurisdiction, the citizenship of the parties must be assessed at the time the complaint is filed. Napletana v. Hillsdale Coll., 385 F.2d 871, 872 (6th Cir. 1967); Television Reception Corp. v. Dunbar, 426 F.2d 174, 177 (6th Cir. 1970) (“The general rule -5- is that federal jurisdiction is tested according to the facts as they exist at the time an action is initiated”). It is axiomatic that federal diversity jurisdiction exists only when “no plaintiff and no defendant are citizens of the same state.” Jerome-Duncan, Inc. v. Auto-By-Tel, L.L.C., 176 F.3d 904, 907 (6th Cir. 1999) (citing U.S. Fid. & Guar. Co. v. Thomas Solvent Co., 955 F.2d 1085, 1089 (6th Cir. 1992 . The plaintiff is an LLC with eleven members, two of whom are citizens of Michigan, and the rest of whom are citizens of four other separate States. For the purpose of diversity jurisdiction, the plaintiff is deemed a citizen of Michigan plus those other four states. The defendant is an LLC with its sole member a citizen of Michigan. The defendant, therefore, is deemed a citizen of Michigan. Because both the plaintiff and the defendant are citizens of Michigan, their citizenship is not diverse. Therefore, the Court does not have subject matter jurisdiction over the case. Accordingly, it is ORDERED that the case is DISMISSED WITHOUT PREJUDICE for want of jurisdiction. It is further ORDERED that the plaintiff’s motion to dismiss the counterclaim [dkt #12] is DISMISSED as moot and the hearing cancelled. Dated: August 10, 2007 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on August 10, 2007. s/Felicia M. Moses FELICIA M. MOSES -6-

=== Coalition to Defend Affirmative Action, et al., v. Jennifer Granholm, et al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case Number 06-15024 Honorable David M. Lawson COALITION TO DEFEND AFFIRMATIVE ACTION, et al., Plaintiffs, v. JENNIFER GRANHOLM, REGENTS OF THE UNIVERSITY OF MICHIGAN, BOARD OF TRUSTEES OF MICHIGAN STATE UNIVERSITY, BOARD OF GOVERNORS OF WAYNE STATE UNIVERSITY, MICHAEL COX, ERIC RUSSELL, and the TRUSTEES OF any other public college or university, community college or school district, Defendants, -and- CHASE CANTRELL, et al., CONSOLIDATED CASES Plaintiffs, v. JENNIFER GRANHOLM and MICHAEL COX, ______________________________________/ Defendants. Case Number 06-15637 Honorable David M. Lawson ORDER CONSOLIDATING CASES, GRANTING ATTORNEY GENERAL’S MOTION TO INTERVENE, AND SETTING DATES On January 5, 2007, the Court held a joint conference with lead counsel for all of the parties in the above named cases. All parties agreed at the conference that the two cases should be consolidated, and the Court is convinced that judicial economy would be served by the consolidation of these matters for all purposes. The cases both come before the Court with common defendants and the plaintiffs in both challenge recently-approved state constitutional amendment, Proposal 06-2, now known as Article 1, section 26 of the Michigan Constitution of 1963, that purports to bar the use of race, sex, color, ethnicity, or national origin to promote diversity in public hiring, contracting, and university admission decisions. The Court has further determined, and all parties agree, that the Michigan Attorney General, who is an intervening defendant in case number 06-15024, ought to intervene as a defendant in case number 06-15637. However, all parties who have now appeared in one of the cases shall be deemed to be participating in the consolidated cases. Accordingly, it is ORDERED that the above-captioned cases are CONSOLIDATED for all purposes, up to and including trial and judgment. It is further ORDERED that all further filings in these cases shall be docketed by the Clerk under Case Number 06-15024. The parties are instructed to use a double caption and include the designation “CONSOLIDATED CASES” in the caption. It is further ORDERED that the Michigan Attorney General’s motion to intervene in Cantrell, Case Number 06-15637 [dkt # 9], is GRANTED. It is further ORDERED that the plaintiffs in the Cantrell case may file an amended complaint on or before January 12, 2007. It is further ORDERED that answers to the complaints in both cases shall be filed on or before January 26, 2007. It is further ORDERED that disclosure required by Federal Rule of Civil Procedure 26(a)(1)(A), (B) and (C) shall be served on opposing counsel, but not filed with the Clerk, on or before January 30, 2007. -2- It is further ORDERED that the plaintiffs in both cases shall serve on opposing counsel, but not file with the Clerk, a joint proposed stipulation of facts on or before February 9, 2007. The proposed stipulation shall be styled in separate, numbered paragraphs each containing a discrete fact per paragraph in simple, concise and direct language. The purpose of the proposed stipulation is to determine the extent to which discovery can be foreshortened or eliminated, and to provide a possible basis for a record for dispositive motions or a trial on stipulated facts. A courtesy copy shall be delivered to the Court’s chambers. It is further ORDERED that responses to the joint proposed stipulation of facts shall be served on opposing counsel, but not filed with the Clerk, on or before February 28, 2007. The responses shall identify which paragraphs in the proposed stipulation of facts will (1) be accepted, (2) be accepted with proposed modifications, (3) require discovery, or (4) be contested or challenged. A courtesy copy shall be delivered to the Court’s chambers. It is further ORDERED that the parties shall conduct a conference and submit a discovery plan to the Court’s chambers pursuant to Federal Rule of Civil Procedure 26(f) on or before March 14, 2007. It is further ORDERED that a status and scheduling conference will be held on March 21, 2007 at 10:00 a.m. Lead counsel for the parties are directed to attend. The appearance of co- counsel for the parties is not necessary for this conference. It is the Court’s intention to conduct the conference for the purpose of reviewing the proposed stipulation of fact and responses, evaluating the parties’ discovery plan, expediting discovery (if any is needed), and establishing deadlines for either filing dispositive motions or conducting a trial on stipulated facts. -3- s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: January 5, 2007 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 5, 2007. s/Veverlyn Foster-Sims VEVERLYN FOSTER-SIMS -4-

=== COALITION TO DEFEND AFFIRMATIVE ACTION et. al. v. JENNIFER GRANHOLM et. al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION Case No. 06-15024 Hon. David M. Lawson AMENDED ORDER GRANTING TEMPORARY INJUNCTION AND DISMISSING CROSS- CLAIM COALITION TO DEFEND AFFIRMATIVE ACTION, INTEGRATION AND IMMIGRATION RIGHTS AND FIGHT FOR EQUALITY BY ANY MEANS NECESSARY (BAMN), UNITED FOR EQUALITY AND AFFIRMATIVE ACTION LEGAL DEFENSE FUND, RAINBOW PUSH COALITION, CALVIN JEVON COCHRAN, LASHELLE BENJAMIN, BEAUTIE MITCHELL, DENESHA RICHEY, STASIA BROWN, MICHAEL GIBSON, CHRISTOPHER SUTTON, LAQUAY JOHNSON, TURQOISE WISE- KING, BRANDON FLANNIGAN, JOSIE HUMAN, ISSAMAR CAMACHO, KAHLEIF HENRY, SHANAE TATUM, MARICRUZ LOPEZ, ALEJANDRA CRUZ, ADARENE HOAG, CANDICE YOUNG, TRISTAN TAYLOR, WILLIAMS FRAZIER, JERELL ERVES, MATTHEW GRIFFITH, LACRISSA BEVERLY, D’SHAWNM FEATHERSTONE, DANIELLE NELSON, JULIUS CARTER, KEVIN SMITH, KYLE SMITH, PARIS BUTLER, TOUISSANT KING, AIANA SCOTT, ALLEN VONOU, RANDIAH GREEN, BRITTANY JONES, COURTNEY DRAKE, DANTE DIXON, JOSEPH HENRY REED, AFSCME LOCAL 207, AFSCME LOCAL 214, AFSCME LOCAL 312, AFSCME LOCAL 836, AFSCME LOCAL 1642, AFSCME LOCAL 2920, and the DEFEND AFFIRMATIVE ACTION PARTY, Plaintiffs, v. JENNIFER GRANHOLM, in her official capacity as Governor of the State of Michigan, the REGENTS OF THE UNIVERSITY OF MICHIGAN, the BOARD OF TRUSTEES OF MICHIGAN STATE UNIVERSITY, the BOARD OF GOVERNORS OF WAYNE STATE UNIVERSITY, and the TRUSTEES of any other public college or university, community college, or school district, Defendants, and REGENTS OF THE UNIVERSITY OF MICHIGAN, THE BOARD OF TRUSTEES OF MICHIGAN STATE UNIVERSITY and the BOARD OF GOVERNORS OF WAYNE STATE UNIVERSITY, Cross-Plaintiffs, v. JENNIFER GRANHOLM, in her official capacity as Governor of the State of Michigan, _________________________________________________________/ Cross-Defendant. AMENDED ORDER GRANTING TEMPORARY INJUNCTION AND DISMISSING CROSS-CLAIM This case was commenced on November 8, 2006 by several plaintiffs who claim that a recently-approved state constitutional amendment, Proposal 06-2, now known as Article 1, section 26 of the Michigan Constitution of 1963, that purports to bar the use of race, sex, color, ethnicity, or national origin to promote diversity in public hiring, contracting, and university admission decisions, violates the United States Constitution. On December 11, 2006, defendants Regents of the University of Michigan, the Board of Trustees of Michigan State University, and the Board of Governors of Wayne State University filed a cross-claim against co-defendant Governor Jennifer Granholm seeking declaratory relief. The University parties also requested a preliminary injunction to delay the implementation of the state constitutional amendment until the current enrollment season is completed. Thereafter, the Michigan Attorney General sought permission to intervene as a defendant in the matter, together with a motion to expedite consideration of the motion to intervene, citing his “duty to defendant the constitutionality” of the ballot initiative. Mot. to -2- Intervene ¶ 13. The parties to the case either took no position or consented to the relief, and the Court granted the motion to intervene on December 14, 2006. On December 18, 2006, the Court received a stipulation [dkt #26] from all parties to the case, including intervening defendant Michigan Attorney General, consenting to the temporary injunctive relief sought by the cross-claimants (the University defendants), and agreeing to dismiss with prejudice the portion of the cross-claim seeking a temporary injunction, and the balance of the cross- claim without prejudice. The Court finds that the interests of all parties and the public are represented adequately through the state defendants and their various elected representatives, and the Court, therefore, will approve the stipulation. Accordingly, it is ORDERED that the application of Article 1, section 26 of the Michigan Constitution of 1963 to the current admissions and financial aid policies of defendants Regents of the University of Michigan, the Board of Trustees of Michigan State University, and the Board of Governors of Wayne State University is enjoined from this date through the end of the current admissions and financial aid cycles or until further order of the Court. This injunction shall expire at 12:01 a.m. on July 1, 2007, unless it is vacated by the Court before that date. It is further ORDERED that the portion of the cross-claim by defendants Regents of the University of Michigan, the Board of Trustees of Michigan State University, and the Board of Governors of Wayne State University seeking temporary injunctive relief is DISMISSED WITH PREJUDICE, and the remaining part of their cross-claim is DISMISSED WITHOUT PREJUDICE. It is further ORDERED that each party shall bear its own fees and costs. -3- It is further ORDERED that the motion for preliminary injunction [dkt # 5] is DISMISSED as moot. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: December 19, 2006 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on December 19, 2006. s/Felicia M. Moses FELICIA M. MOSES -4-

=== United States of America v. David Warren Tice, Jr. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. DAVID WARREN TICE, JR., _____________________________________/ Defendant. Case Number 04-20038 Honorable David M. Lawson ORDER DENYING MOTION TO SUPPRESS EVIDENCE This matter is before the Court on the motion by the defendant, David Tice, to suppress evidence seized pursuant to a search warrant or, alternatively, for a hearing pursuant to Franks v. Delaware, 438 U.S. 154 (1978). Tice is charged along with several others in an indictment alleging various narcotics and firearms violations. On August 2, 2005, a fourth superceding indictment added conspiracy to commit murder to the charges against this defendant and two others; these three defendants face the death penalty on this count. The Court has been informed that the government conducted a meeting in February of this year to determine if it actually will seek the death penalty in this case. However, there has been no word whether a decision has been made, and the case is awaiting trial. In the mean time, Tice has pursued his suppression motion. The defendant argues that FBI agent John B. Cecil included false information in the affidavit for the search warrant, and that much of the information was provided by an unreliable informant, David McWhorter. The government has admitted that one statement made by Agent Cecil in the affidavit was false. Other statements alleged by the defendant to be false, or at least misleading, were statements that “controlled buys” had been conducted, even though these instances were far from “controlled” due to a lack of adequate surveillance for hours at a time. The Court held a hearing on the motion on January 5, 2006. At the hearing, the parties agreed that the affidavit could support a finding of probable cause, even if stripped of all allegedly false or misleading information, if the informant could be considered reliable. The Court determined that a hearing is not necessary to decide this issue because the relevant inquiry must be confined to the four corners of the search warrant affidavit, and the parties then sought leave to submit supplemental briefs on the informant’s reliability. On January 6, 2006 the Court issued an order allowing the parties to submit supplemental briefs on the issue of the informant’s reliability. The briefs were submitted, and the Court now finds that the search warrant affidavit contains sufficient information from which the magistrate could have concluded that the affiant’s informant was reliable and probable cause existed to believe that contraband would be found at the defendant’s house. Therefore, the motion to suppress evidence will be denied. I. The government alleges that defendant Tice is a member of a motorcycle gang known as the Fly-In-Wheels Motorcycle Club, which had a clubhouse in Harrison, Michigan. David Tice also had a residence in Harrison. Government agents suspected club members of engaging in various forms of criminal activity, including dealing in methamphetamine. The government recruited an informant who had access to the clubhouse and club members and pursued an investigation using this person over a period of ten months. The informant has been identified as David McWhorter. On July 29, 2005, agent Cecil completed an affidavit that resulted in a search warrant that led to evidence in the case against Mr. Tice. Apparently, much of the evidence was seized from Tice’s home in Harrison. The contents of the affidavit are set forth below. Paragraphs not related -2- to defendant Tice or otherwise not relevant to probable cause to search the defendant’s home are omitted. 2. During the course of my duties, I have come to know an informant referred to as FBI-1 [McWhorter]. FBI-1 came into contact with law enforcement authorities in October 2003 as a result of criminal charges facing FBI-1. FBI-1 agreed to cooperate with law enforcement authorities in exchange for leniency relating to those charges. FBI-1 stated that he/she was acquainted with several members of the Fly-In-Wheels Motorcycle Club (FWMC) and knew about their involvement in drug distribution and firearm offenses. Based on my experience the FWMC is considered an “outlaw” motorcycle gang that engages in several forms of criminal activity. 3. FBI-1 subsequently reported information that he/she became aware of relating to various FWMC members. In December 2003, FBI-1 advised that he/she was present when FWMC member David Tice dropped off several ounces of methamphetamine for other FWMC members to use at a party in Flint, Michigan that was held earlier that month. 4. FBI-1 also reported that he/she was present in January 2003 when FWMC member Donald York picked up a “softball” sized amount of methamphetamine in Harrison, Michigan at the residence of David Tice. York stated that the methamphetamine was intended for distribution. [The government admits this paragraph is false because the informant was not present.] . . . 6. Later in February 2004, FBI-1 was present when Donald York obtained additional amounts of methamphetamine from David Tice in Harrison. . . . 8. In March of 2004, FBI-1, while working under the supervision of the FBI, made a controlled purchase of methamphetamine from David Tice in Harrison, Michigan. FBI-1 met Tice at the FWMC clubhouse at 3600 North Old State Road in Harrison, Michigan and then went to Tice’s residence at 3931 W. Monroe Street, Harrison, Michigan, where the drugs were actually picked up. FBI-1 observed a sale by Tice to another FWMC member named “Vic” during the time he was present. The drugs were tested and determined to be methamphetamine. The meeting between FBI-1 and Tice was partially taped. 9. Later in March, FBI-1 was present when Donald York obtained a quantity of methamphetamine from David Tice at Tice’s residence on W. Monroe in Harrison, Michigan. 10. In early April 2004, FBI-1 was present when Donald York stated that he had been to Harrison on April 10, 2004 to obtain methamphetamine from David Tice and had seen 20 pounds of methamphetamine at Tice’s residence. 11. On April 29, 2004, FBI-1 made a controlled purchase of methamphetamine while working under the supervision of the FBI, from David Tice at 3931 W. Monroe Street, Harrison, Michigan. The meeting between FBI-1 and -3- Tice was partially taped. The drugs were tested and determined to be methamphetamine. . . . 13. FBI-1 advised that he/she was present at the FWMC clubhouse in Harrison, Michigan on July 4, 2004 for a large party that was attended by many FWMC members. FBI-1 observed “Jay” distributing cocaine to numerous individuals and David Tice distributing methamphetamine to numerous individuals. FBI-1 observed numerous firearms stored at the FWMC clubhouse including shotguns and pistols. FBI-1 also stated that all FWMC members at the party were carrying handguns and Donald York bragged about obtaining a .44 caliber handgun that was not traceable. 14. FBI-1 also said during the party on July 4, 2004, David Tice stated he met with a “Mexican” and discussed obtaining kilo quantities of methamphetamine. 15. FBI-1 also stated that on July 4, 2004, he/she was present when David Tice packaged cocaine and methamphetamine at a residence in Harrison, Michigan that Tice said he owned and was going to allow his daughter to live in. FBI-1 later saw Tice distribute some of the methamphetamine to “Vic” at the FWMC clubhouse. 16. FBI-1 stated that the FWMC held a national meeting in Harrison, Michigan at the grounds of the FWMC clubhouse starting approximately July 23, 2004 and continuing to the present. FBI-1 stated on July 29, 2004 that he/she was at the location of the meeting on and off since July 23, 2004 and Tice was distributing quantities of methamphetamine to many, if not all, of the people present at the meeting. FBI-1 has been in the FWMC clubhouse and in several of the trailer structures during the period between July 23 and July 29, 2004, and observed quantities of drugs, which he believes to be methamphetamine, at all of those locations. FBI-1 also observed several fully automatic firearms on the clubhouse grounds during this period. During the evening of July 28, 2004, FBI-1 observed Donald York in possession of a .44 caliber revolver on the grounds of the FWMC clubhouse while apparently under the influence of drugs. In my experience it is extremely unlikely that any fully automatic firearms would be properly registered to any of these individuals under federal law. 17. The information provided by FBI-1 has been extremely reliable. The information has been confirmed by controlled purchases made by FBI-1, surveillance that was conducted as part of this investigation and a review of phone records from phones used by the individuals involved in these allegations. Def.’s Mot. to Suppress Ex. 1, Cecil Affidavit. The government concedes that paragraph four of the affidavit is false because the informant was not “present” when York obtained the drugs. However, the government states the inclusion of this information was “the product of inadvertence and not an attempt to mislead the issuing -4- magistrate.” Govt.’s Resp. Br. at 7. The government states that York told the informant he obtained the methamphetamine from Tice at Tice’s home. The parties also agree that paragraphs nine, ten and eleven would establish probable cause to search Tice’s house if the informant could be deemed reliable. II. The Fourth Amendment provides that “no warrants shall issue but upon probable cause, supported by oath or affirmation.” U.S. Const. amend. IV. On the continuum between doubt and certainty, “[p]robable cause arises if there are ‘reasonable grounds for belief, supported by less than prima facie proof but more than mere suspicion.’” United States v. Coffee, 434 F.3d 887, 892 (6th Cir. 2006) (quoting United States v. Bennett, 905 F.2d 931, 934 (6th Cir. 1990 . “In order for a judicial officer to issue a warrant, law enforcement officials must present evidence from which the magistrate judge can conclude” that probable cause exists. United States v. Williams, 224 F.3d 530, 532 (6th Cir. 2000) (quoting Illinois v. Gates, , 238 (1983 ; see also United States v. Grubbs, __U.S.__, 126 S. Ct. 1494, 1499 (2006). The determination of probable cause by a magistrate must be based on the totality of the circumstances. United States v. Rodriguez-Suazo, 346 F.3d 637, 646 (6th Cir. 2003). “The task of the issuing magistrate is simply to make a practical, common-sense decision whether, given all the circumstances set forth in the affidavit before him, including the ‘veracity’ and ‘basis of knowledge’ of persons supplying the hearsay information, there is a fair probability that contraband or evidence of a crime will be found in a particular place.” United States v. Helton, 314 F.3d 812, 819 (6th Cir. 2003). When asked to review that determination, a court is “limited to the information presented in the four corners of the affidavit.” Coffee, 434 F.3d at 892 (citing United States v. Frazier, 423 -5- F.3d 526, 531 (6th Cir. 2005). The review is deferential, and “an issuing magistrate’s discretion should only be reversed if it was arbitrarily exercised.” United States v. Allen, 211 F.3d 970, 973 (6th Cir. 2000) (en banc). When the facts supporting a finding of probable cause come from a hearsay source, the magistrate must have some basis to assess the reliability of the declarant. The precedents do not prescribe any specific formula by which reliability is to be gauged, Allen, 211 F.3d at 975-76; as a general rule, however, the decisions have required either independent corroboration by law enforcement officials or some showing that the informant is otherwise reliable, such as a history of furnishing information that turned out to be accurate. See Helton, 314 F.3d at 819 (noting that “a court must consider the veracity, reliability, and the basis of knowledge for that information as part of the totality of the circumstances for evaluating the impact of that information”); United States v. Smith, 182 F.3d 473, 483 (6th Cir. 1999) (stating that “if the prior track record of an informant adequately substantiates his credibility, other indicia of reliability are not necessarily required”); United States v. Frazier, 423 F.3d 526, 532 (6th Cir. 2005) (observing that “in the absence of any indicia of the informants’ reliability, courts insist that the affidavit contain substantial independent police corroboration”). The Sixth Circuit recently explained in Coffee: [W]hile an affidavit must state facts supporting an independent judicial determination that the informant is reliable, those facts need not take any particular form. The affidavit could state that police corroborated significant parts of the informant’s story. Or the affiant could attest with some detail that the informant provided reliable information in the past. Or there could be other indicia of the informant’s reliability, such as a detailed description of what the informant observed first-hand, or the willingness of the informant to reveal his or her name. As long as the issuing judge can conclude independently that the informant is reliable, an affidavit based on the informant’s tip will support a finding of probable cause. In sum, an affidavit that supplies little information concerning an informant’s reliability may support a finding of probable cause, under the totality of the circumstances, if it includes sufficient corroborating information. -6- Coffee, 434 F.3d at 893 (internal quotes and citations omitted). In this case, the affidavit states that McWhorter, referred to as FBI-1, made two controlled purchases of narcotics, one of which was partially tape-recorded; some of the information he furnished was confirmed by surveillance (although there is no statement as to which information); and agent Cecil confirmed some of the information through telephone records. The defendant argues, however, that these statements are not sufficient to establish the informant’s reliability to a neutral magistrate. The Court disagrees. Based on the affidavit alone, the information agent Cecil included is adequate to allow the magistrate to assess the informant’s reliability and conclude that the information he furnished was sufficient to establish a fair probability that contraband or evidence of a crime would be found in Tice’s house. Cecil averred that he had worked with the informant over a substantial period of time, and the informant bought drugs from Tice on two occasions “while working under the supervision of the FBI” under “controlled” conditions. These allegations both tend to show that the informant has a record of reliable performance and the information furnished was confirmed to some extent by Cecil’s own investigation. However, the defendant contends that the Court ought to look behind the allegations in the affidavit because the claims of agent Cecil as to the “controlled” nature of the purchases are overstated and the affidavit therefore misled the magistrate. As to the purchase referenced in paragraph eight of the affidavit, the defendant points out that Exhibit 6, a report by agent Cecil dated March 21, 2004, indicates that the informant picked up Donald York at a bar in Flint at 12:45 p.m. They drove around for several hours, making stops at a party store, a gas station, and a bar. The report does not indicate that the surveillance team ever saw the informant go to the defendant’s home. The agents conducting the surveillance followed the source and York around and waited -7- outside the places they stopped. The agents abandoned surveillance at 3:40 p.m. because of the rural conditions of the area. Although the informant may claim he purchased drugs from Mr. Tice on this occasion, the defendant believes that telling the magistrate that a controlled buy took place is misleading. Agent Cecil apparently has no independent knowledge regarding where the drugs were obtained or from whom, and the defendant states the informant could have gotten them from anyone at any of the numerous places he stopped that day, including from York, who had previously sold drugs to the informant. The defendant makes a similar argument with respect to paragraph eleven. He points to exhibit seven, a report by agent Cecil dated April 29, 2004, which describes the incident in question. That report states that the informant made multiple stops with periodic surveillance, and the informant was not under surveillance at all from 3:25 p.m. to at least 7 p.m., when the informant’s motorcycle was “spotted” at the defendant’s home. The report does not mention drugs at all. The defendant believes characterizing this incident as a controlled purchase is misleading and was done intentionally to persuade the magistrate to issue the warrant. To accept the defendant’s argument, the Court must have a reason to look beyond the four corners of the affidavit, which requires consideration of the jurisprudence spawned by Franks v. Delaware. Under Franks, if the defendant shows by a preponderance of evidence that a search warrant affiant committed perjury or made a statement in reckless disregard for the truth, the offending statements must be excised from the affidavit and probable cause reassessed. Franks, 438 U.S. at 155-56. However, incorrect statements due to mere negligence or innocent mistake are insufficient to void a warrant. Id. at 171; see also United States v. Ayen, 997 F.2d 1150, 1152 (6th -8- Cir. 1993); United States v. Rodriguez-Suazo, 346 F.3d 637, 648 (6th Cir. 2003). Such information need not be removed from the affidavit. There is no Sixth Circuit case that sets out a definition of “controlled purchase.” However, it appears that the term has acquired a meaning within investigative parlance that includes features designed to ensure that an informant is closely monitored and searched to ensure reliable investigative results. For instance, in United States v. Laughton, 409 F.3d 744, 746 (6th Cir. 2005), the court described the process as follows: Following a tip from confidential informant Thomas Pell that he was able to purchase methamphetamine from the defendant, James Laughton, the Isabella County Sheriff’s Department arranged for Pell to make a controlled buy under surveillance. On November 1, 2001, Deputy Sheriff Scott Clarke and two other officers met with Pell to conduct the purchase. They provided him with $100.00 in marked money and patted him down to make sure that he was not carrying any of his own money or any other narcotics. They also searched his vehicle. Pell then drove to a residence to meet the defendant, and the police followed. The police observed Pell enter the house and re-emerge 10 to 20 minutes later. After Pell left the house, he drove to an arranged location, followed by the police, where he turned over methamphetamine that he reportedly had bought from Laughton for $100.00. Similarly, in United States v. Lattner, 385 F.3d 947, 952 (6th Cir. 2004), the court summarized the informant’s activity, which it characterized as a controlled purchase: On this date the affiant met with the SOI [source of information] to formulate plan to make a controlled purchase from the location of 2416 Monterey. The SOI was searched for money and narcotics with negative results. The affiant issued secret service funds and instructed the SOI to attempt a purchase of narcotics from the location of 2416 Monterey. The affiant observed the SOI go directly to the front door of the location, enter same and stay for a short period of time, then to return directly back to the affiant. The SOI returned and stated that the above seller told him (SOI) to come back later because he (seller) was out of cocaine. Likewise, in Rattigan v. United States, 151 F.3d 551, 553 (6th Cir. 1998), the court described the “controlled purchases” as involving close surveillance, use of pre-recorded funds, and the immediate transfer of the controlled substance to the officer after the transaction was consummated. See also -9- United States v. Clyburn, 24 F.3d 613, 615 n.1 (4th Cir. 1994) (explaining that “a controlled purchase involves the following procedure: law enforcement officers search the informant to make sure that she does not have any illegal narcotics before the purchase; officers provide the informant with marked bills with which to purchase the drugs; officers place a body wire on the informant and monitor all conversations during the purchase; the informant is placed under visual surveillance during the purchase; and the informant turns over the contraband to the officers immediately after the purchase”); United States v. Olson, 978 F.2d 1472, 1475 n.3 (7th Cir. 1992) (stating that the “[s]tandard procedure for a DEA ‘controlled buy’ is to get approval for the disbursement, mark the bills, search the informant immediately before the buy, give him the money, keep him under surveillance as he enters and exits the premises, confiscate the drugs and search the informant again immediately after the exchange”). The Court agrees that agent’s Cecil’s characterization of the two incidents as “controlled purchases” tends to stretch the colloquially-accepted definition of the term. Using that term as a shorthand term-of-art has a tendency to describe more than actually occurred when many of the common features of controlled buys are lacking. By far, the better practice is to state in the affidavit what actually occurred, as exemplified by the affidavit described by the court in Coffee. See 434 F.3d at 894 (noting that “the details of the controlled purchase . . . were spelled out in the affidavit. . . . [T]he purchase was controlled and witnessed by Officer Adams, who searched the CI for money or contraband, provided the CI with pre-recorded funds, observed the CI enter and exit defendant’s house, and then observed and tested the crack cocaine the CI purchased from defendant”). However, the Court is unable to conclude that agent Cecil made the statements in reckless disregard for the truth of what actually occurred in the field, or that he engaged in a -10- deliberate falsehood. Rather, there was some degree of surveillance on both occasions, and it appears that contact with the informant was made before and after the events, despite intervals of time when contact was lost. Under these circumstances, the Court does not find grounds to excise the challenged paragraphs (save paragraph four, of course). Therefore, the Court concludes that the affidavit contains a sufficient basis for the magistrate to find that the informant was reliable, and ultimately probable cause to search Tice’s house. III. Because the affidavit furnished a proper basis to issue the search warrant, the resulting search of the Tice’s premises at 3931 W. Monroe Street, Harrison, Michigan did not offend the Constitution. Accordingly, it is ORDERED that the motion by defendant David Tice to suppress evidence [dkt # 82] is DENIED. Dated: October 30, 2006 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on October 30, 2006. s/Felicia M. Moses FELICIA M. MOSES -11-

=== UNITED STATES OF AMERICA v. JAMES HOWARD LAUGHTON ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, v. JAMES HOWARD LAUGHTON, _______________________________________/ Defendant. Case Number 02-20016 Honorable David M. Lawson ORDER GRANTING DEFENDANT’S MOTION TO SUPPRESS EVIDENCE This matter is before the Court on the defendant’s motion to suppress evidence filed on January 6, 2006. The motion concerns evidence seized in a warrantless search of a motor vehicle that occurred on April 20, 2002, which evidence supports the charge contained in court four of the superseding indictment in this case. The government contends that the search can be justified either by the defendant’s consent to search or as a search incident to a lawful arrest. After considering the evidence offered at the evidentiary hearings held on the motion and the parties’ submissions, the Court concludes that both of the government’s arguments are untenable, the search violated the Fourth Amendment, and the evidence must be suppressed. I. A brief recapitulation of this case is appropriate here. On April 10, 2002, the defendant was charged in a six-count indictment with various drug and weapons offenses, not including the charge contained in the present count four, which is the object of the motion to suppress. The drug offenses concerned trafficking in methamphetamine. Counts one through four of the original indictment were based on controlled buys conducted by the police with the assistance of a confidential informant named Thomas Pell. Based on these controlled buys, Deputy Sheriff Scott Clarke swore out an affidavit for a warrant to search the defendant’s home. The warrant was issued and a search of the defendant’s home was conducted. Counts five and six were based on items found during the search. Unfortunately for the government, Deputy Clarke’s affidavit was poorly drafted. On June 18, 2002, the defendant filed a motion to suppress the evidence obtained in the search. On August 29, 2002, this Court held that the warrant lacked probable cause. However, the Court found that the officers conducting the search acted in good faith in relying on the warrant, saving the evidence from the application of the exclusionary rule. The case proceeded to trial; the defendant was found not guilty on counts one and two and guilty on counts three through six. On appeal, the defendant challenged this Court’s application of the good faith exception to the exclusionary rule. On May 17, 2005, the Sixth Circuit reversed, holding that “[n]o reasonable officer could have believed that the affidavit was not so lacking in indicia of probable cause as to be reliable.” United States v. Laughton, 409 F.3d 744, 751 (6th Cir. 2005). The court of appeals reversed the judgment of conviction on all counts and remanded the case “for further proceedings consistent with this opinion.” Id. at 752. The government now seeks to retry the defendant but admits that it cannot meet its burden on counts five and six of the original indictment without the evidence from the search (including some drugs and a firearm), which must be suppressed according to the court of appeals’ decision. Counts three and four of the original indictment remain. However, on November 30, 2005, the grand jury returned a superseding indictment. Counts three and four from the first indictment are renumbered as counts one and two, and the indictment contains two additional charges. New count three alleges that the defendant violated 18 U.S.C. § 922(g)(1) on November 7, 2001 by possessing a firearm while being a felon. New count four alleges that the defendant violated 21 U.S.C. § 844(a) -2- on April 20, 2002 by possessing methamphetamine after having been convicted of two drug offenses. This last count arises from a search of the defendant’s vehicle by Michigan State Police Trooper William Arndt and his partner, Trooper G. Hubers, at the scene of a minor automobile accident on the April 2002 date. Testimony was taken at the hearings on the suppression motion on February 21 and March 23, 2006; both Trooper Arndt and the defendant testified. Mr. Laughton testified that he was in an automobile accident around 5:30 p.m. on the day of the incident, which he thought was April 19, 2002. He was driving a GMC Jimmy that he had just purchased three or four days earlier from a woman in Flint. He had gone to a secretary of state office the day before the accident to transfer the title and license plate. When the police arrived at the scene about thirty minutes after the accident, the defendant was standing on the shoulder of the road with the driver of the other car. The Jimmy was in a ditch about six to eight feet deep and twelve feet from the road. Laughton denied being under the influence of drugs or alcohol at the time of the accident. When Trooper Arndt and his partner arrived at the scene, the defendant gave them his driver’s license. The defendant states the officers asked him if he had been drinking, which he denied, and they asked him for other documents, including his vehicle registration and proof of insurance. The defendant testified that these documents were in the car’s glove box, a fact that remains uncontradicted on this record. However, the officers would not let him go down into the ditch to get the documents. Instead, Trooper Arndt’s partner went to get them. Trooper Arndt put the defendant in the police vehicle while his partner went down to the defendant’s car to look for the documents. The defendant was not handcuffed, but he claims he was locked in the car. The -3- defendant denies giving consent for the officers to search his car; in fact, he claims he was not even asked. The defendant testified that he could see Trooper Arndt’s partner taking items out of his car and putting them on the roof. The officer spent about five minutes looking in his car, then he waived at Trooper Arndt. At that point, Trooper Arndt took the defendant out of the police car, placed him under arrest, handcuffed him, and put him back in the police car. The defendant asked why he was being arrested. He testified that Trooper Arndt told him that his partner must have found something illegal. At some point while he was in the police car, the defendant testified that he was given a preliminary breath test (PBT), and the results were negative. He does not remember if he was handcuffed before or after he was administered the test. The defendant testified that the officers did not give him a ticket for not having a registration or proof of insurance. A tow truck came to pull the Jimmy from the ditch. Laughton explained that he had called for the tow before the police arrived. The defendant was in jail for 18 hours before he was released. When he returned to the vehicle, the documents the police had requested were still in the glove box of the Jimmy. The defendant does not know where those documents are now, and they were not produced at the motion hearings. Laughton says that he believes his lawyer in a prior state court case may have them. While the defendant was in jail, he claims the officers asked him to sign a form consenting to a search of his vehicle so the police could go back to seize a bulletproof vest they had seen in the car that they had not seized at the scene of the accident. He refused. Two days after he was released, the defendant surrendered after being indicted in this case. He has been in custody since that time. He left his car in front of the courthouse. -4- Trooper William Arndt testified for the government. He said that when he and his partner arrived at the accident scene, the defendant and the other driver were standing by the side of the road, and the Jimmy was off the road and down in the ditch. Arndt said that his preliminary check on the vehicle revealed that the Jimmy was not registered to the defendant but had plates on it that were registered to a different car owned by the defendant. Arndt then asked the defendant for paperwork proving ownership of the vehicle and insurance, but his inquiries were met by inconsistent answers to questions about where the defendant’s paperwork was. First, he stated he had no papers. Then he explained that he had gone to the secretary of state’s office to effectuate the transfer. Trooper Arndt found these statements to be inconsistent, and he testified that he arrested the defendant for having no proof of insurance. However, Arndt stated he did not handcuff the defendant or put him in the police vehicle right away. Rather, the defendant continued to stand on the shoulder of the road. Trooper Arndt claims the defendant was arrested first, and the search was conducted afterwards with consent. As for the consent, Arndt testified on direct examination he asked the defendant, “Do you mind if I take a look in the vehicle?” He claims the defendant said that he could. Trooper Arndt then testified a few minutes later that he asked the defendant if he had any weapons in the vehicle, and the defendant denied having any weapons and offered to allow the officers to conduct a search, stating, “You can look if you want to.” Arndt said he and his partner went down into the ditch. Arndt testified that he saw a six pack of beer in the vehicle, so he went back up to the road to talk to the defendant, leaving his partner to conduct the search. Arndt then testified that the search was conducted incident to the arrest for no insurance and also with the defendant’s consent. Arndt’s partner found a bulletproof vest and a Harley Davidson tin that contained methamphetamine. The -5- methamphetamine was seized at that time, but the vest was not. Trooper Arndt stated the defendant was not given a breath test, even though one was available, because the defendant did not appear intoxicated. On cross examination, Arndt testified that the defendant was given a citation for not having proof of insurance. However, Arndt also testified that he told the defendant, “Based on what I found from the vehicle, if anything was found, if any paperwork was found, he could be issued a citation and released or arrested.” This explanation suggests that the defendant had not been arrested yet at the time of the search, in direct contradiction to Trooper Arndt’s previous testimony that the search was conducted after the arrest. Arndt claims the defendant volunteered to let the officers search his car, and that the defendant was not handcuffed at the time. Trooper Arndt stated that the defendant was handcuffed after the beer was found in his car. The officer does not recall visiting the jail to ask the defendant to sign a consent form. Conrad Henke, an investigator with the Federal Defender Office, testified for the defendant. He had conducted a review of the Michigan secretary of state’s records for the defendant’s car, a 1988 GMC Jimmy with vehicle identification number (VIN) 1GKCT18R9J0501617. The records show the vehicle was purchased by the defendant on April 16, 2002, and that the defendant went to the secretary of state’s office on April 19, 2002 to transfer the title. April 19 was a Friday. Secretary of state office personnel told Mr. Henke that the transfer likely would not be entered into the computer until the following Monday. The incident in this case occurred on Saturday, April 20. The defendant contends that the search of his vehicle violated the Fourth Amendment. The II. Fourth Amendment states: -6- The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized. U.S. Const. amend. IV. The Supreme Court has consistently held that in the criminal context, warrantless searches are per se unreasonable unless they fall within a few specifically established and well-delineated exceptions. Payton v. New York, 445 U.S. 573, 585-86 (1980); Mincey v. Arizona, 437 U.S. 385, 390 (1978); Katz v. United States, 389 U.S. 347, 357 (1967). Those exceptions include the seizure of a fleeing suspect, Warden v. Hayden, 387 U.S. 294, 298-300 (1967), prevention of the imminent destruction of evidence, Schmerber v. California, 384 U.S. 757, 770- 71 (1966), searches incident to a lawful arrest, Chimel v. California, 395 U.S. 752, 762-63 (1969), and consent, Schneckloth v. Bustamonte, 412 U.S. 218, 219 (1973). A. Consent “While the Fourth Amendment protects citizens against unreasonable searches and seizures, a search is not unreasonable if a person with a privacy interest in the item to be searched gives free and voluntary consent.” United States v. Ivy, 165 F.3d 397, 402 (6th Cir. 1998); see also Schneckloth, 412 U.S. at 219; United States v. Kelly, 913 F.2d 261, 265 (6th Cir. 1990). “The government bears the burden of proving through ‘clear and positive testimony’ that the consent to search was given voluntarily.” Ivy, 165 F.3d at 402; United States v. Tillman, 963 F.2d 137, 143 (6th Cir. 1992) (holding that “[c]onsent must be proved by clear and positive testimony and must be unequivocally, specifically, and intelligently given, uncontaminated by any duress and coercion”). To meet this burden, the government must demonstrate that consent was “freely and voluntarily given” without influence of duress, coercion, or mere submission to authority. United -7- States v. Van Shutters, 163 F.3d 331, 335 (6th Cir. 1998). Proof must consist of “clear and positive testimony.” United States v. Hurst, 228 F.3d 751, 757 (6th Cir. 2000). Proof of the consent in this record consists entirely of the testimony of Trooper Arndt, which is directly contradicted by the defendant’s own testimony. The government argues that if the defendant gave verbal consent, it has established sufficient proof to justify the search since consent does not have to be corroborated. The consent in this case, the government points out, mirrors the dialog that occurred in United States v. Erwin, 155 F.3d 818 (6th Cir. 1998), where the court of appeals found consent to have been established. That is all true enough, but the more basic question in this case is whether it has been proven that the defendant gave permission for a Michigan State police officer to search his car. Trooper Arndt’s testimony is blemished by some inconsistencies. In describing his solicitation of the defendant for permission to search the car, Arndt first said, “I asked Mr. Laughton do you mind if I take a look in the vehicle? He said I could.” Tr. of hearing at 45 (2/21/06). Later, he described the encounter differently; he claimed consent came in response to a question about weapons. “I asked him, Hey, you got anything in your vehicle? Guns, knives, bombs, bottle rockets, anything like that? He said: No, you can look if you want to.” Tr. of hearing at 46 (2/21/06). These differences are not fatal to Arndt’s credibility by themselves. However, the two statements suggest different objectives, the first implying a search that might be limited to the registration papers and the second indicating a broader exploration. Another consideration is the unlikelihood that the defendant, knowing that he had an unconcealed tin of methamphetamine and a bulletproof vest in plain view in the back of his vehicle, would readily grant permission to a police officer to rummage through the car’s passenger -8- compartment. Of course, that factor alone is neither controlling nor dispositive. However, it is a fact that must be weighed as part of the totality of the circumstances. Moreover, the defendant does not say that he refused permission; he says that he was never asked. In all events, the defendant’s testimony contradicts Arndt’s. The government argues that the Court should reject the defendant’s testimony and accept Arndt’s because the defendant is a felon with a stake in the outcome. Certainly, issues of bias and character for truthfulness are relevant considerations in weighing testimony. See Fed. R. Evid. 401, 609; United States v. Jackson-Randolph, 282 F.3d 369, 383 (6th Cir. 2002) (noting that “[b]ias is always relevant in assessing a witness’s credibility”) (citing United States v. Abel, 469 U.S. 45, 52 (1984 . However, the Supreme Court recently observed that police officers may be subject to personal liability, and therefore they may have a motive beyond the application of the exclusionary rule to shade their testimony or prevaricate to avoid a finding of a constitutional violation. In Hudson v. Michigan, __ U.S. __, 2006 WL 1640577, *9 (June 15, 2006), the Court held that the exclusionary rule does not apply to violations of the knock-and-announce rule and noted that the threat of civil liability affects the behavior of law enforcement officers: As far as we know, civil liability is an effective deterrent here, as we have assumed it is in other contexts. See, e.g., Correctional Services Corp. v. Malesko, 534 U.S. 61, 70 (2001) (“[T]he threat of litigation and liability will adequately deter federal officers for Bivens purposes no matter that they may enjoy qualified immunity” (as violators of knock-and-announce do not ; see also Nix v. Williams, 467 U.S. 431, 446 (1984). Hudson, 2006 WL 1640577, at *9. The Court stated that the availability of attorney fees in such suits makes them more likely to be filed. “Citizens and lawyers are much more willing to seek relief in the courts for police misconduct.” Hudson, 2006 WL 1640577, at *8. Given these competing motives, this Court finds that neither witness deserves an advantage in the credibility contest. -9- If both versions of the events of April 20, 2002 are equally plausible, the government has not prevailed under any standard of proof. See Concrete Pipe and Products of California, Inc. v. Construction Laborers Pension Trust for Southern California, , 622 (1993) (observing that “[t]he burden of showing something by a ‘preponderance of the evidence,’ the most common standard in the civil law, ‘simply requires the trier of fact “to believe that the existence of a fact is more probable than its nonexistence before [he] may find in favor of the party who has the burden to persuade the [judge] of the fact’s existence”’”) (quoting In re Winship, , 371-72 (1970) (Harlan, J., concurring . The Court believes that the record does not contain “clear and positive testimony” that consent to search the vehicle was given in this case. B. Search Incident to Arrest In Chimel v. California, the Supreme Court held that when a person is arrested in his home, the arresting officers may search the area immediately surrounding him to remove weapons and prevent the defendant from destroying evidence. The Court reasoned: When an arrest is made, it is reasonable for the arresting officer to search the person arrested in order to remove any weapons that the latter might seek to use in order to resist arrest or effect his escape. Otherwise, the officer’s safety might well be endangered, and the arrest itself frustrated. In addition, it is entirely reasonable for the arresting officer to search for and seize any evidence on the arrestee’s person in order to prevent its concealment or destruction. Chimel, 395 U.S. at 762-63. In New York v. Belton, 453 U.S. 454 (1981), the Court expanded the search incident to arrest concept to allow officers to search the entire passenger compartment of the vehicle of someone who has been arrested in the car. Belton was pulled over for speeding. When the officer saw a small quantity of marijuana on the floor of Belton’s car, he arrested Belton for possession of marijuana. The officer then searched the passenger compartment of the car and, inside the pocket of a jacket -10- on the back seat, found cocaine. The Court held that “when a policeman has made a lawful custodial arrest of the occupant of an automobile, he may, as a contemporaneous incident of that arrest, search the passenger compartment of that automobile.” Belton, 453 U.S. at 460. In Northrop v. Trippett, 265 F.3d 372 (6th Cir. 2001), the Sixth Circuit applied Belton to hold that “the right to search an item incident to arrest exists even if that item is no longer accessible to the defendant at the time of the search. So long as the defendant had the item within his immediate control near the time of his arrest, the item remains subject to a search incident to arrest.” Northrop, 265 F.3d at 379. The incident to arrest concept was expanded even further in Thornton v. United States, 541 U.S. 615 (2004), to allow officers to search a car if a “recent occupant” was arrested: In all relevant aspects, the arrest of a suspect who is next to a vehicle presents identical concerns regarding officer safety and the destruction of evidence as the arrest of one who is inside the vehicle. An officer may search a suspect’s vehicle under Belton only if the suspect is arrested. A custodial arrest is fluid and “the danger to the police officer flows from the fact of the arrest, and its attendant proximity, stress, and uncertainty,” Robinson, supra, 414 U.S. at 234-35, and n.5 (emphasis added) . . . The stress is no less merely because the arrestee exited his car before the officer initiated contact, nor is an arrestee less likely to attempt to lunge for a weapon or to destroy evidence if he is outside of, but still in control of, the vehicle. In either case, the officer faces a highly volatile situation. It would make little sense to apply two different rules to what is, at bottom, the same situation. . . . [A]n arrestee’s status as a “recent occupant” may turn on his temporal or spatial relationship to the car at the time of the arrest and search. . . . Once an officer determines that there is probable cause to make an arrest, it is reasonable to allow officers to ensure their safety and to preserve evidence by searching the entire passenger compartment. . . . So long as an arrestee is the sort of “recent occupant” of a vehicle such as petitioner was here, officers may search that vehicle incident to the arrest. Thornton, 541 U.S. at 621-24 (emphasis added). The government contends that the vehicle search in this case was reasonable because the defendant was arrested for having no vehicle registration and he was a “recent occupant” of the -11- Jimmy. With respect to the latter proposition, there is little Sixth Circuit guidance on the question of when an arrestee remains a recent occupant of a motor vehicle. The only published decision by the Sixth Circuit discussing Thornton is United States v. Herndon, 393 F.3d 665 (6th Cir. 2005). In that case, the police saw the defendant driving into a car wash. They checked the license plates and discovered that the vehicle registration had expired a couple of years previously. They approached the defendant, who was standing about five feet away from the open car door. The opinion does not report how much time had passed from when the defendant was in the car to when he was arrested. The officers asked to see his driver’s license, and he stated he did not have one. They arrested the defendant and conducted a search of the vehicle incident to arrest. The Sixth Circuit upheld the search, holding that the facts were virtually indistinguishable from Thornton. In an unpublished opinion, one court of appeals panel stated that although physical proximity to the vehicle is a factor in making the determination, “[t]hat the vehicle was outside the defendant’s ‘grab area’ after he was arrested and handcuffed does not require suppression of the evidence found upon entry of the vehicle.” United States v. Jones, 155 Fed. Appx. 204, 208 (6th Cir. 2005) (unpublished). One commentator has offered a four-factor test by which to assess an arrestee’s status as a “recent occupant” of a vehicle: (1) Was the arrestee in a vehicle at some point prior to arrest?; (2) Did the officers see the arrestee inside the vehicle?; (3) Did the arrest take place in the vicinity of the vehicle?; and (4) In the time period between when the officers saw the arrestee inside, and the arrest itself, were the officers both with the arrestee and conducting investigatory functions for the entire period of time? Dane C. Ball, Thornton v. United States: Blurring Belton’s Bright Line Rule Spells Disaster for Lower Courts and the Fourth Amendment, 35 Sw. U. L. Rev. 1, 33 (2005) (footnotes omitted). The -12- author appropriated this test from United States v. Edwards, 2004 WL 1534173 (D. Kan. June 21, 2004) (unpublished). In that case, police officers observed the defendant in a parked car. Based on their observations, they concluded the defendant was under the influence of some substance. When the defendant drove away, the officers followed him to his house, where he parked and exited the car. The officers approached him and asked him to cross the street so they could give him a sobriety test. The defendant agreed and walked across the street with them, about 40 feet from the defendant’s car. The defendant failed the test, and he was arrested. The officers searched the car incident to the arrest, which occurred about fifteen minutes after they initiated contact with him. They found drugs and guns, which the defendant sought to suppress by arguing that the search could not qualify as a search incident to his arrest due to the time that had passed and the distance from the car. The trial court upheld the search. The court stated forty feet was not too far, without explaining. The court also held that fifteen minutes was not too long. “[G]iven the 15-minute time span between the officers’ initial contact and defendant’s arrest, he was still a ‘recent occupant.’” Id. at *5. The Court finds this test useful because it remains faithful to the relevant considerations discussed in Thornton – time and space – and it focuses the inquiry in a practical way. The factors, however, must be viewed through the lens of prior precedents that sanction searches incident to arrest because of the need to prevent destruction of evidence and promote officer safety. In this case, the defendant admitted that he had been driving the Jimmy before the accident. However, there is no evidence that the officers ever saw the defendant in the vehicle. In fact, the Jimmy had been in a ditch several feet off of and below the roadway, and the defendant was standing on the side of the road when the officers arrived. According to the uncontested facts, the defendant had not -13- been near the vehicle for at least thirty minutes by the time the officers even arrived at the scene. The search occurred well after that. The arrest, according to Trooper Arndt, took place in the back of the police car or on the shoulder of the road, depending on which version of his testimony is accepted. The Court believes, therefore, that the arrest was not within the vicinity of the Jimmy itself. Finally, Trooper Arndt testified that he did not remain with the defendant even after he was “arrested” for not having a vehicle registration, but rather he left the defendant unrestrained at the side of the road and joined his partner in the search before returning to the defendant at the roadway. These factors impel the Court to conclude that the vehicle search cannot be justified as incident to the arrest of a “recent occupant” of the Jimmy under Thornton, nor can it pass muster under the rationale of Chimel or Belton. The officers never saw the defendant in the vehicle, and there is no basis to conclude that the historical justifications for such warrantless arrests – ensuring officer safety and preventing the destruction of evidence, Knowles v. Iowa, 525 U.S. 113, 116 (1998) (noting that “the two historical rationales for the ‘search incident to arrest’ exception [are]: (1) the need to disarm the suspect in order to take him into custody, and (2) the need to preserve evidence for later use at trial”) – are present in this case. Another problem with the government’s argument is the claim that Laughton was actually under arrest when the search was commenced. Trooper Arndt’s testimony was confusing on this point. First, he testified that he arrested the defendant for having no insurance, then the defendant consented to the search, then the search was conducted. However, a short time later, Trooper Arndt testified that he told the defendant that the results of a search of the vehicle would determine whether the defendant would be arrested or not. He testified that he told the defendant “based on what I found from the vehicle, if anything was found, if any paperwork was found, he could be issued a -14- citation and released or arrested.” Tr. of hearing at 53 (2/21/06) (emphasis added). Trooper Arndt’s second version of the events of that day reflect the circumstances recently described by the District of Columbia court of appeals: The question before the court is whether the exception to the warrant requirement under the Fourth Amendment for a search of the passenger compartment of a car incident to a lawful custodial arrest under New York v. Belton, 453 U.S. 454, 460 (1981), applies to a search incident to the possibility of an imminent arrest. We hold that it does not. To come within the exception, the warrantless search cannot precede a custodial arrest; otherwise, neither of the Supreme Court’s two historical rationales for the exception would apply. See Knowles v. Iowa, 525 U.S. 113, 116-117 (1998). Consequently, although the police had probable cause to arrest Ronald Powell for a misdemeanor committed in their presence, because they instead searched a nearby car before informing Powell that he was under arrest or restraining his movement in a manner that would lead a reasonable person in his position to believe he was under arrest, the search was unlawful. United States v. Powell, __ F.3d __, __, 2006 WL 1715683 at *1 (D.C. Cir. June 23, 2006). In Knowles v. Iowa, the Supreme Court held that an actual arrest, as opposed to the issuance of a summons or citation, is required before an incidental search can be justified. Knowles, 525 U.S. at 114 (holding: “An Iowa police officer stopped petitioner Knowles for speeding, but issued him a citation rather than arresting him. The question presented is whether such a procedure authorizes the officer, consistently with the Fourth Amendment, to conduct a full search of the car. We answer this question ‘no.’”). Under the present Fourth Amendment jurisprudence, the arrest must precede the search. As with the matter of consent, the Court likewise finds that the government has not established by “clear and positive testimony” that the warrantless search can be justified as a search incident to the arrest of a recent occupant of a motor vehicle in this case. III. For the reasons explained above, the Court concludes that the search of the defendant’s vehicle on April 20, 2002 was unreasonable under the Fourth Amendment because no warrant was -15- obtained and the government has not established that any of the accepted exceptions to the warrant requirement exist in this case. Accordingly, it is ORDERED that the defendant’s motion to suppress evidence [dkt # 88] is GRANTED. It is further ORDERED that items seized from the defendant’s vehicle at the scene of the accident on April 20, 2002 may not be introduced in evidence at the defendant’s trial. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: June 26, 2006 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on June 26, 2006. s/Tracy A. Jacobs TRACY A. JACOBS -16-

=== MATTHEW DUBAY v. LAUREN WELLS et al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION Case Number 06-11016-BC Honorable David M. Lawson MATTHEW DUBAY, Plaintiff, v. LAUREN WELLS, an individual, and SAGINAW COUNTY PROSECUTING ATTORNEY’S OFFICE, by and through, MICHAEL D. THOMAS, prosecutor, Defendants, and MICHAEL A. COX, Attorney General of the State of Michigan, ______________________________________ / Intervening-Defendant. ORDER REJECTING STIPULATION Plaintiff Matthew Dubay filed this action seeking a declaration that the Michigan’s paternity statute is unconstitutional. Pursuant to that legislation, the Saginaw County, Michigan prosecuting attorney (defendant Michael D. Thomas), on the relation of defendant Lauren Wells, filed an action in state court for a judgment of filiation against Dubay seeking an order for him to pay child support and confinement costs to defendant Ms. Wells, the mother of Dubay’s child. Now before the court is a stipulation signed by the parties purporting to dismiss the case against defendant Wells, only. Because Wells is a necessary party to the litigation, as explained below, the Court must reject the stipulation and retain Wells as a party defendant in the case. I. The facts, as alleged, are straightforward. According to the amended complaint, the plaintiff and defendant Wells had a child together, despite the plaintiff’s express desires to the contrary and Wells’s assurances that she was on birth control and otherwise was infertile. Thereafter, Wells signed a paternity complaint and the Saginaw County, Michigan prosecutor initiated proceedings pursuant to Michigan’s Paternity Act, Mich. Comp. Laws § 722.711 et seq., to force the plaintiff to help support the child and share the costs of the delivery. The plaintiff responded, in part, by filing a lawsuit in this Court challenging the constitutionality of that statute and its enforcement against him under the Fourteenth Amendment’s Equal Protection Clause. On May 10, 2006, the parties presented the instant stipulation. II. The joinder of “necessary” parties in a lawsuit is governed by Federal Rule of Civil Procedure 19, which states in part: A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in the person’s absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person’s absence may (i) as a practical matter impair or impede the person’s ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest. Fed. R. Civ. P. 19(a) (emphasis added). Rule 19 “reflect[s] a policy decision that other interests – primarily the protection of other parties and absentees – outweigh the interest in plaintiff autonomy” namely whom to join as party defendants. 4 Moore’s Federal Practice § 19.02[1]. Rule 19 has been described as “the exception -2- to the otherwise general policy of allowing the plaintiff to decide who shall be parties to the lawsuit.” Lopez v. Martin Luther King, Jr. Hosp., 97 F.R.D. 24, 28 (C.D. Cal. 1983). Although the office of Rule 19 generally is to “establish[] guidelines for determining when it is proper to dismiss a case [when] a person or entity [that] has an interest in the outcome of the litigation . . . [cannot be joined without] depriv[ing] the court of subject matter jurisdiction,” Glancy v. Taubman Centers, Inc., 373 F.3d 656, 664 (6th Cir. 2004), the Court believes that Rule 19 also provides guidance in the present circumstance where a party attempts to withdraw from the litigation. A panel of the Sixth Circuit has observed that “Rule 19 is the tool of the defendant, as the plaintiff has the power to choose which parties it wishes to sue and generally has ample freedom to amend its complaint to add a party.” Id. at 669. Nonetheless, some of the factors that are used to implement Rule 19’s “pragmatic approach” are useful in deciding whether a joined defendant seeking to leave the litigation is indispensable to the lawsuit. See Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 116 n. 12 (1968) (noting that the 1966 amendment of Rule 19 “emphasizes the pragmatic consideration of the effects of the alternatives of proceeding or dismissing” and it eliminated the strict classifications of “necessary” and “indispensable” parties while noting that “the two approaches should come to the same point, since the only reason for asking whether a person is ‘necessary’ or ‘indispensable’ is in order to decide whether to proceed or dismiss in his absence”). Pre-1966 amendment jurisprudence defined indispensable parties as “those without whom the action cannot proceed.” Jamison v. Memphis Transit Management Co., 381 F.2d 670, 674 (6th Cir. 1967). Their importance is such that “[t]hey must be joined even if by such joinder the court loses jurisdiction over the controversy,” say, in a diversity action. Ibid. “Necessary parties are those who have an interest in the controversy but whose interests are -3- separable and will not be directly affected by a decree rendered in their absence, which does full justice between the parties before the court.” Ibid. Although the term “necessary party” has become common legal parlance, the Sixth Circuit has cautioned that the phrase “is a misnomer. It does not mean ‘essential parties’. Rather it means ‘desirable parties’ as distinguished from indispensable parties, on the one hand, and from proper parties, on the other hand. It means ‘parties who should be joined, if feasible.’” Id. at 675 (internal citations omitted). Policy considerations and equitable concerns have led the Sixth Circuit to adopt a three-part test for determining whether an action must be dismissed due to the absence of a party. See Glancy, 373 F.3d at 665-66: First, the court must determine whether the person or entity is a necessary party under Rule 19(a). Second, if the person or entity is a necessary party, the court must then decide if joinder of that person or entity will deprive the court of subject matter jurisdiction. Third, if joinder is not feasible because it will eliminate the court’s ability to hear the case, the court must analyze the Rule 19(b) factors to determine whether the court should “in equity and good conscience” dismiss the case because the absentee is indispensable. (internal citations and quotations omitted). The last two factors do not come into play in the present matter because the party under scrutiny is presently before the Court. The necessity of the party’s presence, however, is addressed by Rule 19(a). Under the first factor, then, three separate, but generally individually sufficient, considerations inform the Court’s determination. First, the absent individual “is necessary if without joinder complete relief cannot be accorded among those already parties.” 4 Moore’s Federal Practice § 19.02[3][b] (citing Fed. R. Civ. P. 19(a)(1 . This subsection of Rule 19 embodies “an interest in efficiency and avoidance of inconsistent results.” Ibid. Second, if subsection 19(a)(2)(i) is used to justify joinder, the absent individual must “claim an interest related to the subject of the -4- action.” Ibid. Necessity arises here if the individual is “so situated” that failure to join her “as a practical matter, would impair or impede [her] ability to protect that interest.” Fed. R. Civ. P. 19(a)(2)(i). Finally, joinder may be necessary if the absence of the individual would potentially subject the other parties to “double, multiple, or otherwise inconsistent obligations.” Fed. R. Civ. P. 19(a)(2)(ii). Defendant Wells’s request to withdraw from the lawsuit implicates both Federal Rule of Civil Procedure 19(a)(2)(i) and 19(a)(2)(ii). She is the mother of the plaintiff’s child. See Am. Compl. at ¶ 15. After the child’s birth, the Saginaw County prosecutor brought a paternity complaint against the plaintiff under Michigan’s Paternity Act, Mich. Comp. Laws § 722.711 et seq. See Am. Compl. at ¶ 17. The plaintiff in this case has pleaded that the statute is unconstitutional as applied to him, and he should not have to pay child support. It is beyond debate that this lawsuit will affect the interest of Wells if she does not remain a party. Although the case is framed in terms of the plaintiff’s constitutional rights, Dubay asks the Court to enjoin the governmental defendants from enforcing Michigan’s Paternity Act against him. An injunction, of course, would mean that the paternity complaint Wells signed, which presently is being prosecuted by the Saginaw County prosecutor’s office, likely could not proceed. As a practical matter, Wells’s ability to protect her interest in recovering confinement costs and child support payments could be compromised by a judgment in this case. See Fed. R. Civ. P. 19(a)(2)(i). Wells’s presence in this suit therefore is necessary so that her interest – the availability of child support – is protected. Under Rule 19(a)(2)(ii), Wells’s presence as a party defendant is necessary for a slightly different reason: the plaintiff potentially could be subject to inconsistent judgments. This Court could find that the plaintiff was entitled to some relief, but potentially the plaintiff still would be -5- liable in state court as a result of the suit initiated by Wells. Therefore, Wells is a necessary party and should not be dismissed from this action. There remains the question whether other parties defendant can represent Wells’s interests adequately. At lease one member of the panel in Glancy v. Taubman Centers, Inc. subscribed to the view that adequacy of representation may not be considered as part of “the threshold Rule 19(a) analysis”; it should arise only after a party’s indispensibility already has been determined. Glancy, 373 F.3d at 668-69; but see id. at 677 (Rogers, J., concurring) (noting that he was “reluctant to conclude, however, that ‘adequacy of representation’ is categorically not to be considered as part of a Rule 19(a) analysis, and such a conclusion is unnecessary to our holding”). However, the Court believes that inquiry is pertinent in the present context since the question does not require dismissal of the action if joinder of a party is not feasible. Certainly the county prosecutor and the intervening Michigan attorney general are able to defend the constitutionality of the statute. But the plaintiff has alleged that Wells engaged in a species of misrepresentation and then refused to terminate her pregnancy, all to the detriment of the plaintiff. See Am. Compl. at ¶¶ 12-16. The Court finds that the remaining defendants likely would not be able to defend against these allegations adequately. III. The Court determines that the presence of defendant Lauren Wells in this case is necessary for the complete adjudication of the rights of the parties affected by the plaintiff’s claims and to avoid inconsistent judgments. -6- Accordingly, it is ORDERED that the stipulation to dismiss Lauren Wells as a party defendant is REFUSED. Dated: June 20, 2006 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on June 20, 2006. s/Tracy A. Jacobs TRACY A. JACOBS -7-

=== STEVE MONTLE v. WESTWOOD HEIGHTS SCHOOL DISTRICT et. al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION STEVE MONTLE, v. Plaintiff, WESTWOOD HEIGHTS SCHOOL DISTRICT, JERRI-LYNN WILLIAMS, in her individual capacity, and GEORGE GRAY, in his individual capacity, ____________________________________/ Defendants. Case No: 05-10137-BC Honorable David M. Lawson OPINION ON JURY VERDICT AND ENTRY OF JUDGMENT Plaintiff Stephen Montle, a probationary high school teacher whose contract was not renewed after his four-year probationary term, filed a five-count complaint against his former employer, Westwood Heights School District, and the district superintendent and high school principal. Montle alleged claims of discrimination based on race and age, and he also contended that the actions of the superintendent and the principal were in retaliation for expressions protected by the First Amendment. On April 18, 2006, the Court filed an order granting in part and denying in part the defendants’ motion for summary judgment and dismissing counts two and five of the complaint, and the case proceeded to jury trial on the remaining counts. On May 31, 2006, the jury returned a verdict in favor of defendants Westwood Heights School District and Jerri-Lynn Williams on the respective race discrimination claims. As to the First Amendment claim, the jury found for defendant Jerri-Lynn Williams and against defendant George Gray, and it assessed compensatory and punitive damages against Gray. The jury also addressed special questions posed by the Court. The jury answered “Yes” to the following question: “Did the plaintiff’s act of wearing a T-shirt during school hours that stated that teachers’ union members were working without a contract cause, or could it have caused, disharmony in the workplace at the Hamady High School?” It answered “No” to this question: “Did the plaintiff’s activity of wearing a T-shirt during school hours that stated that teachers’ union members were working without a contract impair the plaintiff’s ability to perform his duties?” The Court directed the parties to file briefs on the question of reconciling the jury’s responses with their determination of liability in light of the balancing required when a public employee claims that speech motivated retaliatory action by a government employer. See Pickering v. Bd. of Educ. of Twp. High School Dist. 205, Will Cty, 391 U.S. 563, 568 (1968). After reviewing the decisional authorities, the Court concludes that, in light of the jury’s determination of the disruption that was or could have been wrought by the plaintiff’s speech, the plaintiff’s right to speak out on a matter of public concern must be subjugated to his employer’s interest in maintaining order in the workplace. The Court, therefore, will enter judgment for the defendants on all counts of the complaint. I. The conduct underlying the legal issue was the plaintiff’s act of wearing a bright green T- shirt on certain Fridays during the fall of 2004. As described in the trial testimony, the T-shirt bore initials on the front that represented the name of the plaintiff’s union, the Westwood Heights Education Association (“WHEA”); the back of the T-shirt contained the statement, “Working Without a Contract.” Other teachers wore the T-shirt on those days as well. There was testimony that the plaintiff confronted those teachers who declined to wear the T-shirt. The plaintiff testified that he wore the shirt to make parents and students aware of the circumstance that the union and the school board had yet to negotiate a labor contract with the teaching staff, and the teachers were -2- working without any collective bargaining agreement. The plaintiff alleged that this demonstration was a factor in the decision not to renew his teaching contract at the expiration of his four-year probationary period and grant him tenure. The jury apparently agreed with this claim, at least with respect to the principal, defendant George Gray. As noted above, the jury also found that the plaintiff’s act of wearing the T-shirt caused or could have caused disharmony in the workplace at the Hamady High School. II. To make out a First Amendment claim, the plaintiff must show three things: “1) the plaintiff engaged in constitutionally protected speech; 2) the plaintiff was subjected to adverse action or was deprived of some benefit, and 3) the protected speech was a ‘substantial’ or a ‘motivating factor’ in the adverse action.” Brandenburg v. Housing Authority of Irvine, 253 F.3d 891, 897 (6th Cir. 2001). The present inquiry focuses on the first element. This first element of the claim – whether the plaintiff’s speech was protected by the First Amendment – is itself analyzed by applying three factors. As the Sixth Circuit has explained: First, a court must ascertain whether the relevant speech addressed a matter of public concern. If the answer is yes, then the court must balance the interests of the public employee, as a citizen, in commenting upon matters of public concern and the interest of the State, as an employer, in promoting the efficiency of the public services it performs through its employees. Finally, the court must determine whether the employee’s speech was a substantial or motivating factor in the employer’s decision to take the adverse employment action against the employee. Rodgers v. Banks, 344 F.3d 587, 596 (6th Cir. 2003) (internal quotes and citations omitted). These factors account for the twin concerns of protecting the speech rights of citizens who happen to be government employees, and avoiding undue restrictions on public employers to control and direct their employees, who happen to be citizens. As the Supreme Court explained just last month, -3- “public employees do not surrender all their First Amendment rights by reason of their employment.” Garcetti v. Ceballos, 126 S. Ct. 1951, 1957 (2006). However, “[w]hen a citizen enters government service, the citizen by necessity must accept certain limitations on his or her freedom. Government employers, like private employers, need a significant degree of control over their employees’ words and actions; without it, there would be little chance for the efficient provision of public services.” Id. at 1958 (citations omitted). When a public employee contends that he has suffered discipline because of his speech, the critical inquiry can be summarized as follows: “whether the relevant government entity had an adequate justification for treating the employee differently from any other member of the general public.” Ibid. The Supreme Court reiterated the key components of this “delicate balance”: “[a] government entity has broader discretion to restrict speech when it acts in its role as employer, but the restrictions it imposes must be directed at speech that has some potential to affect the entity’s operations.” Ibid. The source of the limitations on such restrictions is the First Amendment, which “limits the ability of a public employer to leverage the employment relationship to restrict, incidentally or intentionally, the liberties employees enjoy in their capacities as private citizens.” Ibid. The Court has already determined that the subject of the plaintiff’s speech in this case touched upon a matter of public concern. Matters of public concern include speech that “relat[es] to any matter of political, social, or other concern to the community,” Connick v. Myers, , 146 (1983), and “involves issues about which information is needed or appropriate to enable the members of society to make informed decisions about the operation of their government.” Brandenburg, 253 F.3d at 898. Although one might be tempted to relegate the plaintiff’s -4- protestation of “no contract” to a typical employee complaint, it is apparent that an announcement by a teacher union that it is working without a contract extends beyond the individual teachers and union members. The end of summer in Michigan typically has brought with it news stories about which school districts were in jeopardy of late openings because of labor unrest. The absence of union contracts is a matter of great concern to parents and students, if not all citizens interested in public education. It is a matter of importance to the vitality of the school district and the community, and it can call into question the effectiveness of the management overseen by the elected school board. In Pickering, the Supreme Court found that a high school teacher’s open criticism of the local board of education on its budgetary priorities amounted to a matter of public concern. Other courts, including the Sixth Circuit, have found that speech by public school teachers concerning the employment of teachers, the economics and budget of the district, and union activities as they relate to employment all touch on matters of public concern. See Columbus Educ. Ass’n v. Columbus City Sch. Dist., 623 F.2d 1155 (6th Cir. 1980) (holding that a teacher’s “zealous advocacy as a designated union spokesperson of a fellow teacher’s complaint” was a matter of public concern); McGill v. Bd. of Educ. of Pekin Elementary Sch., 602 F.2d 774 (7th Cir. 1979) (teacher’s statements concerning collective bargaining agreement were of sufficient public concern to be protected by the First Amendment); D’Andrea v. Adams, 626 F.2d 469 (5th Cir. 1980) (statements by professor to legislative officials concerning allegedly improper use of university funds protected by the First Amendment). The next question under Pickering and its Sixth Circuit spawn is whether “the interest of the employee as a citizen, in commenting on matters of public concern, outweighs the employer’s interest in promoting the efficiency of the public services it performs through its employees.” -5- Brandenburg, 253 F.3d at 897-98. “Application of the Pickering balancing test is a matter of law for the court to decide.” Farhat v. Jopke, 370 F.3d 580, 593 (6th Cir. 2004) (citing Leary v. Daeschner, 349 F.3d 888, 898 (6th Cir. 2003 . However, “there may be some factual questions for a jury.” Id. at 589. As the Eighth Circuit explained, “[a]lthough the court should resolve each of these questions as a matter of law, ‘[a]ny underlying factual disputes concerning whether the plaintiff’s speech is protected . . . should be submitted to the jury through special interrogatories or special verdict forms.’” Washington v. Normandy Fire Protection Dist., 328 F.3d 400, 404 (8th Cir. 2003); see also Bennis v. Gable, 823 F.2d 723, 729 & n.6 (3d Cir.1987). “For example, the jury should decide factual questions such as the nature and substance of the plaintiff’s speech activity, and whether the speech created disharmony in the work place. The trial court should then combine the jury’s factual findings with its legal conclusions in determining whether the plaintiff’s speech is protected.” Shands v. City of Kennett, 993 F.2d 1337, 1342-43 (8th Cir. 1993) (citations omitted). In this case, the jury specifically determined that the plaintiff’s act of wearing the T-shirt during school hours caused or could have caused disharmony in the workplace at the Hamady High School. By its verdict, the jury also found that this speech was a factor in George Gray’s decision to recommend non-renewal of Montle’s teaching contract. Given these determinations, the Court’s task is to balance Montle’s interest “‘as a citizen, in commenting upon matters of public concern’” and the interest of the school district, through its principal, “‘as an employer, in promoting the efficiency of the public services it performs through its employees.’” Farhat, 370 F.3d at 593 (quoting Pickering, 391 U.S. at 568). “The State [school district] bears a burden of justifying the discharge on legitimate grounds.” Rankin v. McPherson, 483 U.S. 378, 388 (1987) (quoting Connick, 461 U.S. at 150). The State may curtail the plaintiff’s speech on matters of public concern -6- if it “impair[s] discipline by superiors, ha[s] a detrimental impact on close working relationships, undermine[s] a legitimate goal or mission of the employer, impede[s] the performance of the speaker’s duties, or impair[s] harmony among co-workers.” Meyers v. City of Cincinnati, 934 F.2d 726, 730 (6th Cir. 1991). In this case, the Court finds that the defendant has carried his burden of demonstrating that the speech caused disharmony in the workplace. The testimony established that the plaintiff wore his T-shirt containing the legend during class and throughout the work day. He upbraided co- workers who did not conform to the once-per-week practice, and his confrontational behavior actually prompted complaints to the principal by other teachers. Montle’s message, on the other hand, did not amount to much of a revelation, since the teachers had been without a contract for over a year, and the witnesses testified without contradiction that the circumstance was common knowledge in the community. Although the status (or absence) of labor negotiations certainly was a matter of public concern, the school district’s interest in ensuring professional demeanor and good relations among its faculty has been recognized as an interest that outweighs the right to speech during the workday. The Court believes that such a limitation was reasonable to ensure “the efficient provision of public services,” Garcetti, 126 S. Ct. at 1958, which in this case was educating high school students. The defendant demonstrated, and the jury found, that Montle’s speech “ha[d] some potential to affect the entity’s operations.” Ibid. The Court finds, therefore, that the plaintiff’s speech was not protected by the First Amendment. -7- III. Based on the factual determination by the jury, and applying controlling precedent, the Court concludes that the plaintiff’s First Amendment claim against defendant George Gray must fail as a matter of law. A judgment will enter accordingly. Dated: June 15, 2006 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on June 15, 2006. s/Tracy A. Jacobs TRACY A. JACOBS -8-

=== RICHARD DRESSER et al v. CRADLE OF HOPE ADOPTION CENTER, ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION Case Number 03-CV-10083-BC Honorable David M. Lawson RICHARD DRESSER and MARILYN DRESSER, Husband and Wife, and as Next Friend of MIKHAIL ROBERT DRESSER, a Minor Child, Plaintiffs, v. CRADLE OF HOPE ADOPTION CENTER, INC., a Maryland corporation, ____________________________________/ Defendant. ORDER DENYING PLAINTIFFS’ MOTION IN LIMINE, AND GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTIONS IN LIMINE Before the Court are cross motions in limine filed by the parties in preparation for trial. The facts of the case are summarized in detail in the Court’s opinion on the parties’ motions for summary judgment. See Dresser v. Cradle of Hope Adoption Ctr, Inc., 358 F. Supp. 2d 620, 623-30 (E.D. Mich. 2005). In that opinion, the Court dismissed several of the plaintiffs’ claims but left intact a negligence claim against defendant Cradle of Hope Adoption Center, Inc. on behalf of the minor child, Mikhail Dresser. Id. at 638-42, 643. The plaintiffs seek the exclusion of evidence of negligence on the part of plaintiffs Marilyn and Richard Dresser, Mikhail’s parents, because their negligence cannot be attributed to the minor plaintiff, who has the only remaining claim. The defendant has filed five motions seeking the exclusion of evidence of damages sustained by Mikhail’s family members, testimony as to the standard of care, economic and future damages, and expert testimony of Dr. Robertson and Thomas Smith. The plaintiffs oppose all the defendant’s motions except the motion to exclude evidence of damages sustained by Mikhail’s family members, in which they concur. The Court will discuss each motion in turn. I. The plaintiffs contend that evidence of negligence of Mikhail Dresser’s parents is not admissible because under Michigan law, the negligence of a parent may not be imputed to the child. See Byrne v Schneider’s Iron & Metal, Inc., 190 Mich. App. 176, 189, 475 N.W. 2d 854, 860 (1991); Rodriquez v Solar of Michigan, Inc., 191 Mich. App. 483, 492, 478 N.W. 2d 914, 920 (1991). They also contend that Mikhail as a minor under the age of seven years old is “presum[ed] incapable of committing negligent or criminal acts or intentional torts.” Bragan ex rel v. Symanzik, 263 Mich. App. 324, 334, 687 N.W.2d 881, 888 (2004). The defendant argues, however, that under the state’s “tort reform” legislation enacted in 1995, the defendant is entitled to ask for the apportionment of damages against all persons who may have contributed to the plaintiff’s injuries. See Mich. Comp. Laws § 600.2957. The defendant contends that the statutory provision includes parents, and a defendant can be ordered to pay only the percentage of damages that corresponds to its own its liability, which may not include those damages for which non-parties are responsible. If that is so, then the parents’ conduct is relevant to the question of their negligence. There is no Michigan appellate decision that attempts to reconcile the statutes that require apportionment of damages and abolish joint and several liability with the common law rule against imputing a parent’s negligence to a child. Therefore, since the state’s highest court has not decided the issue, “the federal court must ascertain the state law from ‘all relevant data.’” Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995) (quoting Bailey v. V & O Press -2- Co., 770 F.2d 601, 604 (6th Cir. 1985 . “Relevant data includes the state’s intermediate appellate court decisions, as well as the state supreme court’s relevant dicta, restatements of the law, law review commentaries, and the majority rule among other states.” Ososki v. St. Paul Surplus Lines, 156 F. Supp. 2d 669, 674 (E.D. Mich. 2001) (internal quotes and citation omitted) (citing Angelotta v. Am. Broad. Corp., 820 F.2d 806, 807 (6th Cir.1987 . The basis of the rule that a parent’s negligence cannot be imputed to the child is that, under Michigan common law, parents cannot be sued directly for certain tortious injuries to the child. As the Michigan Court of Appeals explained, “Both comparative and contributory negligence are founded upon the breach of some legal duty. . . . Since the child cannot sue his parent for negligent supervision, the parent cannot be jointly or severally liable with another tortfeasor.” Byrne, 190 Mich. App. at 188-89, 475 N.W.2d at 860. Although the doctrine of intra-family immunity has been abrogated in Michigan, parental immunity still exists in cases involving “an exercise of reasonable parental authority over the child” or “reasonable parental discretion with respect to the provision of food, clothing, housing, medical and dental services, and other care.” Plumley v. Klein, 388 Mich. 1, 8, 199 N.W.2d 169, 172-73 (1972). Since this case involves the provision of medical services to Mikhail, certainly his parents would be immune from a tort claim brought against them by Mikhail. However, in 1995 the Michigan legislature enacted Public Act 249, which amended the Revised Judicature Act and eliminated joint and several liability. The relevant statute now states: In an action based on tort or another legal theory seeking damages for personal injury, property damage, or wrongful death, the liability of each person shall be allocated . . . in direct proportion to the person’s percentage of fault. In assessing percentages of fault under this subsection, the trier of fact shall consider the fault of each person, regardless of whether the person is, or could have been, named as a party to the action. -3- Mich. Comp. Laws § 600.2957(1). The purpose of this legislation is to “allocate liability according to the relative fault of all persons contributing to the accrual of a plaintiff’s damages.” Lamp v. Reynolds, 249 Mich. App. 591, 596, 645 N.W.2d 311, 315 (2002). Unlike the rule of joint and several liability, “a person shall not be required to pay damages in an amount greater than his or her percentage of fault.” Mich. Comp. Laws § 600.6304(4). Michigan courts have held that tort damages must be apportioned even against parties who are immune from suit. See Kopp v. Zigich, 268 Mich. App. 258, 260-61, 707 N.W.2d 601, 602-03 (2006) (apportioning damages to the plaintiff’s employer who was immune from suit under the workers’ compensation exclusive remedy provision). According to Michigan’s intermediate appellate court, “the comparative fault statutes do[] not require proof of a duty before fault can be apportioned and liability allocated. The statutes only require proof of proximate cause.” Id. at 260, 707 N.W.2d at 602. Given the change of the legislative focus on the tort reparations system in Michigan from making an injured plaintiff whole to protecting partially at-fault defendants from excessive exposure to damages, the Court believes that Michigan courts would conclude that liability must be apportioned under section 600.2957(1) to parents of an injured child, even if the parents are immune from suit. The plaintiffs also contend that the defendant waived the defense by not pleading it. It appears that a claim that others are at fault is an affirmative defense that must be pleaded. See Veltman v. Detroit Edison Co., 261 Mich. App. 685, 695, 683 N.W.2d 707, 713 (2004) (holding that “[i]f a party desires to take advantage of the limitations of the cited statutes, notice under the court rule is a prerequisite”). Moreover, Michigan has promulgated a court rule that prescribes notice -4- requirements as a condition of alleging “non-party fault.” See Mich. Ct. Rule 2.112(K). The defendant did not serve a notice under Rule 2.112(K) in this case. It is conceivable that Rule 2.112(K)’s notice requirements may not apply in this case because Mikhail’s parents are not “non-parties”; they are named as plaintiffs in their own right and as Mikhail’s next friend. The Court need not decide that question, however, because the state procedural rule does not apply in this federal action. See Long v. Adams, 411 F. Supp. 2d 701, 705- 06 (E.D. Mich. 2006) (holding that in diversity cases, state procedural rules must yield when an issue is governed by a Federal Rule of Civil Procedure). Federal Rule of Civil Procedure 8(c) governs affirmative defenses and states that a defendant “shall set forth affirmatively . . . any . . . matter constituting an avoidance or affirmative defense.” Fed. R. Civ. P. 8(c). The defendant alleged in its answer to the first amended complaint that “[a]ny damage or injury plaintiff may have suffered was caused in whole or in part by persons or factors not related to Cradle of Hope, including plaintiffs themselves, or were pre-existing conditions.” Def.’s Answer First Am. Compl. at 10. That allegation is sufficient to provide the plaintiffs notice of the defense and entitle the defendant to offer evidence on it. See Baker v. City of Detroit, 483 F. Supp. 919, 921 (E.D. Mich. 1979) (observing that “hypertechnicality in pleading requirements should be avoided. Thus, liberal pleading rules are equally applicable to the pleading of affirmative defenses”) (quoting 2A Moore’s Federal Practice Par. 8.27(3 . Evidence of Mikhail’s parents’ conduct is relevant to the defendant’s affirmative defense, and therefore it will be received if it is otherwise admissible. The plaintiffs’ motion in limine will be denied. -5- II. The defendant argues that evidence of damages or hardship suffered by Mikhail’s family members should not be received because the sole remaining cause of action belongs to Mikhail alone, and the damages of others is irrelevant. The plaintiffs agree that evidence reflecting damages suffered by Mikhail’s family members would be irrelevant and inadmissible. Therefore, the Court will grant the motion and bar the evidence. III. The defendant next seeks an order preventing the plaintiffs’ witnesses from testifying about a standard of care for adoption agencies with respect to the obligation to furnish medical records because only a qualified expert witness may furnish such testimony. The defendant believes that in order to prevail, the plaintiffs must prove that Cradle of Hope had an independent duty to secure actual medical records, had access to those medical records, and failed to turn them over timely. Furthermore, the defendant argues that to demonstrate these duties the plaintiffs must present evidence of the Russian legal system and procedures for obtaining medical records, the procedures and customs for obtaining medical records in small Russian villages, and procedures used by other Russian adoption agencies, which presumably only an expert witness can establish. The Court disagrees. The claim that remains in this case is based on general negligence. To prevail, the plaintiffs must prove that the defendant failed to act reasonably toward Mikhail under the circumstances. Although expert testimony may be helpful, it is not necessary. The Sixth Circuit has held that where a tort is “based . . . on general principles of tort law establishing affirmative duties to act” in an area without “existing custom and practice in the profession which defines the standard of liability applicable to the particular professional conduct in question,” an expert witness -6- is not needed to understand the professional norm. Stiver v. Parker, 975 F.2d 261, 273 (6th Cir. 1992) (reversing dismissal of claim by surrogate parents against surrogacy program administrators on ground that expert witness was required to establish liability). That case has direct application here. In denying summary judgment to Mikhail’s claim, this Court concluded that the “recognition of a duty of an adoption agency to the adopted child to furnish to the new parents the medical records available to it is both a logical and incremental extension of well-recognized and firmly-rooted tort principles, and consistent with established state policy.” Dresser, 358 F. Supp. at 640-41. The determinations needed to resolve this dispute relate to reasonable standards of conduct common to tort cases regularly decided by juries; it is not beyond the ken of jurors to apprehend the duty to provide available records and decide whether that duty was breached, whether the breach caused injury, and the resulting damages. The facts to which the defendant points as requiring expert opinion – explaining the Russian legal system and procedures for obtaining medical records, the procedures and customs for obtaining medical records in small Russian villages, and procedures used by other Russian adoption agencies – are issues the parties can address through the testimony of witnesses with knowledge. An expert is not indispensable. The defendant’s motion in limine on this ground will be denied. IV. The defendant moves for an order preventing Dr. Patricia Robertson, Mikhail’s treating physician, from testifying about the causes, diagnosis, and treatment of medulloblastoma, and the manner in which Mikhail’s medical and family history affect the treatment and outcome. The defendant does not challenge Dr. Robertson’s qualifications or expertise, nor does it attack the basis -7- or foundation for her testimony under Federal Rule of Evidence 702. Rather, the defendant argues that because of Dr. Robertson’s candid uncertainty as to the degree that treatment with vincristine contributed to Mikhail’s current condition, her testimony concerning how Mikhail’s past medical history and family history affected his treatment and outcome “may mislead and confuse the jury into believing that Cradle of Hope was responsible for not providing Dr. Robertson with the medical information that may have changed her decision regarding treatment.” Def.’s Mot In Limine [dkt # 131] at 6-7. The defendant points to Dr. Robertson’s testimony that she did not know “for sure” about the link between Mikhail’s prior condition as disclosed in his Russian medical history and the effects of his current treatment, and peripheral neuropathy is a known side effect of vincristine treatment. The defendant reasons, therefore, that the doctor’s testimony that she may not have administered the drug had she known the information in Mikhail’s Russian medical records does not demonstrate whether the defendant’s failure to furnish medical records caused damages. There is no question that Dr. Robertson’s testimony is relevant to the issues in the case. The argument that the evidence nonetheless might confuse the jury is governed by Federal Rule of Evidence 403, which states that relevant evidence may be excluded “if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury.” Fed. R. Evid. 403. “‘Unfair prejudice’ does not mean the damage to a defendant’s case that results from the legitimate probative force of the evidence.” United States v. Bonds, 12 F.3d 540, 67 (6th Cir. 1993) (internal quotes and citation omitted); see also Koloda v. General Motors Parts Div., General Motors Corp., 716 F.2d 373, 378 (6th Cir. 1983) (stating “[o]f course, ‘unfair prejudice’ as used in Rule 403 is not to be equated with testimony simply adverse to the opposing party. Virtually all evidence is prejudicial or it isn’t material. The prejudice must be ‘unfair’”). -8- Rather, the concept of “unfair prejudice” embraces two distinct notions. First, when the evidence may tend to prove more than one proposition and thus could be considered for both a proper and an improper purpose, unfair prejudice can result when the improper purpose overwhelms or substantially overshadows any legitimate basis for receiving the evidence. See United States v. Vandetti, 623 F.2d 1144, 1149 (6th Cir. 1980) (quoting Advisory Comm. Note to R. 403, stating, “‘Unfair prejudice’ within its context means an undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one”). Second, unfair prejudice can result when evidence that is only marginally probative tends to be given preemptive weight by the jury substantially out of proportion to its logical force. See Sutkiewicz v. Monroe Cnty. Sheriff, 110 F.3d 352, 360 (6th Cir. 1997) (stating that “[o]therwise relevant evidence may permissibly be excluded if it serves to inflame the passions of the jury”); Vandetti, 623 F.2d at 1149 (observing that evidence of a witness’s invocation of his Fifth Amendment right before the jury raised “a real danger that . . . [it] may be given undue weight” to the evidence “although it is entitled to none in the law”). When weighing the harmful effect of the evidence against its probative value, the Court must consider whether the proponent of the evidence can prove his point by other means. United States v. Myers, 123 F.3d 350, 363 (6th Cir. 1997) (noting that “[a]nother factor in the Rule 403 balancing is the availability of other means of proof, which would reduce the need for the potentially confusing evidence”) (citing United States v. Merriweather, 78 F.3d 1070, 1077 (6th Cir. 1996 . The essence of the defendant’s argument is that Dr. Robertson’s testimony will confuse the jury and prejudice the defense because she is not certain enough about her opinions, especially the opinions concerning causation. However, the Court believes that the jury is capable of according proper weight to that testimony, which will be subject to cross-examination. Dr. Robertson is the -9- plaintiff’s treating physician; she is the only person who can explain her decision to recommend treatment using vincristine and discuss the factors that led to her choice. Her testimony is relevant and will be helpful to the fact finder to explain the treatment of medulloblastoma and the relationship between a patient’s medical history and treatment. The Court previously determined that the plaintiffs’ submitted evidence supported their theory that had Dr. Robertson “known in advance that Mikhail had suffered spinal trauma at birth, a prior diagnosis of perinatal encephalopathy, slow development and speech difficulties, and birth defects, she would have determined that Mikhail had neurological pathology and was not a good candidate for vincristine treatment” and that the vincristine treatment could have contributed to Mikhail’s injury. Dresser, 358 F. Supp. 2d at 638. Testimony about causes, diagnosis, and treatment of medulloblastoma, when vincristine treatment is appropriate, other options for treating medulloblastoma, and how Mikhail could have been treated more safely all have a direct bearing on the issues in the case. There is little danger that the jury will give undue or preemptive weight to that testimony or consider it for an improper purpose. The defendant contends that to prove causation the plaintiffs must show that vincristine plus a specific condition unknown to Dr. Robertson but disclosed in Mikhail’s Russian medical records caused injuries. Although a connection between Mikhail’s injuries and the conditions recorded in the Russian medical records would further the plaintiffs’ case, such a connection is not required to establish the plaintiffs’ theory. The plaintiffs can successfully show causation if they demonstrate a connection between the nondisclosure of the records and treatment selected, and then, between the treatment selected and the injury to Mikhail. Dr. Robertson’s testimony may contribute to the circumstantial facts that serve to prove those ultimate propositions. See McLean v. 988011 Ontario, -10- Ltd., 224 F.3d 797, 800 (6th Cir. 2000) (noting that a “plaintiff in a Michigan negligence action need only provide proof of ‘a reasonable likelihood of probability’ that his explanation of the injury is correct,” and “[a]bsolute certainty cannot be achieved in proving negligence circumstantially; but such proof may satisfy where the chain of circumstances leads to a conclusion which is more probable than any other hypothesis reflected by the evidence”) (quoting Skinner v. Square D Co., 445 Mich. 153, 516 N.W.2d 475 (1994 . The probative value of the evidence concerning Dr. Robertson’s treatment of medulloblastoma, whether her decision would have been different had she been furnished with certain additional information, and the likely difference in Mikhail’s subsequent course is not substantially outweighed by any danger of unfair prejudice or confusion. The defendant’s motion in limine on this ground will be denied. V. Next, the defendant moves to exclude all testimony and evidence concerning Mr. and Mrs. Dresser’s economic damages. The defendant contends that the evidence of economic damages does not relate to whether a duty was breached and Mikhail suffered injury or the resulting damages because those damages were asserted under the contract claim that the Court dismissed. The defendant further contends that injury to the parents of Mikhail and his siblings is irrelevant to the injury suffered by Mikhail and resulting damages. Alternatively, the defendant argues that evidence should be limited to damages arising out of the purportedly contraindicated application of vincristine treatments and the extraordinary expenses connected to the purportedly contraindicated application of vincristine, which was discontinued in January 2001. The defendant contends that damages should be limited to the period between the beginning of the treatment and this later date. -11- The plaintiffs do not claim that Mikhail’s parents can recover for their own economic loss, but they insist that Mikhail should be permitted to recover economic loss, such as medical expenses, caused by the defendant’s negligence even if those expenses were paid by another source, including his parents. The plaintiffs also ague that they should recover any future damages that might be occasioned by the inopportune vincrintine treatments. The defendant responds that future damages have not been requested in the pleadings and are speculative. Mikhail may recover damages for economic damages including medical expenses even if those costs were paid by a collateral source. See Mich. Comp. Laws § 600.6303(4). Based on the plaintiffs’ theory of the remaining cause of action, the damages should be limited to those caused by the treatment made or withheld by Mikhail’s doctors as a result of the lack of information or misinformation caused by the defendant’s negligence. Of course, damages that are speculative may not be awarded, but that limitation can be conveyed to the jury by a proper instruction. Evidence of economic damages that are personal to Mr. and Mrs. Dresser alone is not relevant to Mikhail’s claim. However, the plaintiffs should not be limited in the presentation of their proofs on the entire impact, if any, of the defendant’s negligence on Mikhail. The defendant’s motion in limine on this ground will be denied without prejudice to the defendant raising the issue during trial by proper objection. Consequently, this is not a “definitive ruling” as to this issue. See Fed. R. Evid. 103(a). VI. Finally, the defendant moves to preclude Thomas Smith from testifying at trial. Apparently, Mr. Smith has been a licenced life insurance specialist since 1986 dealing in life, health, disability, and long-term care annuities, and he will testify how to structure an annuity to care for Mikhail. The -12- defendant contends that the plaintiffs never pleaded damages for future economic opportunity; the opinion concerning Mikhail’s lost economic opportunities is speculative; any lost earning capacity was caused by the meduloblastoma, not the side effects of vincristine; and the $25,000 annual allowance in future “care/living expenses” purportedly used by Mr. Smith is arbitrary. The defendant also criticizes Mr. Smith as unqualified because he has no academic training in accounting or annuities, he does not hold a college degree, and he has never testified as an expert witness. The defendant asserts that Smith is not credible because his children attend school with the Dressers’ children, Smith said he will not charge them for his services, and he will benefit if the Dressers purchase an annuity from him. The plaintiffs acknowledge that the purpose of Smith’s testimony is quite limited. He will testify only as to how to fund a $25,000 annuity. Smith stated at his deposition that he was only “there to crunch the numbers” and did not prepare any reports as to the plaintiff’s life expectancy or lost earnings. Def.’s Mot. In Limine [dkt # 134] Ex. G, Thomas Smith Dep. at 16. Nevertheless, the evidence is contingently admissible to show the jury how to determine a present value for long- term damages suffered by Mikhail, provided the plaintiffs establish a foundation for such damages through other evidence. See 2 Joseph M. McLaughlin, Weinstein’s Federal Evidence § 401.04[2][e] (2d ed. 2004) (noting that “[t]he judge may conditionally admit evidence subject to proof of connecting facts, and if the connecting facts are not proven, strike the evidence from the record”). Smith testified that Marilyn Dresser “had chosen the number of $25,000 per year starting at age 18 in today’s dollars and continuing on from that point. The question was: What would it take in today’s dollars to do that?” Def.’s Mot. In Limine [dkt # 134] Ex. G, Thomas Smith Dep. at 16. The -13- jury may rely on the evidence provided by Smith when making a damages determination if it finds that such damages relate to the injury suffered by the plaintiffs from the treatment. The defendant also attacks the merits of Smith’s testimony, although the defendant does not explain how late production of the testimony, methodology, or minimal documentation make the testimony unreliable. Smith testified that his methodology consisted of applying simple mathematical formulas: Illustrations assumes a $25,000 annual income adjusted for inflation beginning at, I have the child’s name incorrect, at age 18. This opinion is based on current interest rates, current distribution rates, and three percent inflation rates. Obviously everything is changeable . . . This is nothing more than simple math; what it takes in order to do what the Dressers have asked. Def.’s Mot. In Limine [dkt # 134] Ex. G, Thomas Smith Dep. at 19-22. The defendant has not stated how that testimony is rendered inadmissible. Finally, lack of academic training, a college degree, and previous expert witness experience does not render expert testimony inadmissable. See Zuzula v. ABB Power T & D Co., Inc., 267 F. Supp. 2d 703, 713 (E.D. Mich. 2003) (stating that “although a degree might be helpful in determining qualifications, since valid assumptions safely may be drawn from the general training one receives on the way to a diploma, . . . it is neither a necessary nor a sufficient condition for qualification as an expert because the expert’s education must be relevant to the opinion, and qualification may be based on knowledge, skill, experience or training as well”) (citing Berry v. City of Detroit, 25 F.3d 1342, 1349-50 (6th Cir. 1994 . As a licenced life insurance specialist since 1986 dealing in long-term care annuities, Smith is qualified in how to structure an annuity to care for Mikhail. His qualifications are also demonstrated by his Life Underwriter Training Council certification and position as President of the National Association of Insurance and Financial -14- Advisors for the Bay Area Chapter. The prior relationship of the expert to the plaintiffs and the expert’s stake in the outcome of the case also do not make evidence inadmissable but relate to the weight the jury should assign his testimony. The grounds cited by the defendant do not render Smith’s testimony inadmissible, and therefore the motion in limine will be denied. However, as with the previous motion, the admissibility of this testimony will depend on the foundation brought forth at trial. Consequently, this is not a “definitive ruling” as to this issue. See Fed. R. Evid. 103(a). VII. For the reasons states above, the plaintiffs’ motion in limine will be denied and the defendant’s motions in limine will be granted in part and denied in part. Accordingly, it is ORDERED that the plaintiffs’ motion in limine to exclude evidence of any negligence on the part of the plaintiffs’ Marilyn and Richard Dresser [dkt # 128] is DENIED. It is further ORDERED that the defendant’s motion in limine to exclude references to any damages sustained by Mikhail’s family members as a result of the plaintiff’s medical condition [dkt # 129] is GRANTED. It is further ORDERED that the defendant’s motion in limine to exclude plaintiffs’ witnesses from testifying as to the standard of care an adoption agency must conform to when securing medical records when operating in a foreign country [dkt # 130] is DENIED. It is further ORDERED that the defendant’s motion in limine to strike the expert testimony of Dr. Patricia Robertson [dkt # 131] is DENIED. It is further ORDERED that the defendant’s motion in limine to exclude the Dressers’ alleged economic damages [dkt # 132] is DENIED. -15- It is further ORDERED that defendant’s motion in limine to exclude any lost economic opportunity damages and to strike the expert testimony of Thomas E. Smith [dkt # 133] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: March 20, 2006 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on March 20, 2006. s/Tracy A. Jacobs TRACY A. JACOBS -16-

=== ERIC CARLYLE DEAN et al v. CITY OF BAY CITY, ROBERT V. BELLEMAN et al ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION ERIC CARLYLE DEAN and ELIZABETH DEAN, Plaintiff, v. CITY OF BAY CITY, ROBERT V. BELLEMAN and JAMES PALENICK, ____________________________________/ Defendants, Case Number: 04-10120-BC Honorable David M. Lawson OPINION AND ORDER DENYING PLAINTIFFS’ MOTION FOR RECONSIDERATION On December 30, 2005, the Court filed an opinion and order granting in part the defendants’ motions for summary judgment. The Court dismissed the plaintiffs’ federal claims with prejudice and their state law claims without prejudice. The plaintiffs have filed a motion for reconsideration pursuant to Federal Rules of Civil Procedure 59(e) and 60(b) alleging that (1) the Court should reconsider an October 28, 2005 order denying the plaintiffs’ motion to amend their complaint to add a claim under Title II of the Americans with Disabilities Act despite their failure to exhaust administrative remedies; (2) plaintiff Eric Dean was denied due process because he did not learn he was fired on account of perceived alcohol abuse until this law suit was well under way; (3) the Due Process Clause requires that plaintiff Eric Dean should have been given a pre-termination hearing by the city commission instead of the city manager; and (4) plaintiff Eric Dean was denied due process because arbitration would not have constituted a meaningful post-termination hearing without access to voluminous city documents, which would have cost thousands of dollars to reproduce. The Court does not find merit in any of these grounds; therefore the motion will be denied. Federal Rule of Civil Procedure 59(e) provides: “Any motion to alter or amend a judgment shall be filed no later than 10 days after entry of the judgment.” The decision of whether to grant relief under Rule 59(e) is discretionary with the district court. Davis v. Jellico Cmty. Hosp., Inc., 912 F.2d 129, 132 (6th Cir. 1990). Such a motion will generally be granted if the district court made a clear error of law, if there is an intervening change in the controlling law, or if granting the motion will prevent manifest injustice. GenCorp, Inc. v. Am. Int’l Underwriters, 178 F.3d 804, 834 (6th Cir. 1999). A Rule 59(e) motion is not properly used as a vehicle to re-hash old arguments or to advance positions that could have been argued earlier but were not. Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir. 1998). Although the plaintiffs have not specified the section of Rule 60 upon which they rely, it appears they contend that the Court made an error of law in its decision. That suggestion invokes the provisions of Rule 60(b)(1), which states: “On motion and upon such terms as are just, the court may relieve a party or a party’s legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect.” Fed. R. Civ. P. 60(b)(1). The Sixth Circuit has “recognized a claim of legal error as subsumed in the category of mistake under Rule 60(b)(1).” Pierce v. United Mine Workers Welfare & Ret. Fund for 1950 & 1974, 770 F.2d 449, 451 (6th Cir. 1985). When applied under subsection (1), the word “mistake” has been held to include “any type of mistake or error on the part of the court,” including a legal mistake. Barrier v. Beaver, 712 F.2d 231, 234 (6th Cir. 1983) (citing Oliver v. Home Indem. Co., 470 F.2d 329 (5th Cir. 1972 . However, such a claim “must be brought within the normal time for -2- taking an appeal.” Pierce, 770 F.2d at 451. A decision to grant or deny a Rule 60(b) motion “is a matter of discretion for the district court.” Bank of Montreal v. Olafsson, 648 F.2d 1078, 1079 (6th Cir. 1981). The Court’s October 28, 2005 order denying the plaintiffs’ motion to amend their complaint to add an ADA claim was not immediately appealable. The Court considers the plaintiff’s present motion for reconsideration timely because it was filed within ten days after the entry of the final judgment in this case. The crux of the plaintiffs’ complaint is that the City of Bay City improperly terminated plaintiff Eric Dean’s employment as the director of the city’s electric department. He pleaded various federal and state law theories challenging his termination. In the motion to amend the complaint, Dean sought to add another wrongful termination theory under the ADA because, he says, city officials “regarded” him as disabled by his alcoholism and drug dependency. Title I of the ADA states: “No covered entity shall discriminate against a qualified individual with a disability because of the disability of such individual in regard to job application procedures, the hiring, advancement, or discharge of employees, employee compensation, job training, and other terms, conditions, and privileges of employment.” 42 U.S.C. § 12112(a). However, employees seeking a remedy under Title I must apply first to the Equal Employment Opportunity Commission for administrative relief before bringing an action in court. See 42 U.S.C. §§ 12117, 2000e-5(f)(1); Parry v. Mohawk Motors of Mich., Inc., 236 F.3d 299, 309 (6th Cir. 2000). All parties agree that Dean failed to pursue his administrative remedies. Dean now attempts to avoid the administrative exhaustion requirement by contending that he wants to bring his claim under Title II of the ADA. Title II states that “no qualified individual -3- with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity.” 42 U.S.C. § 12132. Dean asserts that Title II claims do not require exhaustion, and he cites a string of cases he claims support his position, at least one of which was decided before the ADA even became law in January 1992. Although Dean may be correct in asserting that the exhaustion requirement does not apply to claims of disability discrimination against public entities for denial of access to services, programs, or activities, the larger question is whether Title II applies to employment cases. That question has not been conclusively decided by the Supreme Court or the Sixth Circuit Court of Appeals. In Board of Trustees of the University of Alabama v. Garrett, 531 U.S. 356, 360 n.1 (2001), the Supreme Court recognized that the courts of appeals were split on the question but declined to reach the issue because it had not been briefed by the parties. The Sixth Circuit has also declined to decide the issue. Swanson v. Univ. of Cincinnati, 268 F.3d 307, 318 (6th Cir. 2001) (holding that the court need not resolve the question because the plaintiff did not qualify as disabled under the criteria applicable to Title II); see also Knapp v. City of Columbus, 93 Fed. Appx. 718, 720 (6th Cir. 2002) (unpublished) (declining to rule on the issue because it was beyond the scope of the court’s review); McKibben v. Hamilton County, No. 99-3360, 2000 WL 761879 (6th Cir. May 30, 2000) (unpublished) (declining to rule on the issue because the defendants did not raise it). A district court in the Eastern District of Michigan has encountered this question but declined to decide it because the plaintiffs had failed to cite a separate cause of action for Titles I and II and because the defendants had not raised the issue. Fobar v. City of Dearborn Heights, 994 F. Supp. 878, 885 n.3 (E.D. Mich. 1998). -4- Notably, the Sixth Circuit has held that Title III of the ADA is not applicable in employment cases. In Parker v. Metropolitan Life Insurance Company, 121 F.3d 1006 (6th Cir. 1997) (en banc), the plaintiff sued her employer and an insurance company under Title III of the ADA for offering employees a long-term disability plan that provided longer benefits to physically disabled employees than to mentally disabled employees. Title III prohibits disability discrimination concerning “full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation.” 42 U.S.C. § 12182(a). The court held, inter alia, that the employer was properly dismissed from the action because “the statutory framework of the ADA expressly limits discrimination in employment practices to Title I of the ADA.” Id. at 1014. The court quoted with approval the language in Motzkin v. Trustees of Boston University, 938 F. Supp. 983, 996 (D. Mass. 1996): “The legislative intent is so clear from the language of Titles I and III that one need not go beyond that language to conclude that employment discrimination is the exclusive province of Title I.” The Parker court included an explanation from Motzkin in a footnote: [I]t would make no sense to construe Title III as including employment practices within its scope. Indeed, to do so might wreak havoc with the careful balance that Congress attempted to strike in Title I between the rights of employers and the rights of workers with disabilities. For example, the term “qualified individual with a disability” appears in Title I, but is absent from Title III. As a result, if Title III were construed to apply to employment practices, an employer would be within its rights under Title I, but might be liable under Title III, if it denied employment to an individual who, because of a disability, was incapable of performing the essential functions of the job. Parker, 121 F.3d at 1015 n.12 (quoting Motzkin, 938 F. Supp. at 996). Other circuits are split on the issue. The Eleventh Circuit and the Fourth Circuit have recognized a cause of action under Title II for employment-related suits. Bledsoe v. Palm Beach County Soil & Water Conserv. Dist., 133 F.3d 816 (11th Cir. 1998); Doe v. Univ. of Md. Med. Sys. -5- Corp., 50 F.3d 1261 (4th Cir. 1995). In Doe, an HIV-positive neurosurgical resident who had been terminated sued his employer under Title II of the ADA and the Rehabilitation Act. Doe, 50 F.3d at 1264. Without questioning the applicability of Title II in an employment context, the Fourth Circuit held that the plaintiff was not a “qualified individual” within the meaning of Title II and the Rehabilitation Act. Id. at 1267. In Bledsoe v. Palm Beach County Soil and Water Conservation District, an employee sued the Palm Beach County Soil and Water Conservation District for failing to accommodate his knee injury. 133 F.3d at 818. The plaintiff brought suit under Title II of the ADA because the district did not have enough employees to fall under the requirements of Title I. Ibid. The court reversed the district court’s finding that Title II was inapplicable to employment cases, reasoning that Department of Justice regulations, specifically 28 C.F.R. § 35.140, brought Title II employment claims against public entities within the scope of Title I. The Ninth Circuit disagreed, concluding that “Congress unambiguously expressed its intent for Title II not to apply to employment.” Zimmerman v. Oregon Dept. of Justice, 170 F.3d 1169, 1173 (9th Cir. 1999). That court considered 28 C.F.R. § 35.140 as well, but concluded that the rule was beyond the power of the agency to enact, citing Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Whether employment actions against public entities can be brought under Title II of the ADA or not, it is instructive to examine the language of the administrative rule that other circuits have deemed pivotal on that issue to answer the specific question before the Court, namely whether the exhaustion requirements of Title I can be avoided. Title 28, section 35.140 of the Code of Federal Regulations, which was promulgated by the Attorney General as pertinent to Title II of the ADA, states: -6- (a) No qualified individual with a disability shall, on the basis of disability, be subjected to discrimination in employment under any service, program, or activity conducted by a public entity. (b)(1) For purposes of this part, the requirements of title I of the Act, established by the regulations of the Equal Employment Opportunity Commission in 29 C.F.R. part 1630, apply to employment in any service, program, or activity conducted by a public entity if that public entity is also subject to the jurisdiction of title I [i.e. employs fifteen or more employees]. (b)(2) For the purposes of this part, the requirements of section 504 of the Rehabilitation Act of 1973, as established by the regulations of the Department of Justice in 28 CFR part 41, as those requirements pertain to employment, apply to employment in any service, program, or activity conducted by a public entity if that public entity is not also subject to the jurisdiction of title I. 28 C.F.R. § 35.140 (emphasis added). According to the rule, employment claims against public entities brought under Title II are subject to the requirements of Title I relating to exhaustion of administrative remedies. The Court concludes that, based on the language quoted above from Parker v. Metropolitan Life Insurance Company, it is unlikely that the Sixth Circuit would hold that Title II of the ADA applies to employment cases, which are covered explicitly by Title I. Moreover, even if Title II applies to employment cases, the administrative rule requires a claimant to abide by the exhaustion requirements stated in Title I. Because the plaintiff failed to exhaust administrative remedies, there is no basis to reconsider the order denying his motion to amend his complaint because a claim under Title II of the ADA would be futile. Dean also argues that he was denied due process because he belatedly came to the realization that he was fired because his employer regarded him as disabled. However, even after that ground occurred to him, which he says was in the midst of discovery in this case, he did not file a claim with the EEOC or take any of the required steps to advance an employment discrimination claim under -7- the ADA. He has not explained how his due process rights were abridged under those circumstances, nor has he alleged that the defendants interfered with his efforts to pursue such a claim. Reconsideration on that ground will be denied. The last two grounds stated by the plaintiffs in support of their motion for reconsideration were discussed by the Court in its summary judgment opinion. The plaintiffs make no new arguments, but they do reassert their disagreement with the Court’s decision. However, “motions for rehearing or reconsideration that merely present the same issues ruled upon by the court, either expressly or by reasonable implication,” shall not be granted. E.D. Mich. LR 7.1(g)(3). The Court finds no basis to conclude that a mistake of law was made in its summary judgment opinion or that the plaintiffs otherwise are entitled to relief under Rule 59(e) or 60(b). Accordingly, it is ORDERED that the plaintiffs’ motion for reconsideration [dkt # 117] is DENIED. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 16, 2006 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 16, 2006. s/Tracy A. Jacobs TRACY A. JACOBS -8-

=== INTERMODAL TECHNOLOGIES, INC. v. NORMAN Y. MINETA, et al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION INTERMODAL TECHNOLOGIES, INC., Plaintiff, v. NORMAN Y. MINETA, in his capacity as SECRETARY OF TRANSPORTATION, and JACQUELINE GLASSMAN, in her capacity as ACTING ADMINISTRATOR of the NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, ______________________________________/ Defendants. Case Number 05-10204-BC Honorable David M. Lawson OPINION AND ORDER DENYING DEFENDANTS’ MOTION TO DISMISS AND SETTING CALENDAR DATES This case represents the latest effort by William Washington to gain approval for the truck braking system he invented, the MSQR 5000®. In June 2001, the acting chief counsel for the National Highway Traffic and Safety Administration (NHTSA) posted a letter on the agency’s website expressing the opinion that the MSQR 5000® would not meet a certain Federal Motor Vehicle Safety Standard (FMVSS) pertaining to anti-lock braking systems (ABS). Washington’s company filed suit in this Court, but that matter was dismissed because the Court concluded that the letter did not constitute final agency action. See Air Brake Systems, Inc. v. Mineta, 202 F. Supp. 2d 705 (E.D. Mich. 2002). On appeal, the Sixth Circuit affirmed but observed that the plaintiff was not without a remedy: “the company remains free to petition NHTSA to alter Standard 121 under the agency’s rulemaking powers. 49 C.F.R. § 552.3(a) (‘Any interested party may file with the Administrator a petition requesting him . . . [t]o commence a proceeding respecting the issuance, amendment or revocation of a motor vehicle safety standard.’). The denial of such a petition, notably, would be a final reviewable order.” Air Brake Systems, Inc. v. Mineta, 357 F.3d 632, 646 (6th Cir. 2004). The company filed such a petition, but the agency has not yet decided it. The plaintiff has filed the present complaint seeking a writ of mandamus directing NHTSA to decide its exemption petition. The defendants have filed a motion to dismiss, to which the plaintiff has responded. The Court heard argument from counsel for the parties on January 3, 2006, and now determines that the motion must be denied because the defendants have a duty to decide the plaintiff’s application within a reasonable time, although, of course, the choice of whether to grant or deny the petition lies within the defendants’ discretion. I. William Washington is the principal owner of the plaintiff in this case, Intermodal Technologies, Inc., which has filed this mandamus action pursuant to 28 U.S.C. § 1361. The plaintiff seeks a ruling by this Court to force the defendants, the Secretary of Transportation and the Administrator of NHTSA, to either grant or deny its petition for an exemption from certain safety standards promulgated by NHTSA. The plaintiff manufactures truck trailers that are required under the National Traffic Motor Vehicle Safety Act, 49 U.S.C. § 30101 et seq., and implementing regulations to be equipped with anti-lock breaks that have certain warning features. See 49 C.F.R. § 571.121. The plaintiff has chosen to outfit its trailers with a non-electronic, pneumatic airbrake system for trucks and trailers called the MSQR 5000® made by Air Brake Systems, Inc. Air Brake Systems also is owned by Washington. In prior litigation in this Court, Air Brake Systems challenged opinion letters written by NHTSA’s acting chief counsel. See Air Brake Systems, 202 F. Supp. 2d at 705. According to the complaint filed in this case, the chief counsel “opined [in the letters] that the MSQR-5000® does -2- not satisfy the warning signal requirements of [Federal Motor Vehicle Safety Standard 121] due to the fact that there are no warning signals installed on the exterior of the truck trailer.” Compl. at ¶ 15. This Court found that the opinion letters, one of which was posted on NHTSA’s website, did not constitute final agency action and therefore could not be reviewed under the Administrative Procedures Act. Id. at 712-14. As noted above, the Sixth Circuit affirmed. Air Brake Systems, 357 F.3d at 632. The gist of Air Brake System’s arguments both in this Court and on appeal was that NHTSA effectively has decided that the company’s brakes do not meet federal standards and has announced that decision to potential buyers of the brakes, leaving it no possibility to sell its brakes and no mechanism by which to challenge the agency’s action. The result, the company stated, was a “Catch 22.” Id. at 645. The court of appeals rejected that contention and noted that section 30113 of the Act permitted the company to seek an exemption from Safety Standard 121: In all events, Air Brake errs in suggesting it has no other options. The company remains free to show the market its confidence in the product by agreeing to indemnify a prospective manufacturer against the costs of defending any potential NHTSA action. And more importantly (and perhaps more realistically for smaller companies), the company remains free to petition NHTSA to alter Standard 121 under the agency’s rulemaking powers. 49 C.F.R. § 552.3(a) (“Any interested party may file with the Administrator a petition requesting him . . . [t]o commence a proceeding respecting the issuance, amendment or revocation of a motor vehicle safety standard.”). The denial of such a petition, notably, would be a final reviewable order. Id. at 645-46. Washington, through plaintiff Intermodal Technologies, heeded the Sixth Circuit’s advice, and on January 26, 2004, it filed a petition for an exemption. As noted, section 30113 of the Safety Act authorizes the Secretary of Transportation to grant exemptions to safety standards “on a temporary basis . . . on terms the Secretary considers appropriate.” 39 U.S.C. § 30113(1). The agency also has promulgated regulations governing the -3- handling of petitions. See 49 C.F.R. § 555.7. Although a petition conforming to the administrative regulation was submitted in January 2004, the plaintiff alleges, it was not actually time-stamped as received by the agency the until July 15, 2004, more than six months later. However, on July 2, 2004, NHTSA’s chief counsel informed the plaintiff in a letter that the agency had “prepared a notice for publication in the Federal Register requesting comment” and the agency would “inform [the plaintiff] when the Administrator has made a decision on the petition.” Compl. at ¶ 21. The agency published the notice on July 19, 2004, and the deadline for filing comments was August 18, 2004. By December 6, 2004, the plaintiff had not received information on the disposition of its petition, and its attorney wrote a letter to NHTSA requesting “any information you may have concerning the processing of our petition.” Compl. at ¶ 23. On February 28, 2005, the plaintiff wrote again seeking “some indication as to when we could expect a decision concerning our application.” Compl. at ¶ 24. Again, the plaintiff received no response. On March 31, 2005, the plaintiff sent a final letter requesting information on the disposition of the petition. Attached to the letter was a proposed complaint for a writ of mandamus. According to the plaintiff, NHTSA’s counsel responded to this letter and assured the plaintiff that the agency was reviewing the petition, but he could not specify a date for decision. Since that time, a decision on the petition has not been reached. On August 9, 2005, the plaintiff filed the present complaint asking the Court to force the defendants to resolve the petition one way or the other. In lieu of an answer, the defendants filed the instant motion to dismiss. II. The defendants state that their motion to dismiss is based on Federal Rules of Civil -4- Procedure 12(b)(1) and (6), suggesting that they are contending that the Court does not have subject matter jurisdiction over the case and the plaintiff has not stated a claim for which relief can be granted. Motions to dismiss are governed by Rule 12(b) of the Federal Rules of Civil Procedure; Rule 12(b)(1) concerns motions to dismiss for “lack of jurisdiction over the subject matter.” Lack of subject matter jurisdiction may be asserted at any time, either in a pleading or a motion. Fed. R. Civ. P. 12(b)(1); Television Reception Corp. v. Dunbar, 426 F.2d 174, 177 (6th Cir. 1970). When subject matter jurisdiction is challenged, the plaintiff has the burden of proving jurisdiction in order to survive the motion. Michigan Southern R.R. Co. v. Branch & St. Joseph Counties Rail Users Ass’n., Inc., 287 F.3d 568, 573 (6th Cir. 2002); see also Moir v. Greater Cleveland Reg’l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990). Title 28, section 1361 of the United States Code states that “[t]he district courts shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.” To obtain relief under section 1361, an individual must establish that he has a clear right to relief and that a federal employee has a clear, nondiscretionary duty to act. See Heckler v. Ringer, 466 U.S. 602, 616-17 (1984); In re Bankers Trust Co., 61 F.3d 465, 469 (6th Cir. 1995); Ryon v. O'Neill, 894 F.2d 199, 205 (6th Cir. 1990). The Sixth Circuit has explained that a writ of mandamus “is an extraordinary remedy, and is intended to provide a remedy only if the plaintiff has exhausted all other avenues of relief and the defendant owes the plaintiff a clear nondiscretionary duty.” Willis v. Sullivan, 931 F.2d 390, 395 (6th Cir. 1991). The plaintiff in this case does not seek an order compelling the defendants to grant his petition, which plainly would be beyond this Court’s authority. Rather, he merely seeks an order -5- compelling a decision on the petition one way or the other. The Court has subject matter jurisdiction to entertain that request under section 1361. Whether the petition has merit or even states a claim for relief is another question entirely. But the potential lack of merit in the petition does not undermine this Court’s subject matter jurisdiction. “[T[he fact that a complaint may not state a claim upon which relief can be granted is of no relevance to the question of subject matter jurisdiction.” Cherokee Exp., Inc. v. Cherokee Exp., Inc., 924 F.2d 603, 609 (6th Cir. 1991) (internal quotes and citation omitted). In reviewing a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the allegations in the complaint are taken as true and are viewed favorably to the non-moving party. Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1995), Herrada v. City of Detroit, 275 F.3d 553, 556 (6th Cir. 2001). To survive a motion to dismiss, a complaint must contain “either direct or indirect allegations respecting all material elements to sustain a recovery under some viable legal theory.” In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir. 1993). The Court may consider only whether the allegations contained in the complaint state a claim for which relief can be granted. Roth Steel Prod. v. Sharon Steel Corp., 705 F.2d 134, 155 (6th Cir. 1983). The motion shall be granted only if “no set of facts in support of [the plaintiff’s] claim would entitle [the plaintiff] to relief.” Broyde v. Gotham Tower, Inc., 13 F.3d 994, 996 (6th Cir. 1994). The defendants argue that dismissal is required here because there is no clear duty mandating that the NHTSA administrator decide the plaintiff’s petition at all. Indeed, the requirement that an agency owe a plaintiff seeking mandamus relief a non-discretionary duty “has been read narrowly to require that the officer or employee of the United States owe a “ministerial duty that [is] compelled by law.” Ryon, 894 F.2d at 205 (citations omitted). In fact, “[f]or there to be a duty owed -6- to the plaintiff within the meaning of section 1361, there must be a mandatory or ministerial obligation. If the alleged duty is discretionary or directory, the duty is not owed.” Ibid. (citations omitted). Further, “[a] duty is not owed unless the obligation is plainly defined and peremptory.” Ibid. The defendants contend that the language of the Safety Act juxtaposes the words “may” and “shall” in such a way as to compel the conclusion that Congress intended that the NHTSA administrator need not decide exemption petitions filed with that agency. The defendants point to statutory language stating that “[t]he Secretary may act under this subsection,” 49 U.S.C. § 30113(3), and argue that it implies the contrary as well, i.e. that the Secretary need not act. Few federal courts have dealt with mandamus actions to compel a governmental agency to exercise its power to act or act in a timely fashion. Certain principles nonetheless are discernible. As a general concept, an agency may be compelled to exercise power vested in it as long as it has a mandatory duty to act. See Rural Electrification Admin. v. Northern States Power Co., 373 F.2d 686, 687 n. 1 (8th Cir. 1967). In other words, even if the outcome of that exercise rests within the agency’s discretion, the agency can be compelled to exercise its discretion. Com. of Pennsylvania, by Sheppard v. National Ass'n of Flood Insurers, 520 F.2d 11, 26-27 (3d Cir. 1975), overruled on other grounds by Pennsylvania v. Porter, 659 F.2d 306 (3d Cir. 1981) (noting that “mandamus may issue to require the exercise of permissible discretion, although the manner in which the discretionary act is to be performed is not to be directed by the court”); McQueary v. Laird, 449 F.2d 608, 611 (10th Cir. 1971) (recognizing that “[t]his court has held that the 1962 Act relating to mandamus against federal officers, employees and agencies authorizes the court to issue mandamus only to require the exercise of permissible discretion, or to compel performance of ministerial -7- duties”). However, an agency’s inaction may itself amount to an exercise of discretion if responsibilities for a particular subject area have been entrusted to the agency without any plainly defined mandate to act, or where construction or application of a particular statute has been left to agency discretion. United States ex rel Girard Trust Co. v. Helvering, 301 U.S. 540 (1937). The Administrative Procedures Act provides additional guidance for dealing with agency inaction and delay. Section 706(1) states that a reviewing court may “compel agency action unlawfully withheld or unreasonably delayed.” 5 U.S.C. § 796(1). This provision generally has been found to be coextensive with relief available under the statutory mandamus provisions. See, e.g., Carpet, Linoleum and Resilient Tile Layers v. Brown, 656 F.2d 564, 567 (10th Cir. 1981) (reasoning that the mandatory injunction being sought was “essentially in the nature of mandamus” and therefore its issuance could be based on mandamus or the APA, or both). The source of the mandatory duty can be a statute, a regulation, or result from judicial precedent. See Buchannon v. Apfel, 249 F.3d 485 (6th Cir. 2001) (finding a mandatory duty based on regulations promulgated by the Social Security Administration); Brewer v. Dahlberg, 942 F.2d 328 (6th Cir. 1991) (noting that Supreme Court precedent required officials to conduct parole hearings in a specific manner); In re Bankers Trust Co., 61 F.3d at 460 (looking to both statutes and regulations for the source of a duty). In Buchannon, for example, the Sixth Circuit considered a mandamus to compel the Social Security Commissioner to decide applications for attorneys fees by applying the factors set forth in the regulations rather than automatically imposing a twenty-five percent cap. The court of appeals reversed the district court’s dismissal of the complaint, noting that “despite our lack of jurisdiction to pass on the reasonableness of any fee awarded . . . at the administrative level, . . . we do have jurisdiction to consider whether the Commissioner has failed -8- to comply with his own regulations. We accordingly hold that mandamus jurisdiction is available.” Id. at 492. The provisions of the Safety Act governing exemptions provides: (1) The Secretary of Transportation may exempt, on a temporary basis, motor vehicles from a motor vehicle safety standard prescribed under this chapter or passenger motor vehicles from a bumper standard prescribed under chapter 325 of this title, on terms the Secretary considers appropriate. . . . (2) The Secretary may begin a proceeding under this subsection when a manufacturer applies for an exemption or a renewal of an exemption. The Secretary shall publish notice of the application and provide an opportunity to comment. . . . (3) The Secretary may act under this subsection on finding that – (A) an exemption is consistent with the public interest and this chapter or chapter 325 of this title (as applicable); and (B)(i) compliance with the standard would cause substantial economic hardship to a manufacturer that has tried to comply with the standard in good faith; (ii) the exemption would make easier the development or field evaluation of a new motor vehicle safety feature providing a safety level at least equal to the safety level of the standard; (iii) the exemption would make the development or field evaluation of a low-emission motor vehicle easier and would not unreasonably lower the safety level of that vehicle; or (iv) compliance with the standard would prevent the manufacturer from selling a motor vehicle with an overall safety level at least equal to the overall safety level of nonexempt vehicles. . . . (g) Notice of decision. – The Secretary shall publish in the Federal Register a notice of each decision granting an exemption under this section and the reasons for granting it. (h) Permanent label requirement. – The Secretary shall require a permanent label to be fixed to a motor vehicle granted an exemption under this section. . . . 49 U.S.C. § 30113. The defendants contend that under this statute the only mandatory duties they have – denoted by the word “shall” – is to publish the notice of an application and allow comment, publish a notice -9- of its decision, and require permanent labeling. All other acts denoted by the word “may,” including the prerogative of acting on a petition, they argue, is discretionary and beyond the scope of mandamus. Certainly, the defendants are correct that generally the use of the word “may” means that an act is discretionary and therefore beyond the relief intended by the mandamus statute. See Jama v. Immigration and Customs Enforcement,125 S. Ct. 694, 703 (2005) (explaining that “[t]he word ‘may’ customarily connotes discretion. That connotation is particularly appropriate where, as here, ‘may’ is used on contraposition to the word ‘shall’”); see also Lopez v. Davis, 531 U.S. 230, 241 (2001) (reasoning that “Congress’ use of the permissive ‘may’ in one section contrasts with the legislators’ use of a mandatory ‘shall’ in the same section”). The defendants are also correct that the term “shall” appears only with respect to publishing notice of an application, notice of the disposition of a petition, the application procedure to be followed by the applicant, and the label requirement should an exemption be granted. However, the Court believes that the defendants read the statute too narrowly and assume that the term may elsewhere in the statute connotes no duty even to decide an application for an exemption. A more reasonable reading of the statute is that Congress simply did not speak at all in this legislation to the question whether the agency had to decide a filed petition. There is no question that the Secretary enjoys discretion to grant a petition for exemption – that is, to “act” on it – if an exemption is in the public interest and one of four criteria is met. See 49 U.S.C. § 30113(3)(A) & (B)(i)-(iv). But there is no statutory language authorizing the Secretary to shelve a petition and pay it no mind whatsoever. The statute states simply that the Secretary may deny or grant a petition for reasons within his discretion; it does not answer the question whether the -10- Secretary must decide, one way or the other, an application for exemption. In the absence of clear statutory language, the Court turns to the regulations for an answer to the question of duty in this case. Section 555.7 of the Code of Federal Regulations provides: (d) If the Administrator determines that the application does not contain adequate justification, he denies it and notifies the petitioner in writing. He also publishes in the Federal Register a notice of the denial and the reasons for it. (e) If the Administrator determines that the application contains adequate justification, he grants it, and notifies the petitioner in writing. He also publishes in the Federal Register a notice of the grant and the reasons for it. 49 C.F.R. § 555.7(d) - (e). This regulation governing the processing of applications makes clear that the agency must either grant an application or deny it, publish its decision in the Federal Register, and notify the petitioner. There is no discretionary language contained in these subsections. To be sure, they do not include the term “shall,” but there is no suggestion that the Secretary construed the statutory grant of authority as including options for action or inaction other than “grant” or “deny.” The defendants argue that this language is of little consequence because it merely sets up a chain of events and does not require clearly that the agency decide petitions at all. The Court agrees that the regulation prescribes a course of events, but that course must lead eventually to a decision. The plain language of the regulation does not allow for any other option. An agency’s failure to decide does not constitute a decision that is subject to judicial review. See United States v. Bean, 537 U.S. 71, 75 (2002) (holding that “inaction” by the Bureau of Alcohol, Tobacco and Firearms “does not amount to a ‘denial’ within the meaning of” the statute allowing subsequent judicial review). At the same time, however, neither the statute nor the regulations provide a time frame for deciding petitions. The petition has been pending in this case for over seventeen months. In the absence of language setting forth a time frame, the Court looks to the Administrative Procedures Act -11- for further guidance, which, as noted earlier, authorizes a court to “compel agency action unlawfully withheld or unreasonably delayed.” 5 U.S.C. § 796(1). The statutory language implies that an agency of government is charged with the duty of acting reasonably; therefore, the Court determines that in the absence of a specific timetable, the agency has a duty to decide the petition with a reasonable time. Nonetheless, mandamus lies to compel such action, which is what the plaintiff is seeking. The complaint, therefore, states a viable claim for relief. III. The Court finds that it has subject matter jurisdiction and the plaintiff has stated a claim for which relief can be granted. The determination of the time within which an agency reasonably may act must account for the activities of the agency and the demands on its resources. Discovery may be necessary to resolve that issue. Accordingly, it is ORDERED that the defendants motion to dismiss [dkt # 3] is DENIED. It appears that the defendants have now answered the complaint. It is further ORDERED that discovery shall be completed by the parties by April 21, 2006, and dispositive motions shall be filed on or before May 5, 2006. A status conference will be scheduled upon the request of either party. If no request is made, the Court will proceed to schedule a hearing on dispositive motions after they are filed. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: February 7, 2006 -12- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on February 7, 2006. s/Tracy A. Jacobs TRACY A. JACOBS -13-

=== DARRELL COWEN and TERESSA COWEN v. AMERICAN MEDICAL SYSTEMS INC. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION DARRELL COWEN and TERESSA COWEN, Plaintiffs, v. AMERICAN MEDICAL SYSTEMS, INC., __________________________________________/ Defendant. Case Number 05-10307-BC Honorable David M. Lawson OPINION AND ORDER DENYING DEFENDANT’S MOTION TO DISMISS This matter is before the Court on the defendant’s motion to dismiss. The plaintiffs originally commenced this action in a Michigan state court. The defendant removed the matter to this Court based on diversity of citizenship. However, in its motion, the defendant alleges that the plaintiff did not serve the summons and complaint prior to removal in accordance with Michigan’s procedural rules. The defendant contends, therefore, that this Court has no personal jurisdiction over it and the case should be dismissed. The Court heard the parties’ arguments in open court today. The Court concludes that although the defendant was served with an expired summons, which the state judge did not have authority to issue under Michigan’s court rules, this Court may make orders to correct the defect and properly bring the necessary parties before it. The motion to dismiss, therefore, will be denied. I. The plaintiffs, husband and wife, are residents of Isabella County, Michigan. On November 24, 2004, the plaintiffs filed their complaint in state court against the manufacturer of the husband’s penile implant, which he received on October 11, 2001 to correct his partial erectile dysfunction. The plaintiffs allege the implant was defective, and the plaintiff-husband had to undergo surgery in May 2003 to have it removed. The complaint, which was filed on November 24, 2004, contains two counts: count one alleges negligent manufacturing, testing, warning, and failure to recall the defective product; and count two alleges loss of consortium by the plaintiff-wife. The state court issued a summons when the complaint was filed, but under Michigan rules the summons expired on February 22, 2005. See Mich. Ct. R. 2.102(D) (stating that unless extended, “[a] summons expires 91 days after the date the complaint is filed”). It appears that there are two companies called American Medical Systems, Inc. Before the summons expired, the plaintiffs apparently served the wrong company, which was located in Livonia, Michigan. That company never responded, and the plaintiffs obtained a default judgment in the Michigan court on March 16, 2005. The plaintiffs thereafter learned that they had served the wrong company, and according to the plaintiffs’ attorney, he contacted one Dan Johnson, national counsel for the correct defendant, by letter and telephone. Speaking to Mr. Johnson’s assistant, he informed Mr. Johnson of the mistake and announced that he planned to obtain an amended summons. The plaintiffs claim Mr. Johnson “had absolutely no problem” with this. Pls.’ Resp. at 4. On August 9, 2005, the plaintiffs moved the state court to issue an amended summons. The case then was transferred the Bay County Circuit Court (apparently to cure a potential conflict arising from the plaintiff-wife’s employment in Isabella County Circuit Court), and the amended summons eventually was issued on October 31, 2005. The amended summons and the complaint were served on the correct defendant on November 8, 2005. -2- On December 1, 2005, the defendant removed this case to this court, alleging that it is a citizen of Delaware, the place of its incorporation, and Minnesota, its principal place of business, and the amount in controversy exceeds $75,000. The plaintiffs do not dispute these claims. Four days after removal, the defendant filed the present motion to dismiss. It alleges that the plaintiffs failed to effectuate proper service because the state court had no power to issue the second summons. The defendant reasons that when the original summons expired, the case was “deemed dismissed” at that time by operation of law. The plaintiffs argue that the state court had authority to issue the second summons because a Michigan Court Rule allows amendment of service “at any time on terms that are just.” The plaintiffs also claim the defendant agreed to set aside any dismissal that would occur due to the mistake in service. Finally, the plaintiffs claim the defendant admitted jurisdiction in this court by removing the case here, and they seek a remand to state court and attorneys’ fees imposed for expenses incurred in responding to its motion. II. As an initial matter, the Court must reject out of hand the plaintiffs’ argument that the defendant submitted to personal jurisdiction by filing its removal notice. The Supreme Court held over 75 years ago that a defendant does not waive objections to service of process or personal jurisdiction by removing a state court action to federal court. See Morris & Co. v. Skandinavia Ins. Co., 279 U.S. 405, 409 (1929). It also appears that state court’s issuance of the amended summons was contrary to state procedure. Michigan Court Rule 2.102(D) states that the life of a summons is 91 days, and that the court may extend the summons for up to one year if it acts within those 91 days. In Hyslop v. Wojjusik, 252 Mich. App. 500, 652 N.W.2d 517 (2002), the state appellate court held that an order -3- extending a summons entered after the summons expired was invalid, explaining, “Plaintiffs could only extend the original summons by filing a motion within the initial ninety-one-day period.” Id. at 507, 652 N.W.2d at 520. There is no dispute here that the order amending the summons was entered after the initial 91-day period. The Sixth Circuit has held that the failure to comply with state service-of-process rules can result in the dismissal of removed actions. See Bates v. Harp, 573 F.2d 930 (6th Cir. 1978). “[I]n determining the validity of service in the state court prior to removal, a federal court must apply the law of the state.” 4A Wright & Miller, Federal Practice and Procedure § 1082. However, after an action is removed, federal law governs, and defects in service can be cured in accordance with federal rules of procedure. See, e.g., Weinberg v. Colonial Williamsburg, Inc., 215 F. Supp. 633, 635 (D.C.N.Y. 1963) (holding that “[t]he Court will not . . . dismiss on this ground since, in a removed action, if the original service was defective, service of new process under 28 U.S.C. § 1448 may be authorized”). The state court did not formally dismiss the matter, and the Michigan court rule that would “deem” the matter dismissed as to a defendant not “served with process as provided in [the Michigan] rules,” Mich. Ct. R. 2.102(E)(1), does not govern federal courts. Section 1448, Title 28, United States Code provides: In all cases removed from any State court to any district court of the United States in which any one or more of the defendants has not been served with process or in which the service has not been perfected prior to removal, or in which process served proves to be defective, such process or service may be completed or new process issued in the same manner as in cases originally filed in such district court. 28 U.S.C. § 1448. The procedures that must be followed for correcting defective service after removal are those set forth in the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 81(c) (stating that “[t]hese rules apply to civil actions removed to the United States district courts from -4- the state courts and govern procedure after removal”). In addition, Congress has authorized, “[i]n any case removed from a State court, the district court may issue all necessary orders and process to bring before it all proper parties whether served by process issued by the State court or otherwise.” 28 U.S.C. § 1447(a). Federal Rule of Civil Procedure 4 governs the issuance of summonses in this Court. Subsection (h) prescribes the manner service upon corporations that do not waive service under Rule 4(d), and subsection (m) provides the time limits for service. For cases originally filed in federal court, Rule 4(m) permits service within 120 days after filing the complaint. However, in a case removed from state court, the time begins to run on the date of removal. Bruley v. Lincoln Property Co., N.C., Inc., 140 F.R.D. 452, 453 (D.C. Col. 1991) (holding that the “120-day period for serving process starts to run on the date of removal rather than the date the state complaint was filed”); Motsinger v. Flynt, 119 F.R.D. 373, 376 (D.C.N.C. 1988) (noting that “in a removal action the 120- day service period commences to run from the date of removal”). This case was removed to this Court on December 1, 2005. The plaintiffs therefore have until March 31, 2006 to serve the defendant, unless the defendant waives service. III. The plaintiffs have asked the Court to remand this case to state court and award them costs. They cite no authority for that request, and this Court can discern no basis to remand the matter based on the motion papers, as subject matter has been established by the defendant under 28 U.S.C. §§ 1332(a) and 1441(a). However, at oral argument on the motion, the plaintiffs advised the Court for the first time that the state court did not extend the summons against the named defendant, but actually allowed the plaintiffs to add another defendant – with the same name as the previously- -5- named defendant – and issued a new summons under Michigan procedural rules. The “new” (and proper) defendant is a Minnesota corporation. The plaintiffs previously had taken a default judgment against a Livonia, Michigan company. Because the plaintiffs suggest that there may be two defendants in this case, one with its principal place on business in Michigan, the prospect of incomplete diversity must be addressed. It is axiomatic that federal diversity jurisdiction exists only when “no plaintiff and no defendant are citizens of the same state.” Jerome-Duncan, Inc. v. Auto-By-Tel, L.L.C., 176 F.3d 904, 907 (6th Cir. 1999) (citing United States Fidelity & Guar. Co. v. Thomas Solvent Co., 955 F.2d 1085, 1089 (6th Cir. 1992 . Therefore, complete diversity of citizenship must exist “both at the time that the case is commenced and at the time that the notice of removal is filed.” Ibid. (citing Easley v. Pettibone , 990 F.2d 905, 908 (6th Cir. 1993). An exception to the complete diversity rule is found in the doctrine of fraudulent joinder. “When a non-diverse party has been joined as a defendant, then in the absence of a substantial federal question the removing defendant may avoid remand only by demonstrating that the non-diverse party was fraudulently joined.” Jerome-Duncan, 176 F.3d at 907 (quoting Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir. 1992 . Establishing that joinder of a party is “fraudulent” requires no proof of the plaintiff’s actual motive. See 16 Moore’s Fed. Prac. § 107.14[2][c] (noting that “[t]he term ‘fraudulent joinder’ is a bit misleading because it requires neither a showing of fraud nor joinder in one sense”). Rather, the thrust of the inquiry is “whether [the plaintiff] had at least a colorable cause of action against [the non-diverse defendant] in the Michigan state courts.” Jerome-Duncan, 176 F.3d at 907 (citing Alexander v. Electronic Data Sys. Corp., 13 F.3d 940, 949 (6th Cir. 1994 . -6- The issue is easily resolved here because the plaintiffs conceded at oral argument that they have no colorable claim against the entity against which a default judgment was entered. The plaintiffs acknowledge that they intended to sue the company that manufactured the penile implant, which likely is the defendant, American Medical Systems of Minnesota, but most certainly is not its Livonia, Michigan namesake. According to the caption of the case and the text of the complaint, there is but one defendant named in this lawsuit. There is complete diversity of citizenship between the plaintiffs and the company they intended to sue. But even if the pleadings can be construed in light of the state court’s order authorizing the “new” summons to add a defendant, the Court is satisfied that the doctrine of fraudulent joinder requires that the citizenship of the mistakenly-sued defendant – the Livonia, Michigan company – be disregarded. When that is done, complete diversity is preserved. There is no basis to remand the matter. IV. Since the plaintiffs yet may perfect service of process, the defendant’s motion to dismiss for want of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2) or insufficiency of service of process under Rule 12(b)(4) is premature. However, this Court has subject matter jurisdiction over the dispute, and remand is not appropriate. Accordingly, it is ORDERED that the defendant’s motion to dismiss [dkt # 3] is DENIED. It is further ORDERED that the Clerk of the Court shall issue a summons against the defendant, and the plaintiffs shall effectuate service of process in accordance with the Federal Rules of Civil Procedure on or before March 31, 2006, unless the defendant waives service of process. Thereafter, the defendant shall promptly answer the complaint. -7- It is further ORDERED that the plaintiffs’ request to remand the matter is DENIED. Dated: January 31, 2006 s/David M. Lawson DAVID M. LAWSON United States District Judge PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 31, 2006. s/Tracy A. Jacobs TRACY A. JACOBS -8-

=== FRANK LONG v. DR. MARK ADAMS and SAGINAW VALLEY NEUROSURGERY, P.C. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION FRANK LONG, Plaintiff, v. DR. MARK ADAMS and SAGINAW VALLEY NEUROSURGERY, P.C. __________________________________________/ Defendants. Case Number 04-10042-BC Honorable David M. Lawson OPINION AND ORDER DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Presently before the Court is the defendants’ motion for summary judgment. On March 8, 2004, the plaintiff, Frank Long, a citizen of Missouri, filed a complaint in this Court alleging medical malpractice against the defendants, who are citizens of Michigan. The plaintiff contends that he suffered injury due to the professional negligence of Dr. Mark Adams, one of the named defendants, when Adams failed to timely perform a procedure to correct complications that arose after the plaintiff’s initial brain surgery. In their untimely motion for summary judgment, the defendants rely on a recent ruling by the Michigan Court of Appeals that interprets the formalistic requirements of Michigan Compiled Laws § 600.2912d(1), which addresses the procedure for signing and verifying out-of-state affidavits. The defendants claim that the plaintiff’s affidavit of merit is defective, and even if allowed to correct the defect, the plaintiff’s new affidavit would be filed outside the applicable statute of limitations. However, the authority on which the defendants rely address state procedural rules that are not applicable in federal court under the rule of Erie R.R. Co. v. Tompkins and its progeny. The plaintiff’s affidavit and pleadings conform to the applicable federal rules. Therefore, the Court will deny the defendants’ motion for summary judgment. I. Long filed his amended complaint alleging medical malpractice against Dr. Mark Adams and his employer, Saginaw Valley Neurosurgery, P.C., on March 8, 2004. The initial complaint did not contain a notarized affidavit of merit; however, the amended complaint includes an affidavit of merit from a physician that was notarized in California. According to the amended complaint, Adams performed a craniotomy, evacuation of a subdural hematoma, and fenestration of an arachnoid cyst (brain surgery) upon the plaintiff in Michigan on September 7, 2001. On September 11, 2001, after the operation, Adams determined that the fenestration was unsuccessful and the plaintiff required a cysto-peritoneal shunt “in order to properly manage the problem and prevent brain damage.” Amended Compl. at ¶ 4. Dr. Adams apparently consulted with a colleague, Dr. DeHart, about the plaintiff’s postoperative care. A September 17, 2001 entry by Dr. Adams in the plaintiff’s medical records indicated that Dr. DeHart “agree[d] with the shunt procedure and I fe[lt] it was safe.” Ibid. (internal quotation marks omitted). On September 18, 2001, Dr. DeHart further noted, “I believe that overall he is unlikely to have an infectious complication of the shunt procedure.” Ibid. Between September 11 and September 19, 2001, the plaintiff alleges that he “continued to have an archnoid cyst, which reaccumulated, progressed and compressed the left frontotemporal region across the falx such that a trapped ventricle occurred.” Id. at ¶ 6. The plaintiff believes that he “presented progressive signs and symptoms of neural compression.” Ibid. The signs meant that there would be “a strong likelihood of . . . permanent brain damage” unless Dr. Adams “performed timely and adequate surgery, particularly before September 19, 2001.” Ibid. -2- However, the plaintiff believes that the necessary procedure to resolve the postoperative complications did not occur in a timely fashion. The delay between September 11, 2001 and September 19, 2001, the ultimate date of procedure, “progressively adversely affected [the plaintiff’s brain] by the mass effect of the re-accumulation in the cyst, clinically resulting in delirium and decreased level of alertness and responsiveness, culminating in a respiratory arrest and acute hypoxemic respiratory failure on September 18, 2001.” Id. at ¶ 7. The plaintiff alleges that Dr. Adams negligently delayed surgical intervention, failed to complete rounds to determine the plaintiff’s status, and did not examine the plaintiff properly or re- evaluate his condition on September 18, 2001, although Adams knew or should of known that the plaintiff had a “dangerous re-accumulation of the cyst.” Id. at ¶ 8. In addition, the plaintiff notes that Dr. Adams did not make arrangements for some other doctor to check the plaintiff’s status. Finally, the plaintiff states that Dr. Adams’s conduct likely violated hospital procedures, rules, regulations, and policies on following patients until the day they are discharged from the hospital. As noted, the plaintiff filed with his amended complaint an affidavit of merit completed by Dr. Edward Smith, a board-certified neurosurgeon who apparently practices medicine in California. See Amended Compl. Ex. , Smith aff. In the affidavit, Smith “hereby swear[s] or affirm[s] upon oath” that: 2. I have read the record concerning the care and treatment of Frank Long at St. Mary’s Hospital in September 2001, particularly as provided by his neurosurgeon, Dr. Mark Adams, whom I deduce to be a Board Certified Neurosurgeon. 3. I have read the Pre-Notice of Intent to file suit sent on or about July 18, 2003. 4. I have read the complaint filed on behalf of Frank Long in this action, and hereby state it has merit, and in particular state -3- (a) the applicable standard of care is as stated in detail in the Complaint and the report attached, with Affidavit by Dr. Lerner, a neurosurgeon, basically summarized as he needed to re-operate on the cyst to ameliorate the re-accumulation of fluid. (b) in my opinion, Dr. Adams breached the standard of care by waiting until September 19, 2001, to re-operate. (c) Dr. Adams should have operated on Mr. Long before he arrested to decompress the re-accumulation of fluid in the cyst; (d) The failure to re-operate allowed the re-accumulation of fluid in the cyst to compress and damage delicate brain structure unable to withstand that type of insult. There is merit to the Complaint. Smith aff. at ¶¶ 2-4. The affidavit bears the stamp and seal of Kashia Gomez, a notary public in Santa Barbara, California, whose commission was set to expire on May 5, 2004. The date recorded on the affidavit is March 5, 2004. The amended complaint also contains a document entitled “Affidavit” that was filed with the initial complaint, which was authored by Dr. Bernard Lerner. That “affidavit” was not notarized, nor did Dr. Lerner state that he was making his statements on oath. It concludes that “it is my opinion, within a reasonable degree of medical certainty, that Dr. Mark Adams departed from applicable standards of care relating to the treatment of Mr. Frank Long, inclusive of September 6, 2001 through October 1, 2001[.]” Lerner aff. at ¶ 1(I). The affidavit is based on a detailed report, also attached to the amended complaint, prepared by Dr. Lerner containing his reasoning. II. A motion for summary judgment under Fed. R. Civ. P. 56 presumes the absence of a genuine issue of material fact for trial. It is “appropriate [when] ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter -4- of law.’” Frazier v. Honda of America Mfg., Inc., 431 F.3d 563, 565 (6th Cir. 2005) (quoting Fed. R. Civ. P. 56(c . Summary judgment under Rule 56 is a particularly apt method of addressing an issue when the parties agree, as here, that there are no material facts in dispute and “the sole question at issue [is] a question of law.” United States v. Donovan, 348 F.3d 509, 511 (6th Cir. 2003); see also Wachovia Bank v. Watters, 431 F.3d 556, 559 (6th Cir. 2005); Progressive Corp. and Subsidiaries v. United States, 970 F.2d 188, 190-91 (6th Cir. 1992). In medical malpractice cases, Michigan law contains certain requirements designed to ensure that plaintiffs have consulted with the appropriate medical professionals in advance of filing suit to verify that claims of professional negligence have merit before doctors and hospitals are sued and put to the expense of mounting a defense. One such rule states that a person contemplating a lawsuit against a medical provider for professional negligence must give advance notice of an intent to sue and identify the grounds for relief. Mich. Comp. Laws § 600.2912b. Another statute provides a heightened pleading requirement and states that “the plaintiff’s attorney shall file with the complaint an affidavit of merit signed by a health professional who the plaintiff’s attorney reasonably believes meets the requirements for an expert witness . . . [who] has reviewed the notice and all medical records supplied to him or her by the plaintiff's attorney concerning the allegations contained in the notice.” Mich. Comp. Laws § 600.2912d(1). The Michigan Supreme Court has observed that “the purpose of the statute[s] [is] to prevent frivolous medical malpractice claims.” Dorris v. Detroit Osteopathic Hosp. Corp., 460 Mich. 26, 47, 594 N.W.2d 455, 466 (1999). As noted above, the plaintiff filed an affidavit of merit with his amended complaint in this case. He sought the advice of a physician certified in the same specialty as Dr. Adams, who opined that Dr. Adams’s care rendered to the plaintiff was substandard and Dr. Adams was negligent. -5- According to the plaintiff’s expert, the claim is not frivolous. However, the defendants, seeking to take advantage of a recent Michigan Court of Appeals decision interpreting Michigan’s formal – and now formalistic – requirements relating to the verification of affidavits signed by out-of-state notaries, claim that the plaintiff’s affidavit does not comply with Michigan’s requirements, it is therefore a nullity, and the complaint is rendered defective thereby and should be dismissed. The Case Management and Scheduling Order provides that summary judgment motions were to be filed in this case on or before December 15, 2004. The impetus for the defendant’s tardy motion was the state court of appeals’ decision in Apsey v. Memorial Hosp. (On Reh), 266 Mich. App. 666, 702 N.W.2d 870 (2005), initially decided on April 19, 2005, and then published after reconsideration on June 9, 2005. In that case, the court found that the Michigan legislature had enacted two statutes pertaining to affidavits signed by out-of-state notaries public. The first, enacted by the state legislature in 1879, required that affidavits intended to be “received” and “read” in “judicial proceedings” must be “authenticated” by a certificate “by the clerk of any court of record in the county where such affidavit shall be taken, under the seal of said court.” Mich. Comp. Laws § 600.2102. The second, which became effective in 1970 when Michigan adopted the Uniform Recognition of Acknowledgments Act, provides that an out-of-state notary’s signature in his or her own state is as valid as if the notary had performed the act in Michigan. Mich. Comp. Laws § 565.262(a). Additional certification or authentication is not required because “the signature, rank or title and serial number, if any, of the person are sufficient proof of the authority of a holder of that rank or title to perform the act. Further proof of his authority is not required. . . . The signature and title of the person performing the act are prima facie evidence that he is a person with the designated title and that the signature is genuine.” Mich. Comp. Laws § 565.263(1), (4). The Aspey court -6- determined that the 1879 statute took precedence over the later-enacted legislation. Because Aspey’s affidavit of merit was notarized in Pennsylvania, and no certification was attached, the state court held that the affidavit was a “nullity” and the complaint thus did not fulfill the heightened pleading requirements for medical malpractice actions. Id. at 676, 702 N.W.2d at 877. However, because of the novelty of its holding, the court held that its new rule would have prospective application only. Id. at 682, 702 N.W.2d at 881. The defendants argue that the same fate ought to befall Frank Long, and his case should be dismissed because his affidavit does not meet Michigan’s procedural requirements. The defendants’ arguments, however, ignore the fact that this case pends in federal court, and the state’s procedural rules have no application here. Sixth Circuit precedent firmly establishes that “[i]n federal diversity actions, state law governs substantive issues and federal law governs procedural issues.” Legg v. Chopra, 286 F.3d 286, 289 (6th Cir. 2002) (citing Erie R.R. Co. v. Tompkins, (1938 ; see also McDonald v. Petree, 409 F.3d 724, 730 (6th Cir. 2005) (holding that federal courts sitting in diversity action must apply the federal claim preclusion and law-of-the-case rules because such rules are “procedural”); First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501, 528-29 (6th Cir. 2002) (stating that “‘[i]f the [federal] Rule speaks to the point in dispute and is valid, it is controlling, and no need be paid to contrary state provisions’”) (quoting 19 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4508 (1982 . Over forty years ago in Hanna v. Plumer, 380 U.S. 460 (1965), the Supreme Court clarified the distinction between “substantive” and “procedural” laws. The Court stated that a federal court sitting in diversity should determine whether a federal procedural rule directly “collides” with the state law sought to be applied. Id. at 470-74. If a direct conflict exists, the federal rule ought to be -7- applied if it is constitutional and within the scope of the Rules Enabling Act. See also Ggasperinin v. Centr. for Humanities, Inc., 518 U.S. 415, 427 (1996). The task is relatively straight-forward when a Federal Rule of Civil Procedural is involved: When a situation is covered by one of the Federal Rules, the question facing the court is a far cry from the typical, relatively unguided Erie choice: the court has been instructed to apply the Federal Rule and can refuse to do so only if the Advisory Committee, this Court, and Congress erred in their prima facie judgment that the Rule in question transgresses neither the terms of the Enabling Act nor constitutional restrictions. Hanna, 380 U.S. at 471. The Supreme Court has explained that a federal court, in determining whether a Federal Rule collides with state law, should consider the scope of the Federal Rule and whether it is “sufficiently broad to control the issue before the Court.” Burlington Northern R.R. Co. v. Woods, 480 U.S. 1, 4-5 (1987). The Federal Rule is sufficiently broad when it “leave[es] no room for the operation of the [state] law.” Ibid. Courts are to read the Federal Rules in such away to give them their plain meaning; federal courts should not read the Federal Rules narrowly specifically to avoid a conflict with state law. Walker v. Armco Steel Corp., 446 U.S. 740, 750 n. 9 (1980) (stating “a broad reading that would create significant disuniformity between state and federal courts should be avoided if the text permits”). The defendants’ argument that the plaintiff’s complaint is insufficient is grounded on the premise that it falls short of the heightened pleading requirements of Michigan Compiled Laws section 600.2912d. However, Federal Rule of Civil Procedure 8 requires only that “[a] pleading which sets forth a claim for relief [must] . . . contain (1) a short and plain statement of the grounds upon which the court’s jurisdiction depends . . . (2) a short and plain statement of the claim showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief the pleader seeks.” -8- Fed. R. Civ. P. 8(a). There are no heightened pleading requirements for medical malpractice cases contained in Rule 8(a). In fact, the Supreme Court has held that it is inappropriate for a federal court to require pleading beyond Rule 8’s basic formula. See Swierkiewicz v. Sorema N.A., (2002). Rule 8(a)’s simplified pleading standard applies to all civil actions, with limited exceptions. Rule 9(b), for example, provides for greater particularity in all averments of fraud or mistake. . . . Thus, complaints in [municipal liability] cases, as in most others, must satisfy only the simple requirements of Rule 8(a). . . . [T]he Federal Rules do not contain a heightened pleading standard for employment discrimination suits. A requirement of greater specificity for particular claims is a result that “must be obtained by the process of amending the Federal Rules, and not by judicial interpretation.” . . . Furthermore, Rule 8(a) establishes a pleading standard without regard to whether a claim will succeed on the merits. “Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test.” Id. at 514-15 (citations omitted). As is clear from Rule 8(a)’s language, there is no requirement that any affidavit of merit must be filed to commence a medical malpractice case in federal court. The plaintiff’s complaint in this case complies with Rule 8(a), and he need do no more to commence his action in this Court. The presence or absence of an affidavit does not render the complaint defective or subject it to dismissal. Even if an affidavit were required, however, it is clear that the affidavit of Dr. Smith is sufficient under federal law. The governing federal statute does not even require affidavits and declarations to be notarized, and it permits substantial compliance with its provisions. See 28 U.S.C. § 1746. That statute provides: Wherever, under any law of the United States or under any rule, regulation, order, or requirement made pursuant to law, any matter is required or permitted to be supported, evidenced, established, or proved by the sworn declaration, verification, certificate, statement, oath, or affidavit, in writing of the person making the same -9- (other than a deposition, or an oath of office, or an oath required to be taken before a specified official other than a notary public), such matter may, with like force and effect, be supported, evidenced, established, or proved by the unsworn declaration, certificate, verification, or statement, in writing of such person which is subscribed by him, as true under penalty of perjury, and dated, in substantially the following form: . . . (2) If executed within the United States, its territories, possessions, or commonwealths: “I declare (or certify, verify, or state) under penalty of perjury that the foregoing is true and correct. Executed on (date).” 28 U.S.C. § 1746. Dr. Smith’s affidavit was sworn on oath and acknowledged by a notary public. It is in a proper form and substantially complies with the federal requirements. Other federal courts sitting in diversity have considered and rejected the argument that state laws requiring the filing of affidavits of merit with complaints alleging medical malpractice govern the pleading requirements in federal court. For instance, in Baird v. Celis, 41 F. Supp. 2d 1358, 1360 (N.D. Ga. 1999), the court considered whether the Georgia statutory provision requiring a plaintiff to file an affidavit of merit to commence a medical malpractice action directly collided with Federal Rule of Civil Procedure 8. The plaintiff did not file an affidavit of merit. The court reasoned that she nonetheless had properly commenced a suit in federal court, even though a state court would have dismissed the action. The court reasoned: Based on the rule of Hanna, the Georgia expert affidavit requirement does not apply in this federal proceeding. . . . [T]he expert affidavit which requires specific allegations of negligence is in direct conflict with the notice pleading standard of Federal Rule 8(a). . . . Like the state law in Hanna, Georgia’s expert affidavit requirement creates a higher standard for plaintiffs seeking to initiate a particular type of action than the conflicting Federal Rule. Like the Massachusetts law in Hanna, the affidavit requirement reflects a substantive policy of the State of Georgia with respect to tort reform. Nonetheless, Rule 8(a) controls the Plaintiff’s pleading burden in the instant case. “When, because the plaintiff happens to be a non-resident, . . . [a state created] right is enforceable in a federal as well as in a State court, the forms and mode of enforcing the right may at times, naturally enough, vary because the two judicial systems are not identical.” Hanna, 380 U.S. at 473. -10- Baird, 41 F. Supp. 2d at 136-37 (citations omitted). The same result was reached in Boone v. W.R. Knight III, 131 F.R.D. 609 (S.D. Ga. 1990), a case in which the plaintiff alleged the professional negligence of an insurance broker. The defendants argued that the negligence claim amounted to a claim of professional malpractice, subject to Georgia’s statute requiring an expert affidavit. The court declined to reach the question of whether this type of malpractice was contemplated by the statute because the Federal Rules of Civil Procedure controlled the filing of the complaint, not the state statute. The court stated that “[t]he instant case falls squarely within the rule of Hanna [v. Plumer, 380 U.S. 460 (1965)]. The Georgia statute at issue here is codified in the state’s civil procedure code and is essentially a pleading requirement. . . . Pleading in the federal courts, however, is governed by the specific provisions of Fed. R. Civ. P. 8.” Id. at 611-12. A federal district court in Florida similarly has refused to apply a state law requiring an affidavit of merit in a medical malpractice suit because the federal rules control pleading requirements. See Braddock v. Orlando Regional Health Care Sys., Inc., 881 F. Supp. 580 (M.D. Fla. 1995); see also Brown v. Nichols, 8 F.3d 770, 773 (11th Cir. 1993) (stating that “[w]e have . . . observed that, in diversity actions . . . federal law governs pleading requirements”). The only state affidavit-of-merit laws that have been sustained in federal diversity actions are those laws that do not create additional pleading requirements, but rather require filings well after the pleadings have been fixed and the issues joined. For instance, in Chamberlain v. Giampapa, M.D., 210 F.3d 154 (3d Cir. 2000), the court considered a New Jersey law that required the filing of an affidavit by “an appropriately licensed person” attesting that the defendant’s conduct breached applicable professional standards; but the affidavit was not required until “60 days -11- following the date of filing of the answer to the complaint by the defendant.” Id. at 156 n.1. The court held that the statute in that case did not collide with Rule 8. See also Cruz v. Chang, 400 F. Supp. 2d 906, 910 (W.D. Tex. 2005) (applying state statute requiring the furnishing of expert information “[n]ot later than . . . the 180th day after the date on which a health care liability claim is filed”). The defendants cite in support of their arguments a decision by the district court in Michigan’s Western District, Lee v. Putz, 368 F. Supp. 2d 813 (W.D. Mich. 2003), rev’d on other grounds, 146 Fed. Appx. 383 (6th Cir. 2005). In that case, the court held that the plaintiff’s defective affidavit of merit in a medical malpractice case, due to the lack of certification of an out- of-state notary’s signature, deprived that court of jurisdiction to proceed because the plaintiff’s complaint did not state a cognizable claim. This Court cannot agree with the rationale or result in that case for two reasons: first, by casting the issue in jurisdictional terms, the Putz court confounded the distinct concepts of the court’s power to proceed with the merits of the claim set forth in the complaint. However, “the fact that a complaint may not state a claim upon which relief can be granted is of no relevance to the question of subject matter jurisdiction.” Cherokee Exp., Inc. v. Cherokee Exp., Inc., 924 F.2d 603, 609 (6th Cir. 1991) (internal quotes and citation omitted). Second, in concluding that the plaintiff’s complaint with its flawed affidavit was itself defective, the Putz court entirely ignored the substantial body of law represented by Erie and Hanna. In addition, the court failed to address the sufficiency of the affidavit in light of 28 U.S.C. § 1746. This Court, therefore, respectfully declines to follow Putz. Finally, even if Apsey provided guidance to the procedures to be followed in this federal diversity action, which it does not, the Michigan appellate court has limited the application of that -12- decision to cases filed after the filing of the opinion on rehearing. Apsey, therefore, would not undermine the plaintiff’s pleadings in this case, including the attached affidavit of merit. III. The Court believes that Michigan’s heightened pleading requirements for medical malpractice cases do not apply to cases filed in federal court invoking the Court’s diversity jurisdiction because the state rules collide with the plain requirements of the Federal Rules and statutes prescribing the procedures to be used in the federal courts. The defendants’ motion for summary judgment is grounded entirely on those state rules. However, the Court finds that the plaintiff’s amended complaint complies with the applicable Federal Rules of Procedure. Accordingly, it is ORDERED that the defendants’ motion for summary judgment [dkt # 26] is DENIED. It is further ORDERED that the Case Management and Scheduling Order is modified as follows: The parties shall submit a proposed Joint Final Pretrial Order to chambers on or before May 8, 2006. The Final Pretrial Conference shall be held before the Court on May 15, 2006 at 2:30 o’clock in the afternoon. Trial shall commence on May 30, 2006 at 8:30 a.m. The balance of the Case Management and Scheduling Order shall remain in full force and effect. Dated: January 23, 2006 s/David M. Lawson DAVID M. LAWSON United States District Judge -13- PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on January 23, 2006. s/Tracy A. Jacobs TRACY A. JACOBS -14-

=== Linda Rose, et al., v. Saginaw County, et al. ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION Case Number 01-10337-BC Honorable David M. Lawson LINDA ROSE, JENNIFER CRADIT, SYLVIA DENISE BRADDOCK, LISA RENEE BRANDIMORE, DWAYNE BUTTERFIELD, BOBBIE WAYNE CARTER, DANIEL WRAY CLAYTON, JOSHUA FULLER, NICHOLAS ANTHONY GILES, WILLIE LOUIS HENDRICKS, TANISHA RAMON JOHNSON, ROBERT ALLEN KELSEY, SUE ANN LETTERMAN, DONNA LYNN QUARLES, GREGORY LOUIS SCHULTZ, AMANDA RAE SHINAVER, DWAYNE ALANN SIMMONS, ROBIN RENEE THOMAS, JOSHUA ALLEN WEIGANT, JUSTIN ANDERSON, CRAIG MASON, and MATTHEW STARKWEATHER, Plaintiffs, v. SAGINAW COUNTY, SAGINAW COUNTY SHERIFF’S DEPARTMENT, MUNICIPAL GOVERNMENTAL ENTITIES, CHARLES BROWN, and OFFICERS JOHN DOE, and JANE DOE, (in their individual capacity), jointly and severally, ______________________________________ / Defendants. OPINION AND ORDER DENYING PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION AND DENYING DEFENDANTS’ MOTION TO AMEND AFFIRMATIVE DEFENSES This matter is before the Court on various procedural motions filed by the parties. Although the Court previously bifurcated the case and determined the liability question upon adjudication of the parties’ cross motions for summary judgment, through the present motions – the plaintiffs’ motion for class certification and the defendants’ motion for leave to file new affirmative defenses – the parties seek to unwind the litigation as it has proceeded thus far and litigate different theories involving additional claimants. The Court heard the parties arguments in open court on November 9, 2005 and now finds that the plaintiffs have not demonstrated the propriety of certifying the matter as a class action, the plaintiffs’ motion is filed too late, equitable estoppel or tolling does not save it because they have submitted no evidence of wrongful behavior by the defendant, the defendants’ proposed amended affirmative defenses would be futile because (with one exception) they would not bar the plaintiffs’ claims, and the request to amend is untimely. The Court, therefore, will deny the parties motions. I. The plaintiffs initial complaint was filed on October 9, 2001. It named as plaintiffs Linda Rose, Jennifer Cradit, and Jane Doe Detainees of the Saginaw County Jail. The complaint sought class action certification. According to the case management and scheduling order, as amended by this Court’s July 23, 2002 order, the plaintiffs were required to file any motion for class certification by September 13, 2002. The present plaintiffs, twenty-two individuals, claim they were subjected to an unconstitutional policy by officials at the Saginaw County jail when they were held as pretrial detainees at various times between May 1999 and December 2001. They contend that the Saginaw County sheriff instituted a policy and practice of housing uncooperative and disruptive detainees in administrative segregation cells; and jail personnel would take all of the clothing from such detainees so that they were naked for the time that they spent in administrative segregation. The complaint and its several amendments assert claims under 42 U.S.C. § 1983 and state law. At a scheduling conference on May 14, 2002, the defendants stated that only thirty prisoners housed as pretrial detainees had been put in a cell naked over the prior three years. The defendants -2- claimed to have eliminated the practice after the suit was filed. The plaintiffs failed to file a motion for class certification prior to September 13, 2002, apparently based on the defendants’ representation that only thirty people were affected by the policy. The plaintiffs amended their complaint from time to time with leave of court in order to add additional plaintiffs who emerged during the pendency of the case and alleged that they also were subjected to the naked detention policy. On December 9, 2002, the plaintiffs filed their sixth amended complaint. The amended complaint added more named plaintiffs and repeated the allegations that the plaintiffs, when detained while awaiting arraignment or trial, were forced to disrobe in the presence of corrections officers even though there was no reason to believe the plaintiffs were dangerous or possessed weapons. The amended complaint focused on the viewing of the plaintiffs’ naked bodies by jail personnel and alleged constitutional violations, gross negligence, invasion of privacy, assault and battery, intentional infliction of emotional distress, and violation of the Michigan Elliott Larson Civil Rights Act, Mich. Comp. Laws. § 37.2101 et seq. This version of the complaint omitted reference to class action certification, but it did request injunctive relief to prevent the defendants from engaging in the alleged illegal behavior. In February 2003, a local television station showed a story about the naked segregation policy. The plaintiffs’ lawyers apparently received a number of phone calls after the story aired, leading them to dozens of potential plaintiffs. The plaintiffs have collected data from these potential plaintiffs, which they have presented to the court in a chart attached to the motion. On December 22, 2004, the plaintiffs filed a motion to join even more parties as plaintiffs. They argued that the defendant had misrepresented the extent to which the naked segregation policy had been applied. The plaintiffs stated this misrepresentation prevented them from discovering 100 -3- additional potential grievants in a timely manner and caused them to withdraw their class action claims. The plaintiffs’ motion requested permission to add additional plaintiffs discovered some time after the filing of the lawsuit. The defendants opposed the motion stating the plaintiffs had not shown good cause, and the defendants would be prejudiced if the motion were granted. The defendant also claimed many of the new plaintiffs’ claims would be barred by the statute of limitations. On January 26, 2005, the Court filed an opinion adjudicating the parties’ cross motions for summary judgment. The Court addressed and resolved all of the liability issues in the case, holding that the naked detention policy was unconstitutional as applied to pretrial detainees. The Court dismissed the other counts. Rose v. Saginaw County, 353 F. Supp. 2d 900 (E.D. Mich. 2005). The Court also denied the plaintiffs’ motion to add additional parties plaintiff and stated that “[a]dding new parties as plaintiffs would serve to further complicate the litigation” because extensive discovery had already taken place and the defendants’ assertion that the statute of limitations barred many of the new plaintiffs’ claims. Id. at 926. The Court suggested that any new claimants not barred by the statute could file their own lawsuits. On April 29, 2005, the plaintiffs filed a motion for class certification or, in the alternative, for joinder. The plaintiffs submitted an affidavit of Peggy Goldberg Pitt, a lawyer working on the case. Attached to the affidavit is a chart listing plaintiffs and potential plaintiffs, a summary of what happened to them, the date of their detention, and other information. The list indicates that sixty- four people were subject to the naked detention policy. Twenty of these people are original plaintiffs in the case, leaving forty-four new possible plaintiffs. The affidavit states that twenty- -4- three people were segregated while naked from 2002 through the date of the motion, despite the defendants claims that they have ended the naked detention policy. The defendants dispute much of the data included in the chart and point out that the chart contains either unsworn averments or statements not based on firsthand knowledge of any of these incidents actually happening. The defendants state they ended the unconstitutional policy in November 2001 when this lawsuit was filed. They also contend that only seven of the new potential plaintiffs on the chart were actually pretrial detainees when they were placed in administrative segregation cell. The other thirty-seven had been convicted of a criminal offense. Moreover, the defendants state, eleven of the potential plaintiffs were not even in the jail on the dates alleged according to jail records, and eight were never in administrative segregation. In the mean time, on July 25, 2005 the defendants filed a motion to amend their affirmative defenses to claim that the Prisoner Litigation Reform Act (PLRA), 42 U.S.C. § 1997e(a), requires the plaintiffs to exhaust their remedies prior to filing suit in court and limits damages where no physical injury has been sustained. The plaintiffs contest this motion on the ground that it is untimely and the PLRA does not apply to them. II. In order to be certified as a class action under Federal Rule of Civil Procedure 23, the moving party must establish that the class meets the numerosity, commonality, typicality, and adequacy of representation requirements of Rule 23(a) and falls into one of the subcategories found in Rule 23(b). Sprague v. General Motors Corp., 133 F.3d 388, 397 (6th Cir. 1998). However, before the Court can assess the application of Rule 23’s elements, the moving party must offer a -5- definition of the class itself. Without such a definition, a proper analysis of the utility and propriety of proceeding as a class action cannot be made. As explained by other district courts: Rule 23(a) also contains an implicit requirement that the class be adequately defined and clearly ascertainable. . . . While the precise numbers of proposed class members need not be established, . . . the class description must be sufficiently definite for the court to ascertain member status. Rink v. Cheminova, Inc., 203 F.R.D. 648, 659 (M.D. Fla. 2001) (internal quotes and citations omitted). Before the Court may certify a class pursuant to Rule 23, “the class definition must be sufficiently definite so that it is administratively feasible for the court to determine whether a particular individual is a member of the proposed class.” 5 James W. Moore et al., Moore’s Federal Practice et al. ¶ 23.21[1] (3d ed.1998). The identity of class members, moreover, must be ascertainable by reference to objective criteria. . . . A precise definition allows the Court to determine who would be entitled to relief, who would be bound by a judgment, and who is entitled to notice of the action. See 5 Moore’s Federal Practice ¶ 23.21[3]. Garrish v. United Auto., Aerospace, and Agric. Implement Workers of Am., 149 F. Supp. 2d 326, 330-31 (E.D. Mich. 2001) (citations omitted). The lack of a precise definition compounds the problem in a case in the procedural posture of this one because the previous liability determination necessarily turned on the status and circumstances surrounding the detention of the named plaintiffs. Where the implied definition of the class advanced by the plaintiffs would allow others who do not share all of the features of those named plaintiffs to benefit from that ruling, the Court’s liability holding could be distorted. At oral argument, the plaintiffs conceded that they had not offered a specific class definition in their motion papers. The Court directed them to submit a definition, and the one furnished after the argument reads as follows: -6- All detainees who were placed in administrative segregation in the Saginaw County Jail from October 19, 1998 and were stripped of their clothing before being placed in administrative segregation pursuant to Defendants’ policy. Pls.’ Supplemental Br. at 1. As discussed at oral argument, that definition certainly includes the named plaintiffs – and more. Despite the arguments of the plaintiffs to the contrary, the definition expands the class to deal with a broader group of persons that includes those who are materially different than the named plaintiffs in at least two respects: inmates who are not pretrial detainees; and persons placed in administrative segregation who were given “suicide gowns,” that is, paper gowns that covered their private parts. The core holding of the liability opinion in this case was that the County’s policy of removing all clothing from pretrial detainees housed in administrative segregation violated the detainees’ due process rights, inasmuch as policy was an exaggerated response to the County’s articulated concerns about suicide, the guards’ safety, and administrative costs, and given the magnitude of the right to privacy in one’s own body and availability of alternatives to the policy (such as suicide gowns); and the policy was unreasonable under the Fourth Amendment because the scope of the intrusion was substantial, and the detainees had a legitimate expectation that they would not be required to forfeit all clothing and covering, even for a brief time, when they had been detained for relatively minor violations, there was no individualized suspicion of drug, weapon, contraband possession, and there was no indication that they were suicidal. Rose, 353 F. Supp. 2d at 922-23. The plaintiffs argue that in reaching that result, the Court cited cases that dealt with convicted inmates, such as Cornwell v. Dahlberg, 963 F.2d 912 (6th Cir. 1992), Kent v. Johnson, 821 F.2d 1220 (6th Cir. 1987), Wilson v. City of Kalamazoo, 124 F. Supp. 2d 855 (W.D. Mich. 2000), and Everson v. Michigan Dept. of Corrections, 391 F.3d 737 (6th Cir. 2004). But those cases -7- were cited for the sole proposition that “prisoners have a liberty and privacy interest in shielding their naked bodies from view by others, especially members of the opposite gender.” Rose, 353 F. Supp. 2d at 919. In order to determine whether a particular practice is unconstitutional, the Court must balance that interest against the competing consideration whether “the regulation is . . . reasonably related to legitimate penological interests.” Turner v. Safley, 482 U.S. 78, 89 (1987). In this case, the Court relied heavily on Bell v. Wolfish, 441 U.S. 520 (1979), in striking that balance, which discusses the rules applicable to pretrial detainees. The difference between pretrial detainees – that is, those who are presumed innocent of crime – and convicted inmates who are sentenced to a punishment, might call upon the Court to weigh that balance on different scales. On the other hand, the interests might be identical. However, injecting the extra factor into this case by expanding the universe of possible plaintiffs makes this a different case than the one the Court decided in its summary judgment opinion. It is that primary reason that impels the Court to view the plaintiffs’ proposed class definition as problematical at this stage of the proceedings. In order to accommodate the definition, the Court must plow old ground and reassess the issues already decided in the summary judgment motions in a new light. Of course, the defendants quite properly could demand their right to be heard again since the case becomes a new and different lawsuit. The court is simply unable to grant certification without a class definition “sufficiently definite so that it is administratively feasible for the court to determine whether a particular individual is a member of the proposed class.” Garrish, 149 F. Supp. 2d at 330-31. From the list of potential claimants submitted by the plaintiffs, it appears that the class they seek to have certified includes all detainees from 1998 to present who were sent to administrative segregation, either naked -8- or with a paper gown, whether they were pretrial or postconviction detainees, and whether or not they were exposed to members of the opposite sex. The plaintiffs state in their reply brief that they “have not limited their claim to pretrial detainees.” Pl.’s Reply at 4. However, all the named plaintiffs in the several amended complaints were pretrial detainees. In their motion for summary judgment, which resulted in a ruling that the policy was unconstitutional as applied to pretrial detainees, the plaintiffs stated, “Plaintiffs are pretrial detainees accused of misdemeanors, not felonies.” Pl.’s Mot. Summ. J. at 9. The plaintiffs describe the policy as one that requires officers “to strip naked pretrial detainees for insubordination.” Id. at 1. The argument section of their brief stated that the officers must have probable cause for “any significant pretrial restraint of liberty.” Id. at 10. The brief contains an entire section about the punishment of people not convicted of any crime. Id. at 15-17. It plainly appears that the plaintiffs were arguing on behalf of a group of plaintiffs defined as pretrial detainees who were stripped naked. Certifying the plaintiffs’ proposed class is not the superior method of addressing the issue of other individuals who claim a violation of their constitutional rights. Accepting the plaintiff’s proposed class definition would require the Court to scuttle its previous decision and rebalance the factors it assessed when determining the constitutional issues under the Fourth Amendment and the Due Process Clause. The Court is not willing to pursue that course. Attempting to define the class after the liability determination has been made creates additional problems with respect to the other requirements of Rule 23(a). In determining whether “the class is so numerous that joinder of all members is impracticable,” the Court must consider the plaintiffs’ submissions in light of the opinion deciding the cross motions for summary judgment. -9- Although a strict numerical test does not exist to determine when the class is too numerous to join, Bremiller v. Cleveland Psychiatric Inst., 195 F.R.D. 1, 19 (N.D. Ohio 2000), there must be some evidence to establish generally that “the number of potential class members is large, even if plaintiffs do not know the exact figure.” In re Consumers Power Co. Sec. Litig., 105 F.R.D. 583, 601 (E.D. Mich. 1985). Even “[w]here the exact size of the class is unknown but general knowledge and common sense indicate that it is large, the numerosity requirement is satisfied.” Orantes-Hernandez v. Smith, 541 F. Supp. 351, 370 (C.D. Cal.1982). The plaintiffs argue that they have identified forty-four new possible plaintiffs. However, as the defendants point out, only seven of the new potential plaintiffs on the chart were actually pretrial detainees when they were placed in administrative segregation cell. It is not clear how many of those were given paper gowns when their clothing was taken. However, the Court is not satisfied that the number of potential new plaintiffs is so large that class certification is a preferred or joinder of all plaintiffs is impractical. The commonality requirement, that is, establishing that “there are questions of law or fact common to the class,” Fed. R. Civ. P. 23(a), is also problematic, given the plaintiffs’ proposed class definition. The Sixth Circuit has held that the commonality and typicality requirements tend to merge because “[b]oth serve as guideposts for determining whether under the particular circumstances maintenance of a class action is economical and whether the named plaintiff’s claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence.” Rutherford v. City of Cleveland, 137 F.3d 905, 909 (6th Cir. 1998) (quoting Gen. Tel. Co. of the Southwest v. Falcon, , 157 n.13 (1982 . The Court does not believe it allowable to confound pretrial detainees and convicted inmates, as the plaintiffs -10- propose to do, because each group presents different questions as to the application of custodial policies. The groups do not present common questions of law; different considerations may apply when balancing constitutional rights against legitimate penological interests. As to the third element, a claim is typical if “it arises from the same event or practice or course of conduct that gives rise to the claims of other class members, and if his or her claims are based on the same legal theory.” In re Am. Med. Sys., Inc., 75 F.3d 1069, 1082 (6th Cir. 1996). Although the named plaintiffs’ claims must fairly encompass the class members’ claims, they need not always involve the same facts or law provided there is a common element of fact or law. Senter v. General Motors Corp. 532 F.2d 511, 525 n.31 (6th Cir. 1976). However, the potential difference between pretrial and post-conviction inmates, and those who were confined completely naked and those given paper gowns, presents distinguishing legal issues that upset the claim of typicality. The fourth prerequisite for class certification is the adequate representation of the class by the class representatives. Adequate representation includes two inquiries: (1) whether the class counsel are “qualified, experienced and generally able to conduct the litigation” and (2) whether the class members have interests that are antagonistic to the other class members. Stout v. J.D. Bynder, 228 F.3d 709, 717 (6th Cir. 2000). “The bedrock requirement of adequacy is that the named representatives be a member of the class.” Rockey v. Courtesy Motors, Inc., 199 F.R.D. 578, 585 (W.D. Mich. 2001). This factor likely is satisfied because the named plaintiffs occupy a smaller universe within the broader definition of class proposed. The plaintiffs cite Tardiff v. Knox County, 365 F.3d 1 (1st Cir. 2004), in support of their position that class certification is appropriate, but the Court reads that case as an illustration of the difficulty that can result from an attempt to broaden the class definition, as the plaintiffs here -11- propose, after a decision on the merits that accounts for characteristics of the named plaintiffs not shared by the broader proposed class. In that case, the court of appeals affirmed district court orders certifying classes of pretrial detainees who were subjected to a strip search policy as part of a county jail’s intake process. The district court had addressed the “complications” arising from the fact that the policy “might be lawful as to some groups of arrestees . . . and not others . . . by narrowing the class.” Id. at 5. The court of appeals discussed the potential difficulties in class administration that might arise when individual class members present issues as to liability that are not common to the other members of the class. That possibility, the court believed, did not present an obstacle to class certification in the beginning of the case because the district court retained the option “to consider [further] narrowing or de-certifying the class.” Id. at 6. Those options no longer exist in this case because the Court’s opinion, discussed above, likely applies to a narrower range of detainees than the group proposed by the plaintiffs. For these reasons, the Court will deny the motion to certify the action as a class action. III. The plaintiffs request in the alternative that they be allowed to amend their complaint to join additional plaintiffs and that the statute of limitations be tolled for the new claimants. That request was made earlier and denied as part of the Court’s January 26, 2005 opinion. See Rose, 353 F. Supp. 2d at 926. No reason has been presented to change that ruling now. The plaintiffs claim they are not barred by the statute of limitations because the defendants’ misbehavior prevented them from discovering these new potential plaintiffs in a timely fashion, making equitable tolling applicable. Equitable tolling requires proof that the defendants took affirmative steps to conceal the plaintiffs’ cause of action and that the plaintiffs could not have -12- discovered the cause of action despite exercising due diligence. Jarrett v. Kassel, 972 F.2d 1145, 1423-24 (6th Cir. 1992). The plaintiffs claim that they were misled by the defendants’ assertion that only thirty people were affected by the policy. However, the defendants were working on the assumption, reasonably based on the plaintiffs’ prior assertions and motions, that the class was limited to pretrial detainees. The plaintiffs have submitted no evidence that the group of pretrial detainees who were stripped naked and not given a paper gown is significantly larger than thirty people. Moreover, the comment allegedly was made by the defendants in May 2002. Many of the new people the plaintiffs want to add were incarcerated after that date and could not have been considered by the defendants at the time the comment was made. The defendants state that the plaintiffs did not use due diligence and therefore do not qualify for equitable tolling. “If the plaintiff has delayed beyond the limitations period, he must fully plead the facts and circumstances surrounding his belated discovery ‘and the delay which has occurred must be shown to be consistent with the requisite diligence.’” Campbell v. Upjohn Co., 676 F.2d 1122, 1127 (6th Cir. 1982). The plaintiffs have not provided any information about steps it took to verify that the comment made by the defendant was correct or not. Finally, if defenses against the statute of limitations could be brought in this case, they also could be advanced in a separate action by individual plaintiffs who claim that they were aggrieved by the County’s detention policy. The Court will not permit a further amendment of the complaint. IV. The defendants likewise seek to amend their pleadings. They contend that the plaintiffs were required to exhaust their administrative remedies under the Prisoner Litigation Reform Act prior to -13- filing suit, see 42 U.S.C. § 1997e(a), and because the defendants failed to raise that defense earlier in the litigation, they seek leave to amend their answer so they can raise it now. They also wish to plead the PLRA’s limitation on damages, see 42 U.S.C. § 1997e(e), as an affirmative defense. Under Federal Rule of Civil Procedure 15(a), a party may amend its pleadings at this stage of the proceedings only after obtaining leave of court. Although the Rule provides that “leave of court shall be freely granted when justice so requires,” leave may be denied on the basis of undue delay, bad faith by the moving party, repeated failure to cure defects by previously-allowed amendments, futility of the proposed new claim, or undue prejudice to the opposite party. Forman v. Davis, , 182 (1962); Duggins v. Steak & Shake, Inc., 195 F.3d 828, 834 (6th Cir. 1999); Fisher v. Roberts, 125 F.3d 974, 977 (6th Cir. 1997). “Notice and substantial prejudice to the opposing party are critical factors in determining whether an amendment should be granted.” Wade v. Knoxville Util. Bd., 259 F.3d 452, 458-459 (6th Cir. 2001). The Rule does not establish a deadline within which a party must file a motion to amend. See Lloyd v. United Liquors Corp., 203 F.2d 789, 793 (6th Cir. 1953) (reviewing a district court’s denial of a motion to amend after the entry of summary judgment). However, the party seeking to amend should “act with due diligence if it wants to take advantage of the Rule’s liberality.” Parry v. Mohawk Motors of Michigan, Inc., 236 F.3d 299, 306 (6th Cir. 2000). Thus, where “amendment is sought at a late stage in the litigation, there is an increased burden to show justification for failing to move earlier.” Wade, 259 F.3d at 459. Courts are especially inclined to deny a motion brought under Rule 15 “if the moving party knew the facts on which the claim or defense sought to be added were based at the time the original pleading was filed and there is no excuse for his failure to plead them.” 6 Charles Alan Wright et al., Federal Practice and Procedure § 1487 (2d ed. 1990); see Wade, 259 F.3d at 459 (finding undue -14- delay where the plaintiff knew the facts forming the basis of the amended claims but failed to plead the claims in the original complaint). The plaintiffs argue that the defendants should not be allowed to amend their affirmative defenses because the request comes too late, that is, six months after the liability opinion was filed, and the amendment would be futile because the PLRA does not apply to them. The Court agrees. The PLRA’s exhaustion requirement reads as follows: No action shall be brought with respect to prison conditions under section 1983 of this title, or any other Federal law, by a prisoner confined in any jail, prison, or other correctional facility until such administrative remedies as are available are exhausted. 42 U.S.C. § 1997e(a). The plaintiffs argue that the statute does not apply to former prisoners, and the defendants contend that it does. The Sixth Circuit has not ruled on this issue. By its terms, the statute applies to lawsuits brought by “a prisoner confined in any jail, prison, or other correctional facility.” None of the named plaintiffs, save one, was an inmate at the time suit was filed; they all had been released. The statute has a temporal element in its language: it is directed to lawsuits by prisoners who are presently confined, not those who were confined at the time the cause of action arose or any other time. That construction is consistent with the purpose of the PLRA, which, according to its sponsors, was enacted to curb abuses by prisoners filing frivolous lawsuits in the federal courts. For example, Senator Dole commented that “[t]his legislation is a new and improved version of S. 866, which I introduced earlier this year to address the alarming explosion in the number of frivolous lawsuits filed by State and Federal prisoners.” 141 Cong Rec S14413 (daily ed. Sept. 27, 1995). Senator Kyl, a sponsor of an earlier version of the Bill, decried the proliferation of frivolous lawsuits by prison inmates, noting that “[f]iling frivolous civil rights lawsuits has become a recreational -15- activity for long-term residents of our prisons.” 141 Cong Rec S7526 (daily ed. May 25, 1995). The reforms introduced included the exhaustion requirement. Senator Kyl explained, “Section 7 will make the exhaustion of administrative remedies mandatory. Many prisoner cases seek relief for matters that are relatively minor and for which the prison grievance system would provide an adequate remedy.” Id. at S7527. He based the need for such reform in part on the comment by Justice Rehnquist in his dissent in Cleavinger v. Saxner, where he observed, “With less to profitably occupy their time than potential litigants on the outside, and with a justified feeling that they have much to gain and virtually nothing to lose, prisoners appear to be far more prolific litigants than other groups in the population.” Cleavinger, 474 U.S. 193, 211 (1985) (Rehnquist, J., dissenting) (emphasis added). It plainly appears that the purpose of the PLRA reforms was to curb the litigiousness of prisoners presently in custody. The Sixth Circuit has observed that another purpose of the PLRA’s exhaustion requirement was “to give increased powers to prisons so that they could solve their problems according to their own internal dispute resolution systems.” Jones Bey v. Johnson, 407 F.3d 801, 807 (6th Cir. 2005); see also Porter v. Nussle, 534 U.S. 516, 525 (2002) (observing that by enacting the PLRA, “Congress afforded corrections officials time and opportunity to address complaints internally before allowing the initiation of a federal case. In some instances, corrective action taken in response to an inmate’s grievance might improve prison administration and satisfy the inmate, thereby obviating the need for litigation”). That goal would not be achieved by requiring a plaintiff who no longer is part of the prison population to return to the institution to partake of an internal administrative dispute mechanism. -16- Other courts have reached the opposite view. See, e.g., Morgan v. Maricopa County, 259 F. Supp. 2d 985, 991-92 (D. Ariz.2003); Zehner v. Trigg, 952 F. Supp. 1318, 1327 (S.D. Ind.1997), aff’d, 133 F.3d 459 (7th Cir.1997); Kerr v. Puckett, 967 F. Supp. 354, 361-62 (E.D. Wis.1997). However, those decisions appear to constitute a minority position, as several other courts have held that the PLRA applies only to inmates confined at the time the lawsuit is commenced. See Page v. Torrey, 201 F.3d 1136, 1140 (9th Cir. 2000) (holding that the exhaustion requirement applies only to “individuals who, at the time they seek to file their civil actions, are detained as a result of being accused of, convicted of, or sentenced for criminal offenses”); Greig v. Goord, 169 F.3d 165, 167 (2d Cir.1999) (former prisoner not required to comply with PLRA); Kerr v. Puckett, 138 F.3d 321, 323 (7th Cir.1998) (same); Doe v. Washington County, 150 F.3d 920, 924 (8th Cir.1998) (same); Kritenbrink v. Crawford, 313 F. Supp. 2d 1043, 1047-48 (D. Nev. 2004) (stating that the “plain language of the statute” compels the “holding that the exhaustion requirement does not apply to former prisoners”). A district court in this circuit also has held that the PLRA does not apply to former inmates. See Smith v. Franklin County, 227 F. Supp. 2d 667 (E.D. Ky. 2002). In that case, the court observed that the reforms of the PLRA “will not be subverted by holding that the PLRA does not apply to former prisoners,” and rejected the defendant’s contention that the PLRA should be “stretched to include former prisoners.” Id. at 675-76. The court reasoned: [T[his Court finds Defendants’ proposed interpretation to be nonsensical. To require former prisoners to initiate or pursue those internal, administrative remedies once they have left the confines of a facility is a strained application of § 1997e at best. Former prisoners are no longer members of the community that such administrative processes and limitations are meant to serve. This is particularly so with those prisoners who are incarcerated for short periods of time as their opportunity to initiate and pursue administrative remedies while incarcerated is temporally limited at best. -17- Ibid. This Court is convinced that the plain language of section 1997e(a) compels the conclusion that its requirements apply to prisoners who are confined when they file their lawsuits, and not to former inmates who bring actions after their release from custody. That construction of the statute is consistent with the purposes and goals of the Act and tracks the legislative history. Consequently, allowing the defendants to amend their affirmative defenses to plead the failure to exhaust remedies as required by 42 U.S.C. § 1997e(a) would be futile because that statute does not apply to all the named plaintiffs. The defendants contend that even if the exhaustion requirement is inapplicable, the damage limitation should apply. That section of the statute states: No Federal civil action may be brought by a prisoner confined in a jail, prison, or other correctional facility, for mental or emotional injury suffered while in custody without a prior showing of physical injury. 42 U.S.C. § 1997e(e). In Cox v. Malone, 199 F. Supp. 2d 135, 139-40 (S.D.N.Y. 2002), the district court attempted to distinguish circuit precedent that the exhaustion requirement did not apply to former prisoners as a “procedural requirement” and held that the damage limitation did apply to former prisoners because it is a “substantive limitation.” This Court cannot accept that distinction, however, because it ignores the plain language of the statute. Subsections (a) and (e) both refer only to “a prisoner confined in a jail, prison, or other correctional facility.” The court in Smith v. Franklin County stated: The Sixth Circuit has yet to address this issue, but it is widely held that “prisoner” means someone confined, incarcerated, or detained, not a former prisoner. See Abdul-Akbar v. McKelvie, 239 F.3d 307, 314 (3rd Cir.2001); Janes v. Hernandez, 215 F.3d 541, 543 (5th Cir.2000); Page v. Torrey, 201 F.3d 1136, 1140 (9th -18- Cir.2000); Harris v. Garner, 216 F.3d 970, 981 (11th Cir.2000); Greig v. Goord, 169 F.3d 165, 167 (2nd Cir.1999); Kerr v. Puckett, 138 F.3d 321, 323 (7th Cir.1998); Doe v. McKee, 150 F.3d 920, 924 (8th Cir.1998). Smith, 227 F. Supp. 2d at 675. This Court agrees with that observation and further holds that there is no principled way to construe one section to include only current prisoners and expand the other to apply to former prisoners. This Court has held in the past that the PLRA prohibits inmates from suing to recover mental anguish damages absent physical injury, although nominal, compensatory, and punitive damages are available upon appropriate proof. See Meade v. Plummer, 344 F. Supp. 2d 569, 572-74 (E.D. Mich. 2004). That limitation, however, does not apply to individuals who bring actions against their former custodians after release from custody, as in this case. The defendants’ proposed amendment also fails because it comes too late. The Sixth Circuit has not addressed in a published opinion whether the exhaustion requirement is an affirmative defense that can be waived. In fact, the court expressly declined to do so in Curry v. Scott, 249 F.3d 493, 501 (6th Cir. 2001) (stating “Plaintiffs point out that most courts to consider the issue have characterized the PLRA’s exhaustion requirements as affirmative defenses. . . . We need not answer this argument here”). Courts in other circuits have treated the PLRA’s requirements as affirmative defenses that must be pleaded lest they be waived. See, e.g., Anderson v. XYZ Correctional Health Serv., Inc., 407 F.3d 674, 681 (4th Cir. 2005) (stating that “an inmate’s failure to exhaust his administrative remedies must be viewed as an affirmative defense that should be pleaded or otherwise properly raised by the defendant”); Johnson v. Testman, 380 F.3d 691, 695 (2d Cir. 2004) (observing that “[t]he failure to exhaust available administrative remedies is an affirmative defense” and holding that “that this defense is waiveable”); Foulk v. Charrier, 262 F.3d 687, 697 (8th Cir. 2001) (holding that “the assertion that a plaintiff prisoner failed to exhaust all available -19- administrative remedies as required under the PLRA is an affirmative defense under Fed. R. Civ. P. 8(c). It is the burden of the defendant asserting this affirmative defense to plead and prove it”); Massey v. Helman, 196 F.3d 727, 735 (7th Cir.1999) (holding exhaustion requirements are waivable if not asserted); Perez v. Wisconsin Department of Corrections, 182 F.3d 532, 536 (7th Cir.1999) (holding that PLRA’s exhaustion requirement is an affirmative defense that can be waived or forfeited by defendants); Jenkins v. Haubert, 179 F.3d 19, 29 (2d Cir.1999) (ruling that section 1997e sets forth affirmative defenses under Fed.R.Civ.P. 8(e ; Jackson v. District of Columbia, 89 F. Supp. 2d 48, 57 (D.D.C.2000) (same). If, as the majority of courts hold, the defenses are waiveable, surely the defendants have waived them here. Almost three years have past since the plaintiffs filed their sixth amended complaint. The defendants have filed motions and made appearances before this court arguing the merits of the case. The court has adjudicated the cross motions for summary judgment and held that the defendants’ practice and policy is unconstitutional. The request to amend the affirmative defenses is untimely. V. The Court finds that the plaintiffs have not established the required elements to permit certification of their proposed class. The defendants’ request to amend their affirmative defenses must fail because of futility and untimeliness. Accordingly, it is ORDERED that the plaintiffs’ motion for class certification or joinder and continued tolling [dkt # 172] is DENIED. It is further ORDERED that the defendants’ motion to amend affirmative defenses [dkt # 194] is DENIED. -20- It is further ORDERED that the attorneys for the parties shall appear for a status conference on December 15, 2005 at 2 p.m. to discuss a schedule for resolution of the claims that remain. s/David M. Lawson DAVID M. LAWSON United States District Judge Dated: November 21, 2005 PROOF OF SERVICE The undersigned certifies that a copy of the foregoing order was served upon each attorney or party of record herein by electronic means or first class U.S. mail on November 21, 2005. s/Tracy A. Jacobs TRACY A. JACOBS -21-

=== Gary Majeske v. Bay City Board of Education ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION GARY MAJESKE, Plaintiff, v. THE BAY CITY BOARD OF EDUCATION, ______________________________________/ Defendant. Case No. 00-CV-10485-BC Hon. David M. Lawson OPINION AND ORDER DENYING MOTION TO REMAND This matter is presently before the Court on the motion by the plaintiff, Gary Majeske, to remand the case to the Bay County, Michigan Circuit Court where he originally filed the matter. The plaintiff claims that the defendant improvidently removed the case to this Court because there is no substantial federal question sufficient to invoke the jurisdiction of this Court, or in the alternative, the state law claims predominate over the federal claims. Because the Court finds that Count IV of the plaintiff’s complaint states a federal cause of action over which this Court has original jurisdiction under 28 U.S.C. § 1331, and because 28 U.S.C. § 1441(c) does not allow remand of the entire case when a viable federal question claim is pleaded, the Court will deny the motion. I. The plaintiff originally filed this action in the Bay County, Michigan Circuit Court on December 5, 2000. The plaintiff is an administrative employee under contract with Bay City Public Schools and a member of the Bay City Association of School Administrators (BCASA). BCASA represents administrative personnel employed as principals and assistant principals through a collective bargaining agreement (CBA) entered into with Bay City Public Schools. The plaintiff formerly held the administrative position of Assistant Principal of Western High School and was allegedly removed without explanation from that position. The plaintiff brought suit in state court alleging claims founded on breach of contract, declaratory judgment, wrongful termination, age discrimination, defamation and denial of due process rights secured by the Constitutions of Michigan and the United States. Count IV of the complaint, entitled “Denial of Due Process,” contains the following allegations: 36. 37. 38. 39. . . . 41. Defendant is an incorporated subdivision of the government of the State of Michigan. All rights secured by the Constitution of the United States and the Constitution of the State of Michigan are secured to the Plaintiff. (Collective Bargaining Agreement § 4.10) Plaintiff is possessed of valuable personal rights arising from his longstanding relationship with Defendant, and under his Employment Agreement with Defendant. (Exhibit A). Certain procedural safeguards, including the right to “final and binding” arbitration are available to Plaintiff pursuant to the Collective Bargaining Agreement, § 9.25. Plaintiff’s rights to due process under the Constitutions of the United States and the State of Michigan have been denied. Compl. ¶¶ 36-39, 41. On December 28, 2000, defendant filed a timely notice of removal pursuant to 28 U.S.C. § 1441(b) invoking this Court’s subject matter jurisdiction under 28 U.S.C. § 1331. The defendant asserts that because of the allegations in Count IV of the complaint, the case is a “civil action arising under the Constitution of the United States,” and plaintiff’s other claims “derive from a common nucleus of operative fact.” Notice of Removal at 2. In riposte, the plaintiff filed a motion to remand contending that plaintiff’s claims are premised on contract theory, and that “no relief arising directly -2- and solely under a federal right, as separate and distinct from any state claim, is sought.” Mot. to Remand ¶ 8. The plaintiff argues that his due process claim was made purely in reference to the defendant’s breach of his collective bargaining agreement, which itself guaranteed due process protections, raises no substantial question of federal interest, and is only an alternate theory of recovery. Id. ¶ 7. The plaintiff also argues that remand is justified because issues of state law predominate over any perceived federal claims in his complaint. Id. ¶ 9. The defendant responded that the plaintiff alleged a federal due process claim in his complaint, and that this claim in the plaintiff’s “well-pleaded complaint” is sufficient for removal. The plaintiff filed a memorandum reply, and the Court entertained oral argument in open court on March 13, 2001. II. A. The provisions of 28 U.S.C. § 1441 require that a defendant demonstrate that a district court would have original jurisdiction over a civil action in order to invoke this Court’s removal jurisdiction. Long v. Bando Mfg. of America, Inc., 201 F.3d 754, 757 (6th Cir. 2000). The party seeking removal bears the burden of demonstrating that the district court has original jurisdiction. Id.; Conrad v. Robinson, 871 F.2d 612, 614 (6th Cir. 1989). “Because lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts resolved in favor of remand.” Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996). See also Her Majesty the Queen in Right of the Province of Ontario v. City of Detroit, 874 F.2d 332, 339 (6th Cir. 1989). The defendant’s removal petition is based on 28 U.S.C. § 1441(b), which provides that “[a]ny civil action of which the district courts have original jurisdiction founded on a claim or right arising -3- under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties.” District courts have original jurisdiction over “actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. “[B]ecause the ‘arising under’ language of § 1441(b) is almost identical to the language of 28 U.S.C. § 1331, the scope of removal jurisdiction based on the existence of a federal question under § 1441(b) is considered to be identical to the scope of federal question jurisdiction under § 1331.” Long, 201 F.3d at 757-58. A claim falls within this Court’s original jurisdiction under 28 U.S.C. § 1331 “only [in] those cases in which a well-pleaded Complaint establishes either that federal law creates the cause of action or that the plaintiffs right to relief necessarily depends on resolution of a substantial question of federal law.” Thornton v. Southwest Detroit Hosp., 895 F.2d 1131, 1133 (6th Cir. 1990) (citing Franchise Tax Bd. v. Constr. Laborers Vacation Trust, , 27-28 (1983). Under the “well- pleaded complaint” rule, federal jurisdiction is determined by the allegations on the face of the plaintiff’s properly pleaded complaint. Long, 201 F.3d at 758. The plaintiff is the “master of his complaint,” and the fact that a claim could be stated under federal law does not prevent him from stating it under state law only. Alexander v. Electronic Data Sys. Corp., 13 F.3d 940, 943 (6th Cir. 1994). In this case, the plaintiff does not invoke any federal statutory authority to support his claims for relief. Although in some circumstances a cause of action can be brought against governmental agents for a violation of specific constitutional rights, see Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971), a Bivens claim, which seeks damages under a constitutional provision itself cannot be brought against state or municipal entities. See Thomas v. -4- Shipka, 818 F.2d 496, 501-03 (6th Cir. 1987) overruled on other grounds 872 F.2d 772, 773 (6th Cir. 1989). However, lack of reference to a specific federal law in the complaint is not controlling. See North American Phillips Corp. v. Emery Air Freight Corp., 579 F.2d 229, 233 (2d Cir. 1978). “[It] is . . . a court’s responsibility, in considering either the propriety of removal or the propriety of remand, to look beyond the statutory citations in the pleadings to the nature of the claims as they appear on the face of the complaint at the time the petition for removal was filed.” Hood v. City of Boston, 891 F. Supp. 51, 54 (D. Mass. 1995). In Hood, the plaintiff pleaded violations of his rights under the Fourth and Fourteenth Amendments to the United States Constitutions, but failed to state anywhere in his complaint that he was invoking 42 U.S.C. § 1983. Id. at 53-54. Looking at the nature of the claims presented by the complaint, the Court nevertheless found it reasonable to conclude that the complaint claimed a violation of federal rights, which necessarily must be presented under 42 U.S.C. § 1983. Id. at 54; see also Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168 (1993) (reaffirming that only notice pleading is required in actions under 42 U.S.C. § 1983). Although Hood eventually upheld the plaintiff’s dismissal of his federal claims and remanded the case, it affirmed that original jurisdiction existed in the first instance. In this case, the plaintiff argues that his due process claim is merely an alternative theory of recovery which, under Christianson v. Colt Ind. Operating Corp., 486 U.S. 800, 809-10 (1988), is insufficient to invoke this Court’s jurisdiction. Although it is true that federal-question jurisdiction exists only in cases in which the complaint “‘establishes either that federal law creates the cause of action or that the plaintiff’s right to relief necessarily depends on resolution of a substantial question -5- of federal law,’” id. at 808 (quoting Franchise Tax Board of California v. Construction Laborers Vacation Trust, , 27-28 (1983 , the plaintiff misconstrues the import of Christianson. As the Court of Appeals noted in Long, federal question jurisdiction may arise where a well-pleaded complaint advances a claim framed in terms of state law, but which requires the resolution of a substantial federal question as necessary to the decision. Long, 201 F.3d at 759. However, where that state law claim is based on alternate state- and federal-law theories, either of which would be sufficient to resolve the claim, there is no substantial federal question and no “arising under” jurisdiction. Id. In this case, the plaintiff’s Count IV is framed in terms of federal law. Although the plaintiff has presented alternate and independent theories of recovery, like the plaintiff in Hood, the plaintiff here raises his due process concerns as a separate claim. In his complaint, the breach of contract claim is pleaded in Count II. At oral argument on the motion, the plaintiff avowed an intention to state a separate claim of denial of due process under both the Michigan and United States Constitutions in Count IV. Under the well-pleaded complaint rule, the plaintiff has stated a claim “arising under” the laws of the United States within the meaning of 28 U.S.C. § 1331 and 1441(c). B. The manner in which the plaintiff has framed his remand motion, coupled with the language of 28 U.S.C. § 1441(c), suggests another issue which the Court is compelled to address. Before 1990, § 1441(c) stated: Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise non- removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction. -6- The Judicial Improvements Act of 1990 made two changes to 28 U.S.C. § 1441, which now reads: Whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise non- removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates. . . . In the first change, the original language of “which would be removable if sued upon alone” was replaced with “within the jurisdiction conferred by Section 1331 of this title.” Second, at the end of the section, “remand all matters not otherwise within its original jurisdiction” was replaced by the phrase “remand all matters in which State law predominates.” The obvious effect of the first substitution was to restrict application of this section to cases involving federal questions only. The second change, however, is more subtle and has been more controversial. Initially, some district courts interpreted the amendment to the second phrase in § 1441(c), specifically as to the word “matters,” as Congressional authorization to remand entire “cases,” even those containing federal claims, provided that the state-law claims “predominated” over the federal claim or claims in each case. See, e.g., Martin v. Drummond Coal Co., Inc., 756 F. Supp. 524, 527 (N.D. Ala. 1991) effectively overruled by In re City of Mobile, 75 F.3d 605, 607-08 (11th Cir. 1996) (dismissing similar reasoning under 28 U.S.C. § 1367); Moore v. DeBiase, 766 F. Supp. 1311, 1319- 21 (D.N.J. 1991) overruled by Borough of West Mifflin v. Lancaster, 45 F.3d 780, 787 (3d Cir. 1995); Moralez v. Meat Cutters Local 539, 778 F. Supp. 368, 370-71 (E.D. Mich. 1991). The rationale undergirding these decisions can be synthesized into the following points. First, the commentary to the 1990 revisions in West’s U.S.C.A., written by David D. Siegel, acknowledges the ambiguity of the word “matters,” and posits that the term could be construed to refer to an entire case, rather than individual claims. See Moralez, 778 F. Supp. at 370-71. Second, the change in -7- language is portrayed as “dramatic,” and Congress is presumed to have a reason when it changes the language of a statute. See Martin, 756 F. Supp. at 525; Moore, 766 F. Supp. at 1320. Third, the Courts’ interpretation supposedly implements Congress’s “clear intent” to simplify and reduce the removal jurisdiction of the federal courts. See Martin, 756 F. Supp. at 525. Fourth, the Court’s removal jurisdiction is to be narrowly and strictly construed. See Moralez, 778 F. Supp. at 371 n.4 (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941 . Finally, the impracticability of maintaining the federal claims in federal court while sending state claims for trial in another forum counsels an interpretation of “matter” that keeps the case unified. See Martin, 756 F. Supp. at 527. Although the Court of Appeals for the Sixth Circuit has not addressed the issue, subsequent decisions by other federal appellate courts have rejected the reasoning of these district courts. See Borough of West Mifflin v. Lancaster, 45 F.3d 780, 787 (3d Cir. 1995); Buchner v. F.D.I.C., 981 F.2d 816, 819-20 (5th Cir. 1993); Gaming Corp. of America v. Dorsey & Whitney, 88 F.3d 536, 542 (8th Cir. 1996) (“A district court has no discretion to remand a claim that states a federal question.”); Brockman v. Merabank, 40 F.3d 1013, 1017 (9th Cir. 1994); cf. In re City of Mobile, 75 F.3d 605, 607-08 (11th Cir. 1996) (rejecting similar rationale for remand of federal claims under 28 U.S.C. § 1367). There are several bases for the contrary interpretation. First, while the Siegel commentary points out a potential ambiguity in the statute, it provides absolutely no warrant for the interpretation advocating the remand of a federal claim. Second, canons of statutory construction are meant to be guides to the ultimate determination of legislative intent; they are not to be used to compel an illogical or senseless result. Cf. United States v. Locke, 471 U.S. 84, 98 (1985) (common-law conceptions helpful, but not controlling). Congress can change the language of a statute for any number of reasons, and the mere fact that language has been altered does not compel a court to -8- conclude that the essential meaning has also changed. See McElroy v. United States, 455 U.S. 642, 650 n.14 (1982). Furthermore, the goal of simplifying and reducing removal jurisdiction is already aptly accomplished by the revision of the first phrase of § 1441(c), which limits its application to federal question cases. As for the final argument, although the Martin Court’s personal distaste for compelling plaintiffs to pursue federal and state claims in different forums is sensible, it has nothing to do with Congress’s intent in implementing its changes to a federal statute. The mere fact that Congress intended to simplify a statute does not invite every district judge to implement additional “improvements” obliquely suggested by the statutory text. Other courts in this district have followed the lead of Martin and its progeny, see, e.g., Moralez, 778 F. Supp. at 370-71 (Zatkoff, J.); McKinney v. City of Grosse Pointe Park, 72 F. Supp. 2d 788, 790 (E.D. Mich. 1999) (Gadola, J.). This Court, however, finds the reasoning of the courts of appeals more persuasive. The authorization to remand “matters” more properly refers to the “otherwise non-removable claims” in which “state law predominates,” rather than to the entire case, including federal-question claims. See Kabealo v. Davis, 829 F. Supp. 923, 926 (S.D. Ohio 1993). This conclusion is further compelled by the overriding principle, repeatedly emphasized by the Supreme Court, that in the absence of extraordinary circumstances, “[f]ederal courts have a virtually unflagging obligation to exercise the jurisdiction conferred upon them by the coordinate branches of government and duly invoked by litigants.” Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976); see also Deakins v. Monaghan, 484 U.S. 193, 203 (1988); Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996). There is no precedent suggesting that the presumption of construing removal statutes narrowly can overrule this fundamental rule. If Congress actually had intended to change this bedrock principle, it is unlikely that it would have -9- conferred discretionary authority upon district courts to curtail core Article III jurisdiction. See generally Moore’s Federal Practice § 107.41[1][e], at 107-203 (Rev. 2000) (“Federal question jurisdiction is not discretionary with the court.”) The argument, then, advanced by the plaintiff that remand is called for when state law claims predominate carries no leverage when it is used to pry loose from this Court an entire case in which a federal claim has been found. Although the Court has discretion to remand the state law claims only, see 28 U.S.C. § 1441(c), and to remand the entire case if the federal claim is dismissed, see 28 U.S.C. § 1367(c)(3), there is no discretionary authority to remand a case and decline federal jurisdiction over a federal-question-based claim merely because state law claims otherwise predominate. III. The plaintiff’s complaint contains a claim “arising under” the laws of the United States, specifically 42 U.S.C. § 1983. By filing its removal petition, the defendant has properly invoked the subject-matter jurisdiction. The plaintiff does not contest the existence of this Court’s supplemental jurisdiction over his state-law claims once a federal claim has been established. Accordingly, it is ORDERED that the plaintiff’s motion to remand [dkt #6] is DENIED. ______________________________ DAVID M. LAWSON United States District Judge Date: December 27, 2001 Copies to: David R. Skinner, Esq. Raymond M. Davis, Esq. -10-

=== Chris Mehney-Egan v. Mendoza ===

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN NORTHERN DIVISION CHRIS MEHNEY-EGAN, Plaintiff, v. Case No. 00-10209 Hon. David M. Lawson ANTONIO MENDOZA, JR., LARRY KERSTEN and CITY OF ROSE CITY, Defendants. and ANTONIO MENDOZA, JR., Plaintiff, v. CHRIS MEHNEY-EGAN, LARRY KERSTEN, BOB BARBER, JEFFREY ERICKSON, FRED MCKINNON, PATRICIA ANN HEBERT, PATRICIA KATRIA ALLARD, ROSOLIN RUSSELL, GLEN’S MARKET OF ROSE CITY, GLEN’S MARKET OR CORP. HQT. OF GAYLORD, OGEMAW SHERIFF’S DEPT., OGEMAW COUNTY, ROSE CITY, Defendants. ____________________________________/ MEMORANDUM OPINION AND ORDER ADJUDICATING MOTION TO REMAND Before the Court is a motion by plaintiff, Chris Mehney-Egan, to remand this civil action to Ogemaw County, Michigan Circuit Court. I. Plaintiff originally filed this action in the Ogemaw County Circuit Court on January 10, 2000 naming as defendants Antonio Mendoza, Jr. (“Mendoza”), the City of Rose City (“Rose City”), and Larry Kersten, the former Rose City police chief (“Kersten”). In her complaint, plaintiff contends that Mendoza had threatened her several times prior to August 15, 1998 prompting her to contact Chief Kersten to request protection. She alleges that she provided Kersten with evidence demonstrating that Mendoza would act violently toward her, and that Kersten instructed the plaintiff to deal with Kersten directly rather than contact other law enforcement officers. The plaintiff alleges further that Mendoza assaulted her on August 15, 1998 causing her to suffer gunshot wounds and other physical injuries. The complaint includes counts of assault and battery against Mendoza in which plaintiff seeks compensatory and exemplary damages, negligence against Kersten and Rose City for failing to prevent Mendoza’s attack on the plaintiff, violation of the Elliot Larson Civil Rights Act (“ELCRA”), MCL §§ 37.2101, et seq., against Kersten and Rose City for gender discrimination by the police department against female crime victims, discrimination based on the Michigan Constitution against Kersten and Rose City, and a violation of the Michigan Constitution’s due process clause against Kersten and Rose City resulting from the alleged failure to pursue evidence which plaintiff furnished to Kersten before the assault showing Mendoza’s violence, failure to follow up on the evidence, investigate the evidence or enforce personal protection orders issued to the plaintiff against Mendoza. Kersten and Rose City answered the complaint on March 13, 2000. At that time, both defendants were represented by the same attorney. On April 3, 2000, Mendoza, a prison inmate, filed his pro se answer to the complaint. -2- On May 8, 2000, the Ogemaw County Clerk issued a summons to Mendoza in a case entitled Antonio Mendoza, plaintiff, vs. Chris Mehney-Egan, Larry Kersten, Bob Barber, Jeffrey Erickson, Fred McKinnon Hale, Patricia Ann Hebert, Rosolin Russell, Patricia Katria Allard, Glen’s Market of Rose City, Glen’s Market Corp. Hqt. of Gaylord, Ogemaw County Sheriff’s Department, and Ogemaw County, Rose City, defendants. The clerk did not assign a case number and none appears on the summons. However, Mendoza checked the box on the summons which states: “A civil action between these parties or other parties arising out of the transaction or occurrence alleged in the complaint has previously been filed in the 34th Circuit. The docket number and assigned judge are: 00-652929, Judge Ronald Bergeron.” Mendoza prepared a hand-written pleading entitled “Cross-complaint of defendants and plaintiff” which is dated April 11, 2000 and file-stamped by the Ogemaw County Clerk on June 21, 2000. The “cross-complaint” bears the same caption as the summons and likewise has no case number. In his “cross-complaint,” Mendoza attempts to turn the tables on the plaintiff and other city and county public officials by contending that those officials helped plaintiff stalk Mendoza who himself was a victim of threats by the plaintiff, and that they failed to prosecute plaintiff’s friends for trying to run Mendoza over in a parking lot. Mendoza likewise complains that personnel at Glen’s Market in Rose City denied him entry into the market and refused to hear complaints of employees harassing him. Mendoza also contends that Ogemaw County Prosecutor, Fred McKinnon violated Mendoza’s civil rights in violation of 42 U.S.C. § 1983, as did former Ogemaw County Sheriff Deputy Jeffrey Erickson. Mendoza claims that Kersten violated 42 U.S.C. § 1983 “by discriminate [sic] practices, unconstitutional violations of the 4th and 14th Amendments by his special relationship -3- with [plaintiff] on state constitutional violations.” Finally, Mendoza contends that Rose City and various public officials failed to protect him as a potential crime victim because they discriminated against male assault victims in violation of the Elliot Larson Civil Rights Act and they failed to preserve evidence regarding the violation of plaintiff’s personal protection order. On June 2, 2000, Rose City, represented by new counsel, filed a notice of removal in this court contending that Mendoza’s cross-claims against this defendant involved a federal question in that defendant, Mendoza, had alleged, pursuant to 42 U.S.C. § 1983, that this defendant violated his civil rights under the United States Constitution. (Notice of Removal ¶ 4). Citing 28 U.S.C. §§ 1441 and 1446, Rose City contends that this Court has jurisdiction over the entire case because Mendoza’s “cross-claim” constitutes an “action . . . over which the District Courts of the United States have been given original jurisdiction pursuant to 28 U.S.C. § 1331.” (Notice of Removal ¶ 5). Rose City further contends that the plaintiff’s claims in plaintiff’s original complaint are separate and independent from the claims made by Mendoza in the “cross-complaint” and therefore the plaintiff’s complaint is removable under 28 U.S.C. § 1441(c). (Notice of Removal ¶ 11). On June 29, 2000, the plaintiff filed her motion to remand, in which she argues that Mendoza’s “cross-complaint” was not properly filed in the Ogemaw County Circuit Court at the time Rose City filed its removal petition in this court. She also contends that removal was improper because all of the cross-claim defendants did not concur in removal. Finally, plaintiff argues that a cross-defendant is not within the class of parties entitled to effectuate removal under 28 U.S.C. § 1441. Plaintiff requests costs against Rose City pursuant to 28 U.S.C. § 1447(c). -4- The Court finds that the parties have adequately set forth the relevant law and facts in their briefs and motion papers, and oral argument would not aid in the disposition of the instant motion. See, E.D. Mich. LR 7.1(e)(2). Accordingly, the Court ORDERS that the motion be decided on the briefs submitted. For the reasons stated below, the Motion to Remand is GRANTED. II. The provisions of 28 U.S.C. § 1441 require a defendant to show that a district court would have original jurisdiction over a civil action in order to invoke the Court’s removal jurisdiction. Long v. Bando Mfg. of America, Inc., 201 F.3d 754, 757 (6th Cir. 2000). The party seeking removal bears the burden of demonstrating that the district court has original jurisdiction. Id., Conrad v. Robinson, 871 F.2d 612, 614 (6th Cir. 1989). “Because lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts resolved in favor of remand.” Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996). See also, Her Majesty the Queen in Right of the Province of Ontario v. City of Detroit, 874 F.2d 332, 339 (6th Cir. 1989). In seeking removal, Rose City asks this Court to treat Mendoza’s “cross-complaint” as a complaint and view Rose City as a “defendant” for the purpose of 28 U.S.C. § 1441, rather than as a cross-defendant. Rose City filed its removal petition on June 2, 2000. According to the Ogemaw County Clerk date stamps on papers furnished to this Court, the only paper other than his answer which Mendoza had filed in state court was a summons. The summons by itself does not constitute a “civil action” within the meaning of section 1441(a) and therefore cannot provide the basis for removal of the entire action to this court. -5- Even if this Court were to view Mendoza’s later-filed “cross-complaint” as somehow relating back to the date stamp on the summons,1 there are several reasons which preclude removal. First, the pleading itself – the “cross-complaint” – was not filed in conformity with the Michigan Court Rules. Plaintiff observes that Mich. Ct. R. 2.203(D) permits the filing of a counter- claim or a cross-claim only with an answer or as an amendment under Mich. Ct. R. 2.118. The latter rule requires leave of court for amended pleadings filed beyond fourteen days after the original pleading. Mendoza’s answer was filed in state court on April 3, 2000. Because Mendoza did not obtain leave of court to file his summons on May 8, 2000 or his “cross-complaint” on June 21, 2000, those pleadings are effectively a nullity. Rose City argues in opposition that there is a distinction to be drawn for purposes of removal between a state court pleading that was “filed” and one that was “properly filed,” the former being sufficient for purposes of removal. Rose City cites no authority for this proposition, and the Court finds the position untenable inasmuch as it would render nugatory the provisions of the Michigan Court Rules requiring judicial permission to file amended pleadings after the amendment-by-right period had expired. Mendoza’s “cross-complaint” was not properly filed, and consequently “there was no proceeding in the state court which was capable of being removed.” FDIC v. Klayer, 519 F. Supp. 889, 890 (E.D. Ky. 1981). Second, the procedure for removal under 28 U.S.C. § 1446 requires the “defendant or defendants desiring to remove a civil action . . . [to] file . . . a notice of removal.” Thus, when there are multiple defendants, all must timely join in the removal. Chicago, Rock Island and Pacific Ry. 1 It is doubtful that papers filed in state court after removal can be considered by the Federal Court to establish federal jurisdiction because, by operation of 28 U.S.C. § 1446(d), once the state court receives notice of removal it “shall proceed no further . . .,” and new state filings are improper. Town of Edenton v. Hervey Found., 71 F. Supp. 998 (E.D.N.C. 1947). -6- v. Martin, 178 U.S. 245 (1900). Passive acquiescence is not sufficient. “[A]n official filing or voicing of consent is necessary to constitute a joinder under Section 1446.” Godman v. Sears, Roebuck & Co., 588 F. Supp. 121, 124 (E.D. Mich. 1984). The official consent must be submitted within the 30-day period prescribed by § 1446. Id. In this case, because Rose City seeks to align the parties as Mendoza did in his “cross- complaint,” the Court views the unanimity rule as requiring joinder in the removal petition by all of the “defendants” including Kersten and the original plaintiff, Mehney-Egan. Kersten did not officially voice his consent until he filed his response to plaintiff’s reply brief on July 28, 2000, well after the 30-day deadline. Mehney-Egan opposes removal. Nonetheless, Rose City argues that unanimity is not required when removal is sought under 28 U.S.C. § 1441(c), as Rose City urges here, because Mendoza’s cross-complaint alleges a claim that is separate and independent from the plaintiff’s original cause of action. Plaintiff contends that Mendoza’s “cross-complaint” is not at all separate, but rather arises from the transaction upon which the plaintiff’s original complaint is based. Both plaintiff and defendant Rose City rely on Dunn v. Ayre, 943 F. Supp. 812 (E.D. Mich. 1996). In that case, the plaintiffs commenced an action in the Genesee County Circuit Court alleging that certain defendants (“non-municipal defendants”) damaged and vandalized plaintiff’s residence and property. Plaintiffs further alleged that certain other defendants (“municipal defendants”) violated plaintiff’s First and Fourteenth Amendment rights by failing to respond to plaintiff’s complaints about the property damage. Finally, plaintiffs alleged that all defendants deprived the plaintiffs of rights guaranteed by the Equal Protection Clause. Id. at 813. -7- The Court in Dunn acknowledged that “those defendants properly joined and served must join timely and concur in the removal notice pursuant to 28 U.S.C. § 1446.” Id. However, the Court noted that there are exceptions to the rule requiring unanimous concurrence. One exception arises under 28 U.S.C. § 1441(c), which provides that when a separate and independent claim arising under federal law is joined with one or more otherwise non-removable claims, “the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates.” Thus, if the claims are “separate and independent,” only the defendants who are subject to the federal claim need join in the removal notice. Id. at 814 (footnote omitted). The Court noted that claims are not “separate and independent” simply because they assert different theories of recovery or allege different causes of action. Rather, in order to be “separate and independent,” the claims themselves must derive from a different set of acts or transactions. Id. In that case, the Court observed that the plaintiff accused the non-municipal defendants of damaging and vandalizing their property. The claims against the municipal defendants were based upon the alleged failure to respond to the complaints about property damage and vandalism. Finally, the plaintiffs claimed that both municipal and non-municipal defendants worked in conjunction with each other to deprive the plaintiffs of constitutional rights. The Court determined that the factual bases for these claims were virtually identical, and therefore the claims against the municipal defendants could not be “separate and independent.” Id. The failure of all served defendants to unanimously join in the removal petition was, therefore, fatal to removal and thus the federal court did not have subject matter jurisdiction over the claim. Id. at 814-15. In the case at hand, Rose City does not base its removal upon the separate and independent claims against it within the plaintiff’s complaint. Rather, Rose City predicated removal under 28 U.S.C. § 1441(c) upon the assertion that Mendoza’s “cross-claim” contained federal claims against -8- Rose City that were separate and independent from Mehney-Egan’s state claims in her complaint. Mendoza is a pro se litigant and apparently untrained in the rules of pleading. His court papers, including the “cross-complaint,” are not models of clarity and precision. The “cross- complaint” itself contains very few facts, and in it Mendoza appears to have incorporated several concepts found within the plaintiff’s complaint, adding parties that appear to have been collaterally involved with the original incident between the plaintiff and the defendant. However, one insight into Mendoza’s intent can be found on the summons itself where Mendoza avers that his claim “aris[es] out of the transaction or occurrence alleged in the complaint [which] has been previously filed” in the Ogemaw County Circuit Court, referencing the case number assigned to plaintiff’s complaint. In reading the original complaint in conjunction with Mendoza’s cross-complaint, one is left with the definite and firm impression that a long-standing dispute existed between Mehney-Egan and Mendoza which was punctuated by acrimonious encounters and complaints to local authorities, and which culminated in the acts of violence on August 15, 1998. The Court therefore finds that the “cross-complaint” does not raise claims that are separate and independent from the claims contained in the plaintiff’s complaint, and Rose City’s reliance on the exception to the unanimity rule is misplaced. All “defendants” were required to affirmatively and timely join in the removal. This rule is particularly important here, where it does not appear that Mendoza has pleaded a federal cause of action against Rose City. Although Mendoza mentions violations of 42 U.S.C. § 1983 against Kersten and Ogemaw County officials, the sole basis of his complaint (“cross- complaint”) against Rose City is a state statute. See “cross-complaint” ¶¶ 11, 12. It would be incongruous to permit a “defendant” against whom no federal claim has been pleaded, to usurp the -9- privilege of removal on the basis of a federal claim against a “co-defendant” who has not timely consented to the removal. Another issue raised by the plaintiff is the propriety of allowing removal by a party named as a cross-defendant in a cross-complaint that contains a federal question, where the literal language of the removal statute confines the removal privilege to “defendants.” See 28 U.S.C. § 1441(a); Shamrock Oil & Gas, Corp., v. Sheets, 313 U.S. 100 (1941). Due to the disposition of the issues above, however, the Court need not address this question. The Court holds that removal was improvident and the Motion to Remand must be granted. III. The plaintiff has also requested an award of costs and attorney fees pursuant to 28 U.S.C. § 1447(c) which provides that “[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” Rose City resists such an award contending that the issues raised in the motion are novel. Rose City also suggests that a letter by its counsel to plaintiff’s attorney inviting the plaintiff to share her research which discloses “controlling authority” insulates it from costs. Both parties rely on Morris v. Bridgestone/Firestone, Inc., 985 F.2d 238, 240 (6th Cir. 1993), which holds that an award of costs is discretionary with the Court and often turns on whether the removal lacked merit. Both parties also cite to General Electric Capitol Auto Lease, Inc., v. Mires, 788 F. Supp. 948, 951 (E.D. Mich. 1992), which holds that cases rejecting attorney fees cite novel questions of law that have not otherwise been fully addressed. The Court does not view this motion as presenting a close case. Rose City bases its entire argument for removal on the claims made against it by Mendoza. Yet the only papers by Mendoza -10- on file in the state court when the removal petition was filed in this court was the summons. In the removal petition, Rose City contends that Mendoza’s claims are “separate and independent” from plaintiff’s original claims. (Notice of Removal ¶ 11). Yet Mendoza stated in the summons that the claims “aris[e] out of the transaction or occurrence alleged in [plaintiff’s] complaint . . . .” (Summons). Rose City states in the removal petition that “Mendoza’s cross-claim against this defendant involves a federal question . . . pursuant to 42 U.S.C. § 1983, that this defendant violated his rights under the United States Constitution.” (Notice of Removal ¶ 4). The post-removal-filed “cross-complaint” makes no such claim. Although a novel and unsettled question was presented by the motion, i.e., whether a “cross- defendant” may file a removal petition where a federal question arises for the first time in a cross- complaint, that question was not controlling, and the decision to remand is based on more basic principles. Finally, the exchange of correspondence between counsel for the plaintiff and Rose City in which concurrence in the Motion to Remand was sought and denied does not militate against an award of costs. Plaintiff’s counsel’s letter of June 9, 2000 suggested the folly of Rose City’s removal arguments. In response, Rose City’s attorney stated that he was “aware of ample authority, supporting the principle that federal law, not state law, governs proper filing and service” of state court pleadings for removal purposes, although none was cited in Rose City’s answer to the Motion to Remand, and concluded with an invitation to plaintiff’s counsel to write again after spending some more time in the library. Each party has an obligation to research its own position, and cannot expect to rely on an opponent’s efforts to discover the applicable law. -11- The Court concludes, therefore, that an award of costs is appropriate. However, the plaintiff has presented no evidence of her “just costs and . . . actual expenses, including attorney fees,” and this Court will not speculate as to what they might be. The Court concludes that it has no subject-matter jurisdiction of this case for the reasons stated above. An Order of Remand shall issue in twenty-one (21) days. Plaintiff may submit evidence of her costs within seven (7) days of the date of this opinion. Rose City may submit evidence or argument in opposition thereto within seven (7) days thereafter. It is so ORDERED. _____________/s/_____________________ DAVID M. LAWSON United States District Judge Dated: November 30, 2000 Copies to: Daniel J. Cline, Esq. John E. Gannon, Esq. Antonio Mendoza Paul E. Pedersen, Esq. H. William Reising, Esq.